United States v. Scheer , 168 F.3d 445 ( 1999 )

PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
_______________
U.S. COURT OF APPEALS
No. 96-4225 ELEVENTH CIRCUIT
_______________ 2/25/99
THOMAS K. KAHN
D. C. Docket No. 87-6034-CR-HOEVELER CLERK
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
DANA SCHEER,
Defendant-Appellant.
______________________________
Appeal from the United States District Court
for the Southern District of Florida
______________________________
(February 25, 1999)
Before EDMONDSON and BIRCH, Circuit Judges, and LAWSON*, District
Judge.
*
Honorable Hugh Lawson, U. S. District Judge for the Middle District of Georgia, sitting
by designation.
BIRCH, Circuit Judge:
Dana Scheer appeals his convictions for misapplication of
bank funds, 18 U.S.C. §§ 2 and 657, and making false statements
for the purpose of influencing a financial institution, 18 U.S.C. §§
1014 and 2. Scheer’s trial and convictions arise from his
participation in a series of transactions that culminated in the
insolvency of the Sunrise Savings and Loan Association. In this
appeal, Scheer raises numerous issues concerning the fairness of
his trial, several of which relate to alleged prosecutorial
misconduct. Having reviewed the record with respect to each of
these claims, we conclude that Scheer’s claim regarding
prosecutorial intimidation of a witness sufficiently undermines our
confidence in the integrity of Scheer’s trial and in the verdict to
warrant reversal of Scheer’s convictions and, therefore, remand
this case for a new trial.1
1
Because we set aside Scheer’s convictions based on this single issue, we decline to
address the other enumerations of error that Scheer raises on appeal.
2
I. BACKGROUND
The facts surrounding the formation and eventual failure of
Sunrise Savings and Loan Association (“Sunrise”) have been
detailed extensively in several of our prior opinions, see, e.g.,
United States v. Foxman, 87 F.3d 1220 (11th Cir. 1996) and
United States v. Jacoby, 955 F.2d 1527 (11th Cir. 1992). We
briefly summarize the facts and allegations relevant solely to the
charges against Scheer and the specific issues raised in this
appeal: In 1984, the year in which most of the events pertinent to
this action transpired, Scheer worked as an associate at the law
firm of Blank, Rome, Comiskey, and McCauley (“Blank, Rome”).
Scheer’s immediate supervisor at that time was Kenneth
Treadwell, a partner at Blank, Rome. Among his duties as an
attorney, Scheer routinely handled real estate closings on behalf
of Sunrise, which had been founded by another Blank, Rome
partner, Michael Foxman. In 1984, Robert Jacoby was the
president and chairman of the board of directors at Sunrise. Early
3
in that same year, Sunrise’s board of directors entered into a
supervisory agreement with the Federal Savings and Loan
Insurance Corporation (FSLIC) and the Florida Comptroller’s
Office pursuant to which, inter alia, all future Sunrise loans
exceeding a specified amount would require board approval and
“specific supporting documentation demonstrating compliance
with underwriting and credit requirements.” Jacoby, 955 F.2d at
1531.
William Frederick and Thomas Moye were co-owners of
Commercial Center Development Corporation, a real estate
company that developed commercial properties. Frederick and
Moye began borrowing money from Sunrise in 1980 and, over the
course of the next five years, Sunrise became their exclusive
lending institution. By 1983, Frederick and Moye had fallen
behind substantially on the interest payments on their loans but,
to maintain the appearance that the accounts were current,
obtained additional loans through overdrafts, or unsecured lines of
4
credit, that were approved by individuals within Sunrise. By the
summer of 1984, Sunrise had loaned Frederick, Moye, and their
business concerns over $150 million. At the same time, Sunrise’s
outside auditors discovered that Frederick and Moye’s personal
accounts collectively were overdrawn by more than $4 million. As
a result, the auditors advised Jacoby that, unless the overdrafts
were satisfied by August 30th, the auditors would not certify
Sunrise’s financial statements for that fiscal year. R34 at 2911.
According to testimony adduced at trial, Jacoby, Frederick, and
several other individuals associated with Sunrise2 discussed
various options for eliminating the Frederick and Moye overdrafts.
