United States v. Glenn W. McMurray and R. Glade Whiting

On Rehearing En Banc

SETH, Chief Judge.

These are appeals from the District of Utah in number CR-77-11 wherein the appellants were convicted in a jury trial. The appellants McMurray and Whiting urge that errors were committed by the trial court in its denial of their motions for acquittal, and as to certain instructions. They also urge that there was not sufficient evidence to support the verdicts.

Appellants McMurray and Whiting assert that the trial court was in error in its denial of their motions to dismiss on the ground of double jeopardy. The cases were based on several indictments all relating to a Small Business Investment Company.

The grand jury handed down several indictments based on applications made by the Utah Capital Corporation, which was a Small Business Investment Company, to the Small Business Administration. Each indictment in identical language alleges a conspiracy to make false entries in reports and statements in violation of 18 U.S.C. §§ 1006 and 2 to defraud the United States by frustrating the operation of the Small Business Administration. Substantive counts were also included in each.

Utah Capital was under the supervision of the Small Business Administration and was in the business of lending funds to small concerns. Under the statute (15 U.S.C. § 683) it could apply to the SBA to issue government guaranteed debentures. The amount of such debentures which could be issued by Utah Capital depended on the total of its paid-in capital and surplus. For authorization to issue debentures, Utah Capital had to apply and did apply to the SBA by an Application for Guaranty. In this application it was required to state the amount of its paid-in capital and surplus.

The Government in the indictments alleged that the defendants conspired to falsely and fictitiously misrepresent the amount of Utah Capital’s capital and surplus. This was alleged to have been done by making deposits in the corporate bank account of funds which in fact were not unencumbered corporate funds but were provided by a number of persons for temporary use to increase the corporate bank deposits to support an application to issue guaranteed debentures. These advances were by prearrangement returned to the individuals within a very short time. The application to the SBA was submitted at the time when the bank account of Utah Capital was so fictitiously increased.

The defendant McMurray was president and defendant Whiting was vice president of Utah Capital. Defendant Cassity was the attorney for the corporation. The record shows that the purpose of the conspiracy was to assemble funds in a certain agreed amount, deposit them in a bank, prepare and file the application with the SBA based on the then balance in the account, then return the funds to the individuals who had provided them for the described purpose.

The four indictments each named defendants McMurray, Whiting, and Cassity who came to be known as the “hub defendants.” In each indictment there were named other defendants who it was asserted had conspired to provide one of the four segments of the total deposit. These “spoke” defendants were eight in number and were each named in but one indictment. For example, in the indictment which became case number CR-76-126, and was the first tried, defendants McMurray, Whiting, and Cassity were named with the “spoke” defendants Lindquist, Nemelka, and Solomon. It was there alleged that this group had provided $550,000.00 of the $2,185,000.00 deposit on May 21st for use in a SBA application. In CR-77-11 (the case before us) defendant Wilstead was named with McMurray, Whiting, and Cassity in providing $725,000.00, part of which was used in the same May 21st deposit of $2,185,000.00 and part used in a September deposit. The indictments in 76-126 and 77-11 both concern the same deposit to provide apparent support for the same SBA application.

In trial court case number CR-76-126 there were tried defendants McMurray, Whiting, and Cassity, the so-called “hub” defendants, as mentioned above, and others. In CR-76-126 Count I alleged a conspiracy and Counts II through V alleged false entries and aiding and abetting. After jeopardy had attached during the trial in 76-126 the court on the Government’s motion dismissed all counts except the conspiracy count.

The jury in CR-76-126 acquitted defendant Cassity but convicted defendants McMurray, Whiting, and Nemelka. The convictions were appealed and became in this court 79-1655, 79-1654, and 79-1393. The cases were consolidated and the panel opinion wa$ filed November 13, 1980.

The defendant Cassity who was acquitted in CR-76-126 was brought to trial under another of the four indictments in case CR-77-13. On motion of Cassity the trial court dismissed on the ground of double jeopardy arising from the trial in 76-126. We affirmed the dismissal on the Government’s appeal in our 79-1077 with an opinion filed January 31, 1980.

The Government also sought to again try defendants McMurray and Whiting, who had been convicted in 76-126 on another of the four indictments as case number CR-77- 11. Defendant Wilstead was tried in CR-77-11. He had not been tried before. The trial judge, who did not hear 77-13 (Cassity), denied the double jeopardy motions of defendants McMurray and Whiting and they went to trial. This denial, and the subsequent convictions, were appealed to this court and became numbers 78-1928, 78- 1929, and 78-1930. The panel filed an opinion on March 5, 1980. 656 F.2d 540. Rehearing en banc was granted and this is the opinion on such rehearing.

We must hold that there was but one conspiracy and this was to amass the $2,185,000.00 for deposit to support the SBA application. It was assembled in segments with different groups providing funds for the purpose of supporting the Application for Guaranty. This was the objective of all the arrangements. ■

The Government asserts that there was no connection directly between the two “spoke” groups here concerned (CR-76-126 and CR-77'-ll), and thus each acted independently with the “hub” group. The Government thus, takes the view that each arrangement with a “spoke” group for a segment of the total deposit was a separate conspiracy. It thus moves back one step from the assembly of, and the making of the total deposit, and moves back from the submission of the application.

We are persuaded by the singleness of the ultimate objective of all the defendants. It was a narrow one and was to make the deposit to support the application to the SBA. It took a lot of arranging, some close timing, and a number of individuals to accomplish the objective, but again it was but one well defined objective. With each of the two “spoke” groups the subsidiary objective was to arrange for one segment or portion of the total deposit. The “spoke” group in CR-76-126 had no direct relationship with the group in CR-77-11; each was negotiated with separately by the “hub” group directly. All planning was directed by the “hub” defendants to the ultimate deposit and application.

