United States v. CrouchUnited States v. Crouch
- Reporters:
- , ,
- Before:
- Garwood, Politz, King, Jolly, Higginbotham, Davis, Jones, Smith, Duhé, Wiener, Barksdale, Emilio M. Garza, DeMoss, Benavides, Stewart, Parker, Dennis
Before POLITZ, Chief Judge, KING, GARWOOD, JOLLY, HIGGINBOTHAM, DAVIS, JONES, SMITH, DUHÉ, WIENER, BARKSDALE, EMILIO M. GARZA, DeMOSS, BENAVIDES, STEWART, PARKER and DENNIS, Circuit Judges.
GARWOOD, Circuit Judge:
In this prosecution for alleged savings and loan offenses, the district court, prior to trial, dismissed the indictment against Guy Crouch III (Crouch) and Michael Frye (Frye) for pre-indictment delay, notwithstanding that the statute of limitations had not run. United States v. Crouch, 835 F.Supp. 938 (S.D. Tex. 1993). The government appeals.
The district court, following a hearing before a magistrate judge, concluded that the delay was sufficiently extensive to
A divided panel of this Court affirmed the dismissal of the indictment. United States v. Crouch, 51 F.3d 480 (5th Cir. 1995). The panel majority recognized that for pre-indictment delay the triggering prejudice must be actual, not presumptive, but concluded that the district court‘s finding of actual prejudice was adequately supported. Id. at 484-485. Relying on United States v. Townley, 665 F.2d 579 (5th Cir.), cert. denied, 102 S.Ct. 2305 (1982), the panel majority further held that no showing of prosecutorial bad faith was required, and that instead the reasons for the delay would be balanced against the extent of the prejudice. Crouch at 483. The panel majority held that the government‘s reasons——essentially, lack of manpower and the low priority which this investigation was assigned——were insufficient
We now reverse the district court‘s order dismissing the indictment. We hold that where the indictment is not barred by the statute of limitations, dismissal for pre-indictment delay requires an appropriate showing not only of prejudice but also that the prosecution purposely delayed the indictment to gain tactical advantage or for other bad faith purpose. We further hold that the present record does not support a finding of the requisite actual, substantial prejudice——as opposed to potential prejudice——to justify dismissal prior to trial. Events of the trial may demonstrate actual prejudice, but at the present time appellees’ due process claims are speculative and premature. United States v. Marion, 92 S.Ct. 455, 466 (1971).
BACKGROUND
Offenses Charged
The instant indictment was returned November 12, 1992. It contains 19 counts. Crouch is named a defendant in all counts, and Frye is named a defendant in counts 1, 2, 8, 13, and 18. The only other defendant charged in the indictment——Kerry Shawell, charged in counts 1, 2, 9, 14, and 19——had pleaded guilty, and agreed to cooperate with the government, before the hearing on the motions of Crouch and Frye to dismiss for preindictment delay. The indictment concerns seven loans, all of which closed June 28, 1985, made by
The conspiracy and the bank fraud (executing and attempting to execute a scheme and artifice to defraud Delta) were charged in
While certain aspects of the government‘s theory of the case are not entirely clear, it is evident that the loans to Connally, Frye, and Shawell are all alleged to be nominee loans, with Frye and Shawell being nominees for Ferguson, and Connally also, at least to some extent, being a nominee for Ferguson. It may further
Count one, the conspiracy count, appears to essentially allege the counts 3 through 19 substantive offenses as objects of the conspiracy. It alleges that Crouch, Frye, and Shawell conspired with each other and with other individuals, both known and unknown. In response to a motion for bill of particulars, the government identified Carl Gerjes——who was president of Delta until he was discharged sometime during May or June 1985——and Ferguson as [t]he unindicted co-conspirators. The government also stated that arguably the term may also cover Barnes and Mark Connally.1 The conspiracy count also refers to activities in furtherance of the conspiracy by Delta insiders, and the response to the bill of particulars states that Delta insiders refers to Gerjes, Cholakian, a Delta officer who succeeded Gerjes as president in May or June 1985, and Erskin, another Delta officer. The government‘s general theory of the case is set forth in its response below to Frye‘s motion to dismiss for failure to charge an
1. Between December, 1984 and June 28, 1985, defendant Crouch, Robert B. Ferguson and others devised a scheme to rid Delta‘s records of various tracts of real estate acquired by the thrift through foreclosure. Part of the scheme required that Ferguson provide persons willing to pretend to be bona fide buyers of the property and to sign loan contracts purporting to evidence their purchase of the Delta real estate.
2. In furtherance of this plan, Ferguson caused defendants Frye and Shawell to prepare loan applications, personal financial statements, board of directors’ minutes, corporate resolutions and other documents portraying the defendants as intended purchasers of Delta real estate located near Houston, Texas. Additionally, the sham buyers signed Delta loan contracts purporting to finance the purchases in their name. It was the understanding of all parties that the named buyers were mere nominee borrowers on behalf of Ferguson. All parties to the scheme were aware that the use of nominee borrowers was necessary in order to avoid loan to one borrower limitations.
3. In furtherance of the scheme, defendant Frye submitted to Delta the documents described above and signed as borrower on the loan supporting the transaction. The wording of the documents was such that they represented to persons unfamiliar with the scheme defendant Frye‘s intent to buy the real estate and to be held personally liable on the real estate loan for the purchase. The documents omitted any declaration that the loan was a nominee loan intended to benefit Ferguson, defendant Crouch and others.
4. Defendant Frye participated in this scheme because he anticipated preferential treatment by Delta in future transactions. Additionally, defendant Frye believed that Ferguson was acquiring Bankers Savings and Loan Association of Galveston and that he -- Frye -- would receive preferential treatment there, as well.
