U.S. v. Senffner

• Decision Date: 06 February 2002
• Docket Number: No. 00-3764.,00-3764.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Kenneth M. SENFFNER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

280 F.3d 755

UNITED STATES of America, Plaintiff-Appellee, v. Kenneth M. SENFFNER, Defendant-Appellant.

No. 00-3764.

United States Court of Appeals, Seventh Circuit.

Argued March 27, 2001.

Decided February 6, 2002.

COPYRIGHT MATERIAL OMITTED

David E. Bindi (argued), Office of U.S. Atty., Crim. Div., Chicago, IL, for U.S William H. Theis (argued), Terence MacCarthy, Office of Federal Defender Program, Chicago, IL, for Kenneth M. Senffner.

Before POSNER, MANION, and WILLIAMS, Circuit Judges.

WILLIAMS, Circuit Judge.

Kenneth Senffner was convicted of contempt of court, obstruction of justice, and obstruction of a proceeding pending before the SEC, based on his actions in an investment fraud scheme. He appeals, challenging the sufficiency of the evidence to support his conviction for obstruction of an SEC proceeding, and the district court's admission of his prior civil contempt and other conduct not charged in the indictment in evidence. We believe the evidence was sufficient to sustain conviction and that the district court properly admitted the challenged evidence at trial. Therefore, we affirm.

I. BACKGROUND

The saga of Senffner's wheeling and dealing began in 1991. That year John Lauer was hired by the CHA as its employee benefits manager. One of his early tasks was to find insurance for CHA tenants who worked tenant patrol. Capital American, represented by Senffner, answered the call. In making an offer to provide insurance, Senffner sweetened the deal by agreeing to cut Lauer in on his sales commission. But, Lauer did not tell the CHA about the commission agreement when he presented Senffner's offer.

The next year, Lauer was assigned the task of reviewing the CHA's employee health benefits insurance rolls and updating the CHA's record-keeping. Lauer talked with Senffner about the assignment, and Senffner had just the fix. He had a company, called Midwest Medcost, that performed those services, and with another illegal kickback, Lauer sealed the deal with the CHA (again not telling the CHA of the kickback). The CHA then paid $2.4 million to Midwest Medcost for past-due premiums.

Then, the real games began. Lauer knew the CHA was perpetually late in making its insurance payments and that the insurers accepted this practice. With this window (one they were supposed to close), Senffner and Lauer used the money to make short-term investments for themselves. They invested $420,000 in four high-interest CDs with Canadian Trade Bank, a company for whom Senffner was also a sales agent. Both Senffner and Lauer received sales commissions. Unfortunately, the risk, but not the returns, materialized. To make matters worse, Michael Randy, an officer of the company, was arrested and ultimately convicted of racketeering and mail fraud. At the time of his arrest, Randy had Senffner collect the CDs from Lauer and give them to his (Randy's) wife, who promptly reissued them in Lauer's name.

Following this exchange, Senffner was questioned by a Postal Inspector conducting a criminal investigation into Randy and his company. Senffner and Lauer had earlier agreed to conceal their illegal activities if ever questioned. So Senffner lied. He told the inspector and testified at Randy's criminal trial in federal court that he had only sold CDs to Lauer and Alan Hilberg. For the $420,000 of CHA money they invested, Senffner and Lauer got back $22,000. And, to get that amount they submitted false CD certificates in Randy's bankruptcy proceeding.

Later that year, the CHA wanted to create an early retirement program that included a supplemental incentive check and supplemental medical coverage, but the CHA's pension fund provider could not make the extra allowances. Senffner and Lauer had a solution. They created CCI, a limited partnership with no capitalization. The CHA deposited $4.7 million into two accounts, one for supplemental incentives and the other for supplemental medical insurance. Senffner and Lauer controlled the accounts, from which they took $3 million (and later another $200,000) and invested in Legacy Trust. Just like the Canadian Trade Bank debacle, Senffner and Lauer served as sales agents for Legacy Trust and collected commissions on the sale. But Legacy Trust was not reputable either because it was investing in illegal bank instruments. This investment tanked, and Senffner and Lauer lost everything.

