United States v. Douglas G. Thompson Roger D. Thompson

Citations: 287 F.3d 1244; 2002 U.S. App. LEXIS 6973; 2002 WL 555100Docket: 01-3014

Court: Court of Appeals for the Tenth Circuit; April 16, 2002; Federal Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The United States Court of Appeals for the Tenth Circuit reviewed an appeal by the United States against Douglas G. Thompson and Roger D. Thompson, following the dismissal of an indictment by the District Court for the District of Kansas on statute of limitations grounds. The government contended that the indictment was timely and that the dismissal was primarily due to a violation of Federal Rule of Criminal Procedure 6(e)(4). 

The court determined that the indictment was "found" when the grand jury voted to indict and the foreperson endorsed it, thus satisfying the statute of limitations as per 18 U.S.C. 3282. However, the indictment's sealing breached Rule 6(e)(4), necessitating a harmless error analysis. Ultimately, the court affirmed the lower court's decision despite the procedural misstep.

The case involved the Thompson brothers, co-owners of Plaza Speedway, who took a $75,000 loan from the Small Business Administration (SBA) in 1993 to repair flood damage. During a 1997 civil case against the United States, suspicions arose regarding the use of the loan, suggesting the funds were misappropriated to purchase a co-owner's share instead of for repairs. This led to a federal grand jury issuing a nine-count indictment in February 1999, charging the brothers with conspiracy to defraud a U.S. agency, mail fraud, and engaging in monetary transactions involving criminal proceeds, all of which were subject to a five-year statute of limitations.

The district court sealed the indictment at the government's request without a record discussion, unsealing it eleven months later on January 18, 2000. The last overt act of the conspiracy occurred on April 4, 1994, leading to a statute of limitations expiration on April 4, 1999, unless tolled. The substantive offenses' limitations expired by April 6, 1999. The indictment was returned on February 10, 1999, about two months before the expiration of the limitations but was unsealed nine months after its expiration. The defendants filed a motion to dismiss the indictment, challenging the statute of limitations. During the hearing, the court heard testimony, including from defendant Douglas Thompson. The district court ruled that a sealed indictment may toll the statute of limitations if sealed for a legitimate purpose, citing United States v. Thompson.

The government justified sealing the indictment to further investigate and to avoid influencing a related civil suit. However, the district court found neither justification valid, and the government later conceded that the indictment was improperly sealed. The court determined that the defendants did not need to prove actual prejudice for dismissal, yet they demonstrated prejudice due to the statute of limitations violation. The prosecution's case primarily revolved around communications concerning an SBA loan in early 1994, with Doug Thompson managing all related business communications and record-keeping, which he did not share with his brother Roger. Doug relocated his office in June 1999, a move he had planned for over a year.

During a move, records older than five years, including SBA loan documentation, were ordered destroyed. This included time record sheets detailing interactions with the SBA, correspondence, payment records, and tax information. Doug testified to not recalling two letters from the SBA and noted phone conversations not reflected in the SBA log, particularly a key discussion on February 28. He also mentioned correspondence regarding a letter dated January 28 that was absent from SBA files. Prior to June 1999, the defendants had an intact SBA file and supporting documentation for their defense. They have shown actual prejudice due to the loss of these records and memory lapses regarding communications from over six years prior.

The court reviews the dismissal of an indictment for abuse of discretion, while legal interpretations of governing statutes are assessed de novo. Under 18 U.S.C. 3282, the statute of limitations for non-capital offenses is five years from the date the offense occurred. The government argues that an indictment is "found" by the grand jury, not upon public filing or defendant notification. They assert that the sealing of the indictment does not violate the statute of limitations but rather Rule 6(e)(4) of the Federal Rules of Criminal Procedure, which requires showing prejudice for dismissal due to procedural violations. The defendants counter that the statute of limitations was violated since the indictment was sealed without legitimate prosecutorial intent, arguing that the indictment is not "found" until made public, thus advocating for its dismissal. The court emphasizes that statutory interpretation begins with the statute's language and should consider the broader context of the statute as a whole.

