REVISED UNITED STATES COURT OF APPEALS For the Fifth Circuit
No. 95-10733
UNITED STATES OF AMERICA, Plaintiff-Appellee,
VERSUS
JAMES R. FISHER and JOHN R. CARNEY, Defendants-Appellants.
Appeal from the United States District Court for the Northern District of Texas
February 13, 1997
Before POLITZ, Chief Judge, SMITH and DUHÉ, Circuit Judges.
DUHÉ, Circuit Judge:
Defendants-Appellants James Fisher and John Carney appeal
their convictions on several counts including bank fraud, mail
fraud, wire fraud, conspiracy, and making false statements to the Federal Home Loan Bank Board and the Office of Thrift Supervision.
For the reasons assigned, we reverse and vacate the convictions and
remand for a new trial.1
1 We note at the outset there is no double jeopardy issue in remanding for a new trial: “[T]he Double Jeopardy Clause’s general prohibition against successive prosecutions does not prevent the government from retrying a defendant who succeeds in getting his first conviction set aside, through direct appeal or collateral attack, because of some error in the proceedings leading to conviction.” Lockhart v. Nelson, 488 U.S. 33, 38, 109 S.Ct. 285, BACKGROUND
In 1984, James Fisher, John Carney and Jeff Noebel2 formed
Equisource Realty Corporation as a real estate investment company
in Dallas, Texas. By 1987, Texas real estate was no longer a
profitable investment, and the Equisource Realty partners began to
investigate other business opportunities.
At that time, the savings and loan industry was in disastrous
condition. Many S&Ls had declared bankruptcy, and the federal
government was faced with the unappealing reality of bailing out
numerous failed institutions. In an effort to curtail the
disaster, the Federal Home Loan Bank Board (“FHLBB”) sought private
investors to aid in the bailout.
To induce investment, bankrupt S&Ls were allowed to recognize
“regulatory goodwill” as an asset. This goodwill was not
recognized under Generally Accepted Accounting Principles, but was
instead a creation of federal regulators. The goodwill asset
created artificial capital for S&Ls without requiring investors to
contribute hard dollars.
Equisource Realty became interested in acquiring an S&L in the
summer of 1987. It targeted Bayside Savings and Loan Association
in Port Charlotte, Florida, and applied for regulatory approval to
purchase the institution. In the fall of 1987, Bayside had zero
value, was $1,000,000 in debt and was losing $50,000 a month.
289 (1988). 2 Jeff Noebel was indicted with Fisher and Carney but entered into a plea agreement and was not a defendant.
2 To acquire Bayside, the defendants and Noebel formed
Equisource Capital Corporation to act as the general partner of a
newly formed bank holding company, U.S. Savings Associates
(“USSA”). Davis Hughes served as president of a sister
organization, Equisource Financial Corporation.
Originally, USSA proposed to regulators it raise $3,000,000
for the acquisition: $2,000,000 in equity and $1,000,000 in debt.
This proposal received approval. However, before closing, USSA
opted to instead raise $4,000,000 in equity, with $875,000 of that
sum subject to repurchase agreements. To accomplish this goal,
USSA sold 80 units in USSA for $50,000 a unit to approximately 37
investors.
Some of the investors in USSA were represented by Joe
Courrege, an agent for the financial interests of several NFL
football players (“Players”). Courrege had purchased several homes
in Dallas in the early eighties and then sold the homes to the
Players as investments. By 1988, however, changes in the tax laws
and the general decline of the real estate market had contributed
to extremely high interest rates on the loans made to acquire the
homes. Courrege was interested in refinancing these homes to
decrease the monthly loan payments.
Early in 1988, Courrege learned of the USSA investment. As
incentive to have his Players invest, USSA promised Courrege it
would obtain refinancing on the Players’ homes if the Players
bought units in USSA.
Jeff Walker was represented by Courrege and sought to purchase
3 a USSA share. Jeff Walker’s father Trent Walker deposited $10,000
with USSA for the purchase of one share, with the remaining $40,000
owed to be financed. Trent Walker was offered a repurchase
agreement if the homes owned by his son were not refinanced by
December 31, 1988. Both Walkers had trouble obtaining financing
for the remaining $40,000 owed, so Trent Walker sent USSA a check
for $40,000 in October 1988 to be placed in escrow until financing
of the balance came through. That check was instead cashed by
USSA.
Other investors were also promised repurchase agreements.
Another Courrege client, Gary Hogeboom, invested $100,000 in USSA
with the understanding his homes would be refinanced, and that his
shares would be repurchased if such refinancing did not come
through. Michael Barlerin purchased one unit in USSA in October
1988. Barlerin testified he was promised a repurchase agreement.
Ramesh Mahtani, an investor who joined the Bayside Board of
Directors, paid $250,000 for five units in USSA in October 1988.
He also testified USSA promised him he could “put” the investment
back to USSA within 18 months of the investment. Theodore Taub,
another investor who joined the Bayside Board of Directors,
purchased one unit for $50,000, and testified USSA promised him a
repurchase agreement. Dennis Noebel, USSA partner Jeff Noebel’s
brother, bought a half unit with the understanding he could “put”
the investment back.
