U.S. v. Knop, 82-1078

• Decision Date: 02 March 1983
• Docket Number: No. 82-1078,82-1078
• Parties: 12 Fed. R. Evid. Serv. 1252 UNITED STATES of America, Plaintiff-Appellee, v. Edward P. KNOP, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 670

701 F.2d 670

12 Fed. R. Evid. Serv. 1252

UNITED STATES of America, Plaintiff-Appellee, v. Edward P. KNOP, Defendant-Appellant.

No. 82-1078.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 5, 1982.

Decided March 2, 1983.

William Schick, Arndt, Schubert, Andich, Williams & Schick, Rock Island, Ill., for defendant-appellant.

L. Lee Smith, Asst. U.S. Atty., Peoria, Ill., for plaintiff-appellee.

Before PELL, ESCHBACH and POSNER, Circuit Judges.

PELL, Circuit Judge.

Defendant-Appellant was charged in a three-count indictment with violating 18 U.S.C. Sec. 1014 by making false statements to federally insured banks. A jury found him guilty on all three counts.

Count one charged him with willfully overvaluing land in a financial statement submitted to the Farmers National Bank. It was charged, and the jury found, that the defendant's financial statement overvalued land he owned in Wisconsin and overstated the extent of his interest in land he owned in Iowa. Count two charged, and the jury found, that the defendant had submitted the same false statements, as alleged in count one, to the Moline Illinois National Bank. Count three charged, and the jury found, that the defendant had submitted to the Moline Illinois National Bank a list of accounts receivable containing an account that had previously been paid in full.

I

One of appellant's contentions is that the Government did not prove an essential element of the alleged crimes, namely that the banks in question were federally insured at the time of the commission of the alleged offenses. Appellant's contention is a challenge not only to federal jurisdiction, an essential element of which is proof of the banks' federal insurance status as of the time of the commission of the offense, but also to the sufficiency of the evidence required to prove an essential element of the charged offenses. A reversal based on insufficiency of the evidence requires entry of a judgment of acquittal; a second trial would be precluded by the Constitution's guarantee against double jeopardy. Burks v. United States, 437 U.S. 1, 98 S.Ct. 2141, 57 L.Ed.2d 1 (1978).

Interjected between questions relating to identification of the defendant and the promissory notes, the following is the colloquy between appellee's counsel and the banks' officials relating to the banks' federal insurance status:

Q. Mr. Lindsey [President of Farmers National Bank], is your bank insured by the Federal Deposit Insurance Corporation?

A. Yes, it is.

Q. May I have that back, Mr. Lindsey?

A. (Handing document).

Q. Mr. Lindsey, I am going to hand you what has been marked for identification as "Government's Exhibit No. 3," and ask you would you tell us what that is.

A. It is a promissory note to Farmers National Bank by Edward P. Knop for $40,823.12.

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[Questioning of the vice-president of the Moline National Bank].

Q. So this note was given very shortly after the defendant presented his statement, the two-page typewritten document?

A. Yes.

Q. Is either of these notes repaid?

A. No, sir.

Q. Mr. Normoyk, is your bank insured by the Federal Deposit Insurance Corporation?

A. Yes, sir.

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* * *

In this case, as in United States v. Safley, 408 F.2d 603 (4th Cir.), cert. denied 395 U.S. 983, 89 S.Ct. 2147, 23 L.Ed.2d 772 (1969), appellant "did not object that the employee[s'] testimony was irrelevant, as well it might have been if it referred only to the time of trial." Id. at 605. Nor did the appellant make even a passing reference in his motion for judgment of acquittal, to a claim that the banks were not insured by the Federal Deposit Insurance Corporation (FDIC) at the time of the commission of the offenses. His argument was directed only to the paucity of the Government's proof of the substantive aspects of the charged offenses. See id.

Taken woodenly and literally the testimony might seem to refer only to the time of the trial. In context ¹ it could plausibly have been taken by the jury as referring to the time of the commission of the offenses, as the court held in Safley, a case which is strikingly similar to the case at bar. The Government's summation to the jury suggests that it viewed the evidence as relating to the banks' federal insurance status at the time of commission of the offenses. Counsel stated: "Well, you heard both Mr. Lindsey and Mr. Normoyk testify that their banks were insured by the Federal Deposit Insurance Corporation, the FDIC." Appellant's counsel's summation to the jury did not challenge proof of the banks' federal insurance status, but merely argued that the statements presented by the appellant to the banks were not false. Most importantly, the court instructed the jury in great detail that proof of the bank's federally insured status at the time of commission of the alleged offenses was an essential element which, as in the case of the other elements, must be proved beyond a reasonable doubt, otherwise the defendant must be found not guilty. The jury verdict obviously reflected the view of the jury that there was the proper insurance at the appropriate time. We decline to indulge in the assumption that the jury willfully failed to follow the court's instructions.

