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United States v. Heine

United States District Court, D. Oregon

July 26, 2017

DAN HEINE and DIANA YATES, Defendants.

          Billy J. Williams, United States Attorney, and Claire M. Fay, Michelle Holman Kerin, and Quinn P. Harrington, Assistant United States Attorneys, United States Attorney's Office for the District of Oregon, Of Attorneys for the United States of America.

          Jeffrey Alberts and Mark Weiner, Pryor Cashman, LLP, Caroline Harris Crowne and Michael C. Willes, Tonkon Torp, LLP, Of Attorneys for Defendant Dan Heine.

          Janet Lee Hoffman, Kelsey R. Jones, Andrew T. Weiner, Katherine Feuer, and Douglas J. Stamm, Janet Hoffman & Associates, LLC, Matthew J. Kalmanson, Hart Wagner, LLP, Of Attorneys for Defendant Diana Yates.


          MICHAEL H. SIMON, District Judge.

         Defendants Dan Heine (“Heine”) and Diana Yates (“Yates”) are charged in this criminal action with conspiring to commit bank fraud and making false bank entries, reports, or transactions during the time when they were the two most senior officers of The Bank of Oswego (the “Bank”).[1] The Court has scheduled a five-week jury trial to begin on October 10, 2017. On June 27, 2017, Yates filed her Amended Motion to Vacate Fourth Trial Management Order. ECF 758. In her motion, Yates asserts that the Bank “has stopped paying Ms. Yates's attorneys' fees, experts, document hosting fees, and other costs, and has indicated that it is considering whether to file bankruptcy.” Id. at 1-2. Thus, argues Yates, “the basic tools of the defense are unavailable because of the Bank's failure and refusal to pay past fees and expenses, while future payments of any kind are uncertain.” Id. at 3. Yates “therefore requests that all pretrial deadlines and the trial date be vacated until efforts to negotiate a resolution with the Bank and HomeStreet Bank are completed.” Id. For the reasons that follow, Yates's motion is denied.


         Heine and Yates co-founded the Bank in 2004. Until August 2016, the Bank had been a financial institution engaged in the business of personal and commercial banking and lending, headquartered in Lake Oswego, Oregon. Heine previously served as the Bank's President and Chief Executive Officer. Heine also was a member of the Bank's Board of Directors (“Board”). Heine left the Bank in September 2014. Yates previously served as the Bank's Executive Vice President and Chief Financial Officer. Yates also was the Secretary of the Board. Yates resigned from the Bank on March 22, 2012.

         On June 24, 2015, a federal grand jury issued a 27-seven count indictment against both Heine and Yates for conduct related to their time with the Bank. On March 9, 2017, a federal grand jury returned a 19-count Superseding Indictment in this case. The Superseding Indictment (“Indictment”) charges Heine and Yates with one count of conspiring to commit bank fraud, in violation of 18 U.S.C. § 1349, and multiple counts of making false bank entries, reports, or transactions, in violation of 18 U.S.C. §§ 2 and 1005. The Indictment alleges that between September 2009 and September 2014, Heine and Yates conspired to defraud the Bank through materially false representations and promises. The Indictment further alleges that one of the purposes of the conspiracy was to conceal the true financial condition of the Bank from the Board, the Bank's shareholders, the public, and the Bank's regulators, including the Federal Deposit Insurance Corporation. According to the Indictment, Heine and Yates reported false and misleading information about loan performance, concealed information about the status of foreclosed properties, made unauthorized transfers of Bank proceeds, and failed to disclose material facts about loans to the Board, shareholders, and regulators, all in an effort to conceal the Bank's true financial condition.

         On August 26, 2015, two months after the grand jury returned the original indictment, Heine brought a civil action against the bank. Heine, a citizen of Florida, filed his lawsuit against the Bank, a citizen of Oregon, in federal court in the District of Oregon, invoking diversity jurisdiction. In his civil lawsuit, Heine sought both declaratory relief and advancement of his reasonable legal fees and expenses in connection with his defense of the federal criminal action, pursuant to the Bank's indemnification obligations contained in its Articles of Incorporation. On November 13, 2015, the Court, through the undersigned district judge, held that Heine was entitled to advancement of his reasonable legal fees and expenses of defense. Heine v. The Bank of Oswego, 144 F.Supp.3d 1198 (D. Or. 2015). Yates, however, was unable to join Heine's civil lawsuit or file her own federal court action against the Bank because she was a citizen of Oregon, thereby precluding diversity jurisdiction.

