USA. v. Polichemi

• Decision Date: 05 July 2000
• Docket Number: 96-3868,Nos. 96-3866,96-3867,s. 96-3866
• Citation: 219 F.3d 698
• Parties: (7th Cir. 2000) United States of America, Plaintiff-Appellee, v. Joseph Polichemi, et al., Defendants-Appellants. & 96-3869
• Court: U.S. Court of Appeals — Seventh Circuit

Page 698

219 F.3d 698 (7th Cir. 2000)

United States of America, Plaintiff-Appellee, v. Joseph Polichemi, et al., Defendants-Appellants.

Nos. 96-3866, 96-3867, 96-3868 & 96-3869

In the United States Court of Appeals For the Seventh Circuit

July 5, 2000

On Petition for Rehearing

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Flaum, Rovner, and Diane P. Wood, Circuit Judges.

Diane P. Wood, Circuit Judge.

This case arose out of the government's prosecution of an elaborate financial scam, perpetrated in large part by the four defendants whose cases we consider on the government's petition for rehearing. In our original opinion, United States v. Polichemi, 201 F.3d 858 (7th Cir. 2000), we concluded that the convictions of Joseph Polichemi, Lyle "Pete" Neal, Oscar William Olson, and Charles Padilla on various counts of wire fraud, money laundering, conspiracy, and perjury, had to be overturned. Our reason was that the trial court erroneously failed to grant the defendants' motion to dismiss a certain juror for cause. This in turn forced the defendants to use a peremptory challenge to eliminate her from the jury; they ran out of peremptory challenges; and the court refused to give them any more. Six days after our decision was handed down, however, the Supreme Court decided United States v. Martinez-Salazar, 120 S.Ct. 774 (2000), which rejected the theory on which we had relied. In due course, the government filed a petition for rehearing and the defendants responded. The panel hereby grants the government's petition, vacates Parts I-III of its earlier opinion, and substitutes the following opinion in their place. (We note, however, that the petition for rehearing does not affect case No. 96-3870, the appeal of Larry P. Oesterman. We affirmed Oesterman's sentence in Part IV of our original opinion, which remains undisturbed.) Finding no reversible error other than the juror problem that is governed by Martinez-Salazar, we affirm all four convictions and sentences with two qualifications noted below.

I

We review briefly the general facts relating to the financial frauds at issue here; to the extent that additional details are relevant to particular claims, we mention them there. Polichemi, Neal, Olson, Padilla, and others were the creators of a scheme to market so-called "prime bank instruments" to unsuspecting victim- investors. In fact, the instruments were phony from top to bottom. Nonetheless, the defendants talked a good game, and they described their "prime bank instruments" as multi-million dollar letters of credit that had been issued by the top 50 to 100 banks in the world. They offered these instruments to investors, telling them that they could purchase the paper at a discount and then resell it to other institutions at face value. The difference in price represented the profit to be earned. The trades, sadly, were fictional; there was no market for the trading of these (or any other) letters of credit, and nothing capable of generating profits ever occurred. None of the "investors" earned a cent, but the defendants for a time were living off the fat of the land. Polichemi, for example, wound up in a $6.2 million home in Florida as a result of the scheme; Olson bought a $4.4 million villa nearby; and Neal's luxury of choice was speed boats (he bought eight).

Between 1991 and 1994, the "prime bank instruments" yielded more than $15 million for the defendants. Their largest patsy was the Chicago Housing Authority, which (with the cooperation of the dishonest former director of employee benefits, one John Lauer, who also landed in prison for his part in the arrangement) turned over more than $13 million of its pension funds to the defendants. In all, some 30 investors were victimized. The defendants passed the monies they received through various bank accounts, used some to pay off prior investors and old debts, and spent the rest on themselves.

Each person had a particular role to play. Polichemi was the president of "Copol," a company that supposedly traded in the "prime bank instruments." He held himself out to be one of a handful of people in the world with a license to trade that kind of financial instrument. Neal was president of Konex Holding and Konex Marketing, companies that marketed Copol's "product" through a network of salespeople. Olson served as an attorney for both Copol and Polichemi, in addition to being a participant in many of the deals. Last, Padilla was Copol's "stateside banker." He served as a reference for the other defendants and reassured potential investors that Copol was a sound and successful company.

