Petition for Writ of Certiorari — Sutton v. United States

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Sev-eme Court, U.S.

kt iLED

JUL EL 1986

JOSEPH F. SPANIOL, JR.

CLERK

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1986

ROBERT B. SUTTON, SUTTON INVESTMENTS, INC.,

SCURRY OIL COMPANY, BPM, LTD., AND

SOONER REFINING COMPANY, INC.

PETITIONERS,

VERSUS

UNITED STATES OF AMERICA,

RESPONDENT.

PETITION FOR WRIT OF CERTIORARI

TO THE TEMPORARY EMERGENCY COURT

OF APPEALS OF THE UNITED STATES

ANTHONY P. SUTTON

Oklahoma Bar Association #8781

Attorney at Law

4835 South Peoria, Suite 25

(918) 749-5815

Attorney for Petitioners, pro bono

William K. Powers

OBA No. 1862

Short, Harris, Turner & Daniel

2761 East Skelly Drive, Suite 700

Tulsa, Oklahoma, 74105

(918) 743-6201

Attorney for Petitioners, pro bono

August 28,1986

QUESTIONS PRESENTED

I. Whether TECA erred in refusing to suppress all

documents obtained by the United States in violation of Fed. R.

Crim. P. 6(e) and in direct conflict with this Court’s decision in

United States v. Sells Engineering, Inc., 463 U.S. 418 (1983) and

thus caused confusion in the application and enforcement of Rule

6(e).

II. Whether the remedy awarded to the United States was a

penalty against Petitioners, rather than restitution; and whether,

because the United States claim is a penalty, it is barred by (a)

statute of limitations and (b) the doctrines of coilateral estoppel

and double jeopardy contained in the Fifth Amendment of the

Constitution of the United States; and whether, because the

Government’s claim is a penalty, Petitioners are entitled to a jury

trial; |

III. Whether TECA erred in holding Individual Petitioner

personally liable for the judgment entered in favor of the United

States under the common law doctrines of alter ego and tortious

conduct liability when such doctrines have been precluded by 15

U.S.C. §754(a)(4); and whether TECA erred in holding

Individual Petitioner personally liable under a tortious conduct

liability theory without providing Individual Petitioner with the

right of trial by jury in violation of the Seventh Amendment of the

Constitution of the United States.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW .........- i

TABLE OF CONTENTS........-----:eeeeereeeet ii

TABLE OF AUTHORITIES. ........----0--eeeeeee? iii

CITATION TO OPINION BELOW ..........------- 2

MI TET gnc seek cece eserccnceceengewe sess 2

STATUTES INVOLVED. .......-----:-eeceeeeceeee 3

STATEMENT OF CASE .......----:eesc etree reees 5

EVIDENCE AND RULING BELOW ..........----> 7

REASONS FOR GRANTING WRIT......----- +5555: 10

oo. * ee Pe eee ae i 24

CERTIFICATE OF MAILING .......------ +22 sere 25

I I, 5. 5 a Ce ek Rae oe Cera A-1

APPENDIX B

ill

TABLE OF AUTHORITIES

Cases Pages

Camrex (Holdings) Ltd. v. Camrex Reliance Paint

Company, Inc., 90 F.R.D. 313 (E.D.N.Y. 1981) ..... 21,22

Citronelle-Mobile Gathering, Inc. v. Edwards,

669 F. 2d (Temp. Emerg. Ct. App.) cert. denied,

eR oc Sos Vo ek ved e s'eu es ce cc's ss 19,20

Curtis v. Loethar,

Co ee othe BS En 22

Dairy Queen v. Woods,

ST os any os kv ea eS bales alee beves 21

Getty Oil Company vy. Department of Energy,

569 F.Supp. 1240 (D. Del. 1983),

appealed on other grounds, No. 3-37

(Temp. Emer. Ct. App. Oct. 19, 1983) ............. 19

In Re: Grand Jury,

469 F.Supp. 666 (M.D. Pa. 1978)...... Sk care ecules aac 14

In Re: Special Grand Jury,

Misc. No. 522 (N.D. Okla. Oct. 8, 1981).......... 17,18

Midcontinent Broadcast Co. v. North Central Air, Inc.,

Se | Ee 11,12

Pakistan International Airlines v. McDonnell Douglas,

en EN, COMP, BOM kee ace sees 13

Porter v. Warner Holding Company,

ee uke ices es cccvocecses 21

Sauder v. Department of Energy,

648 F.2d 1341 (Temp. Emer. Ct. App. 1981) ....... 19

TABLE OF AUTHORITIES (Continued)

Cases (Continued) Pages

State of Texas v. United States Steel Corp.,

546 F.2d 626 (Sth Cir.) cert. denied,

Beg IRIE aA oe ea 12

United States v. American Radiator and

Standard Sanitary Corporation,

Oe ee TF Ce Fe ROOD inc a cio enasess 14

United States vy. Exxon,

773 F.2d 1240 (Temp. Emer. Ct. App. 1985). ......... 19

United States v. Hart,

eS ae | Bn eer 21

United States v. Heinze,

oe a sd | a eer 14

United States of America v. Kilpatrick,

No. 82-CR-22 slip op. (D. Colo. 1984) ............... 15

United States v. Sells Engineering, Inc.,

ee ss bi v ov a anaes eMEa Sed oeNReO A 2,6,

9,10,14,18

UNITED STATES CONSTITUTION:

U. S. Constitution, Amendment V....................-.. 2,4

U. S. Constitution, Amendment VII ..............000... 2,5

STATUTES:

I SE yo wk cn bobs ks oh ahead Rebs ddene 22

es ES os ir oe ke dameabaaeen ekaA 2,4

22.23

gS eae os Ree eee reer erT errr err eres 12

TABLE OF AUTHORITIES (Continued)

Cases (Continued) Pages

FEDERAL RULES:

Es ae I Be I os kk ca ss eV ove oc bie eke a

6,7,8,9,10,1

12,14,15,17,18

Pease, os eee TPN cl SS 13,

gle Be 2 Oe LS | fy ee ee ene menEes 13,

Ne aes I MIS 5s 555 oe he onthe d ea ae 9,11

TREATISES:

Wright & A. Miller, Federal Practice and Procedure,

0 EEE AO rR eS gm eels PS Wy SEI re Pe 21

C. Wright & A. Miller, Federal Practice and Procedure,

NRG. Sd waxed bas thins ae es ae 22

G. Palmer, Law of Restitution, 1.1 (1978) .............. 22

RESTATEMENT:

Resvasienent af Reanditetion, Foc 6c ck sca eo caccdccvcne ae

IN THE SUPREME COURT

OF THE UNITED STATES

OCTOBER TERM, 1986

ROBERT B. SUTTON, SUTTON INVESTMENTS, INC..

SCURRY OIL COMPANY, BPM, LTD., AND

SOONER REFINING COMPANY, INC.*

PETITIONERS.

VERSUS

UNITED STATES OF AMERICA,

RESPONDENT.

PETITION FOR WRIT OF CERTIORARI TO THE

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

To the Honorable Chief Justice and Associate Justices of the

Supreme Court of the United States:

The Petitioners, Robert B. Sutton, (hereafter referred to as

Sutton or Individual Petitioner), Sutton Investments, Inc., Scurry

Oil Company, BPM, Ltd., and Sooner Refining Company, Inc., |

(hereafter referred to collectively as Corporate Petitioners), pray

that a Writ of Certiorari issue to review the judgment and opinion

| of the Temporary Emergency Court of Appeals (hereafter referred

to as TECA) entered in this matter of June 11, 1986.

*Affiliate and Subsidiary Companies of the Corporate Petitioners are: Boomer

Oil Co., Inc.; Oil Patch Investment Co.; Redfish Bay Terminal, Inc.; BOP

Industries, Inc.; BPM International, Ltd; and Robsutt, Ltd.

CITATION TO OPINION BELOW

The June 11, 1986, written opinion of TECA, is the judgment

sought to be reviewed, not yet reported (Temp. Emer. Ct. App.

1986) and is attached hereto as Appendix A.

JURISDICTION

The TECA judgment and written opinion was entered on June

11, 1986. This Court’s jurisdiction is invoked under 28 U.S.C.

§1254 (1).

QUESTIONS PRESENTED

I. Whether TECA erred in refusing to suppress all

documents obtained by the United States in violation of Fed. R.

Crim. P. 6(e) and in direct conflict with this Court’s decision in

United States v. Sells Engineering, Inc., 463 U.S.418 (1983) and

thus caused confusion in the application and enforcement of Rule

6(e).

II. Whether the remedy awarded to the United States was a

penalty against Petitioners, rather than restitution; and whether,

because the United States claim is a penalty, it is barred by (a)

statute of limitations and (b) the doctrines of collateral estoppel

and double jeopardy contained in the Fifth Amendment of the

Constitution of the United States; and whether, because the

Government’s claim is a penalty, Petitioners are entitled to a jury

trial:

Ill. Whether TECA erred in holding Individual Petitioner

personally liable for the judgment entered in favor of the United

States under the common law doctrines of alter ego and tortious

conduct liability when such doctrines have been precluded by 15

U.S.C. §754(a)(4); and whether TECA erred in holding

Individual Petitioner personally liable under a tortious conduct

liability theory without providing Individual Petitioner with the

right of trial by jury in violation of the Seventh Amendment of the

Constitution of the United States.

STATUTES INVOLVED

This case involves the following Federal Rules and Statutes:

I. Federal Rules of Criminal Procedure 6(e)(2) and 6(e)(3)

of the Federal Rules of Criminal Procedure provide:

(e) Recording and Disclosure of Proceedings.

(2) General Rule of Secrecy - A grand juror, an

interpretor, a stenographer, and operator of a

recording device, a typist who transcribes recorded

testimony, an attorney for the Government, or any

person to whom disclosure is made under paragraph

(3)A)(ii) of this subdivision shall not disclose

matters occurring before the grand jury, except as

otherwise provided for in the rules. No obligation of

secrecy may be imposed on any person except in

accordance with this rule. A knowing violation of

Rule 6 may be punished as a contempt of court.

(3) Exceptions.

(A) Disclosure otherwise prohibited by this

rule of matters occurring before the grand jury,

other than its deliberations and the vote of any

grand juror, may be made to-

(i) an attorney for the government for use in the

performance of such attorney’s duty; and

(ii) such government personnel as are deemed

necessary by an attorney for the government to

assist an attorney for the government in the |

performance of such attorney’s duties to enforce

federal criminal law.

(B) Any person to whom matters are disclosed

under subparagraph (A)(ii) of this paragraph shall

not utilize that grand jury material for any purpose

other than assisting the attorney for the government

in the performance of such attorney’s duty to

enforce federal criminal law. An attorney for the

Il.

III.

government shall promptly provide the district

court, before which was impaneled the grand jury

whose material has been so disclosed, with the

names of the persons to whom such disclosure has.

been made.

rule of matters occurring before the grand jury may

also be made-

(i) when so directed by a court preliminarily to or

in connection with a judicial proceeding; or

(ii) when permitted by a court at the request of the

defendant, upon a showing that grounds may exist

for a motion to dismiss the indictment because of

matters occurring before the grand jury.

The Fifth Amendment to the Constitution of the United

States provides in pertinent part, as follows:

No person shall. . .be subject for the same offense to be

twice put in jeopardy of iife or limb. . .nor be deprived of

life, liberty, nor property. without due process of law. .

Title 15 U.S.C. §754(a)(4) provides as follows:

Any individual director, officer, or agent of a

corporation who knowingly and willfully authorizes,

orders or performs any of the acts or practices constituting

in whole or in part a violation of paragraph (3), shall be

subject to penalties under this subsection without regard

to any penalties to which that corporation may be subject

under paragraph (3) except that no such individual

director, officer or agent shail be subject to imprisonment

under paragraph (3), unless he also has knowledge, or

reasonably should have known, of notice of non-

compliance received by the corporation from the

President.

IV. The Seventh Amendment to the Constitution of the

United States provides as follows:

In suits at common law, where the value in controversy

shall exceed twenty dollars, the right of trial by jury shall

be preserved, and no fact tried by a jury, shall be

otherwise reexamined in any court of the United States,

than according to the rules of the common law.

STATEMENT OF THE CASE

In 1978, the Department of Energy (Hereafter referred to as

DOE) commenced the first of two audits of Petitioners. DOE

subpoenaed Petitioners’ documents but abandoned the subpoena

action and made no determination. Subsequently, the Department

of Justice (hereafter referred to as DOJ) instituted a criminal

proceeding in October, 1981. The grand jury investigation led to

the institution of a criminal proceeding against Petitioners, and

was managed by the DOJ with DOE personnel assistance. The

criminal action sought forfeiture of all Petitioners’ assets through

the Racketeer Influenced and Corrupt Organization Act (hereafter

referred to as RICO) in Counts | through 3 and charging in Counts

4 through 15 violations of the emergency price control regulations

through mail fraud and wire fraud. On May 13, 1982, all

Petitioners were acquitted on all such counts because there was

insufficient evidence to go to the jury. Individual Petitioner was

convicted of one count of obstruction of justice and one count of

conspiracy to obstruct justice. No monetary judgment was

rendered because the Government failed to carry its burden of

proof.

The DOE commenced a second audit of Petitioners in June,

1982, using documents obtained without proper authorization

from the grand jury that returned the criminal indictment against

Petitioners. This 1982 audit forms the basis for the civil action

filed against Petitioners after the unsuccessful asset seizure sought

in the criminal case. The present civil action asserted the same

violations and was based on the same transactions that were in

issue in the criminal proceeding.

The civil complaint was brought under the guise of restitution,

yet the measure of restitution was not based on unjust enrichment

of Petitioners or injury to third parties. In addition to the

fundamental error of TECA regarding Rule 6(e), TECA affirmed

the district court’s decision denying Petitioners a jury trial even

though the Government’s claim sought a penalty against

Corporate Petitions and tortious conduct liability against

Individual Petitioner.

Soon after the civil complaint was filed, Petitioners discovered

that the Government had based its second audit upon material

procured from the criminal grand jury in violation of the secrecy

provisions of Fed. R. Crim. P. 6(e). Petitioners filed a Motion to

Suppress the procured material. The district court agreed that the

Government had violated Rule 6(e). The trial court reserved

decision on an appropriate sanction for this violation and failed to

suppress the illegally procured material.

Subsequently, Petitioners filed a Request for Certification of

Interlocutory Appeal on the question of “whether grand jury

documents should be suppressed when obtained by a Government

agency in violation of Fed. R. Crim. P. 6(e) pursuant to an invalid

court order issued after a Government agency had illegally gained

access to the documents and used them to prepare an audit upon

which civil case is based.”’ From the bench, the district court again

denied Petitioners’ request.

In July 1983, following the decision of this Court in United

States v. Sells Engineering, Inc., 463 U.S. 418, (1983),

Petitioners renewed their Motion to Suppress the procured

material. Se//s denounced any use of grand jury materials by

agency personnel without a court order authorizing disclosure

after a showing of a particularized need. In the case at bar, the trial

court decided that the documents produced for the grand jury were

subject to the requirements of Fed. R. Crim. P. 6(e) and that

Petitioners had standing to challenge the Government’s use of

Petitioners’ documents as well as third party documents employed

in the criminal investigation, and that the Government had

obtained documents in violation of Rule 6(e). Ultimately, the trial

court determined that only two percent (2%) of those documents

obtained by the Government were obtained in violation of Rule

6(e). It is at this point that the trial court, and subsequently TECA,

began to confuse the application and enforcement of the secrecy

provisions of Rule 6(e). The trial court erroneously found that

98% of the documents used by the Government in preparing its

second audit had either never been, or, were no longer, protecied

by the secrecy provisions of Rule 6(e). In this regard, the trial court

noted that apart from the documents obtained by the Government

from sources other than the grand jury, some invoices previously

presented to the grand jury (approximately 40%) were received

into evidence as Exhibits 27 and 53 in the criminal trial of the

Petitioners, and as such, were held to be no longer impressed with

the grand jury secrecy imposed by Rule 6(e). The predominant

volume of documents obtained from the grand jury (approximately

58%) were used by the Government in the criminal trial of

Petitioners in preparation for summaries introduced as Govern-

ment’s Exhibits 80 and 81 at the criminal trial pursuant to the

provisions of Rule 1006 Federal Rules of Evidence. Exhibits 80

and 81 are each one-page summaries consisting of a two-line chart

with Government-compiled figures of four categories of oil and the

number of barrels bought and sold. These one-page, two-line

summaries are attached hereto as Appendix B (hereafter referred

to as the summaries). The actual grand jury documents from which

the summaries were prepared were neither offered nor admitted

into evidence during the criminal trial, but were present in the

courtroom for review by the parties prior to and during the crimina!

trial.