Bradley Branson, a professional basketball player living
abroad, purchased two units of USSA through his accountant Michael
4 Tannery. In September 1988, Tannery sent USSA a check for $20,000
on Branson’s behalf, with the remainder of the purchase price to be
financed. Tannery then sent another Branson account check to USSA
in October for $20,000. Tannery claimed the check was sent by
mistake. That check was cashed by USSA.
The USSA investment was beset with problems from the start.
After promising refinancing to the players as an incentive to
investment, USSA discovered that their homes had dropped
significantly in value since their original financing, and that
refinancing could only be obtained based upon the new worth of the
homes. The Players believed that the homes could be refinanced
without any out of pocket expense. In reality, large loan
shortfalls would result, necessitating a hefty payment from the
Players. Refinancing on the terms the Players had expected was not
forthcoming.
The Bayside investment itself also received a severe blow. In
1989, Congress passed the Financial Institution Reform, Recovery,
and Enforcement Act of 1989 (“FIRREA”), Pub.L. 101-73, 103 Stat.
183. FIRREA eliminated the regulatory goodwill offered by
regulators as an incentive to purchase S&Ls. This severely
restricted the amount of capital available in S&Ls using regulatory
goodwill, and also limited the size of the S&Ls since their ability
to lend was contingent on their capital reserves.3 Bayside had
3 In United States v. Winstar Corp., 116 S.Ct. 2432 (1996), the Supreme Court held that the United States breached its contracts to allow purchased savings and loans to use regulatory goodwill when it passed FIRREA. The Court also held the government could be liable for this breach. Bayside currently has a $5,000,000 action
5 used much of its original cash investment to pay off Bayside’s
debts to federal regulators, and had relied on the goodwill to
support its capital base until the institution had recouped some of
its losses. Bayside’s capital base was reduced by FIRREA from
close to $4,000,000 to around $800,000.
As well as vastly reducing operating capital, FIRREA greatly
diminished the attractiveness of S&L investment. Many USSA
investors were understandably nervous, and some of those with
repurchase agreements with USSA sought to exercise them. However,
after FIRREA, USSA no longer had surplus capital, and could not
make good on all the repurchase agreements. Some of the parties
involved sued USSA to enforce the buy back provision.
Michael Tannery, Bradley Branson’s accountant, had difficulty
obtaining a refund of his $20,000 overpayment for Branson’s
account. He testified that Fisher told him to apply for a loan
from Bayside in Branson’s name, and that Fisher and Carney would
then repay the loan.
In its indictment against Carney, Fisher, Noebel and Hughes,
the Government charged they conspired to commit mail fraud, wire
fraud, and bank fraud, and also conspired to make false statements
to and obstruct the operation of the FHLBB and Office of Thrift
Supervision. The indictment then charged separate counts of mail
fraud, wire fraud, making false statements, and bank fraud.
At trial, Fisher and Carney were found guilty of all charges
against them. Hughes was acquitted. Fisher and Carney were
pending to recover losses it attributes to FIRREA.
6 sentenced to 87 months in prison, followed by five years’
supervised release, and ordered to pay $895,000 in restitution.
They now appeal.
Discussion
The defendants assign numerous points of error to their trial
proceedings. We discuss certain of those points below.
I.
Carney alleges the district court erred when it denied his
motion for new trial because the Government impermissibly impeached
him on cross examination with a constitutionally infirm conviction.
Several months before his trial in this case, a Texas court
found Carney guilty of criminal contempt for failure to comply with
a state court’s turnover order.4 The judge in the contempt hearing
also made many factual findings implying Carney had acted in a
deceitful and unscrupulous manner. Carney sought a writ of habeas
corpus from the Texas Supreme Court.
While Carney’s habeas application was pending, the present
action went to trial. Before Carney testified, the Government
obtained a ruling allowing it to impeach Carney with the conviction
and factual findings from the turnover action. The district court
held that Carney could have both the conviction and factual
findings used against him if he chose to testify in his defense.
Notwithstanding this ruling, Carney chose to testify to
4 According to Carney’s testimony, Dennis Noebel filed a lawsuit to enforce his repurchase agreement. USSA apparently settled with him. Noebel obtained a final judgment against Carney in December 1993, and a hearing related to the satisfaction of that judgment resulted in the criminal contempt conviction.
7 explain his version of the events the Government was prosecuting.
Because the Government had already obtained a ruling from the trial
court allowing it to introduce the contempt conviction if Carney
testified, Carney’s attorney asked him about the contempt hearing
and conviction on direct in an effort to ameliorate any forthcoming
negative cross examination. Carney tried to explain his version of
the events leading to the conviction: namely, that he had believed
the hearing would be a restricted inquiry into the turnover of
certain assets.5 Contrary to Carney’s expectations, the hearing
quickly escalated into a very serious inquiry on the turnover order
that resulted in the contempt conviction.
