Source: https://law.justia.com/cases/federal/appellate-courts/F2/809/397/385760/
Timestamp: 2019-10-15 00:11:20
Document Index: 631044775

Matched Legal Cases: ['§ 371', '§ 2314', '§ 2', '§ 2', '§ 371', '§ 2314', '§ 2315', '§ 1005', '§ 656', '§ 2', '§ 2315']

United States of America, Plaintiff-appellee, v. David Bruun and Ronald Berkovitz, Defendants-appellants, 809 F.2d 397 (7th Cir. 1987) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Seventh Circuit › 1987 › United States of America, Plaintiff-appellee, v. David Bruun and Ronald Berkovitz, Defendants-appell...
United States of America, Plaintiff-appellee, v. David Bruun and Ronald Berkovitz, Defendants-appellants, 809 F.2d 397 (7th Cir. 1987)
US Court of Appeals for the Seventh Circuit - 809 F.2d 397 (7th Cir. 1987) Argued Dec. 11, 1986. Decided Jan. 13, 1987. Rehearing Denied March 9, 1987 in No. 85--1311
This is an appeal from judgments of conviction against the defendants on one count of conspiracy to commit offenses against the United States, in violation of 18 U.S.C. § 371 (1982), and several substantive counts involving: (1) the transportation of stolen securities in interstate commerce in violation of 18 U.S.C. § 2314, (2) aiding and abetting the willful misapplication of the moneys, funds and credits of a federally insured bank in violation of 18 U.S.C. §§ 2 and 656, and (3) aiding and abetting the making of false entries in the books, reports, or statements of such a bank in violation of 18 U.S.C. §§ 2 and 1005. For the reasons stated herein, we will affirm in part and reverse in part.
Defendants Berkovitz and Bruun, along with Giova, Bontkowski, Rabin, Adamczyk, Babian and Wade, were indicted by a grand jury in a multi-count indictment charging conspiracy to commit offenses against the United States, in violation of 18 U.S.C. § 371, and several substantive counts involving: (1) the transportation of stolen securities in interstate commerce, (2) misapplication of the moneys, funds and credits of a federally insured bank, and (3) the making of false entries in the books, records and statements of such a bank.5 Giova pled guilty to some of the counts and was not tried on the others. Berkovitz and Bruun were tried together, despite their motions for severance, which the district court continued until the close of the case and then denied. Additionally, both moved to dismiss the indictment on the basis that it was duplicitous and stated multiple conspiracies in a single count. Bruun filed a motion in limine to exclude statements he had made to the FBI and an Assistant United States Attorney, which motion was also denied.
Defendant Berkovitz raises a number of challenges to his conviction. He claims that there was insufficient evidence to support his convictions under the substantive counts. With regard to the conspiracy count, he claims that there was a fatal variance between the indictment and proof, that the count was duplicitous, and that there was a misjoinder under Fed. R. Crim. P. 8. Additionally, he contends that the district court's refusal to grant a severance was an abuse of discretion in light of his and Bruun's "mutually antagonistic" defenses. Finally, Berkovitz contends that his conviction must be reversed as a result of outrageous conduct on the part of the government. We agree that there was insufficient evidence as to the counts involving interstate transportation of stolen securities, but we find his other contentions to be without merit. Therefore, we will reverse his convictions on counts two through four (interstate transportation of stolen securities), but we will affirm his convictions on count one (conspiracy), counts five through seventeen and nineteen (misapplication) and count twenty (false entries).
Counts 2, 3, and 4 of the indictment charged that Berkovitz "transported and caused to be transported" in interstate commerce certain securities on February 18, March 11, and March 26, 1982, "knowing the same to have been stolen, converted and taken by fraud," in violation of 18 U.S.C. § 2314.6 Berkovitz argues that the evidence adduced at trial does not support his convictions on these counts. We agree.
The evidence was quite clearly enough to support a finding that Berkovitz knew that the securities he was using as collateral for the loans were stolen,7 but that is not sufficient to support a conviction for violating Sec. 2314. Berkovitz was not indicted for knowing receipt or negotiation of stolen securities, which would have been punishable under 18 U.S.C. § 2315,8 but rather for transporting them, or causing their transportation in interstate commerce. The receiver of an item is not, by virtue of that fact alone, considered to have transported it in interstate commerce.
