Petition for Writ of Certiorari — United States v. Olano

FEB 11 1992

as inckliaancmi CLERK

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Iu the Supreme Court of the United States

OCTOBER TERM, 1991

UNITED STATES OF AMERICA, PETITIONER

Guy W. OLANO, JR., and RAYMOND M. GRAY

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, II]

Assistant Attorney General

WILLIAM C. BRYSON

Deputy Solicitor General

ROBERT A. LONG, JR.

Assistant to the Solicitor General

ANDREW LEVCHUK

Attorney

Department of Justice

Washington, D.C. 20530

(202) 514-221 7

QUESTION PRESENTED

Whether allowing alternate jurors to be present

during jury deliberations is automatic reversible

error, even when the defense consents to that proce-

dure.

TABLE OF CONTENTS

Page

Opinion below l

Jurisdiction l

Federal rule involved 2

Statement 2

Reasons for granting the petition 6

Conclusion 17

Appendix A la

Appendix B doa

Appendix C 34a

{ av.f fe, 111 S. Ct. 1246 (1991) }

{ lacayv. 0 106 U.S. 404 (1972)

Ballew Vv. Georgia, 435 U.S. 223 (1978) ,

B rA _~ ; y 7 ; \iaf 1x" | ~ }

(19RR) J

B hv.l 1, 441 U.S. 130 (1979)

/ , vy / fed Nitaft 229 TS. 1 (1988)

dD mv.l ana, 391 U.S. 145 (1968)

Estelle v. Willian 125 U.S. 501 (1976) ld

Faretta V. California, 422 U.S. 806 (1975 L

hnson V. Duckworth, 650 F.2d 122 (7th Cir.)

cert. denied, 454 U.S. 867 (1981) 9

lo} nv.l ana, 406 U.S. 356 (1

Jones \ Jarnes. 4683 U.S. 745 (19838) lS

Reedv. R , 468 U.S. 1 (1984) it

Rushen Vv. Spain, 464 U.S. 114 (1983)

Sinte v. ¢ ch. 530 P.2d 2RR (Wash. 1975)

/ iZn4 LS 100) (1988) 1G

Taylor v. I ana, 419 U.S. 522 (1975) i]

United States v. Beasley, 464 F.2d 468 (10th Cir

1972» v

al

l fed States V. ¢ [ 584 F.2d 1358 (4t! r

*

1978) }

(IIT)

IV

Cases—Continued:

r

‘mited States v. Reed, 790 F.2d 208 (2d Cir.)

nited States Vv. Eagle Thunder, 893 F.2d 950 (8th

Cir. 1990)

‘nited States v. Frady, 456 U.S. 152 (1982)

‘9 ited States V Jones. 763 2 2d 518 (2d Ulr.),

cert. denied, 474 U.S. 981 (1985)

‘mnited States v. Kaminski. 692 F 94 505 (8th Cir

1982)

ted States \ Lane. 174 LU ~ 138 { LOR6)

‘nited States v. Oppon, 863 F.2d 141 (lst Cir

19RR)

‘nited States Vv. Phillips, 664 F.2d 971 (5th Cir

1981), cert. denied, 457 U.S. 1136 (1982)

'nited Ntates V P) nce. RR F Id 953 (llth (ir

LORY)

cert. denied, 479 U.S. 954 (1986)

‘nited States v. Rodriguez-Cardenas, 866 F.2d

890 (11th Cir. 1989). cert. denied, 493 U.S. 1069

(1990)

ré d State \ Sohamou 0, ROY 2 Id 41) (T) (° (ir

1989). cert. denied, 111 S. Ct. 78 (1990)

ted States Vv. Vachon, 969 F.2d 653 (1st Ci

LORY)

ted Nhe fee \ V rqinia Krect aon C4 rp B35 2 |

RHR (4th { ir 1964)

ted States vy. Watson. 669 F.2d 1374 (11th Cir

LYS2)

'y ted State _' You? qd, i70 1] ~ ] { 1985)

rinwright v. Sykes, 483 U.S. 72 (1977)

‘ainwright v. Witt, 469 U.S. 412 (1985)

liams V. Florida, 399 U.S. 78 (1970)

18 U.S.C. 37

18 U.S.C. 657

18 U.S.C. 1006

18 U.S.C. 10]

18 U.S.C. 1343

18 U.S.C. 2314

Page

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24(c)

52 (Dd)

Iu the Supreme Court of the Uuited States

OCTOBER TERM, 1991

No.

UNITED STATES OF AMERICA, PETITIONER

Guy W. OLANO, JR.. and RAYMOND M. GRAY

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

The Solicitor General, on behalf of the United

States, respectfully petitions for a writ of certiorari

to review the judgment of the United States Court

of Appeals for the Ninth Circuit in this case.

OPINION BELOW

The opinion of the court of appeals (App.,

la-32a) is reported at 934 F.2d 1425.

JURISDICTION

The judgment of the court of appeals (App., infra,

34a-35a) was entered on May 31, 1991. A petition

for rehearing was denied on October 18, 1991. App.,

mfra, 33a. On January 7, 1992, Justice O’Connor

extended the time for filing a petition for a writ of

certiorari to and, including February 15, 1992. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1)

(]

)

FEDERAL RULE INVOLVED

Federal Rule of Criminal Procedure 24(c) pro-

\ ides :

Alternate Jurors. The court may direct that not

more than 6 jurors in addition to the regular

jury be called and impanelled to sit as alternate

jurors. Alternate jurors in the order in which

they are called shall replace jurors who, prior

to the time the jury retires to consider its ver-

dict, become or are found to be unable or dis-

qualified tO pel ‘orm their duties. * An al-

ernate juror who does not replace a regular

juror shall be discharged after tl

to consider its verdict.

STATEMENT

|. Following a three-month trial in the United

States District Court for the Western District of

Washington, a jury convic

spiracy to defraud several thrift institutions, in vio-

ed respondents of con-

lation of 18 U.S.C. 371; willful misapplication of

federally insured funds by a bank officer, in violation

of 18 U.S.C. 657; making false statements in connec-

lending institution, in

8 U.S.C. 1006; and interstate transpor-

tion with a federally insured

violation of

tation of stolen money, in violation of 18 U.S.C, 2314.

Respondent Gray is also convicted of wire fraud,

in violation of 18 U.S.C. 1343, and respondent Olano

was also convicted of making

loan document, in violation of 18 U.S.C. 1014. Re-

spondents were each sentenced to 15 years’ imprisgn-

false statement on a

ment. to he followed bv five vears’ probation, and

ere ordered tO pay restit 1tio1 Al 1) nfra “oi

ia 2a

The f idence aT trial how er that Olano Was the

chairman of Alliance Federal Savings and Loan As-

3

sociation in Kenner, Louisiana. Gray was the chair-

man of Home Savings and Loan Association

in Seattle, Washington. Along with several co-

defendants, Gray and Olano engaged in an elaborate

scheme to defraud the savings and loan institutions

they controlled by making a series of unauthorized

loans and fraudulent extensions of credit, and by

paying kickbacks from loan proceeds. App., infra,

da-4a.

At the end of trial, the district court suggested

that the two alternate jurors be allowed to remain

with the jury during deliberations. The court aid:

[I ]t’s just a suggestion and you can—if ther

is even one person who doesn’t like it we won’t

do it, but it is a suggestion that other courts

have followed in long cases where jurors have

sat through a lot of testimony, and that is to let

the alternates go in but not participate, but just

to sit in on deliberations.

It’s strictly a matter of courtesy and I know

many judges have done it with no objection from

counsel. One of the other things it does is if

they don’t participate but they’re there, if an

emergency comes up and people decide they’d

rather go with a new alternate rather than 11,

which the rules provide, it keeps that option

open. It also keeps people from feeling they’ve

sat here for three months and then get just kind

of kicked out. But it’s certainly not worth—

unless it’s something you all agree to, it’s not

worth your spending time hassling about, you

know what I mean? You've got too much else

on your mind. I don’t want it to be a big issue;

it’s just a suggestion. Think about it and let

me know.

App., infra, 5a n.5; Tr. 10,400,

4

Initially, counsel for Olano objected to the district

court’s suggestion. Later, before the case went to the

jury, the district court noted that defense counsel

had agreed that the two alternates could go to the

jury room with the jury. Counsel for one of the co-

defendants stated: “It’s my understanding that the

conversation was the two alternates go back there

instructed that they are not to take part in any

fashion in the deliberations.” App., infra, 6a. After

charging the jury, the district court instructed the

alternates not to participate in the deliberations and

sent them into the jury room. One of the alternates

asked to be excused, and the district court granted

the request. The other remained with the jury until

it reached a verdict. /d. at 7a n.7.

