U.S. v. Finlay

• Decision Date: 25 May 1995
• Docket Number: Nos. 94-10106,94-10107,s. 94-10106
• Citation: 55 F.3d 1410
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Gordon FINLAY, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. FINLAY TESTING LABORATORIES, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1410

55 F.3d 1410

UNITED STATES of America, Plaintiff-Appellee, v. Gordon FINLAY, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. FINLAY TESTING LABORATORIES, INC., Defendant-Appellant.

Nos. 94-10106, 94-10107.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 14, 1995.

Decided May 25, 1995.

John J. Cleary, Cleary & Sevilla, San Diego, CA, for defendant-appellant Gordon Finlay.

M. James Lorenz, Lorenz, Alhadeff, Cannon & Rose, San Diego, CA, for defendant-appellant Finlay Testing Laboratories, Inc.

Steven S. Alm and Mark E. Recktenwald, Asst. U.S. Attys., for plaintiff-appellee U.S.

Appeals from the United States District Court for the District of Hawai'i.

Before: FLETCHER, REINHARDT and NOONAN, Circuit Judges.

NOONAN, Circuit Judge:

Gordon Finlay (Finlay) appeals his conviction of two conspiracies to defraud the United States in violation of 18 U.S.C. Sec. 371, the first occurring between January and October of 1987 by transporting nuclear materials in violation of law and in this connection falsifying records for submission to the Nuclear Regulatory Commission (the NRC); the second, a conspiracy between August 1987 and November 1987 to defraud the United States by obtaining from the NRC a reinstatement of the license of Finlay Testing Laboratories, Inc. (FTL) to possess radioactive materials. Finlay also challenges his conviction of violating 18 U.S.C. Sec. 1001 by making a materially false statement to the NRC.

Finlay Testing Laboratories, Inc., appeals its conviction of ten counts of illegally transporting radioactive materials in April 1987 in violation of 49 U.S.C.App. Sec. 1809(b) and its further conviction of six counts of concealing a material fact within the jurisdiction of the NRC in violation of 18 U.S.C. Sec. 1001.

We affirm the convictions of Finlay and of FTL.

FACTS

From the perspective of the government, the following was established at trial:

FTL is engaged in industrial testing by radiography, a process conducted by using portable devices known as "sources" or "cameras" which create an image of a metal object through the use of radiation. Each source contains a small pellet of nuclear material emitting gamma radiation. FTL was licensed to use such radioactive materials by the NRC and was subject to NRC regulations set out in 10 C.F.R. pt. 34 (1994); see also 10 C.F.R. pts. 19, 20, and 71 (1994).

Gordon Finlay was the owner and chief executive officer of FTL. In 1987 he owned 51% and his wife owned 49% of its stock. In December 1991, after commencement of the NRC investigation leading to the convictions challenged here, he transferred 2% of his stock to his wife, so that she now holds a majority interest, and he put the remaining 49% of the stock into a revocable trust of which he is both the trustee and the beneficiary.

Operating out of Oahu, FTL in 1987 had only three sources in Hawaii. The transportation of radioactive materials was prohibited on aircraft carrying passengers. 49 U.S.C.App. Sec. 1809(b); 49 C.F.R. Sec. 173.448(f). Compliance with the law meant that FTL had to ship its sources by barge with the result that they were tied up for a week on jobs on Hawaiian islands other than Oahu and even longer when the sources were used on a military base being constructed on Johnston Island, 700 miles from Oahu. FTL could not openly defy the law and report the breach to the NRC. FTL needed swift transport of the sources; to obtain it, FTL had to resort to deception.

In January 1987 Finlay directed the return of a source from Johnston Island to Honolulu by an employee secretly carrying the source aboard a military passenger plane. Finlay sent out a replacement source to Johnston Island as unaccompanied baggage on a civilian passenger plane. In the same month Finlay himself covertly carried a source on a passenger flight from Oahu to the Big Island of Hawaii and brought a source back in the same way. In February 1987 FTL's radiation safety officer, Tim Carroll, put a source aboard a passenger flight to the Big Island for a job at Big Island Meat Company. Two other FTL employees, at Finlay's direction, brought the undocumented source back to Oahu. In April 1987 an FTL employee made three interisland trips on passenger aircraft secretly carrying sources at Finlay's direction.

Also at Finlay's order they secretly carried a source to Maui and back to Oahu. On August 18, 1987, Finlay packed a container carrying a source for Ron and Randy Austin, who then carried it without documentation on a military passenger flight from Oahu to Johnston Island.

