Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-95-06030/USCOURTS-ca10-95-06030-0/pdf.json

Parties Involved:
Larry Baresel
Appellee
John Hudson
Appellee
Jack B. Rackley
Appellee
United States of America
Appellant

Document Text:

.. 

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

. FILED 

VDJted States Court of Appeals 

Tenth Circuit 

PATRICK FISHER 

Clerk 

UNITED STATES OF AMERICA, 

Plaintiff-Appellant 

v. No. 95-6030 

JOHN HUDSON; LARRY BARESEL; 

JACK B. RACKLEY, 

Defendants-Appellees. 

Appeal from the United States District Court 

for the Western District of Oklahoma 

(D.C. No. CR-92-152-T) 

(879 F.Supp. 1113) 

Joseph Douglas Wilson, Criminal Division, Department of Justice, 

Washington, D.C., (Patrick M. Ryan and Timothy W. Ogilvie, U.S. 

Attorneys Office, Oklahoma City, Oklahoma, with him on the 

briefs), for Plaintiff-Appellant . 

B.J. Rothbaum Jr., Linn & Neville, Oklahoma City, Oklahoma (Drew 

Neville, Linn & Neville, Oklahoma City, Oklahoma; Lynn A. Pringle 

and Stephen W. Elliott, Oklahoma City, Oklahoma; James A. Rolfe, 

Dallas, Texas; C. Merle Gile, Oklahoma City, Oklahoma, with him 

on the briefs) for Defendants-Appellees. 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 1 
Before TACHA, LOGAN and REAVLEY,* Circuit Judges. 

REAVLEY, Circuit Judge. 

The United States appeals the dismissal on double jeopardy 

grounds of its criminal indictment against John Hudson, Larry 

Baresel, and Jack B. Rackley ("defendants" or "appellees"). 

Prior to being indicted the defendants had been fined by the 

Office of the Comptroller of the Currency ("OCC"). The 

defendants moved to dismiss the indictment for violating the 

"multiple punishments" prong of the Double Jeopardy Clause. 1 The 

district court granted the motion, concluding that the OCC fines 

were punishment for the same offenses charged in the indictment. 

Because we find that the fines were not punitive, we reverse and 

remand for further proceedings. 

The Honorable Thomas M. Reavley, United States Court of 

Appeals, Fifth Circuit, sitting by designation. 

1The Double Jeopardy Clause of the Fifth Amendment provides: 

"[N]or shall any person be twice put in jeopardy of life or limb. 

" U.S. Const. Amend. V. The Double Jeopardy Clause 

protects against three abuses: (1) a second prosecution for the 

same offense after acquittal; (2) a second prosecution for the 

same offense after conviction; and (3) the imposition of multiple 

punishments for the same offense. United States v. Halper, 490 

u . s . 4 3 5 I 4 4 0 I 1 0 9 s . Ct . 18 9 2 I 18 9 7 ( 19 8 9 ) . 

2 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 2 
PROCEDURAL HISTORY 

In 1989, the OCC issued civil penalties against the 

appellees for alleged banking violations. 2 The OCC maintained 

that the violations caused approximately $900,000 in losses to 

the Federal Deposit Insurance Corporation, and ordered Hudson to 

pay $100,000 and Rackley and Baresel to pay $50,000 each. The 

OCC also issued orders ("prohibition orders") which in essence 

sought to prohibit appellees from all banking activities. 

As a result of the then pending administrative actions 

against them, the appellees and the OCC entered into agreements 

("consent orders") in which Hudson consented to pay $16,600 and 

Rackley and Baresel consented to pay $15,000 each. The appellees 

also agreed not to participate in most, if not all, banking 

activities without prior authorization from the government. In 

addition, each consent order contained a provision ("waiver 

provision") stating that nothing in the consent order constituted 

a waiver of any right the government had to bring other actions 

against the appellee. Hudson's and Baresel's consent orders each 

contained a provision stating that the order "does not constitute 

2 The civil penalties were imposed pursuant to 12 U.S.C. §§ 

93(b) and 504 for alleged violations of 12 U.S.C. §§ 84 and 375b, 

and of 12 C.F.R. §§ 31.2(b) and 215.4(b). 