The Government made the contempt conviction and the
accompanying factual findings a central element of its cross
examination of Carney, subjecting Carney to rigorous interrogation
on both topics.6 The cross examination succeeded in making Carney
5 Carney initially represented himself before realizing the seriousness of the hearing and retaining an attorney. 6 The Government referred to the conviction in its cross examination repeatedly. The examination specifically addressed numerous factual findings made by the state court. Typical of the exchange between the Government and Carney are the following excerpts:
BY THE GOVERNMENT: Q: You’re no stranger to misrepresentations in court or out of court, are you, sir? MR. CARNEY: A: I don’t know what that question asks me. Q: Well, we know, do we not--you don’t deny, or do you, that when Judge Hoffman convicted you of contempt he found that you had specifically made misrepresentations which justified the most severe impositions of sanctions? He found that, didn’t he? A: He did. Q: And he sentenced you to jail for six months based on your
8 appear corrupt, untruthful, and dishonest. In short, Carney’s
credibility was severely undermined by this questioning.
Soon after trial concluded and Carney was convicted, the
contempt conviction was overturned by the Texas Supreme Court on
the grounds Carney did not receive full and proper notice of the
subject matter of the contempt motion, or when, how and by what
means he was guilty of contempt. Carney moved for a new trial in
the present case on the ground that the use of the invalid
conviction and factual findings was highly prejudicial to him. He
argued that his guilt or innocence rested on his credibility, and
that “manifest and undue harm” was done to him by cross examination
with an invalid conviction. The district court denied that motion.
While Federal Rule of Evidence 609 specifically details the
rules of impeachment at trial by evidence of prior conviction, past
cases have carved out exceptions beyond the scope of that rule when
an exception is necessary to protect the constitutional rights of
conduct, didn’t he? A: That is on appeal and I disagree with his order and the notice upon which it was founded. * * * Q: [Judge Hoffman] specifically found, for example, that you had engaged in dilatory and harassing tactics for the purpose of delaying, didn’t he? A: I believe that’s in the order, yes. * * * Q: When you described the outcome of this matter on Friday, you said you were branded, right? A: Yes. A: And that’s because you were branded for what you really are: someone who’s modus operandi is to engage in repeated intentional misrepresentations, deceptions and delaying tactics. Isn’t that the truth, sir? A: No, sir. Record Vol. 14 at 82-110.
9 the accused. For example, the Supreme Court has held that the
admission of a prior criminal conviction at trial to support guilt
or enhance punishment is impermissible if that conviction was
invalid because it was obtained in violation of the defendant’s
right to counsel. Burgett v. Texas, 389 U.S. 109, 115, 88 S.Ct.
258, 262 (1967). Later Supreme Court cases reaffirmed this rule.
United States v. Tucker, 404 U.S. 443, 92 S.Ct. 589 (1972); Loper
v. Beto, 405 U.S. 473, 92 S.Ct. 1014 (1972).
This Court addressed the Burgett rule in Spiegel v. Sandstrom,
637 F.2d 405 (1981). Defendant Spiegel’s petition for habeas
relief from a state conviction was granted by a federal district
court. The state appealed. Spiegel argued his sentence in a trial
for aggravated battery was enhanced because of a prior
constitutionally invalid conviction for bribery, and that the
prosecutor at trial prejudiced Spiegel by asking him if he had ever
been convicted of a felony. At the time of trial, the earlier
conviction was pending on appeal.
After Spiegel was convicted of battery, his bribery conviction
was overturned on two grounds. First, the Florida Court of Appeals
found Spiegel was denied effective assistance of counsel in
violation of the Sixth Amendment. Second, the appeals court stated
illegally seized evidence was impermissibly introduced against
Spiegel in violation of his Fourth Amendment rights. Spiegel was
retried for battery and acquitted. This Court held the district
court had properly granted habeas relief because the
constitutionally infirm conviction should not have been used
10 against Spiegel.
The Spiegel Court stated:
We perceive a major distinction between a prior conviction appealed on non-constitutional grounds and one, as here, appealed on the ground of violation of a Sixth Amendment right to counsel. . . .Here, Spiegel’s guilt or innocence rested on his credibility. . . .[H]e was the sole witness to testify in his behalf. The Federal district court determined that manifest and undue harm was done to Spiegel through the introduction of his prior unconstitutional conviction. . . .
Spiegel, 637 F.2d at 407.
Carney argues that since the Texas Supreme Court found he was
not given notice of the contempt motion or exactly how he was
guilty of contempt, a violation of his due process rights, this
Court should find that use of an invalid conviction obtained in
violation of constitutional rights other than the Sixth Amendment
was error for which Carney deserves a new trial. The conviction
was not overturned for a technical error, but because of a
substantive violation of his constitutional rights. He argues his
credibility was of central importance at his trial, since the jury
was forced to decide in several instances whether to believe Carney
or the Government’s witnesses. When he was made to appear a liar
on cross examination, his character for veracity was impugned
beyond repair.
