Opinion ID: 1820486
Heading Depth: 1
Heading Rank: 5

Heading: specification number fiveduty to investigate

Text: 1. The general allegations hereinabove recited are incorporated herein as if set forth verbatim; 2. On or about March 14, 1983, Paul L. Douglas received a copy of a letter from the Federal Bureau of Investigation generally describing financial irregularities occurring at Commonwealth Savings Company; 3. Sometime in March, 1983, Paul L. Douglas met with Barry Lake and Paul Amen, and possibly others, to discuss the F.B.I. letter and financial irregularities; 4. In the spring of 1983, on a date unknown, Barry Lake advised Paul L. Douglas of possible criminal activity involving Marvin Copple and Commonwealth Savings Company; 5. On or about May 4, 1983, Paul L. Douglas assigned, or consented to the assignment of, Ruth Anne Galter, an Assistant Attorney General, to the Nebraska Department of Banking and Finance for the purpose of assisting said Department in prosecuting white collar crime; 6. At all material times, Paul L. Douglas was aware of the fact that Ruth Anne Galter was personally indebted to Commonwealth Savings Company for large sums of money and that she was the estranged wife of Paul Galter; 7. In July of 1983, on a date not known, Ruth Anne Galter advised Paul L. Douglas of the possibility of criminal activity involving Marvin Copple and Commonwealth Savings Company; 8. The Nebraska Department of Banking and Finance made available or would have made available to Paul L. Douglas or Ruth Anne Galter all information it had in its possession regarding alleged criminal activity involving Marvin Copple or Commonwealth Savings Company from and after March 14, 1983; 9. Substantially nothing was done to prosecute or investigate Marvin Copple or Commonwealth Savings Company, from March 14, 1983, until Commonwealth Savings Company was declared insolvent on November 1, 1983, by Paul L. Douglas or any of his subordinates; 10. By virtue of the foregoing, Paul L. Douglas violated the provisions of Neb.Rev.Stat. § 84-205(4) and other laws of the State of Nebraska generally. Paragraphs 2 to 8 of the specification are general statements of information, knowledge, and evidence that Douglas is alleged to either have possessed or had available to him as Attorney General; they all concern financial irregularities at Commonwealth and the possible criminal activity of Marvin Copple. The charge in paragraph 9, Substantially nothing was done to prosecute or investigate ..., falls far short of being specific. From this charge we conclude that the State admits that Douglas did in some way respond to the information he either possessed or had available to him; however, it then alleges his judgment and response did not meet the standard imposed by the Constitution, statutes, and his inherent common-law duties, and implies that his acts or omissions were `subversive of some fundamental or essential principle of government or highly prejudicial to the public interest ....' State v. Hastings, 37 Neb. 96, 115, 55 N.W. 774, 780 (1893). The principal facts upon which the specification is based relate to the March 10, 1983, FBI letter, a carbon copy of which was received by the defendant, and a conversation between the defendant and Barry Lake which took place sometime during the spring of 1983. The gravamen of the charge is that substantially nothing was done to prosecute or investigate Marvin Copple or Commonwealth Savings Company from March 14, 1983, until after November 1, 1983, the date on which Commonwealth was declared insolvent by the Department of Banking and Finance. The evidence shows that some investigation was made but no prosecution was commenced during this period. Thus, the charge is that the defendant failed to do sufficient investigation during this time, and failed to prosecute Copple. The last paragraph of the specification refers to Neb.Rev.Stat. § 84-205(4) (Reissue 1981), and alleges that the defendant violated this statute and other laws of the State of Nebraska generally. The statute cited provides that the duties of the Attorney General shall be: (4) At the request of the Governor, the head of any executive department, the Secretary of State, State Treasurer, Auditor of Public Accounts, Board of Educational Lands and Funds, State Department of Education or Public Service Commission, to prosecute any official bond or any contract in which the state is interested, deposited with any of them, and to prosecute or defend for the state all actions and proceedings, civil or criminal, relating to any matter connected with any of their departments; Provided, that, after investigation, he is convinced there is sufficient legal merit to justify the proceeding; and none of the above-named officers shall pay, or contract to pay, from the funds of the state any money for special attorneys or counselors at law, unless the employment of such special counsel shall be made upon the written authorization of the Governor or the Attorney General. This statute requires the Attorney General, when requested by the Governor, the head of any executive department, or certain other named officers, (1) to prosecute any official bond or any contract in which the State is interested; and (2) to prosecute or defend for the State all actions