2. The court of appeals reversed. App., infra, la-

32a. The court held that Fed. R. Crim. P. 24(c)

requires the district court to discharge the alternates

when the jury retires to deliberate. The court ob-

served that the Advisory Committee on the Criminal

Rules had considered and rejected a proposal to send

alternates into the jury room with instructions not

to participate in the deliberations. Consequently, the

court concluded, the district court’s failure to dis-

charge the alternates at the outset of deliberations

violated Rule 24(c). The court of appeals further

concluded that defendants can waive their objections

to a violation of Rule 24(c), but only if the defend-

ants themselves, rather than their counsel, personally

consent on the record to the procedure. Because

“ nothing in the record suggests that [respondents |

intelligently and knowingly consented personally to a

waiver of their rithts under the Rule,” the court held

that there was no waiver in this case. App., mfra,

27a-28a.

a

The court recognized that, because respondents did

not object to sending the alternates into the jury

room, the district court’s action was subject to re-

versal only for plain error. App., infra, 22a-23a. The

court of appeals held that permitting alternates to

be present during deliberations is plain error be-

cause it “inherently” prejudices defendants by “in-

fring[ing] upon the jury’s privacy and the secrecy

of the jury process.” /d. at 28a. The court said that

it could not determine whether the alternates had

obeyed the district court’s instruction not to par-

ticipate in the deliberations. And even if the alter-

nates attempted to follow the court’s instructions,

their “attitude[s], conveyed by facial expressions,

gestures or the like, may have had some effect upon

the decision of one or more jurors.” Jbid. (quoting

United States v. Virginia Erection Corp., 335 F.2d

868, 872 (4th Cir. 1964)). The court of appeals con-

cluded that “[a]bsent a valid personal waiver by the

defendants, allowing alternate jurors to be present

during jury deliberations constitutes a violation of

Rule 24(c) and requires a reversal of the verdict.”

App., infra, 30a. Although only Olano raised the

issue on appeal, the court applied its ruling to Gray

as well to avoid a “manifest injustice.” Jd. at 30a-

dla.’

‘The court of appeals also held that there was insufficient

evidence to support respondents’ convictions under 18 U.S.C.

1014. App., infra, 13a-17a, 18a-20a. The government does

not seek further review of that portion of the court of appeals’

decision.

6

REASONS FOR GRANTING THE PETITION

The court of appeals erred in concluding that a

violation of Fed. R. Crim. P. Rule 24(c) is plain

error that requires reversal in the absence of a per-

sonal waiver by the defendant. The court of appeals’

decision conflicts with decisions of other courts of

appeals holding that violations of Rule 24(c) do not

require reversal of a criminal conviction absent a

showing of prejudice. The decision is also inconsis-

tent with decisions of this Court recognizing that

very few trial errors should result in reversal of con-

victions absent a showing of prejudice to the defend-

ant. Finally, the court of appeals’ decision is incon-

sistent with the well-settled principle that defendants

cannot obtain reversal of their convictions based on

claims of procedural irregularity to which their coun-

sel have consented. The court’s ruling that the con-

sent of counsel was not sufficient, and that the per-

sonal consent of respondents themselves was re-

quired, conflicts with the repeated admonitions of

this Court that counsel are ordinarily understood to

speak for their clients, and that it is only on such

fundamental matters as the decision to waive counsel

or the decision to plead guilty that the court must

obtain the defendant’s personal consent before it may

take action, rather than relying on the representa-

tions of counsel.

As a result of the court of appeals’ erroneous de-

cision, the government will be required to repeat a

lengthy and complex trial because of a technical erro:

that did not infringe any constitutional or other sub-

stantial right of the defendants. The Court should

grant certiorari to resolve the conflict in the circuits

and to correct the court of appeals’ error in this im-

portant prosecution.

~)

1. As an initial matter, the court of appeals cor-

rectly held that allowing alternate jurors to be pres-

ent during jury deliberations violates Fed. R. Crim.

P. 24(c). Rule 24(c) provides that “[a]n alternate

juror who does not replace a regular juror shall be

discharged after the jury retires to consider its ver-

dict.” By its plain terms, Ruie 24(c) requires the

district court to discharge alternate jurors when the

jury retires to begin its deliberations. In light of the

mandatory language of the Rule, we agree with the

court of appeals that the district court erred in al-

lowing the alternate jurors to be present during the

jury’s deliberations. We disagree, however, with the

court of appeals’ conclusion that the district court’s

error requires that respondents’ convictions be re-

versed.

2. There is a conflict among the circuits on the

question whether a violation of Rule 24(c) is rever-

sible error per se. The court of appeals’ decision in

this case conflicts with decisions of other courts of

appeals, which have held that “a violation of Rule

24(c) does not require reversal per se absent a show-

ing of prejudice.” United States v. Reed, 790 F.2d

208, 210 (2d Cir.), cert. denied, 479 U.S. 954 (1986).

In Reed, the district court erroneously permitted an

alternate juror to participate in the jury’s delibera-

tions and to cast a vote for conviction. The Second

Circuit nevertheless affirmed the conviction because

it concluded that “[i]t would be difficult to see how

[the defendant] would be prejudiced by the use of a

jury of thirteen instead of twelve,” and because it

found nothing to indicate that the defendant had been

prejudiced. 790 F.2d at 210 (quoting State v. Cuzick,

530 P.2d 288, 289 (Wash. 1975). See also United

States v. Jones, 763 F.2d 518, 523 (2d Cir.). cert.

denied, 474 U.S. 981 (1985). Similarly, in United

8

States v. Kaminski, 692 F.2d 505 (8th Cir. 1982),

the district court erroneously allowed an alternate

juror to sit with the jury during its deliberations,

and it later substituted the alternate for one of the

regular jurors. The Eighth Circuit held that a vio-

lation of Rule 24(c) requires reversal “only where

there is some showing of prejudice,” and concluded

that no such showing had been made. /d. at 518.

The Fifth, Eleventh, and District of Columbia Cir-

cuits have reached the same conclusion. In United

States v. Watson, 669 F.2d 1374 (11th Cir. 1982),

an alternate juror was inadvertently permitted to re-

tire with the jury. Before the district court discov-

ered its mistake, the jury elected the alternate as its

foreman. The district court subsequently discharged

the alternate and instructed the remaining jurors to

disregard any prior deliberations. On appeal, the

Eleventh Circuit rejected a rule of “automatic re-

versal” and instead remanded the case to allow the

district court to determine whether the presence of

the alternate juror had affected the jury’s verdict.

Id. at 1391-1392.

Likewise, in United States v. Phillips, 664 F.2d

971 (5th Cir. 1981), cert. denied, 457 U.S. 1156

(1982), the Fifth Circuit held that a district court’s

refusal, over defense counsel’s objection, to dismiss

an alternate juror when the jury retired to delib-

erate, and its subsequent replacement of a member of

the jury with the alternate, was not reversible error.

The court stated that it “does not apply a per se

rule of reversal to Rule 24(c) violations,” and it

found no evidence that the procedure had prejudiced

the defendants. /d. at 994.

Finally, in United States. v. Sobamowo, 892 F.2d

90, 95-96 (D.C. Cir. 1989), cert. denied, 111 S. Ct. 78

(1990), the District of Columbia Circuit held that a

9

violation of Rule 24(c) does not require reversal ab-

sent a showing of prejudice. Because there was no

indication that the defendant was prejudiced the

court held that reversal was not required.’

Although .five circuits have rejected, explicitly or

implicitly, a rule of automatic reversal, two other

courts of appeals have agreed with the Ninth Circuit

that violations of Rule 24(c) are reversible error per

se. See United States v. Virginia Erection Corp., 335

F.2d 868 (4th Cir. 1964); United States v. Chatman,

584 F.2d 1358, 1361 (4th Cir. 1978) (“Virginia

Erection * * * establishes a per se rule of plain er-

ror’): United States v. Beasle y, 464 F.2d 468, 469

(10th Cir. 1972) (“inclusion of the alternate in dny

proceeding commenced by the jury itself after it re-

tires to deliberate is ground for a mistrial’). Thus,

there is a clear conflict among the courts of appeals

as to whether violations of Rule 24(c) are automatic

reversible error.

3. The decision of the court of appeals is at odds

with decisions of this Court holding that there are

very few ‘errors that should result in automatic re-

versal of a criminal conviction absent a showing of

prejudice to the defendant. See, e.g., Arizona v. Ful-

minante, 111 §. Ct. 1246, 1263-1266 (1991) (opinion

of Rehnquist, C.J., collecting cases); Bank of Nova

Scotia vy. United States, 487 U.S. 250 (1988) (dis-

trict court may not dismiss an indictment for prose-

cutorial misconduct that does not prejudice the de-

fendant); United States vy. Lane, 474 U.S. 438, 446

* See also Johnson Vv. Duckworth, 650 F.2d 122. (7th Cir.)

(Constitution does not forbid States from allowing alternate

jurors to be present during jury deliberations over the defend-

ant’s objection), cert. denied, 454 U.S, 867 (1981).

10

(1986) (misjoinder under Fed. R. Crim. P. 8(b) is

subject to harmless error analysis) ; Rushen v. Spain,

164 U.S. 114, 118-119 (1983) (rejecting rule that

unrecorded ex parte communications between trial

judge and juror can never be harmless error). The

principle for which these cases stand is that error in

the course of a criminal trial does not call for auto-

matic reversal unless the error constitutes a “struc-

tural defect affecting the framework within which

the trial proceeds,” such as the total deprivation of

the right to counsel or the denial of an impartial

judge or factfinder. Arizona v. Fulminante, 111 5.

Ct. at 1265 (opinion of Rehnquist, C.J.).

In concluding that a violation of Rule 24(c) is

“inherently prejudicial” and “infringes upon a sub-

stantial right of the defendants,” App., infra, 28a,

30a n.23, the court of appeals relied on the Fourth

Circuit’s decision in United States v. Virginia Erec-

tion Corp., supra. See App., infra, 28a-29a. Virginia

Erection Corp., in turn, rests on the view that the

“ ‘trial by jury’ contemplated by Article III, Section

2, (Cl. 3] and the Sixth Amendment is a trial by a

, ‘ -

jury of twelve persons, neither more nor less.” 3309

F.2d at 870. See also id. at 871 (““Twelve is the magic

number.”). But the constitutional right to trial by

jury does not encompass a right to trial by a jury of

exactly 12 persons. Consequently, even if the alter-

nate jurors had participated in the deliberations in

this case, there would be no basis for the court of ap-

peals’ conclusion that respondents were deprived of a

constitutional or other substantial right.