At the July 1993 hearing before the magistrate judge, the government further explained its theory as follows:
. . . as this deal was done, only Mr. Crouch was aware of everyone‘s identity and involvement. Mr. Ferguson was purchasing a savings and loan in Galveston. He was attempting to swap REO properties from Banker‘s to Delta. Delta had some REO properties it needed to get rid of and they were going to swap or sell their properties to Banker‘s through the person of Robert Ferguson.
Sir, Mr. Ferguson knows that properties were to be swapped. He did not know who was purchasing the properties until just before the closing. He didn‘t know that Ben Barnes and Mark Connally would be brought in. We have evidence that he did not know that Mark Connally was to be substituted in as a nominee until literally at the closing. There is no evidence to suggest that Ben Barnes or Mark Connally ever heard the names Kerry Shawell or Michael Frye. They only knew that there were loans that they were involved in and certain circumstances.
All of these loans took place on the same day. All of them were either closed at Defendant Crouch‘s office in Alvin; or with regards to Mr. Frye and Shawell, Robert Ferguson actually took those documents to those individuals and had them sign everything and had it notarized.
At this hearing, the government also essentially admitted it had no direct evidence of Frye‘s knowledge or involvement other than in respect to counts 8, 13, and 18, each relating to the $3,950,000 loan to him. To show Frye knew he was a nominee borrower, the government stated it would rely on expected testimony of Ferguson, Gerjes and others, Mr. Shawell, admissions Frye made in July 1986 to Federal Home Loan Bank Board (FHLB) examiner Mims, and 1986 letters of Mr. Frye and his attorney to Delta stating that he purchased the property as an accommodation to Mr. Crouch and Mr. Ferguson.
Another aspect of the government‘s theory of the case is reflected by Gerjes’ testimony on cross-examination by the government at the hearing before the magistrate judge.2 Gerjes stated that in his capacity as Delta‘s president he had negotiated and dealt with Barnes and Mark Connally in regard to the charged
In its response to the motion for bill of particulars, the government described Defendant Crouch‘s obtained benefit from the various charged offenses as follows:
His law firm earned legal fees. His title company earned title related fees. He earned fees and bonuses related to his board of directors position. His actions kept the federal regulators from immediately taking over the institution which would have caused any stock owned by Crouch and his family to be worthless.
The record suggests that Crouch personally owned about 5% of Delta‘s stock. His father, who was not on the board at any time during or after 1985, owned about 34% of the stock, and another some 34% was owned by board member Gubert, who preceded Crouch as chairman.
Investigation
Delta was apparently placed under state supervision and control in May 1986, as reflected in a report of examination prepared by FHLB examiner Mims, a copy of which is attached as an
In response to the loan underwriting deficiencies uncovered during the examination, President Terry Cholakian stated that former Managing Officer Carl Gerjes and former Senior Vice President of Real Estate Lending W.A. Erskine had little regard for loan underwriting regulations. According to Ms. Cholakian, Messrs. Gerjes and Erskine were primarily concerned with closing loans
now and worrying about regulations later. . . . President Cholakian remarked that prior to July 1985, loans were closed outside of the Loan Committee. Messrs. Gerjes and Erskine agreed to loan commitments first and then presented the details to the full committee, at which point all committee members were expected to sign.
Loan Committee procedures have changed since July 1985. According to Ms. Cholakian, all loans are now approved during committee meetings, and underwriting guidelines and procedures have been established.
. . . .
President Cholakian provided the following statement with regard to the transactions involved with the aforementioned two escrow closings [Frye and Shawell]:
‘In addressing the situation on the Ferguson direct loans and nominee loans, I have informed you and your staff that neither I, nor any other member of current management, has all of the facts surrounding this arrangement. This was put together by the former president, Carl Gerjes, and I have not been able to find any written documentation or clarification of the transaction. I have also not been able to find any written agreements that outline the transaction and expected actions of the parties.
‘It has become clear to us, here now, that JMG and Shawell are nominees for Ferguson. We had to deduce that from the subsequent actions and responses of JMG and Shawell on requests for financial statements and interest payments. . . .’
In August 1986, the FHLB examiner sent criminal referrals to the FBI and the United States Attorney with respect to Delta concerning at least these seven loans and the Carl Vaughan transactions, and at least the former implicated Crouch and Frye, among others, though Crouch‘s name was not among the target names listed on the cover sheet (whether Frye‘s was is not stated). FBI special agent Kettler, in charge of the Delta investigation during most of the time thereafter, testified that such a referral was
In 1990, after Gerjes’ conviction and sentencing in the bonus case, Kettler began focusing more on Delta, gathering and examining documents. There were forty boxes of records. Kettler interviewed employees at Delta (some before Delta closed), and he interviewed Mims (with whom he had previously talked on the telephone) in 1991 and Frye some time in 1990 (after September of that year) or possibly 1991. In January 1992, Ferguson pleaded guilty to charges in connection with the instant transactions pursuant to a deal, and, according to the government‘s response to Crouch‘s motion to dismiss, Ferguson gave information which focused the government‘s investigation squarely on defendants Crouch, Frye and Shawell. In March 1992 Gerjes pleaded guilty to charges in connection with the instant transactions and likewise agreed to cooperate with the government. Gerjes’ sentencing on this conviction has apparently
Frye testified before the grand jury in November 1992. Crouch never testified before the grand jury.
