US v. Gressett, 91-40001-04 to 91-40001-06.

• Decision Date: 08 August 1991
• Docket Number: No. 91-40001-04 to 91-40001-06.,91-40001-04 to 91-40001-06.
• Court: U.S. District Court — District of Kansas
• Parties: UNITED STATES of America, Plaintiff, v. Ray A. GRESSETT, James E. Savage and R.J. Fellows, Defendants.

773 F. Supp. 270

UNITED STATES of America, Plaintiff, v. Ray A. GRESSETT, James E. Savage and R.J. Fellows, Defendants.

No. 91-40001-04 to 91-40001-06.

United States District Court, D. Kansas.

August 8, 1991.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Lee Thompson, U.S. Atty., Wichita, Kan., Richard L. Hathaway, Asst. U.S. Atty., Topeka, Kan., for U.S.

Warren Lyon (for Rule 5 only), Jim Burnham, Dallas, Tex., Stephen W. Cavanaugh, Fisher, Cavanaugh & Smith, P.A., Topeka, Kan., for Ray A. Gressett.

Thomas D. Haney, Topeka, Kan., Robert C. Bennett, Houston, Tex., for James E. Savage.

Marilyn M. Trubey, Asst. Federal Public Defender, Topeka, Kan., for R.J. Fellows.

MEMORANDUM AND ORDER

ROGERS, District Judge.

On July 26, 1991, the court held a hearing on a number of pretrial motions filed by the defendants. The purpose of this memorandum and order is to memorialize the rulings made by the court at the hearing and to address the unresolved motions. In resolving these motions, the court recognizes, pursuant to the order of the magistrate judge, that each defendant is deemed to have joined in all motions not "opted out" of within three days after filing. The court notes that none of the defendants has opted out from the motions filed by co-defendants. Accordingly, the rulings on all of the motions shall apply to all of the defendants.

The remaining defendants, Ray A. Gressett, James E. Savage and R.J. Fellows, are charged in a thirteen-count indictment. All of the counts concern the defendants' involvement with transactions with Peoples Heritage Federal Savings and Loan Association (Peoples). In count 1, the defendants are charged with conspiracy to defraud the United States and to commit crimes against the United States in violation of 18 U.S.C. § 371. In counts 2 to 10, the defendants are charged with bank fraud in violation of 18 U.S.C. § 1344(2). In counts 11 to 13, the defendants are charged with making a false statement to the United States in violation of 18 U.S.C. § 1001.

GRESSETT'S MOTIONS

Motion to Dismiss Indictment or, in the Alternative, to Strike the Surplusage (Doc. # 131)

Defendant Gressett moves to dismiss the superseding indictment because it charges the defendants with violations of unspecified civil banking regulations and internal banking policies and is therefore inadequate to sustain criminal liability. He further asserts that the indictment is unconstitutionally vague in charging the unspecified violations of regulations and policies. Alternatively, defendant asks that all references to alleged violation of regulations and internal banking policies be stricken as surplusage, specifically paragraphs 3, 5, 6, 8, 9, 10 and 11.

The government contends that the defendants are not charged with violating a criminal law on the basis of civil regulatory violations. The government asserts that the defendants are charged with committing fraud by conspiring to conceal material information from Peoples, an intentional and knowing action designed to deprive Peoples of the ability to make loan decisions on the basis of complete and relevant information.

The charges are not subject to dismissal. First, the government has adequately charged the defendants with conspiring to intentionally conceal affiliate interests in loans made by Peoples. United States v. Frost, 914 F.2d 756 (6th Cir.1990); United States v. Walker, 871 F.2d 1298 (6th Cir. 1989). Second, the government has adequately charged the defendants with bank fraud and false statements to a federal agency. In sum, the superseding indictment adequately sets forth the elements of the offenses charged and apprises the defendants of the nature of the crimes charged.

In the alternative, the defendant has asked that all references to alleged violations of regulations and internal banking policies be stricken as surplusage. The court may strike surplusage in an indictment. Fed.R.Crim.P. 7(d). A motion to strike surplusage is addressed to the sound discretion of the court. United States v. Collins, 920 F.2d 619, 631 (10th Cir.1990). A motion to strike surplusage should be granted only if the disputed allegations are clearly not relevant to the charge and are inflammatory and prejudicial. Id.

The government contends that the reference to violations of federal regulations and internal policies and procedures is relevant to the defendants' intent and motive in structuring the transactions as they did. We agree. Accordingly, this alternative motion shall be denied.

