Opinion
Case No. CR01-197-C-EJL
August 19, 2002
ORDER
Pending before the Court in the above-entitled matter is Defendants' William David Gladhart and Emily Sharon Gladhart (hereinafter "Defendants") Motion for Judgment of Acquittal and/or New Trial. The Defendants were charge with making materially false statements to a federally insured financial institution in violation of 18 U.S.C. § 1014. (Docket No. 1). A jury found both Defendants guilty of the charge. (Docket No. 36). The matter has been filly briefed and is ripe for the Court's consideration.
Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the court conclusively finds that the decisional process would not be significantly aided by oral argument, this motion shall be decided on the record before this Court without oral argument. Local Rule 7.1(b).
PROCEDURAL AND FACTUAL BACKGROUND
Defendants owned Christy Manufacturing (hereinafter "Christy"), a closely held corporation which produced and sold logging equipment. On August 13 1999, the Bank of Latah (hereinafter "the Bank"), a federally insured financial institution, approved a loan to Christy in the amount of $160,530.00. The loan was renewed on August 15, 2000. At the time of the initial loan application and renewal, Defendants submitted personal and corporate financial statements, prepared by their accountant. The Bank's loan officer testified that he relied heavily upon the financial statements in deciding whether to issue and renew the loan. Subsequent to the renewal, Christy began experiencing financial problems. Christy ultimately failed and Defendants filed for bankruptcy at which time the Bank discovered discrepancies in Defendants' financial statements relating to certain property, outstanding liabilities, and other relevant financial information.
On December 18, 2001 Defendants were charged with making materially False statements to a federally insured financial institution for the purpose of influencing the action of the bank in violation of 18 U.S.C. § 1014. Following a four day trial, the jury returned a guilty verdict as to both Defendants. Defendants have now filed this motion based on Federal Rules of Criminal Procedure 29 and 33.
STANDARDS
Motions for a judgment of acquittal are governed by Federal Rule of Criminal Procedure 29, which allows the court to set aside the verdict and enter a judgment of acquittal where after viewing the evidence in the light most favorable to the prosecution the court finds there is insufficient evidence upon which any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. United States v. Johnson, 229 F.3d 891, 894 (9th Cir. 2000); united States v. Yossunthorn, 167 F.3d 1267 (9th Cir. 1999) (quoting Jackson v. Virginia, 443 U.S. 307, 319 (1979)).
however, a district court's power to grant a Rule 33 motion for new trial is "much broader" than its power to grant a motion for judgment of acquittal. See United States v. Kellington, 217 F.3d 1084, 1097 (9th Cir. 2000). "The district court need not view the evidence in the light most favorable to the verdict; it may weigh the evidence and in doing so evaluate for itself the credibility of the witnesses." Id. at 1094 (quoting United States v. Alston, 974 F.2d 1206, 1211 (9th Cir. 1992). "If the court concludes that, despite the abstract sufficiency of the evidence to sustain the verdict, the evidence preponderates sufficiently heavily against the verdict that a serious miscarriage of justice may have occurred, it may set aside the verdict, grant a new trial, and submit the issues for determination by another jury. Alston, 974 F.2d at 1211-1212 (citation omitted). Rule 33 specifically states that "[o]n a defendant's motion, the court may grant a new trial to that defendant if the interests of justice so require."
DISCUSSION
Defendants' motion is based on several grounds: 1) the evidence was insufficient for a reasonable jury to find beyond a reasonable doubt that either Defendant "knowingly" made a false statement; 2) the indictment "could not be read as to charge them with making a false statement regarding the back rent;" 3) Defendants' due process rights were violated when the Government mislead and withheld in formation from the grand jury; 4) the Government failed to properly identify the nature of the charges; 5) admission of "objectionable" evidence; and 6) the Court's refusal to submit a special verdict form to the jury. (Docket No. 42, pp. 20-21). In order to assure the Defendants' motion is fully addressed, the Court has considered each of the arguments raised by Defendants in light of the standards for both the motion for judgment of acquittal and, in the alternative, the motion for a new trial.
1) Sufficiency of the Evidence:
Defendants contends a judgment of acquittal is warranted because "[t]he evidence presented at trial would not allow any rational jury to conclude the defendants were guilty beyond a reasonable doubt." (Docket No. 42, p. 12). Defendants assert only two possible grounds exist for a finding of guilt: 1) Defendants' failure to disclose the back rent owed by the business; and 2) Defendants' failure to disclose the transfer of the Arizona property. (Docket No. 42, p. 13).