Crouch testified at the hearing before the magistrate judge on the motion to dismiss. He related that in the spring of 1986, when Mims examined Delta, Mims requested, and received from Crouch, the Delta records concerning the transactions in question and said no, we do not when Crouch asked if he had any problems with me in connection with those transactions. Crouch also stated that he and his father were visited in 1989 by an Assistant United States Attorney in connection with the Gerjes bonus prosecution and was told that he, Crouch, was not the subject of an investigation. In September or October 1990, Kettler came to Crouch‘s title company to get documents consisting of or including those concerning these loans, and was furnished copies. Kettler, in response to Crouch‘s inquiry, said Crouch was not a subject of the investigation. Kettler returned in June or September 1991 with a subpoena and procured the original records.5 Again on this occasion, Kettler responded no to Crouch‘s inquiry whether he was a subject of the investigation. In March 1992, Crouch was told he was a subject of the grand jury investigation and might be indicted (Frye was also so notified at that time). Other aspects of
Rulings Below
The magistrate judge recommended granting the motion to dismiss. He concluded that the delay in indictment was presumptively prejudicial, relying on Doggett v. United States, 112 S.Ct. 2686 (1992), although recognizing Doggett was a Sixth Amendment case. He further opined that [w]hile the Court must confess that Crouch and Frye cannot, for the most part, identify with specificity the actual harm they have suffered as a result of the eight year lapse of time, nevertheless they had with the added assistance of the presumption attendant to the eight-year delay, proven the existence of substantial prejudice. Relying on Townley, the magistrate judge ruled that no showing of bad faith was required, stating this Court will not, and need not, decide the issue of bad faith. Instead, the magistrate judge balanced the prejudice against the reasons for the delay. It weighed the balance in favor of the defense, noting that low priority assigned to an investigation, overload of other investigative or prosecutive responsibilities, and insufficient personnel, similar to the reasons offered in the case at bar, are entitled to only slight weight in the balance. However, the magistrate judge did commend the current prosecutor‘s handling of the case since its assignment to him in May 1991.
DISCUSSION
In United States v. Marion, 92 S.Ct. 455 (1971), the Supreme Court first addressed pre-indictment delay where limitations had not run. There, the district court had granted, prior to trial, the defendants’ motion to dismiss, which asserted that, although the statute of limitations had not expired, the 38-month pre-indictment delay violated their rights to due process and to a speedy trial under the Fifth and Sixth Amendments. Id. at 457. The district court concluded that the government had been aware of the relevant facts more than two years prior to the indictment. Id. at 458. The government appealed directly to the Supreme Court under former
However, Marion went on to hold that:
the statute of limitations does not fully define the appellees’ rights with respect to the events occurring prior to indictment. Thus, the Government concedes that the Due Process Clause of the Fifth Amendment would require dismissal of the indictment if it were shown at trial that the pre-indictment delay in this case caused substantial prejudice to appellees’ rights to a fair trial and that the delay was an intentional device to gain tactical advantage over the accused. Id. at 465 (emphasis added).
The Court also noted we need not, and could not now, determine when and in what circumstances actual prejudice resulting from pre-accusation delays requires the dismissal of the prosecution and indicated such a determination will necessarily involve a delicate judgment based on the circumstances of each case. Id. at 466. The Court then proceeded to reverse the order of dismissal, holding there was no Sixth Amendment violation and that, as to due process:
[n]or have appellees adequately demonstrated that the pre-indictment delay by the Government violated the Due Process Clause. No actual prejudice to the conduct of the defense is alleged or proved, and there is no showing that the Government intentionally delayed to gain some
tactical advantage over appellees or to harass them. Id. at 466.
The opinion‘s final sentence noted that [e]vents of the trial may demonstrate actual prejudice, but at the present time appellees’ due process claims are speculative and premature. Id.
The Supreme Court next addressed pre-indictment delay in United States v. Lovasco, 97 S.Ct. 2044 (1977), which again involved a dismissal prior to trial. There the district court, following a hearing, dismissed the indictment because of a seventeen-month delay, during the last some six months of which a defense witness died, between the time the government had all the information relating to the defendant‘s alleged commission of the offenses and its presentation to the grand jury. The Government made no systematic effort in the District Court to explain its long delay and a divided panel of the Eighth Circuit affirmed (as to all but one count), sustaining the District Court‘s finding that the Government‘s actions were ‘unjustified, unnecessary, and unreasonable’ and that the defense had been impaired by the witness‘s death. Id. at 2047. The Supreme Court reversed. It initially reiterated that statutes of limitations . . . provide ‘the primary guarantee, against bringing overly stale criminal charges’ (quoting Marion‘s quoting of Ewell), and that the Due Process Clause has a limited role to play in protecting against oppressive delay. Id. at 2048. The Court next held that Marion‘s concluding sentence establishes only that proof of actual prejudice makes a due process claim concrete and ripe for adjudication, not that it makes the claim automatically valid.
Lovasco next rejects the contention that the Constitution requires that charges be filed promptly once the Government has assembled sufficient evidence to prove guilt beyond a reasonable doubt. Id. at 2050. It notes that such a rule would cause numerous problems in those cases in which a criminal transaction involves more than one person or more than one illegal act, and that if courts were required to decide in every case when the prosecution should have commenced, it would be necessary for them to trace the day-by-day progress of each investigation, thus burdening both prosecutors and courts. Id. & n.14. It concludes
Our decisions following Marion and before Lovasco generally construed Marion as stated in United States v. Butts, 524 F.2d 975, 977 (5th Cir. 1973), viz:
“In United States v. Marion, . . . the Supreme Court held that the applicable statute of limitations being the primary guarantee against bringing overly stale criminal charges, one must show (1) that substantial prejudice resulted from the delay in seeking an indictment and (2) that the delay was an intentional measure to gain a tactical advantage before the indictment can be dismissed.” (Emphasis added).