In United States v. Burdix-Dana, the Seventh Circuit examined whether the filing of an information in district court constituted the initiation of a prosecution under 18 U.S.C. § 3282, which has a five-year statute of limitations. The government filed an information before the statute expired but did not return an indictment until after the expiration. The defendant contended that the prosecution was not 'instituted' as required by the statute because the government had not secured a waiver of indictment necessary for prosecuting based on the information. The court held that the filing of the information is sufficient to meet the statutory requirement of 'instituting' a prosecution under § 3282, regardless of the need for a waiver under Federal Rule of Criminal Procedure 7(b).

Additionally, the court clarified that in the context of an indictment, the closest analogous action to filing an information would determine when an indictment is considered 'found.' Federal Rule of Criminal Procedure 6(f) stipulates that a grand jury must reach a concurrence of 12 or more jurors to return an indictment, thereby indicating that an indictment is 'found' when a grand jury formally indicts. The rule does not suggest that an indictment is 'found' merely when it becomes public or known to the defendant. Furthermore, it emphasized that indictments are established by the grand jury's findings and cannot be amended by the court without the grand jury's approval, as supported by historical case law.

18 U.S.C. § 3282 does not address the sealing of indictments or include a tolling provision related to it. The determination of whether an indictment is 'found' by the grand jury is independent of whether it is sealed. This is supported by the Third Circuit's ruling in United States v. Michael, where the indictment was returned before the statute of limitations expired, but sealed until after the expiration. The court concluded that the indictment was still considered 'found' within the statutory period once the grand jury voted to indict and the foreperson endorsed it, regardless of subsequent actions taken by the court regarding the sealing. 

While some circuits view the statute of limitations as still running after the return of a sealed indictment, they maintain that the statute is tolled if the indictment is sealed for legitimate reasons. If the sealing lacks legitimacy, the indictment is deemed 'found' only upon its unsealing. This court declines to adopt the alternative approach proposed by the defendants, which would link the timing of an indictment being 'found' to the propriety of its sealing, emphasizing that neither statutory nor rule-based frameworks consider the date of an indictment 'found' to be contingent upon the reasons for sealing.

Rule 6(e)(4) of the Federal Rules of Criminal Procedure allows for the sealing of indictments until a defendant is in custody or released pending trial. Circuit courts recognize that indictments may be sealed for legitimate prosecutorial reasons or public interest. Upon unsealing an indictment, a defendant may challenge the sealing's propriety, prompting the government to justify its actions. If the government fails to provide a valid reason or concedes that the sealing was improper, it violates Rule 6(e)(4). Violations of the Federal Rules are typically assessed for harmless error under Rule 52(a), which mandates the disregard of errors that do not affect substantial rights. Nonconstitutional errors are evaluated under a standard that considers whether the error substantially influenced the outcome or leaves grave doubt about its effect. Although the government contends that harmless error analysis should occur post-trial, it acknowledges that pretrial analysis is feasible. The Supreme Court's ruling in Bank of Nova Scotia emphasizes that dismissal of an indictment for grand jury errors is warranted only if it is shown that such violations significantly influenced the grand jury’s decision or if there is serious doubt regarding the influence of violations, although the case specifically addressed violations of secrecy and disclosure, not sealing issues.

The sealing of an indictment occurs after a grand jury votes to indict, and in this case, there were no allegations of misconduct during the grand jury's proceedings. The court must evaluate whether the improper sealing of the indictment affected subsequent criminal proceedings, including plea negotiations and pretrial preparations, thereby potentially hindering the defendants' ability to mount a defense prior to trial. For violations of Rule 6(e)(4) regarding sealing, the government bears the burden of proving that the error did not significantly harm the defendant's ability to defend against the charges. Previous cases cited by the government do not apply, as they do not involve sealing violations and focus on the policy against interlocutory appeals. Therefore, the court can assess harmlessness of the sealing violation before the trial, particularly given that the defendants inadvertently destroyed documents pertinent to their defense. The standard for determining harmless error focuses on whether the sealing error substantially influenced the defendant's defense capabilities, rather than merely assessing if sufficient evidence existed to support the charges independently of the error. The government's challenge lies in demonstrating that the sealing did not materially affect the defense, a task complicated by the defendant's rights against self-incrimination and privilege issues. Nonetheless, the government’s actions in improperly sealing the indictment contribute to these difficulties.