THE EVIDENCE AND RULINGS BELOW

On or before June 8, 1982, at the request of Sharon Tucker,

DOE counsel, Assistant United States Attorney James Schwartz,

one of the Government’s counsel involved in the criminal

prosecution, turned over grand jury documents obtained by the

DOJ to DOE personnel. Mr. Schwartz simply filed a post hoc

notice on June 8, 1982, with Chief Judge H. Dale Cook of the

Northern District of Oklahoma, before whom the grand jury had

been impaneled. Mr. Schwartz did not obtain court authorization

after a showing of particularized need as required by Fed. R. Crim.

P. 6(e). The notice stated:

‘This is to inform you that pursuant to the provisions of

Rule 6(e) of the Federal Rules of Criminal Procedure,

disclosure of material subpoenaed by the grand jury

presently sitting in session in the Northern District of

Oklahoma is being made to the following additional

named persons: Sharon Tucker - Department of Energy

attorney; Star Gee - Department of Energy auditor,

James Laughlin - Department of Energy auditor; Gerald

Coster - Department of Energy auditor; Jim Pohl -

Department of Energy auditor; Lynn McDaniel -

Department o? Energy auditor.”

On July 15, 1983, after the DOE informed Mr. Schwartz of

additional employees who had access to grand jury materials

Schwartz filed a second notice with Chief Judge H. Dale Cook:

“This is to inform you that pursuant to the provisions of

Rule 6(e) of the Federal Rules of Criminal Procedure,

disclosure of materials subpoenaed by the immediate

past grand jury which was sitting in session in the

Northern District of Oklahoma is being made to the

following additional named persons: Department of

Energy personnel: Tom Newkirk, Jerry Weiner, Tom

Frey, Kenneth Jones, Nancy Crisman, Judith

Mather.”

The disclosed documents included Petitioners’ crude oil records

as well as numerous third party records, which Petitioners did not

give permission for disclosure.

After the disclosure to DOE personnel in early June, 1983,

James Louthan, who was among the first group to obtain access to

the grand jury materials, directed a comprehensive audit of

Petitioners’ crude oil purchases and sales transactions based upon

the grand jury documents obtained from Mr. Schwartz. Louthan

marshalled over twenty (20) people who spent 15,000 to 20,000

man-hours on the audit.

On October 5, 1982, after the audit was virtually complete, the

DOE filed an ex parte motion and brief requesting an order of the

court “‘confirming”’ the DOE’s authority to use the grand jury

documents in civil enforcement proceedings. On the same date,

Chief Judge H. Dale Cook granted Plaintiff's ex parte motion.

Defendants had no knowledge of the motion or opportunity to

object to release of the grand jury records.

RULINGS BELOW

Writing for the TECA majority, the Honorable Leslie E. Brown

affirmed that the Government utilized a large number of

documents obtained in violation of Fed. R. Crim. P. 6(e) as

construed in United States v. Sells Engineering, Inc., supra.

TECA affirmed the District Court’s suppression at trial of two

percent (2%) of the documents utilized in the Government’s

second audit. Of the remaining ninety-eight percent (98%) of the

documents used in the preparation of the audit and presentation of

the Government’s case, forty percent (40%) of the documents

were attributable to Exhibits 27 and 53 at the criminal trial. These

Exhibits, TECA ruled, became matters of public record when they

were received, without qualification, in the criminal trial. The

remaining fifty-eight percent (58%) of the documents were

extracted from those documents illegally procured by the DOE

from the criminal grand jury and incorporated in part into the

summaries at the criminal trial. During the criminal trial, the

summaries were admitted into evidence under Fed. R. Evid. 1006.

However, the actual documents themselves were not introduced or

otherwise made public during the criminal trial. Items of

information contained in those documents that were critical to the

restitution award, namely, the prices of various transactions, were

not introduced or made public during the criminal proceedings.

Prior to the civil trial, the Government amended its Complaint

by dropping its claim for civil penalties authorized by the EPAA,

but retained its claim for a penalty not authorized by any statute. It

labeled its claim “restitution”. After the Government dropped its

claim for civil penalties, the trial court struck Petitioners’ demand

for a jury trial. By its June 11, 1986 opinion, TECA determined

that the Government’s claim was not a claim for penalty and,

therefore, denied Petitioners of a jury trial. Petitioners’ assertion

that the Government’s claim was barred by the applicable statute

of limitations, collateral estoppel and double jeopardy was found

to be without merit by TECA. Additionally, the TECA majority

opinion concluded that Sutton was personally liable on a tortious

conduct liability theory, and erroneously ruled that the tort cause

against him did not give rise to a right to trial by jury.

The TECA opinion, written by The Honorable Leslie E. Brown

with The Honorable Reynaldo G. Garza concurring, contains a

written dissenting opinion by The Honorable Sam C. Pointer, Jr.

Judge Pointer’s dissent recommended compliance with this

Court’s decision in Se//s and that this case be remanded to the

district court for recalculation of the amount of the award to the

Government, suppressing approximately sixty percent (60%) of

those docments procured by the Government in violaton of Rule

6(e).

REASONS FOR GRANTING WRIT

I. TECA has refused to enforce this Court’s ruling in

United States v. Sells Engineering, Inc. regarding the Govern-

ment’s violation of Fed. R. Crim. P. 6(e).

The TECA decision has created confusion in the application

and enforcement of Rule 6(e). This confused application and

uneven enforcement of Rule 6(e) began when TECA confirmed

the district court’s ruling that the DOE had obtained the grand jury

documents without proper advance authorization. Confusion

continued when TECA refused to suppress all of the documents

and materials obtained by the Government’s violation of Rule

6(e). Refusal to suppress is in direct conflict with this Court’s

decision in United States v. Sells Engineering, Inc., supra.

Confused enforcement of the secrecy provisions of Rule 6(e) arose

when TECA found exceptions to the violation without the benefit

of any proper authority and unsupported by the facts and

circumstances of the case.

The TECA ruling has set a dangerous course for Government

personnel to follow. The Government must abide by Rule 6(e).

TECA provides the Government with an escape from the secrecy

obligation of Rule 6(e) and therefore allows for continued abuse

and uneven enforcement of the secrecy protection. TECA

erroneously affirmed the trial court’s determination that the

Government’s violation of Rule 6(e) was not reckless and

systematic. Therefore, not only should the majority of the

documents obtained by the Government in violation of 6(e) have

been suppressed, TECA should have reversed the trial court’s

decision not to dismiss the case with prejudice because of the

Government’s reckiess and systematic violation of Rule 6(e).

Because TECA affirmed the trial court’s decision that the

Government did obtain grand jury materials in violation of Rule

6(e) and has affirmed that the appropriate remedy for such

violation is suppression of the materials obtained in violation of

Rule 6(e), Petitioners do not need to further argue that the

Government violated Rule 6(e) and that suppression is, at the very

least, one of the appropriate remedies. Both TECA and the trial

court have affirmed the suppression of two percent (2%) of the

documents and materials obtained by the Government in violation

of Rule 6(e). However, TECA erred by determining that

approximately fifty eight percent (58%) of the documents legally

obtained were made public record in the criminal trial although

such documents were neither offered nor admitted into evidence

by any of the parties to the criminal trial. TECA misplaced its

reliance on Midcontinent Broadcast Co. v. North Central Air,

Inc., 471 F. 2d 357, 359-360 (8th Cir. 1973), a case decided ten

years prior to the Sells case. Midcontinent does not involve a

violation of Fed. R. Crim. P. R. 6(e). Midcontinent held that

summary exhibits provided for in Fed. R. Evid. Rule 1006 may be

offered and admitted into evidence although the documents used to

prepare such summary exhibits are not offered and admitted into

evidence. Midcontinent does not stand for the proposition that

those documents used to prepare summary exhibits pursuant to

Rule 1006 which are neither offered nor admitted into evidence are

made a part of the record and therefore, public record, by virtue of

the fact that summary exhibits of same were admitted pursuant to

Rule 1006. By its misplaced reliance on Midcontinent, TECA has

added more confusion to the application and enforcement of Rule

6(e).

In the present case, approximately fifty-eight percent (58%) of

the documents unlawfully and illegally obtained by the Govern-

ment in violation of Rule 6(e) were neither offered nor admitted

into evidence at any criminal or civil trial. At the criminal trial, the

Government used the grand jury documents to prepare the skeletal

summaries. These summaries did not include the price per barrel,

Petitioners’ customer or trading partner, and miscellaneous

information necessary for the Government to perform the second

audit. These documents were neither offered nor admitted into

evidence. The documents were present in the courtroom on the day

the summaries were admitted into evidence, but they were not

accessable to the public. When the trial court was not in session,

the courtroom was locked to prevent access by the public, and FBI

agents were present to prevent access to the grand jury documents

at other times. After the summaries were introduced into evidence,

the supporting documents were returned to the grand jury room

and remained physically separated from trial evidence and the trial

record. The actual documents were never in the United States

District Clerk’s office with the trial evidence. In fact, the DOE’s

chief auditor testified that the DOE originally obtained the

documents from the grand jury room. The cursory summaries did

not reveal the important contents of the actual documents. The

nature of the transactions between the Petitioners and third

parties, as recorded in the actual documents, remained secret and

protected by Rule 6(e).

In State of Texas v. United States Steel Corporation, 546 F.2d

626 (5th Cir.), cert. denied, 434 U.S. 889 (1977), the court

determined that even though grand jury testimony of corporate

employees had been made available to corporate defendants to aid

in their defense in a civil suit, the grand jury’s secrecy surrounding

the transcripts ‘“‘remained unaffected.” Jd at 629. The State of

Texas sought production of the transcripts, arguing that it did not

show a particularized need because the possession by the

corporate defendants of their employees transcripts had already

breached grand jury secrecy. The court rejected the State’s

argument, emphasizing, “[t]he State underrates the importance

and misconceives the reasons for the cloak of grand jury

secrecy...” Id at 629.

In Pakistan International Airlines v. McDonnell Douglas, 94

F.R.D. 566 (D.C. Cir. 1982), the court held that tne fact that the

grand jury had been dissolved and that the requested grand jury

testimony had been disclosed to the defendant under Fed. R. Crim.

P. 16(a)(1)(A) did not affect the secrecy of the material nor did it

obviate the requirement of a showing of a particularized need in

order for disclosure of the material. Fed. R. Crim. P. 16 provides

for discovery and inspection. Rule 16(a)(1)(A) in part provides:

Where the defendant is a corporation, partnership,

association or labor union, the court may grant the

defendent, upon its motion, discovery of relevant recorded

testimony of any witness before a grand jury who (1) was,

at the time of his testimony, so situated as an officer or

employee as to have been able legally to bind the

defendant in respect to conduct constituting the offense, or

(2) was, at the time of the offense, personally involved in

the alleged conduct constituting the offense and so

situated as an officer or employee as to have been able

legally to bind the defendant in respect to that alleged

conduct in which he was involved.

With regard to the discovery and disclosure of documents to a

defendant, Rule 16(a){1)(C) provides:

Upon request of the defendant the government shall

permit the defendant to inspect and copy or photograph

books, papers, documents, photographs, tangible objects,

buildings or places, or copies or portions thereof, which

are within the possession, custody or control of the

government, and which are material to the preparation of

his defense, or are intended for use by the government as

evidence in chief at the trial, or were obtained from or

belong to the defendant.

In the United States v. Heinze, 361 F.Supp. 146, 157 (D. Del.

1973), the court held that the review by a witness of his prior

testimony was not a disclosure under Rule 6(e) and that the

secrecy protected by Rule 6(e) had not been affected. See also, In

Re: Grand Jury, 469 F.Supp. 666, 669 (M.D. Pa. 1978); United

States v. American Radiator and Standard Sanitary Cor-

poration, 45 F.R.D. 477 (M.D. Pa. 1968).

Likewise in this case, access by the Petitioners to copies of

documents familiar to them did not make those documents public

or breach grand jury secrecy. TECA’s opinion that the thousands

of documents used compile the two one-page, two-line summaries

were public documents because of the documents’ availability to

Petitioners, ignores this court’s decision in Sells and makes

secrecy under Rule 6(e) meaningless. Such a ruling creates an

obvious conflict between Rule 6(e) and Rule 16(a)(1)(A) and(C).

The corporate documents in Se//s were clearly available to the

defendants. The Supreme Court nonetheless, determined that

grand jury secrecy protected these materials by requiring a court

order only after the requesting party showed a particularized need

for further disclosure. If grand jury secrecy was destroyed merely

as a result of the litigant’s access to documents, as allowed by Fed.

R. Crim. P. 16(a)(1)(C) the Sed/s defendants, by having access

would have had noclaims. As TECA Judge Pointer stressed in his

dissenting opinion, the Se//s case requires that, in the case at bar,

- fifty-eight percent (58%) of the documents used by the Govern-

ment to prepare their second audit should be suppressed and not

used as a basis for the civil judgment. Similarly, mere compliance

with Midcontinent with regard to the proper admittance of the

summaries pursuant to Fed. R. Evid. Rule 1006 should not be

considered appropriate authority for disclosure of secret grand

jury documents in violation of Fed. R. Crim. P. 6(e). The TECA

majority opinion in this case is in clear conflict with this court’s

decision in Sells and creates confusion in the application and

enforcement of Rule 6(e). Judge Pointer has properly construed

the facts in connection with this Court’s decision in Sells and

voiced his concern over the confusion effecting Rule 6(e), Rule

16(a)(1)(A) and (C) and Fed. R. Evid. 1006 that has been

wrought by the majority opinion.

Because of the Government’s reckless and systematic violation

of Rule 6(e), dismissal of the cause was justified. In United States

of America v. Kilpatrick, No. 82-CR-222, slip opinion (D. Colo.

1984), the court concluded that “where Rule 6(e) is violated

recklessly and systematically, dismissal is appropriate.” In

Kilpatrick, the court noted that IRS agency representatives

determined to whom disclosure of grand jury material should be

made and that notices to the district court “‘were prepared in some

instances substantially after such disclosure.” /d. The Court

concluded that such behavior was reckless and systematic. As

stated, “‘[t]he extensive disclosure of grand jury materials to IRS

civil employees, the haphazard and post hoc method of identifying

those to whom disclosure was made and the omission from the

disclosure nctices of numerous IRS employees privy to grand jury

information clearly contravened the Rule.” /d. The court

dismissed the case.

In this case, the Government blatantly violated Rule 6(e) as

“recklessly and systematically” as the IRS agency personnel

violated Rule 6(e) in Kilpatrick. As in Kilpatrick, the evidence

clearly supports the conclusion that grand jury materials were

extensively disclosed to DOE civil employees and that the method

of identifying employees, if at all, was haphazard and post hoc.

Dismissal is an appropriate remedy.

Not only were the documents revealed without proper court

authorization to the twelve (12) DOE civil agency personnel listed

in the notices, but after illegally obtaining the documents, the DOE

disseminated the grand jury records throughout the Department of

Energy offices, including the Office of Special Investigations as

well as to IRS agency personnel, in complete and blatant disregard

of Rule 6(e). The DOE’s chief auditor testified that, although he

knew the documents were sensitive, the grand jury documents

obtained by the DOE from the Tulsa, Oklahoma, grand jury room

were copied and distributed to the Tulsa, Dallas, Houston and

New Orleans DOE offices. A DOE employee under the super-

vision of the DOE’s chief auditor, testified that no limits were

placed on the number of DOE personnel who could gain access to

the grand jury materials nor were limitations placed upon the

Bree

materials that could be reviewed by those persons. Once the DOE

Houston office obtained the subject documents, the procedures for

verifying access and emphasizing confidentiality of the documents

were lax or non-existent. In Houston, incomplete records were

kept of the names of auditors reviewing the documents. The DOJ

attorney, Mr. Schwartz, who released the records was never

provided the names of additional persons given access to the grand

jury records. These records were also given to other auditors

throughout the DOE who reviewed these records in an effort to

pursue audits of third parties without giving these other personnel

unrelated to the present case any precautionary instructions

related to reviewing these documents. These documents were

subsequently copied, without limitations, and distributed through-

out the DOE for work-up and audit of other companies unrelated

to the present case.

