U.S. v. Frazier

• Decision Date: 12 September 1989
• Docket Number: 88-5528,Nos. 88-5392,s. 88-5392
• Parties: UNITED STATES of America, Plaintiff-Appellant/Cross-Appellee, v. William K. FRAZIER and Mark B. DeBusk, Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 878

880 F.2d 878

UNITED STATES of America, Plaintiff-Appellant/Cross-Appellee, v. William K. FRAZIER and Mark B. DeBusk,

Defendants-Appellees/Cross-Appellants.

Nos. 88-5392, 88-5528.

United States Court of Appeals, Sixth Circuit.

Argued May 22, 1989.

Decided July 26, 1989.

Rehearing and Rehearing En Banc Denied Sept. 12, 1989.

John W. Gill, Jr., U.S. Atty., Chattanooga, Tenn., Robert E. Simpson, Asst. U.S. Atty., Knoxville, Tenn., J. Edgar Schmutzer, Asst. U.S. Atty., Greeneville, Tenn., Joseph C. Wyderko (argued), Dept. of Justice, Crim. Div., Appellate Section, Washington, D.C., for U.S.

Gordon Ball (argued), Newport, Tenn., for William K. Frazier.

Bob Jessee (argued), Johnson City, Tenn., for Mark B. DeBusk.

Before MERRITT and NELSON, Circuit Judges; and LIVELY, Senior Circuit Judge.

LIVELY, Senior Circuit Judge.

This appeal and cross-appeal require us to determine whether principles of collateral estoppel prevent a second trial in a prosecution under a multicount indictment where a jury has acquitted the defendants on some counts and has been unable to agree on other counts.

I.

A.

In 1982 William Frazier was president of a bank in Bristol, Tennessee. Mark DeBusk owned a jewelry store in Bristol and maintained an account at Frazier's bank. In March 1982 DeBusk married Frazier's daughter. In 1982 DeBusk also began operating a wholesale jewelry establishment in Bristol and took steps to incorporate the business. This business also maintained an account at the Bristol bank. He hired Randall Sargent to work in the jewelry store and Sanford Nelson to work for the wholesale business.

Beginning in January 1982 DeBusk wrote checks on the jewelry store account that created overdrafts. Since DeBusk was a "preferred customer" with an established line of credit, the bank honored the checks. By July 1982 the jewelry store account was overdrawn by $156,665. On July 23, 1982 DeBusk signed a note to the Bristol bank for $138,500 as president of the jewelry store, pledging inventory, fixtures and accounts receivable as collateral. The same day Frazier, as president of the bank, assigned the note to another bank with himself as guarantor. The cashier's check for $138,500 from the other bank was deposited in the jewelry store account. Thus the records of the Bristol bank did not reflect the fact that its funds were used to cover the large overdraft. Also on July 23 Nelson signed a promissory note to the bank for $24,500 after being told by Frazier that he, Nelson, would not be responsible for repayment of the loan. The proceeds were not delivered to Nelson; instead, they were used to cover further the jewelry store's overdraft. In October 1982 Frazier used the proceeds of a $23,000 loan from the Bristol bank to Sargent to cover an overdraft of the wholesale business. Frazier resigned as president of the bank in November 1982 after advising his board of directors of the unpaid $138,500 note assigned to the other bank.

B.

Frazier and DeBusk were indicted in December 1986. The indictment contained 52 counts. It alleged a course of conduct in which DeBusk issued checks on his two accounts, knowing that there were insufficient funds to pay them, and Frazier willfully misapplied bank funds to cover the checks and caused false entries to be made in the bank's records to conceal the overdrafts. It charged that Frazier personally monitored the DeBusk accounts, that he exceeded his loan authority in one or more devices employed to cover the overdrafts Count 1 charged the defendants Frazier and DeBusk, and Nelson and Sargent as unindicted co-conspirators, with conspiracy to misapply funds of a federally insured bank and to make false entries in the records of the bank. The indictment listed 35 overt acts, including checks drawn on the two accounts controlled by DeBusk that resulted in overdrafts in those accounts and the three loans described above. The jury acquitted both defendants under count 1.

and that he failed to inform the bank's board of directors of the condition of the accounts and of loans made to cover the overdrafts.

Counts 2 through 47 charged that Frazier, aided and abetted by DeBusk, misapplied bank funds by directing employees to pay forty-six checks that created overdrafts in the DeBusk jewelry store account. The indictment alleged that both defendants knew that the account did not contain sufficient funds to cover the checks. These 46 checks were issued and paid between March 27 and July 20, 1982. Seven of the checks were listed as overt acts in the conspiracy count. The jury acquitted both defendants under counts 2 through 18, but was unable to agree on a verdict with respect to counts 19 through 47.