The government accepts the district court's finding that Douglas Thompson destroyed relevant documents innocently after the statute of limitations expired but before the indictment was unsealed. It does not contest the court's factual conclusions regarding the prejudice related to the Thompsons' communications with the SBA, arguing instead that the lost records are unrelated to dealings with individuals Bob More or Bret Young. Additionally, the government claims there is no evidence demonstrating that the destruction of documents impaired the Thompsons' ability to cross-examine these individuals at trial. The government further questions the impact of the document destruction on the memories of the Thompsons and other witnesses, asserting that any memory loss must have occurred during the improper sealing period as established by precedent.

Applying the harmless error standard, the court finds that the sealing violation significantly hindered the Thompsons' defense. The district court determined that Douglas Thompson ordered the destruction of records older than five years during his move, which included critical SBA loan documents. Prior to this, the defendants had access to a complete SBA file for their defense. Testimony from Douglas and Connie Thompson at a March 22 hearing confirmed that all significant documents predating January 1, 1995, except for specific client files, were destroyed. This destruction encompassed vital records, such as call memoranda necessary for recollection, implying that the loss extended beyond just SBA loan negotiations.

Moreover, the district court established that Douglas Thompson handled all communications with the SBA for Plaza Speedway and did not share records with Roger Thompson, who did not independently communicate with the SBA. The government did not contest these findings as clearly erroneous. During the evidentiary hearing, the government failed to cross-examine witnesses about the Thompsons' transactions with More and Young or their alleged false statements, nor did it call More or Young to testify, indicating a lack of preparation for a thorough examination.

Evidence indicates that the destruction of documents during the sealing period significantly impaired the Thompsons' ability to defend against the charges in the indictment. The government did not provide evidence demonstrating that the improper sealing of the indictment did not cause harm to the defendants, failing to meet its burden of proving harmless error. Consequently, the district court's dismissal of the indictment with prejudice is upheld.

Federal Rule of Criminal Procedure 6(e)(4) allows a sealed indictment to remain secret until the defendant is in custody or released pending trial. While Rule 6(f) mandates the return of an indictment in open court, the defendants did not argue that this requires public disclosure of the indictment's contents. Case law clarifies that the requirement pertains only to the physical presentation of the indictment in court, not to its contents being publicly disclosed. 

Indictments must be returned in open court to be valid; however, the statute of limitations is satisfied upon the finding of the indictment, as specified in 18 U.S.C. 3282. Although an indictment's validity requires its return in open court, the limitations period does not continue to run after the indictment is found. The government acknowledged that while separate, the finding and return of an indictment typically occur in quick succession. Additionally, in a cited case involving pre-indictment delay, the court ruled that only speculative prejudice was shown by the defendants.

Pre-trial dismissal of an indictment based on a due process claim requires the defendant to show actual, substantial prejudice to their trial defense. Courts should typically wait until after the verdict to assess such prejudice unless the case is clear and indisputable. The government contends that defendants must prove harmless error, which is consistent with other circuit rulings addressing prejudice in sealing violations. However, those cases treated sealing violations as related to the statute of limitations, while this case involves a violation of Rule 6(e)(4), which was established not to have violated the statute of limitations. The government cannot shift its argument to the statute of limitations prejudice requirement after asserting a violation of Rule 6(e)(4). The court notes that O'Neal v. McAninch, which discusses harmless error, does not govern this case, and a burden-free harmless error approach has been applied in civil cases post-O'Neal. Regardless, even if O'Neal were applicable, the record indicates that the Rule 6(e)(4) violation significantly impaired the defendants' ability to defend against the charges, with the government providing no evidence to demonstrate the sealing error was harmless.