Moreover, the DOE employed the services of J. D. Young

Company to copy fifty percent (50%) of the grand jury documents

which it had obtained from the Tulsa grand jury room. The Young

Company employees were not informed that they were copying

grand jury documents and no record was maintained of those

company employees engaged in the copying process.

In fact, one employee of the DOE, Gary Allen, refused to copy

grand jury documents when asked to do so, stating that the DOE

“didn’t have a right” to copy the grand jury documents. Despite his

concern, he was directed by the supervisors in the DOE Tulsa

office to copy the documents. Gerald Koester stated that no further

inquiries were made regarding to Mr. Ailen’s concern that the

DOE had no authority to copy the grand jury documents.

In the face of this cavalier distribution and copying of grand jury

materials, both DOE and DOJ personnel were aware that DOE

personnel could not obtain the grand jury materials atissue here for

use in a civil case until after, not before, a district court authorized

disclosure of those materials. Internal DOE memoranda and the

U.S. Attorney Manual used by the DOJ attorneys demonstrate

such awareness. In a March 22, 1982 memorandum from Sharon

Tucker, a DOE lawyer, to her supervisor, Milton Lorenz, Miss

Tucker wrote:

“The civil audit requires that the DOE obtain access to all

BPM existing records as well as the records of all BPM

suppliers and purchasers immediately. .. We recommend

that DOE immediately approach DOJ officials con-

cerning the possibility of seeking to obtain now, prior to

the trial date, the records we need to perform a complete

audit by requesting a 6(e) order permitting our access

under the Federal Rules of Criminal Procedure.

[Emphasis added]

In a May 28, 1982, memorandum to supervisor Robert Heiss,

Sharon Tucker related a telephone conversation with Robert

Ogren of the Fraud Section of the DOJ, commenting:

“T reiterated that since DOE needed all BPM related

records in order to proceed with the civil case, we may

need to consider seeking [Rule] 6(e) order.”

The U.S. Attorney Manual dated August 17, 1978, used by the

DOJ attorneys, including James Schwartz, the DOJ attorney who

ignored Rule 6(e) and disclosed the grand jury materials to the

DOE, states in Section 9-11.363 that Rule 6(e) authorizes

disclosure of matters occurring before the grand jury only when

authorized by the order of the District Court that impaneled the

grand jury. The U.S. Attorney Manual dated February 16, 1982,

continued, “‘It is clear that Rule 6(e) does not authorize disclosure

to attorneys for other federal government agencies” for use in civil

proceedings.

The trial court concluded, and TECA affirmed, that the

violation of Rule 6(e) was not egregious because James Schwartz

was relying upon a court order by Judge James Ellison in which the

court held documents not to be subject to Rule 6(e). See, In Re:

Special Grand Jury, Misc. No. 522 (N.D. Okla., October 8,

1981). Assuming arguendo that the documents were not subject to

Rule 6(e), the DOJ attorney’s manual itself states that a court

order is required before making documents public:

“The most commonly denied request for grand jury

documents are requests for the disclosure of or access to

ome ab ener we

all the documents subpoenaed by a particular grand jury

or a list or inventory of all such documents. .. While Rule

6(e) ordinarily does not apply to the release of documents

subpoenaed to the grand jury, a court order nevertheless is

required for their public disclosure. Such documents have

been held to remain the property of the person from whom

they were subpoenaed, with a grand jury merely having

taken temporary custody. Where the owner of the

documents does not consent to their release, disclosure

must be court authorized. See Section 9-11.365, 366.”

{Emphasis added. }

With regard to James Schwartz’ reliance on Judge Ellison’s order,

it is important to note that the Government took the position in the

case before Judge Ellison that the documents were in fact subject

to grand jury secrecy. See, In Re: Special Grand Jury, supra.

Moreover, although the court disagreed with the Government’s

position, it refused to release the documents at issue without the

consent of the owners. Jd.

Unless this court enforces its decision in Sells and erases the

confusion caused by the TECA decision regarding Rule 6(e), this

Court’s decision in Se//s and the misapplication and uneven

enforcement of grand jury secrecy will continue. The TECA

decision provides the Government with the opportunity and

authorization to disregard the correct procedure in the future and

ignore grand jury secrecy, which allow Government agencies to

circumvent the civil discovery procedure, to rummage through

grand jury documents, to compile evidence for civil cases after

extensive review and investigation of grand jury documents Here,

the result of the Government’s gross misconduct was a shallow

reprimand. Rule 6(e) secrecy was totally ignored and will continue

to be ignored if the TECA decision is not reviewed. The deterent

value of Rule 6(e) stands to be emasculated and grand jury secrecy

to become a memory as a result of the TECA opinion. Dismissal of

this entire cause is justified by the Government’s reckless conduct

in this case.

Ii. Because the Government’s claim was one for penalty and

not restitution, this case should be dismissed.

A. TECA has erred in affirming the theory of restitution.

Only the trial court below, affirmed by TECA on appeal, have

ever awarded restitution to the Government for miscertifications

alone. Not other court in the United States has made such an

award. At the same time that the trial court stated that the judgment

against Petitioners for miscertifications was “restitution. . .not...a

penalty,” the Court acknowledged that the Government did not

prove that Petitioners’ pricing practices were contrary to the

guidelines of the regulations. In other words, the Government did

not prove that Petitioners overcharged their purchasers.

‘*Restitution”’ for miscertifications is a contradiction in terms if

the miscertifier did not overcharge its purchasers because

restitution is intended “‘to make the victims whole. . .”’ Citronelle-

Mobile Gathering, Inc. v. Edwards, 669 F.2d 717 (Temp. Emer.

Ct. App.) cert. denied, 459 U.S. 877 (1982). The trial court and

TECA relied upon Citronelle-Mobile Gathering, Inc. v.

Edwards; Sauder v. Department of Energy, 648 F.2d 1341

(Temp. Emer. Ct. App. 1981), Getty Oil Company v. Department

of Energy, 569 F.2d Supp. 1204, 1217-18 (D. Del. 1983),

appealed on other grounds, No. 3-37 (TECA October 19, 1983);

and United States v. Exxon, 773 F.2d 1240 (Temp. Emer. Ct.

App. 1985), cert. den., __.__s—«wU2«S.. Es (January 27,

1986); rehearing denied, ____>_- U.S.____ (April 7, 1986)

for the proposition that restitution to the Government for a

violation of the miscertification regulations is appropriate. Getty,

Exxon and Citronelle are distinguished because the violations

were for violation of pricing regulations, not miscertification as in

this case.

In Exxon, the restitution had a direct relationship to Exxon’s

overcharges. Exxon was not disgorged of all gross profit for

miscertifying, it was only disgorged of that profit received which

had a relationship to pricing overcharges. Likewise, in Citronelle

and Getty, the courts concluded that restitution was appropriate

relief for pricing overcharge. 669 F.2d at 721; 569 F.Supp. at

1217. In Sauder v. Department of Energy, supra, at 1348, the

court referred to “restoring the status quo”’ by refunding to Mobile

es SSI MiSs

the amount by which Mobile was overcharged. It is important to

note each of these cases are compietely void of any reference to

Section 212.131. The Government based its restitution claim on

12 U.S.C. §1904, note 209 which permits restitution of “monies

received” in violation of agency regulations. The court allowed

restitution in the context of overcharges, “money received”’ in

violation of the regulations. In the present case, there is no

statutory authority for restitution for a miscertification violation.

Section 212.131 is nothing more than a recordkeeping require-

ment which provides for civil penalties only and not restitution.

~ The Government dropped its claim for civil penalties one month

prior to trial in order to avoid its claim being barred by the statute of

limitations and because it saw an opportunity to try to deny

Petitioners a jury trial.

To obtain restitution, the Government must demonstrate not

only unjust enrichment to the Petitioners, but also injury to third

parties. See, Citronelle-Mobile Gathering, Inc. v. Edwards,

supra. Here, the Government never proved that the Petitioners

were unjustly enriched (because the Government could not

demonstrate that Petitioners overcharged their customers) and the

Government never proved that Petitioners’ business practices

injured third parties.

Although TECA relied upon its rulings in Citronelle-Mobile

Gathering, Inc. v. Edwards, supra, and other cases decided under

price control programs similar to those imposed by the Emergency

Stabilization Act (hereafter referred to as ESA) and the

Emergency Petroleum Allocation Act (hereafter referred to as

EPAA), it has distorted the principle of restitution. The remedy

allowed here was not restitutional but penal. Judge Pointer, in his

dissent, acknowledged this distortion in a long line of other TECA

cases. Without review by this Court, TECA will continue to

intensify the distortion and allow the Government a restitutionary

remedy without the necessity of proving the mandatory and

fundamental elements of the theory of restitution. Without these

elements, the Government did not have a prima facie case in

restitution and should not have recovered a judgment.

Because the Government failed to obtain a monetary judgment

in the criminal trial, the Government filed the civil claim seeking

the same penalty but masking the penalty claim in the guise of

“restitution”. The TECA majority adopted the Government’s

argument that gross misconduct gave rise to restitution despite the

absence of unjust enrichment and injury to third parties. The Fifth

Amendment to the United States Constitution provides that no

one shall be placed twice in jeopardy for their liberty and property.

Petitioners’ prior charges under RICO allowed jeopardy to attach.

The Government, under the Fifth Amendment to the United

States Constitution is prevented from pursuing Petitioners in the

civil action.

B. As the Government’s claim is a penalty claim,

TECA erred in denying Petitioners a jury trail.

In its Second Amended Complaint, the Government dropped its

claim for civil penalties authorized by the EPAA, but retained its

claim for a penalty not authorized by a statute. It labelled this claim

“‘restitution.”’ This label is misleading.

“The right to a jury trial is to be determined from the pleadings,

the label put on a claim in the pleadings is not decisive. The court

must consider the nature of the issues in the case regardless of what |

they have been called by the pleader.” C. Wright and A. Miller, |

Federal Practice and Procedure, Section 2304 (citing Dairy

Queen v. Wood, 369 U.S. 469, 477-478 (1962). Thus, TECA’s |

uncritical acceptance of the Government’s characterization of its

claim as “restituion’’ was erroneous. The Government’s claim is

penal; such claims are legal rather than equitable and carry an

attendant right of jury trial. Porter v. Warner Holding Company,

328 U.S. 395, 401-402 (1946); United States v. Hart, 86 F.Supp.

787 (E.D. Va. 1949).

In Camrex (Holdings) Ltd. v. Camrex Reliance Paint

Company, Inc., 90 F.R.D. 313 (E.D. N.Y. 1981), the Govern-

ment was mistaken in its belief that restitution is limited to equity

and that no jury trial is available where restitution is sought. Jd. at

322. Restitution developed in courts of law and equity prior to the

)

ratification of the Seventh Amendment to the United States

Constitution in 1789. Restatement of Restitution, at pages 5-10;

G. Palmer, Law of Restitution, Section 1.1 (1978). “At law the

principle remedy is quasi-contract, leading to a money judgment. .

. In equity the principle remedy is constructive trust. ..” Id. To the

extent that the Government’s claim for restitution in this case

seeks the recovery of alleged overcharges by the Corporate

Petitioners, it is a quasi-contract claim for damages which is legal

in nature. The Government’s prayer for a money judgment instead

of a constructive trust, equitable lien, or accounting, confirms the

restitution claim is not equitable in nature. Therefore, the Seventh

Amendment guarantee of right to trial by jury was denied

Petitioners on the restitution issue. Curtis v. Loether, 414 U.S.

189 (1974); Camrex (Holdings) Ltd. v. Camrex Reliance Paint

Company, Inc., supra (corporate defendant held entitled to jury

trial on restitution issue); C. Wright and A. Miller, §2316 ("If a

new statutory claim, unknown to the common law, is created and

Congress is silent on jury trial, there is a right of jury trial if the

action is found to be analogous to an action at common law.”’)

Moreover, the Government sought and obtained, and TECA

confirmed, a personal liability judgment against Sutton,

individually, as the President and sole stockholder of the

Corporate Petitioners under a “tortious conduct liability theory.”

This judgment appears to rest on two theories: (1) that Sutton was

the alter ego of each of the Corporate Petitioners; and (2) that

Sutton authorized, or participated in, the miscertifications which

the Corporate Petitioners purportedly committed. Since Section

5(a)(4) of the EPAA (15 U.S.C. §754(a)(4) provides the

exclusive remedy for knowing and wiliful violations of the Act by

corporate officers, directors and agents, alter ego and tortious

conduct, liability is precluded thereby.

Furthermore, personal liability for conduct in violation of the

EPAA is authorized by Section 5(a)(4) of the Act and the remedy

of civil penalties is provided by Section 5(a)(3) thereof. Despite

the obvious availability and applicability of Section 5(a)(4) and

the circumstances of this case, the Government chose to forego the

federal statutory remedy in favor of acommon law remedy which it

had never raised in any of the complaints filed. Despite Petitioners

objections, the trial court adopted, and TECA confirmed, the

Government’s unplead theory of alter ego and found Sutton

personally liable for the Corporate Petitioners’ alleged mis-

certifications. Since the remedy of “‘piercing the corporate veil” is

not authorized by the EPAA, TECA erred in applying it as a rule

of decision. The court cannot avoid the facts that the regulatory

scheme embodied in the ESA and the EPAA is comprehensive

and novel. Both acts provide civil penalties for violations by

individuals, and neither statute authorizes the application of the

alter ego doctrine to pierce the corporate veil.

Personal liability based on tortious conduct is precluded by the

clear provisions for individual liability contained in the EPAA.

The civil penalties promulgated by Congress for such unlawful

conduct must not be supplanted by a judicial remedy which has

never been authorized by Congress.

A claim based upon tortious conduct liability is a legal (tort)

claim which carries with it an attendant right of jury trial. The

Government's claim is in the nature of a penalty, and is founded

upon 5{a)(4) of the EPAA providing for civil penalties against

corporate officers and directors for tortious conduct, therefore

Sutton was entitled to a jury trial in order to determine individuai

liability.

CONCLUSION

Petitioners are entitled to a Writ of Certiorari due to the

Temporary Emergency Court of Appeals total disregard of this

court’s decision in the Sells case and in total disregard of the strict

constitutional protectional requirements of Federal Rules for

Criminal Procedure 6(e) and due to TECA’s disregard of the Fifth

and Seventh Amendments to the United States Constitution

providing for protection from double jeopardy and right to a jury

trial, respectively.

ROBERT B. SUTTON, SUTTON INVESTMENTS,

INC., BPM, LTD., and SOONER REFINING

COMPANY, INC., PRO SE

» Fol

Anthony P. Sutton

Oklahoma Bar Association #8781

Attorney at Law

4835 South Peoria, Suite 25

Tulsa, Oklahoma, 74105

(918) 749-5815

Attorney for Petitioners, pro bono

Of Counsel:

Mildred E. Otey

Oklahoma Bar Association #6810

2761 East Skelly Drive, Suite 700

Tulsa, Oklahoma 74105

(918) 743-6201

Attorney for Petitioners, pro bono

Sam P. Daniel III

Oklahoma Bar Association #2151

Short, Harris, Turner & Daniel

2761 East Skelly Drive, Suite 700

Tulsa, Oklahoma74105

(918) 743-6201

Attorney for Petitioners, pro bono

CERTIFICATE OF MAILING

I, Anthony P. Sutton, do hereby certify that on the 28th day of

August, 1986, that I mailed, by certified mail, return receipt

requested, three and correct copies of the foregoing Petition for

Writ of Certiorari to the Temporary Emergency Court of Appeals

of the United States, with proper postage prepaid to:

Mr. Thomas C. Newkirk

Economic Regulatory Administration

Room 6H-025

Forrestal Building

1000 Independence Ave. S.W.

Washington, D.C. 20585

Attorney for Respondent

wh, Anthony P. Sutton

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1986

ROBERT B. SUTTON, SUTTON INVESTMENTS. INC...