In Williams vy. Florida, 399 U.S. 78 (1970), the

Court rejected the contention that the constitutional

cuarantee of a trial by jury necessarily requires a

trial by exactly 12 persons. The Court concluded that

“the fact that the jury at common law was composed

)

, . . ™ . | . } > ‘¥ :

of precisely 12 is a historical accident unnecessa!

effect the purposes of the jury system and wl

without significance ‘ xcept to mystics " /d t 102

(quoting Duncan v. Louisiana, 391 U.S. 145, 182

(1968) (Harlan, J., dissenting)). The Court recog

nized that the purpose of a jury “is to prevent Op-

pression by the Government.” 399 U.S. at 100. Se

also Taylor vy. Lowisiana, 419 U.S. 522, 530 (1975)

Duncan v. Louisiana, 391 U.S. at 156. The C

reasoned that “[t]he performance of this role is

a function of the particular aumber of the body that

makes up the jury.” 399 U.S. 100

To be sure, the Court recognized in W ams that

the number of jurors “should probably be larg

enough to promote group deliberation, free from out-

side attempts at intimidation, and to provide a fai)

possibility for obtaining a representative cross-sec-

t}

tion of the community.” 399 U.S. at 100. In subs:

quent cases, the Court established constitutional lim-

its on the minimun size OF a Jur’ See Johnson \

Louisiana, 106 U.S. 356 (1972) (9-3 verdict consti-

tutional): Apodaca vy. Ore 106 U.S. 404 (1972)

(10-2 verdict constitutional): Burch v. Louisiana.

1441 U.S. 130 (1879) (5-1 verdict unconstitutional! ) :

Ballew v. Ge orgia, 435 U.S. 2283 (1978) (5-0 we rdict

unconstitutional). But the Court has never suggested

eo

that the Constitution imposes a limit on the mavi-

mum size of juries. Certainly there is no support for

the proposition that a 13-member or 14-member jur\

would violate any constitutional right of the defend-

ant

Indeed, the Court’s jury-size decisions provide su

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port for the proposition that a defendant is likely to

benefit, not suffer, from an enlarged jurv. The Court

has recognized that the risk of an erroneous cor vie-

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made i tact iif ChnO1CE"

Si KLreme I imstal

ThNAtL Sie neent 7 ,

iT a) The Ty7 ‘ ’ | maT |

f respondent lefend

7 Tnat fie@TteyT

a i¢ fendant tr “

s held that neent it “

. pe r liad nsent I eaci!

- —— -_— errr ee mes ae eo CF -

’

16

fective waiver of trial rights is very much the ex-

ception rather than the rule, and the exceptions all

involve decisions that have sweeping implications for

the litigation.

With respect to most rights of the defendant in

the criminal justice process, the defendant’s attorney

is authorized to make tactical decisions that result

in forfeiture of those rights without the need to ob-

tain an on-the-record recital of the defendant’s per-

sonal and informed consent. As this Court has ex-

plained

Although there are basic rights that the attorney

annot waive without the fully informed and

publicly acknowledged consent of the client, the

lawyer has—and must have—full authority to

manage the conduct of the trial. The adversary

process could not function if every tactical deci-

sion required client approval

Taylor v. Illinois, 484 U.S. 400, 417-418 (1988)

(footnote omitted) ‘Under ou adversary system,’

the Court has stated, “once the defendant has the

sistance of counsel the vast array of trial decisions,

trategic and tactical, which must be made befor:

rial rests with the act ised and his attor

ney.” Estelle v. Willia 125 U.S. 501, 612 (1976

see Reed vy. Ross, 468 U.S. 1, 13 (1984) (“absent «

tional circumstances. a defendant is bound by the

>ractTiC: | dec} té) of ecomnNnetent co if) el’’) Fare tha

("a/ rorniad >? | SS sible’ VAL (1975) { **w ner a de.

fendant chooses to have a iawvyer Manag and present

; a

his case. law and tradition may allocate to the cou!

17

the sort of “fundamental” trial decision that the de-

fendant must make personally. Compare Wain-

wright v. Witt, 469 U.S. 412 (1985) (defendant can

forfeit, without personal consent, the right not to

have members of the venire excluded because of their

attitudes toward capital punishment). The ruling of

ihe court of appeals was therefore clearly at odds

with this Court’s decisions regarding counsel’s au-

thority to speak for the defendant. Review of the

court’s decision is warranted on that ground, as well

as to resolve the conflict among the circuits on

whether Rule 24(c) requires automatic reversal of

lefendant’s conviction.

CONCLUSION

The netition for a W rit of certiorari should be

granted

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, II]

Assistant Attorney General

WILLIAM C. BRYSON

De puty Nolic itor (,eneral

ROBERT A. LONG, JR.

Assistant ta the Of Takai, (,eneral

ANDREW LEVCHUK

ittorney

APPENDIX A

ES COURT ©!

NTH CIRCUIT

STAT

AY YT

inl

87-3128. 88-3096 and! 88-2295

—

INITED STATES OF AMERICA.

PLAIN TIFF-APPELLEE

Guy W. OLANO, Jk.,

DEFENDANT-APPELLANT

UNITED STATES OF AMERICA.

PLAIN TIFF-APPE!

RAYMOND M. GRAY.

DEFENDANT-APPELLANT

Appeal from the United State 1); t]

for the Western District of Wash

’

Submitted on the

No. 87-312

PPO i

~YAd

* The panel unanimo

cision without ora!

Circuit Rule 3-4-4.

Submission Vacated March 7, 1990

tesubmitted Nov. 19, 1990

Decided May 31, 1991

Before WRIGHT, REINHARDT and O’SCANN-

LAIN, Circuit Judges.

REINHARDT, Circuit Judge:

Appellants Olano and Gray appeal their convic-

tions for participating in an elaborate “kickback”’

scheme involving loans between and among various

officers and directors of savings and loan institu-

tions.’ At trial, the government asserted that Gray

and Olano, along with several co-conspirators, includ-

ing Davy Hilling and David Neubauer,’? defrauded

three thrift institutions by using their positions as

directors and officers of their respective institutions

to make unauthorized and unsound loans and to grant

extensions of credit to each other in exchange for

reciprocal loans, extensions of credit, or kickbacks

1 Specifically, Gray was convicted of conspiracy, wire fraud,

transportation of stolen money, misapplication of funds, and

false bank transactions, in violation of 18 U.S.C. §§ 371, 657,

1006, 1343 and 2314. Olano was convicted of conspiracy, aid-

ing and abetting Gray in willfully misapplying funds, causing

a false financial] statement to be made, and transportation of

stolen money, in violation of 18 U.S.C. §§ 371, 657, 1006, 1014.

2The initial indictment charged Gray, Olano, Hilling,

Neubauer, Joseph S. Ascani, Stewart P. Kalterman, Zaki S.

Mansour, Brian G. Marler, and Jerome E. McCuin together.

The district court granted Mansour’s and McCuin’s severance

motion. The remaining defendants were charged in a supe.

seding indictment. Ascani, Kalterman, and Marler were ic

quitted of all charges.

3a

from the loan proceeds. Gray and Olano claim, inter

alia, that there is insufficient evidence tu sustain

their convictions on certain counts. With respect to

counts V, VI, and VII against Gray and counts VI

and VIII against Olano, we find the evidence insuffi-

cient and therefore reverse the appellants’ convic-

tions. We reject Gray’s contention that the evidence

was insufficient as to counts III and IV, and likewise

find the evidence sufficient to sustain Olano’s con-

victions on counts III and IX. However, Olano and

Gray also assert that the district court violated their

right to a jury of twelve persons in allowing the two

alternate jurors to retire to the jury room and re-

main there during jury deliberations. We agree and

vacate the convictions of both appellants on all counts

not reversed for insufficiency of evidence and remand

for a new trial on those counts.’

I. Facts and Procedural History

Throughout the alleged conspiracy, defendants

Hilling, Neubauer, Gray, and Olano each had effec-

tive control over three savings and loan institutions:

Hilling was chairman of the board of directors of

Irving Savings Association in Irving, Texas; Neu-

bauer was operations manager of I.C.R. Mortgage

Bankers, Inc., a wholly-owned subsidiary of Irving

3 Appellants raise other substantial issues, including the

applicability of the rule set forth in McNally v. United States,

483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987) and

United States v. Hilling, 863 F.2d 677 (9th Cir. 1988) to the

jury instructions given in this case, The appellants also

challenge the district court’s decision to conduct the trial on

one afternoon in the absence of a juror. In view of the con-

clusion we reach with respect to the Rule 24(c) violation, it

is unnecessary for us to address those issues.

III LEE

4a

Savings; Gray was chairman of the buard of direc-

tors of Home Savings and Loan Association in Se-

attle, Washington; and Olano was chairman of the

board of directors of Alliance Federal Savings and

Loan Association in Kenner, Louisiana. These four

defendants allegedly caused their respective institu-

tions to transfer millions of dollars to each other by

issuing loans and letters of credit. The government

contends that, in carrying out the scheme, the de-

fendants frequently bypassed generally-accepted pro-

cedural and record-keeping practices, such as docu-

menting the issuance of letters of credit, requiring

collateral, and ensuring that the institutions’ finan-

cial obligations were adequately underwritten.