In examining the scope of the conspiracy, we must look to the submission of the Application for Guaranty as the most important element. This submission was the basic aim of all the arrangements. The dollar total therein or in the supporting deposit is not significant for our purposes, but the submission was. It is apparent that all the convicted conspirators in CR-76-126 and CR-77-11 entered into the sham investment plan to support an Application for Guaranty. The success of the application influenced the “spoke” defendants’ compensation or that of most of them. The indictment alleged that the “spoke” defendants would receive loans for their participation. It is thus apparent that all the defendants in both cases were concerned with the success of the application, and the whole arrangement was dependent thereon.

The proof did not show that the “spoke” defendants had any contact or connection with other “spoke” defendants. Obviously the “hub” defendants were the same. Thus as the record before us stands, there is no showing of any connection or meetings between the two groups of “spoke” defendants.

Under the authorities it is not necessary that each conspirator agree with all others or even know of the others, or have contact with each of them. Blumenthal v. United States, 332 U.S. 539, 68 S.Ct. 248, 92 S.Ct. 154, presents fundamental issues as to the admission of evidence and its impact on the various defendants. However, on the broader questions the Court stated that participants could be convicted upon a showing of the nature of the plan and their connections with it, and “without requiring evidence of knowledge of all its details or of the participation of others.” The Court continued to demonstrate several details in the conspiracy which might be unknown to some of the conspirators. This included knowledge of the participation by the unknown owner of the whiskey in the arrangement. The Court also there stated:

“By their separate agreements, if such they were, they became parties to the larger common plan, joined together by their knowledge of its essential features and broad scope, though not of its exact limits, and by their common single goal.”

And further:

“All by reason of their knowledge of the plan’s general scope, if not its exact limits, sought a common end, to aid in disposing of the whiskey. True, each salesman aided in selling only his part. But he knew the lot to be sold was larger and thus that he was aiding in a larger plan. He thus became a party to it and not merely to the integrating agreement with Weiss and Goldsmith.”

In Kotteakos v. United States, 328 U.S. 750, 66 S.Ct. 1239, 90 L.Ed. 1557, each loan was a separate transaction complete in itself each with a separate illegal purpose and end. The only connection shown was that Brown handled all the loan applications. Each was a direct transaction, and was not part of a chain of events common in drug conspiracies.

We must again refer to the single purpose of the arrangement for the temporary use of the “spoke” defendants’ funds. The defendants in both cases knew of this purpose; this was the plan and the agreement. Again, it was not necessary for all to know the ultimate dollar figure. It was not necessary that all know the others involved in the same purpose — those who provided other dollars. The “hub” defendants dealt separately with the groups in the accumulation of the funds, but all was for the same purpose and the separate dealings did not thereby create separate conspiracies. Nor could the Government by separate indictments divide up a single conspiracy. Thus we must hold that but one conspiracy has been shown to exist, and the defense of double jeopardy was valid.

It is apparent that the issue as to whether one or more conspiracies existed in the cases before us is to be resolved by an examination of the facts. The problem is a factual one and each case is unique. There are no general legal propositions which will decide all the cases; instead, an examination must be made on a case by case basis starting with the purpose of the conspiracy and how it was carried out. The agreement obviously is the central element of any conspiracy. The agreement includes the objective of the combination. The objective here was to defraud the SBA by the Application for Guaranty based on fictitious bank deposits. All the convicted defendants knew the objective — the purpose of the accumulation of funds, and all participated in attaining the objective. In the cases before us there were two groups seeking to accomplish the same ends. The several participants had somewhat different roles as we have described. The success of the agreement was to be the approval of the application, and all worked to this end. The facts before us with the clear objective — a single business transaction — which all participants were seeking to bring about present a very much clearer picture than do the many drug conspiracies which find their way to the courts. See, for example, our United States v. Martinez, 562 F.2d 633 (10th Cir.). We have here a limited time span with the same cast of characters throughout. The comparison must again be made with the facts in Blumenthal v. United States, 332 U.S. 539, 68 S.Ct. 248, 92 S.Ct. 154, from which we have taken quotations in the preceding paragraphs. This was a conspiracy to sell whiskey provided by an unidentified owner which had come into the possession of Weiss and Goldsmith. The issue was whether there was one conspiracy to dispose of the whiskey or whether there were two conspiracies, one between Weiss-Goldsmith and the owner and another between Weiss-Goldsmith and the several salesmen. The Court decided there was one conspiracy and said:

“All knew of and joined in the overriding scheme. All intended to aid the owner, whether Francisco or another, to sell the whiskey unlawfully, though the two groups of defendants differed on the proof in knowledge and belief concerning the owner’s identity. All by reason of their knowledge of the plan’s general scope, if not its exact limits, sought a common end, to aid in disposing of the whiskey. True, each salesman aided in selling only his part. But he knew the lot to be sold was .larger and thus that he was aiding in a larger plan. He thus became a party to it and not merely to the integrating agreement with Weiss and Goldsmith.”

The defendants here all knew of the general plan, purpose, and aim, as we have mentioned. All were aware of the accumulation of funds for the May deposit and the purpose of the deposit. Some participated by providing different amounts of money as compared to the sales in Blumenthal of different quantities of whiskey. The knowledge, the awareness of the purpose and objective are the same in this case as in Blumenthal.

The judgments of conviction of defendant Glenn W. McMurray in CR-77-11 Utah (our number 78-1928) and of R. Glade Whiting in CR-77-11 Utah (our number 78-1929) are reversed and the cases remanded with directions to dismiss the actions and the indictments.