         On October 14, 2015, in the pending criminal case, Yates moved to compel the Bank of Oswego to advance legal fees. Yates made the same contract arguments that Heine asserted in his civil lawsuit based on the Bank's indemnification obligations contained in its Articles of Incorporation. In her motion against the Bank brought in the pending criminal action, Yates asserted that the Court has ancillary jurisdiction to resolve Yates's private contract claim against the Bank. The Court disagreed and denied Yates's motion on January 4, 2016, concluding that Yates's motion for contractual relief against the Bank did not fall within the Court's jurisdiction in this criminal case.

         In March 2016, Yates filed a civil lawsuit against the Bank in state court in Oregon. Yates v. The Bank of Oswego, Case No. 16-CV-07657 (Clackamas County Circuit Court). Shortly thereafter, Yates and the Bank entered into a settlement agreement under which Yates abated her civil lawsuit and released the Bank from claims in exchange for the Bank's agreement to advance reasonable expenses incurred by Yates in defending the criminal action. ECF 548 at 1-2 (¶ 3). By August 2016, Heine and Yates's combined advancement expenses exceeded the limits of the Bank's Director & Officer insurance policy, and the Bank then began to pay Defendants' requested advancement expenses with its own funds. Id. By November 2016, the Bank began TO pay less than all of Yates's submitted bills. ECF 758 at 4.

         On January 26, 2017, the Bank filed a non-party motion in this criminal action, asking the Court to review for reasonableness the detailed billing statements from counsel for Heine and Yates. ECF 547. In its motion, the Bank stated that it “remains committed to satisfying any obligations it may have to advance Defendants' reasonable criminal defense fees and expenses.” Id. at 2 (emphasis in original). In its motion, the Bank disclosed the substantial amount that it had already paid as of November 4, 2016.[2] The Bank added that it had recently received bills from counsel for Yates and Heine for work performed in October and November, and “the resulting legal bills, by any standard, are grossly excessive and unreasonable.” Id. The Bank explained that it had “reduced Yates's and Heine's recent bills for attorneys' fees by fifty percent and forty percent, respectively” and “[o]ther than the reduction for attorneys' fees, no other reductions were made by the Bank.” Id. (footnotes omitted). Heine objected to the Court reviewing for reasonableness the invoices that his counsel had sent to the Bank, arguing that such a review is “premature.” Id. at 1.[3] Yates, however, did not object to the Court reviewing for reasonableness her counsel's billing statements. ECF 563. On February 16, 2017, the Court declined to exercise ancillary jurisdiction in this criminal case over the non-party Bank's fee dispute with either Heine or Yates. ECF 581.

         In her opening motion to vacate, Yates asserted that the Bank had not yet paid Yates's counsel for any services rendered after January 2017 and that the Bank recently stated that it is considering filing for bankruptcy unless a resolution can be reached regarding the Bank's ongoing obligations to advance defense costs. Yates originally asked the Court to vacate the trial date of October 10, 2017 and set a status conference at some point in the future so that Yates's counsel can report back regarding her efforts to resolve the matter. In her reply, Yates asserts that the Bank recently paid a portion of her counsel's February 2017 invoice and that the Bank's counsel recently stated that the Bank was considering pursuing legal action in state court regarding the reasonableness of counsel's legal fees and expenses. Yates concludes her reply by asking the Court to vacate the current trial schedule, continue the trial date to February 2018, and set a status conference in 60 days so that Yates's counsel can report what progress has been made toward resolving the funding issues. Both the Government and Defendant Heine oppose Yates's motion and urge the Court not to continue the trial date, which is currently set to begin on October 10, 2017.


         A. Motion to Continue Trial Date

         When a defendant in a criminal case moves for a continuance of the trial date, the court must consider the following four factors: (1) the defendant's diligence in preparing for trial; (2) the likelihood that the requested continuance will satisfy the defendant's needs that underlie the request for continuance; (3) the inconvenience that a continuance will cause the Court and the Government; and (4) the extent to which the defendant will suffer harm if the request for continuance is denied. United States v. Zamora-Hernandez, 222 F.3d 1046, 1049 (9th Cir. 2000). “The fourth factor is most critical.” Id. These four factors are well established in the law. See United States v. Tham, 960 F.2d 1391, 1396 (9th Cir. 1992); United States v. Shirley, 884 F.2d 1130, 1134 (9th Cir. 1989).

         B. Sixth Amendment Right to ...

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