and proceedings for the named departments. Under this statute there is no duty to investigate until the Attorney General has been requested to prosecute or defend. The investigation which is to be made is for the purpose of determining if there is sufficient legal merit to justify the proceeding. We recognize that the Attorney General has some duties which are not purely statutory and are sometimes referred to as the common-law duties of the office. In State v. State Board of Equalization and Assessment, 123 Neb. 259, 242 N.W. 609 (1932), we stated that the Attorney General is clothed and charged with all such common-law powers and duties except insofar as they have been limited by statute; and in the absence of some express legislative restriction to the contrary, he may exercise all such power and authority as the public interests may require from time to time. See 7 Am.Jur.2d Attorney General § 9 (1980). It is generally acknowledged that the attorney general is the proper party to determine the necessity and advisability of undertaking or prosecuting actions on the part of the state. 7 Am.Jur.2d, supra § 16 at 20; State v. Pacific Express Co., 80 Neb. 823, 115 N.W. 619 (1908). This discretion is obvious when exercising inherent powers; and it is also recited in § 84-205(4),  Provided, that, after investigation, he is convinced there is sufficient legal merit to justify the proceeding .... (Emphasis supplied.) `[I]nvestigation' means the process of inquiring into or tracking down through inquiry ... `investigate' means to follow up by patient inquiry or observation; to inquire and examine with systematic attention to detail and relation. Mason v. Peaslee, 173 Cal.App.2d 587, 592 n. 2, 343 P.2d 805, 808 n. 2 (1959). Although § 84-205 provides that the Attorney General shall have the same powers and prerogatives in each of the several counties of the state as the county attorneys have in their respective counties, the affirmative duty to prosecute all criminal matters is specifically placed upon the county attorney. Neb.Rev.Stat. § 23-1201 (Cum.Supp.1982). This is a common arrangement throughout the United States. See 7 Am.Jur.2d, supra § 13. The evidence shows that with regard to criminal prosecutions the usual and customary practice, and the procedure which had been followed by the office of the Attorney General, was to refer them to the proper county attorney after an investigation by the interested department had developed sufficient information to establish that a criminal prosecution was justified. This policy had been one of necessity because the office of the Attorney General did not have sufficient personnel or resources to carry on investigations, except in a few limited areas, and the other departments had skilled employees who were trained and experienced in their particular fields of operation. This was especially true with respect to financial institutions which were supervised and examined routinely by personnel of the Department of Banking and Finance. The evidence further shows that this procedure was followed in 1982 in connection with a prosecution in Douglas County, Nebraska, for the violation of banking laws and regulations. The Department of Banking and Finance, through Barry Lake, delivered a complete report of investigation, together with a suggested form of complaint, to the office of the Attorney General. The matter was referred to the county attorney of Douglas County, Nebraska, and prosecutions instituted and completed in 1983. The FBI letter of March 10, 1983, was addressed to the Director of Banking and Finance, and stated that during an investigation at Beatrice, Nebraska, information was obtained concerning similar transactions at Commonwealth, including a $1,250,000 transaction in which S.E. Copple received $750,000 of the proceeds. The letter advised the director that the FBI could provide further details concerning the matter. The letter, which did not mention Marvin Copple, was not a surprise to the banking department because it had been advised in 1982 about the investigation being made in Beatrice. On March 14, 1983, after the copy of the FBI letter had been received by the Attorney General, there was a conference at the office of the Attorney General with Paul Amen, the Director of Banking and Finance, and Barry Lake, an assistant director of the banking department and counsel to the department, concerning the letter. The evidence is in conflict as to other personnel present at this meeting. The substance of the conversation was that the Director of Banking and Finance was very concerned about the financial condition of Commonwealth and a number of other industrial loan and investment companies. The director testified that he related his deep concern about the industrials; that any type of prosecution would blow the lid; and that it would mean a number of these industrials would come tumbling down. He further testified that he felt the failure of one institution, or perhaps even some adverse publicity, could cause a run and eventually topple the entire industry. Lake admitted that at this conference they did not disclose to the defendant in any extensive detail the information in the reports of examination or information the department had on insider transactions. As early as March 