3 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 3 
an admission" by either "to any of the charges contained" in the 

OCC's notices. 

After the government indicted the defendants for the same 

transactions upon which the OCC sanctions were based, the 

defendants moved to dismiss the indictment. The district court 

initially denied the motion, ruling that the waiver provision was 

a valid waiver of the defendants' double jeopardy claim, and that 

the fines and nonparticipation sanction were solely remedial. 

The defendants appealed, and a prior panel of this court reversed 

in part, affirmed in part, and remanded for further proceedings. 

See United States v. Hudson, 14 F.3d 536 (lOth Cir. 1994) 

( "Hudson I" ) . 

Hudson I first determined that the waiver provision did not 

constitute a waiver of the defendants' double jeopardy rights. 

Id. at 539. The court then affirmed that the prohibition order 

was remedial and therefore did not violate the Double Jeopardy 

Clause. Id. at 540-42. The court concluded, however, that there 

was insufficient evidence in the record to support the district 

court's determination that the money sanctions were solely 

remedial, pointing out that the district court made no findings 

regarding actual losses the government incurred. Id. at 543. 

4 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 4 
The court therefore vacated the district court's decision on the 

money sanctions and remanded for further proceedings. 

On remand the district court conducted an evidentiary 

hearing and found that the government's proven costs were the 

$72,000 the OCC spent pursuing the defendants, but concluded that 

that the OCC monetary sanctions against the defendants were not 

solely remedial. The court found that the fines were imposed for 

the same offenses charged in the indictment, and held that the 

indictment violated the Double Jeopardy Clause. 

ANALYSIS 

The only issue we need to address on this appeal is whether 

the district court erred in determining that the monetary 

sanctions were not solely remedial. 3 We review the district 

court's determination for abuse of discretion. United States v. 

Halper, 490 U.S. 435, 450, 109 S.Ct. 1892, 1902 (1989); United 

States v. Bizzell, 921 F.2d 263, 267 (lOth Cir. 1990). 

Hudson I acknowledged that the case is controlled by Halper, 

which considered when a civil sanction may be considered 

3Because we reverse the case on this issue, we do not 

address whether the monetary sanctions were imposed for the same 

offenses charged in the indictment. 

5 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 5 
punishment for double jeopardy purposes. 4 Under the objective 

test outlined in Halper, a particular sanction is not punishment 

when it bears a rational relation to the goal of compensating the 

government for its loss. Halper, 490 U.S. at 449-51, 109 S.Ct. 

at 1902-03 . The defendant in Halper had overbilled the 

government $585 by submitting 65 false claims. He was convicted 

in a criminal case and received a $5000 fine. The government 

then brought a civil action under the False Claims Act, seeking 

civil penalties of over $130,000, based on the Act's provision 

for a civil penalty of $2000 per false claim submitted. The 

Court held that the fine was grossly disproportionate to the 

damage caused, and was therefore a punishment. The Court 

emphasized that its ruling was "a rule for the rare case," id. at 

449, 109 S.Ct. at 1902, where the civil penalty is "exponentially 

greater than the amount of the fraud," id. at 445, 109 S.Ct. at 

1900, and is "so extreme and so divorced from the Government's 

4The recent Supreme Court case of United States v. Ursery, 

Nos. 95-345 and 95-346, 1996 WL 340815 (U.S. June 24, 1996), 

reaffirms that Halper controls the case at bar. In Ursery, the 

Supreme Court distinguished between cases involving civil fines 

and sanctions, which may constitute punishment under Halper, and 

in rem civil forfeitures, which are neither punishment nor 

criminal for double jeopardy purposes. ~. at *7 - *9. Because 

the case at bar involves civil fines and sanctions, Halper 

controls. 