SCURRY OIL COMPANY, BPM, LTD., AND

SOONER REFINING COMPANY, INC.

PETITIONERS,

VERSUS

UNITED STATES OF AMERICA,

RESPONDENT.

APPENDIX A

ANTHONY P. SUTTON

Oklahoma Bar Association #8781

Attorney at Law

4835 South Peoria, Suite 25

(918) 749-5815

Attorney for Petitioners, pro bono

SAM P. DANIEL III

Oklahoma Bar Association #2151

Short, Harris, Turner & Daniel

2761 E. Skeily Drive, Suite 700

Tulsa, Oklahoma 74105

(918) 743-6201

Attorney for Petitioners, pro bono

MILDRED E. OTEY

Oklahoma Bar Association #6810

2761 East Skelly Drive, Suite 700

Tulsa, Oklahoma 74105

(918)743-6201

Attorney for Petitioners, pro bono

——s 4

Cemporary Emergency Court of Appeals

nf the United States

Nos. 10-57 and 10-58

UNITED STATES OF AMERICA,

PLAINTIFF-APPELLEE AND CROSS-APPELLANT.

Vv.

RoBERT B. SUTTON, SUTTON INVESTMENTS, INC.,

ScurrY Or COMPANY, BPM, LTD., and

SOONER REFINING COMPANY, INC.,

DEFENDANTS-APPELLANTS, AND CROSS-APPELLEES.

On Appeal from the United States District Court

for the Northern District of Cklahoma

(No. 82-C-1069-B)

(Argued: October 21, 1985 Decided: June 11, 1986)

GEORGE W. BRAMBLETT, JR., CHARLES C. FREDERIKSEN,

Eliot D. Shavin, Sharon N. Freytag of Haynes & Boone,

Dallas, Texas, Attorneys for Appellant Corporate

Defendants;

Michael B. Lansden, Baton Rouge, Louisiana, Attorney

for Appellant Robert B. Sutton;

THOMAS C. NEWKIRK, Larry P. Ellsworth, Floyd I.

Robinson, Marcia K. Sowles, Beth N. Mizuno, Rodney u.

Solenberger, Patricia D. Graham, Erich T. Schwartz, of

the Economic Regulatory Administration, Department of

Energy, Washington, D.C., for Appellee, United States of

America;

Harold E. Kohn, Joseph C. Kohn, Kohn, Savett, Marion &

Graf, P.C., Philadelphia, Pennsylvania, Attorneys for

Amicus Curiae Philadelphia Electric Company;

A-1

Philip P. Kalodner, Philadelphia, Pa., Attorney for

Amicus Curiae National] Freight, Inc., RJG Cab Inc., ard

Geraldine H. Sweeney;

Alphonse M. Alfano, Robert 8. Bassman, Douglas B.

Mitchell, Bassman, Mitchell & Alfano, Washington, D.C.,

Attorneys for Amici Curiae, the Petroleum Marketers

Association of America and the Jobbers’ Group;

James F. Flug, Paula Dinerstein, Lobel, Novins & La-

mont, Washington, D.C., Attorneys for Amicus Curiae,

the States of Alabama, California, Connecticut, Idaho,

Illinois, Indiana, Maryland, Michigan, Mississippi, Mon-

tana, Ohio, Vermont, Wisconsin, Wyoming, and New

York;

Irwin I. Kimmelman, Attorney General of New Jersey,

Newark, New Jersey, and Jim Mattox, Attorney General

of Texas, Austin, Texas, Attorneys for Amici Curiae

“The Interested States.”

Before REYNALDO G. GARZA, WESLEY E. BROWN, and

Sam C. POINTER, JR., Judges.

WESLEY E. Brown, Judge.

These appeals arise from an action for restitution filed

in the Northern District of Oklahoma by the United

States against defendant appellants Robert B. Sutton,

Sutton Investments, Inc., BPM, Limited, Scurry Oil

Company and Sooner Refining Company, pursuant to the

provisions of Section 209 of the Economic Stabilization

Act (“ESA”), as amended, 12 U.S.C. Sec. 1904 note, as

incorporated in Section 5(a) (1) of the Emergency Pe-

troleum Allocation Act (“EPAA”), 15 U.S.C. Sec. 754

(a) (1).2. The government alleged that the defendants,

* Judge Pointer filed an opinion, attached hereto, concurring

in part and dissenting in part.

1The United States initially sought civil penalties under

Section 208(b) of the Act as weil as restitution, but dropped

thie claim prior te trial. ad

as resellers of crude oil, had, during the period of May,

1976 through January, 1981, miscertified their crude oil

sales in violation of the provisions of 10 C.F.R. Secs.

212.131, 210.62 (c), anc 205.202.

Following a seven week trial before a magistrate and

the district court, sitting without a jury, the trial court

found that defendants had committed the miscertifications

alleged and entered judgment against all defendants,

jointly and severally for $423,050,902.92 in restitution to

be paid to the United States for distribution to the states

for use in energy related programs.? Although Robert

Sutton acted in the names of the corporate defendants,

the trial court held him to be jointly and severally liable

with his corporations because the corporations were

merely Sutton’s alter egos. In addition, the court found

that Sutton himself had engaged in tortious conduct,

since he personally caused, or directed the illegal mis-

certifications.

Defendants appeal the trial court’s finding of liability,

and the amount of the award of restitution. In addition,

they contend that the court erred in refusing to suppress

all documents obtained by the government from a grand

jury, allegedly in violation of Rule 6(e), Fed. R. Crim.

Procedure. Defendants contend that the award to the

government was in the nature of a penalty and not res-

titution, and as such it was barred by the statute of

limitations and the doctrines of collateral estoppel and

double jeopardy. Defendants also claim that the penalty

nature of the claim entitled them to trial by jury, they

claim that the certification regulations in question were

invalid, and that the one-house legislative veto provisions

* The judgment of $423,050,902.92 included $210,786,532.92

in restitution and $212,814,869.00 in interest accumulated

through August 81, 1984, plus interest of $132,815.97 per day

for each day after August 31, 1984, through the date of Judg-

ment, September 14, 1984, plus interest at 11.98% on the

total judgment thereafter, pursuant to 28 U.S.C. Sec. 1961.

A-3

of the EPAA and EPCA preclude the government’s re-

liance on this legislation.

The United States has cross-appealed on two limited

issues. The government claims that the district court

erred in reducing the restitution award by excluding

overcharges proved through use of certain documents ob-

tained from a grand jury following Sutton’s criminal

trial in 1982, and by setting off Sutton’s losses on some

crude oil trades, against the total amount of overcharges.

By leave of court the Philadelphia Electric Company,

National Freight, Inc., RJG Cab, Inc., Geraldine H.

Sweeney, the Petroleum Marketers Association of Amer-

ica, the Jobbers’ Group, and various States of the United

States, have appeared as Amici Curiae. These parties

have filed briefs presenting differing views as to the

appropriate distribution of the restitution funds, without

taking any position as to defendants’ liability.

I. The Chadha Issue

Defendants have preserved their claim, previously

raised in a Motion for Summary Judgment, that the

EPCA and the EPAA contain unconstitutional legisla-

tive veto provisions, under the ruling in Immigration

and Naturalization Service v. Chadha, 462 U.S. 919, 77

L.Ed.2d 817 (1983). Although defendants are aware

of this court’s decision reported as Exxon Corp. v. United

States Dept. of Energy, 744 F.2d 98 (TECA 1984), cert.

denied, 105 S.Ct. 576, they present the issue in this

appeal “as there has been no definitive statement by the

United States Supreme Court on this issue.” The history

of the veto provisions which appear within the Economic

Stabilization Act of 1970, as well as Section 551, Section

552 of the Energy Policy and Conservation Act, 42

U.S.C. Sec. 6201, note, and our analysis of these pro-

visions in terms of Chadha, have been discussed in the

Ezxzon case and will not be repeated at this point. We

A-4

ee ae EET ee nC Nee

find that we have jurisdiction of this appeai, auu ._

the Chadha decision has no effect on any of the issues

presented to us in this litigation.

Il. Crinino: Proceedings

Because of the nature of defendants’ claim that the

trial court erred in refusing to suppress all documents

obtained by the government from the grand jury which

returned a criminal indictment against defendants, it is

necessary to review in some detail the criminal] prosecu-

tion and pretrial matters pertaining to the civil litiga-

tion which is the subject matter of this appeal.

In October, 1981, a grand jury in the Northern Dis-

trict of Oklahoma returned a 17-count indictment against

Robert B. Sutton, BPM, Ltd., and the Scurry Oil Com-

pany. The first 15 counts of this indictment were based

upon the allegation that defendants were engaged in a

fraud scheme whereby approximately 240 million barrels

of crude oil were falsely certified under federal Manda-

tory Price Regulations. Counts 1, 2, and 8 charged viola-

tions of the anti-racketeering statutes; Counts 4 through

15 charged violations of the mail and wire fraud stat-

utes; Count 16 alleged obstruction of justice in violation

of 18 U.S.C. Sec. 1505 for attempting to destroy sub-

poenaed records, and Count 17 charged conspiracy to ob-

struct justice in violation of 18 U.S.C. Sec. 371 for at-

tempting to prevent witnesses from testifying. At the

close of the prosecution’s evidence, the trial court found

that the government had failed to meet its burden of

proof on the first 15 counts, and a judgment of acquittal

was entered on all of these counts. Upon application by

the United States, a writ of mandamus staying entry

of the judgment of acquittal was first granted by a

three judge panel, United States v. Ellison, 684 F.2d

664, and then denied en banc, 722 F.2d 595 (10 Cir.

1982).

A-5

Following remand by the Circuit, trial on the remain-

ing Cours 16 and *7 continued. The jury found defend-

ant chert B. Srtton guilty on Count 17—conspiracy to

obstruct justice, but could not reach a verdict on Count

16. A mistrial] was declared on that count, and a few

weeks later Sutton was retried and convicted on Count

16. United States v. Sutton, 782 F.2d 1488 (10 Cir.

1984). Count 16 grew out of the destruction of BPM

corporate records, after they had been subpoenaed in

1978 by the Department of Energy which was conduct-

ing an audit of defendants’ business activities. The evi-

dence at the criminal trial established that after the

subpoena was served, Robert Sutton ordered all of his

company records to be collected and moved into storage

in Crowley, Louisiana. Shortly thereafter, all of these

records were destroyed—by vandals—according to Sut-

ton.* When Sutton learned one box of records had not

been moved into storage, he ordered Gaylord Simon, a

BPM employee to destroy it. Simon did not do so—he

gave the box to Jack Clothier, Sutton’s former business

associate, and Clothier’s attorney, William Lambert later

surrendered the box in response to a grand jury sub-

poena. United States v. Sutton, supra, 782 F.2d at 1487-

1488. This box, sometimes referred to as “The Box”,

and its contents of BPM invoices covering transactions

of 1976 to 1978, were admitted as Exhibit 53 in the

2In entering judgment for restitution in the instant case

the trial court found that defendants, “through Robert B.

Sutton attempted to destroy or cause to be destroyed certain

of their books and records;” that Sutton “stated to his em-

ployees that the company’s stored crude oil reseller records

had been destroyed by either fire, flood and/or vandalism ;”

and that there “was no independent evidence offered such as

photographs or insurance claims, etc. to corroborate the pur-

ported fire, flood, or vandalism.” The trial court further

found that the evidence “supports the conclusion that Robert

B. Sutton personally saw to it that most of the defendants’

crude oil reseller relevant records were destroyed or secreted.”

Findings of Fact (F/F) Nos. 29, 80, R. 26128).

A-6

criminal trial, and as =xhibit PX1A in this restitution

case. It has been previously cciimined that this box

was properly authenticated and admitted into evidence

at the criminal trial under the provisions of Rule 901 (a)

Fed. R. Evid. United States v. Sutton, supra, 732 F.2d

at 1490.

The evidence on Count 17—conspiracy to obstruct jus-

tice—included taped conversations between Robert Sut-

ton and one Carlos Marcello in which Sutton stated that

he wanted Marcello to prevent Lambert and Clothier

from talking to the F.B.I. To prove motive, the govern-

ment offered testimony that Sutton “had bought oil for

which there was a ceiling price and sold it as oil for

which there was no ceiling price.” United States v.

Sutton, supra, 782 F.2d at 1488.

III. The Grand Jury Documents. Rule 6(e) Fed. R. Crim.

Proc.

Prior to institution of any criminal proceedings

against Sutton and his companies, the Department of

Energy attempted to investigate its suspicion that the

defendant corporations, as crude oil resellers, had im-

properly certified crude oil which it had resold during

the late 1970’s. For this purpose, various administrative

subpoenas were issued in an attempt to obtain defend-

ants’ records. When the grand jury investigation began

in Oklahoma the administrative investigation was aban-

doned. Shortly after Robert Sutton was found guilty on

Count 17 of the indictment on May 27, 1982, Assistant

United States Attorney, James Swartz, one of the gov-

ernment’s counsel in the criminal] prosecution, addressed

a letter under date of June 8, 1982, to Chief Judge H.

Dale Cook of the United States District Court, Northern

District of Oklahoma:

This is to inform you that pursuant to the provi-

sions of Rule 6(e) of the Federal Rules of Criminal

A-7

Procedure, disclosure of materiuis subpoenaed by the

grand jury presently sitting in session in the North-

ern District of Oklahoma is being made to the fol-

lowing additional named persons:

(Then followed the names of one attorney and five

auditors for the Department of Energy)

On July 15, 1982, a second letter was sent to Judge

Cook advising that disclosure of materials subpoenaed

by the grand jury was being made to six additional em-

ployees of the Department of Energy.

On October 5, 1982, the government filed what it

terms an “Ex Parte Motion to Utilize in Civil Proceed-

ings Documents Obtained by the Grand Jury.” In dis-

cussing its particularized need for the grand jury ma-

terial, the government made these allegations in this mo-

tion (R. 23,419) :

Documents collected during the course of the Grand

Jury investigation are relevant to on-going investi-

gations being conducted by the DOE pursuant to its

civil enforcement authority. Copies of the docu-

ments have been provided to DOE agents as reflected

in letters filed with the court pursuant to Federal

Rule of Criminal Procedure 6(e). By this motion

the Government seeks a formal order from the Court

confirming the Department’s authority to utilize

these documents in civil enforcement proceedings. In

accordance with the general rule of Grand Jury

secrecy this motion is made ex parte and accom-

panied by the motion to seal, and the proposed form

or order granting the motion provides that it and

the moving papers shall remain under seal until

further order of the Court.

In effect, the ex parte motion sought confirmation of the

use of the documents in these present civi] enforcement

proceedings, actual access having been obtained four

months earlier. On October 5, 1982, Judge Cook granted

the government’s motion, and directed that the grand

jury documents otherwise remain under seal.

A-8

The United States then filed this civil action for

restitution on November 9, 1982, claiming that defene-

ants had violated the price regulations by miscertifying

or failing to certify over 177 million barrels of crude oil,

resulting in violations totalling more than $700 million.

The defendants immediately moved to suppress docu-

mentary evidence used by the government in preparing

the audit which was the basis of the action, claiming

that DOE civil enforcement personnel had improperly

gained access to the documents in violation of grand jury

secrecy requirements of Rule 6(e) Fed. R. Crim. Pro-

cedure. The general rule of secrecy is set out in Rule

6(e) (2) which provides that parties to the proceedings,

including attorneys for the government, shall not dis-

close matters except as provided by the rules, but that

no obligation of secrecy may be imposed on any persons

except in accordance with the rule. Any knowing viola-

tion of Rule 6 may be punished as a contempt of court.

The exceptions to secrecy requirements are set out in

Rule 6 (e) (8) :

(A) Disclosure otherwise prohibited by this rule

of matters occurring before the grand jury, other

than its deliberations and the vote of any grand

juror, may be made to—

(i) an attorney for the government for use

in the performance of such attorney’s duty; and

(ii) such government personnel ... as are

deemed necessary by an attorney for the gov-

ernment in the performance of such attorney’s

duty to enforce federal criminal law.