On December 8, 1986, Gray and Olano were

charged in a multi-count indictment in connection

with the alleged kickback scheme. Gray was charged

in eight of the counts and Olano in seven. Both appel-

lants were charged with conspiracy to commit of-

fenses against the United States, in violation of 18

U.S.C. § 371 (count I); wire fraud, in violation of

18 U.S.C. § 1343 (count II); interstate transporta-

tion of stolen property, in violation of 18 U.S.C.

§ 2314 (count III); misapplication of funds, in vio-

lation of 18 U.S.C. § 657 (count IV); false state-

ments, in violation of 18 U.S.C. § 1006 (count VI and

VIII). Gray was charged separately on two addi-

tional counts of violating § 1006 (counts V and VII).

Olano was charged separately with submitting false

loan documents for the purpose of influencing Home

Savings, in violation of 18 U.S.C. $ 1014 (count IX).

After approximately three months of trial, the

jury, along with two alternate jurors, retired for

deliberations. The jury found Gray guilty of all

counts in which he was charged (counts I-VIII).

5a

Olano was found not guilty of count II, but was con-

victed on the remaining counts in which he was

charged (counts I, III-VI, VIII, and IX). Gray and

Olano were senienced to a series of three consecutive

five-year terms and were ordered to make full resti-

tution to the financial institutions.* Gray and Olano

were also sentenced to five years probation commenc-

ing upon their release from custody.

On May 26, 1987, before the conclusion of trial, the

district judge suggested that the two alternate jurors

be allowed to remain with the jury during delibera-

tions, unless the parties had an objection.* The follow-

ing day, the court asked defense counsel “whether you

want the alternates to go in and not participate.”

Olano’s counsel responded, “We would ask that they

not.”” No more discussion took place that evening.

‘Failing to appear for sentencing, Gray was indicted for

and convicted of violating 18 U.S.C. §§ 3146(a) and (b). The

district court imposed a five-year probation sentence for his

conviction on this count. We affirmed, but remanded for re-

sentencing, since the sentence was based on erroneous infor-

mation. See United States v. Gray, 876 F.2d 1411 (9th Cir.

1989).

5 The district judge explained:

It’s strictly a matter of courtesy and I know many

judges have done it with no objection from counsel. One

of the other things it does is if they don’t participate but

they’re there, if an emergency comes up and people de-

cide they’d rather go with a new alternate rather than 11,

which the rules provide, it keeps that option open. It also

keeps people from feeling they’ve sat here for three

months and then get just kind of kicked out. Put it’s

certainly not worth—unless it’s something you all agree

to, it’s not worth your spending time hassling about, you

know what I mean? You’ve got too much else on your

mind. I don’t want it to be a big issue; it’s just a sugges-

tion. Think about it and let me know.

6a

However, on May 28, just befure the prosecution’s re-

buttal argument, the following colloquy took place:

THE COURT: Do I understand that the de-

fendants now—it’s hard to keep up with you,

counsel. This is surt of a day by day—but that’s

all right. You do all agree that all fourteen de-

liberate?

Okay. Do you want me to instruct the two al-

ternates not to participate in deliberation?

MR. KELLOGG [counsel for co-defendant

Hilling]: That’s what I was on my feet to say.

It’s my understanding that the conversation was

the two alternates go back there instructed that

they are not to take part in any fashion in the

deliberations.

While it appears that Kellogg spoke on behalf of all

defense counsel, Olano’s and Gray’s counsel did not

expressly consent. More important, the record does

not show express personal consent from either defend-

ant; nor does it reflect that either defendant under-

stood what was being waived. Indeed, Olano claims

that he was not even present for this colloquy because

he (unlike the other defendants) was incarcerated at

the time and the marshals had not yet returned him

to the courtroom after the lunch recess.*

¢ Although the record does not indicate whether or not

Olano was present for the colloquy, his assertion that he was

absent finds some support in the record. Olano cites an earlier

portion of the Reporter’s Transcript in which the court ex-

pressed dissatisfaction with the marshal’s tardiness in return-

ing him to court. The government now contends that Olano

must have been present for the colloquy, since the court re-

porter would have undoubtedly noted the unexpected absence

of Olano from the proceedings. However, the passage cited

by Olano tells us that he was sometimes late in returning, but

—-—— +

Ta

Informing the jury of the procedural modification,

the district judge stated:

[S]Jince the law requires that there be a jury of

twelve, it is only going to be a jury of twelve.

But what we would like to do in this case is have

all [fourteen] of you go back so that even the al-

ternates can be there for the deliberations, but

according to law, the alternates must not par-

ticipate in the deliberations. It’s going to be

hard, but if you are an alternate, we think you

should be there because things do happen in the

course of lengthy jury deliverations, and if you

need to step in, we want you to be able to step in

having heard the deliberations. But we are going

to ask that you not participate.

The alternate jurors then retired with the jury, which

began its deliberations.’

II. Analysis

A. Sufficiency of the Evidence

Gray contends that the evidence introduced at trial

was insufficient to support his convictions on counts

III, IV, V, VI, and VII. Olano argues that his con-

victions on counts III, VIII and IX should be reversed

for insufficiency of the evidence. Beth Olano and

Gray moved for judgments of acquittal under Fed. R.

Crim. P. 29. The district court denied their motions.

the government fails to cite a single instance in which the

transcript reflects that fact.

™ During deliberations, the district court excused one of the

alternates upon his request. The other alternate remained

with the jury throughout the deliberations until the jury

reached its verdict.

8a

Viewing the evidence in the light most favorable to

the prosecution, we must determine whether “any ra-

tional trier of fact could have found the essential ele-

ments of the crime beyond a reasonable doubt.”

Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781,

2789, 61 L.Ed.2d 560 (1979) (emphasis in original).

See United States v. Washington Water Power Co.,

793 F.2d 1079, 1081 (9th Cir. 1986).°

1. Count III: Gray

Gray contends that the evidence was insufficient to

support his conviction on Count III for willfully caus-

ing the interstate transportation (via wire transfer)

of $2.346 million from Home Savings to Alliance Fed-

eral, knowing that the money had been taken by

fraud, in violation of 18 U.S.C. § 2314.’

To support a conviction under § 2314, the govern-

ment must prove beyond a reasonable doubt that Gray

(1) transferred or caused to be transferred across

state lines (2) monies valued at $5000 or tnore (3)

with the knowledge that such monies had heen stolen,

converted, or taken by fraud. Gray first argues that

there was insufficient evidence to establish his intent

to deprive Home Savings of the transferred funds,

because, prior to wiring the funds, he had agreed with

® We review the appellants’ insufficiency of the evidence

claims before considering the jury issue because reversal for

insufficient evidence would result in acquittal. Reversal on

the basis of appellants’ remaining claims would permit a

retrial.

°18 U.S.C. § 2314 makes it a crime for an individual to

“transport[], or transfer[]} in interstate or foreign commerce

any goods, wares, merchandise, securities or money, of the

value of $5000 or more, knowing the same to have been stolen,

converted or taken by fraud.”

9a

Shephard, the president of Home Savings, that the

recipient of the funds would be instructed to hold

them until Shepherd granted further approval. The

record shows that Shepherd gave that instruction but

the wire operator inadvertently omitted it. Gray

claims that, absent the omission, the funds would

never have been disbursed, and that because he did

not cause the omission, he did not intend that the

money be transferred to Alliance Federal.

To establish that Gray “transferred” the funds in

violation of § 2314, the prosecution need only show

that Gray caused the money to be transferred, not

that he personally transferred it. United States v.

Vaccaro, 816 F.2d 443, 455 (9th Cir. 1986), cert. de-

nied sub nom. Alvis v. United States, 484 U.S. 914,

108 S.Ct. 262, 98 L.Ed.2d 220 (1987), and cert. de-

nied, 484 U.S. 928, 108 S.Ct. 295, 98 L.Ed.2d 255

(1987); United States v. Gundersen, 518 F.2d 960,

961 (9th Cir. 1975) (quoting Pereira v. United

States, 347 U.S. 1, 9, 74 S.Ct. 358, 363, 98 L.Ed. 435

(1954)). Jurors may infer intent from circumstan-

tial evidence. United States v. Kaplan, 554 F.2d 958,

964 (9th Cir.) (per curiam), cert. denied, 434 U.S.

956, 98 S.Ct. 483, 54 L.Ed.2d 315 (1977). The evi-

dence established that Gray underwent considerable

efforts to ensure the transfer of the funds. He pre-

pared a commitment letter on Home Savings station-

ery in Olano’s office and used his influence at Home

Savings to expedite the loan approval process. Shep-

herd testified that, notwithstanding the fact that the

underwriting process had not yet been completed,

Gray pressured him into wiring the funds by threat-

ening to terminate his employment. The fact that

Gray agreed to allow Shepherd to place a hold on the

funds is not determinative. The prosecution intro-

10a

duced evidence from which a jury could reasonably

infer that Gray believed a hold on the funds would be

meaningless. Gray apparently knew that Olano

exerted considerable influence over the account to

which the funds were transferred. The yecord shows

that, under the wire instructions, the funds were to be

credited to Alliance Federal through the escrow ac-

count. Gray, Olano, and McGuin intended to fund the

$2.346 million loan from Home Savings through an

account McCuin had at Alliance Federal. More im-

portant, the evidence shows that it was Shepherd, not

Gray, who sought to place the hold on the funds and

who.assumed responsibility for releasing the hold at

the appropriate time. Gray merely yielded to Shep-

herd’s demand in allowing him to place such restric-

tions on the account. The record demonstrates that

Gray’s efforts went solely to ensuring that the funds

were wired immediately. Shepherd’s failed attempt to

block the ultimate transfer does not immunize Gray

from responsibility for causing it. Thus, a jury could

reasonably have concluded beyond a reasonable doubt

that Gray ultimately caused the money to be trans-

ferred to Alliance Federal.”

