U.S. v. Jennings
| Decision Date | 06 June 2007 |
| Docket Number | No. 06-1889.,06-1889. |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Loren George JENNINGS, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Daniel M. Scott, argued, Minneapolis, MN (Douglas A. Kelley, Minneapolis, MN, on the brief), for appellant.
Joseph T. Dixon, argued, Asst. U.S. Atty., Minneapolis, MN, for appellee.
Before LOKEN, Chief Judge, LAY1 and MELLOY, Circuit Judges.
Loren George Jennings, a former member of the Minnesota House of Representatives, was convicted by a jury of mail fraud, in violation of 18 U.S.C. § 1341, and money laundering, in violation of 18 U.S.C. § 1957. The district court2 sentenced Jennings to forty-eight months' imprisonment and ordered restitution and forfeiture of the funds that benefitted him personally. Jennings appeals, arguing that: (1) the evidence was insufficient to support a conviction for mail fraud; (2) the district court erred in its jury instructions; (3) the district court erred in admitting certain evidence; (4) the district court erred in its application of the advisory Sentencing Guidelines; and (5) the district court erred in ordering Jennings to forfeit his personal gain from the scheme. We affirm.
Jennings was elected to the House of Representatives for the State of Minnesota in 1984 and served through 2002. In 1997 and 1998, Jennings served as chairman of the House Regulated Industries Committee, a committee that addressed legislation affecting utility companies. After the Republican Party took control of the House in 1999, Jennings remained the ranking minority member on the committee.
In addition to being a legislator, Jennings owned two separate businesses. Jennings was the president of M & M Sanitation, Inc. ("M & M"), a garbage-hauling business located in Cambridge and Rush City, Minnesota. Jennings owned approximately 42.5 percent of M & M. He had two co-shareholders: Brad Cook, the secretary/treasurer, who also owned approximately 42.5 percent of M & M, and Jerry Moses, the chief financial officer, who owned approximately fifteen percent of M & M. Jennings was also a fifty-percent partner with Brad Cook in Cook & Jennings Properties ("C & J Properties"), a partnership that owned various real estate and commercial properties.
One of Jennings's business associates, John James, was a banker at the Town & Country Bank in Almelund, Minnesota. Town & Country Bank lent money to a business called Poletech, and the loan became a problem loan for the bank. In 1997, James asked Jennings to make a loan to Poletech for a short period of time while new investment money could be found for Poletech. Poletech was attempting to develop a "hollow veneer" utility pole, an alternative to traditional wood-cut poles.
In April 1997, James formed a new company, Northern Pole, to purchase the assets of Poletech. Northern Pole's corporate resolution listed George Vitalis and Robert Warnke, both close friends of James, as the company's officers and directors. Warnke was never active in the company and ultimately resigned and relinquished his shares. Initially, Vitalis was a shareholder and officer, but did not actively participate in Northern Pole. Until the Town & Country Bank closed in May 2000, James controlled the Northern Pole bank account.
Jennings talked to his two co-shareholders about M & M making a "bridge loan" to Northern Pole. Jennings proposed to the other shareholders that M & M lend $315,000 to Northern Pole. Although they did not see a reason to go forward with the loan, Jennings's co-shareholders ultimately agreed to do so because Jennings wanted to do it and agreed to be personally responsible for the loan. Jennings's coshareholders knew nothing about Northern Pole and did no investigation.
On April 30, 1997, M & M borrowed $315,000 from Town & Country Bank, which M & M in turn lent to Northern Pole. In return, Northern Pole provided M & M with a promissory note for $315,000. The promissory note was short term, with a due date of August 1, 1997.
On July 30, 1997, M & M executed an extension for its loan from Town & Country Bank. Additional extensions were signed on October 31, 1997, on January 15, 1998, and on March 15, 1998. Jennings's co-shareholders became increasingly upset about the situation.
M & M did not record the transaction in its financial statements prepared by Secretary/Treasurer Moses and the company accountant. M & M did not include the $315,000 loan from the bank as a liability or the Northern Pole promissory note as an M & M asset. When asked why the transaction did not appear in M & M's financial statement, Moses explained that the Town & Country Bank loan would be paid by either Northern Pole, James (who had personally guaranteed the Northern Pole loan), or Jennings.