(B) Any person to whom matters are disclosed

under subparagraph (A) (ii) of this paragraph shall

not utilize that grand jury material for any purpose

other than assisting the attorney for the government

in the performance of such attorney’s duty to enforce

federal criminal law. An attorney for the govern-

ment shall promptly provide the district court, be-

A-9

fore which was impaneled the grand jury whose ma-

terial has been so disclosed, with the names of

vat persons to whom such disclosure has been

made,....

of matters occurring before the grand jury may also

be made—

(i) when so directed by a court preliminarily

to or in connection with a judicial proceeding;

a * * «

If the court orders disclosure of matters occurring

before the grand jury, the disclosure shall be made

in such manner, at such time, and under such condi-

tions as the court may direct.

In an order of January 7, 1983 (R. 23,416) over-

ruling defendants’ motion to suppress, the trial court

found that material which was made available during

the criminal trial was no longer subject to Rule 6(e)

secrecy provisions, and would therefore be admissible in

civil litigation. As to other material procured from

the grand jury, the court determined that the United

States Attorney had no authority in June and July,

1982, to turn over grand jury material to DOE civilian

enforcement personnel without obtaining a prior court

order. However, although a violation of grand jury

secrecy was found, the trial court believed that the gov-

ernment had acted in good faith and that the disclosure

was not so “egregious” as to require suppression of the

evidence. A decision on an appropriate sanction was then

reserved for future decision.

Following the decision of the Supreme Court in United

States v. Sells Engineering, Inc., 468 U.S. 418, 77 L.Ed.

2d 748, 108 S.Ct. 3133 (1983), defendants renewed their

motion to suppress the questioned grand jury material.

From supplementary evidence added to the record, the

trial court was able to find that 98% of the documents

used by the government in preparing its civil restitution

A-10

case had never been, or were no longer, protected by the

secrecy provisions of Rule 6(e). Order of October 31,

1983, R. 24.255. In this respect, the court noted that

apart from documents obtained by the government from

sources other than the grand jury, some invoices pre-

viously presented to the grand jury were received in evi-

dence as Exhibits 27 and 58 in the criminal trial of

Robert B. Sutton, and as such, were no longer impressed

with grand jury secrecy. Another large volume of docu-

ments obtained from the grand jury was used to recon-

struct BPM records which had been destroyed, and these

documents were used to prepare summaries of these

records. These summaries were introduced as plaintiff’s

exhibits 80 and 81 at the criminal trial of Robert Sutton,

pursuant to the provisions of Rule 1006, Fed. Rules of

Evidence.* These documents, although not admitted as

exhibits during the criminal trial, were present in the

courtroom for further examination in relation to ad-

mission of the summary exhibits, and they were produced

and made available to defendants prior to commencement

of the criminal] trial. Under these circumstances, the

trial court found that the reconstructed records of BPM

were no longer impressed with secrecy because they had

been produced at the criminal trial and had been used

in preparing the summary exhibits which reflected and

summed up the contents of all of these documents. The

court also determined that while the remaining 2% of

the documents used by the government in preparing its

civil action remained subject to Rule 6(e) secrecy re-

quirements, the evidence established that the government

* Federal Rule 1006 provides that:

“The contents of voluminous writings, recordings, or

photographs which cannot conveniently be examined in

court may be presented in the form of a chart, summary,

or calculation. The originals, or duplicates, shal] be made

available for examination or copying, or both, by other

parties at a reasonable time and place. The court may

order that they be produced in court.”

A-11

hud acted in good faith and in reliance on existing case

law which was suvseyuently overruled by the Sells de-

cision. The trial court again reserved judgment on the

question of sanctions against the government until a later

date. Order of October 31, 1983, supra, at R. 24,259.

On May 7, 1984, the first day of trial in this civil

litigation, the trial] court laid out the ground rules for

admission of documentary evidence, including the Rule

6(e) grand jury materials:

Concerning the documents that the Court has deter-

mined were obtained by the government in violation

of Rule 6-E—that is, the Federal Rule of Criminal

Procedure, Rule 6-E in reference to the grand jury

secrecy. These documents will be received in evi-

dence assuming they comply with one of the above

stated ground rules, and in the Court’s final order

and judgment herein, a determination will be made

whether or not the documents will be considered.

Any government calculations in this matter should

be in the alternative. That is, with any of such Rule

6-E documents being included, and also them being

excluded. (Vol. I Record, pp. 44, 45)

In entering Findings of Fact and Conclusions of Law,

the trial court ultimately made a decision on the status of

the materials obtained by the government in violation of

Rule 6(e)—and that was to exclude all such documents

as evidence when calculating the extent of defendants’

unjust enrichment through their miscertification scheme.

® The trial court found that the government and Mr. Swartz,

the Assistant U.S. Attorney, “were relying on existing case

authority” as well as on an order of Judge James O. Ellison

entered October 8, 1981 in a criminal case, which held that

the literal language of Rule 6(e) did not apply tc physical

evidence, such as documents and records, if they had been

created for purposes not related to the grand jury investiga-

tion itself. As noted by the trial court, the ruling in Sells was

to the contrary. R. 24,258.

A-12

Thus in Findings of Facts Nos. 41, and 42, the court

found that:

41. As a result of the de“sndants’ crude oil pur-

chase and sale policies and practices of miscertifica-

tion, profits were realized by the defendants of

$210,736,582.92. ... This sum of $210,736,532.92

allows the defendants credit for sales of uncontrolled

(stripper and foreign) crude oil as well as some

other crude oil which defendants sold for substan-

tially less per barrel price than it paid, which was

brought about principally by the tier price averag-

ing scheme discussed in paragraph 23 above... .

42. The plaintiff’s claim seeks restitution for un-

just enrichment. The defendants should be required

to disgorge the amount of profit they have been un-

justly enriched due to the crude oil sale certification

violations. This sum is the amount of the profits

realized by defendants from implementation of their

crude oil miscertification scheme which is the sum

of $210,736,732.92.... (R. 26,126, 26,127).

By footnote to these two findings, the court noted that:

The Court by its Order dated January 7, 1983

determined that some of the documents were ob-

tained by the Government in violation of F.R. Crim.

P. 6(e). This restitution amount of $210,786,582.92

excludes said documents from the calculation as an

appropriate sanction.” (R. 26,127) (Emphasis

supplied. )

In Conclusion of Law No. 12, R. 26,144, the court

ruled that:

During the entire period beginning in May 1976

and continuing through January 1981, defendants

falsely certified or failed to certify 177,605,924.48

barrels of crude oil in violation of 10 C.F.R. Secs.

212.131, 210.62(c) and 205.202. However, for pur-

poses of restitution the miscertified barrels total

167,840,268.01 and a_ restitution amount of

$210,736,532.92. ...

A-13

Again by footnote, the court exp!sined that “as an ap-

propriate sanction” the figure of $210,756,532.92 excluded

the Rule 6(e) material from calculation.

We find that admission of 98% of the documents in

question was correct and without error since the grand

jury secrecy rule does not apply to documents which are

already a part of the public record. The public has the

right of access to all criminal trials, as well as the right

to inspect and copy all records of judicial proceedings not

under seal. All of the questioned documents admitted by

the trial court were introduced in evidence as Exhibits 27

and 53 in the criminal trial or were physically present

in court to support the summary Exhibits 80 and 81

admitted under Rule 1006, Fed. R. Evidence. These

“back-up” materials were in fact the real evidence pre-

sented in the case. The summaries only avoided the un-

necessary introduction of multi-volumes of paper ma-

terial. These supporting documents did not need to be

separately admitted in evidence, as long as they were

made available to other litigants aud the court. Mid-

continent Broadcast Co. v. North Central Air, Inc., 471

F.2d 357, 359-360 (8 Cir. 1978). Here, it is admitted

that the documents supporting the summary exhibits had

been turned over to defendants during discovery in the

| criminal case, the documents were present in the court-

room throughout the criminal trial, and they were in

fact the subject of extensive cross-examination during

that criminal trial, following the admission of the sum-

mary exhibits 80, and 81. (Criminal Trial Transcript pp.

8034-3047, Vol. 47, Record, pp. 22,592-22,605). Under

these circumstances, we are satisfied that the documents

supporting the summary exhibits were no longer subject

to the grand jury secrecy requirements of Rule 6(e).

The government contends that the trial court erred in

excluding the remaining 2% of the documents in ques-

tion because these third party business records, all physical

items of evidence, were not within the scope of “matters

A-14

occurring before the grand jury,” subject to Rule 6(e)

protection. The argument is made that physical items

of evidence, such as these business records, do not reval

what occurred before a grand jury, because they w2re

created before the grand jury at issue even came into

existence. In this respect, the government relies upon the

reasoning expressed by the Third Circuit in In re Grand

Jury Investigation, 680 F.2d 996, 1000 (8 Cir. 1980):

The mere fact that a particular document is re-

viewed by a grand jury does not convert it into a

‘matter occurring before the grand jury’ within the

meaning of 6(e). Documents such as the business

records sought by the Commission here are created

for purposes independent of grand jury investiga-

tions, and such records have many legitimate uses

unrelated to the substance of the grand jury

proceedings.

A number of other circuit courts have determined that

documents are subject to the provisions of Rule 6(e).

See e.g., Fund for Constitutional Gov. v. National Ar-

chives, 656 F.2d 856, 868-870 (D.C. Cir. 1981). What-

ever may have been the state of law prior to the decision

of the Supreme Court in United States v. Sells Engineer-

ing, Inc., supra, the Court in Sells, speaking in terms of

“grand jury materials,” determined that documents which

had been produced before a grand jury could not be

disclosed to attorneys.and others within the Justice De-

partment’s Civil Division, without a prior court order

obtained after a showing of particularized need.

The government suggests that the ruling in Sells should

not be applied retroactively. The Ninth Circuit has held,

however, that the companion case to Sells, United States v.

Baggot, 463 U.S. 476, 77 L.Ed.2d 785 (1983), should

apply to a disclosure order filed three years before Baggott

was decided.* In Re Sells, 719 F.2d 985 (9 Cir. 1983).

As pointed out by the Ninth Circuit,

* In Baggot, the Supreme Court held that disclosure of grand

jury materials for use in an IRS audit of civil tax liability

A-15

The general rule is that an appellate court should

apply the law as it stands on the date of the appel-

late decision. See Thorpe v. Housing Authority, 898

U.S. 268, 281-88, 89 S.Ct. 518, 525-27, 21 L.Ed.2d

474 (1969); United States v. The Schooner Peggy,

5 U.S. (1 Cranch) 103, 110, 2 L.Ed. 49 (1801).

This is true even if the result is reversal of a decision

that was correct when made. Courts have made ex-

ceptions to this general rule to prevent manifest in-

justice, . . . but this is not such a case... . (719

F.2d at 990).

In determining that the government had violated the

provisions of Rule 6(e) as to 2% of the questioned docu-

ments, the trial court correctly interpreted and applied

existing law, as found in the ruling of the Supreme Court

in Sells. As to these documents, defendants have obtained

the relief which they sought for in its ultimate findings

of fact and law, the trial court excluded all of these docu-

ments in its determination of liability. The trial court

did not abuse its discretion in electing to impose this

exclusion as an appropriate sanction.

IV. Validity of the Regulatione

Defendants contend that the trial court erred in deny-

ing their supplementary motion for summary judgment

since the regulations upon which the government relied

were invalid and of no effect because they had been

adopted or amended without proper notice or opportunity

for oral comment.

The history and application of the Economic Stabiliza-

tion Act of 1970 (ESA), 12 U.S.C. Sec. 1904 note, and the

Emergency Petroleum Allocation Act of 1973 (EPAA),

15 U.S.C. Secs. 751 et seq. have been many times reviewed

by the Court and that history will not be again reviewed

is not available because an investigation to determine tax

liability is not preliminary to, or in connection with, a ju-

dicial proceedings within the meaning of Rule 6(e).

A-16

in detail. The Cost of Living Council originally set up

a two-tier pricing system for price controlled, “old”, oil,

and free market priced, “new”, oil 6 C.F.R. Sec. 150.354.

On February 1, 1976, the regulations were amended to

create a three-tier crude oi] pricing system that was in

effect for the pricing periods here in question. 10 C.F.R.

Secs. 212.72-212.76. Under these provisions, there were

two levels of price controlled oil (lower tier, or old oil,

and upper tier or new oil), as well as free market priced

oil. Production up to a level set during a base period

was sold as old oil, the excess could be sold at a higher

controlled price as “new” oil, while the third tier con-

sisted of foreign crude oil and, after September 1, 1976,

stripper oil, both of which could be sold at free market

prices.

In order to equalize the benefits of price controlled oil,

the Federal Energy Office set up the “Old Oi) Allocation

Program” in 1974. This program, referred to as the

“Entitlements Program”, reallocated cost benefits received

by those refiners who had access to large quantities of

price controlled oi] to those refiners who were obliged to

rely on sources providing high cost, uncontrolled oil.

Under this program each refiner was issued monthly

“entitlements” to its proportionate share of the national

supply of price controlled oil. If its entitlements were

fewer than the number of barrels of lower tier oil actually

refined for the month, the refiner was required to pur-

chase additional entitlements from refiners who did not

have access to lower priced oil. The price of each entitle-

ment was set by the Department of Energy each month

and was generally equal to the difference in price between

the average cost of lower tier oil and the average cost

of oi] not subject to price controls.

From the beginning, producers of crude oi] were re-

quired to certify in writing to their purchasers the tier

of each volume of crude oil sold. 6 CFR Sec. 150.854 (c)

(4) (1973). When the entitlements program was estab-

A-17

lished the certification regulations were extended to all

crude oil resellers in order to identify and trace particular

transactions in crude oil to the refinery. 10 C.F.R. Sec.

212.181. A reseller was defined as a firm which carried

on the trade or business of purchasing crude oi] and

reselling it, “without substantially changing (its) form,

to purchasers other than ultimate consumers.” 10 C.F.R.

Sec. 212.181.

From November, 1974 until September, 1976, a reseller

was required to certify in writing all lower tier oil and

the lawfulness of the prices charged. 10 C.F.R. Sec.

212.181(a) (2) (December 4, 1974). After the three-tier

system was adopted, a reseller was required to certify

each different tier in each resale. Thus, 10 C.F.R. Sec.

212.131 (b) (1) provided that:

(E)ach seller of domestic crude oi] . . . shall, with

respect to each sale of domestic crude oil . . . certify

in writing to the purchaser the respective volumes of

and ... per barrel prices for the old crude oil, new

crude oil, stripper well crude oil, and other domestic

crude oils .... The certification shall also contain

a statement that the price charged for domestic

crude oil is no greater than the maximum price

permitted... by law.

Section 212.181(c) of 10 C.F.R. made it unlawful for a

reseller to sell crude oii unless it provided the required

certifications. These certifications were to be in writing

either upon the invoice or by separate instrument. Sec.

212.181 (d).

Crude oi] resellers were prohibited from engaging in

any practice that circumvented or contravened or resulted

in the circumvention of the agency’s regulations. 10

C.F.R. Sec. 205.202, formerly Sec. 205.201. A reseller

was also prohibited from employing any practice that

constituted a means to obtain a price higher than that

permitted by the regulations. 10 C.F.R. Sec. 210.62(c).

All firms were required to maintain appropriate records

A-18

and to provide access to such records when requested by

the agency. 0 C.F.R. Sec. 210.92(a) and (b). Be-

ginning in January, 1978, crude oil resellers were required

to file monthly reports on Form ERA-69 for the purpose

of determining compliance. 10 C.F.R. 212.187(b). Fol-

lowing decontrol, the record keeping requirements were

continued in effect for all transactions prior to the date

of decontrol, April 1, 1981. 10 C.F.R. Sec. 210.1 (April

8, 1981).

Under this regulatory scheme, if price controlled crude

oil was miscertified as uncontrolled oil, then “old oil”

receipts by refiners would be artificially reduced, thus

decreasing the ratio oi “old oil” to all refined oil and

distorting the entitlements program. This would result

in fewer “old oil” entitlements being issued, thus increas-

ing the cost of crude oil for all refiners because less low

priced oil would be available to lower the average. These

higher costs would then be passed on by the refiners to

others in the distribution chain, and finally on to the

ultimate consumers."

In this appeal, defendants contend that there was never

a valid DOE regulation which required any form of certi-

fication by crude oil resellers because the DOE did not

- comply with the rule-making requirements of the Ad-

ministrative Procedure Act (APA), 5 U.S.C. Secs. 551-

559, the Federal Energy Administration Act (FEAA),

15 U.S.C. Sec. 766, and/or the Department of Energy

Administration Act (DOEOA), 42 U.S.C. Sec. 7191.