Gray also contends that the evidence was insuffi-

cient to prove that he knew the funds were procured

by fraud. Specifically, he claims that the only fraud

associated with the transfer of funds was McCuin’s

and Mansour’s production of false income tax returns

and McCuin’s submission of a false financial] state-

ment to Home Savings. The prosecution did not in-

troduce any evidence regarding Gray’s knowledge of

10 Although the statute makes the transfer across state

lines unlawful, the indictment describes the specific offense

with which Olano is charged as being the transfer (across

state lines) to Alliance Federal. Tas

lla

McCuin’s and Mansour’s false submissions. However.

it proffered ample other evidence of fraud assuciated

with the loan so that a jury could reasonably have

concluded beyond a reasonable doubt that Gray knew

the monies were taken by fraud. According to the evi-

dence introduced by the government, Gray intention-

ally deceived the officers and directors of Home Sav-

ings by concealing his interest in the McCuin loan.

That is, the McCuin loan was simply another facet

f the elaborate kickback scheme in which Gray par-

ticipated. A jury could reasonably have found that

Gray’s failure to inform Home Savings of this

scheme, including his own interest in the McCuin

loan, constituted fraud, as the loan might never have

been granted if the other directors and/or officers had

known of his interest. We therefore reject Gray’s con-

tention that there was insufficient evidence with re-

spect to his knowledge that the loan was procured by

fraud and find the evidence sufficient to support his

conviction on Count ITI.

2. CountIV: Gray

Gray was convicted on Count IV for willfully mis-

applying Home Savings’ funds, in connection with the

McCuin loan, with the intent to defraud, in violation

of 18 U.S.C. § 657."" Gray claims that the evidence

1! 18 U.S.C. § 657 provides in pertinent part:

Whoever, being an officer, agent or employee of or

connected in any capacity with . . . any land bank, inter-

mediate credit bank, ... [or] savings and loan... associa-

tion . . . embezzles, abstracts, purloins or willfully mis-

applies any moneys, funds, credits, securities or other

things of value belonging to such institution, or pledged

or otherwise intrusted to its care, shall be fined not more

than $5,000 or imprisoned not more than five years, or

both. ...

l2a

was insufficient to prove that he (1) “willfully mis-

applied” the funds and (2) had the “intent to dle-

fraud” Home Savings.

In defining “wilfull misapplication,” courts have

generally stated that a person willfully misapplies

bank funds by converting them to his, or a third

party’s, use, benefit, or gain. United States v. Payne,

750 F.2d 844, 856 (11th Cir. 1985) (citing United

States v. Britton, 107 U.S. 655, 666-67, 2 S.Ct. 512,

522, 27 L.Ed. 520 (1883)). Gray asserts that his

agreement with Shepherd to place a hold on the funds

precluded any rational factfinder from concluding

that he was responsible for the actual conversion of

the funds. In United States v. Stuart, 718 F.2d 931

(9th Cir. 1988), we held that the actual disbursement

of money is not a prerequisite for conviction for mis-

application of monies under § 657. Jd. at 933. Rather

evidence that a defendant instigated the approval of

loans larger than necessary—because they included

amounts for kickbacks—is sufficient to prove misap-

plication of funds. Here, the prosecution introduced

evidence that Gray pressured Home Savings to fund

the McCuin loan to benefit his alleged co-conspir ‘tor,

Olano. The record shows that McCuin received a

$340,000 “furniture allowance” for his role in apply-

ing for the loan. A reasonable juror could have In-

ferred from this evidence that the payment to McCuin

represented a kickback for his participation in secur-

ing the loan and that the necessity for such a kick-

hack made the initial loan amount excessive. Once

again, Gray’s attempt to rely upon his agreement with

Shepherd to place a hold on the funds is of no help

to him. A reasonable juror could have concluded that

Gray knew that any hold on the funds would be illus-

ory and that his efforts in causing Home Savings to

18a

make loans in excess of the amounts needed would

have the effect of diverting bank funds frum thei,’ in-

tended purposes. Such evidence is sufficient to esizh-

lish a willful misapplication of bank funds.

Gray also argues that the evidence was insuflicient

to prove that he intended to defraud Home Savings.

We disagree. The prosecution’s evidence tended to

show that Gray defrauded Home Savings by conceal-

ing his involvement in the kickback scheme and that

Gray intended unlawfully to deprive the institution.

of its property by causing it to issue loans in excess

of the appropriate amount.

Viewing the evidence in the light most favorable

to the prosecution, we conclude that there was suffi-

cient evidence for a reasonable jury to have found

beyond a reasonable doubt that Gray misapplied funds

in violation of § 657.

3. Counts V, VI, and VII: Gray

Counts V, VI, and VII charged Gray with issuing

Home Savings financial obligations “without being

duly authorized,” in violation of 18 U.S.C. § 1006."

Gray contends that the government failed to prove

beyond a reasonable doubt that he was “not author- .

ized” to issue these obligations." '

“Count V involves a Home Savings take-out loan for $4

million. Count VI relates to a $2.346 loan commitment letter.

Count VII is based on an unconditional letter of credit for

$3.4 million in favor of defendant Marler, which he used as

collateral to obtain an Alliance Federal loan.

13 Gray also argues that the loan commitments that are the

subject of counts V and VI were conditional commitments and

thus not “obligations” within the meaning of § 1006. We need

not reach this issue, given our resolution of his authorization

argument. For purposes of addressing the question whether

14a

§ 1006 provides in pertinent part:

Whoever, being an officer, agent or employee of

or connected in any capacity with... any lend-

ing, mortgage, insurance, credit or savings and

loan corporation or association .. . without being

duly authorized, draws any order or bill of ex-

change, makes any acceptance, or issues, puts

forth or assigns any note, debenture, bond or

other obligation ..., or, with intent to defraud

the United States or any agency thereof, or any

corporation, institution, or association referred to

in this section, participates or shares in or re-

ceives directly or indirectly any money, profit,

property, or benefits through any transaction,

loan, commission, contract, or any other act of

any such corporation, institution, or association,

shall be fined not more than $10,000 or impris-

oned not more than five years, or both.

Id. (emphasis added). Even in the light most favor-

able to the prosecution, a review of the record demon-

strates that the government failed to prove beyond a

reasonable doubt that Gray was not authorized to is-

sue the obligations.

The two principal items of evidence the government

points to are the statements of John Morris, a govern-

ment agent, and of John Shepherd, the president of

Home Savings. These items are insufficient to support

the government’s burden. Federal Home Loan Bank

Board Supervisory Agent Morris testified that he in-

formed Gray in March 1984 that “the proper role of

a director is not to be involved in the lending deci-

Gray was authorized to issue the commitments, we will as-

sume that such commitments constitute obligations under the

statute.

15a

sions” of a financial institution. Gray stated that he

understood and agreed to refer lending opportunities

to the appropriate officers of Home Savings. How-

ever, according to Morris’ testimony, he informed

Gray of a director’s “proper role” not in order to offi-

cially instruct or adminish him, but to ensure that

Gray, who had little banking experience, was aware of

“the implications of appearances of conflict of inter-

est in his business dealings and as his role as a new

director of a savings and loan.” Thus, Morris’ state-

ments did not purport to delineate any regulatory

rule restricting Gray’s conduct; they simply set forth

a normative rule which apparently stemmed from

Morris’ many years of experience in the banking

industry.”

The defense introduced uncontroverted evidence

that the allocation of lending authority to various

officers and directors varies among financial insti-

tutions. Norman Jenson, a government witness, tes-

tified that it is not uncommon for a chairman of the

board of an institution to issue obligations and that

this practice was found throughout the industry.”

'* With respect to the character of Morris’s statements to

Gray, other testimony undermines any contention that Morris

officially instructed or reprimanded Gray. Charles Brook, a

supervisory agent for both FSLIC and the FHLBB testified

that verbal requests made by FSLIC or FHLBB personnel are

not binding on an institution. Similarly, Henry Holden, a

FHLSB field manager testified that it is FHLBB “policy ...

not to give a verbal warning without a follow up confirmation

in writing.”” There is no indication in the record that Morris

ever instructed or admonished Gray in writing. Nor. inci-

dentally, do we think that even if he did the evidence would be

sufficient, because the statements pertained to normative, not

regulatory, rules.

'* David Resha testified that in his 16 years as a loan officer

and president of a savings and loan association he had never

ee a

l6a

Thus, in order to prove that Gray did not have au-

thority to issue the obligations, the prosecution should

have presented evidence regarding the procedural

rules or policies-of- Home Savings.

