United States v. Sutton

• Citation: 795 F.2d 1040
• Decision Date: 11 June 1986
• Docket Number: No. 10-57,10-58.,10-57
• Parties: UNITED STATES of America, Plaintiff-Appellee and Cross-Appellant. v. Robert B. SUTTON, Sutton Investments, Inc., Scurry Oil Company, BPM, Ltd., and Sooner Refining Company, Inc., Defendants-Appellants and Cross-Appellees.
• Court: U.S. Temporary Emergency Court of Appeals

795 F.2d 1040

UNITED STATES of America, Plaintiff-Appellee and Cross-Appellant. v. Robert B. SUTTON, Sutton Investments, Inc., Scurry Oil Company, BPM, Ltd., and Sooner Refining Company, Inc., Defendants-Appellants and Cross-Appellees.

Nos. 10-57, 10-58.

Temporary Emergency Court of Appeals.

Argued October 21, 1985.

Decided June 11, 1986.

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George W. Bramblett, Jr., Charles C. Frederiksen, Eliot D. Shavin, Sharon N. Freytag of Haynes & Boone, Dallas, Tex., for appellant corporate defendants.

Mitchell B. Lansden, Baton Rouge, La., for appellant Robert B. Sutton.

Thomas C. Newkirk, Larry P. Ellsworth, Floyd I. Robinson, Marcia K. Sowles, Beth N. Mizuno, Rodney L. Solenberger, Patricia D. Graham, Erich T. Schwartz, of the Economic Regulatory Admin., Dept. of Energy, Washington, D.C., for appellee, U.S. of America;

Harold E. Kohn, Joseph C. Kohn, Kohn, Savett, Marion & Graf, P.C., Philadelphia, Pa., for amicus curiae Philadelphia Elec. Co.

Philip P. Kalodner, Philadelphia, Pa., for amicus curiae Nat. Freight, Inc., RJG Cab Inc., and Geraldine H. Sweeney.

Alphonse M. Alfano, Robert S. Bassman, Douglas B. Mitchell, Bassman, Mitchell & Alfano, Washington, D.C., for amici curiae, the Petroleum Marketers Ass'n of America and the Jobbers' Group.

James F. Flug, Paula Dinerstein, Lobel, Novins & Lamont, Washington, D.C., for amicus curiae, the States of Ala., Cal., Conn., Idaho, Ill., Ind., Md., Mich., Miss., Mont., Ohio, Vt., Wis., Wyo., and N.Y.

Irwin I. Kimmelman, Atty. Gen. of N.J., Newark, N.J., and Jim Mattox, Atty. Gen. of Tex., Austin, Tex., for amici curiae "The Interested States."

Before GARZA, BROWN, and POINTER,^* Judges.

WESLEY E. BROWN, Judge.

These appeals arise from an action for restitution filed in the Northern District of Oklahoma by the United States against defendant appellants Robert B. Sutton, Sutton Investments, Inc., BPM, Limited, Scurry Oil Company and Sooner Refining Company, pursuant to the provisions of Section 209 of the Economic Stabilization Act ("ESA"), as amended, 12 U.S.C. Sec. 1904 note, as incorporated in Section 5(a)(1) of the Emergency Petroleum Allocation Act ("EPAA"), 15 U.S.C. Sec. 754(a)(1).¹ The government alleged that the defendants, as resellers of crude oil, had, during the period of May, 1976 through January, 1981, miscertified their crude oil sales in violation of the provisions of 10 C.F.R. Secs. 212.131, 210.62(c), and 205.202.

Following a seven week trial before a magistrate and the district court, sitting without a jury, the trial court found that defendants had committed the miscertifications alleged and entered judgment against all defendants, jointly and severally for $423,050,902.92 in restitution to be paid to the United States for distribution to the states for use in energy related programs.² Although Robert Sutton acted in the names of the corporate defendants, the trial court held him to be jointly and severally liable with his corporations because the corporations were merely Sutton's alter egos. In addition, the court found that Sutton himself had engaged in tortious conduct, since he personally caused, or directed the illegal miscertifications.

Defendants appeal the trial court's finding of liability, and the amount of the award of restitution. In addition, they contend that the court erred in refusing to suppress all documents obtained by the government from a grand jury, allegedly in violation of Rule 6(e), Fed.R.Crim. Procedure. Defendants contend that the award to the government was in the nature of a penalty and not restitution, and as such it was barred by the statute of limitations and the doctrines of collateral estoppel and double jeopardy. Defendants also claim that the penalty nature of the claim entitled them to trial by jury, they claim that the certification regulations in question were invalid, and that the one-house legislative veto provisions of the EPAA and EPCA preclude the government's reliance on this legislation.

The United States has cross-appealed on two limited issues. The government claims that the district court erred in reducing the restitution award by excluding overcharges proved through use of certain documents obtained from a grand jury following Sutton's criminal trial in 1982, and by setting off Sutton's losses on some crude oil trades, against the total amount of overcharges.