The Government claims that Carney is not entitled to a new
trial despite the introduction of an invalid conviction for
numerous reasons. It first argues Carney waived his right to
appeal the use of the conviction since he introduced it in direct
examination, relying on United States v. Williams, 939 F.2d 721
11 (9th Cir. 1991), Shorter v. United States, 412 F.2d 428 (9th Cir.
1969), cert. denied, 396 U.S. 970 (1969), and United States v.
Cobb, 588 F.2d 607, 613 (8th Cir. 1978), cert denied, 440 U.S. 947
(1979).
However, the Fifth Circuit has held a party is not prohibited
from introducing evidence in direct examination when the trial
court has already ruled the evidence may be introduced on cross
examination. Reyes v. Missouri Pac. R.R. Co., 589 F.2d 791 (5th
Cir. 1979). Plaintiff Reyes unsuccessfully attempted, through a
motion in limine, to keep certain evidence excluded from trial.
Anticipating introduction of the evidence by the defense, and “[i]n
an attempt to minimize the damaging effects of his prior
convictions, Reyes brought them out on direct examination.” Id. at
793. On appeal, the defense argued Reves waived error by himself
introducing evidence of the prior convictions. This Court refused
to accept that argument, stating, “After the trial court refused to
grant Reyes’ motion in limine to exclude the evidence, he had no
choice but to elicit this information on direct examination in an
effort to ameliorate its prejudicial effect.” Id. at 793 n.2.
Following our Reyes holding, we decline to agree that when
opposing counsel obtains a ruling allowing it to introduce damaging
evidence on cross, the affected party who attempts to anticipate
that negative evidence waives his right to object to the
introduction of that testimony by himself raising it. Clearly, no
defendant would introduce damaging testimony unless he feared he
would be more injured by the jury first hearing of that evidence
12 from the prosecution. When the Government obtains a ruling in
advance allowing it to introduce prior conviction evidence, the
defendant is faced with a difficult dilemma: to refrain from
testifying in his own defense, or risk impeachment by the opposite
side. A holding that, under these facts, a defendant who testifies
in anticipation automatically waives his right to object to a trial
court’s ruling admitting the damaging evidence goes against basic
notions of fairness. Therefore, when the prosecution obtains, over
objection, a ruling in limine that it may use evidence of an
earlier conviction if the defendant testifies, the defendant who
introduces evidence of the conviction, later found to be
constitutionally infirm, in direct examination in an effort to
ameliorate the highly prejudicial effect of that evidence, should
not be deemed to have waived objection to the erroneous
introduction of such evidence.
The Government next relies on United States v. Galvan-Garcia,
872 F.2d 638 (5th Cir. 1989), cert denied, 493 U.S. 857 (1989), for
the proposition that when a defendant attempts on direct
examination to explain an earlier conviction, he may be cross
examined on those facts. Id. at 640-41. However, that case shared
none of the circumstances of Carney’s case. First, Defendant
Galvan-Garcia failed to object to the admission of evidence of a
prior conviction at trial. The asserted evidentiary error was only
reviewed for plain error. Second, the Government did not
affirmatively seek a ruling allowing it to use the conviction,
necessitating introduction by the defense of the damaging testimony
13 on direct. Third, and most important, the defendant was not
impeached by the use of a constitutionally invalid conviction. The
defendant suffered no manifestly unjust treatment from admission of
a conviction that was properly admissible under Fed.R.Evid. 609,
that he failed to object to at trial, and that he introduced on
direct.7
The Government contends even if we find admission of Carney’s
contempt conviction erroneous, no new trial is required since the
rule of Loper, that constitutionally invalid convictions may not be
used to impeach a testifying defendant, has been subjected to a
harmless error analysis. The Government argues it had such a
plethora of evidence against Carney, the use of the invalid
conviction against him at trial was not meaningful. We disagree.
The Government used the contempt judgment and the findings made in
connection with it as an integral part of its cross. As such, we
cannot find the admission of the conviction to impeach Carney did
not affect his substantive rights.
The Government avers that the rule of Burgett and Spiegel only
applies to prior convictions obtained in violation of a defendant’s
7 Insofar as Galvan-Garcia suggests that a defendant waives any objection to the introduction of impeachment evidence when he offers evidence of prior convictions on direct examination, following an adverse ruling on a motion in limine concerning the admissibility of such prior convictions, we decline to follow that suggestion. See Galvan-Garcia, 872 F.2d at 640. As we have already explained, our decision in Reyes holds that a motion in limine is sufficient to preserve error for appeal under such circumstances, and we reaffirm that holding today. See Reyes, 589 F.2d at 793 n.2; accord Coursey v. Broadhurst, 888 F.2d 338, 341 n.3 (5th Cir. 1989); Petty v. IDECO, 761 F.2d 1146, 1152 n.3 (5th Cir. 1985), superseded on other grounds, Green v. Bock Laundry Mach. Co., 490 U.S. 504 (1989).
14 Sixth Amendment rights, and that a conviction invalidated for any
other reason may be used against a defendant. We disagree. The
rational of Burnett and Spiegel is equally applicable to this
constitutional infirmity arising from lack of notice.
