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United States v. Gregory

United States District Court, D. Kansas

January 15, 2019

TROY A. GREGORY, Defendant.



         Before the court are two motions:

I. Defendant's Motion to Dismiss Indictment (Doc. 23) (“First Motion to Dismiss”); the government's response (Doc. 29); and defendant's reply (Doc. 45).
II. Defendant's Motion to Dismiss Indictment or, in the alternative, Exclude Post-Indictment Grand Jury Evidence (Doc. 25) (“Second Motion to Dismiss”); the government's response (Doc. 28); defendant did not file a reply.

         The Court will rule on each motion in turn. But first, some necessary background.

         The Indictment charges defendant with conspiracy to commit bank fraud (Count 1), bank fraud, (Counts 2-5) and false statements in bank records (Counts 6-7). (Doc. 1.) The Indictment is the result of a multi-year criminal investigation into, primarily, John Duncan and his business(es) for allegedly fraudulent banking activities. The IRS commenced the investigation in the fall of 2011, but other government agencies, including the Federal Deposit Insurance Corporation, Office of Inspector General (“FDIC”) and the United States Attorney's Office for the District of Kansas (“USAO”), soon joined the investigation. The criminal investigation of Duncan lasted approximately two years, culminating with Duncan pleading guilty to three counts: bank fraud, money laundering, and false statements. See United States v. John Wyatt Duncan, No. 13-40013-01-JAR, Dkt. 20 (D. Kan. September 11, 2013). In 2014, Duncan was sentenced to 57 months of imprisonment and restitution in the amount of $6, 923, 622. See id. Relevant to this case is the bank fraud to which Duncan pleaded guilty, as the alleged victim was Kaw Valley National Bank of Topeka, Kansas, (“KVB”). Enter KVB's private, civil attorneys, Patricia Hamilton and Bradley Finkeldei of Stevens & Brand LLP (collectively, the “S&B Attorneys”).

         According to the government, it interviewed Ms. Hamilton as part of its investigation into Duncan's actions because KVB was the victim and she its representative. At this point, around 2011, Hamilton and the government began communicating about the on-going investigation.

         Parallel to the government's investigation was a civil suit in Douglas County, Kansas, in which University National Bank (“UNB”)-where defendant Gregory formerly worked as a loan officer during the relevant time period-sued KVB and others for judgment on a promissory note. See University National Bank v. JMD, LLC (No. 2011CV560) (the “Civil Suit”). The case involved Duncan's banking activities, and it lasted until February 2016. For almost five years, the S&B Attorneys exhaustively investigated the underlying facts, which included defendant Gregory's conduct, and litigated the Civil Case for KVB until it ended when the court granted summary judgment for UNB, ruling against KVB. Id. (See also Doc. 23-2.)

         But all the while, the government-which, importantly, was never a party to the Civil Case- continued its investigation through the present. According to defendant, from 2011 through defendant's Indictment on December 1, 2017, the S&B Attorneys communicated extensively with the government. Defendant tabulates over 430 email communications and twenty instances of communications in person or by phone. At least 160 of those communications occurred after the S&B Attorneys lost their Civil Case. And communications also occurred after defendant's indictment, including communications with the government's current counsel. These communications between the government and the S&B Attorneys form the basis of some of defendant's motions.

         I. Dismissal Is Not Appropriate

         In both his First and Second Motions to Dismiss, defendant requests the court dismiss his Indictment. The court will not do so on either motion.

         With respect to defendant's first motion, the court notes that defendant does not offer a specific basis, e.g. something in Federal Rule of Criminal Procedure 12(b)(3), upon which to seek dismissal. He argues the S&B Attorneys' extensive contacts and interactions with government investigators and prosecutors, as detailed in Section II, constitute “special circumstances that suggest the unconstitutionality or even the impropriety of th[e] criminal prosecution” that violate his due process rights and thus warrant dismissal of the indictment. United States v. Kordel, 397 U.S. 1, 12, (1970). That vague dicta is the extent of defendant's argument, even though he repeatedly mentions the quantity and severity of the S&B Attorneys' involvement with the government during its investigation. But, as in Kordel, this is not a case where the government was prosecuting a parallel civil case. Nor is it a case in which the government failed to advise the defendant in a civil proceeding that it contemplates his criminal prosecution. Here, the parallel case is a private civil suit, and there is evidence that defendant Gregory was, at some point during the Civil Suit and thus the investigation leading to this Indictment, informed that the criminal investigation was ongoing because, he invoked his rights under the Fifth Amendment, presumably on the advice of his counsel. (Though, eventually, he was deposed in the Civil Case.) Whatever the relationship between the S&B Attorneys and the government may be, the court finds there are no circumstances, special or otherwise, that suggest this prosecution is unconstitutional or improper.[1] Id. at 12.

         Dismissal is also unwarranted on the grounds in defendant's second motion. Defendant argues the government abused the grand jury process by collecting evidence after he was indicted. Dismissal of the indictment is appropriate only where the established grand-jury violation(s) either (1) substantially influenced the grand jury's decision to indict, or (2) provides “grave doubt” that the decision to indict was free from substantial influence of the violation(s). Bank of Nova Scotia v. United States, 487 U.S. 250, 256 (1988). Even assuming that these subpoenas and resulting testimony constituted an abuse of the grand jury process, defendant offers no evidence that the grand jury's decision to indict him would have changed absent these violations. Further, defendant was indicted before any of those violations, or the effects of those violations, occurred. The grand jury's decision to indict, therefore, would not have come out differently. The court declines to dismiss the Indictment on this ground.

         Because dismissal is not appropriate, the court denies defendant's motions to dismiss (Docs. 23 & 25) with respect to his request for dismissal as relief. But defendant also requested additional relief in both motions to dismiss. The court will analyze those requests now.

         II. First Alternative Relief: Declare the S&B Attorneys ...

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