The government did not introduce sufficient evi-

dence of Home Savings’ rules or policies in regard to

the allocation of lending authority. Indeed, the gov-

ernment, despite its own witness’ recommendation,

did not introduce either the articles of incorporation

or the corporate bylaws for Home Savings, or, in

fact, any corporate resolutions. The government re-

lies heavily on the testimony of Home Savings’ presi-

dent. It contends that John Shepherd testified that

no one may commit Home Savings without Board

approval and that this testimony was sufficient to

establish the rules regarding lending authority at

that institution. However, Shepherd’s testimony does

not yield such an unambiguous characterization of

Home Savings’ rules and policies. Shepherd testified

that, “I don’t think that anybody has the right to

commit the institution without the proper actions

being taken by the institution, but I’m also aware

that an officer’s signature on a commitment can be

known a director or a chairman of the board to issue a com-

mitment of an institution without a corporate resolution

authorizing that act. This testimony merely suggests that

directors ordinarily do not issue commitments without cor-

porate resolution. It does not, however, reflect the rules in

effect at Home Savings for any given period. Nor does it

vitiate Jenson’s testimony that a director may issue commit-

ments. :

Additionally, the testimony of Ashley Branning, who served

on the Home Savings Board of directors, and Charles Brooks,

a supervisory agent with FSLIC and FHLBB, comport with

Jenson’s testimony. Both Branning and Brooks stated that

authority to issue loan commitments differs in every institu-

tion.

l7a

binding to the institution, whether it’s proper or

not.” (emphasis supplied). Shepherd’s statement does

not purport to set forth an official institutional rule—

formal or informal—only his own informal opinion

as to the authority of the institution’s officers, and

not its directors, which Gray was. Moreover, his

testimony does not identify the source of his informal

opinion, and fails to provide a basis upon which a

reasonable juror could have concluded that Gray rea-

sonably should have known of any such “rule.” ”

We conclude that the prosecution failed to intro-

duce sufficient proof that the procedures or policies

of Home Savings denied Gray authority to issue the

obligations. Accordingly, we reverse Gray’s convic-

tions on counts V, VI, and VII for insufficiency of

the evidence. The determination requires a reversal

of Olano’s conviction on Count VI for aiding and

abetting Gray.

4. Count III: Olano

Olano contends that there was insufficient evidence

to support his conviction on Count III for the inter-

state transportation of funds taken by fraud, in vio-

lation of 18 U.S.C. § 2314, because (1) there was

no evidence that he had knowledge that the wiring

of the funds would be improper and (2) the owner

‘© The only other evidence on which the government relies

is Gray’s statement that he should not have issued the $3.4

million commitment to Marler and the absence from the min-

utes of a Home Savings board meeting relating to the McCuin

loan of any reference to the commitment. Gray’s statement is

highly ambiguous, at best, and could just as easily refer to

the merits of the loan as to his authority or lack thereof. The

failure of the- minutes to mention the commitment is of no

consequence in the absence of testimony explaining the signifi-

cance of that failure.

18a

of the funds, Home Savings, consented to that wir-

ing. These claims lack merit. The prosecution in-

“troduced evidence that Olano knowingly concealed his

interest in the loan. The government’s evidence sug-

gests that the $2.346 million loan was primarily for

the benefit of Olano, who desperately sought to pay

off his debt for the Dauphine Condominiums. Accord-

ing to the government’s evidence, Gray and Olano

obtained McCuin’s assistance by paying him $340,-

000 from the loan proceeds as a “furniture allow-

ance.” Moreover, the closing statement submitted

to Home Savings by Olano falsely represented that

McCuin paid $414,000 as a cash down payment.

Olano also received approximately $25,000 in legal

fees for this transaction from the proceeds of the

loan, without the knowledge of Home Savings. Thus,

there is sufficient evidence to show fraudulent con-

duct on the part of Olano. It follows that he was

aware that wiring the funds would be unlawful.

Olano’s second argument is equally unavailing. Home

Savings’ consent is irrelevant. Moreover, the evi-

dence shows that Home Savings’ “consent” to dis-

burse the funds was given as a result of the fraudu-

lent scheme manufactured by Gray and Olano. We

therefore reject Olano’s claim that the evidence was

insufficient to support his conviction on Count III.

5. Count VII{: Olano

Count VIII charged Olano with aiding and abet-

ting the defrauding of Home Savings with respect to

a $2.346 million loan “in that, in return for this

loan, Guy W. Olano caused Raymond M. Gray to

receive reciprocal accommodation loans from Alliance

Federal” (emphasis added) in the amounts of

$3 400.909. $2.550,600, and $450,000, all in violation

————— ae ae

19a

of 18 U.S.C. § 1006. The “in that” clause specifies

the‘ wrongful conduct the government must prove in

order to obtain a conviction on the particular count

involved. Olano asserts that the prosecution failed to

introduce any evidence that a fraud was perpetrated

on the directors or officers at Alliance Federal or

that he caused the loans to be received by Gray. Our

review of the record leads us to agree with Olano.

The record yields no evidence which could reasonably

support a conclusion that Olano caused Alliance Fed-

eral to issue the “reciprocal” loans to Gray. There is

no evidence that Olano pressured any officer or di-

rector into approving the loans; there is no evidence

that Olano participated in drafting the letters of com-

mitments describing the purposes of the loans; nor

is there evidence that Olano in any way facilitated

Alliance Federal’s making of the loans to Gray.”

The record indicates that Stewart Kalterman, senior

executive vice-president of Alliance Federal and pres-

ident of Alliance Financial Services (a wholly-owned

subsidiary of Alliance Federal which was responsible

for underwriting and servicing loans extended by the

association), orchestrated the approval of the “re-

ciprocal” loans. Any conclusion that Kalterman

'? Olano instructed Williams Delsa, an attorney employed in

Olano’s law office, to prepare the necessary legal documents

to transfer title to the Battle Ridge Ranch, which Gray and

Marler owned jointly, to Marler alone, in order to avoid ex-

ceeding the “loans to one borrower” ceiling. While this evi-

dence suggests that Olano was involved in advising Gray how

best to go about applying for the loan, it does not provide a

basis from which a jury could have reasonably inferred that

Olano caused the loan to be made to him. It is worth noting,

incidentally, that Delsa testified that he did not believe that

the transfer of title for the purpose of meeting the “loans to

one borrower” requirement was in any way illegal or im-

proper.

20a

acted at the behest of Olano rests upon speculation,

as we find nothing in the record to support such a

conclusion.

The government asserts that the evidence of the

conspiracy among Olano, Gray, Hilling, and Neu-

bauer was sufficient circumstantial evidence for the

jury to infer that Olano used his position as chair-

man of the board of Alliance Federal to ensure the

approval of the reciprocal loans to Gray. We dis-

agree. The prosecution has the burden of showing

that the conspiracy extended to the loans to Gray and

that Olano used his position as chairman to cause

that loan to be made. The prosecution’s burden is

not met by abstract reference to the fact that Olano

was involved in a “kickback” scheme. Rather, the

prosecution must show with some specificity that

Olano in some fashion caused Alliance Federal to

make the particular loans in question. While a rea-

sonable jury could have concluded that Olano indi-

rectly obtained the $2.346 million loan from Home

Savings by fraud, it could not automatically infer

that the loans to Gray arose under the fraudulent

scheme. More important, in the absence of probative

evidence, it could not infer that Olano caused the

loans to be made to Gray. The record before us dem-

onstrates that the prosecution did not introduce evi-

dence as to any of those considerations. Accordingly,

we reverse Olano’s conviction on Count VIII and

order him acquitted of that charge.

6. Count IX: Olano

In Count IX, Olano was charged with causing

false statements to be presented to Home Savings

in conjunction with a $2.346 million loan to McCuin,

2la

in violation of 18 U.S.C. § 1014." The superseding

indictment states that, in a false financial statement,

Olano represented that $414,000 in cash had been

received from McCuin as a down payment, and that

$99,060.44 had been paid to real estate agencies as

commissions. In fact, no cash had been received from

McCuin and no fees were paid to the real estate

agencies listed in the document. McCuin received

$340,000, and $30,000 had been paid to another real

estate agency.

Olano asserts that he had no involvement whatso-

ever with the preparation of the false closing state-

ment; he neither prepared nor signed the document

containing the false statements. The critical question

here is whether there was sufficient evidence upon

which a jury could reasonably have concluded that

Olano was responsible in whole or in part for the fact

that the closing statement set forth false materia]

information. The false statements were prepared by

Olano’s notarial secretary, Jane McLaughlin,” who

'* At the time of Olano’s trial, 18 U.S.C. § 1014 provided in

pertinent part that:

Whoever knowingly makes any false statement or report,

or willfully overvalues any land, property or security, for

the purpose of influencing in any way the action of... a

Federal Savings and Loan Association... upon any

application, advance, discount, purchase, purchase agree-

ment, repurchase agreement, commitment, or loan, or any

change or extension of any of the same, by renewal,

deferment of action or otherwise, or the acceptance, re-

lease, or substitution of security therefor, shall be fined

not more than $5,000 or imprisoned not more than two

years, or both.

” According to McLaughlin’s testimony, a “notarial secre-

tary” assists real estate agents or attorneys by preparing and

witnessing (i.e. attest to the signature of the person signing)

—— ee

22a

transcribed the false figures from a purchase agree-

ment. McLaughlin testified that she did not recall

who prepared the purchase contract in the Dauphine

Condo project. On cross-examination, however, she

acknowledged that Joseph Ascani signed the purchase

agreement on behalf of Olano. The government also

raised doubts about the veracity of McLaughlin’s

statement that Olano had no role in the actual prep-

aration of the closing statement by eliciting testi-

mony that she may have relied on information pro-

vided by Olano and that she was unduly loyal to

Olano.