These arguments were presented to, fully considered, and

then overruled by, the district court in a lengthy Order

7 In Union Oil Co. of Cal. v. U.S. Dept. of Energy, 688 F.2d

797, 802 (TECA 1982), cert. den., 459 U.S. 1202, 103 S.Ct.

1186, 75 L.Ed.2d 483 (1983) we discussed the effect upon

the Entitlements Program of miscertifications of crude oil

production. See also our discussion in United States v. Exxon

Corp., 778 F.2d 1240, at p. 1284-1286 (TECA 1985), cert.

den., —— U.S. —— (January, 1986), rehearing denied,

— U.S. —— (April 7, 1986).

A-19

filea on April 4, 1384. |Vol. I, Defendants’ Record, Item

9. In order to avoid undue expansion of this opinion, we

adopt the findings of the District Court in reaching our

conclusion that the trial court properly found that the

regulations are procedurally and substantively valid. Spe-

cifically, we conclude that the trial court properly found:

1. That the first amendment to Sec. 212.181 which

required all resellers to certify appropriate classifications

contained a request for comment, comment was in fact

received, and there was substantial compliance with the

notice required of the APA, 5 U.S.C. Sec. 553. People

of the State of California State Lands Comm'n v. Simon,

504 F.2d 430, 489 (TECA 1974), cert. den. 419 U.S.

1021 (1974).

2. Section 212.131 was in fact repromulgated on De-

cember 4, 1974 in a procedurally valid manner, and it

was therefore unnecessary for the court to pass on the

validity of the August 29, 1974 amendment. Atlantic

Richfield Co. v. U. S. Dept. of Energy, 655 F.2d 1118,

1127 (TECA 1981).

8. When the FEA amended the reseller certification

requirements of Sec. 212.131(b) (1) effective September

1, 1976, to require separate identification of old, new,

and stripper cil, it determined that the certification pro-

visions would be modified without an opportunity for prior

written comment or oral testimony.*

* The FEA explained that:

“The amendments are effective September 1, 1976, be-

cause any delay in their effectiveness as compared with

the statutory effective date of the exemption of stripper

well crude oil could result in inconsistencies between the

pricing of stripper well crude oil (and other exempt

crude oils) and their treatment under the entitlements

program. Such a delay could also be detrimental to some

refiners, in that the cost equalizing calculations of the

entitlements program would not take into account for

those refiners the higher exempt prices for these crude

oils.” (41 Fed. Reg. 87809).

A-20

The action of the FEA complied with the provisions of

15 U.S.C. Sec. 766(i) (1) (B) which a‘.owed the FEA to

proceed without notice and opportumty to comment “where

strict compliance is found to cause serious harm or in-

jury to the public health, safety, or welfare, and such

finding is set out in detail in such rule, regulation, or

order.” The September 1976 amendment to Sec. 212.131

was procedurally valid.

4. New Subpart L regulations effective January 2,

1978 set out new pricing standards. On December 23,

1977, Sec. 212.181 was amended to state that certifica-

tions must contain a statement that prices charged were

determined in accordance with the requirements of Sub-

part L. This amendment was not mentioned in the

notice of proposed rule-making issued in August, 1977

in connection with new Subpart L rules, and thus the

requirements of the APA and the FEAA were not com-

plied with. Since all sellers were required to follow Sub-

part L anyway, beginning January 1, 1978, the December,

1977 amendment was only a technical amendment to the

certification requirements, there was no substantive change

in the duties of the resellers, and thus the failure of the

agency to give notice and opportunity for comment as

to this amendment did not invalidate the regulation.

Nat. Helium Corp. v. Federal Energy Administration,

569 F.2d 1187, 1146 (TECA 1978).

5. The provisions of 10 C.F.R. Sec. 210.62(c), which

prohibit any firm from employing any practice designed

to obtain unlawful prices was formerly codified as 6

C.F.R. Sec. 150.20, as adopted by the Cost of Living

Council. When the Federal Energy Office was created, it

repromulgated the old CLC regulations with notice and

opportunity for comment. Inadvertently, the recodifica-

tion did not include Sec. 150.20, but correction was made

in February, 1974, with the explanation that Sec. 150.20

had been omitted and that the reinclusion of Sec. 150.20,

as Sec. 210.62(c), was a technical correction. Under 5

A-21

U.S.C. Sec. 553(b) (8) (B), the FEO found there was

good cause to promulgate the regulatiois immediately

without inviting comment. The fact thai there was no

notice and opportunity for comment does not invalidate

Sec. 210.62(c). We recently addressed the merits of vio-

lations of Sec. 210.62(c) in Eastern Air Lines v. Mobil

Ou Corp., 677 F.2d 879, 881 (TECA 1982), and USA

Petroleum Corp. v. Anaconda Co., 653 F.2d 502, 510-511

(TECA 1981).

6. Section 205.202 of 10 C.F.R. provides that:

Any practice that circumvents or contravenes or

results in a circumvention or contravention of the

requirements of any provision of this chapter or any

order issued pursuant thereto is a violation of the

DOE regulations stated in this chapter.

This section, previously numbered Sec. 200.8, and Sec.

210.81, was previously included in proposed rulemakings

in December, 1973, and in July, 1974 at which time

notice and opportunity to be heard were properly given.

Accordingly, Sec. 205.202 is procedurally valid.

7. Defendants contend that Sec. 212.131 is substan-

tially invalid because it is unconstitutionally vague, and

because the DOE did not consider the relevant factors

as required by the EPAA before promulgating that sec-

tion, and no rational basis for it exists.

Section 212.131 provides in pertinent part that:

(b) (1) Reseller certification. Each seller of do-

mestic crude oil . . . shall, with respect to each sale

of domestic crude oil . . . certify in writing to the

purchaser (i) that the price charged for the domestic

crude oil is not greater than the maximum price

permitted pursuant to this part and (ii) the re-

spective volumes of and respective per barrel prices

for the—

(A) Lower-tier (‘old’) crude oil ...

(B) Upper-tier (‘new’) crude oil...

A-22

tes Los vei nanaall

Alaska pipeline...

(D) Stripper well crude oil ;

(E) Incremental tertiary crude oil ;

(F) Tertiary incentive crude oil;

(G) Newly discovered crude oil;

(H) Market Level new crude oil;

(I) Heavy crude oil; and

(J) Other domestic crude oils the first sale of

which is exempt from the provisions of this

part—included in the volume of domestic

crude oil so sold.

As noted by the trial court, it is clear that this regula-

tion requires a reseller of crude oil to maintain certifica-

tions for particular volumes of crude oi] transactions.

This language adequately describes the conduct required

of sellers of crude oil. While a regulation could have

been drafted more precisely, the doctrine prohibiting

vagueness even in criminal law, requires “no more than

a reasonable degree of certainty.” Boyce Motor Lines

v. United States, 342 U.S. 837, 340, 96 L.Ed. 367, 871

(1952). In Village of Hoffman Estates v. Flipside, Hoff-

man Estates, 455 U.S. 489, 498, 71 L.Ed. 2d 862, 871-

872, the Supreme Court pointed out that the degree of

vagueness that the Constitution will tolerate depends in

part upon “the nature of the enactment”:

Thus, economic regulation is subject to a less strict

vagueness test because its subject matter is often

more narrow, and because businesses, which face

economic demands to plan behavior carefully, can be

wo consult relevant legislation in advance of

action. Indeed, the regulated enterprise may have the

ability to clarify the meaning of the regulation by

its own inquiry, or by resort to an administrative

process.

8. Defendants also claim that Sec. 212.181 is sub-

stantively invalid because the DOE failed to consider

A-23

th:. objectives set forth in 15 U.S.C. Ses. 753(b) (1)

which. provides that regulations issued under the EPAA

shall, to the extent practicable, provide for the public

health, safety and welfare; maintain all public services,

and agricultural, operations; preserve an economically

sound and competitive petroleum industry; allocate crude

oil so as to permit refineries to operate at full capacity;

provide for equitable distribution of crude oil and prod-

ucts at equitable prices; maintain the exploration for,

and production of, fuels and other minerals; promote eco-

nomic efficiency; and minimize economic distortion and

unnecessary interference with market mechanisms.

In setting up the Entitlements Program, the FEA fully

considered all of those objectives. In Cities Service Co.

v. FEA, 529 F.2d 1016, 1025, (TECA 1975), cert. den.,

426 U.S. 947 (1976), we determined that the entitle-

ment regulation was “a rational response to the chang-

ing conditions under which the objectives of the (EPAA)

section 4(b) must be read,” and that the regulation was

not arbitrary, capricious or an abuse of discretion. The

certification regulations were implemented to assure that

the Entitlements Program would operate in such a man-

ner that each refiner could determine the composition

of the crude oi] which passed through its refinery. Under

such circumstance, it is clear that the DOE gave full

consideration to the objectives described above, and that

such regulations are substantively valid.

V. Evidentiary Rulings

In proving its case, the government prepared an analy-

sis of defendants’ crude oil transactions over the years,

and this analysis, referred to as “tne audit”, was re-

ceived in evidence as Plaintiff’s Exhibit 1. As described

by defendants, this audit included (a) 50 volumes en-

titled “BPM, Ltd., Analysis of Matched Purchases and

Sales”; (b) 50 volumes entitled “BPM, Ltd., Source Doc-

uments”, which included purchase invoices, sales invoices,

A-24

purchase contracts, and sales contracts; (c) 50 volumes

entitled “BPM, Ltd., Analysis of Transactions by Pipe-

line Locations and Supporting Documentaticn”; (d) 2

volumes entitied “BPM, Ltd., Summary Schedules and

Source Documents Relating to Matched and Unmatched

Barge Transactions”; and (e) 1 volume entitled “BMP,

Ltd., Documentation to Support Transactions with

Trucked Crude Oil”.

The “source documents” mentioned above were gen-

erally documents obtained from third parties who trans-

acted business with defendants, and they were offered in

evidence, supported by third party interrogatories sent

by the government to some 64 separate companies. De-

fendants objected to all such evidence as hearsay, claim-

ing that the “personal knowledge” requirements of Rules

602 and 806(b) of the Federal Rules of Evidence had

not been satisfied.°

Rule 803(6), Fed. R. Evid., the Business Records Rule,

provides an exception to the general rule prohibiting

hearsay evidence, in the case of:

A memorandum, report, record, or data compilation,

in any form, of acts, events, conditions, opinions, or

diagnoses, made at or near the time by, or from

information transmitted by, a person with knowledge,

if kept in the course of a regularly conducted busi-

ness activity, and if it was the regular practice of

that business activity to make the memorandum, re-

port, record, or data compilation, all as shown by

the testimony of the custodian or other qualified wit-

ness, unless the source of information or the method

or circumstances of preparation indicate lack of

trustworthiness.

Rule 803(24), sometimes referred to as the “residual

hearsay exception”, further provides for the admission

of :

® Rule 602 provides that a witness may not testify to a

matter without persona! knowledge of that matter.

A-25

A statement not specifically covered by any of the

foregoing exceptions but having equivalent circum-

stantial guarantees of trustworthiness, if the court

determines that (A) the statement is offered as

evidence of a material fact; (B) the statement is

more probative on the point for which it is offered

than any other evidence which the proponent can

procure through reasonable efforts; and (C) the gen-

eral purposes of these rules and the interests of

justice will best be served by admission of the state-

ment in evidence. ...

Prior to trial, the parties spent several days before

the Magistrate in an unsuccessful attempt to reach un-

derstanding on the admissibility of documentary evi-

dence. After receiving the Magistrate’s report, the trial

court then conducted a five day hearing upon defendants’

hearsay objections to almost all of the government docu-

mentary evidence. (Vols. I through V, Record, pp. 1

through 1117). Before doing so, the court set out the

ground rules which would govern all rulings on this type

of evidence:

Let me make some basic comments here before we

get underway in this matter, with specific further

de novo document exhibit discussion. Of course, the

underlying consideration in reference to this myriad

of documents is: Do they, or does the document have

the necessary indicia of reliability and trustworthi-

ness. After reviewing this matter with the magis-

trate, the following are general views of mine. And

i say reviewing this matter with the magistrate, I

also have reviewed what briefs were filed on the

subject of these exhibits up through noon of last

Friday.

First, if the documents were produced by the de-

fendants or entities owned by the defendants pur-

suant to a subpoena or voluntarily and they appear

to have relevance to the issue of alleged miscertifica-

tion here, they probably will be received in evidence.

Authority for this conclusion is Rule 901-A, 901-B

A-26

(4), 808(6), 808(24) and a couple of applicable cases

on the subject are Fisher versus U.S. 425 U.S. 391

ri a U.S. v. Fox, 721 Federal 2nd 82, pages 88

Secondly, documents authenticated by a third party

records custodian wherein the defendants have been

given the right of cross-examination concerning these

documents, and if appearing relevant to the issues

of crude oil tier certification, will be received in evi-

dence. The same cited Federal Rules of Evidence sec-

tions the Court thinks are applicable here. Cases on

that subject the Court thinks are relevant are Rosen-

berg v. Collins, 624, Federal 2nd, 659 to 665, U.S. v.

Evans, 572 Federal 2d, 455, at 490 and U.S. v.

Veytia-Bravo, 603 Federa] 2nd, 1187, 1191 to 1192.

Next, documents produced by a third party, ...

by subpoena or otherwise—regarding which the de-

fendants have had no right to cross-examination, will

probably not be received in evidence unless during the

trial, an appropriate witness should provide the neces-

sary predicate for the document to be admitted and

thereby affording the defendants the right of cross-

examination.

The next category is the box. That is, Plaintiff’s

Exhibit 53 in the criminal trial of U.S. v. Sutton,

case 81-CR-97, in this court, which is documents 1

through 4106 in this case, will be received in evi-

dence based upon the ruling of the 10th Circuit ....

In reference to those documents, the better approach

would be to have the criminal trial witness, if avail-

able to supply the underlying testimony for admis-

sion of the ‘box’. However, if the witness is not

available or is outside the 100 mile subpoena distance,

the relevant parts’ of the criminal trial transcript

should be offered as a part of the record in this case.

Concerning the issue of trustworthiness, a con-

sideration in this case is that 10 C.F.R. Section

210.92 requires the crude oil reseller to maintain

A-27

appropriate records foi review on a proper request.

- + . The vast majurity of tie records required to

be maintained by the defendants, it appears at least

at this juncture in this case, have not been produced

by the defendants. Added to this, is the fact that the

individual defendant in this case, Mr. Robert Sutton,

was convicted of conspiracy to obstruct justice in

attempting to destroy records. The ideal situation is

that of the reseller who has maintained all of its

books and records. ... We don’t have that here.

Therefore, the Court will look to the assurances of

trustworthiness in the context of what I discussed

above. The Court thinks this is within the spirit

and the intend(sic) of Federal Rules of Evidence

expressed in Rule 901-B(4) and 803(24). (R. pp.

41-44). :

The cases relied upon by the trial court establish that

any person with authority to do so may attest to the au-

thenticity of business records, even though he was not

the preparer of the record, and even though he can not

personally attest to the accuracy of the information con-

tained in the business record. Rosenberg v. Collins, 624

F.2d 659, 665 (5 Cir. 1980). The custodian need not

even have been employed by the business when the rec-

ords were created or received. United States v. Evans,

572 F.2d 455, 490 (5 Cir. 1978). In United States v.

Veytia-Bravo, 603 F.2d 1187 (5 Cir. 1979), cert. den.,

444 U.S. 1024 (1980), a case involving business records

kept in compliance with federal regulations, the court

stated:

Where circumstances indicate that the records are

trustworthy, the party seeking to introduce them

does not have t present the testimony of the party

who kept the record or supervised its preparation.

Testimony by the custodian of the record or other

qualified witness that the record is authentic and

was made and kept in the regular course of business

will suffice to support its admission. (603 F.2d at

1191-92)

A-28

As noted, in addition to the business records exception

to the hearsay rule, the trial court also relied upon the

provisions of Rule 803(24), which permit, as justice

may require, the admission of probative hearsay evi-

dence, when more direct evidence can not be procured

through reasonable effort. In this case, it is clear that

defendants failed to maintain the records required by

law. When a party fails to keep, or refuses to produce

documents, or in fact destroys evidence, an adverse in-

ference may certainly be drawn, and where vital docu-

mente are missing, Rule 803(24) is the obvious vehicle

to be employed in serving justice. See Karme v. C.I.R.,

673 F.2d 1062, 1065 (9 Cir. 1982).

Defendants also claim that the testimony of James L.