By leave of court the Philadelphia Electric Company, National Freight, Inc., RJG Cab, Inc., Geraldine H. Sweeney, the Petroleum Marketers Association of America, the Jobbers' Group, and various States of the United States, have appeared as Amici Curiae. These parties have filed briefs presenting differing views as to the appropriate distribution of the restitution funds, without taking any position as to defendants' liability.

I. The Chadha Issue

Defendants have preserved their claim, previously raised in a Motion for Summary Judgment, that the EPCA and the EPAA contain unconstitutional legislative veto provisions, under the ruling in Immigration and Naturalization Service v. Chadha, 462 U.S. 919, 103 S.Ct. 2764, 77 L.Ed.2d 317 (1983). Although defendants are aware of this court's decision reported as Exxon Corp. v. United States Dept. of Energy, 744 F.2d 98 (TECA 1984), cert. denied, ___ U.S. ___, 105 S.Ct. 576, 83 L.Ed.2d 515, they present the issue in this appeal "as there has been no definitive statement by the United States Supreme Court on this issue." The history of the veto provisions which appear within the Economic Stabilization Act of 1970, as well as Section 551, Section 552 of the Energy Policy and Conservation Act, 42 U.S.C. Sec. 6201, note, and our analysis of these provisions in terms of Chadha, have been discussed in the Exxon case and will not be repeated at this point. We find that we have jurisdiction of this appeal, and that the Chadha decision has no effect on any of the issues presented to us in this litigation.

II. Criminal Proceedings

Because of the nature of defendants' claim that the trial court erred in refusing to suppress all documents obtained by the government from the grand jury which returned a criminal indictment against defendants, it is necessary to review in some detail the criminal prosecution and pretrial matters pertaining to the civil litigation which is the subject matter of this appeal.

In October, 1981, a grand jury in the Northern District of Oklahoma returned a 17-count indictment against Robert B. Sutton, BPM, Ltd., and the Scurry Oil Company. The first 15 counts of this indictment were based upon the allegation that defendants were engaged in a fraud scheme whereby approximately 240 million barrels of crude oil were falsely certified under federal Mandatory Price Regulations. Counts 1, 2, and 3 charged violations of the anti-racketeering statutes; Counts 4 through 15 charged violations of the mail and wire fraud statutes; Count 16 alleged obstruction of justice in violation of 18 U.S.C. Sec. 1505 for attempting to destroy subpoenaed records, and Count 17 charged conspiracy to obstruct justice in violation of 18 U.S.C. Sec. 371 for attempting to prevent witnesses from testifying. At the close of the prosecution's evidence, the trial court found that the government had failed to meet its burden of proof on the first 15 counts, and a judgment of acquittal was entered on all of these counts. Upon application by the United States, a writ of mandamus staying entry of the judgment of acquittal was first granted by a three judge panel, United States v. Ellison, 684 F.2d 664, and then denied en banc, 722 F.2d 595 (10 Cir.1982).

Following remand by the Circuit, trial on the remaining Counts 16 and 17 continued. The jury found defendant Robert B. Sutton guilty on Count 17—conspiracy to obstruct justice, but could not reach a verdict on Count 16. A mistrial was declared on that count, and a few weeks later Sutton was retried and convicted on Count 16. United States v. Sutton, 732 F.2d 1483 (10 Cir. 1984). Count 16 grew out of the destruction of BPM corporate records, after they had been subpoenaed in 1978 by the Department of Energy which was conducting an audit of defendants' business activities. The evidence at the criminal trial established that after the subpoena was served, Robert Sutton ordered all of his company records to be collected and moved into storage in Crowley, Louisiana. Shortly thereafter, all of these records were destroyed— by vandals—according to Sutton.³ When Sutton learned one box of records had not been moved into storage, he ordered Gaylord Simon, a BPM employee to destroy it. Simon did not do so—he gave the box to Jack Clothier, Sutton's former business associate, and Clothier's attorney, William Lambert later surrendered the box in response to a grand jury subpoena. United States v. Sutton, supra, 732 F.2d at 1487-1488. This box, sometimes referred to as "The Box", and its contents of BPM invoices covering transactions of 1976 to 1978, were admitted as Exhibit 53 in the criminal trial, and as Exhibit PX1A in this restitution case. It has been previously determined that this box was properly authenticated and admitted into evidence at the criminal trial under the provisions of Rule 901(a) Fed.R.Evid. United States v. Sutton, supra, 732 F.2d at 1490.

The evidence on Count 17—conspiracy to obstruct justice—included taped conversations between Robert Sutton and one Carlos Marcello in which Sutton stated that he wanted Marcello to prevent Lambert and Clothier from talking to the F.B.I. To prove motive, the government offered testimony that Sutton "had bought oil for which there was a ceiling price and sold it as oil for which there was no ceiling price." United States v. Sutton, supra, 732 F.2d at 1488.

III. The Grand Jury Documents. Rule 6(e) Fed.R. Crim.Proc.

Prior to institution of any criminal proceedings against Sutton and his companies, the Department of Energy attempted to...