Other decisions of ours to the same effect include United States v. Beckham, 505 F.2d 1316, 1319 (5th Cir.), cert. denied, 95 S.Ct. 1683 (1975); United States v. Duke, 527 F.2d 386, 388, 390 (5th Cir.), cert. denied, 96 S.Ct. 3177 (1976); United States v. Scallion, 533 F.2d 903, 912 (5th Cir. 1976), reh‘g on other grds denied, 548 F.2d 1168 (5th Cir. 1977), cert. denied, 98 S.Ct. 2843 (1978); and United States v. Manetta, 551 F.2d 1352, 1354 (5th Cir. 1977). See also United States v. Croucher, 532 F.2d 1042, 1044 (5th Cir. 1976).8
Since Lovasco, the overwhelming majority of our decisions have stated the rule essentially as we had stated it in Butts, supra. Thus, in United States v. Willis, 583 F.2d 203, 207 (5th Cir. 1978), we wrote that to prevail on a claim of preindictment delay “the accused must show that: (1) substantial prejudice resulted from the delay and (2) the delay was an intentional measure in order to gain a technical advantage.” In United States v. Durnin, 632 F.2d 1297 (5th Cir. 1980), we rejected a due process claim of preindictment delay on the sole basis that the defendant had not shown a motive on the part of the prosecutor to use the delay for tactical advantage, and we did so without even evaluating the presence or extent of prejudice:
“Appellant alleges that the delay denied him due process because he lost the testimony of an important witness in the interim between when the government could have brought an indictment and when it finally chose to do so. However, to establish a violation of the Due Process Clause in this context, appellant must show, not only
substantial prejudice flowing from an inordinate delay, but also a motive on the part of the prosecutor to use the delay to gain a tactical advantage. . .[citing Lovasco, Marion, and Willis]. Appellant does not contend that the government sought to delay his indictment for tactical advantage, and the district court specifically found that the delay resulted from the government‘s good faith attempt to ascertain appellant‘s guilt beyond a reasonable doubt. Trial Transcript, vol. 3, at 78. Since this finding is abundantly supported by the record, the district court‘s ruling on the motion to dismiss must be affirmed.” Id. at 1299-1300 (citations and footnote omitted; emphasis added).
More recently, we wrote in United States v. Byrd, 31 F.3d 1329, 1339 (5th Cir. 1994), that: “To prove that pre-indictment delay violated his due process rights, a defendant must demonstrate that the prosecutor intentionally delayed the indictment to gain a tactical advantage and that the defendant incurred substantial prejudice as a result of the delay.” (Emphasis in original). In all, since Lovasco at least twenty-nine different judges of this Court——including twenty-five of the thirty-three judges who have served either as active or senior judge of this Court since it split October 1, 1981——have authored, or joined without reservation, unanimous published opinions in some eighteen different cases holding or stating in substance just what we said in Byrd, Durnin, and Willis.9
We recognize that language to the contrary may be found in a scattered few of our opinions. For example, in United States v. Brand, 556 F.2d 1312 (5th Cir. 1977), cert. denied, 98 S.Ct. 1237 (1978), we rejected the defendant‘s preindictment delay claim because he had not demonstrated any prejudice. Id. at 1316-1317. The Brand panel then appended a footnote expressing its disagreement with the government‘s contention that “both actual prejudice and intentional tactical delay” had to be shown, asserting that instead the validity of a preindictment delay claim “depends on the due process balancing between the extent of the actual prejudice and the governmental interests at stake.” Id. at 1317 n.7. We did not there engage in any such balancing, however, for we had already found no actual prejudice (nor did we even identify or assess the reasons for the delay or “the governmental interests at stake“). The Brand footnote is pure dicta. The panel and the district court placed primary reliance on Townley——a quorum decision by two judges——where, in affirming Townley‘s conviction, we rejected his claim that the district court had erred in overruling his motion to dismiss for preindictment delay. The Townley panel concluded that “the lengthy pre-indictment delay
Townley notwithstanding, it is plain that the vast majority of this Court‘s opinions have followed the contrary approach as reflected in Butts, Durnin, Byrd, and the other opinions cited in note 9, supra. Although as an en banc court we are not strictly bound by prior panel decisions, we now choose to follow the vast majority of our prior opinions in this respect and to reject the Townley approach.
We recognize that neither Marion nor Lovasco is crystal clear on this issue, and each opinion contains some language that can give comfort to either view. However, we believe that the better reading of these opinions is that the Supreme Court, in instances where the statute of limitations has not run, has refused to
Crucially, the Supreme Court itself, albeit in dicta, appears to have interpreted Marion and Lovasco in essentially the same manner as we did in Byrd, Durnin, Butts, and our other cases cited in note 9, supra. Thus, in United States v. Gouveia, 104 S.Ct. 2292, 2299 (1984), the Court stated:
“But applicable statutes of limitations protect against the prosecution‘s bringing stale criminal charges against any defendant, United States v. Lovasco, supra, 431 U.S., at 788-789, 97 S.Ct., at 2047-2048; United States v. Marion, supra, 404 U.S., at 322, 92 S.Ct., at 464, and, beyond that protection, the Fifth Amendment requires the dismissal of an indictment, even if it is brought within the statute of limitations, if the defendant can prove that the Government‘s delay in bringing the indictment was a deliberate device to gain an advantage over him and that it caused him actual prejudice in presenting his defense. United States v. Lovasco, supra, 431 U.S., at 789-790, 97 S.Ct. at 2048-2049; United States v. Marion, supra, 404 U.S., at 324, 92 S.Ct. at 465.” (Emphasis added).