At oral argument, the Government cited the recent Supreme
Court decision in Custis v. United States, 511 U.S. 485, 114 S.Ct.
1732 (1994) as further support for its position the invalid
conviction was properly introduced against Carney. The Court held
only defendants whose conviction was obtained in violation of their
right to counsel could attack the validity of the earlier
conviction at a later proceeding. However, Custis only addresses
the right of a defendant in a federal sentencing proceeding to
collaterally attack the validity of prior state proceedings. That
case did not stand for the proposition that no inherent prejudice
results when a constitutionally infirm conviction is used to
impeach a defendant, so that the use of any constitutionally infirm
conviction other than one obtained in violation of the right to
counsel is per se acceptable.
The Government also refers us to Smith v. Collins, 964 F.2d
483 (5th Cir. 1992). Defendant Smith was impeached with several
convictions found to be void because the indictments contained
technical defects. This Court stated that since the factual
reliability of the convictions was not in question, and since Smith
never claimed he was innocent of the charges, there was no
reversible error. We then distinguished the facts in Smith from
those in Loper: “the use of the void convictions in Loper ‘might
15 well have influenced the outcome of [that] case’ because the issue
of innocence and guilt ‘turned entirely on whether the jury would
believe the testimony. . .of Loper.’” Smith, 964 F.2d at 486
(quoting Loper v. Beto, 405 U.S. 473, 480 (1972)). Carney’s case
is far closer to that in Loper than in Smith. Carney protested his
innocence against the charges of contempt. The Government relied
heavily on the contempt conviction to cast doubt on Carney’s
character and truthfulness. As in Loper, the evidence against
Carney was hardly overwhelming. Carney’s word was an important
part of his defense, and when the Government attacked him with the
invalid conviction, Carney lost much of his credibility with the
jury.
Finally, the Government states the conviction should have come
in as probative of Carney’s modus operandi of stalling and
confusing investors. This argument is without merit. If the
Government’s position were allowed in this particular case, it
would in effect be permitted to use circumstantial evidence of
guilt to prove Carney’s alleged ultimate crime. The limited
allowances of Fed.R.Evid. 404(b) do not extend as far as the
Government asks us to go.
Evidence of the contempt conviction was wrongly admitted
against Carney, and merits reversal and remand for a new trial.
II.
Defendant Fisher appeals the trial court’s refusal to grant
him severance once evidence of Carney’s contempt conviction was
16 introduced to the jury.
Fisher and Carney were indicted together, and tried together,
for the same offenses. The two defendants attempted to present a
uniform defense. During his opening statement, Fisher’s attorney
told the jury that Fisher and Carney’s conduct was so connected the
acts of both defendants should be considered collectively.8
Fisher’s attorney made these statements before he was aware the
contempt conviction would be used against Carney.
After Carney testified on direct examination to his contempt
conviction, Fisher unsuccessfully moved for a severance because of
the introduction of such evidence before the jury. The devastating
cross of Carney followed. At the close of evidence, co-defendant
Hughes also moved for a severance. Because Fisher’s attorney filed
a motion before trial to adopt the motions and memoranda of co-
defendants, both motions inured to his benefit to preserve the
alleged error for appeal. United States v. Bernal, 814 F.2d 175,
182 (5th Cir. 1987).
Fisher argues that the introduction of the void contempt
conviction against Carney caused a prejudicial spillover effect to
Fisher’s right to a fair trial and to his right to be judged
independently by the jury. He cites Zafiro v. United States, 113
S.Ct. 933 (1993) for the proposition that severance was proper in
8 In opening statements, Fisher’s attorney told the jury:
Carney and Fisher’s conduct, or lack of conduct, are intertwined about a hundred percent. It has to do with Fisher, it has to do with Carney. If it has to do with Carney, it has to do with Fisher. That’s all there is to it.
17 his case. The Court there stated:
[A] district court should grant a severance under Rule 14 only if there is a serious risk that a joint trial would compromise a specific trial right of one of the defendants, or prevent the jury from making a reliable judgment about guilt or innocence. Such a risk might occur when evidence that the jury should not consider against a defendant and that would not be admissible if a defendant were tried alone is admitted against a codefendant. For example, evidence of a codefendant’s wrongdoing in some circumstances erroneously could lead a jury to conclude that a defendant was guilty.
Id. at 938. Fisher contends that the contempt conviction and the
acts constituting the alleged contempt would not have been
admissible in evidence if Fisher had been tried separately from
Carney, and that the jury could have attributed Carney’s apparent
wrongdoing to Fisher. Fisher argues the apparent prejudice at the
introduction of the contempt conviction was such he is entitled to
a new trial.
The Government responds that whether to sever defendants is a
matter within the trial court’s discretion, and a denial of
severance is only reviewable for abuse of that discretion. United
States v. Faulkner, 17 F.3d 745, 758 (5th Cir. 1994), cert denied,
115 S.Ct. 193 (1994). Reversal is only warranted when the
appellant can show compelling prejudice the trial court could not
protect against--the rule, not the exception, is that persons
indicted together should be tried together. United States v.