In March 1993, Senffner and Lauer made another improper investment in Konex, using $10 million of CHA pension fund money. They had access to this money because Lauer had been promoted to CHA director of benefits and risk management. Initially, they received no commission, but Senffner and Lauer arranged to receive a commission on any trades Konex made with the money. A short time later, they added another $2.5 million to the investment, this time with CHA pension money and CHA money from the CCI and Medcost accounts. Predictably, they lost it all. Konex traded in the same illegal bank investments as Legacy Trust.

Finally, the SEC stepped in to stop these investment schemes. And, on June 21, 1994, the SEC filed a lawsuit seeking civil penalties and interest; a temporary and permanent injunction restraining CCI and Konex from any further securities violations; and a freeze of assets. The district court issued a temporary restraining order ("TRO"), freezing CCI's assets.

Around the same time, the Tennessee Department of Commerce sued Legacy Trust for illegal securities transactions and had the trust assets placed in receivership for the benefit of the victims. The largest victim was CCI, who had lost $3.2 million. On July 5, 1994, the Tennessee Receiver's Office sent a check to CCI for $373,714.91, representing what remained of CCI's loss. Lauer turned the check over to the CHA, but Senffner had the Tennessee Receiver put a stop-payment order on the check and issue a second check to him. Senffner assigned this check to his attorney Glenn Palmer to deposit into his attorney escrow account.

These funds were subject to the TRO that arose out of the SEC lawsuit against CCI. After Lauer discussed the stop-payment order with Senffner, Senffner told him that he intended to make a quick investment, before returning the money, and he asked Lauer to stall. When the SEC discovered Senffner's transfer, they demanded its return, which he eventually returned, pursuant to a civil contempt order issued by the district court. Later, Senffner was charged with contempt of court under 18 U.S.C. § 401(3), obstruction of justice (in relation to the SEC lawsuit) under 18 U.S.C. § 1503, and obstruction of a proceeding pending before the SEC under 18 U.S.C. § 1505. In Senffner's criminal prosecution, the government offered evidence of Senffner's conduct, and the jury convicted him on all three counts. Senffner appeals.

II. ANALYSIS

A. Sufficiency of the Evidence

We begin our analysis with the statute involved. When an individual "corruptly... influences, obstructs, or impedes or endeavors to influence, obstruct, or impede the due and proper administration of the law under which any pending proceeding is being had before any department or agency of the United States," there is a violation of 18 U.S.C. § 1505. Senffner asserts that the evidence was insufficient to sustain his conviction under this statute, arguing that the evidence does not show that he in fact obstructed an SEC proceeding or that he "endeavored" to obstruct an SEC proceeding. We reject both arguments.

In rejecting these arguments, we are mindful of several standards that apply to our analysis. We must consider the evidence in the light most favorable to the government, drawing all reasonable, justifiable inferences in its favor. In connection with that obligation, we will not reweigh the evidence, nor second-guess the jury's credibility determinations. Only when the record contains no evidence from which the jury could find guilt beyond a reasonable doubt, will we overturn the verdict. United States v. Masten, 170 F.3d 790, 794 (7th Cir.1999); see also Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979) (stating the question as whether "any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt" (emphasis in original)).

1. SEC proceeding.

Senffner argues that the evidence was insufficient to convict him of obstruction of a proceeding pending before the SEC, because the SEC had no independent authority to freeze or distribute assets, or to impose civil penalties, but needed to obtain an order from the federal district court. He argues that he only obstructed the district court, not the SEC. His argument is without merit; he obstructed both.

The SEC, as a government agency, can only act through individuals or other instrumentalities using the enforcement mechanisms it has available. These mechanisms may be internal or involve other entities, including the federal courts. Therefore, whenever an entity acting for or at the direct request of an agency has been obstructed, the agency itself has also been obstructed. See, e.g., United States v. Aguilar, 515 U.S. 593, 600, 115 S.Ct. 2357, 132 L.Ed.2d 520 (1995) (recognizing that although no obstruction occurs when an individual lies to FBI agents who might or might not testify before a grand jury, it may occur if the "agents acted as an arm of the grand jury, or indeed that the grand jury had even summoned the testimony of these particular agents"). The fact that an agency cannot perform a particular function itself or through its own labor is of no moment; rather the question is whether the agency proceeding affirmatively, by its specific actions, seeks to have the particular function performed as part of the proceeding.

The purpose of the SEC's initial proceeding,¹ investigating the securities law violations of Lauer, Senffner, and CCI, was not solely to investigate those violations for the sake of exposing them, but also to identify and...