Where the jury returns a guilty verdict, as in this case, the Government is entitled on appeal to the benefit of all reasonable inferences from the evidence. United States v. Garcia-Geronimo, 663 F.2d 738, 744 (7th Cir.1981). We also note that federal law mandates that national banks be federally insured, see 12 U.S.C. Sec. 1814(b). We believe that from the evidence, viewed in context, the jury could and did draw the reasonable inference that the banks were federally insured at the time of commission of the offenses. ² See United States v. Safley, 408 F.2d at 605.

We hesitate to suggest that counsel for the defendant deliberately engaged in a "sandbagging" process. Yet we cannot ignore what a unique opportunity this situation presents. Counsel aware of the lack of pinpointing of the time to the offense could easily have objected to the question as being irrelevant because of its reference to the insurance status as of the time of the testimony. Counsel would also have been aware had he done so that the objection would have been sustained and the Government could easily have brought in the requisite proof. By saying nothing about the matter at any time at the trial level his client could easily have a built-in claim for reversal if the jury should reject his defense on the substantive merits.

The Supreme Court, in the habeas context, has spoken extensively on this subject in Wainwright v. Sykes, 433 U.S. 72, 89-90, 97 S.Ct. 2497, 2507-08, 53 L.Ed.2d 594 (1977). It is appropriate to set forth that view here:

We think that the rule of Fay v. Noia [372 U.S. 391, 83 S.Ct. 822, 9 L.Ed.2d 837], broadly stated, may encourage "sandbagging" on the part of defense lawyers, who may take their chances on a verdict of not guilty in a state trial court with the intent to raise their constitutional claims in a federal habeas court if their initial gamble does not pay off. The refusal of federal habeas courts to honor contemporaneous-objection rules may also make state courts themselves less stringent in their enforcement. Under the rule of Fay v. Noia, state appellate courts know that a federal constitutional issue raised for the first time in the proceeding before them may well be decided in any event by a federal habeas tribunal. Thus, their choice is between addressing the issue notwithstanding the petitioner's failure to timely object, or else face the prospect that the federal habeas court will decide the question without the benefit of their views.

The failure of the federal habeas courts generally to require compliance with a contemporaneous-objection rule tends to detract from the perception of the trial of a criminal case in state court as a decisive and portentous event. A defendant has been accused of a serious crime, and this is the time and place set for him to be tried by a jury of his peers and found either guilty or not guilty by that jury. To the greatest extent possible all issues which bear on this charge should be determined in this proceeding: the accused is in the courtroom, the jury is in the box, the judge is on the bench, and the witnesses, having been subpoenaed and duly sworn, await their turn to testify. Society's resources have been concentrated at that time and place in order to decide, within the limits of human fallibility, the question of guilt or innocence of one of its citizens. Any procedural rule which encourages the result that those proceedings be as free of error as possible is thoroughly desirable, and the contemporaneous-objection rule surely falls within this classification.

... If a criminal defendant thinks that an action of the state court is about to deprive him of a federal constitutional right there is every reason for his following state procedure in making known his objection.

Because we think the jury regarded this as well as other essential issues as having been proven beyond a reasonable doubt by the evidence, we decline to accept the appellant's present contention of reversible error.

Nevertheless, we also think it appropriate to recall the admonition of the Fifth Circuit that

certainly we recognize the possibility that we or our sister courts may some day be faced with an insufficiency of the evidence of insurance ... which would warrant reversal.... [T]he government treads perilously close to reversal in this case, and may soon find itself crossing the line from sufficiency to insufficiency.

United States v. Maner, 611 F.2d 107, 111-12 (5th Cir.1980). Because proof that the banks were federally insured is crucial to the establishment of federal jurisdiction and to proving an essential element of the offense, we fail to understand why the Government should rely on indirect evidence of FDIC-insured status, when that status...