Pofahl, 990 F.2d 1456, 1483 (5th Cir. 1993). “[T]he mere presence
of a spillover effect does not ordinarily warrant severance.” Id.
As well, a limiting jury instruction, such as one instructing the
jury to consider each defendant separately, is often sufficient to
18 cure any risk of prejudice. Zafiro, 113 S.Ct. at 938-39.
Since we hold the invalid conviction should never have been
introduced in this trial, we hold that even though midtrial
severance is an extraordinary measure, warranted in very few cases,
the damaging impeachment of Carney with an invalid conviction so
poisoned the entire trial against both defendants as to render the
verdict against Fisher suspect. Since Fisher’s counsel announced
to the jury Fisher and Carney had considered their actions to be
intertwined, the destruction of Carney’s credibility irreparably
harmed Fisher. The instructions the jury received to consider each
defendant and offense separately before returning a verdict were
insufficient to protect Fisher.9 Midtrial severance is an
extraordinary measure, but as we believe the introduction of the
invalid conviction against Carney was egregiously wrong, and since
it could not have been admitted against Fisher if they had been
separately tried, we find that Fisher was entitled to a severance
when that evidence came in against his partner and co defendant.10
9 The jury instruction stated in part:
[T]he case of each defendant should be considered separately and individually. The fact that you may find one or more of the defendants guilty or not guilty of any of the crimes charged should not control your verdict as to any other crime or any other defendant. You must give separate consideration to the evidence as to each defendant. 10 Our conclusion that Fisher was entitled to a separate trial, under the unique circumstances of this case, does not signal a retreat from the general principle that the mere “spillover” effect of damaging evidence introduced against one defendant is insufficient to warrant the severance of other defendants. See e.g. United States v. Broussard, 80 F.3d 1025, 1037 (5th Cir.), cert. denied, 117 S.Ct. 264 (1996); United States v. Mitchell, 31 F.3d 271, 276 (5th Cir.), cert. denied, 115 S.Ct. 455 (1994);
19 III.
Fisher alleges that Count One of the indictment alleged four
separate and distinct conspiracies, and was therefore duplicitous
under Fed.R.Crim.P. 8(a) and should have been dismissed. He moved
before trial to dismiss Count One for this reason, but the district
court informed him it would cure the error in the jury
instructions. Fisher apparently felt the instruction was
insufficient to cure any error, and argues that a duplicitous
indictment subjected him to prejudice in obtaining appellate review
and the prevention of double jeopardy, and risked a non-unanimous
jury verdict.
A conspiracy may have more than one object without making the
indictment alleging that conspiracy duplicitous. United States v.
Duvall, 846 F.2d 966, 975 (5th Cir. 1988).
[A] single count may be used where those actions “represent a single, continuing scheme,” provided the indictment (1) notifies the defendant adequately against the charges against him; (2) does not subject the defendant to double jeopardy; (3) does not permit prejudicial evidentiary rulings at trial; and (4) does not allow the defendants to be convicted by a nonunanimous jury verdict.
United States v. Baytank (Houston), Inc., 934 F.2d 599, 609 (5th
Cir. 1991). However, “[i]f an indictment is duplicitous and
prejudice results, the conviction may be subject to reversal.” Id.
Pofahl, 990 F.2d at 1483. To the contrary, the Supreme Court has instructed us to consider the risk of prejudice on a case-by-case basis. Zafiro, 506 U.S. at 539. Therefore, although we conclude that Fisher has demonstrated “compelling prejudice” warranting reversal of his conviction, see Pofahl, 990 F.2d at 1483, we limit our holding to the extraordinary circumstances of this case.
20 at 608.
Fisher only alleges he was prejudiced by subjection to double
jeopardy and conviction by a nonunanimous jury verdict. The
indictment against Fisher did not subject him to double jeopardy.
The classic test for resolving issues of double jeopardy was set
out by the Supreme Court in Blockburger v. United States, 284 U.S.
299 (1932). Blockburger directs that double jeopardy concerns are
not raised if each crime charged requires an element of proof the
other crimes charged do not. Id. at 304. The Supreme Court
recently reaffirmed this “same elements” test, stating that “where
the two offenses for which the defendant is punished or tried
cannot survive the ‘same elements’ test, the double jeopardy bar
applies.” United States v. Dixon, 113 S.Ct. 2849, 2856 (1993).
This Court has also relied frequently on the Blockburger test.