The government might have been able to provide the requisite causal link had it shown that Berkovitz brought or induced another to bring the securities to Chicago, but it did not do so. In fact, the government conceded at oral argument before us that no such proof was made. Nonetheless, the government contends that the fact that the securities were delivered in Chicago a short time after their theft in New York, along with Berkovitz's knowledge that they were received from someone who did not hold valid title, supplies the missing proof. At oral argument, the government pressed the theory that, by providing a ready market for the stolen securities, Berkovitz "caused" their transportation. We cannot agree, for to do so would obliterate the distinction between Sec. 2314 and Sec. 2315. See United States v. Greer, 467 F.2d 1064, 1068 (7th Cir. 1972), cert. denied, 410 U.S. 929, 93 S. Ct. 1364, 35 L. Ed. 2d 590 (1973).
Furthermore, while interstate commerce has been broadly defined in other contexts, see, e.g., Wickard v. Filburn, 317 U.S. 111, 63 S. Ct. 82, 87 L. Ed. 122 (1942), this is a criminal action, which calls for precision in terminology. An individual must be adequately informed of the nature of the offense. Under the facts of this case, we cannot say that a conviction for transporting or causing the transportation of stolen securities was supported by evidence which, at best, showed knowing receipt of stolen securities. Therefore, Berkovitz's convictions on counts 2, 3 and 4 are reversed.9
Berkovitz's essential contention is that there were multiple conspiracies, rather than a single, overall conspiracy. He claims that this resulted in a variance between the indictment and proof, which prejudiced him and rendered the joinder of the separate counts improper under Fed. R. Crim. P. 8.10 We disagree.
As an initial matter, it appears to us that there was in fact a single conspiracy, the object of which was to defraud FNBC. That the means used to accomplish this goal were varied does not change the result. The gist of a conspiracy is an agreement among the conspirators to commit an offense, attended by an act of one or more of them to effect the object of the conspiracy. Braverman v. United States, 317 U.S. 49, 53, 63 S. Ct. 99, 101, 87 L. Ed. 23 (1942); United States v. Falcone, 311 U.S. 205, 61 S. Ct. 204, 85 L. Ed. 128 (1940); see also United States v. Percival, 756 F.2d 600, 606-09 (7th Cir. 1985); United States v. Ras, 713 F.2d 311, 314-15 (7th Cir. 1983); United States v. Greer, 467 F.2d 1064, 1071 (7th Cir. 1972), cert. denied, 410 U.S. 929, 93 S. Ct. 1364, 35 L. Ed. 2d 590 (1973); United States v. Varelli, 407 F.2d 735, 741-42 (7th Cir. 1969), appeal after remand, United States v. Saletko, 452 F.2d 193 (1971), cert. denied, 405 U.S. 1040, 92 S. Ct. 1311, 31 L. Ed. 2d 581 (1972). The scope of the agreement determines the scope of the conspiracy, Varelli, 407 F.2d at 742, and there may be a single conspiracy even though the commission of two or more offenses is contemplated. Braverman, 317 U.S. at 53, 63 S. Ct. at 102. The allegation in a single count of a conspiracy to commit several crimes is not duplicitous. Id. at 54, 63 S. Ct. at 102; United States v. Knox Coal Co., 347 F.2d 33, 39 (3d Cir.), cert. denied, 382 U.S. 904, 86 S. Ct. 239, 15 L. Ed. 2d 157 (1965); United States v. Lutwak, 195 F.2d 748, 753 (7th Cir. 1952), aff'd on other grounds, 344 U.S. 604, 73 S. Ct. 481, 97 L. Ed. 593 (1953).
Proper joinder is determined from the face of the indictment. United States v. Harrelson, 754 F.2d 1153, 1176 (5th Cir.), cert. denied, --- U.S. ----, 106 S. Ct. 277, 88 L. Ed. 2d 241 (1985); United States v. Bledsoe, 674 F.2d 647, 655 (8th Cir.), cert. denied, 459 U.S. 1040, 103 S. Ct. 456, 74 L. Ed. 2d 608 (1982). Therefore, if the indictment charged a single conspiracy, joinder was proper notwithstanding the fact that the evidence at trial showed multiple conspiracies. See United States v. Sutherland, 656 F.2d 1181, 1190 n. 6 (5th Cir.), cert. denied, 455 U.S. 949, 991, 102 S. Ct. 1451, 1617, 71 L. Ed. 2d 663 (1981). We believe that such a single conspiracy was alleged by the indictment in the instant case,11 even if the government proved multiple conspiracies at trial.
