Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 84 CR 726 - John F. Grady, Judge.
Before WOOD, COFFEY, and RIPPLE, Circuit Judges.
The defendant, William Patterson, filed a motion prior to trial requesting that the district court dismiss his indictment on the grounds that it violated the double jeopardy clause, the collateral estoppel doctrine, the compulsory joinder doctrine, and due process. In the alternative, he requested that the court exercise its supervisory power over the prosecution and require it to dismiss the indictment. The district court denied the motion and Patterson appeals. We remand to the district court for further consideration consistent with this opinion.
Patterson was initially indicted in a federal district court in Oklahoma for crimes arising from the collapse of the Penn Square Bank ("PSB") in Oklahoma City, Oklahoma. At the time of the PSB's collapse, Patterson was a vice president of PSB, charged with the responsibility of approving the energy loans made by the bank. After the collapse of the PSB, grand juries were convened in Oklahoma City, Chicago, Seattle, and other cities, to investigate the operations of the PSB and its relationship with the correspondent banks in those cities. These banks routinely engaged in loan participation agreements with other financial institutions wherein the larger bank ("up stream bank") would proportionately share or purchase part of a loan being made by a smaller bank ("down stream bank"), as the Penn Square Bank, to customers of the smaller bank. The participation of a larger bank in the loan is oft times necessary since the smaller bank's customers frequently request loan amounts in excess of the smaller bank's legal lending capacity.
On July 17, 1984, a federal grand jury convened in Oklahoma City and returned a thirty-four count indictment, naming Patterson as the defendant. Subsequently, nine counts of the thirty-four count indictment were dismissed and a revised twenty-five count indictment, encompassing alleged criminal conduct involving a number of transactions, was filed with the court. The majority of the counts contained in the indictment charged that Patterson, in his capacity as head of the energy loans for PSB, willfully misappropriated the funds of PSB and several of its customers. As an example, the Oklahoma indictment in Count I alleges a scheme to defraud, in violation of U.S.C. 1343 (wire fraud), and lists the Continental Bank of Illinois, in an introductory paragraph, along with several other major banks that participated in loans with the PSB to provide funds to PSB's customers. This count, as other counts in the indictment, recite that Patterson caused a PSB customer to apply for and receive loans from PSB under false pretenses and that Patterson, upon receipt of this money, used the proceeds to repay those overdue loan payments of those customers he had previously approved for the granting of loans. Other counts in the Oklahoma indictment charged that Patterson, without proper customer authorization, wrote checks drawn on the customers' accounts to make payments on overdue loans of other PSB customers, in violation of 18 U.S.C. § 656 (theft and embezzlement or misapplication of funds by bank officer). In another count of the indictment, Patterson was explicitly charged with defrauding the Michigan National Bank, one of those banks listed in the introductory paragraphs of the indictment that had participated with the PSB in extending loans to PSB's customers.*fn1 The Oklahoma indictment finally charges Patterson with making false entries in the PSB's books in order that he might conceal his fraudulent activities, in violation of 18 U.S.C. § 1005 (fraudulent bank entries, reports and transactions). In September of 1984, after a three week trial, the jury acquitted Patterson of these charges.
The day prior to the return of the verdict in the Oklahoma trial, Patterson was indicted in the Northern District of Illinois for defrauding the Continental Bank of Illinois. Specifically, the Illinois indictment in Count I charged that Patterson along with John Lytle, the vice president of Continental Bank's Mid-Continent Division, and Jere Sturgis, a customer of the PSB, schemed to defraud Continental of its funds in violation of 18 U.S.C. 1343. According to this indictment, Lytle would approve Continental Bank loans to the customers of PSB without investigating their credit worthiness or securing the proper collateral. The PSB would receive a one percent finder's fee on these loans made by the Continental Bank.*fn2 This count further charges that in exchange for Lytle's extending the loans to PSB's customers, Patterson lent funds to Lytle in excess of $500,000 at "favorable interest rates." Finally, Count I of the Illinois indictment alleges that Patterson arranged and personally guaranteed a loan at the Oklahoma City Bank to pay off Lytle's indebtedness to PSB. According to the government, in order to conceal this (Lytle's) loan from Oklahoma City Bank, Jere Sturgis, the PSB customer, repurchased Lytle's share of an investment in a drilling exploration company at a grossly inflated price and Lytle used the proceeds from the sale of this investment to pay off his loan from the Oklahoma City Bank. Sturgis funded the repurchase of Lytle's investment through another loan received from the PSB. The indictment also charges, in other counts the underlying acts of theft and wire fraud employed by the defendants, in violation of 18 U.S.C. § 656 (theft and embezzlement or misapplication of funds by a bank officer) and 18 U.S.C. § 1343 (wire fraud), to support their scheme to defraud the Continental Bank.
In his argument for dismissal of the indictment before the district court, Patterson asserted that the Oklahoma indictment was broadly worded, including references to "up stream banks," such as the Continental Bank, and thus the government, in filing the Illinois indictment, was again attempting to prosecute him for defrauding the Continental Bank. Patterson contended that the government introduced evidence relating to the Illinois indictment at the Oklahoma trial and argued to the Oklahoma jury that as part of the scheme to defraud the PSB, Patterson also schemed to defraud the so-called "up stream" banks, including the Continental Bank of Illinois. For example, Patterson contended that the allegations made against him in Count fifteen of the Illinois indictment*fn3 were previously litigated in the Oklahoma trial under Counts two and ten of that indictment as the government introduced evidence at the Oklahoma*fn4 trial in an attempt to convict Patterson of these counts.*fn5 Patterson requested that the court dismiss the Illinois indictment on the grounds either of double jeopardy, collateral estoppel, compulsory joinder, or due process. In the alternative, Patterson requested that the district court invoke its inherent power over the prosecutor to prevent what he alleged to be an abuse of power on the part of the government in pursuing the Illinois indictment after he had been cleared of the same wrongdoing by the Oklahoma jury. The government responded that the Oklahoma indictment covered only those transgressions of the law dealing with Patterson's alleged defrauding of Penn Square Bank and that it did not allege, much less offer any proof or endeavor to prove, that Patterson attempted to defraud the up stream banks referred to herein, such as the Continental Bank of Illinois.*fn6
The district court, after reviewing Patterson's motion to dismiss the Illinois indictment, denied the same. We note that at the time the court made this ruling, the transcript of the Oklahoma trial was not available as i had not yet been entirely transcribed. The district court stated that:
"Count I of the Oklahoma indictment contains a lengthy recitation of the background facts concerning Patterson's alleged scheme to defraud. Numerous individuals, corporations, partnerships and banking institutions are mentioned in the recitation, and, if one had to rely on just the first 5-1/2 pages of Count I, it would be difficult to tell just who is alleged to have been victimized by the scheme."
After reviewing the Oklahoma and Illinois indictments, the district court found that the counts contained in the Oklahoma indictment alleged only schemes to defraud the Penn Square Bank and its customers, but did not allege that Continental was one of the victims of these schemes to defraud; thus, the court found the indictment separate and distinct. The district court concluded that:
"the intent [of the alleged scheme to defraud the Penn Square Bank] may indeed have been to benefit the Penn Square at the expense of other banks, including Continental. In short, an intent to defraud Penn Square and an intent to defraud Continental are two different things; they could combine in a particular instance, but they need not."
On appeal, Patterson reasserts that the filing of the Illinois indictment violates the double jeopardy clause, the doctrine of collateral estoppel, the doctrine of compulsory joinder, and due process. In the alternative, he requests that this court exercise its supervisory power over the prosecutor to prevent him from pursuing the crimes charged in the Illinois indictment as the government is ...