United States v. Thomas K. Benshop ( 1998 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 97-1445
___________
United States of America, *
*
Appellee, *
* Appeal from the United
States
v. * District Court for the
* District of Minnesota
Thomas K. Benshop, *
*
Appellant. *
___________
Submitted: October 21, 1997
Filed: March 13, 1998
___________
Before McMILLIAN, FLOYD R. GIBSON and LAY, Circuit
Judges.
___________
McMILLIAN, Circuit Judge.
Defendant Thomas K. Benshop appeals from a final
judgment entered in the United States District Court1 for
the District of Minnesota, upon a jury verdict, finding
1
The Honorable Michael J. Davis, United States District Judge for the District of
Minnesota.
him guilty of one count of bank fraud, in violation of 18
U.S.C. § 1344, and four
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counts of making a materially false statement to a
financial institution, in violation of 18 U.S.C. § 1014.
United States v. Benshop, Crim. No. 3-96-59 (D. Minn.
Jan. 30, 1997). The district court sentenced defendant
to thirty-six months imprisonment, five years of
supervised release, a fine of $25,000, and payment of
restitution totaling $207,114.89. For reversal,
defendant argues that the district court erred in denying
his motion to dismiss the superseding indictment on the
ground that preindictment delay resulted in a violation
of his due process rights. Id. (Aug. 22, 1996) (order
adopting the report and recommendation of the magistrate
judge,2 id. (Aug. 1, 1996)). For the reasons stated
below, we affirm the judgment of the district court.
Jurisdiction
Jurisdiction in the district court was proper based
upon 18 U.S.C. § 3231. Jurisdiction in this court is
proper based upon 28 U.S.C. § 1291. The notice of appeal
was timely filed pursuant to Rule 4(a) of the Federal
Rules of Appellate Procedure.
Background
Defendant was initially indicted on May 22, 1996, on
one count of bank fraud, three counts of making a
materially false statement to a financial institution,
and one count of criminal forfeiture. The charges were
based upon events occurring in 1987 through 1989,
2
The Honorable John M. Mason, United States Magistrate Judge for the District
of Minnesota.
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approximately seven to nine years prior to the date of
the indictment. The charges in the indictment had been
the subject of a lengthy grand jury investigation in the
Northern District of Illinois, after which the case had
been referred to the United States Attorney’s Office in
the District of Minnesota in October 1994.
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Defendant moved to dismiss the indictment on the
ground that preindictment delay resulted in a violation
of his due process rights. He argued, among other
things, that his defense had been prejudiced because a
key defense witness, Mr. Leslie Formell, had died in a
car accident in February 1996. The matter was submitted
to a magistrate judge, who recommended that defendant’s
motion be denied because defendant had failed to show
sufficient prejudice resulting from the preindictment
delay and failed to show that the government had
intentionally delayed the indictment to harass or gain a
tactical advantage. Id., slip op. at 4-5 (D. Minn.
June 27, 1996) (report and recommendation). Upon
receiving no objections to the magistrate judge’s report
and recommendation, the district court denied defendant’s
motion. Id. (July 23, 1996).
In the meantime, on July 2, 1996, defendant was
charged by a superseding indictment with one count of
bank fraud, four counts of making a materially false
statement to a financial institution, and one count of
criminal forfeiture. The charges were again based upon
events occurring in 1987 through 1989. Defendant filed,
among other motions, a motion to dismiss the superseding
indictment based upon preindictment delay. That motion
was denied for the same reasons that his first motion to
dismiss was denied. Id. (Aug. 22, 1996) (upon receiving
no objections, adopting the magistrate judge’s report and
recommendation, id. (Aug. 1, 1996)).
The case went to trial in September 1996. At trial,
the government introduced evidence of the following
events. In August 1988, Formell, an architect, purchased
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the Graceville State Bank in Graceville, Minnesota.
Formell selected a new board of directors (the board) for
the Graceville State Bank, which included, among others,
himself, E. Joseph Seifert, three former board members,
and defendant. At that time, Formell and defendant
already knew each other, having previously been involved
in a building project together. A three-member
“executive loan committee” was also created which
consisted of Formell, defendant, and Seifert, who was
also the bank president.
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On August 15, 1988, defendant sought a loan from the
Graceville State Bank for $100,000. He did not propose
the loan at a board meeting on August 15, 1988. Instead,
he approached Seifert after the board meeting to request
the note. Defendant told Seifert that he had the support
of a majority within the three-member executive loan
committee because both defendant and Formell approved the
loan. Seifert opposed giving defendant the $100,000
loan. Thereafter, defendant submitted financial
documentation to Seifert to support his request for the
loan. Among those documents was defendant’s personal
financial statement which declared that defendant had no
judgments or outstanding legal actions against him. In
fact, he had judgments against him totaling $285,975.
