US v. Lytle
| Decision Date | 27 January 1988 |
| Docket Number | No. 87 CR 135.,87 CR 135. |
| Parties | UNITED STATES of America, Plaintiff, v. John R. LYTLE, William G. Patterson and Jere A. Sturgis, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
Anton R. Valukas, U.S. Atty., Joseph J. Duffy, Ted S. Helwig, Mark L. Rotert, Asst. U.S. Attys., Chicago, Ill., for U.S.
John Powers Crowley, James R. Streicker, Mathew F. Kennelly; Cotsirilos, Crowley, Stephenson, Tighe & Streicker, Chicago, Ill., for Lytle.
William T. Huyck, Chicago, Ill., for Sturgis.
John Lytle ("Lytle"), William Patterson ("Patterson") and Jere Sturgis ("Sturgis") have been indicted five times (!) under the federal wire fraud and misapplication of bank funds statutes, 18 U.S.C. §§ 1343 ("Section 1343") and 656, for alleged schemes to defraud Continental Illinois National Bank ("Continental").1 Lytle and Sturgis have now moved to dismiss the fourth and fifth indictments (the first three having already been disposed of) on a variety of grounds.2 Lytle has also moved alternatively (1) to dismiss the fifth indictment for vagueness and (2) for a bill of particulars. For the reasons stated in this memorandum opinion and order, the fourth indictment (the "March Indictment") will be dismissed (but not now), the fifth indictment (the "August Indictment") will not be dismissed, the portion of the August Indictment alleging wire fraud under the socalled "intangible rights" theory is stricken, and a limited bill of particulars is granted.
Defendants were first indicted September 25, 1984 in Case No. 84 CR 726, assigned to this Court's colleague Honorable John Grady. Patterson sought dismissal of the indictment on double jeopardy and other grounds. After Judge Grady had denied that motion in its entirety, our Court of Appeals (782 F.2d 68 (7th Cir.1986)) held the collateral estoppel branch of Patterson's double jeopardy claim could be addressed only through a review of the evidence at his earlier Oklahoma trial.3
Before Judge Grady could implement the Court of Appeals' mandate, he became Chief Judge of our District Court and the case was reassigned to this Court's calendar. This Court's review of the file disclosed a lurking (and inadvertent) Speedy Trial Act problem not previously identified by either Judge Grady or the litigants. That compelled the dismissal of the indictment on July 17, 1986 — but given the unintended nature of the statutory violation, this Court exercised its discretion by ordering dismissal without prejudice (see 18 U.S. C. § 3162(a)(2)).
On November 24, 1986 a new indictment (86 CR 847) was returned by the Special December 1983 Grand Jury. But because that "indictment" turned out to have been issued by a grand jury that — its statutory term having expired — was no longer authorized to conduct business, it too had to be dismissed — again without prejudice (see Appendices to United States v. Lytle, 658 F.Supp. 1321, 1328, 1330 (N.D.Ill.1987)).
On March 3, 1987 the government then obtained the March Indictment4 from the Special December 1986 Grand Jury.5 By that time the statute of limitations had run on some of the counts, and this Court accordingly dismissed those counts (658 F.Supp. at 1325).
L.Ed.2d 292 (1987) limited the scope of the federal mail fraud statute, 18 U.S.C. § 1341 ("Section 1341"), in turn casting doubt on whether some of the counts in the March Indictment had validly alleged violations of Section 1343.6 Rather than merely striking the questionable portions, on August 31, 1987 the government returned to the Grand Jury and obtained what it labels the "superseding" August Indictment.7
Lytle and Sturgis say both the March and August Indictments must be dismissed. Their primary contention is that the differences between the March and August Indictments are so substantial as to require two conclusions:
If those arguments succeed, no more is needed. If either or both fail, defendants advance several fallback positions:
Of course the United States disputes each of defendants' contentions.
Lytle was employed as Vice President in charge of Continental's Mid-Continent Division (March ¶ 5; August ¶ 5). As such he supervised Continental's lending activities for energy development in an area including Oklahoma (March ¶¶ 8-10; August ¶¶ 9-12). Patterson was Vice President in charge of Penn Square's Oil and Gas Division, as well as a director and stockholder of Penn Square's parent First Penn Corporation (March ¶¶ 2, 6, 7; August ¶¶ 2, 6, 7).
Continental and Penn Square entered into participation agreements under which Continental purchased loans (or portions of loans) Penn Square had made to its customers (March ¶ 39, 40; August ¶ 18). Sturgis and entities he controlled were borrowers from Penn Square.
Both indictments allege Lytle and Patterson engaged in a series of transactions from July 1980 through July 1982. Lytle is supposed to have approved a series of loans to Penn Square's customers in violation of Continental's lending policies and prudent banking practices, while Patterson is alleged to have arranged personal loans to Lytle from Penn Square on favorable terms and to have provided other benefits to Lytle.
March ¶ 43 alleges Lytle and Patterson entered into a scheme to defraud Continental that lasted from July 1980 through July 1982. As part of that scheme Patterson is alleged to have approved nine "unsecured loans totalling $585,000, at favorable interest rates" to Lytle (March ¶ 45). Patterson is also charged with (1) obtaining a $565,000 loan for Lytle from Community Bank of Oklahoma ("Community") to help Lytle pay the Penn Square loans, (2) personally paying over $40,000 in interest for Lytle, (3) attempting to conceal that payment and (4) obtaining a $150,000 line of credit for Lytle at the Bank of Healdton ("Healdton") in Oklahoma (March ¶¶ 46-52).
August ¶ 18 alleges Lytle and Patterson engaged in a scheme to defraud Continental that began in July 1981. In keeping with the later date of inception, the indictment charges Patterson approved only four loans to Lytle totalling $385,000 as a part of the scheme (August ¶ 22A). Nevertheless August ¶ 21A alleges the other five loans, without asserting they were approved as part of the scheme. August ¶ 24A also charges Patterson's payment of interest on Lytle's loans and the transactions with Community and Healdton, although the Healdton transaction is called a loan rather than a line of credit.
On the other side (whether "quid" or "quo") of the scheme, the March Indictment charges Lytle with approving a series of 15 specific loans totalling almost $90 million from Continental to Penn Square in violation of Continental's procedures or prudent lending practices (March ¶¶ 69-83). In each instance the indictment specifies not only the amount and recipient of each loan but also the Continental policy Lytle is alleged to have violated (id.). August ¶¶ 22D and 24C allege only that Lytle approved 12 loans totalling $44 million in violation of Continental's policies and prudent banking practices. In addition to charging three fewer loans, the indictment reduces the value of several of the loans.9 Finally, the August Indictment does not specify the Continental policy or prudent practice Lytle is alleged to have violated in approving the individual loans.
Based on its factual allegations the March Indictment charged Lytle and Patterson with (March ¶ 43):
Counts 1 through 11 of the indictment10 then alleged 11 separate telephone or wire communications in furtherance of that scheme in violation of Section 1343. Counts 12 through 16 charge misapplication arising from five of the loans.
August ¶ 18 recast the alleged scheme as one to:
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