Randall Roth, an attorney who worked in Olano’s

law office, testified that Olano negotiated the terms of

the purchase agreement, in particular the $340,000

furniture allowance to McCuin. From this evi-

dence, a jury could reasonably have inferred that

Olano instructed his secretary to exclude from the

closing statement certain figures listed in the pur-

chase agreement. Such an inference would have per-

mitted a reasonable jury to conclude that Olano

“caused” false statements to be submitted to Home

Savings. We therefore reject Olano’s contention that

the evidence was insufficient to sustain his conviction

on Count IX.

B. Alternate Jurors’ Presence During Deliberations

1. Standard of Review

Neither Olano nor Gray expressly objected to the

district court’s decision to retain the alternate jurors

after the jury retired to consider its verdict. Accord-

real estate sales documents. A “notary,” on the other hand,

executes documents—i.e. reviews the documents with the pur-

chaser and seller, signs and affixes his seal on the documents

ingly, we review this issue for plain error. United

States v. Perez, 491 F.2d 167, 173 (9th Cir.), cert.

denied, 419 U.S. 858, 95 S.Ct 106, 42 L.Ed.2d 92

,

(1974).

—

+

-_

_—

~

-

~

oe

~

'

Rule 24(c) of the Federal

cedure DFO ides in pert inent part

he court may direct that not more than 6 ju-

rors in addition to the regular jury be called and

impaneled to sit as alternate jurors. Alternate

.

jurors in the order in which they are called shall

replace jurors who, prior to the time the jury

etires to conside) Ls erdict, become or are

found to be unable or disqualified to perform

their duties \n alternate juror who does

‘ev ular Juror shall ay d Sr harae j

after the jury retires to consider its verdict

Fed. R. Crim. P. 24(c) (emphasis added). Rule 23(b)

complements and must be read along with Rule 24(c)

Rule 23(b) pi (les that, before or after the com-

letion of the trial proceedings, parties may stipulate

to a jury of less than 12: after the iurvy has retired

F’. R. Crim. P. Rule 23(b) provides

Juries shall be of 12 but at any time before verdict the

parties may stipulate in writing with the approval of the

court that the jury shall consist of any number less than

12 or that a valid verdict may be returned by a iurv of

less than 12 should the court find it necessary to excuss

7

one or more jurors for any just cause after trial c:

24a

Committee on Rules squarely rejected the proposal

to allow alternate jurors to be present during jury

deliberations, or to permit them, regardless of their

physical location during the initial part of the jury

proceedings, to substitute for regular jurors after

the deliberations have commenced. The Advisory

Committee noted the inherent constitutional and prac-

tical difficulties with such practices. It observed that

“there does not appear to be any way to nullify

the impact of what has occurred without the partici-

pation of the new juror.” F. R. Crim. P. Rule 23(b)

(1990 ed.) (Advisory Committee Notes to 1983

Amendment). The Advisory Committee concluded

specifically that the practice “of sending in the alter-

ates at the very beginning with instructions to listen

but not to participate until substituted” is imprac-

tical and constitutionally impermissible. /d.

We have not previously directly resolved the ques-

tion of the validity of a verdict when alternate

jurors are permitted to be present during the

jury’s deliberations. However, the language of Rule

94(c)}, Rule 23(b), the Advisory Committee Notes to

ule 23, and related Ninth Circuit precedent clearly

establish that the presence of alternate jurors during

deliberations when there is any reasonable possibility

that they may affect the verdict violates the Rule.

See, e.g., United States v. Rubio, 727 F.2d 786, 799

(9th Cir. 1983): United States v. Lamb, 529 F.2d

1153. 1156-57 (9th Cir. 1975) (en banc).

Although Rule 24(c) is phrased in unmistakabiy

mandatory language and does not expressly provide

mences. Even absent such stipulation, if the court finds

it necessary to excuse a juror for just cause after the jury

has retired to consider its verdict, in the discretion of the

court a valid verdict may be returned by the remaining

11 jurors.

for any waiver, we have allowed defendants to con-

sent to a waiver of its requirements under some cir-

cumstances. However, in all such cases involving

either Rule 23(b) or Rule 24(c), we have required,

that the record show that the defendants. and not

merely their counsel, actually consented to the waiver

of their rights. See United States Uv. Guerrero-

Peralta, 446 F.2d 876. 877 (9th Cir. 1971) (holding

that defense counsel’s assertion that defendant has

consented, even if defendant acquiesces in defense

counsel’s assertion is insufficient to waive jury of 12

requirement under Rule 23(b)): United States v.

Reyes, 603 F.2d 69, 71 (9th Cir. 1979) (concluding

that “the defendant’s expression of consent on the

record must appear at the time the stipulation is

made” in order to meet Rule 23(b)’s waiver require-

ments (emphasis added)):; see also United States

Crisco, 725 F.2d 1228, 1230 (9th Cir.). cert. de-

ved, 466 U.S. 977, 104 S.Ct. 2360, 80 L.Ed.2d 832

(1984) (affirming waiver of Rule 24(c) based on

written stipulation signed by the government. de-

fense counsel, and the defendant personally) : United

States 7 Foster, 711 F.2d S71, S85-86 (9th Cir.

1933), cert. denied, 465 U.S. 1108, 104 S.Ct. 1602. 80

L.Ed.2d 132 (1984) (enforcing written stipulation

Ty,

with respect to Rule 24(¢c) sioned by all the defend-

'

ants and their counse!] )

In one case decided shortly after Rule 24 was adopted, we

upheld a juror substitution that occurred after deliberations

had commenced even though there was no express personal

consent by the defendants. See Leser v. United States, 358

F.2d 3138, 31

3 8 (9th Cir.), cert. dism’d, 385 U.S. 802. 87

S.Ct. 10, 17 d

7-1

L.Ed.2d 49 (1966) In Leser,. however, counse

for defendants had stipulated to the substitution both prio!

to the time the jury began deliberations and thereafter. In

26a

We note that the requirement that an expression

of the defendant’s consent appear on the record

“serves more than the evidentiary purpose of provid-

ing reliable evidence that the defendant has in fact

consented. . . . [I]t underscore[s] the significant

decision faced by the parties.” Reyes, 603 F.2d at

71. The requirement that the trial court receive ex-

press personal consent from the defendant alerts the

defendant to the fact that a waiver of Rule 24(c)’s

protections may affect the outcome of the case. It

suggests to him that the alternate jurors’ presence

during deliberations may amount to participation in

the decision-making process—whether in explicit or

fact, as the court noted, the issue was discussed repeatedly in

the presence of the defendants. We held that, under the cir-

cumstances, the appellants had knowingly and intelligently

acquiesced in the waiver.

We have seriously doubts that Leser is of continuing

vitality. All of our subsequent cases have either involved or

required personal consents from defendants, both under Rules

23(b) and 24(c). Moreover, in amending Rule 23(b) in 1983,

the drafters made it absolutely clear that alternate jurors

should not be substituted. The drafters instead gave the dis-

trict court the discretion to allow a jury of 11 to return a valid

verdict if cause existed for excusing one of the jurors after

the commencement of jury deliberations. See Fed. R. Crim. P.

Rule 23(b) (as amended April 28, 1983, eff. Aug. 1, 1983).

Finally, Leser would not apply in any event, because in that

case the court expressly distinguished the circumstances in

which more than 12 jurors were present during deliberations.

See Leser[{,| 358 F.2d at 318. Specifically, Leser distinguished

the Virginia Erection line of cases, see discussion infra, on

the ground that in those cases the alternate juror was per-

mitted to go into the jury room with the regular jurors and

remain there during deliberations, whereas in Leser there

were never more than 12 jurors present during deliberations.

Our case falls in the Virginia Erection category, rather than

under Leser.

aia

more subtle forms or more of the deliberat-

ing jurors may modify his or her factual determina-

tions and ultimately rest a verdict, in part, on the

alternate jurors “expressions” of their opinions.

Here, the record snows that neither Olano nor Gray

ever gave his personal consent to the presence of the

alternates during jury deliberations. Moreover, the

record is unclear with regard to the question whether

counsel for either defendant ever specifically con-

sented to the waiver, although counsel for appellants’

co-defendant certainly did. We may assume, ar-

guendo, that co-defendant’s counsel spoke as counsel

for all defendants on this issue. Even so, his consent

was insufficient to meet the requirements set forth by

Guerrero-Peralta and Reyes, because the district court

did not obtain individual waivers from each defend-

ant personally, either orally or in writing. Nothing

in the record suggests that the defendants intelli-

as one

*2 With respect to a defendant’s waiver of his right to a

constitutional jury of twelve under Rule 23(b). we observed

in dicta that “[a]n oral stipulation may, under certain cir-

cumstances, satisfy the Rule, but it must appear from the

record that the defendant personally gave express consent in

open court, intelligently and knowingly, to the stipulation.”

Guerrero-Peralta, 446 F.2d 876, 877 (9th Cir. 1971). Subse-

quently, in Reyes, we cast some doubt on whether an oral

stiplation might be enough and emphasized the need to follow

the explicit language of Rule 23(b), which calls for stipula-

tions in writing. Reyes, 603 F.2d 69, 71-72 (9th Cir. 1979).