See R34 at 2913. The participants at the meeting agreed that
Sunrise would extend loans in the amount of $500,0003 to various
2
Trial testimony from several witnesses consistently showed the following individuals to
have been present at this meeting: Jacoby; Frederick; William Frame, Sunrise’s executive vice-
president for lending operations and a co-defendant at Scheer’s trial; Joseph Taber, also a
Sunrise executive vice-president; Thomas Skubal, a Sunrise Mortgage Corporation vice-
president; and Ron Berkovitz, a representative from Alpha Capital Group, which arranged
financing for developers. See e.g., R39 at 3579; R34 at 2912.
3
According to the government’s theory of the case at trial, setting the amount of the loans
at $500,000.00 or less enabled the various individuals who implemented this plan to circumvent
both the documentation required by the supervisory agreement and the requirement that the loan
5
personal acquaintances or relatives of those attending the
meeting; these borrowers would use the funds to purchase
property from Frederick and Moye, who would in turn use those
proceeds to cover the overdrafts in their accounts with Sunrise.
The borrowers chosen for these transactions were Charles
Powell, an associate of Ron Berkovitz at Alpha Capital Group;
Virginia Valosin, Frederick’s cousin and employee; and Meryl
Wood, Frederick’s yacht broker. According to the testimony of
Taber, at the conclusion of the meeting Jacoby requested that
those present “get it done.” Id. at 2918. It is undisputed that on
August 30th and 31st, Sunrise extended lines of credit for real
estate, guaranteed by Frederick, to Meryl Wood, Charles Powell,
and Virginia Valosin, and that Scheer acted as the closing
attorney for these transactions (“the August 30th transactions”). It
was the government’s contention at trial that the loans to each of
these individuals constituted sham transactions, whereby Powell,
be approved by Sunrise’s board of directors.
6
Wood, and Valosin acted as nominee borrowers to enable
Sunrise to extend further credit (that Sunrise would otherwise be
precluded from extending by virtue of the supervisory agreement)
to Frederick and Moye.
In addition, the government introduced evidence at trial
demonstrating that, subsequent to the August 30th transactions,
Sunrise purchased from Frederick and Moye a property, referred
to by the parties as “Seawalk,” for $13.5 million. See e.g., R34 at
2957. The government argued at trial that Sunrise purchased
Seawalk for more than its fair market value; that this constituted
another attempt to cover the increasingly delinquent interest
payments accruing in Frederick’s and Moye’s accounts with
Sunrise; and that Scheer facilitated this scheme by acting as
closing attorney on the real estate purchase.
The government indicted and prosecuted Scheer for thirteen
counts of conspiracy to misapply bank funds, misapplication of
bank funds, and aiding and abetting the making of false
7
statements on a loan application in relation to both the August 30th
and Seawalk transactions. R1 at 436. After a lengthy trial, the jury
convicted Scheer of conspiracy to misapply bank funds, as well as
two counts of misapplication of bank funds and two counts of
aiding the making of false statements in connection with the
extension of credit to Wood and Valosin on August 30th, 1984; the
jury acquitted Scheer of all counts related to the Seawalk
purchase.
In a post-trial order, the district court set aside the conspiracy
conviction with respect to Scheer (as well as his two co-
defendants) after finding a variance in the indictment and the
proof adduced at trial that substantially prejudiced the defendants.
Specifically, the court determined that the indictment alleged that
part of the conspiracy count involved another savings and loan
institution, referred to by the parties as “Crusader,” in which these
defendants unambiguously never participated and which occurred
prior to their tenure with Sunrise; that the prosecutor argued his
8
intention to “link up” the evidence but, in fact, never showed any
relationship between the events surrounding Crusader and the
evidence that arguably implicated these defendants; and that the
prosecutor made repeated reference to Crusader in his opening
and closing statements and in questions to witnesses,
notwithstanding the fact that—as found by the district court—there
was no connection between Crusader and any of the allegations
regarding Scheer or his co-defendants.