More recently, in Arizona v. Youngblood, 109 S.Ct. 333 (1988), the Court, in support of its holding that “unless a criminal defendant can show bad faith on the part of the police, failure to preserve potentially useful evidence does not constitute a denial of due process of law,” stated that:
“Our decisions in related areas have stressed the importance for constitutional purposes of good or bad faith on the part of the Government when the claim is based on loss of evidence attributable to the Government. In United States v. Marion, 404 U.S. 307, 325, 92 S.Ct. 455, 466, 30 L.Ed.2d 468 (1971), we said that ‘[n]o actual prejudice to the conduct of the defense is alleged or proved, and there is no showing that the Government intentionally delayed to gain some tactical advantage over appellees or to harass them.’ Id.; see also United States v. Lovasco, 431 U.S. 783, 790, 97 S.Ct. 2044, 2048, 52 L.Ed.2d 752 (1977).” Id. at 337.
A significant majority of our sister circuits appear to now follow the same rule, namely that where limitations has not run dismissal for preindictment delay requires a showing not only of substantial, actual prejudice, but also that the prosecutor intentionally delayed to gain tactical advantage or to advance some other improper purpose. See, e.g., United States v. Mills, 925 F.2d 455, 464 (D.C. Cir. 1991), cert. denied, 113 S.Ct. 471 (1992) (“. . . pre-indictment delay . . . offends due process if the defendant can carry the burden of showing (1) that the government delayed bringing the indictment in order to gain a tactical advantage; and (2) that the delay caused him actual and substantial
We conclude that several other considerations also strongly militate against utilizing a Townley-type balancing test to determine whether prejudicial preindictment delay violates due process and in favor of requiring that the delay have been intentionally caused by the prosecution to gain a tactical
The Townley test purports to weigh or balance the extent or degree of the actual prejudice against the extent to which the government‘s “good faith reasons” for the delay deviate from what the court believes to be appropriate.16 However, what this test seeks to do is to compare the incomparable. The items to be placed on either side of the balance (imprecise in themselves) are wholly different from each other and have no possible common denominator that would allow determination of which “weighs” the most. Not only is there no scale or conversion table to tell us whether eighty percent of minimally adequate prosecutorial and investigative staffing is outweighed by a low-medium amount of actual prejudice, there are no recognized general standards or principles to aid us in making that determination and virtually no body of precedent or historic practice to look to for guidance. Inevitably, then, a “length of the Chancellor‘s foot” sort of resolution will ensue and judges will necessarily define due process in each such weighing by their own “‘personal and private notions’ of fairness,” contrary to the admonition of Lovasco.
Apart from the above difficulty, grounding a due process violation on the basis of good faith but inadequate, ineffective, or insufficient governmental personnel or management leading to preindictment delay runs counter to two basic constitutional principles. In the first place, “[h]istorically, this guarantee of
Finally, serious separation of powers concerns are implicated.
For example, the government has cited to us the following observations in a report of the House Committee on Government
“19. a. Pending bank fraud investigations are overwhelming the Federal criminal justice system. There are acute shortages of sufficiently compensated and experienced prosecutors and investigators in most areas of the nation to handle these more complex cases.
b. Timely investigations and/or prosecutions of many of the 3,340 pending FBI investigations involving losses of $100,000 or more is highly improbable, if not impossible, without a substantial increase in the Justice Department‘s static budget.”21
In response, Crouch‘s brief cites, inter alia, a 1990 report of the same House Committee,22 which he characterizes as having “found that shortages of personnel for the investigation and prosecution of such fraud and embezzlement (F&E) cases were the result of the failure of the Executive Branch and the Department of Justice to request sufficient finding and to assign appropriate priorities.”
What are we to make of all this? Are we to say that there would be no due process violation if the President had vigorously and timely requested additional funds to investigate and prosecute these cases, but Congress had refused? Or, that even so we will find a due process violation because Congress shouldn‘t have refused? Of course, funds must come from somewhere. Are we to say that such additional funding is better than increasing taxes or the
Accordingly, we reject the Townley balancing test and hold that for preindictment delay to violate the due process clause it must not only cause the accused substantial, actual prejudice, but the delay must also have been intentionally undertaken by the government for the purpose of gaining some tactical advantage over the accused in the contemplated prosecution or for some other impermissible, bad faith purpose.23 We need not now attempt to
We turn now to the prejudice component of the due process claim.
Prejudice Requirement
General Principles
As noted, we agree with the panel‘s holding, 51 F.2d at 483-84, that the district court erred in concluding that the length of preindictment delay established substantial presumptive prejudice.25 All our precedents, as well as a fair reading of Marion and Lovasco, plainly indicate that actual, not presumptive, prejudice must be shown where complaint is made of preindictment delay. See, e.g., United States v. Wehling, 676 F.2d 1053, 1059 (5th Cir. 1982); United States v. McGough, 510 F.2d 598, 604 (5th Cir. 1975) (“when preindictment delay is asserted, actual prejudice and not merely the real possibility of prejudice inherent in any extended delay is a necessary element which must be shown“); Butts at 977 (“[t]he mere passage of time [does] not constitut[e] the type of
Moreover, preindictment delay generally tends to favor the defense, not the prosecution. See, e.g., United States v. Davis, 487 F.2d 112, 119 (5th Cir. 1973), cert. denied, 94 S.Ct. 1573 (1974).
That actual, substantial prejudice——not merely possible or potential prejudice——must be shown is also consistent with the nature of the due process right in question. That right is one not to be “deprived of life, liberty, or property, without due process of law.”
“Before trial, of course, an estimate of the degree to which delay has impaired an adequate defense tends to be speculative. . . . The essence of a defendant’s Sixth Amendment claim in the usual case is that the passage of time has frustrated his ability to establish his innocence of the crime charged. Normally, it is only after trial that that claim may fairly be assessed.” Id. at 1552 (emphasis added).
