U.S. v. Hilling, s. 87-3121
| Decision Date | 21 November 1989 |
| Docket Number | 87-3123,Nos. 87-3121,s. 87-3121 |
| Citation | 891 F.2d 205 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Davy L. HILLING, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. David P. NEUBAUER, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Terrence Kellogg, Seattle, Wash., for defendant-appellant Hilling.
Robert O. Wefald, Wefald Law Office, Ltd., Bismarck, N.D., for defendant-appellant Neubauer.
Robert H. Westinghouse and Thomas C. Wales, Asst. U.S. Attys., Seattle, Wash., for plaintiff-appellee.
Appeal from the United States District Court for the Western District of Washington.
Before NELSON, BOOCHEVER and BRUNETTI, Circuit Judges.
The mandate shall issue forthwith.
This appeal is from a conspiracy conviction that arose out of an elaborate kickback scheme whereby defendant Hilling, chairman of the board of directors of Irving Savings Association in Irving, Texas; defendant Neubauer, operations manager of I.C.R. Mortgage Bankers, Inc., a wholly owned subsidiary of Irving Savings; defendant Gray, chairman of the board of directors of Home Savings and Loan Association in Seattle, Washington; and defendant Olano, chairman of the board of directors of Alliance Federal Savings and Loan Association in Kenner, Louisiana, utilized their control to defraud these institutions of money by making loans and extensions of credit to each other in exchange for kickbacks from the loan proceeds or through the receipt of reciprocal loans and extensions of credit. The defendants' scheme caused multiple loans and extensions of credit to be issued from these financial institutions, culminating in Home Savings and Loan Association transferring $2.346 million dollars to Alliance Federal Savings and Loan Association to close a fraudulent condominium deal in New Orleans.
A jury convicted Hilling and Neubauer of one count of conspiracy to violate the federal wire fraud statutes in violation of 18 U.S.C. § 371. Hilling and Neubauer were acquitted of the underlying substantive offenses, including engaging in wire fraud in violation of 18 U.S.C. § 1343, and transporting funds obtained by fraud in interstate commerce in violation of 18 U.S.C. § 2314. The defendants were sentenced to five years of imprisonment and were ordered to pay restitution amounting to $17,599,910 jointly and severally with the other defendants found guilty of participating in the conspiracy.
The indictment charged that the defendants "knowingly executed, through wire transfers in interstate commerce, a scheme ... to defraud the depositors and other shareholders of [the various financial institutions] and the Federal Home Loan Bank Board ... of their right to have the business and affairs of these financial institutions conducted honestly and impartially; free from deceit, craft, trickery, corruption, fraud, undue influence, dishonesty, and conflict of interest; and in a manner consistent with the[ir] fiduciary duty." At the government's request, the district court instructed the jury that
[D]efendants are charged with "executing a scheme and artifice (1) to defraud the depositors and other shareholders of those financial institutions and the Federal Home Loan Bank Board (FHLBB) or (2) to obtain money by false and fraudulent pretenses, representations and promises." Instruction No. 18.
The court then instructed the jury:
"One way in which the government may establish a scheme or artifice to defraud is to show beyond a reasonable doubt that a defendant, acting with the specific intent to defraud, has deprived a financial institution of the honest services of one of its officers or directors or of its right to have its business and affairs conducted honestly and impartially, free from deceit, fraud, undue influence, and conflict of interest, and in a manner consistent with the fiduciary duty owing by officers and directors of the financial institution to the depositors and other shareholders of the financial institution." Instruction No. 19 (emphasis added).
On appeal, Hilling and Neubauer argue that their conspiracy conviction must be overturned in light of the Supreme Court's recent decision in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), decided after the conviction in this case. Although conceding that McNally applies to this case and conceding that the instruction in question was erroneous under McNally, the government argues that the challenged language, rather than describing intangible rights, must necessarily have been understood by the jury as referencing a property right. Because the indictment, jury instructions and the proof at trial in the instant case permitted the jury to convict on the now-invalid nonproperty rights theory, we reverse.
In reviewing the district court's order, we are bound by McNally despite the fact that it was decided after the jury convicted Hilling and Neubauer and was therefore unavailable to the district court. United States v. Asher, 854 F.2d 1483, 1487 (3rd Cir.1988) (internal citations omitted). See Griffith v. Kentucky, 479 U.S. 314, 107 S.Ct. 708, 716, 93 L.Ed.2d 649 (1987) ().
Relying on the legislative history, the Supreme Court in McNally held that the mail fraud statute was intended to protect property or monetary rights, broadly defined, but not "the intangible right of the citizenry to good government." McNally v. United States, 107 S.Ct. at 2879. See Carpenter v. United States, 484 U.S. 19, 108 S.Ct. 316, 320-21, 98 L.Ed.2d 275 (1987) ().
In McNally, a state official chose an insurance agent to provide insurance for the state, in exchange the agent paid a portion of its commission to other insurance agencies owned and controlled by the state official. The jury was charged as follows:
[D]efendants devised a scheme ... to ... defraud the citizens ... of their right to have the Commonwealth's business and its affairs conducted honestly, impartially, free from corruption, bias, dishonesty, deceit, official misconduct, and fraud; and ... obtain ... money ... by means of false and fraudulent pretenses.
Although the state official did receive commissions, the commissions were not the Commonwealth's money and the state was not deprived of any property. According to the Court, "the premium for insurance would have been paid to some agency, and what [defendants] did was to assert control that the Commonwealth might not otherwise have made over the commissions paid by the insurance company to its agent;" hence, no violation of the mail fraud statute. Id. at 2882.
According to the Court, the mail fraud statute's reference to schemes "to defraud," or "for obtaining money or property by means of false or fraudulent pretenses, representations, or promises" should not be read disjunctively; rather, the word "defraud" itself also refers to "wronging one in his property rights." Id. at 2880-81 (internal citations omitted). Because the charge in McNally did not require the jury to find the state was defrauded of a money or property interest, the court held that the convictions must be reversed. Id. at 2882.
Since the Court's decision in McNally, a significant number of pre-McNally criminal convictions have been challenged on the ground that the convictions were based on the intangible rights instructions. In those cases in which the indictment, the proof presented at trial and the "instructions to the jury could not assure that money or property interests were implicated, [verdicts] have been overturned on McNally 's authority." United States v. Asher, 854 F.2d 1483, 1490 (3rd Cir.1988) (internal citations omitted). See United States v. Dadanian, 856 F.2d 1391, 1392 (9th Cir.1988) ().
In the present case, the proof, indictment and the jury instructions do not assure that the defendants' convictions were based on a scheme that had the result of effecting monetary or property losses to the shareholders and depositors of the financial institutions. The jury charge and the indictment are permeated with the...
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U.S. v. Dischner
...and proof do not assure that the scheme had the result of effecting monetary or property losses as required by United States v. Hilling, 891 F.2d 205, 207-08 (9th Cir.1988). "We review a claim of error in a jury instruction by looking to 'the adequacy of the entire charge ... in the context......
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