At trial, the Government raised another argument supporting the charge asserting the Defendants failed to disclose that their primary residence was encumbered by a reconveyance of title to the home to a third-party, Mr. William Stoddard, who had loaned Defendants money. The Court ruled as a matter of law that the deed of reconveyance did not and could not transfer a security interest in the Defendants' home and, therefore, the Defendants' failure to not inform the bank that they had given Mr. Stoddard the deed was not a "false statement" as defined by the statute.
As to the first ground, Defendants argue they did not "knowingly" fail to disclose the rent owed and no rational jury could have so found because the evidence indicated that the failure to report the back rent was merely "inadvertent," not "knowingly." (Docket No. 42, pp. 13, 15). Defendants' further argue the rent liability was only a minimal amount of the corporations total liability and that the Defendants were unsophisticated in financial matters and relied upon the financial statements complied by their accountant. (Docket No. 42, pp. 13, 15). The Defendants' motion also repeatedly points to alleged "errors in judgment" by their accountant and the bank officer.
As to the second ground, Defendants argue they informed the Bank officer of the transfer of the Arizona property and that the bank manager told them it made no difference in whether the bank would renew the loan. Defendants further assert the transfer occurred nine months before the loan was renewed and, therefore, the Government's position that the property was transferred to avoid losing it is unsupported. (Docket No. 42, p. 13). Finally, Defendants again point out that any errors by Defendants were unintended and were only one of the many "errors in judgment" which, during the course of the loan process, were committed by several people. (Docket No. 42, pp. 14-15).
The evidence presented at trial concerning whether the back rent payments were reported was conflicting. The Defendants' testified that they assumed the corporate financial statements included the back rent liability and, therefore, any error in the statements was not "knowingly" omitted. The Bank officer and manager, however, both testified that the financial statements did not reveal the back rent payments and had the Bank known about the rent it would have made a difference in the bank's decision to renew the loan. In particular, the Bank manager testified that "the biggest" undisclosed liability was the "accrued rent due" which should have been reported as accrued debt because it affected the corporations financial condition. Defendants' accountant also testified that the past due rents should have been included on the corporation's financial statement but that Defendants did not provide him with information regarding the past due rents.
The jury was properly instructed as to the definition of knowingly. (Docket No. 41, Instr. 28).
The Bank manager was employed by the Bank after Defendants' loan was renewed but reviewed the entire file and testified about how the Bank decides to issue loans and the importance of accurate financial statements when issuing loans.
The evidence relating to the transfer of the Arizona property was also conflicting. Defendants asserted both at their deposition and at trial that the Bank was informed of the transfer. Defendants' son also testified that the Bank was told about the transfer at the renewal meeting. The Bank loan officer testified that while he had no specific recollection of when he discovered the Arizona property had been transferred he was sure it was not prior to the renewal of the loan. During the various witnesses testimony the Government highlighted the fact that there was no notations made on the financial statement relating to the Arizona property but there were other notes in the margins relating to other aspects of the statement. The Bank manager also testified that the transfer of the Arizona property would have been a "red flag" to renewing the loan and that there was no evidence in the Bank's file reflecting that the Bank was aware of the transfer prior to the renewal.
The Court finds that in viewing the evidence in the light most favorable to the prosecution and recognizing the juries function to resolve factual disputes and assess the credibility of witnesses, that the evidence presented against the Defendants was sufficient to sustain a conviction of the charged offense. Further, the Court's own review of the entire record and evidence presented does not led the Court to conclude that the evidence preponderates sufficiently heavily against the verdict or that a serious miscarriage of justice may have occurred.
2) Adequacy and Nature of the Charges:
Defendants' motion repeatedly challenges the adequacy or the indictment as to whether the Defendants were properly informed of the nature of the charges against them and whether the indictment charged the Defendants of the crime for which they were convicted. (Docket No. 42. pp. 7, 18-19).
a) Nature of the Charges:
Defendants assert they were never properly informed of the charge against them because the indictment was insufficient and the Government's position throughout the litigation was "vague" and "shilling." Defense counsel argues that as a result it was difficult to prepare for trial. Specifically, the motion contends the charges in the indictment, the evidence presented to the grand jury, and in the Government's pre-trial filings all pointed to "personal debt" not "corporate debt." (Docket No. 42, p. 15). Defendants assert none of the Government's filings informed them of the charges against them specifically as the charges relate to the corporation's debt. Further, Defendants contend the Government's pre-trial brief (Docket No. 30) only discussed the personal residence but nothing referring to "misstatements in the corporate financial statement." (Docket No. 42. p. 9).