The NRC required licensees such as FTL to maintain "U-logs" to be prepared each time a source was used. FTL was also required to maintain shipping and receiving logs for the sources and to make out Hazmat forms warning shippers that they were carrying hazardous material. FTL did not prepare the U-logs or other documents that were required for any of the above-listed interisland or Johnston Island flights. For the Johnston Island job the records were further falsified to indicate that the sources were sent by barge.

In August 1987 the NRC learned of two of the illegal shipments: that to the Big Island Meat Company and that by the Austin brothers to Johnston Island. The NRC began an investigation.

Carroll admitted to the NRC that he had been involved with the source shipment to the Big Island Meat Company. Finlay and Carroll agreed that the way to placate the NRC was for Finlay to appear to suspend Carroll, and Finlay announced a one month suspension without pay in a letter to Carroll that Finlay showed to NRC investigators. Carroll continued to work and to be paid, although these facts were kept from the NRC. Despite the show of contrition, the NRC suspended FTL's license on September 21, 1987.

Two weeks later, on October 5, 1987, FTL filed a "request for recision or relaxation of order" with the NRC. The two incidents that the NRC knew of were presented by FTL as actions by employees acting without Finlay's knowledge. The violations were said not to have been authorized by FTL or Finlay "and certainly were not the usual course of business at Finlay Testing." Finlay was stated to have provided all the appropriate shipping papers, including a Hazmat form to Ron Austin for the August shipment to Johnston Island. Carroll's action was portrayed as "surprising, aberrational and unusual," and to have been met, when discovered, by Carroll's prompt suspension, at the end of which chastisement he would return, reformed, to the company. Attached to this request to the NRC were six false documents that Carroll had faked in April 1987 at Finlay's direction to cover up the illegal January 1987 shipments to and from Johnston Island. These documents were submitted as evidence that the proper papers had been prepared for the later Austin shipment. The bluff was clumsy since the documents on their face were dated January 9, 1987; apparently Finlay thought the fact that Carroll's name appeared on them would be enough for them to pass muster with the NRC.

PROCEEDINGS

By April 1992 the United States Attorney for the District of Hawaii was on the verge of procuring an indictment of FTL and Finlay. Finlay already had one lawyer, Dennis Ing, for business matters. He now sought the assistance of an experienced criminal defense lawyer, John Edmunds, who contacted the United States Attorney, Daniel Bent. Bent made it clear that the United States was willing to negotiate but only if the defendants waived the five year statute of limitations. In response to this position, FTL passed a corporate resolution, drafted by Ing, authorizing the waiver of the statute of limitations for any failure of the United States to prosecute prior to April 3, 1992. Finlay signed this waiver on behalf of FTL.

Thereafter Edmunds and the United States Attorney's Office continued their conversations. In the course of them Bent stated that the United States was ready to indict FTL and Finlay at any time. The government had already indicted Carroll, and that indictment was shown to Edmunds and to Finlay. In the face of Bent's representations, Edmunds advised Finlay that negotiations could not go on unless Finlay authorized him to waive the statute for both Finlay and FTL. Finlay so authorized Edmunds. During July and August "everyone" was going to be out of town, so that it was important that a waiver be executed that would be in effect during this period.

At the beginning of August two such waivers were executed, one on behalf of Finlay and another on behalf of FTL; the waivers provided "that the period between March 30, 1992 through September 14, 1992 shall not be considered in computing the time that has run under any statute of limitations that may apply to a criminal prosecution against" either defendant. The waivers were signed by Edmunds and not by Finlay or any other officer of FTL.

Later, on August 14, 1992, Edmunds told Finlay that he had executed the waivers. Finlay made no negative comment and did not tell Edmunds that he had acted without authorization and should so advise the United States Attorney. On September 15, however, after a meeting with the United States Attorney, Finlay informed him that Edmunds had no authority to sign. The next day Finlay and FTL were indicted.

At trial Finlay moved for acquittal on the first count of conspiracy on the ground that the statute of limitations had run on all acts prior to October 1987; that Edmunds had acted without authorization in waiving the statute; and that the October 5, 1987, act charged in Count I was simply a concealment of the main conspiracy, not indictable under Grunewald v. United States, 353 U.S. 391, 403-404, 77 S.Ct. 963, 973, 1 L.Ed.2d 931 (1957). The district court denied the motion after an evidentiary hearing on Edmunds' authority to sign. The district court found that Edmunds had authority. The district court further found that, in any event, the...