United States v. Gonzales, 40 F.3d 735, 738 n.5 (5th Cir., 1994);
Bias v. Ieyoub, 36 F.3d 479, 480.11
11 Several years ago, in United States v. Marable, 578 F.2d 151 (5th Cir. 1978), this Court first set out a test to resolve when an indictment risks exposing a defendant to double jeopardy. That test asked “whether the proof for charges in a second indictment would have been admissible in the first trial and would have supported a conviction.” United States v. Robin, 693 F.2d 376, 378 (5th Cir. 1982) (citing Marable, 578 F.2d at 153.) In 1980, however, this Court, in an en banc decision, discredited the analysis in Marable, holding the better interpretation of Blockburger is one that focuses “on the elements of the offense charged, not on the evidence adduced at trial.” United States v. Rodriguez, 612 F.2d 906, 919 (5th Cir. 1980) (en banc), aff’d, 450 U.S. 333 (1981), overruled on other grounds, United States v. Michelena-Orovio, 719 F.2d 738, 757 (5th Cir. 1983) (en banc), cert. denied, 465 U.S. 1104 (1984). For that reason, we feel the Blockbuster “same elements” test is the test we should use to resolve Fisher’s claim. We recognize that this Court has cited the Marable test even after Rodriguez was decided. Robin, 693 F.2d at 378. However, the abundance of
21 Under the “same elements” test, the indictment did not subject
Fisher to double jeopardy. Each part of the conspiracy charged in
Count One required proof of its own element. No double jeopardy
concerns were raised.
The danger of a nonunanimous jury verdict may be avoided by
proper jury instructions. Baytank, 934 F.2d at 609. The judge
instructed the jury on the burden of proof the Government was
required to meet before they could find the defendants guilty. The
judge also gave the jury a specific instruction that while they
need not find the defendants committed each of the five offenses
alleged in the indictment, they must unanimously agree the
defendants committed at least one of the five offenses alleged to
have made up the conspiracy. The jury instructions in this case
were sufficient to cure any alleged defect in the indictment.
Fisher has not made the necessary showing of prejudice to
merit reversal on this ground. In Robin, we noted that a
duplicitous indictment is not reversible error if defense
preparation was not affected and the jury’s verdict is unambiguous.
Robin, 693 at 379. We do not find either condition occurred in
this case. Any alleged duplicity in the indictment did not cause
any prejudice and was harmless.
authority endorsing the “same elements” test leads us to believe that is the better standard. We also note that regardless of which test we use, Fisher’s claim fails. Under the Marable test, each element of Count One was supported by adequate, separate evidence, so that none of the evidence could be used as the basis for a future indictment.
22 IV.
Both defendants allege the district court erred when it
refused to admit evidence that the defendants had prevailed in an
arbitration proceeding between themselves and four of the NFL
players seeking to have their USSA shares repurchased. The
defendants argue their success in arbitration showed the legitimacy
of their position the athletes had breached their contracts with
USSA and were not entitled to repurchase contracts. The district
court excluded the evidence under Fed.R.Evid. 402 and 403,
concluding the risk of confusing and misleading the jury with the
evidence outweighed its probativity.
This evidence was highly relevant. Evidence that an
arbitration proceeding occurred and that the defendants were not
found obliged to repurchase the Players’ shares goes to the heart
of the case. The objections the Government had to this evidence--
namely, that the arbitrator did not detail his reasons for the
finding, and that the jury might not understand they were not bound
by the arbitrator’s decision--may be pointed out in cross
examination on these subjects and argued to the jury. The
defendants have been found guilty of a crime and sentenced to
substantial jail terms. Evidence that is so relevant must be
extremely prejudicial to warrant its exclusion in these
circumstances. The arbitration results are not so inherently
confusing that the defense should have been prevented from
introducing them.
The Government also argues a civil judgment is not admissible
23 in a criminal case, particularly when the Government is not a party
to both matters. Wharton’s Criminal Evidence, § 669 (14th ed.
1985). However, the arbitration results were not offered to prove
innocence, but to show that contrary to the Government’s
assertions, the defendants’ legal position against the Players was
not a “ruse” or a position taken in bad faith. Also, as the
defense notes, several of the Government’s own witnesses mentioned
the results of other civil litigation against USSA. If civil
actions against the defense where the defense was unsuccessful were
mentioned in testimony, Fisher and Carney should have been allowed
to discuss the results of arbitration they won. It was error to
exclude this evidence.
V.
Michael Tannery, the accountant for Bradley Branson who
mistakenly overpaid USSA by $20,000, testified at trial. He stated
when he tried to obtain a refund of the $20,000 overpayment, Fisher
advised him to take out a loan at Bayside in Branson’s name, and
Fisher and Carney would later repay that loan.
Tannery was the central witness against Fisher on the bank
fraud charge, Count Ten of the indictment. Tannery testified to
the grand jury and again at trial that Brad Branson was aware of
the loan from Bayside when it was requested.
Before trial, Fisher’s counsel had successfully filed a
“Motion for Production of Favorable Evidence,” which included
information affecting the credibility of any person called as a
24 witness by the Government. The Government answered it was unaware
of any Brady12 material at that time. After Tannery testified, the
defendants filed a specific motion seeking Brady material relating
to Tannery. At that point, the Government submitted to the defense
an FBI 302 report from November 1992 of an interview with Bradley
Branson. In that interview, the FBI learned Branson did not
request the loan from Bayside, he did not request Tannery to obtain
a loan, and he was unaware a loan was requested in his name. He
did not know why the loan was requested or how the proceeds were
used. This evidence was directly contradictory to what Tannery
testified to both in the grand jury hearing and at trial. The
Government did not at any point attempt to correct the inconsistent
testimony.