Federal Rule of Criminal Procedure 7(c) governs the nature and contents of an indictment and requires that "[t]he indictment . . . shall be a plain, concise and definite written statement of the essential facts constituting the offense charged . . . shall state for each count the official or customary citation of the statute, rule, regulation or other provision of law which the defendant is alleged therein to have violated." The indictment in this case states:
the Defendants, did knowingly make a materially False statement to The Bank of Latah, a federally insured financial institution, knowing the statement was in fact false for the purpose of in influencing the action of The Bank of Latah: to wit, failed to disclose the true nature of the personal and corporate financial situations in regards to their assets, liabilities and statement of income which were considered when they renewed a Commercial — Revolving Draw in the amount of $160,530.00, loan number 30310, when in truth and Fact the Defendants knew their Statement of Financial Condition failed to disclose the existing liability against their personal residence, along with other relevant information. In violation of Title 18, United States Code, Section 1014.
(Docket No. 1). The indictment meets the requirements of Rule 7 and properly includes the elements of the charged offense. Moreover, the Government's pre-trial filings identified the nature of the charge and the elements making up the charge. (Docket No. 25). Specifically, the Government's response to Defendants' motion for bill of particulars stated explicitly the false statements upon which the Government based the charge and of which the Government presented evidence of at trial. (Docket No. 25). Defendants' argument that the Government did not refer to "corporate financial statement[s]" is erroneous in light of the fact that the indictment specifically states "failure to disclose the true nature of the personal and corporate financial situations. . . ." (Docket No. 1) (emphasis added).
The response stated "The false statements included: failure to disclose in their personal financial statement that they had transferred the ownership of property in Arizona to their son; the fact that they had given the `deed' to their residence to William Stoddard to hold against their substantial debt before they applied for the loan and long before they renewed their loan at the Bank of Latah; and they failed to disclose the true financial picture of the business, in that they failed to reveal the extent of their debt to William Stoddard. Further, they failed to list William Stoddard as a person from whom they borrowed money and the extent of the personal debt to Mr. Stoddard." (Docket No. 25).
The Court finds the Defendants were properly informed of the nature of the charge against them, the elements of that charge, and the allegations making up that charge. Further, defense counsel was supplied with ample information upon which to prepare for trial. A review of the pretrial filings of both the Government and Defendant in light of the evidence presented at trial, reveals that the Government's position was not "vague" or "shifting" as alleged by the Defendants.
The Court finds the jury had sufficient evidence upon which to base the conviction and the Defendants' due process rights were not violate. Further, the Court's own review of the evidence presented does not led the Court to conclude that the evidence preponderates sufficiently heavily against the verdict or that a serious miscarriage of justice may have occurred.
b) Charged Offense:
Defendants' second argument challenging the indictment asserts "the grand jury never charged the [Defendants] with a false statement on their corporate financial statement in which any back rent payment would have appeared." (Docket No. 42, pp. 9, 15). Defendants assert the indictment cannot be read to include a charge of making a false statement about the back rent but only as to their personal residence. (Docket No. 42. pp. 16, 20). This argument is without merit. The charge in the indictment, as stated above, clearly includes the allegation that Defendants failed to "disclose the true nature of the personal and corporate financial situations in regards to their assets, liabilities and statement of income" in relation to the renewal of the loan in question. (Docket No. 1) (emphasis added). The indictment properly complied with the requirements of Rule 7 and charged the offense for which Defendants were convicted.
3) Government's Conduct Before the Grand Jury:
Defendants assert the Government's presentation to the grand jury amount to prosecutorial misconduct which denied Defendants "the most basic of their due process rights." (Docket No. 42, p. 16-17). Defendants argue the Government "withheld information" by not reading complete portions of the deposition transcript and "grossly mislead" the grand jury regarding the deed of trust for Defendants' primary residence. (Docket No. 42, pp. 16-17). Defendants contend the grand jury would not have returned the indictment had it not been mislead by the Government and that allowing the verdicts to stand would result in a miscarriage of justice. (Docket Nos. 42, p. 18 and 44, p. 8). The Government asserts its presentation to the grand jury was not misleading but "conscientious and straight-forward" (Docket No. 43, p. 7). Further, the Government contends any error in the grand jury process was harmless in light of the petit jury's subsequent conviction. (Docket No. 43, p. 7) (citing United States v. Mechanik, 475 U.S. 66, 70 (1986)).