At the same time, we suggested that a thorough investigation

by the district judge might be adequate to validate an oral

waiver under Rule 23(b). However, we did not decide

whether under appropriate circumstances an oral waiver

might suffice, as we reversed on the ground that there was no

indication in the record that the defendant consented to the

waiver at all. Here, we are faced with the same circumstances

Again, we need not decide whether an oral stipulation would

ever be sufficient.

28a

gently and knowingly consented personally to a

waiver of their rights under the Rule. We therefore

hold that the district court did not obtain valid con-

sents from the defendants to deviate from Rule

24(c)’s mandatory requirements.

8. District Court’s Error Prejudices Defendants’

Substantial Rights

We conclude that permitting unauthorized persons

to be present in the jury room while the jury is de-

liberating, in violation of Rule 24(c), is inherently

prejudicial. The presence of alternate jurors, even if

they are instructed not to participate, infringes upon

the jury’s privacy and the secrecy of the jury process.

United States v. Virginia Erection Corp., 335 F.2d

868, 872 (4th Cir. 1964). The Advisory Committee

on the Federal Rules of Criminal Procedure, agreeing

with the reasoning of the Fourth Circuit in Virginia

Erection, stated that the possibility of sending in the

alternates at the very beginning with instructions to

listen but not to participate until substituted ... is

. attended by practical difficulties and offends ‘the

cardinal principle that the deliberations of the jury

shall remain private and secret in every case.’ United

States v. Virginia Erection Corp., 335 F.2d 868 (4th

Cir. 1964.” Fed. R. Crim. P. 23(b) (1990 ed.) (Ad-

visory Committee Notes to 1983 Amendment).

We cannot fairly ascertain whether in a given case

the alternate jurors followed the district court’s pro-

hibition on participation. However, even if they

‘heeded the letter of the court’s instructions and re-

mained orally mute throughout, it is entirely possible

that [their] attitude[s], conveyed by facial expres-

sions, gestures or the like, may have had some effect

upon the decision of one or more jurors.” Virginia

29a

Erection Corp., 335 F.2d at 872. As Judge Wright

wisely observed over fifteen years ago in United

States v. Lamb, 529 F.2d 1153 (9th Cir. 1975) (en

banc) :

[T]he presence of an alternate juror in the jury

room ... “destroys the sanctity of the jury.”

United States v. Beasley, 464 F.2d 468, 470

(10th Cir. 1972). The mere presence of the

alternate may well have an effect on the delibera-

tions of the twelve. ...

When an alternate is present in the jury room,

thereby violating the privacy of jury delibera-

tions, a problem of constitutional dimension

arises. There is thus greater justification for a

rule of reversal per se where an alternate is pres-

ent during deliberations . . . than where an alter-

nate is substituted after deliberations have com-

menced. See Leser v. United States, 358 F.2d 313,

318 (9th Cir[.]), petition for cert. dismissed,

385 U.S. 802, 87 S.Ct. 10, 17 L.Ed.2d 49 (1966).

Id, at 1160 (Wright, J., dissenting). Although Judge

Wright’s prescient remarks were contained in a dis-

sent, the majority opinion is fully consistent with his

view.

Given the difficulty of ascertaining the numerous,

and often subtle, ways alternate jurors can impinge

upon the privacy of the jury, given the potential that

their presence may in fact affect the deliberating

jurors’ ultimate determination if they are allowed to

be present, and given the emphatic adoption of the

Virginia Erection prinicples by the Advisory Commit-

tee on the Federal Rules, we conclude that the district

court’s deviation from Rule 24(c) without the ex-

press, personal consent of the defendants was inher-

30a

ently prejudicial. Absent a valid personal waiver by

the defendants, allowing alternate jurors to be present

during jury deliberations constitutes a violation of

Rule 24(c) and requires a reversal of the verdict.”

4. Application of Olano’s Arguments to Gray

Gray did not raise in his brief the issue regarding

the district court’s deviation from the procedural re-

quirements of Rule 24(c). However, at oral argu-

ment, Gray requested that he be allowed to adopt

Olano’s arguments regarding the alternate jurors is-

sue. Ordinarily, we would limit each defendant’s ap-

peal to the issues specifically raised and argued in his

brief. See United States v. Loya, 807 F.2d 1483,

1486-87 (9th Cir. 1987). However, Rule 2 of the Fed-

eral Rules of Appellate Procedure gives us discretion

to suspend the Rules for “good cause shown,” or if a

failure to review an issue not properly presented

would result in manifest injustice. See id. at 1487.

We believe it would be manifestly unjust to reverse

Olano’s conviction and not Gray’s when both suffered

the same prejudice from the same fundamental error

in the same trial. See United States v. Rivera Pedin,

861 F.2d 1522, 1526 n.9 (11th Cir. 1988); United

States v. Gray, 626 F.2d 494, 497 (5th Cir. 1980),

cert. denied sub nom. Fennell v. United States, 449

U.S. 1038, 101 S.Ct. 616, 66 L.Ed.2d 500 (1980), cert.

denied{,] 449 U.S. 1091, 101 S.Ct. 887, 66 L.Ed.2d

820 (1981), cert. denied sub nom. Barker v. United

States, 450 U.S. 919, 101 S.Ct. 1367, 67 L.Ed.2d 346

23 Because the violation is inherently prejudicial and because

it infringes upon a substantial right of the defendants, it falls

within the plain error doctrine. See United States v. Bustillo,

729 F.2d 1364, 1367 (9th Cir. 1986) (citations omitted).

8la

(1981) ; United States v. Anderson, 584 F.2d 849, 853

(6th Cir. 1978). Therefore, we consider Olano’s Rule

24 argument adopted by Gray for purposes of this

appeal.

5. Summary

It is certainly understandable that a trial judge

who is nearing the end of a long trial would have con-

cerns about the prospect of trying the case again.

Nevertheless, we must all heed Rule 23(b)’s and Rule

24(c)’s unambiguous instructions on how to handle

alternate jurors: At the close of trial, the district

judge should discharge all the alternate jurors as

required by Rule 24(c) and must: thereafter resolve

any unexpected vacancies by proceeding in the man-

ner provided in Rule 23(b). Under Rule 23(b),

when vacancies occur after the discharge of the alter-

nates, the parties may agree to the return of a ver-

dict by 11 or fewer jurors, or, if they fail to do so,

the district judge may direct that a verdict by 11

jurors will suffice. However, absent the defendant’s

valid consent, no alternate should be permitted to

join the jury, or be substituted for a juror, once de-

liberations begin. Here, the district court’s decision

to allow the alternates to remain present during de-

liberations without the defendants’ express personal

consent to a waiver of the rules constitutes plain

error. Accordingly, we vacate the convictions of both

Olano and Gray on all counts, other than those which

we have reversed, supra, on the ground of insuff-

ciency of the evidence.

cams ee

32a

III. Conclusion

Gray’s convictions on counts V, VI, and VII are

reversed because there was insufficient evidence to

support the convictions. Likewise, Olano’s convic-

tions on counts VI and VIII are reversed for insuffi-

ciency of the evidence. The appellants are ordered

acquitted on these counts. With respect to the re-

maining counts, the convictions are vacated, but the

government is not barred from retrying the appel-

lants. The judgment of the district court is reversed

in part; the convictions on the remaining counts are

vacated, and the case is remanded for further pro-

ceedings consistent with this opinion.

REVERSED in part; VACATED and RE-

MANDED in part.

33a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 87-3128

D.C. No. 86-202-BJR

UV,

GUY W. OLANO, JR., DEFENDANT-APPELLANT

Nos. 88-3096 & 88-3295

D.C. No. 86-202-BJR

UNITED STATES OF AM ERICA, PLAINTIFF-APPELLEE

RAYMOND M. GRAY, DEFENDANT-APPELLANT

ORDER

| Filed Oct. 18, 1991]

Before: WRIGHT, REINHARDT, O’SCANNLAIN,

Circuit Judges

The panel has voted to deny the petition for re-

hearing and to reject the suggestion for rehearing

£ Ee £

en banc. The full court has been advised of the sug-

gestion for en banc rehearing, and no judge of the

court requested a vote on the suggestion for rehear-

ing en bane. Fed. R. App. P. 35(b).

The petition for rehearing is denied, and the sug-

gestion for rehearing en banc is rejected.

34a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 87-3128

CT/AG=+: CR-86-202-R

LJNITED STATES OF AMERICA, PLAINTIFF-APPELLEE

Uv.

Guy W. OLANO, JR., DEFENDANT-APPELLANT

No. 88-3096

CT/AG#: CR-86-202-R

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE

v.

RAYMOND M. GRAY, DEFENDANT-APPELLANT

xT oO o« ~

iN ©, RR BOOH

CT/AG#: CR-86-202-R

[JNITED STATES OF AMERICA, PLAINTIFF-APPELLEE

Uv.

RAYMOND M. GRAY, DEFENDANT-APPELLANT

35a

Appeal from the United States District Court

for the Western District of Washington (Seattle)

JUDGMENT

| Filed Dec. 13, 1991}

THIS CAUSE came on to be heard on the Tran-

script of the Record from the United States District

Court for the Western District of Washington (Seat-

tle) and was duly submitted.

ON CONSIDERATION WHEREOF, It is now

here ordered and adjudged by this Court, that the

judgment of the said District Court in this cause be,

and hereby is REVERSED in part; VACATED and

REMANDED in part.

Filed and entered 5/31/91