6 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 6 
damages," id. at 442, 109 S.Ct. at 1898, that it could only be 

characterized as punishment under the Double Jeopardy Clause. 

In the case at bar there was no gross disproportionality 

between the total fines imposed, $44,000, and the proven damages 

to the government, $72,000. 

In United States v. Bizzell, 921 F.2d 263 (lOth Cir. 1990), 

we held that a fine is not punishment unless it is overwhelmingly 

disproportionate to the government's damages. Id. at 267. In 

Bizzell, the Department of Housing and Urban Development ("HUD") 

filed administrative complaints against Charles and John Bizzell. 

The Bizzells entered into settlement agreements with HUD. Both 

agreements prohibited the Bizzells from participating in HUD 

programs for a short period, 5 and John Bizzell agreed to pay a 

$30,000 sanction. When the government subsequently indicted the 

Bizzells for the same transactions set forth in the HUD 

administrative complaint, both defendants moved to dismiss the 

indictment on double jeopardy grounds. The district court ruled 

that the prohibitions were remedial, but concluded that the 

monetary sanction was a punishment because it bore no relation to 

a remedial goal. Id. at 265. This court agreed that the 

5John Bizzell was excluded for two years conditioned upon 

the payment of his fine and Charles for 18 months. Id. at 265. 

7 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 7 
prohibitions were remedial, but disagreed that the monetary 

sanction was a punishment. Id. at 266. 

The Bizzell court read Halper to state that "a civil remedy 

enacted by the government does not rise to the level of 

proscribed 'punishment' unless 'in a particular case a civil 

penalty . . may be so extreme and so divorced from the 

Government's damages and expenses as to constitute punishment.'" 

Id. (quoting Halper, 490 U.S. at 442, 109 S.Ct. at 1898); see 

also Burke v. Board of Gov. of Federal Reserve System, 940 F.2d 

1360, 1367 (lOth Cir. 1991) ("[M]ultiple punishments exist for 

purposes of double jeopardy where 'a civil penalty [is] so 

extreme and so divorced from the Government's damages and 

expenses as to constitute punishment.'" (quoting Halper, 490 U.S. 

at 442, 109 S.Ct. at 1898)), cert. denied 504 U.S. 916, 112 S.Ct. 

1957 (1992). In Bizzell we noted that under Halper the question 

is "whether the civil remedies can be fairly described as 

remedial," Id. at 267, and then applied this objective test to 

the facts before it. The court held that the district court had 

abused its discretion by holding that the $30,000 sanction was 

punitive because "[t]he record simply does not suggest that the 

amount John Bizzell agreed to pay HUD was 'overwhelmingly 

disproportionate to the damages he caused.'" Id. at 267. The 

8 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 8 
court found that the sanction served a remedial goal because "the 

government's losses attributable to John Bizzell far exceeded 

$30,000." Id. 

Following that language in Bizzell, the record in the case 

at bar "simply does not suggest that the amount [the defendants] 

agreed to pay [the OCC] was 'overwhelmingly disproportionate to 

the damages [they] caused.'" And the sanctions can "fairly be 

characterized as remedial" because "the government's losses 

attributable to [the defendants] far exceeded [the amount of the 

fines imposed]." 

If subjective intent of the administrative agency were 

determinative, we would have to conclude that the prohibition 

order, held to be remedial in Hudson I, was punishment, for 

undoubtedly the OCC hoped to deter future violations with that 

penalty also. It is worth stressing that the Halper test 

"constitutes an objective rule that is grounded in the nature of 

the sanction and the facts of the particular case. It does not 

authorize courts to undertake a broad inquiry into the subjective 

purposes that may be thought to lie behind a given judicial 

proceeding." Halper, 490 U.S. at 453, 109 S.Ct. at 1904 

(Kennedy, J., concurring); cf. Hicks v. Feiock, 485 U.S. 624, 

635, 108 S.Ct. 1423, 1431 (1988). 