Later that same day, August 15, 1988, Seifert drew up the
note for defendant’s $100,000 loan. The next day,
August 16, 1988, Seifert informed the other board members
about defendant’s $100,000 loan. Some of the board
members expressed their intent to resign. The loan came
up for a vote at the next board meeting and the board
voted against it. Thereafter, Formell asked defendant to
resign from the board, and defendant did. Formell sent
a letter to the FDIC noting that a mistake had been made
when the Graceville State Bank made the $100,000 loan to
one of its board members (i.e., defendant) without board
approval, but that the mistake had been corrected by the
resignation of that board member.
Defendant fell behind in paying off the $100,000
loan. He was required to renew the loan and submit
documentation in support thereof. Defendant again
submitted documents which misstated his personal
financial status. He obtained the renewal but continued
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to fail in his payments. The Graceville State Bank later
sued him for the unpaid balance of $93,000.
The government also introduced evidence at trial
concerning four other loans defendant obtained from other
banks. Those loans included a $10,000 loan in April 1987
from TCF Savings and Loan, of which that bank lost over
$9,800. To obtain that loan, defendant submitted a
falsified 1985 tax return showing an income level of
$150,000, whereas the income tax return he actually filed
declared a negative adjusted
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gross income for 1985. Defendant obtained another loan
in October 1988 from the Marquette, Lakeville Bank, using
false documentation. That loan was for $27,500, of which
$26,500 was never recovered. In February 1989, defendant
borrowed $32,000 from the Signal Hills Bank using false
documentation. Over $31,400 of that loan was written
off. In August 1989, defendant used false documentation
to obtain a renewal of a $46,748 loan from the FirStar
Shelard Bank. That loan was eventually written off for
nonpayment. In each case, defendant omitted, among other
things, the fact that he had judgments against him
totaling $285,975.
Defendant testified at trial in his defense. He
testified that he did not believe he had made any false
statements to the banks because he did not feel an
obligation to disclose judgments against himself. With
respect to the Graceville State Bank loan, he testified
that Formell was a friend and business associate who was
well aware of defendant’s financial circumstances and
outstanding judgments against him. Defendant also
testified about a conversation between himself and
Formell which allegedly occurred while the two were
driving together to the board meeting on August 15, 1988.
According to defendant, he informed Formell at that time
of his intent to request a $100,000 loan and further
explained his reasons why he was confident that he would
be able to repay the loan.
The jury found defendant guilty of all five offenses
charged in the superseding indictment and returned a
special verdict against defendant on the forfeiture
count. Following his sentencing, defendant appealed.
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Discussion
Defendant’s sole argument on appeal is that the
district court erred in failing to dismiss the
superseding indictment on the basis of preindictment
delay in violation of his rights under the Due Process
Clause. Defendant maintains that he did not waive the
right to raise this issue on appeal by failing to
reassert it in a post-trial motion
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because, following a trial, “[t]he district court is free
to reevaluate whether the delay has caused [the
defendant] such prejudice as to impair the fairness of
the trial.” United States v. Bartlett, 794 F.2d 1285,
1294 (8th Cir.), cert. denied, 479 U.S. 934 (1986).
“To show preindictment delay violated the Due Process
Clause, a defendant must first show the delay actually
and substantially prejudiced the defendant. If the
defendant establishes actual, substantial prejudice, then
the court balances the reasons for the delay against the
prejudice shown.” United States v. McDougal, 133 F.3d
1110, 1113 (8th Cir. 1998) (citing Bennett v. Lockhart, 39
F.3d 848, 851(8th Cir. 1994), cert. denied, 514 U.S. 1018(1995), and United States v. Bartlett, 794 F.2d at 1289).
If actual and substantial prejudice has been
demonstrated, the government may be required to show that
the delay was for investigative purposes or some other
legitimate reason. See, e.g., United States v. Lovasco,
431 U.S. 783, 795-96 (1977) (“In our view, investigative
delay is fundamentally unlike delay undertaken by the
Government solely ‘to gain tactical advantage over the
accused’ . . . . [T]o prosecute a defendant following
investigative delay does not deprive him [or her] of due
process, even if his [or her] defense might have been
somewhat prejudiced by the lapse of time.”); United
States v. Bartlett, 794 F.2d at 1293-94 & nn.12-14
(commenting, in dictum, on the government’s justification
for the delay and concluding “[w]e . . . have difficulty
finding in the government’s decision to delay indicting
[the defendant] an appropriate governmental interest”).