When the defense received the 302 report, on the last day of
trial, Carney’s counsel moved for a mistrial due to the
Government’s failure to provide the information in a timely manner.
The court overruled the motion because it stated it did not think
the report was inconsistent with other testimony, and that no one
had attempted to have Branson appear as a witness, or if Branson
were unavailable,13 to take a deposition for use at trial.
In Brady v. Maryland, 373 U.S. 83 (1963), the Supreme Court
held the suppression by the prosecution of material evidence
favorable to the accused violates due process.
To prevail on a Brady claim, petitioner must prove that
12 Brady v. Maryland, 373 U.S. 83 (1963). 13 Bradley Branson lives in Spain.
25 (1) the prosecution suppressed or withheld evidence (2) which was favorable to the defense and (3) material to either guilt or punishment. Materiality requires the petitioner to demonstrate that “there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different.”. . .[A] reasonable probability is shown when the non-disclosure “could reasonably be taken to put the whole case in such a different light as to undermine confidence in the jury verdict.”
Westley v. Johnson, 83 F.3d 714, 725 (5th Cir. 1996), petition for
cert filed, No. 96-6205 (Sept. 30, 1996)(citations omitted).
Fisher argues that Tannery was the critical witness against
him on Count Ten, a count on which he was found guilty and
sentenced to 87 months in prison. Even though the Government had
been ordered to turn over all evidence that might affect the
credibility of its witnesses before trial began, the Government did
not disclose the report to the defense in time for it to make a
meaningful difference in their trial strategy. Fisher contends no
effort was made to depose Branson or have him appear at trial
because the defense was unaware Branson did not know of the loan
when it was requested, or that Branson had disclaimed Fisher was
responsible for the loan. He argues the information in the 302
report would have severely impeached the credibility of Tannery.
Since Tannery was the key witness against him on Count Ten, and
since Tannery’s believability was critical to a jury finding of
guilt on that count, disclosure of the 302 would have made a
different result reasonably probable, as required to prevail under
Brady and its progeny.
The Government claims that while the 302 did contradict
Tannery’s testimony, Branson’s statements were not material. It
26 argues that the withheld 302 could not have exculpated Fisher or
impeached Tannery on essential issues, and that much other evidence
was presented that proved Fisher’s guilt. For those reasons, the
failure to disclose the 302 did not undermine confidence in the
verdict.
While the 302 would not have directly exculpated Fisher, it
would have severely impeached the testimony of a key government
witness. As Tannery was the essential witness against Fisher on
Count Ten, any evidence tending to discredit his testimony would
have been valuable to the defense. The Government knew of the 302
and that Branson directly contradicted Tannery’s evidence. Had the
defense known of the 302, it could have deposed Branson and had his
testimony contradicting Tannery ready for trial. The Government’s
failure to release this material information to the defense was
error, and should have resulted in a new trial for Fisher.
VI.
Both Fisher and Carney allege insufficient evidence was
produced to support Count Seven of the indictment, making false
statements under 18 U.S.C. § 1014. The indictment alleged Fisher
and Carney submitted an affidavit to the FHLBB which “falsely
stated that no material adverse events or material adverse changes”
occurred with respect to the financial condition of USSA since the
defendants submitted their application to buy Bayside. This
application represented that USSA would be capitalized with
$2,250,000 in equity and $1,000,000 in debt. After submitting the
27 affidavit, however, USSA restructured its capital and increased
equity to $4,000,000, but with $875,000 of that sum subject to
repurchase agreements and no debt. Defendants did not report this
change and contend it was not an adverse event. They certified
that no material adverse change had occurred.
The Government disagrees. It claims that the FHLBB should
have been told this information since demand repurchase agreements
affected the timing of when funds would come due. It points out a
defense witness testified he would want to know about repurchase
agreements in deciding whether to approve an application for change
in control. It then notes the defendants made no provision for
repayment of the sums included in the buy back agreements, creating
a risk of bankruptcy. The fact that equity was increased and debt
decreased does not end the inquiry.
“To overturn the convictions on a sufficiency of the evidence
challenge, we must find that a rational trier of fact could not
have found that the government proved the essential elements of the
crime charged beyond a reasonable doubt.” United States v.
Jimenez, 77 F.3d 95, 97 (5th Cir. 1996). When we view the evidence
in this light, we cannot find the verdict so unsupported as to
merit reversal. The change in capitalization created, in effect,
a sizable debt payable on demand. No provision was made for
repayment of this debt. This created a danger that several
investors would seek repayment at the same time and drain Bayside
of operating capital. While we are sympathetic to the impact of
FIRREA on Bayside, the fact that Bayside was unable to repay its
28 liabilities when investors sought to exercise repurchase options
illustrates the dangers inherent in these liabilities. There was
sufficient evidence to support the verdict on these counts. The
information withheld was adverse.
CONCLUSION
As we find the district court erred and reverse its decision,
we do not reach the remaining contentions on appeal. We REVERSE
Appellant’s convictions, VACATE their sentences and REMAND.