U.S. v. Streebing, 92-1154

• Decision Date: 02 March 1993
• Docket Number: No. 92-1154,92-1154
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Steven C. STREEBING, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 368

987 F.2d 368

UNITED STATES of America, Plaintiff-Appellee, v. Steven C. STREEBING, Defendant-Appellant.

No. 92-1154.

United States Court of Appeals, Sixth Circuit.

Argued Jan. 28, 1993.

Decided March 2, 1993.

Jennifer J. Peregord (argued and briefed), Office of U.S. Atty., Detroit, MI, for plaintiff-appellee.

Edward Wishnow (argued and briefed), Southfield, MI, for defendant-appellant.

Before: KENNEDY and GUY, Circuit Judges; and BROWN, Senior Circuit Judge.

KENNEDY, Circuit Judge.

Defendant Steven C. Streebing appeals his jury conviction and sentence for mail fraud and for making false and material statements and representations on applications he submitted to the Social Security Administration for disability insurance benefits. The following issues are raised on appeal: (1) whether the District Court erred in failing to utilize its supervisory powers to dismiss the indictment in light of the government's alleged promise not to indict the defendant if he cooperated; and (2) whether the District Court erred in imposing restitution based on the entire mail fraud scheme in the absence of a finding of guilty for each of the mailings pursuant to that scheme. For the reasons set forth below, the defendant's convictions are affirmed, the restitution component of the sentence is vacated in part, and this case remanded for resentencing.

I.

On October 8, 1985, defendant, an employee of General Dynamics Land Systems ("General Dynamics"), was temporarily reassigned from his engineering position to the production area of the plant. Citing fears evoked by reason of a previous injury, defendant told the occupational health nurse that he did not want to work in tool and die. Defendant was sent home that same day when he said he was sick. Claiming total disability due to depression and other psychological problems caused by the job reassignment, defendant applied for, and began receiving, sickness and accident benefits (SAB) from General Dynamics. ¹ From November 1985 to April 1986, defendant received approximately $7,439.90 in sickness and accident benefits from Aetna Insurance Company, General Dynamics' insurance carrier. Defendant also applied for and began receiving long-term disability (LTD). From April 1986 to January 1989, defendant received approximately $43,261.54 in long-term disability benefits from Aetna.

In May of 1986, defendant applied for social security disability benefits and filled out a social security disability report. The application for disability asked the applicant to enter the names and addresses of all persons, companies, and agencies for whom the applicant had worked "this year, last year, and the year before." Defendant's answer was "General Dynamics." The application also asked whether the applicant was "self-employed this year, last year, or the year before." Defendant responded "no." Defendant's application was denied, and on October 23, 1987, defendant made out another application for social security benefits and an accompanying disability report. His answers to the questions pertaining to his employment activity were the same as on the first application. Again defendant's request was denied. After filling out another application in December of 1987, defendant was finally awarded social security benefits. Between December of 1987 and August of 1989, defendant received social security benefits totalling $14,115.00.

The evidence adduced at trial showed that shortly after defendant began receiving sickness and accident benefits from Aetna, he formed a corporation, Valhala Music, to create and market computer software for the music industry. Defendant was president of the corporation and owned 51% of its stock. During the entire time that defendant was receiving long-term disability and social security benefits, he was actively involved in the operations of Valhala, including creating, advertising, and marketing the software. The corporation was operated out of defendant's home for which Valhala paid a substantial portion of the upkeep and expenses. ²

On April 26, 1991, defendant was charged with nine counts of mail fraud and three counts of making false statements in connection with an alleged scheme to defraud the Social Security Administration and Aetna Life Insurance Company of disability benefits. On August 24, 1989, about a year and eight months before this indictment was returned, defendant was interviewed at his home by an agent from the Federal Bureau of Investigation, an investigator for the Department of Health and Human Services, and an investigator for General Dynamics. This interview was conducted as part of the investigation into what appeared to be defendant's falsification of his status as totally disabled. The first hour and one half of the interview was videotaped by defendant.

The recording establishes that during the interview, defendant made inculpatory statements and admissions with respect to activities charged in the indictment. Prior to trial, defendant filed a motion to dismiss the indictment alleging that the FBI agent told defendant "both directly and impliedly that if he cooperated and made a statement and told the agent what he wanted to hear, there would be no prosecution and there would [be] no indictment." The District Court denied the motion.