The Court has reviewed the transcript from the grand jury proceeding and finds the Defendants allegations of misconduct during the grand jury proceeding are without merit. The Government properly presented sufficient evidence upon which the grand jury could return the indictment. Further, as stated above, the Court finds the indictment properly charged Defendants of the offense for which they were ultimately convicted of by a jury. Finally, there is no indication that a "serious miscarriage of justice occurred" at the grand jury proceeding warranting a new trial.
4) Admission of Evidence and Use of a General Verdict Form:
a) Evidence:
Defendants assert their motion should be granted because the admission of evidence relating to events occurring in the spring of 2001 relating to the closing of Christy and Defendants personal residence was "objectionable" and allowed the jury to base its conviction on "speculation." (Docket No. 42, pp. 17-18, 21). Prior to trial, the Government properly served notice on Defendants of its intent to introduce Rule 404(b) evidence. (Docket No. 26). The Defendants made no objection to the admission of this evidence either prior to trial or at trial. Defendants now, however, raise this post-trial argument that, on the one hand, it was "necessary" to allow the evidence to be admitted at trial in order to disprove the Government's allegations but, on the other hand, the admission of this evidence allowed the jury to convict Defendants based on speculation. (Docket No. 42, pp. 17-18).
It is well established that counsel must make a "timely objection or motion to strike on the record stating the specific ground of objection. . . ." Fed.R. Evidence 103(a)(1). Defendants' failure to make a timely objection precludes their ability to now argue the admission of the evidence warrants anew trial. To properly challenge the evidence, defense counsel should have filed a motion in limine whereupon the Court and counsel could have investigated the admissibility of the evidence at a hearing prior to trial. At the very least, defense counsel should have objected to the admission of the evidence at trial whereupon defense counsel would have been allowed to make an offer of proof and/or otherwise make the Court aware of the "objectionable" nature of the evidence. In this case, defense counsels' failure to lodge any objection, either prior to trial or at trial, precludes counsels' ability to raise the objection at this late date. Further, the Court finds the challenged evidence did not prejudice but, instead, that there was sufficient evidence upon which the jury could base its conviction. Further, the Court's own review of the evidence in light of this argument does not led the Court to conclude that the evidence preponderates sufficiently heavily against the verdict or that a serious miscarriage of justice may have occurred.
b) Verdict Form:
The Defendants also challenge the Court's refusal to give their proposed special verdict form. (Docket No. 42, pp. 12, 20). The proposed verdict form required the jury to, if after finding guilt, state the specific "false statement" upon which they unanimously agreed was the basis for their guilty verdict. (Docket No. 29). At trial, Defense counsel argued the special verdict was necessary because the "jury's verdict must be unanimous as to the specific false statement." The Defendants motion now additionally asserts the special verdict form was necessary to correct errors by the Government before the grand jury and errors at trial.
The Court finds Defendants' argument is without merit. At trial. Defendants asserted the special verdict form was necessary to assure the jury unanimously agreed as to the same "false statement" and to allow Defendants to determine which specific "false statement" upon which the jury based the finding of guilt. To address Defendants' concerns, the Court instructed the jury as to the requirement of unanimity as to the specific "false statement" in instruction number twenty-six. which states, in relevant part:
The jury must agree unanimously that each of these elements have been proven beyond a reasonable doubt with all of you agreeing as to the specific false statement or statements that were made.
(Docket No. 41, Instr. 26). A jury is presumed to follow the court's instructions. See Weeks v. Angelone, 528 U.S. 225, 234 (2000). The Court did not err in refusing to give a special verdict form because the jury was properly instructed as to the unanimity requirement of the charged offense. Further, the use of a general verdict form did not prejudice the jury and, in viewing the evidence in the light most favorable to the prosecution, the evidence presented at trial was such that a rational jury could conclude that the Defendants were guilty beyond a reasonable doubt of the charged offense. Further, the Court's own review of the evidence presented does not led the Court to conclude that the evidence preponderates sufficiently heavily against the verdict or that a serious miscarriage of justice may have occurred.
CONCLUSION
The evidence in this case was properly presented to the jury. The jury was properly instructed. The jury fulfilled its function to resolve factual disputes and assess the credibility of witnesses in reaching its verdict. The evidence presented was sufficient to sustain the conviction and this Court will not second-guess the jury's findings. Further, the Court's own review of the evidence presented does not led the Court to conclude that the evidence preponderates sufficiently heavily against the verdict or that a serious miscarriage of justice may have occurred.
ORDER
Based on the foregoing and being fully advised in the premises, the Court finds Defendants' Motion for Judgment of Acquittal or Alternatively for a New Trial (Docket No. 42) is without support in fact or law and, therefore, is DENIED.
IT IS SO ORDERED