31, 1982, the department knew of numerous insider transactions at Commonwealth, including a loan to Dana Saylor in which the proceeds were endorsed to Newt Copple. Although the director did not specifically ask the Attorney General not to investigate Commonwealth, there was no request to investigate and no request to prosecute anyone connected with Commonwealth at that time. The director testified that our position was simply to point out the seriousness of our problem and what we thought would happen if there were an investigation and possible prosecution. It was concluded at the meeting that someone should talk to the FBI about the letter. Barry Lake testified that it was resolved that I would go to the Federal Bureau of Investigation and discuss that letter with them. It was the aim and purpose of the Department of Banking and Finance to save the institution for the depositors, if possible, by obtaining an infusion of capital and finding a purchaser. In accordance with banking department policy, criminal prosecution was the last step in the process, and was not to be commenced until the institution had been saved or all efforts to save the institution had been attempted. The effort to save Commonwealth was successful only in part, in that S.E. Copple contributed additional property and capital to the institution. The department was unable to find a buyer, and on November 1, 1983, Commonwealth was declared insolvent and was closed by the Department of Banking and Finance. After the institution was closed there was some delay in commencing the receivership proceeding because the director was still trying to find a purchaser and did not want the Attorney General to file a petition in the district court immediately. During 1983 and earlier, the Department of Banking and Finance had been trying to obtain the services of a full-time assistant attorney general to assist the department with the large number of matters that were then pending in the department. Most of these matters involved security law violations, but there were also banking law violations. Lake estimated that the department had about a 2-year backlog of securities cases and an increasing number of criminal cases involving banks and other depository institutions like industrial loan and investment companies. On October 1, 1982, an assistant attorney general was hired and assigned to the banking department full time, but this employee left for a better paying job on October 11, 1982. There was a delay in finding another employee, partly due to transitional problems resulting from a change in the office of the Governor. During the interim, an assistant attorney general was assigned to the department, but not on a full-time basis. On July 1, 1983, upon the recommendation of Gerald Vitamvas, the deputy attorney general, Ruth Anne Galter, an assistant attorney general of some 5 years' experience, was assigned to the Department of Banking and Finance full time. The assignment was actually made on May 4, 1983, but her duties with the banking department did not commence until June 1, and she was not full time until July 1, 1983. On May 10, 1983, Ms. Galter met with Barry Lake and Patricia Herstein, also an assistant director and legal counsel to the department. Ms. Herstein had prepared two memorandums, one of which was a detailed list of matters which were under investigation and of concern to the department. The list contained 25 to 35 items, but Commonwealth was not on the list. On or about May 4, 1983, Barry Lake mentioned to the defendant that a report of examination of Commonwealth disclosed that Marvin Copple had received two $250,000 fees or commissions as part of a real estate transaction, which Lake thought amounted to theft. He did not testify to, and the record does not show, the date the fees or commissions were received. At this conversation the defendant stated that he had had a personal and prior business relationship with Marvin Copple but he said that would not make any difference with respect to any criminal prosecution and that if Marv Copple was guilty of any crimes, that he would prosecute Marv Copple. According to Lake, he advised Ms. Galter at a meeting with her on June 24, 1983, that she was to review and supervise any potential criminal activity in regard to Commonwealth and its principals. A typewritten status report of department investigations prepared by Lake and dated June 23, 1983, listed seven matters under investigation. Two items were added to this list in handwriting, one of which was Commonwealth Sav Co.Copples. The list included cases involving two industrial loan and investment companies other than Commonwealth, a cooperative credit association, and four banks. Lake testified that each of the nine items was discussed with Ms. Galter on June 24, 1983. Lake testified that he met with Ms. Galter every other two weeks to discuss matters that she was working on and that he was satisfied with the progress which she made. Lake further testified that in his discussions with Ms. Galter he told her that, because of the large volume of cases that had been referred to her, we should try to be as efficient as we could and that we should try to piggyback off of the FBI's investigation as much as possible. He further testified, I mentioned to