This, too, fully applies to claims of preindictment delay. The denial of relief before trial in no way precludes the accused, if
Necessarily, then, a far stronger showing is required to establish the requisite actual, substantial prejudice pretrial than would be required after trial and conviction. Indeed, it is difficult to imagine how a pretrial showing of prejudice would not in almost all cases be to some significant extent speculative and potential rather than actual and substantial. We are aware of no reported federal appellate decision since Lovasco that has sustained a pretrial dismissal for preindictment delay where the
Townley presents an instructive example of how a strong pretrial showing of substantial prejudice may ultimately dissolve in the unfolding of the actual trial itself. Townley and his partner Owens were charged with mail fraud in connection with inducing persons to purchase and invest in nonexistent vending machines. Townley at 582. Townley claimed that due to preindictment delay he was unable to show that he had really believed the machines would be produced and be a valuable investment for the purchasers. We concluded that the requisite substantial prejudice would have been shown “had the thrust of the government’s case” as presented at trial “been that Townley well knew that he and Owens could not deliver the machine sold or that the scheme could not be successful.” Id. at 583. We found no such substantial prejudice, however, because “the main thrust of the government’s case,” as presented at trial, “concerned [particular] misrepresentations made by Townley in the sale of the machines.” Id. Townley also claimed prejudice from being unable to adequately
“Insofar as counsel was unable to corroborate Townley’s testimony that (after he had discovered Owens’ fraud) he had informed the financing company not to approve any further applications for credit by investor-purchasers, the government expressly stated it would not dispute Townley’s testimony, and neither by argument nor evidence did it attempt to cast doubt upon this creditable act by Townley or upon his two customer-witnesses whose testimony tended to corroborate him. The government further made full disclosure of its files to Townley’s attorney to aid him in the preparation of the defense.” Id. at 585-86 (citation omitted).
And, we observed that the government did not use but “had available” a witness “who would have cast doubt on Townley’s exculpatory testimony.” Id. at 586. We accordingly affirmed the district court’s decision, after the close of all the evidence, to deny Townley’s pretrial motion to dismiss for preindictment delay.
Similarly instructive is our opinion in McGough, reversing the district court’s pretrial dismissal on account of preindictment delay. We described the defendant’s claim as follows:
“McGough’s assertion of actual prejudice to his defense is based primarily upon the death of some six potential defense witnesses. Some of these witnesses, McGough claimed, would have testified as to firsthand knowledge of several of the transactions which entered into the government’s calculation of the amount understated; the testimony of others might impeach government witnesses. . . . [T]he government asserted at the hearings that it had expected two of them to be government witnesses, rather than witnesses for the defense.” Id. at 604.
Although we could “find no indication that the trial court weighed the contradictory factual assertions before stating that there was actual prejudice,” id. at 604, we nevertheless did not remand for
Prejudice in this case
At this stage of the proceedings, any claim that Crouch and Frye will suffer actual and substantial trial prejudice from the preindictment delay——let alone be convicted——is purely speculative and unsupported by the record. So far as actual prejudice is concerned, there is simply no basis on which to conclude that this case will not be another Townley.
Crouch’s main claim is that the delay caused him to lose the testimony of six witnesses who had died prior to the July 1993 hearing before the magistrate judge, namely: his father, who died in June 1992; Gubert, who died at some unspecified time in 1988;
As to Levy and Tschearner, so far as this record discloses, they may well have died in 1987 or 1988, prior to any delay having become even arguably undue, and hence their “loss” could not be attributable to any improper delay. The same is true of Gubert, who for all this record shows may have died in January 1988. Moreover, there was no adequate showing that these three individuals could have contributed any testimony that was material or related to matters that could not otherwise be established. Levy was not claimed to have any knowledge at all of——much less any participation in——any of the transactions at issue. He would simply have testified how an outside director of a savings and loan association typically functioned and relied on management. There is no suggestion that similar testimony was not otherwise readily available. Tschearner, as a Bankers’ employee, negotiated with Ferguson concerning his purchase from Bankers of its REO tracts, and, according to Crouch, would have testified that the only people Ferguson mentioned to Tschearner as individuals at Delta with whom Ferguson dealt were Gerjes and Erskine, and that Crouch was not mentioned. But this is not necessarily contrary to the government’s theory of the case, and there is nothing to suggest
Crouch’s father died in June 1992, and accordingly the loss of his testimony——unlike that of Levy, Tschearner, and Gubert——is doubtless fairly attributed to any delay here that may be found undue and improper. However, Crouch does not claim that his father——who was not shown to have been a Delta officer, employee, or director at any of the times referenced in the indictment——ever had any knowledge whatever of, or in any way participated in, any of the charged transactions. Many of the matters Crouch says his father could have testified to——such as that Crouch, though a Delta director and chairman of its board, was not a Delta officer or employee and did not have an office on Delta premises, and that his
Crouch’s fifth missing witness, Corson, had been chairman of Vision Bank, an institution not claimed by anyone to have any involvement whatever in the instant transactions. Nor does Crouch claim that Corson had any knowledge whatever of, or any participation in, any of the instant transactions. Crouch
Finally, Crouch claims John Connally, who died June 15, 1993, after a brief illness, would have been a favorable witness. It is unclear, however, that the loss of this witness is attributable to preindictment delay. Crouch was aware he might well be indicted about fifteen months before John Connally died, but apparently took no steps to interview him or the like. Moreover, the original trial setting in this case was for a time several months before June 15, 1993, and there is nothing to suggest John Connally would have been unavailable at the earlier trial setting. Nor is there any showing that his testimony would have been favorable. Crouch said “I feel like” Connally would have testified he did not consider himself or the Barnes-Connally partnership liable for the Delta loans to Mark Connally because John Connally’s financial
To the extent that Crouch may have lost any witnesses due to improper delay, he has not shown any resulting actual, substantial prejudice, and his claims of prejudice are essentially speculative and premature. As to lost documentation, Crouch’s motion to dismiss admits that “the Defendant cannot point to the loss of any significant documents at this time.” And, there is no showing that any of the loan documents or closing papers are missing.35