It is clear that reversal for improper joinder is not required if the error was harmless. An error involving misjoinder requires retrial only if it results in actual prejudice because it had a substantial and injurious effect or influence in determining the jury's verdict. United States v. Lane, --- U.S. ----, 106 S. Ct. 725, 88 L. Ed. 2d 814 (1986). Here, quite clearly, any erroneous joinder was harmless. Even if there were, as Berkovitz contends, multiple "wheel" conspiracies, the evidence showed clearly that he was at the hub of each. Cf. United States v. Levine, 546 F.2d 658, 662 (5th Cir. 1977) (When unrelated transactions involving several defendants are joined together it cannot be said that all defendants would not be prejudiced.). We note that Levine adopted a per se prejudice standard for joinder errors, and thus has been effectively overruled by the Supreme Court's recent decision in Lane.
Any variance between the indictment and proof was harmless for a similar reason. While the charging of one conspiracy where the evidence shows multiple conspiracies is error, Kotteakos v. United States, 328 U.S. 750, 66 S. Ct. 1239, 90 L. Ed. 1557 (1946), the error is harmless where the defendant is shown to have been a member of each of the allegedly separate conspiracies. United States v. Noble, 754 F.2d 1324, 1330 (7th Cir.), cert. denied, U.S. ----, 106 S. Ct. 63, 88 L. Ed. 2d 51 (1985); United States v. Chamley, 376 F.2d 57, 60 n. 5 (7th Cir.), cert. denied, 389 U.S. 898, 88 S. Ct. 221, 19 L. Ed. 2d 220 (1967); see also United States v. Lindsey, 602 F.2d 785, 787 (7th Cir. 1979) (fact that defendant could not have been part of overall conspiracy charged did not require reversal unless he was prejudiced by submission of overall conspiracy theory to jury). As we have noted, the evidence overwhelmingly showed that, if separate conspiracies were involved, Berkovitz was at the hub of each. In such a situation, the error, if any, was harmless.
A related, but distinct, issue is whether the district court should have granted Berkovitz's motion for a severance under Fed. R. Crim. P. 14, in light of Bruun's defense that he was merely following Berkovitz's instructions and was unaware of any illegal activity, i.e., that he was "conned" by Berkovitz.12 A refusal to grant a severance will be disturbed on appeal only if it results in manifest and substantial prejudice; in other words, it is reviewable only for abuse of discretion. United States v. Gironda, 758 F.2d 1201, 1220 (7th Cir.), cert. denied, --- U.S. ----, 106 S. Ct. 523, 88 L. Ed. 2d 456 (1985); see also United States v. Shively, 715 F.2d 260, 267 (7th Cir. 1983), cert. denied, 465 U.S. 1007, 104 S. Ct. 1001, 79 L. Ed. 2d 233 (1984); United States v. Sotomayor, 592 F.2d 1219, 1227-28 (2d Cir.), cert. denied, 442 U.S. 919, 99 S. Ct. 2842, 61 L. Ed. 2d 286 (1979). Such prejudice cannot be shown here.
Berkovitz argues that his defense and that of his codefendant were "mutually antagonistic." However, such a claim will only justify severance if the defenses "conflict to the point of being irreconcilable and mutually exclusive," Shively, 715 F.2d at 268 (quoting United States v. Crawford, 581 F.2d 489, 491 (5th Cir. 1978)), so that "acceptance of one defendant's defense will preclude the acquittal of the other defendant." Gironda, 758 F.2d at 1220.