At trial, defendant was acquitted on Counts 1, 3, 4 and 5, and was found guilty on four mail fraud counts (8, 9, 11 and 12) and on three counts of making false statements to the Social Security Administration (2, 6, and 7). ³ On January 24, 1992, defendant was sentenced to concurrent terms of five (5) months imprisonment on each count, three (3) years supervised release, and was ordered to make restitution to Aetna and the Social Security Administration in the amount of $64,816.44. This timely appeal followed.

II. Dismissal of the Indictment

Defendant first argues that the District Court erred in failing to dismiss the indictment. Defendant contends that during the course of the August 24, 1989 interview, a special agent of the FBI promised the defendant he would not be prosecuted if he cooperated in making a statement. During the course of the taped portion of the interview between defendant and the investigators, the following exchange took place:

JAY SIEGER (FBI): Ok, then, if you want to resolve it, when this man [referring to John Pollock of HHS] asks you why you put none [referring to Streebing's answer to a question about his earnings or self-employment income on his social security application forms], then you gotta tell him--I put none because I knew if I would have put something down there I wouldn't have got the benefits. That's what you gotta tell him.

JOHN POLLOCK (HHS): And not

STREEBING: And then it won't go to court? And then

POLLOCK: No, let me put, let me put

STREEBING: I just reimburse you guys, or whatever? or ah

POLLOCK: Steve, your gonna reimburse us, ok

STREEBING: Can I, but will I be able to do it without going to court? or will

POLLOCK: I don't know that, I'm not a jury. All I am is an investigator.

SIEGER: You're not gonna be indicted, you're not going to be indicted. Ok, if we go back to the United States Attorney's office and we tell him, here's what we did, we went out and talked to this guy, he acknowledged what he did, he acknowledged violating federal law, ok, now Mr. Prosecutor, do you want to prosecute this man or not, that's gonna be his decision. If I go to him, after I, if you let me walk out of here today, and I go out and prove what I know we can prove, I'll guarantee you what will happen when we walk out with him. You're gonna be prosecuted one way or another, Steve, you're gonna have to face that, ok. You're either gonna be, we're either gonna go and ask for an indictment against you, or you're gonna come down and resolve it prior to that time. By your telling us what you're telling me today, and John today, is that you don't want to resolve it at this time. You'd rather wait until after charges are brought against you and then resolve it.

(Emphasis added). Defendant maintains that because he cooperated, the government was obligated to fulfill its part of the bargain and because it did not, the District Court should have dismissed the indictment.

The power of a district court to dismiss a grand jury indictment under the supervisory powers doctrine is premised on the inherent ability of the federal courts to formulate procedural rules not specifically required by the Constitution or Congress to supervise the administration of justice. See United States v. Isgro, 974 F.2d 1091, 1094 (9th Cir.1992); United States v. Talbot, 825 F.2d 991, 998 (6th Cir.1987), cert denied, 484 U.S. 1042, 108 S.Ct. 773, 98 L.Ed.2d 860 (1990) (the courts retain inherent supervisory authority over the law enforcement processes which culminates in the criminal proceedings brought before them). In order to invoke this power, a court must first find that the defendant is actually prejudiced by the misconduct. Id. In accepting the magistrate judge's report and recommendation that the indictment in this case should not be dismissed, the District Court stated:

As [the] Magistrate ... correctly noted in his Report and Recommendation, the court should not dismiss an indictment absent a showing that defendant "was demonstrably prejudiced by the violation." United States v. Talbot, 825 F.2d 991, 998 (6th Cir.1987). Even assuming the FBI agent told defendant he would not be prosecuted if he cooperated (an assertion which the government strongly contests) dismissal of the indictment is a drastic remedy, which is appropriate only in truly egregious cases. See United States v. Morrison, 449 U.S. 361, 101 S.Ct. 665, 66 L.Ed.2d 564 (1980 [1981]. Defendant has failed to show any such prejudice in this case.

The District Court based its decision that there was no prejudice on the government's stipulation that none of the statements made by defendant at the interview with the agents would be...