Second Motion to Dismiss Indictment or, in the Alternative, to Strike the Surplusage (Doc. # 132)

Defendant moves to dismiss the superseding indictment because it charges the defendants with violating their "fundamental duties" to Peoples, none of which can result in criminal liability. He further asserts that the indictment is unconstitutionally vague in charging unspecified violations of the defendants' fundamental duties. Alternatively, defendant asks that all references to defendants' "fundamental duty" to Peoples be stricken as surplusage.

The government makes the same arguments as it made in the preceding motion. The government asserts that the defendants are not charged with a mere breach of fiduciary duties, but rather with committing fraud by conspiring to conceal material information from Peoples.

Again, we believe that the indictment is sufficient. A fair reading of the indictment, as a whole, reveals that the charges in the indictment are not founded upon defendants' fiduciary breaches, but rather are founded upon defendants' actions in conspiring to conceal affiliate interests in various loans.

Defendant's alternative motion to strike surplusage shall also be denied. The references to defendants' violations of fundamental fiduciary duties are relevant to the defendants' intent and motive in structuring the transactions in the way they did.

Third Motion to Strike Surplusage (Doc. # 133)

Defendant seeks to strike the following statement from paragraph 57 of the superseding indictment as surplusage: "proceeds of this $4,520,000 loan would be diverted through a sham sale of property." Defendant contends that these words are not essential to the offense charged and are prejudicial.

This description is relevant to the government's case. See United States v. Sciandra, 529 F.Supp. 320, 322 (S.D.N.Y.1982). Accordingly, the motion shall be denied.

Fourth Motion to Strike Surplusage (Doc. # 134)

Defendant seeks to strike the following statement from paragraph 18A of the superseding indictment as surplusage: "by obstructing and defeating by deceitful and dishonest means." Defendant contends that these words are not essential to the offense charged and are prejudicial.

Deceit and dishonesty are the essence of the government's charges. Accordingly, the use of these words is relevant to the government's case. See United States v. Walker, 871 F.2d 1298, 1307 (6th Cir.1989). This motion shall be denied.

Fifth Motion to Strike Surplusage (Doc. # 135)

Defendant seeks to strike the words "nominee borrower" from paragraphs 29, 42, 48, 69 and 79 as surplusage. Again, defendant contends that these words are not essential to the offenses charged and are prejudicial.

The government asserts that they will demonstrate at trial that the defendants accomplished their fraud through transactions involving nominee borrowers. Accordingly, this language is relevant to the government's case, and the motion shall be denied.

Sixth Motion to Strike Surplusage (Doc. # 136)

Defendant seeks to strike the words "concealment," "concealed," and "concealing" from paragraphs 16, 22, 26, 29, 30, 32, 33, 36, 42, 48, 50, 53, 56, 61, 67, 72, 74, 77, 79 and 85 of the superseding indictment as surplusage. Again, defendant asserts that these words are not essential to the offenses charged and are prejudicial.

Again, the government contends that they will demonstrate at trial that the defendants accomplished their fraud through concealment of their transactions. Accordingly, this language is proper and should not be stricken.

Motion to Dismiss Counts 1, 2 and 10 (Doc. # 152)

Defendant seeks dismissal of counts 1, 2 and 10 because Peoples Financial Mortgage Company is not a federally chartered or federally insured financial institution. The defendant argues that Peoples Financial is a holding company or a subsidiary, and 18 U.S.C. § 1344 was not extended to cover holding companies and subsidiaries of federally insured financial institutions until August 9, 1989.

The government asserts that Peoples Financial was a subsidiary of Peoples and was its alter ego. The government argues that 18 U.S.C. § 1344 covers the charges contained in counts 1, 2 and 10 because all the misrepresentations contained in these counts were ultimately made to Peoples, a federally insured financial institution. We agree. Defendant's motion to dismiss counts 1, 2 and 10 shall be denied.

Motion to Dismiss Indictment for Failure of the Government to Comply with the Pretrial Order of May 15, 1991 (Doc. # 161)

Defendant seeks dismissal of the indictment because the government has failed to comply with a portion of the pretrial order of May 15, 1991. Defendant contends that the government has not produced a complete set of documents concerning the following matters which were ordered to be produced: (1) Jenkens & Gilchrist files relating to transactions contained in the Indictment; (2) reports of examinations conducted by OTS, FHLBB of Topeka and Dallas, RTC, FDIC, or FSLIC; (3) loan committee minutes of Peoples, minutes of all meetings of Peoples Financial Mortgage Corp., minutes and director's packets for board of directors of Peoples Heritage Federal Savings & Loan.

The government responded at the hearing that it has supplied all of the materials ordered by the magistrate judge and this court. The government points out that the defendants are unable to show that any documents or information have been with-held.

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