Absent a showing that the government acted intentionally
to harass or to gain a tactical advantage, no due process
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violation may be found. United States v. Stierwalt, 16
F.3d 282, 285 (8th Cir. 1994); see also United States v.
Marion, 404 U.S. 307, 324 (1971) (noting “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 preindictment 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”).
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Defendant argues that he was actually and
substantially prejudiced in this case because Formell
died in February 1996, eight years after the events
involving the Graceville State Bank, but before defendant
was ever indicted. According to defendant, Formell would
have testified that, prior to defendant’s formal request
for the $100,000 loan from the Graceville State Bank,
Formell and defendant had been alone together in a car,
traveling to the August 15, 1988, board meeting, when
defendant explained to Formell his business reasons for
needing the $100,000 loan and his reasons for being
confident that he could repay the loan. Defendant
maintains that Formell would have further testified that,
at that time, he (Formell) had been a friend and business
associate of defendant’s for several years and already
knew about the several judgments against defendant.
Defendant also claims that Formell would have testified
that he (Formell) asked defendant to seek the renewal of
the loan to improve the financial appearance of the bank,
even though he knew that defendant was on the verge of
declaring bankruptcy. Defendant argues that Formell’s
testimony would have shown that defendant lacked the
intent to defraud the Graceville State Bank at the time
he initially applied for and obtained the $100,000 loan
and later in the loan renewal process. Defendant also
maintains that Formell’s testimony was unavailable from
any other sources. Consequently, defendant concludes, he
suffered actual and substantial prejudice as a result of
Formell’s absence as a trial witness. Defendant
additionally argues that the magistrate judge erred in
placing the burden of proof on him to show that the
government intentionally delayed the indictment to harass
or gain a tactical advantage. See slip op. at 4 (Report
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and Recommendation) (Aug. 1, 1996) (“Even if the
Defendant were to show prejudice, he has not shown that
the Government intentionally delayed the indictment to
harass or gain a tactical advantage.”).
In response, the government first argues that
defendant failed to preserve the issue now being raised
on appeal and therefore the denial of defendant’s motion
to dismiss the superseding indictment must be reviewed
under the plain error standard. In support of this
argument, the government notes that defendant did not
file objections to the magistrate judge’s report and
recommendation and did not renew his motion to
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dismiss the indictment after the trial. On the merits of
the preindictment delay issue, the government maintains
that “[b]efore an inquiry is made into any actual
prejudice suffered, the defendant must establish that the
‘government intentionally delayed either to gain a
tactical advantage or to harass [him].’” Brief for
Appellee at 18 (citing United States v. Meyer, 906 F.2d
1247, 1251 (8th Cir. 1990) (per curiam)). The government
then points out that the delay in this case resulted
primarily from a lengthy grand jury investigation in the
Northern District of Illinois, from which the present
case was referred to the United States Attorney’s Office
in the District of Minnesota in October 1994. Moreover,
the government maintains, defendant never argued, nor is
there any evidence to show, that the government
intentionally delayed the indictment in order to harass
him or to gain a tactical advantage. The government also
separately argues that defendant did not suffer actual or
substantial prejudice as a result of the delay. The
government contends that, according to defendant’s own
assertions, Formell’s testimony at best would have merely
corroborated defendant’s own testimony and it was
therefore available from another source. See United
States v. Bartlett, 794 F.2d at 1291 (reversing district
court’s pretrial dismissal based upon unreasonable
preindictment delay where prejudice resulting from death
of potential witness was too speculative and the
defendant had not shown why the information would not
have been available from the victim on cross-examination
or the defendant himself, if he chose to testify).
Alternatively, the government maintains that Formell’s
testimony, as described by defendant, would not have
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exonerated defendant but merely would have incriminated
Formell as an accomplice.
As a threshold matter, we reject as meritless the
government’s waiver argument. The cases cited in the
government’s brief are all inapposite because, in each of
them, the issue deemed waived was truly being raised for
the first time on appeal. Defendant clearly did raise
his due process claim based upon preindictment delay in
his motion to dismiss the superseding indictment.
Therefore, it is not being raised for the first time on
appeal. The government now suggests that the
preindictment delay issue should nevertheless be deemed
waived in the present case because it was not reasserted
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after the trial, thus allowing the district court an
opportunity to reevaluate defendant’s due process
argument in light of the evidence presented at trial. We
disagree.