her my meeting with the FBI, the general substance of it and said I thought it would be a good idea for her to meet with the FBI and possibly the U.S. Attorney's office to try to get as much of theof evidence from their investigation as she could so that she wouldn't have to duplicate interviewing the people they had already interviewed. On June 30, 1983, Ms. Galter met with Ronald Lahners, the U.S. attorney, concerning the Commonwealth matter. She was referred to Agent Campbell of the FBI, and she had several telephone conversations with Campbell. Campbell mentioned the names of several people, but stated that the information she wanted could be found in the records of the Department of Banking and Finance. She requested information concerning Commonwealth from both Lahners and Campbell, but it was not made available to her. According to Ms. Galter, when she looked over a report of examination of Commonwealth in July, she requested a copy of the report, but it was not furnished to her. She requested a copy of the report again in October, but it was not given to her. Both Lake and Ms. Galter testified that from time to time Lake would advise her as to which cases had priority and should be worked on first. Lake testified that the department did not set any specific priority on the Commonwealth matter. There is no evidence that Commonwealth was ever given a high priority by the banking department or that Ms. Galter was instructed to give it preference over the many other cases which had been assigned to her. It is important to recognize the number of cases which had been assigned to Ms. Galter between July 1 and November 1, 1983, by the Department of Banking and Finance through Lake. During this time, Ms. Galter assisted the county attorney of Buffalo County in two cases. One, State v. Giese, involved a complicated fraud and theft charge. The other, State v. Doolittle, involved investigation in numerous counties. She was involved in State v. Soukup and State v. Adams, both of which were filed in Sarpy County but involved transactions in both Douglas and Sarpy Counties. There were two criminal matters in Knox County which required her time. When the Bank of Niobrara failed, that matter required a week of her time. The financial crisis involving the Bank of Blair took a week of her time. When Ruth Anne Galter reported to the defendant that she was investigating the matter of the $500,000 in commissions received by Marvin Copple, she was directed by the defendant to keep on it and keep him advised. There is no evidence that Ruth Anne Galter failed to pursue the investigation or did anything which hampered or prejudiced the investigation of the commissions received by Marvin Copple from Commonwealth. It is true that Ruth Anne Galter was indebted to Commonwealth at the time she was assigned to the Department of Banking and Finance and that she was the estranged wife of Paul Galter, who was a participant in the real estate transactions with the defendant. She was concerned about the possibility of a conflict of interest, and discussed the matter with the defendant and obtained legal advice from private counsel. She was advised by her counsel that there was no conflict of interest at that time. When Commonwealth was declared insolvent, Ruth Anne Galter requested that she be relieved of any further duties in regard to Commonwealth because of the conflict of interest arising out of her indebtedness to Commonwealth, which was then about to be placed in receivership. From our consideration of the evidence we find that the allegations contained in specification No. 5 were not proved beyond a reasonable doubt and that the specification forms no basis upon which to remove the defendant from office. There is no evidence of gross neglect of any duty of the office, and no evidence of corrupt conduct or other malfeasance. We believe it is appropriate to point out that whatever delay there may have occurred in regard to a prosecution of Marvin Copple was consistent with the policy of the Department of Banking and Finance and its efforts to save the institution. There is no evidence of any prejudice to the State whatever in regard to a prosecution of Marvin Copple because of a failure to commence a prosecution at any time prior to November 1, 1983. Insofar as an investigation of Commonwealth is concerned, from the evidence presented in this case it would appear that most of the essential information was already in the possession of the banking department at the time of the conference with the Director of Banking and Finance at the office of the Attorney General on March 14, 1983. There is no evidence whatever of any prejudice to the State from a failure to conduct a more extensive investigation during the 7½-month period prior to November 1, 1983, alleged in the specification. Under the evidence in this case the Attorney General had no duty to refuse to cooperate with the Director of Banking and Finance in his efforts to save the institution. While these efforts may have been futile because of the condition of the institution, there is no evidence that the Attorney General was aware of the true financial condition of Commonwealth, and no evidence that he should have questioned the judgment of the Director of Banking and Finance in the matter.