Count 48 charged that Frazier, aided and abetted by DeBusk, misapplied funds of the bank by causing the $24,500 loan (described in overt acts 22 and 27) to be disbursed to unindicted co-conspirator Nelson. It alleged that Frazier and DeBusk knew the loan was not for Nelson's benefit. Instead the proceeds were deposited in one of DeBusk's accounts to conceal its overdraft condition. Count 49 charged that Frazier, aided and abetted by DeBusk, caused a false entry to be made in the bank records with respect to the "Nelson loan" of $24,500 with intent to deceive the F.D.I.C., bank examiners, and others.

Count 50 charged that Frazier, aided and abetted by DeBusk, misapplied bank funds on July 23, 1982, by wrongfully crediting the proceeds of the $138,500 loan (described in overt acts 23-26) to conceal an overdraft in a DeBusk account.

Count 51 charged that Frazier misapplied bank funds in October 1982 by using the proceeds of the $23,000 loan nominally made to unindicted co-conspirator Sargent (described in overt acts 33-35) to cover an overdraft in a DeBusk account. Count 52 charged Frazier with causing false entries to be made in connection with the "Sargent loan."

II.

A.

After receiving the jury's verdict the district court dismissed counts 1, 2 through 18, and 48, and declared a mistrial as to the remaining counts. Both defendants then made motions for acquittal on all the remaining counts. The district court granted the defendants' motion in part, dismissing counts 32, 41, 44, 49 and 50. The court denied the motions as to the other counts and set a date for retrial on counts 19 through 31, 33 through 40, 42 and 43, 45 through 47, and 51 and 52. In its opinion the district court applied principles of collateral estoppel as set forth in Ashe v. Swenson, 397 U.S. 436, 90 S.Ct. 1189, 25 L.Ed.2d 469 (1970). The court concluded that a guilty verdict on counts 32, 41, 44, 49 and 50 at a second trial "would indeed require that an issue of fact necessarily determined favorably to the defendants at the first trial now be decided in favor of the government." On the other hand, the court found no such bar to a second trial of the remaining counts "since a rational jury could have reached its verdict of not guilty on Counts 1 through 18 and 46 upon issues other than that which the defendants seek to foreclose from consideration."

B.

Both the defendants and the government appealed from the court's order. The defendants filed a motion to dismiss the appeal, arguing that there is no authority for the government to appeal from an acquittal. The motion to dismiss was referred to the hearing panel.

18 U.S.C. Sec. 3731 authorizes an appeal by the government in a criminal case from "a decision, judgment, or order of a district court dismissing an indictment or information ... as to any one or more counts" except where the double jeopardy clause prohibits further prosecution. The Supreme Court has construed Sec. 3731 to remove all statutory barriers to government appeals from orders dismissing counts of an indictment unless the double jeopardy clause prevents a retrial. United States v. Wilson, 420 U.S. 332, 339, 95 S.Ct. 1013, 1019, 43 L.Ed.2d 232 (1975). In the present case the court did not evaluate the evidence following a hung jury mistrial and "determine [ ] that it was legally insufficient to sustain a conviction." United States v. Martin Linen Supply Co., 430 U.S. 564, 572, 97 S.Ct. 1349, 1355, 51 L.Ed.2d 642 (1977). Such a determination would have precluded retrial. Instead, the district court's order dismissed particular counts of the indictment solely on collateral estoppel grounds. The government's appeal is limited to that portion of the order, and does not address any counts in which the jury found the defendants not guilty. The appeal is authorized by Sec. 3731. The motion to dismiss the government's appeal is denied.

III.

In Ashe v. Swenson the Supreme Court prescribed the steps to be taken by courts applying principles of collateral estoppel in criminal cases:

The federal decisions have made clear that the rule of collateral estoppel in criminal cases is not to be applied with the hypertechnical and archaic approach of a 19th century pleading book, but with realism and rationality. Where a previous judgment of acquittal was based upon a general verdict, as is usually the case, this approach requires a court to "examine the record of a prior proceeding, taking into account the pleadings, evidence, charge, and other relevant matter, and conclude whether a rational jury could have grounded its verdict upon an issue other than that which the defendant seeks to foreclose from consideration." The inquiry "must be set in a practical frame and viewed with an eye to all the circumstances of the proceedings." Sealfon v. United States, 332 U.S. 575, 579 [68 S.Ct. 237, 239, 92 L.Ed. 180 (1948) ].

397 U.S. at 444, 90 S.Ct. at 1194 (footnote omitted).

The government makes an argument that would, if accepted, relieve the court of the necessity of following the prescribed procedures in the present case. The government contends that collateral estoppel applies only in situations such as Ashe, where the state sought to prosecute a defendant at successive trials in which the same evidence that led to an...