Louthan, the government’s principal audit witness, should

have been excluded as opinion testimony by a lay wit-

ness, and as inadmissible hearsay. Louthan supervised

the audit and summarized the work of approximately 20

auditors who worked on the project. His testimony was

properly admitted under Rule 602, Fed. R. Evidence, as

testimony based upon personal knowledge. Rule 701 Fed.

R. Evid. allows a lay witness to give cpinions or to draw

inferences “which are (a) rationally based on the per-

ception of the witness and (b) helpful to a clear under-

standing of his testimony or the determination of a fact

in issue.” In addition, the record demonstrates that de-

fendants had ample opportunity to depose this witness

concerning the audit for several days prior to trial. Mr.

Louthan’s testimony was properly admitted.*°

10 In its Findings of Fact and Conclusions of Law, the trial

court described the nature of Louthan’s testimony in this

manner:

James Louthan was the DOE auditor in charge of the

audit. As the supervising auditor he had a hybrid expert-

nonexpert status. In interpreting and explaining the

audit methodology employed, as well as his ‘understand-

ing’ of the applicable DOE regulations, Louthan could be

A-29

Defendants next contend that all evidence concerning

what they term “reseller chains” should have been ex-

cluded because the government failed to provide pretria!

discovery in this area, and because the “reseller chain”

documents and testimony were irrelevant in this action.

Prior to trial, the trial court directed the government te

provide some reseller chain evidence in order to establish

the effect of Sutton’s miscertifications on the entitlements

program. While such evidence of transfer chains would

not be relevant to the question of whether Sutton mis-

certified crude oil, it was offered, at the direction of the

trial court, as relevant rebuttal evidence to defendants

claim of lack of harm to the entitlements program, the

industry and the consumer. The defendants deposed

Louthan on the chain documents prior to trial, and an-

other opportunity to depose this witness in the middle of

the trial was waived. There was no error in the ad-

mission of evidence concerning reseller chains in which

defendants were involved.

Evidentiary rulings by our trial judges will not be

overturned on appeal absent a clear abuse of discretion.

Here, the district court’s evidentiary rulings are fully

supported by the record and the law.

VI. Liability

At trial, the government established the audit of de-

fendants’ certifications for the period of May, 1976

through January, 1981 upon the basis of third party

business records, and records which defendants produced

for the grand jury. Crude oi] transactions were recon-

considered an expert. Concerning the DOE Policy and

rationale behind the policy and/or regulations, Louthan

could not be considered an expert as he was not involved

in the formulation of the policy or regulations nor did

he have such authority. In the areas Louthan could be

considered an expert, the defendants were granted ex-

tensive discovery. (Findings, page 10, f.n. 1)

A-30

structed by matching corresponding purchases and sales

of crude oil by type and quality, pipeline delivery points

ind volumes. James Louthan, who directed the audit,

wstified for eight days, explaining the audit methods and

its results. Defendants failed to file DOE Form ERA-69,

the “Crude Oil Reseller’s Self-Reporting Form” for each

month which included sales during the period of January,

1978 through January, 1981. The trial court found that

the audit methodology was reasonable and appropriate:

Most of defendants’ purchases and sales had to be

reconstructed from third party records, because de-

fendants have no adequate records of their crude oil

reselling activity beyond those reflecting transactions

occurring during the period of May 1980 through

January 1981 .... The certification audit meth-

odology of matching crude oil purchases and sales of

the defendants, although often involving auditor judg-

ment, was reasonable and appropriate in view of the

defendants’ failure to maintain and keep accurate

records. The audit matching process was essentially

supported by the reconstructed records. Although the

defendants took issue with the audit methodology,

they offered no alternative certification audit to rebut

the government’s audit. (Finding of Fact No. 27)

This audit established that defendants generally pur-

chased more lower tier and upper tier crude oi] by pay-

ing prices above the prevailing market price, and then,

upon resale, defendants miscertified the crude oil as either

upper tier, stripper, or foreign crude oil, and generally

resold the miscertified crude oil at prices below the pre-

vailing market price for the new tier to which it had

been miscertified :

The defendants would usually purchase from a re-

seller lower tier, upper tier and stripper crude oil

and the defendants would then average the purchase

price and resell all of the oil certified (miscertified )

as stripper, adding a profit of approximately one

dollar ($1.00) to one dollar and a half ($1.50) per

barrel. The profit realized may have been within the

A-31

pricing guidelines, but the bulk of the oi! resold was

miscertified by tier.

By July 1977 and continuing thereafter, Sutton

began to buy from, miscertify and sell directly back,

usually on the same day, to the same resellers on a

regular and continuous basis. . . . This could aptly

be described as tier laundering, i.e., from controlled

with its lower market price to uncontrolled with its

higher market price and economic potential. . . .

(Findings of Fact Nos. 23, 24)

The evidence of miscertification was overwhelming.

From May 1976 through January 1981, defendants pur-

chased 133 million barrels of lower tier oil, 175 million

barrels of upper tier oil, and 33 million barrels of stripper

oil. (F/F 83) During that same period, defendants sold

only 8 million barrels of lower tier oil, 81 million barrels

of upper tier oil, and over 283 million barrels of stripper

oil. These figures establish that defendants bought 269

million more barrels of price-controlled oi] than they sold,

and sold 250 million more barrels of uncontrolled stripper

oil than they bought. On the basis of this evidence, the

trial court found that for the relevant period, defendants

falsely certified, or failed to certify, 177,605,924.48 bar-

rels of crude oi] in violation of 10 C.F.R. Secs. 212.131,

210.62(c), and 205.202. For purposes of restitution, the

miscertified barrels were set at 167,340,263.01, with a

restitution amount of $210,736,532.92.% (Conclusion of

Law 12) In addition to the documentary evidence pro-

vided by the audit, the testimony of various employees of

defendants established the true nature of defendants’

crude oi] reselling transactions.”

11 This reduction resulted from excluding 2% of the grand

jury documents offered in evidence.

“E.g., Robert B. Sutton told his employees, “‘We don’t

buy stripper, we sell stripper.” (F/F 19). Robert B. Sutton

made an agreement with the president of AWECO to fabri-

cate tier certifications on 12 rales invoices in exchange for a

$1,000,000 payment to a Sutton owned company. (F/F 25).

A-32

The trial court’s firding that defendants falsely certi-

fied or failed to vertity crude oil as stated is supported

by substantial evidence and is not clearly erroneous.

Defendant Robert Sutton contends that the trial court

erred in holding him personally liable for the full amount

of defendants’ miscertifications.

He first alleges that Section 5(a) (4) of the EPAA,

15 U.S.C. Sec. 754(a) (4) provides the exclusive remedy

for knowing and willful violations of the Act by corporate

officers, thereby precluding imposition of liability upon

the basis of alter ego, or tortious conduct. That section

provides that:

Any individual director, officer, or agent of a corpora-

tion who knowingly and willfully authorizes, orders

or performs any of the acts or practices constituting

in whole or in part a violation of paragraph (3),

shall be subject to penalties under this subsection

without regard to any penalties to which that cor-

poration may be subject under paragraph (3) except

that no such individual director, officer or agent shall

be subject to imprisonment under paragraph (3),

unless he also has knowledge, or reasonably should

have known, of notice of noncompliance received by

the corporation from the President. (Emphasis sup-

plied)

Section 5(a) (8) of the Act, 15 U.S.C. Sec. 754 (a) (3),

referred to above, provides for imposition of civil penal-

ties, as well as criminal penalties for violation of the Act.

Section 5(a) (4) neither precludes an action for restitu-

tion under the provisions of Section 209 of the ESA, nor

does it abrogate notions of common law alter ego lia-

bility, or liability in restitution for one’s own tortious

conduct. The legislative history of Section 5(a) (4) ex-

plicitly provides that “nothing in the section is intended

to change existing case law relating to the individual

responsibility of corporate directors, officers or agents for

violation of those corporations.” See S.Conf. Rep. No.

A-33

94-516, 94th Cong., Ist Sess., reprinted in 1975 U.S. Code

Cong. & Ad. News, i9£3, at 2042. See also, Johnson Oil

Co., Inc. vs. U. S.-Dept. of Energy, 690 F.2d 191, 202

(TECA 1982). The fact that a statute does not explicitly

provide for piercing the corporate vei] does not preclude

application of that doctrine. United States v. Pisani,

646 F.2d 88, 87-89 (8d Cir. 1981).

Again, the evidence concerning Robert Sutton’s control

over his various corporate entities is overwhelming, and

without dispute. There was evidence of noncompliance

with corporate formalities, nonpayment of dividends,

failure of directors to play any meaningful role in

managing the corporation, absence of any arm’s length

relationship between Sutton and his corporations, diver-

sion of corporate funds for personal purposes, payment

of personal expenses with corporate funds, use of cor-

porate assets for personal purposes, payment of excessive

compensation to Sutton and members of his family, the

making of non-interest bearing loans to Sutton and his

allied companies, and inadequate capitalization of, and

intermingling of funds among, Sutton’s various corpora-

tions, all at his direction.”

The trial court found that virtually all of the profits

generated by the corporate defendants were obtained

through Sutton’s illegal crude oil trading operations.

Financial staterrents indicated that the total assets and

net worth of defendants Sutton Investments and its sub-

sidiaries, including BPM and Redfish Bay, successor to

defendant Scurry Oil Company, were approximately $46.2

million and $14.4 million, respectively. At the time of

trial, BPM and Sooner Refining Company had filed for

bankruptcy, and in April, 1984, soon after the trial court

appointed a receiver because of failure to comply with

the court’s financial reporting order, Robert B. Sutton

%* By April, 1980, twelve affiliates owed BPM over $44

million, with $33 million due from 6 firms owned directly by

Sutton. (F/F 80).

A-34

and Sutton Investments filed for bankruptcy. In its

findings of fact, the trial court found thst:

The corporate defendants’ creditors, including the

United States, have been materially harmed by Sut-

ton’s appropriation of corporate funds to himself, his

family, and his numerous personally-owned business

ventures. As a result, the funds available to the

corporate defendants with which to pay the judg-

= in this case are significantly inadequate. (F/F

102).

As of October 81, 1988, Sutton’s stated total personal

assets were $39.9 million. His stated personal net worth

was $23.8 million. This stated total personal net worth

in late 1983 was $23.6 million dollars more than his net

worth in 1976 when Sutton initiated his miscertification

scheme.**

Without reference to state law, this Court has held

that the corporate veil may be pierced to hold a con-

trolling shareholder liable for corporation violations of

DOE regulations. United States v. Ariz. Fuels Corp.,

688 F.2d 239, 244 (TECA 1980), cert. denied, 451, U.S.

985 (1981). The Tenth Circuit, applying the Oklahoma

law, has recognized the general rule, concluding that

“Oklahoma permits the court to disregard the corporate

entity if used, (1) to defeat public convenience, (2)

justify wrong, (8) to perpetrate fraud whether actual

or implied, or (4) to defend crime.” Robertson v. Roy L.

Morgan Production Company, 411 F.2d 1041, 1043 (10th

Circuit 1969) .¥

4 The government estimated that Sutton withdrew at least

$67 million for his personal use during the audit period—

$11,511,828 directly, at least $56,247,602 indirectly through

his personal business ventures, and approximately $1,261,000

paid to family members.

18 Sutton contends that the district court should have ap-

plied Oklahoma law on the piercing issue, but United States v.

Arizona Fuels Corp., supra, is fully in accord with the general

A-35

In addition to piercing the corporate veil, the district

court found that Sutton was liable on account of his own

tortious conduct. The finding that Sutton was the central

figure in the miscertification scheme is supported by sub-

stantial evidence. Liability for tortious conduct depends

upon the individual’s acts, and not upon any theory of

vicarious liability based upon mere status as an owner

or other party responsible for corporate activities. A

shareholder may be liable if he is the “central figure” in

a corporation’s tortious conduct. Citronelle-Mobile Gath-

ering, Inc. v. O'Leary, 499 F.Supp. 871, 881 (S.D. Ala.

1980), aff'd as modified, 669 F.2d 717 (TECA 1982),

cert. denied, 459 U.S. 887 (1982).

The evidence fully supports the district court’s con-

clusion that Robert Sutton is jointly and severally liable

with his corporate defendants because these corporations

were Sutton’s alter egos and because Sutton personally

engaged in tortious conduct. Such findings and con-

clusions are not clearly erroneous.

VII. The Nature of Restitution, and the Amount of

Recovery

Under the provisions of Sec. 209 of the ESA, 12 U.S.C.

Sec. 1904, Note, the district court was authorized to order

restitution of benefits received in violation of orders and

regulations issued under the Act.**

rule that in federal question cases, where the governing

statute is silent, federal common law, not state law controls.

Sutton’s case citations do not persuade us that Oklahoma law

is heal any way contrary to the standards applied by the trial

court.

** Section 209 provides that the Attorney General may bring

an action for temporary and permanent injunction to restrain

violations, and the court is authorized to issue such injunc-

tions, as well as to “order restitution of moneys received in

violation of any such order or regulation.”

A-36

The defendants contend that the remedy awarded in

shis action was a penalty, and not restitution, because

the government failed to demonstrate unjust enrichment

or injury. The argument is made that because the trial

court ordered that the monies be disbursed to state gov-

ernments (allegedly “non-injured parties”), the Court’s

award constituted a penalty, and not restitution. Upon

this basis, the defendants further claim that since the

government’s claim is a penalty claim, the trial court

erred in rejecting the statute of limitations defense, that

the penalty claim is barred as a matter of law by the

doctrines of collateral estoppel and double jeopardy, and

that the trial court erred in denying defendants a jury

trial.

This court recently had the occasion to examine at

length the nature of the restitution claim under the pro-

visions of Sec. 209 of the ESA. United States v. Exxon

Corp., 778 F.2d 1240 (TECA 1985), cert. den.,

U.S. —— (January 27, 1986), rehearing denied, ——

U.S. —— (April 7, 1986). Defendants’ assertion that

restitution is appropriate only if both unjust enrich-

ment and injury to third parties is established is without

merit. In Citronelle-Mobile Gathering, Inc., v. Edwards,

supra, 669 F.2d 717 at 722, we pointed out that:

The central purpose of restitution is to determine

the amount by which the wrongdoer has been unjustly

enriched and then to make him disgorge that amount.

No proof is required that the plaintiff was damaged,

much less the amount of any damage. (Emphasis

supplied)

An award of restitution is an equitable remedy, and

not a penalty. Under such circumstances, the district

court properly denied Sutton’s request for a jury trial.

SEC v. Commonwealth Chemical Securities, Inc., 574

F.2d 90, 95 (2d Cir. 1978).

A civil prosecution under the provisions of Section 209

is not barred by double jeopardy because of a prior un-

A-37

sucessful criminal action. See, One Lot Stones, 409 U.S.

2&2, 235, 34 L.Ed. 2d 428, 442 (1972). Defendant’s

attempt te avoid this rule by claiming that the restitution

awarded by the district court was really a criminal penalty

is without merit.

State statutes of limitation are not applicable to cases

brought to enforce DOE regulations. Citronelle-Mobile

Gathering, Inc. v. Edwards, supra, 669 F.2d at 721:

The primary underlying policy of the ESA is to

insure effective enforcement of the pricing regula-

tions on a national scale .... As an aide (sic)

to such enforcement the DOE has the right to seek

restitution in ESA enforcement actions .... The

right to enforce compliance to such restitution of

price overcharges is equitable . . . and suits to

enforce equitable rights created by federal law are

not subject to state statutes of limitations, even if

brought by a private party.