The defenses in this case show little antagonism at all, much less the sort of drastic conflict that would justify our interfering with the district court's exercise of its sound discretion. Berkovitz contended that the government failed to prove him guilty beyond a reasonable doubt; Bruun contended that the guilt, if any, belonged to Berkovitz rather than him. In Gironda, we rejected a contention that a defense based on non-participation in a conspiracy was inconsistent with a defense that the government failed to prove its case, even if one defendant's counsel made a remark in opening argument that implied the existence of a conspiracy. 758 F.2d at 1220 (citing United States v. Petullo, 709 F.2d 1178 (7th Cir. 1983)).13 Those authorities are controlling here. While there was no doubt some hostility and finger pointing during the joint trial, this alone is insufficient to justify granting a severance. See United States v. Harris, 542 F.2d 1283, 1313 (7th Cir. 1976); United States v. Hutul, 416 F.2d 607, 620-21 (7th Cir. 1969), cert. denied, 396 U.S. 1012, 90 S. Ct. 573, 24 L. Ed. 2d 504 (1970).
Berkovitz challenges his conviction on the misapplication counts (counts 5-17, 19), not because there was insufficient evidence that he aided and abetted Giova. Instead, he contends that there was insufficient evidence that Giova misapplied bank funds. This contention is without merit. As we have noted before, an appellant who challenges the sufficiency of the evidence to sustain a jury verdict of conviction bears a heavy burden; we may only overturn such a verdict where the record contains no evidence, regardless of how it is weighed, from which the jury could find guilt beyond a reasonable doubt. United States v. Redwine, 715 F.2d 315, 319 (7th Cir. 1983), cert. denied, 467 U.S. 1216, 104 S. Ct. 2661, 81 L. Ed. 2d 367 (1984) (citing United States v. Garcia, 562 F.2d 411, 414 (7th Cir. 1977), and Brandom v. United States, 431 F.2d 1391, 1400 (7th Cir.), cert. denied, 400 U.S. 1022, 91 S. Ct. 586, 27 L. Ed. 2d 634 (1970)); see also United States v. Reynolds, 801 F.2d 952, 954 (7th Cir. 1986) (evidence reviewed in light most favorable to government and verdict sustained if any rational trier of fact could have found guilt beyond a reasonable doubt). Berkovitz has not sustained this burden.
The evidence that Giova misapplied bank funds is, in a word, overwhelming. A bank officer misapplies funds when, inter alia, he converts funds to his own use or that of a third party, lends money to a fictitious borrower, causes a loan to be made to his own benefit while concealing his interest from the bank, or violates state law or bank policy. See, e.g., United States v. Mohr, 728 F.2d 1132, 1134 (8th Cir.), cert. denied, 105 S. Ct. 148, 83 L. Ed. 2d 87 (1984); United States v. Shively, 715 F.2d 260, 265-66 (7th Cir. 1983), cert. denied, 465 U.S. 1007, 104 S. Ct. 1001, 79 L. Ed. 2d 233 (1984); United States v. Krepps, 605 F.2d 101, 103 (3d Cir. 1979); United States v. Twiford, 600 F.2d 1339, 1341 (10th Cir. 1979). The evidence shows that Giova engaged in a continuing course of conduct involving several types of misapplication, with the aid and at the direction of Berkovitz.
Berkovitz's argument seems to be that, in spite of all of the above mentioned acts, Giova lacked the requisite intent to injure FNBC. However, the "intent to injure" required by Sec. 656 is not a subjective desire that the bank be harmed. Rather, it is sufficient that the loan officer engaged in acts, the natural tendency of which would be to injure the bank. United States v. Thomas, 610 F.2d 1166, 1174 (3d Cir. 1979); United States v. Farrell, 609 F.2d 816 (5th Cir. 1980); see also United States v. Angelos, 763 F.2d 859, 861 (7th Cir. 1985) (intent sufficient where officer acts in contravention of bank policy and his conduct posed a serious risk of harm to the bank). In sum, the intent required to make out a criminal misapplication of bank funds is minimal. United States v. Hansen, 701 F.2d 1215, 1218 (7th Cir. 1983). The evidence was more than sufficient to sustain the conviction.2. Making of False Entries
Finally, Berkovitz claims that the evidence was not sufficient to convict him of aiding and abetting the making of false statements and entries in FNBC's records, a violation of 18 U.S.C. § 1005, in connection with the Taylor loans (count 20). In connection with this loan, Berkovitz suggested to Giova that two loans be made to disguise the fact that the loan to the Taylors exceeded Giova's lending limit. Even if Berkovitz's contention that he was unaware of the false memorandum approving a $75,000 credit line to the Taylors and of the misstatements of assets attributable to them was credible--and we believe the jury was entitled to infer otherwise--his assistance to Giova in making loans in excess of his lending limit, and concealment of the fact from FNBC, was clearly sufficient to support the conviction.14
Finally, Berkovitz argues that the conduct of the FBI in this case was so outrageous as to preclude his conviction. See Hampton v. United States, 425 U.S. 484, 96 S. Ct. 1641, 48 L. Ed. 2d 113 (1976); United States v. Russell, 411 U.S. 423, 93 S. Ct. 1637, 36 L. Ed. 2d 366 (1973). In those cases, the possibility was left open that, even though a defendant might not be able to assert an entrapment defense (due, for example, to his predisposition to commit the crime), in some situations the government's conduct might be "so outrageous that due process principles would absolutely bar the government from invoking judicial processes to obtain a conviction." Russell, 411 U.S. at 431-32; 93 S. Ct. at 1643; see also Hampton, 425 U.S. at 491-95, 96 S. Ct. at 1650-53 (Powell, J., concurring).