II

In this section of the opinion, we discuss the many issues relating to the trial and convictions of the four defendants. Some points pertain to all of them, while others are individual in nature.

A. Juror Disqualification

We begin with the point that we are overruling as a result of Martinez-Salazar. During the jury selection process, prospective juror Lorena Nape came up as a potential member of the final jury. As a result of questioning, the parties learned that she was a 15-year employee of the U.S. Attorney's Office for the Northern District of Illinois--precisely the same office from which the prosecuting attorneys came. Based on her affiliation with the prosecutor's office, the defendants moved to strike her for cause. Even though Nape, in response to questions, stated that she could be fair and impartial, the defendants took the position that at a minimum she was excludable on the ground of implied bias. The district court denied their motion, and they then used one of their peremptory challenges to remove her from the jury.

Two different questions are presented by this scenario: the first is whether Nape should have been excluded for cause, and the second is whether an error in that ruling deprives the defendants of any rule-based or constitutional right, if the jury that actually sat was an impartial one. We first address the question whether the district court erred in refusing to strike Nape, because if its ruling was correct, we would have no need to address the Martinez- Salazar issue.

In spite of the government's arguments to the contrary in its petition for rehearing, we continue to be of the view that the implied bias doctrine applies in the particular circumstances of this case, and that it required the disqualification of prospective juror Nape. If she had sat on the final jury, this appeal would be quite different, and we note that Martinez- Salazar rejected the contention that "a defendant is obliged to use a peremptory challenge to cure the judge's error." 120 S.Ct. at 777. But here, Nape did not sit, and we suspect that prudent defense counsel will continue to use peremptory challenges to protect their clients against potentially biased jurors, rather than gambling everything on their ability to show bias after-the-fact and to obtain a reversal of a conviction on this basis.

The concept of implied bias is well-established in the law. Many of the rules that require excusing a juror for cause are based on implied bias, rather than actual bias. For example, a court must excuse a juror for cause if the juror is related to one of the parties in the case, or if the juror has even a tiny financial interest in the case. See, e.g., United States v. Annigoni, 96 F.3d 1132, 1138 (9th Cir. 1996); Getter v. Wal-Mart Stores, 66 F.3d 1119, 1122 (10th Cir. 1995). Such a juror may well be objective in fact, but the relationship is so close that the law errs on the side of caution.

In its decision in United States v. Haynes, 398 F.2d 980, 984 (2d Cir. 1968), the Second Circuit traced the implied bias doctrine back to Chief Justice John Marshall's opinion in United States v. Burr, 25 Fed. Cas. 49 (No. 14692g) (C.C. Va. 1807), one of several opinions in the prosecution of Aaron Burr. There the Chief Justice addressed the ways in which the law strives to assure an impartial jury:

Why is it that the most distant relative of a party cannot serve upon his jury? Certainly the single circumstance of relationship, taken in itself, unconnected with its consequences, would furnish no objection. The real reason of the rule is, that the law suspects the relative of partiality; suspects his mind to be under a bias, which will prevent his fairly hearing and fairly deciding on the testimony which may be offered to him. The end to be obtained is an impartial jury; to secure this end, a man is prohibited from serving on it whose connexion with a party is such as to induce a suspicion of partiality.

22 Fed. Cas. at 50. The Second Circuit later reviewed different grounds on which jurors were excusable for presumptive bias under the common law: kinship, interest, former jury service in the same cause, or because the prospective juror was a master, servant, counselor, steward, or of the same society or corporation. United States v. Haynes, 398 F.2d at 984.

We agree with the United States that government employment alone is not, and should not be, enough to trigger the rule under which an employee is disqualified from serving as a juror in a case involving her employer. But one need not adopt such a broad rule to find a problem in this case. Here, Nape was a long-time employee of the very U.S. Attorney's Office that was conducting the prosecution.

The Supreme Court had no such problem before it in United States v. Wood, 299 U.S. 123 (1936), or in Dennis v. United States, 339 U.S. 162 (1950), on which the government relies. Wood rejected the sweeping proposition that no government employee of any kind, and no recipient of government largesse such as a pension, could sit in any criminal case. Dennis raised a similarly broad challenge to all government employees as jurors, because the defendant there had been charged with failing to comply with a subpoena issued by the House Committee on Un-American Activities. The...