In its order, the district court further remarked upon multiple
instances of prosecutorial overzealousness and excess, see e.g.,
R4 - 817 at 37 (“Apparently, one of the prosecution’s motivations
for introducing Crusader evidence was to prejudice these
defendants by tainting them with crimes in which they played no
role.”); id. at 42 (“The enthusiasm and aggressiveness with which
the prosecution pursued this case . . . ultimately led to excesses,
some, but certainly not all, of which have been outlined.”); id. at
28 (“The vigor and enthusiasm which powers the successful
9
prosecution of those guilty of criminal conduct is commendable
and should be encouraged. We must never, however, sanction
the excesses which result form [sic] unchecked
enthusiasm—excesses which lead to justifications of the type
presented [by the prosecution] here.”). The court, however, found
the evidence sufficient to sustain the remaining convictions
against Scheer for misapplication and false statements in
connection with the August 30th loans to Wood and Valosin.
Prominent among the instances of possible prosecutorial
overreaching described by the district court in its post-trial
memorandum, the court noted that, during the trial, the lead
prosecutor apparently issued a verbal threat to a critical witness,
Robert Jacoby, who testified on behalf of the government. The
district court held a hearing on the allegation and decided that,
although the incident did “appear[] to be an instance of
prosecutorial intimidation of a witness,” id. at 45, the defendants
had not shown that Jacoby had changed his testimony as a result
10
of the threat. Finding no connection between the prosecutor’s
threat and Jacoby’s testimony, the court let the convictions stand.
Although we note that the district court’s handling of this unwieldy
and contentious trial from start to finish was often exemplary, the
following discussion outlines our basis of disagreement with the
court’s disposition of this particular issue.
II. DISCUSSION
Scheer presents his claim of prosecutorial misconduct under
the rubric of Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10
L.Ed.2d 215 (1963). Scheer argues that, in withholding
information regarding the prosecutor’s threatening remarks to a
key prosecution witness, the government failed to divulge material
impeachment evidence that was, in essence, exculpatory by
virtue of its ability to cast substantial doubt on the credibility of the
witness. The facts and allegations underlying this contention are
described briefly below.
11
A. The Conversation Between Jacoby and Genge
Jacoby was on probation when he testified at Scheer’s trial
and at the post-trial evidentiary hearing. At the hearing, Jacoby
testified that, during the week end that intervened between the
first and second day of his testimony, he met with Assistant
United States Attorney Genge and another member of the
prosecution team, David Batlle, to go over his testimony. Jacoby
testified that, during that conversation,
[Mr. Genge] at some point kind of turns to me
and says—he has a funny way of
pointing—kind of points at me and says,
“Now, I know you are going to come through
for us or for me. I know you are going to
come through on that, and if you don’t come
through on that, Tony4 is going to put the
cuffs on you and you are going to be out of
there in 45 seconds.”
He kind of rocks back and smiles. He
may have done it twice, rocked back and
smiles. I turned to David. I looked at Dave,
kind of like, “What is that?” Dave looked at
4
Genge’s reference to “Tony” referred to an agent of the Federal Bureau of Investigation,
Tony Yanketis. See R64 at 27.
12
me. He didn’t smile. He just kind of looked
sheepishly away, and then we went on.
R64 at 81. Jacoby suggested that he inferred from these remarks
that Genge was directing him to state in his testimony that
Jacoby had defrauded Sunrise, see id. at 121, a position that
Jacoby had not taken at his own trial. Jacoby offered conflicting
testimony as to whether he had regarded Genge’s comments as a
threat that had real possible consequences. Jacoby testified that
he had related this entire event to Frame and Thomas Skubal, a
defendant in an earlier criminal proceeding involving Sunrise.
Jacoby suggested, however, that he may have exaggerated his
description of his own response to Genge’s remarks to “mollify,
placate, or in other words, otherwise deal with Mr. Skubal . . .
[who] is a lot more emotionally involved in this case.” Id. at 83.