This circuit has likewise recognized this possibility. United States v. Belzer, 743 F.2d 1213, 1216-21 (7th Cir. 1984), cert. denied, 469 U.S. 1110, 105 S. Ct. 788, 83 L. Ed. 2d 781 (1985); United States v. Thoma, 726 F.2d 1191, 1198-99 (7th Cir.), cert. denied, 467 U.S. 1228, 104 S. Ct. 2683, 81 L. Ed. 2d 878 (1984); United States v. Kaminski, 703 F.2d 1004, 1009-10 (7th Cir. 1983). However, to date we have not yet found conduct which was sufficiently outrageous to warrant the invocation of a due process bar. See United States v. Podolsky, 798 F.2d 177, 181 (7th Cir. 1986). Indeed, according to our research, cases which have applied the outrageous conduct--due process defense to reverse a conviction are quite rare.
In any event, Spinelli's statements, at most, tended to negate Berkovitz's knowledge that the bonds were stolen. We have already held that there was ample evidence to sustain a conviction on this point. Furthermore, the statements were made only in connection with the securities used to obtain the Bontkowski loan. Agent Spinelli was in no way connected with the Taylor, Lopez, or Jordan-Whitney loans, or with the later loans in which stolen securities were used. In sum, this is not a case where the government "manufactured" a crime and then sought to punish it. Cf. United States v. Twigg, 588 F.2d 373 (3d Cir. 1978) (outrageous conduct found where government supplied nearly all the materials and expertise for an illegal drug manufacturing operation and was sole customer of defendants), limited by, United States v. Beverly, 723 F.2d 11 (3d Cir. 1983) (per curiam) .15
Bruun contends that there was insufficient evidence of his participation in the conspiracy. We agree. "In order to establish the crime of conspiracy, the government must prove that there was an agreement between two or more persons to commit an unlawful act, that the defendant was a party to the agreement, and that an overt act was committed in furtherance of the agreement by one of the co-conspirators." United States v. Noble, 754 F.2d 1324, 1328 (7th Cir.), cert. denied, --- U.S. ----, 106 S. Ct. 63, 88 L. Ed. 2d 51 (1985). It is on the second of these elements that the government's case against Bruun faltered.