Frye did not testify at the evidentiary hearing. Frye’s
First, the loan documents include a Memorandum of Profit Participation Agreement, executed by Ferguson C&D, Inc. and Frye’s J.M.G. Corporation in recordable form, reflecting that Ferguson C&D, Inc. had a profit participation in one of the Delta REO tracts Frye purchased, but not specifying the parties’ respective
Frye argues that he has been prejudiced because the Profit Participation Agreement itself has been lost, and it would indicate that he was not a mere nominee for Ferguson. There are several answers to this. In the first place, there is no direct evidence that such an agreement ever existed; certainly there is no testimony that it did. Conversely, there is nothing to indicate that the government will take the position that there was no such agreement, or that Ferguson will not admit that such an agreement existed (or that Ferguson or Frye himself cannot testify to the essential terms of the agreement). Indeed, there is no evidence that such an agreement, if it ever existed, cannot be produced at trial. There is no evidence that Ferguson does not have the agreement——or, indeed, that Frye does not——or that any effort had been made to search the files of the law firm Johnson was with at the time of the transactions.40 Finally, there is nothing to suggest that the agreement itself would be substantially more helpful to Frye than the Memorandum. The crux of the point Frye seeks to make——that he retained a continuing interest in the
Frye’s second claim of prejudice relates to the original of “a waiver of notice of special meeting of directors” of Frye’s J.M.G. Financial Corporation that was submitted in connection with the application to Delta for the $3,950,000 loan to Frye and J.M.G. to purchase Delta REO. The government had apparently been unable to locate the original of the waiver of notice, but had a Xerox copy of it as purportedly signed by attorney Dunn. It also appears that Dunn had informed the authorities that he had not signed the document and that his purported signature on it was not in fact his. Frye asserts that the loss of the original is prejudicial because handwriting analysis cannot be performed on a copy to show that Frye did not forge Dunn’s signature.41 This is assertedly
“[t]he [loan] application and corporate minutes were materially false in that they purport to represent the intent of the defendant Michael J. Frye that he and his corporation be held liable for repayment of the debt, when the defendants [Crouch and Frye] then and there well knew that defendant Michael J. Frye was a mere nominee borrower who believed himself and his company to have no actual liability on the note. Additionally, the corporate minutes were false in that no such director’s meeting was actually held.”42
Again, Frye’s claims of prejudice in this connection are at this stage speculative at best. To begin with, there is simply no sufficient showing that a handwriting analysis could not be performed, and indeed none had even been attempted (see note 41, supra). Moreover, there is absolutely nothing to indicate that the government will make any attempt to prove that Frye forged Dunn’s signature, or even that Dunn’s purported signature was not his.
Frye’s other assertions of prejudice are equally unavailing.44
Frye also introduced testimony by attorney Knoblock, who wrote letters in June 1986, purportedly on behalf of J.M.G. Financial, to Ferguson and Crouch. The letters were on the letterhead of another attorney with whom Knoblock officed. Knoblock, on being shown the letters, said he recognized the signature as his. He stated that he had represented J.M.G. “just for a brief period of time in 1986.” He came to do so at the request of one Dan Croft, a self-employed mortgage broker. He wrote the letters following a meeting with Croft, and an attorney Knoblock did not know, who purported to represent Ferguson, “and some other individual that was representing J.M.G., I don’t recall the name.” He thinks Croft told him to write the letters. It must not have been Frye, because Knoblock testified he did not know Frye and had never met or seen him prior to testifying at the hearing before the magistrate judge. He did not know Crouch or who he was. He had met Ferguson. The letter to Crouch, at Crouch’s law firm, concerned the Delta $3,950,000 loan to J.M.G. and states, “It was the understanding and information of JMG that this transaction was to facilitate a sale from Delta to an undisclosed purchaser, being Mr. R.B. Ferguson.” Knoblock disposed of all his J.M.G. files in 1991. However, there is no evidence as to what those files might have contained. Knoblock did testify that he could not say he ever saw a file containing those letters. This testimony does not establish prejudice to Frye. It rather suggests that the government may have a difficult time tying Frye to the letters. How this will all play out at trial cannot now be reliably ascertained.
Neither Frye nor Crouch has discharged the burden, especially heavy prior to trial, of showing that at trial they almost certainly will suffer substantial, actual prejudice by reason of the claimed undue delay in the return of the indictment. No more than potential, speculative prejudice is shown. To the extent that the district court found otherwise, its findings are not supported by the record and are clearly erroneous. While events at trial may demonstrate actual and substantial prejudice, at present Frye’s and
CONCLUSION
We summarize our holdings.
We reject the Townley balancing test and hold that where an indictment is returned within the statute of limitations, preindictment delay does not violate due process unless that delay, in addition to prejudicing the accused, was intentionally brought about by the government for the purpose of gaining some tactical advantage over the accused in the contemplated prosecution or for some other bad faith purpose. The district court having declined to make any such finding of bad faith,45 accordingly erred in granting the motion to dismiss the indictment for preindictment delay.
We further hold that preindictment delay does not entitle the accused to dismissal of the indictment on due process grounds unless he demonstrates that the improper delay caused actual, substantial prejudice to his defense. The requisite prejudice may not be presumed, rebuttably or otherwise, merely from the length of the delay, and the district court erred in holding to the contrary and in partially relying on presumed prejudice. Moreover, because actual, substantial prejudice to the defense at trial is required, a showing of mere potential or possible trial prejudice does not suffice. This means that dismissal on such a basis prior to trial
We accordingly reverse the district court’s order dismissing the indictment and remand for further proceedings consistent herewith.46
REVERSED and REMANDED
Notes
“In Marion we noted with approval that the Government conceded that a ‘tactical’ delay would violate the Due Process Clause. The Government renews that concession here, Brief for United States 32, and expands it somewhat by stating: ‘A due process violation might also be made out upon a showing of prosecutorial delay incurred in reckless disregard of circumstances, known to the prosecution, suggesting that there existed an appreciable risk that delay would impair the ability to mount an effective defense.’ id. at 32-33, n.25. As the Government notes, however, there is no evidence of recklessness here.” Lovasco at 2051 n.17 (emphasis added).