9 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 9 
Cases in two other circuits are closely on point. In United 

States v. Furlett, 974 F.2d 839 (7th Cir. 1992), an 

administrative law judge sanctioned two futures traders for 

various trading transgressions, stating "it is imperative that 

sanctions be levied against respondents to deter further illegal 

activity and to protect public customers for the type of 

insidious conduct described in this case." Id. at 841 (quoting 

United States v. Furlett, 781 F.Supp. 536, 538 (N.D.Ill. 1991) 

(quoting the ALJ opinion)). In opposing the defendants' motion 

on double jeopardy grounds, the government introduced an 

affidavit delineating the expenses it had incurred in pursuing 

the traders. The district court concluded that the fines were 

remedial for two reasons: they were a form of disgorgement, and 

they were not overwhelmingly disproportionate to the government's 

costs incurred in pursuing the traders. Furlett, 974 F.2d at 

842. 

On appeal, the traders argued that the district court erred 

in upholding the ALJ's sanctions because the ALJ had not, in 

fact, considered the government's loss when he imposed the fine. 

Id . at 843. The appellate court rejected this argument, noting 

that Halper called for an objective inquiry. Id. at 844. The 

court reasoned that merely because the ALJ did not consider the 

10 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 10 
government's loss when imposing the fine does not imply that the 

fine is not related to the government's loss. Id. at 843-44. 

The court held that the fines were remedial largely because they 

were not disproportionate to the damages caused to the 

government. Id. at 843. 

In United States v. WRW Corp., 986 F.2d 138 (6th Cir. 1993), 

WRW corporation was assessed civil penalties of $90,350 for 

violations of safety standards under the Federal Mine Safety and 

Health Act. 6 The officers and directors of WRW were later 

indicted and convicted for these same violations, and they served 

prison sentences and paid criminal fines. After the United 

States brought an action to collect the civil fines that had been 

assessed against the corporation, the defendants moved to dismiss 

on double jeopardy grounds. Relying on Halper, they argued that 

the imposition of civil penalties promoted the aims of 

retribution and deterrence, given the various factors used to 

determine the amount of the civil penalty. 7 The court stated 

6Federal Mine Safety and Health Act of 1977, §§ 2 et seq., 

110 (a), (d), 30 U.S. C. §§ 801 et seq., 820 (a), (d). 

7 These factors included: the operator's history of 

previous violations, the size of the penalty versus size of the 

operator's business, whether the operator was negligent, the 

effect of the penalty on the operator's ability to remain in 

business, and the good faith of the operator to achieve rapid 

11 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 11 
that these factors may as readily be ascribed to remedial as to 

punitive purposes, id. at 141-42, and emphasized that "the fact 

that the Government's expenses may not have been considered when 

assessing the amount of the penalty does not alter the objective 

conclusion by the trial court that the penalty assessed is 

rationally related to the goal of making the Government whole." 

Id. at 142 (citing Furlett, 974 F.2d at 843-44). The court then 

held that the fines were rationally related to the goal of making 

the government whole in large part because the civil fines were 

not excessive in relation to the United States' expenses incurred 

in the investigation and prosecution of the defendants' 

violations. Id. at 142. 

CONCLUSION 

Under Bizzell and Halper, we hold that it was an abuse of 

discretion for the district court to rule that the monetary 

sanctions were not solely remedial. The sanctions were 

rationally related to the government's damages. We therefore 

reverse the order granting the defendants' motion to dismiss and 

remand for further proceedings. 

REVERSED AND REMANDED. 

compliance after notification of a violation. 

(citing 30 U.S.C. § 820(i)). 

12 

Id. at 141, n.1 

Appellate Case: 95-6030 Document: 01019278983 Date Filed: 08/08/1996 Page: 12