Bruun asserts, correctly, that there was no evidence linking him to any of the transactions other than the Bruun loans or any evidence that he was aware that the securities used as collateral for those loans were anything but legitimate. While it is not necessary for the government to prove that an alleged conspirator was aware of every aspect of the conspiracy, it must show that he was aware of the essential nature and scope of the enterprise and intended to participate in it. United States v. Conroy, 589 F.2d 1258, 1269 (5th Cir.), cert. denied, 444 U.S. 831, 100 S. Ct. 60, 62 L. Ed. 2d 40 (1979); see also United States v. Garcia, 562 F.2d 411, 414 (7th Cir. 1977) (association with conspirators, knowledge of conspiracy and presence during conspiratorial discussions insufficient absent evidence that defendant joined and participated in the conspiratorial scheme) (dictum); United States v. Netterville, 553 F.2d 903, 911 (5th Cir.) (government must prove knowing participation), cert. denied, 434 U.S. 861, 98 S. Ct. 189, 54 L. Ed. 2d 133 (1977); United States v. Mattia, 379 F.2d 725, 729 (3d Cir.) (same), cert. denied, 389 U.S. 846, 88 S. Ct. 100, 19 L. Ed. 2d 113 (1967). This the government has failed to do.16
It is possible that the government showed that Bruun participated in a much smaller conspiracy to misapply bank funds, involving only himself, Berkovitz and Giova (see infra Sec. III. B.), but the indictment did not charge such a conspiracy. We cannot say that such a variance was harmless. The activities of Berkovitz and Giova were wide ranging and reprehensible. At trial, the jury heard evidence of those activities, even though Bruun was not shown to have had any connection to them. Under these circumstances, we cannot say that the possibility that guilt would be transferred from Berkovitz to Bruun was not substantial. See United States v. Lindsey, 602 F.2d 785, 788-89 (7th Cir. 1979).17
To be liable as an aider and abettor, Bruun must have shared Giova's criminal intent. United States v. Pope, 739 F.2d 289, 291 (7th Cir. 1984); United States v. Barclay, 560 F.2d 812, 816 (7th Cir. 1977). In the indictment, the government charged that Bruun aided and abetted in Giova's misapplication by obtaining loans in his name, when:
Under these circumstances, we do not believe the government was entitled to a conviction on the theory that Bruun aided and abetted the misapplications that occurred because the money was loaned to him for Berkovitz or because the collateral for the loans was stolen. The mere fact that he obtained the loans for an undisclosed third party would not have made out a criminal misapplication of bank funds. See United States v. Shively, 715 F.2d 260, 265 (7th Cir. 1983), cert. denied, 465 U.S. 1007, 104 S. Ct. 1001, 79 L. Ed. 2d 233 (1984) (citing United States v. Gallagher, 576 F.2d 1028, 1045-46 (3d Cir. 1978) and United States v. Gens, 493 F.2d 216, 222 (1st Cir. 1974)). This is especially true because Bruun always told the bank that he was acting on behalf of a client, even though that client's identity was not disclosed. Nor would the use of the securities as collateral have been a misapplication had the securities not been stolen. Because his acts would have been entirely innocent had the facts been as he supposed them to be, Bruun lacked the shared criminal intent required to convict him of aiding and abetting. United States v. Barker, 546 F.2d 940, 946 (D.C. Cir. 1976); United States v. Byrd, 352 F.2d 570, 572 (2d Cir. 1965).
18 U.S.C. § 656 provides, in pertinent part:
Because the substantive banking crimes can only be committed by certain specified officials, the defendants other than Giova were charged with aiding and abetting the offense, in violation of 18 U.S.C. § 2(a), which provides, "Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal."
For example, Berkovitz had informed Spinelli that there were stolen financial instruments in Chicago from New York, and that they could be purchased for 20% to 30% of their face value. In some cases, Berkovitz came into possession of the securities within days of their theft. See also discussion at part II. E. infra. Finally, the surreptitious nature of the loan transactions for which the securities served as collateral also firmly supports the conclusion that Berkovitz was well aware of the illegal status of this property. See United States v. Gallo, 543 F.2d 361, 363-64, 367-69 (D.C. Cir. 1976); United States v. Smith, 502 F.2d 1250, 1255 (5th Cir. 1974)
18 U.S.C. § 2315 provides, in pertinent part:
Because the knowing participation in the conspiracy by the accused is an essential element, the government must prove it beyond a reasonable doubt. United States v. Arredondo-Morales, 624 F.2d 681 (5th Cir. 1980). The government's contention that once a conspiracy is proven only slight evidence is necessary to connect the accused to it is not correct. See Gov't Br. at 27 (citing United States v. West, 670 F.2d 675 (7th Cir.), cert. denied, 457 U.S. 1124, 102 S. Ct. 2944, 73 L. Ed. 2d 1340 (1982)). In West, we were addressing the quantum of proof required to sustain admissibility of a coconspirator's declarations as an exception to the hearsay rule. We did not hold that proof by anything less than a reasonable doubt was required to sustain a conviction, and to do so would be inconsistent with In re Winship, 397 U.S. 358, 90 S. Ct. 1068, 25 L. Ed. 2d 368 (1970); see also Patterson v. New York, 432 U.S. 197, 204-05, 208, 97 S. Ct. 2319, 2324, 2326, 53 L. Ed. 2d 281 (1977)