In his dissent from the denial of certiorari in Hoo, Justice White noted that the First, Third, Tenth, and Eleventh Circuits, as well as the Second, “required a showing of prosecutorial misconduct designed to obtain a tactical advantage over the defendant or to advance some other impermissible purpose in order to establish a due process violation,” that the Fourth and Ninth Circuits applied a balancing test, and that there were intra-circuit conflicts in the Fifth and Seventh Circuits. Hoo v. United States, 108 S.Ct. 742 (1988).“Because appellant has made no showing of an improper prosecutorial motive, however, we find no deprivation of appellant‘s constitutional rights.
In United States v. Marion, 404 U.S. 307, 324, 92 S.Ct. 455, 465, 30 L.Ed.2d 468 (1971), the Supreme Court held that the due process clause requires the dismissal of an indictment because of preindictment delay only when the delay causes ‘substantial prejudice’ to the defense and the delay is an ‘intentional device to gain tactical advantage over the accused.’ Id. . . . In any event, appellant has failed to show that the government had improperly delayed his prosecution in order to gain a tactical advantage.” Id. at 671.
“To establish that a pre-indictment delay violated due process, Sowa must prove that the delay caused actual and substantial prejudice to his fair trial rights, and there must be a showing that the government delayed indictment to gain a tactical advantage or some other impermissible reason. United States v. Marion, 404 U.S. 307, 325, 92 S.Ct. 455, 465, 30 L.Ed.2d 468 (1971). . . . The district court . . . found that Sowa had proved actual and substantial prejudice resulting from the delay. . . .
Sowa‘s claim, however, fails to meet the requirements of the second prong. With respect to the government‘s delay, due process is only implicated if the government purposely delayed the indictment to take advantage, tactically, of the prejudice or otherwise acted in bad faith.” Id. at 450.
“The law is well settled that it is actual prejudice, not possible or presumed prejudice, which is required to support a due process claim. The applicable statute of limitations is the mechanism established by law to guard against possible, as distinguished from actual, prejudice resulting from the passage of time between crime and the charge, protecting a defendant from overly stale criminal charges. United States v. Ewell, 383 U.S. 116, 86 S.Ct. 773, 15 L.Ed.2d 627 (1966); United States v. Marion, 404 U.S. 307, 92 S.Ct. 455, 30 L.Ed.2d 468 (1971).
The concept of presumed prejudice has no place in a due process analysis, and the district court‘s reliance on Doggett is misplaced. Doggett was a case involving a Sixth Amendment speedy trial violation claim, due to post-indictment delay, rather than pre-indictment delay. The proper measure of a claim of prejudice due to pre-indictment delay is the due process standard of the Fifth Amendment, which requires a showing of actual prejudice. . . .
The Supreme Court was clear in its directive that, “There is no need to . . . guard against mere possibility that . . . delays will prejudice the defense . . . since statutes of limitation already perform that function.” United States v. Marion, 404 U.S. 307, 92 S.Ct. 455, 30 L.Ed.2d 468 (1971).” Id. at 66.
In response to Frye’s counsel’s further suggestion that “we can’t even submit it for a handwriting analysis,” Kettler responded:“Q. [Frye’s counsel] All right. Tell me whether or not you have ever presented this document to the FBI for a handwriting analysis to determine whether Mike Frye was or was not the author of this thing that purports to say Abe Dunn.
A. No, we haven’t
Q. And tell the Court why you haven’t.
A. It’s a copy.
Q. And you can’t do a handwriting analysis not from a copy?
A. Not very well.”
There was no evidence that any handwriting expert had ever examined the copy or opined that no handwriting analysis could be based on it.“A. I’m not saying that. There may be some handwriting analyses people that will work with copies, but our people in our laboratory prefer originals.
Q. And in fact, they won’t work with copies; right?
A. I don’t know. I doubt it, but I don’t know for sure. I don’t think they would.”
Frye also introduced testimony by attorney Knoblock, who wrote letters in June 1986, purportedly on behalf of J.M.G. Financial, to Ferguson and Crouch. The letters were on the letterhead of another attorney with whom Knoblock officed. Knoblock, on being shown the letters, said he recognized the signature as his. He stated that he had represented J.M.G. “just for a brief period of time in 1986.” He came to do so at the request of one Dan Croft, a self-employed mortgage broker. He wrote the letters following a meeting with Croft, and an attorney Knoblock did not know, who purported to represent Ferguson, “and some other individual that was representing J.M.G., I don’t recall the name.” He thinks Croft told him to write the letters. It must not have been Frye, because Knoblock testified he did not know Frye and had never met or seen him prior to testifying at the hearing before the magistrate judge. He did not know Crouch or who he was. He had met Ferguson. The letter to Crouch, at Crouch’s law firm, concerned the Delta $3,950,000 loan to J.M.G. and states, “It was the understanding and information of JMG that this transaction was to facilitate a sale from Delta to an undisclosed purchaser, being Mr. R.B. Ferguson.” Knoblock disposed of all his J.M.G. files in 1991. However, there is no evidence as to what those files might have contained. Knoblock did testify that he could not say he ever saw a file containing those letters. This testimony does not establish prejudice to Frye. It rather suggests that the government may have a difficult time tying Frye to the letters. How this will all play out at trial cannot now be reliably ascertained.