“‘A defendant must raise before trial by motion any
objections based on defects in the indictment.’” United
States v. Sileven, 985 F.2d 962, 965 (8th Cir. 1993)
(quoting United States v. Richards, 723 F.2d 646, 648 (8th
Cir. 1983) (per curiam)). Defendant therefore raised the
preindictment delay issue in a timely manner, and we
think it would be both unfair and unwise under the
present circumstances to deem the issue waived because
defendant did not reassert the same issue at other
procedural opportunities, such as at the end of the
trial. Nor is the government correct in asserting that
the issue was waived because defendant failed to object
to the magistrate judge’s report and recommendation. The
rule in this circuit is that a failure to object to a
magistrate judge’s report and recommendation will not
result in a waiver of the right to appeal “‘when the
questions involved are questions of law or mixed
questions of law and fact, or when neither the local
court rule nor the magistrate’s notice has clearly
informed the [parties] that failure to object to the
magistrate’s report will result in a waiver of the right
to appeal.’” Francis v. Bowen, 804 F.2d 103, 104 (8th
Cir. 1986) (per curiam) (quoting Nash v. Black, 781 F.2d
665, 667 (8th Cir. 1986)). Not only are we dealing with
a question of law in the present case, but also neither
the local rule cited in the government’s brief nor the
magistrate judge’s report and recommendation states that
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a failure to file objections would result in a waiver of
the right to appeal.
We also note that the government incorrectly asserts
that “[b]efore an inquiry is made into any actual
prejudice suffered, the defendant must establish that the
‘government intentionally delayed either to gain a
tactical advantage or to harass [him].’” Brief for
Appellee at 18 (citing United States v. Meyer, 906 F.2d
at 1251). The actual and substantial prejudice issue is
ordinarily considered first, and the defendant’s failure
of proof on that issue is a sufficient ground on which to
deny a motion to dismiss. United States v. Savage, 863
F.2d 595, 598 (8th Cir. 1988) (“[o]nly
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where actual prejudice has been established will the
court inquire into the reasons for the delay”), cert.
denied, 490 U.S. 1082 (1989). Indeed, in United States
v. Meyer, 906 F.2d at 1251, upon which the government
relies, this court disposed of the defendant’s
preindictment delay claim on the basis of the government
intent issue, but also stated “we would normally first
inquire into whether [the defendant] was actually
prejudiced by the delay.”
We now turn to the question of whether defendant
suffered actual and substantial prejudice as a result of
Formell’s unavailability as a trial witness. Upon
careful review, we agree with the district court’s
finding that defendant was not sufficiently prejudiced by
the unavailability of Formell as a trial witness to
establish a due process violation. It is well-
established in this circuit that, in this due process
inquiry, an assessment of the nature and degree of the
prejudice resulting from the missing evidence must be
made in light of the overall strength of the government’s
case. United States v. Bartlett, 794 F.2d at 1292. In
the present case, the government introduced the testimony
of other Graceville State Bank board members that Formell
was himself misled by defendant’s misrepresentations.
The government also introduced the letter sent by Formell
to the FDIC shortly after defendant acquired the $100,000
loan, which admitted that the loan had been made in
violation of the regulations. That letter from Formell
to the FDIC stated “[m]y lack of knowledge of the banking
regulations as well as my dependence on this board member
[i.e., defendant] as an advisor is the cause of this
mistake.” Thus, Formell’s own contemporaneous written
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statement clearly indicates that he had been materially
misled by defendant and was himself a victim of
defendant’s conduct. It is therefore reasonable to
conclude that Formell would not have testified as
defendant alleges. More importantly, however, even if
Formell would have testified as defendant suggests, the
story that he allegedly would have told does not, as
defendant maintains, tend to disprove the government’s
theory that defendant intentionally defrauded the bank as
an institution. Defendant misrepresented his personal
financial status in documentation submitted to Seifert
and the whole board of directors, not just Formell,
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prior to securing the $100,000 loan and the loan renewal.
Thus, even if believed, Formell’s purported testimony
merely would have shown, as the government suggests, that
Formell was a knowing participant in defendant’s fraud.
Defendant therefore has not proven actual and substantial
prejudice. See id. at 1292-93 (holding that absence of
testimony of deceased potential witness did not result in
substantial prejudice in light of overall strength of the
government’s case). Accordingly, we hold that the
district court did not err in denying defendant’s motion
to dismiss the superseding indictment.
Conclusion
For the reasons stated, the judgment of the district
court is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH
CIRCUIT.
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