U.S. v. Morgan, 298

Citation51 F.3d 1105
Decision Date03 April 1995
Docket NumberD,No. 298,298
PartiesUNITED STATES of America, Appellee, v. Michael G. MORGAN, Defendant-Appellant. ocket 94-1121.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Hubert J. Santos, Hartford, CT (Hope C. Seeley, Santos, Peck & Smith, P.C., of counsel), for appellant.

Kari A. Pedersen, Asst. U.S. Atty., Bridgeport, CT (Christopher F. Droney, U.S. Atty., D. Conn., New Haven, CT, of counsel), for appellee.

Before: FEINBERG, KEARSE, and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judge:

Michael G. Morgan takes this interlocutory appeal from the denial of a motion to dismiss a pending indictment against him entered in the United States District Court for the District of Connecticut on January 21, 1994, before Judge T.F. Gilroy Daly. The appeal raises a question as to whether defendant's constitutional right against being twice put in jeopardy for the same offense was violated. Having signed a consent judgment respecting civil charges brought against him, Morgan now maintains that $1.5 million of the restitution payments imposed on him by the settlement, which sum the consent order labeled a "personal obligation," was in essence a punitive civil sanction precluding the government from later indicting him.

The key word to be understood on this appeal is "punishment." If a person is twice subject to punishment for the same offense, double jeopardy protection attaches. It is our task to determine whether the heavy repayment obligations imposed here do or do not constitute punishment; if they do not, the double jeopardy defense has no application. The Supreme Court gives guidance when it tells us that a civil sanction constitutes punishment when the goal it serves is for purposes of deterrence or retribution. Such goal is evidenced when the sanction is overwhelmingly disproportionate to the damages caused. See United States v. Halper, 490 U.S. 435, 448-49, 109 S.Ct. 1892, 1901-02, 104 L.Ed.2d 487 (1989). Thus, an overwhelmingly disproportionate sanction may be present where the civil sanction bears so little relationship to making the government whole as to shock the conscience of the court.

In this case, because there has been no showing of an overwhelmingly disproportionate sanction, the criminal prosecution of Morgan does not offend the Double Jeopardy Clause.

BACKGROUND

Appellant Morgan was a founder, the chief executive officer, and a member of the Board of Directors of Charter Federal Savings and Loan Association (Charter Federal or bank) organized in 1984 and located in Stamford, Connecticut. The bank created a wholly-owned subsidiary called Bedford Equities Corporation to acquire real estate for development purposes. Bedford Equities, the development corporation, was a general partner of a limited partnership called Bedford Equities 1984 Limited Partnership that syndicated real estate acquired by Bedford Equities Corporation. Among the real estate purchases made by Bedford Equities Corporation were three Stamford properties: 1200 Summer Street, 30 Buxton Farms Road, and 159 Franklin Street.

The Resolution Trust Corporation seized Charter Federal in 1990. Following the seizure, the United States Department of the Treasury's Office of Thrift Supervision (OTS) began an investigation into the activities of certain of the bank's officers and directors. This investigation culminated on January 19, 1993 with the filing against Morgan of a Notice of Charges pursuant to 12 U.S.C. Sec. 1818(b). Simultaneously with the filing of this Notice, there were also filed a stipulation of settlement between Morgan and the government, and a consent order and consent judgment with respect to the claims contained in the civil charges.

The five charges in the Notice involved Morgan's role in four separate real estate transactions during the period 1984-1987. Charge one alleged that when voting to finance Bedford Equities' purchase of 1200 Summer Street, he hid his $67,500 commission on the transaction by the use of a "straw" broker; charge two asserted that in improperly structuring bank financing for the sale of 30 Buxton Farms Road so as to show a false profit, Morgan falsely inflated Charter Federal's income and caused it to lose in excess of $1 million dollars when the purchasers defaulted; charge three involved the same Buxton Farms Road property and charged Morgan with paying another bank director, again through a "straw" broker, a $200,000 commission. It was further asserted in this charge that to improve Charter Federal's books the payment was ostensibly waived, but in fact was later siphoned into the board member's pocket, disguised as part of a payment to the same "straw" broker on the 159 Franklin Street sale. Count four charged Morgan with falsely structuring the sale of 159 Franklin Street to meet the criteria for profit recognition by disguising a $450,000 loan as for "development" of the property when in fact the loan was used as a down payment on the purchase of the property. The fourth charge claimed loss and other damage to the bank of over $1 million on this transaction. The fifth and final charge involved Lindale Manor, a condominium complex owned by Lindale Partners. It alleged that Morgan caused Charter Federal to make loans to Lindale Partners, a partnership in which he held a one-third interest. Because this conduct was not reflected in the pending indictment, it is not a subject of this appeal. In sum, based upon the first four counts of the Notice, Morgan was charged in Simultaneously with the issuance of the formal Notice of the charges just related, the government notified Morgan pursuant to 12 U.S.C. Sec. 1818(b) that the OTS intended to prohibit him from participating in the conduct of the business of any federally insured depository institution. All of the civil claims the OTS had against Morgan were settled through the execution of the earlier referred to stipulation, consent order and consent judgment.