On April 24, 1998, a year after the first loan, Jennings and his partner Cook borrowed an additional $355,000 from the Town & Country Bank and lent it to Northern Pole through C & J Properties. As in the previous transaction, Northern Pole provided a promissory note to C & J Properties for $355,000. This note, however, called for quarterly payments with the final payment to take place in 2003. Thus, by the end of April 1998, Jennings had personally guaranteed loans to Northern Pole totaling $670,000.
Sometime in early 1998, Jennings approached a high-level executive at Northern States Power ("NSP"),3 Tom Micheletti. Micheletti testified that, at that time, Jennings's position as the chairman of the House Regulated Industries Committee made him an important legislator to NSP in terms of carrying out its legislative agenda. At a meeting in Jennings's House office, Jennings requested that NSP fund a company called "Northern Pole" or "Poletech" with several hundred thousand dollars.
Jennings indicated to Micheletti that he had an interest in Northern Pole in addition to it being a constituent. Micheletti was concerned by the apparent personal interest Jennings had in the proposal. Micheletti ultimately determined not to go forward with Jennings's request because, as he testified, "it was unclear to me whether or not Representative Jennings was involved financially with this."
Jennings then asked Micheletti whether NSP could fund Northern Pole using conservation funds from the Conservation Improvement Program ("CIP"). Under the CIP, Minnesota requires utility companies to collect a surcharge from their customers to be used on conservation projects, such as giving rebates to customers who purchase appliances that conserve energy. Minn.Stat. § 216B.241 (2006). Micheletti told Jennings that Jennings would need to disclose any interest he had in Northern Pole before NSP could participate. Jennings did not contact Micheletti again, and Micheletti left NSP in 1999. At the time Jennings made his suggestion to Micheletti, Jennings acknowledged that the CIP would need to be amended to permit funding this type of project with conservation funds.
In early summer 1998, after a fire at its work site, Northern Pole changed its business direction. Based on information obtained by Jennings, Northern Pole abandoned its plan to build alternative utility poles and began researching methods by which utility companies could dispose of chemicals that were used to treat traditional wood-cut utility poles. By December 1998, Northern Pole still had not repaid M & M or C & J Properties. Jennings's business associates for both M & M and C & J Properties were demanding repayment and refusing to sign further extensions.
On December 9, 1998, Jennings's business associates called a meeting with Jennings, M & M's and C & J Property's attorney, and John James. In that meeting, Jennings's business associates learned that Northern Pole had lost its licensing rights to a patent related to the alternative poles. Northern Pole's only value, as far as Jennings's business associates knew, was a financial incentive through the CIP. There were no other potential investors or sources of funds. By the end of 1998, Northern Pole had no work site, no license for alternative poles, no researchers, and no assets, but it did carry substantial debt. At the meeting, Jones pledged his shares in Town & Country Bank as collateral for M & M and C & J Property's loans to Northern Pole.
By fall of 1998, Jennings was already discussing obtaining funds through the CIP and had votes lined up to pass legislation necessary to change the CIP to permit Northern Pole to obtain conservation funds. On March 15, 1999, Jennings introduced a new bill to expand the scope of the CIP to include research and development projects. Jennings told lobbyists the CIP legislation was for a constituent. As the bill's chief proponent, Jennings spoke on behalf of the bill, and it was passed out of a subcommittee of the Commerce Committee. On March 18, 1999, Jennings spoke at the full Commerce Committee meeting on behalf of the bill, and the committee members voted to send the bill for a floor vote before the full House. Given his status on the Regulated Industries Committee, as well as his expertise in the field, Jennings carried great weight with his colleagues in the area of utility regulation. On May 3, 1999, Jennings voted in the House to pass the CIP legislation. It passed 128-0, and the governor signed it into law.
Section 216B.241, the CIP authorizing statute, was thus amended to include two new groups of "projects" in the definition of "energy conservation improvement": those that "seek[] to provide energy savings through reclamation or recycling and that [are] used as part of the infrastructure of an electric generation, transmission, or distribution system within the state or a natural gas distribution system within the state," and those that "provide[]...
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