U.S. v. McDougal, s. 95-4125

• Decision Date: 16 January 1998
• Docket Number: Nos. 95-4125,97-2117,s. 95-4125
• Citation: 133 F.3d 1110
• Parties: UNITED STATES of America, Appellee, v. James B. McDOUGAL, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1110

133 F.3d 1110

39 Fed.R.Serv.3d 1163

UNITED STATES of America, Appellee, v. James B. McDOUGAL, Appellant.

Nos. 95-4125, 97-2117.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 17, 1997.

Decided Jan. 16, 1998.

Sam T. Heuer, Little Rock, AR, argued, for Appellant.

Kenneth W. Starr, Little Rock, AR, argued (LeRoy Morgan Jahn, W. Ray Jahn, Rod J. Rosenstein, Kimberly Nelson Brown and Craig S. Lerner, on the brief), for Appellee.

Before FAGG, MAGILL, and HANSEN, Circuit Judges.

FAGG, Circuit Judge.

James B. McDougal appeals his convictions on charges of conspiracy to defraud the United States, see 18 U.S.C. § 371 (1994); wire, bank, and mail fraud, see id. §§ 1343, 1344, 1341; aiding and abetting false statements to and entries in the books and records of federal credit institutions, see id. §§ 1006, 2; aiding and abetting false statements in loan and credit applications to influence a federal loan institution, see id. §§ 1014, 2; and aiding and abetting misapplication of small business investment company (SBIC) funds, see id. §§ 657, 2. We affirm.

This case arises from McDougal's real estate dealings and his role in Madison Guaranty Savings and Loan Association (MGSL). McDougal and his spouse, Susan, bought a controlling interest in MGSL in 1982. They soon formed Madison Financial Corporation (MFC), an MGSL subsidiary, to conduct MGSL's real estate development business. MGSL funds were used to purchase a four-hundred-acre tract of land, known as the 145th Street property, in December 1985. Large sections of the property were sold to Senator William Fulbright and other investors. Many of the purchases were financed through MGSL or Capital Management Services (CMS), an SBIC owned and operated by David Hale and licensed by the Small Business Administration (SBA), to loan money only to socially or economically disadvantaged businesses. McDougal also conducted real estate deals through entities other than MFC, and arranged for MGSL and CMS financing for them. In July 1986 McDougal suffered serious health problems and resigned as president of MFC. He had already resigned his posts as an officer and director of MGSL after an investigation by the Federal Home Loan Bank Board. The Resolution Trust Corporation closed MGSL in 1990.

In 1989, the Government charged McDougal with conspiracy to commit bank fraud in violation of 18 U.S.C. § 371 and bank fraud in violation of 18 U.S.C. § 1344. The charges primarily involved two transactions arising from development of the 145th Street property, namely, the sale of the Levi-Strauss Building to David Fitzhugh, an MGSL employee, and the sale and MGSL financing of a tract to Master Developers, a corporation owned by McDougal's brothers-in-law, Jim and David Henley. The corporation was set up at McDougal's suggestion just for the transaction. The Government asserted the sales were shams designed to alleviate MGSL's overinvestment and undercapitalization. The indictment charged McDougal with conspiring with the Henleys to obtain financing from MGSL by using fraudulent pretenses and representations, and with a scheme to defraud in obtaining funds from MGSL. McDougal was acquitted on all counts.

In August 1995, McDougal, Susan McDougal, and Jim Guy Tucker were charged in the current, multicount indictment. The indictment alleged the McDougals, Tucker, and Hale conspired to commit fraudulent transactions, including the misapplication of MGSL and CMS funds and the entry of false statements in the books and records of MGSL and CMS. According to the indictment, the defendants sought to generate fraudulent profits and engage in "land flips" in which the individual investor incurred no personal risk, while MGSL, MFC, and CMS bore all the risk instead. The indictment asserted McDougal helped obtain fraudulent loans from MGSL or CMS for corporations owned by Dean Paul, Larry Kuca, Stephen Smith, Jim Guy Tucker, and Susan McDougal. The loans financed business improvements or the purchase of land outside the 145th Street property. The indictment also alleged the McDougals and Tucker engaged in false and fraudulent loan transactions wrongfully to obtain MGSL and CMS loans for their personal benefit. Real estate other than the 145th Street property was sold to third-party nominees, and MGSL financed the fraudulent real estate transactions through false appraisals and fraudulent loan documents. Proceeds from the fraudulent sales were invested in CMS to build capital, permitting additional funding from the SBA. CMS would then loan funds to the McDougals. Before McDougal's trial, he moved to dismiss the indictment, alleging unconstitutional preindictment delay. He also sought dismissal of the conspiracy and bank fraud charges, alleging a violation of double jeopardy. The district court denied these pretrial motions and McDougal's renewed motions at the trial's end. A jury convicted McDougal of most of the charges against him.

In his appeal, McDougal first asserts the district court should have granted his motion to dismiss the 1995 indictment because preindictment delay violated the Due Process Clause. McDougal complains the indictment did not issue until more than nine and a half years after the alleged offenses. To show preindictment delay violated the Due Process Clause, a defendant must first show the delay actually and substantially prejudiced the defense. See Bennett v. Lockhart, 39 F.3d 848, 851 (8th Cir.1994). If the defendant establishes actual, substantial prejudice, then the court balances the reasons for the delay against the prejudice shown. See id.; United States v. Bartlett, 794 F.2d 1285, 1289 (8th Cir.1986).

McDougal asserts the delay prejudiced his defense because his physical condition had deteriorated between 1986 and 1995, and his physical deterioration impaired his memory. The district court rejected this assertion after observing McDougal's testimony at trial and watching videotaped excerpts of pretrial television interviews in which McDougal discussed specific facts about his case. The district court found McDougal could refer to events with "great accuracy" and recall specific details of relevant financial transactions. We see no error in this finding. Even if McDougal's medical condition had impaired his memory, the mere "loss of or impairment of memories does not constitute actual prejudice for purposes of the [D]ue [P]rocess [C]lause." Bartlett, 794 F.2d at 1290. McDougal also asserts the delay harmed his defense because in the interim, Senator Fulbright died and MGSL closed, leaving its files disorganized and scattered. McDougal failed to relate the substance of the Senator's testimony to show it would have been relevant or beneficial to his case, and failed to identify any relevant documents that were lost or misplaced or the information they contained. To show actual prejudice, a defendant must specify the witnesses or documents lost during the delay and the information they would have provided. See Bennett, 39 F.3d at 851. Because McDougal has not carried his burden to show the preindictment delay actually prejudiced his defense, his due process claim fails, see Bartlett, 794 F.2d at 1293, and the district court properly refused to dismiss the...