all with causing Charter Federal to incur losses in excess of $2,275,000.

Under the settlement, Morgan neither admitted nor denied the charges made against him. Pursuant to the settlement agreement, he signed a consent judgment that ordered him to pay $300,000 as restitution to OTS. Under the terms of the consent order, he agreed to pay $1.5 million to OTS in addition to the $300,000 imposed by the consent judgment. Both sums were to be repaid according to an agreed-upon payment schedule that was made contingent on the extent of Morgan's future gross income. OTS agreed to refrain from executing the judgment so long as the payment schedule was complied with. Morgan has to date made no payments under the settlement.

The relevant portion of the consent order reads:

RESTITUTION

3. Based upon his sworn statement of financial condition and other relevant factors ...:

a. RESPONDENT shall execute the annexed consent judgment in the amount of $300,000 to correct the conditions alleged to have resulted from the unsafe and unsound practices and violations of law, regulations and rules set forth against the RESPONDENT in the NOTICE....

b. In addition to the judgment, RESPONDENT also agrees to pay the further sum of $1,500,000 pursuant to the schedule set forth in Subparagraph 3.c. This payment obligation is a personal obligation of the RESPONDENT and upon his death will not be an obligation of his estate.

(Consent Order at 2-3) (emphasis added). The stipulation provides that:

11. This STIPULATION and CONSENT, the ORDER, and RESPONDENT'S compliance with the ORDER, do not compromise, settle, dismiss, resolve, or in any way affect:

....

b. any civil or criminal claims, actions, or charges against or liability of RESPONDENT or any other individual or entity asserted by any governmental entity other than the OTS.

(Stipulation at 5).

In September 1993, eight months after the execution of the settlement documents, a Connecticut federal grand jury returned a six-count indictment against Morgan, charging him with two counts of bank fraud, in violation of 18 U.S.C. Sec. 1344, and four counts of misapplying bank funds, in violation of 18 U.S.C. Sec. 657. The charges stem from appellant's alleged misapplication of bank funds with respect to the Summer Street transaction, and his alleged scheme to defraud the bank with respect to the sales of the Buxton Farms Road and Franklin Street properties. All the criminal charges set forth in the indictment stem from the same events addressed by the January 19, 1993 civil Notice of Charges.

Morgan promptly moved to dismiss the indictment as violative of his Fifth Amendment right against double jeopardy. Upon Judge Daly's denial of the motion, Morgan brought this interlocutory appeal. We affirm.

DISCUSSION

Before considering whether the indictment places defendant Morgan twice in jeopardy for the same offense, we note that this interlocutory appeal from a denial of a motion to dismiss on double jeopardy grounds is within the collateral order exception to the rule that appeals may be taken only from final judgments. See Abney v. United States, 431 U.S. 651, 659, 97 S.Ct. 2034, 2040, 52 L.Ed.2d 651 (1977); United States v. Amiel, 995 F.2d 367, 369 (2d Cir.1993); United States v. Helmsley, 864 F.2d 266, 268 (2d Cir.1988), cert. denied, 490 U.S. 1065, 109 S.Ct. 2063, 104 L.Ed.2d 628 (1989). Further, because a motion to dismiss on double jeopardy grounds presents a question of law, we review it de novo. See United States v. Botello, 991 F.2d 189, 192 (5th Cir.1993) (review of denial by district court of motion to dismiss indictment on double jeopardy grounds is de novo ), cert. denied, --- U.S. ----, 114 S.Ct. 886, 127 L.Ed.2d 80 (1994). We turn to the merits.

I Double Jeopardy Waiver

Analysis turns first to whether appellant waived his right to assert a double jeopardy defense to the indictment laid against him. Morgan contends the district court determined in essence that when he entered...

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