The award of equitable relief in this action is not

barred through the doctrine of unclean hands on the

part of the government. In June, 1984, defendants filed

a motion to reopen the evidence in this case because on

June 13, 1984, an article published in the Wall Street

Journal stated that the federal government itself had

violated federal price controls in the sale of oil from

wells on federal lands.7 The district court denied the

motion upon the ground that equitable defenses would

not be applied to block suits by the United States when

such would “frustrate the purpose of its laws or to

thwart public policy.” Pan American Petroleum &

17 According to defendants, an inspection of records filed

in Plateau, Inc. v. DOE, No. C-82-0501, in federal court in

Wyoming would reveal that the Interior Department “not only

overcharged refiners but flagrantly violated the certification

regulation, 10 C.F.R. Sec. 212.181.” The government reports

that the Office of Hearing and Appeals of the DOE has deter-

mined there were no certification violations.

A-38

Transp. Co. v. United States, 278 U.S. 456, 506, 71

L.Ed. 787, 747 (1$2'/). See also, United States v. City

of Milwaukee, 395.i*, Supp. 725, 727 (E.D. Wisc. 1975).

Whether an equitable defense is available to a party

is a question addressed to the discretion of the trial

court. Jicarilla Apache Tribe v. Andrus, 687 F.2d 13824,

1337 (10th Cir. 1982). Given the nature of the public

interest in equitable and fair enforcement of the ESA

and EPAA, together with the fact of Sutton’s “brazen

disregard for and violation of the tier certification re-

quirements”, we find that the trial court did not abuse its

discretion in denying the motion to reopen the evidence.

We now turn to the amount of the judgment for res-

titution which was awarded in this action.

The defendants complain that the government’s audit

was inaccurate and unreliable, providing no basis for

a calculation of violation amount. As previously noted,

the trial court found that the certification audit method-

ology “was reasonable and essentially accurate” and that

conclusion is supported by evidence, and not clearly er-

roneous. It is to be noted that defendants offered no

alternative certification audit to rebut this evidence.

The government contends that the restitution award

should be increased to effect what it terms “full restitu-

tion” in this action.

In its amended complaint, the DOE computed a mis-

certification violation in the amount of $711,352,450.17,°

an amount which reflected the difference between the

prices defendants actually paid for the miscertified crude

oil. At the request of the court, the government pre-

pared and presented several alternative remedial calcula-

% This violation amount would be $696,063,142.16 if trans-

actions attributable to the 2% of the grand jury documents

obtained in violation of Rule 6(e) are excluded.

A-39

tions for the court’s cor.sideratiun. These are summa-

rized in PX 804, R..19845-81.?*

The trial court ultimately based its award upon total

profits realized by defendants through their miscertifica-

tion scheme. In this respect, the court took into account

defendants’ practice of selling all tiers of crude oil at

one averaged price with a markup, and this of course

resulted in losses on some sales of oil. ‘The court’s spe-

cific findings in this regard were as follows:

As a result of the defendants’ crude oil purchase and

sale policies and practices of miscertification, profits

were realized by the defendants of $210,736,532.92.

(PX-310) This sum of $210,736,532.92 allows the

defendants credit for sales of uncontrolled (stripper

or foreign) crude oil as well as some other crude oil

which defendants sold for substantially less per barrel

price than it paid, which was brought about princi-

pally by the tier price averaging scheme discussed in

paragraph 23 above....

The plaintiffs’ claim seeks restitution for unjust

enrichment. The defendants should be required to

disgorge the amount of profit they have been un-

justly enriched due to the crude oil sale certification

violations. This sum is the amount of the profits

realized by defendants from implementation of their

crude oil miscertification scheme which is the sum of

$210,736,732.92.... (F/F 41, 42)

This action is not, of course, a suit for damages. It

is an equitable action, designed to make the defendants

19 These calculations included figures on defendants’ illegal

profits on “upward miscertification” of crude oil; the entitle-

ments impact of defendants’ miscertifications; total profits

on all miscertified or uncertified crude oil, using weighted

average costs/and/or selling prices; profits on upwardly mis-

certified or uncertified barrels based upon an “average profit”

per individual sales invoice; and special subpart F and L

pricing, analyses involving computations upon a “transaction

basis” and upon a “weighted average basis” for certain periods

from May, 1976 through December 1977.

A-40

“disgorge” their unjust enrichment. The amount of the

judgment rendered in this action is supported by the

evidence, it is equitable in nature, amd we find no error.

The defendant Robert Sutton claims that if he is to be

held personally liable, then his liability should be no more

than the amount of his “excess compensation”—a figure

which he claims to be in the amount of $1,986,900. The

record reflects that Sutton’s personal benefits included

not only “excessive salaries,” but far greater amounts in

the form of unpaid loans, personal use of corporate as-

sets, etc. Sutton’s liability for his own tortious conduct

is certainly not to be limited to the money he actually

put in his pocket. A person who is the “animating

force” for regulatory violations is fully liable even though

he does not personally receive all benefits of his iilegal

activities. See Sauder v. Department of Energy, 648

F.2d 1341, (TECA 1981), and United States v. Exxon

Corp., supra, 773 F.2d 1240, 1269-1273.

Finally, we find that the award of prejudgment in-

terest in this action was entirely correct. We refer the

parties to our discussion of this aspect of restitution in

the Exxon case, supra, 773 F.2d 1240, at pp. 1277-1279.

In this instance, the trial court determined that interest

would be based upon the schedule of interest rates ap-

plied by the DOE in administrative enforcement actions

after February, 1980. This is the rate adopted and

approved in the Exxon case.

VIII. The Remedy

Upon the basis of trial testimony, the district court

determined the effect of defendant’s miscertifications

upon the entitlements program:

Defendants’ upward miscertifications decreased the

volume of domestic price-controlled crude oil avail-

able to refiners and reported to the Old Oil Allocation

(Entitlements) Program, thus artificially decreasing

A-41

the benefits to be distributed by the Entitlements

Program and increasing the post-entitlement cost of

all crude oil to all domestic refiners. . . . Defendants’

upward certifications also tended to increase the dis-

parities in refiners’ crude oil costs which the Entitle-

ments Program was intended to reduce. .. . Upward

miscertifications, by removing old oil from the en-

titlements system reduced the entitlements ‘subsidy’,

thereby increasing the post-entitlements crude oil

costs to all refiners. . . . Upward miscertifications

also had the effect of increasing the prices of refined

petroleum products, although due to the economic

complexities it is difficult, if not impossible, to de-

termine the precise amount of that price increase.

... (F/F 43)

The trial court recognized that refiners could pass

through these increased costs to their customers, and

their customers to their customers, through the chain

of commerce to the ultimate consumer of motor gasoline,

home heating oil, and other petroleum products, the re-

sult being that the ultimate loser was the petroleum

products consuming public.

Under these circumstances, the district court ordered

that the proceeds of the restitution judgment be placed

in an escrow fund for subsequent distribution to the

states for use in one or more of three energy conserva-

tion programs. These programs are for the weatheriza-

tion of public buildings under Part A of the Energy Con-

servation in Existing Buildings Act of 1976, 42 U.S.C.

Secs. 686 et seq.; energy conservation programs for

schools and hospitals under Part G of Title III of the

Energy Policy and Conservation Act, 42 U.S.C. Sec.

6371 et seq., and financial assistance for low income fam-

ilies under the Low Income Home Energy Assistance

Act uf 1981, 42 U.S.C. Sec. 8621, et seq.

Under the reasoning set out in our decision in United

States v. Exxon Corp., supra, 778 F.2d at pp. 1283-

1287, we find that the district court exercised its discre-

A-42

tion in a reasonable manner by ordering that the restitu-

tion judgment be distributed to the states for funding

programs designed to benefit public energy consumers.

We repeat our observation set out in Exxon, supra, 773

F.2d at 1287:

While other remedies might have been adopted by

the trial court, the remedy chosen avoids further ad-

ministrative delay and confusion, with additional

costs, it prevents the frustration of congressional

objectives in securing prompt enforcement of what

has been denominated as ‘emergency’ price regula-

tions, and it is a reasonable means to protect the

public interest.

Under all of the circumstances presented in this record,

we conclude that the trial court did not abuse its discre-

tion in fashioning its remedy.

The Judgment of the District Court is AFFIRMED

in all respects.

A-43

POINTER, Judge, concurring in part, dissenting in part.

As noted in my dissent in Citronelle-Mobile Gathering,

Inc. v. Edwards* and echoed by my vote for rehearing

en banc of United States v. Exxon Corp.* I believe that

this court distorts the principles of restitution authorized

by the statute when it permits a search for worthy bene-

ficiaries of an award of unjust enrichment. However, as

this court has rejected that position, I do not dissent on

that basis and, rather, write under the constraint that

the case sub judice is properly treated as one for restitu-

tion subject to broad equitable powers of the trial court.

In this light, I agree that the trial court did not err

in denying the defendants a trial by jury and selecting

suitable persons to receive the defendants’ ill-gotten gains.

I also concur, in general, with those portions of the

majority’s opinion upholding the trial court on such mat-

ters 2s (1) the validity of the statute and regulations;

(2) the admission of evidence (other than grand jury

materials) ;* the finding of gross miscertifications by the

defendants; (4) the imposition of individual liability on

Robert Sutton,‘ not limited to his “excess” compensation;

2669 F.2d 717, 723 (TECA), cert. denied, 459 U.S. 887

(1982).

2773 F.2d 1240 (TECA 1985), cert. denied, —— U.S. ——

(Jan. 27, 1986), reh’g denied, —— U.S. —— (Apr. 7, 1986).

*I would not cite Federal Rule of Evidence 803(24) as a

basis for upholding the admission of PX1, because the gov-

ernment did not satisfy 803(24) (B) or give the advance notice

required by the last sentence of that Rule. The exhibit was,

however, admissible under Rule 803(6) for the reasons given

in the majority’s opinion. It should be noted that the third-

party “interrogatories” which provided the foundation for the

source documents were, by agreement of counsel, used in lieu

of (and with the same effect as) depositions on written

questions.

¢ Although I do not believe that liability may be imposed on

Sutton under the statute premised upon “his own tortious

conduct,” I agree that liability was properly imposed on him

under the statute by “piercing the corporate veil (s).”

A-44

(5) the rejection of defenses based on double jeopardy,

statute of limitations, and “unclean hands”; and (6) the

allowance of prejudgment interest.

In two respects, however, I must dissent. In my view,

the case should be remanded for further consideration of

the amount of the award.

Grand Jury Documents

As discussed in the majority opinion, the government

utilized in this case a large number of documents ob-

tained in violation of Fed. R. Crim. P. 6(e) as construed

in United States v. Sells Engineering Inc.* A few of these

documents—affecting approximately 2% of the transac-

tions in dispute—were suppressed at the trial, a ruling

which this court is affirming as correct. The other docu-

ments were, however, admitted in evidence and indeed

relied upon to determine the amount of the award, a rul-

ing which this court is also affirming as correct.

The basic rationale for this distinction in treatment is

sound and, indeed, not challenged by the appellants: the

government should not be precluded in a civil action from

using information that was presented in evidence at the

prior criminal trial, even though it obtained that in-

formation in violation of Fed. R. Crim. P. 6(e). Exhibits

27 and 53 became matters of public record when they

were received without qualification in the criminal trial

of Robert Sutton, and the trial court properly refused to

suppress the information derived from those documents

when offered in the present case. Approximately 40% of

the unlawful profits found by the trial court was based

on those documents and accordingly should be affirmed.

I do disagree, however, about certain of the documents

on which approximately 58% of the award is based.

Specific data—namely, the number of barrels bought and

® 463 U.S. 418 (1983). Anas

BEST AVA

sold and their certifications—were extracted from these

documents and incorporated into summary exhibits 80

and 81,.* hich were then admitted in evidence under

Fed. 3. Evid. 1006 at the criminal trial.* However, the

documents themselves were not introduced or otherwise

made public in the criminal] trial, nor were items of

information contained in those documents that are critical

to the restitution award—namely, the prices of various

transactions."

In holding that these documents were no longer subject

to the restrictions of Fed. R. Crim. P. 6(e), the majority

explains that the documents had been made available to

Sutton and his counsel for examination both before and

during the criminal trial. This fact, however, provides

no sound basis for disregarding the proscriptions of Rule

6(e). Indeed, in the Sells case, as is often the situation,

the documents in question were the defendants’ own

records, of which they presumably had copies. Nor can

it be said that these documents became a matter of public

record and inspection merely by being produced in the

courtroom at the criminal tria] for Sutton’s examination

and use.

I would remand the case for a recalculation of the

restitution award, eliminating from! consideration in-

formation derived from documents obtained in violation

* Exhibits 80 and 81 were simply charts that aggregated

for 1979 and 1980, respectively, the total number of barrels

bought and sold in those years, subdivided into the categories

of “old,” “new,” and “stripper (foreign & other).”

™The majority opinion recites that the summaries “re-

flected and summed up the contents of all of these documents.”

A more accurate statement would be that the summaries “re-

flected and summed up certain items of information from all

of these documents”—and it should be emphasized that infor-

mation critical to the present case was not reflected in those

summaries.

A-46

LABLE COPY

of Rule 6(e) except to the extent that information was

publicly reveate® during the prior criminal trial.

Methodology of Calculation

In calculating the liability of the defendants, the trial

court determined an average profit-per-barrel, ascertained

by considering both profitable and unprofitable sales, and

multiplied that figure by the number of miscertified

barrels. The government on cross-appeal asserts that

only the particular transactions involving unlawful profits

should have been used, raising the amount before interest

from approximately $211 million to approximately $700

million. I agree with the majority that—given the de-

fendants’ scheme of selling at an averaged price, result-

ing in some losses which reduced their overall profits—

the trial court’s basic approach for determining the

amount of unjust enrichment was supported by the evi-

dence and within its equitable discretion. I therefore

concur in denying the cross-appeal on this issue.

In one respect, however, the methodology used by the

trial court was internally inconsistent, and the position

on this issue advanced by the government on cross-appeal

® The majority opinion recites that the documents “were the

subject of extensive cross-examination”, a point made by the

government (Appellee’s brief, p. 78). The portion of the

criminal] transcript cited—some 14 pages—reflects, however,

not cross examination using or respecting the documents, but

rather cross examination of the prosecution’s witness involv-

ing some monthly worksheets that had been used as an inter-

mediate step in preparing the summaries. The worksheets

were not introduced in evidence and only on two occasions

during this examination was any mention made about prices—

once when the witness stated he was unable to testify whether

Sutton’s company ever received “stripper” prices for stripper

oil, and later when the witness acknowledged that Sutton’s

company had been charged as high as $45 a barrel for oil.

No sound argument can be made that the proscriptions of

Rule 6(e) were somehow waived or abrogated by this cross

examination.

A-47

BEST AVAILABLE COPY

is correct. Having determined because of the nature of

the scheme practiced by the defendants that all of the

transactions, both profitable sr] unprofitable, should be

taken into account in deteruiiuiug the average profit per

barrel, the trial court should have multiplied this amount

by all of the barrels sold, not just those which had been

upwardly miscertified. This adjustment—in view of the

affirmance by the majority of the trial court’s exclusion

under Rule 6(e) of only 2% of the documents—would

raise the amount of the award, before adding interest,

from $210,736,732.92 to $227,254,951.01. I would, of

course, call for this upward adjustment to be made after

suppressing substantially more documents under Rule

6(e).

Conclusion

I would remand the case for recalculation of the amount

of the award, suppressing additional documents obtained

in violation of Rule 6(e) but taking into account under

the trial court’s formula all sales supported by the re-

maining evidence. In other respects I join with the

majority in affirming the trial court.

A-48

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1986

ROBERT B. SUTTON, SUTTON INVESTMENTS, INC.,

SCURRY OIL COMPANY, BPM, LTD., AND

SOONER REFINING COMPANY, INC.

PETITIONERS,

VERSUS

UNITED STATES OF AMERICA,

RESPONDENT.

APPENDIX B

ANTHONY P. SUTTON

Oklahoma Bar Association #8781

Attorney at Law

4835 South Peoria, Suite 25

(918) 749-5815

Attorney for Petitioners, pro bono

SAM P. DANIEL Ill

Oklahoma Bar Association #2151

Short, Harris, Tumer & Daniel

2761 E. Skelly Drive, Suite 700

Tulsa, Cklahoma 74105

(918) 743-6201

Attorney for Petitioners, pro bono

MILDRED E. OTEY

Oklahoma Bar Association #6810

2761 East Skelly Drive, Suite 700

Tulsa, Oklahoma 74105

(918)743-6201

Attorney for Petitioners, pro bono

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.