Later in his testimony, Jacoby stated that he “embellished” the
importance of the event in order to “help” Frame prepare for a
conviction in this case. See id. at 140-42. In response to yet
13
another round of questioning about Jacoby’s perception of
Genge’s remarks, Jacoby testified that “I still don’t think it was a
joking matter in the sense that it is somebody in my spot wouldn’t
take it necessarily as a joke.” Id. at 138-39. Jacoby also offered
the following observations regarding the effect of Genge’s
comments on his trial testimony:
I wasn’t—what is the word? I wasn’t
influenced by it. It did not make me change
my testimony. I didn’t lie because of it. I
didn’t do anything because of it, but it did
upset me, and I would use a different word if I
wasn’t in the court. I thought it was
insensitive, but again that is probably
irrelevant.
Id. at 83.
Jacoby acknowledged in his testimony that, although the
relevant conversation with Genge took place in October, at the
same time he was giving testimony in the case, it is likely that he
did not tell Frame about it until the jury deliberations began in
January. See id. at 109. Jacoby also agreed that he had refused
14
to speak to any of the defendants’ lawyers prior to the evidentiary
hearing and, similarly, had refused to speak to the Justice
Department regarding its earlier investigation of Genge. See id.
at 94-98.
Thomas Skubal, one of Jacoby’s former Sunrise associates,
also testified at the evidentiary hearing. Skubal stated that he had
met with Frame and Jacoby at a bar to discuss business5
sometime during or after the trial. Skubal offered the following
account of what transpired during that meeting:
A: Well, [Jacoby] had told Frame and myself
that Mr. Genge pulled him aside after one of
his days of testimony, and told him that if he
didn’t start cooperating, shaking his finger at
Jacoby, that he would have the FBI Agent
Yanketis take him back to Eglin, or take him
back to prison. I am sorry.
R64 at 27. Skubal testified that Jacoby recounted that Genge
intended for Jacoby to be taken “[o]ff the stand” and back to
5
At time of the hearing, Skubal operated a pool hall located in a shopping center that
Jacoby managed.
15
prison if Jacoby did not “start cooperating.” Id. Skubal further
testified that Jacoby had interpreted the prosecutor’s comment as
a directive to testify that Jacoby had knowingly and intentionally
defrauded the directors of Sunrise and government officials. Id. at
29. Skubal also noted that, in a subsequent conversation held
closer to the time of the hearing, Jacoby told him that “in Mr.
Genge’s mind he may have been joking, but there is no way that
he [Jacoby] took it as a joke.” Id. at 35.6
Frame’s lawyer, with whom Jacoby spoke briefly about the
incident, testified that Jacoby had told him that “any reasonable
person would conclude that what Mr. Genge had said to him was
a threat.” Id. at 69-70. He also stated that Jacoby had indicated
that he would not provide an affidavit describing the incident until
the trial was over. Id. at 70.
6
In addition, Skubal testified that, while in prison together, he and Jacoby had coined an
expression, “the wrath of Genge,” to refer to the fact that “if we did not cooperate with Mr.
Genge, we did not know what was going to happen to us.” Id. at 32.
16
Scheer argues that Genge’s remarks constituted critical
impeachment evidence that the government, by concealing this
incident, withheld from Scheer at the time of the trial. The
potentially exculpatory nature of these remarks derives from the
possibility that Jacoby may have felt compelled to fully implicate
himself, as president of Sunrise, in the knowing, intentional
defrauding of the bank at the risk of having his probation revoked.
The import of such a “confession” would be to fully implicate the
defendant-lawyers, who were admittedly involved in the day-to-
day operations of the bank, as equally knowing participants in
Jacoby’s plan to commit bank fraud. Had Scheer been able to
bring out in his cross-examination of Jacoby the fact that Jacoby
had been intimidated by the assistant U.S. attorney prosecuting
this case, the value of Jacoby’s testimony would have been
considerably diminished.
The government contends on appeal, as it did at the
evidentiary hearing, that Scheer (and his co-defendants)
17
waived this claim by failing to raise it immediately when they
learned of the alleged threats to Jacoby. The district court held
its evidentiary hearing regarding the allegation of prosecutorial
intimidation of Jacoby several months after the trial had
concluded. At that hearing, the defendants’ lawyers indicated to
the judge that, during the third week of jury deliberations, Jacoby
had advised one of the defendants, William Frame, that he had
been threatened by one of the assistant United States attorneys,
Lothar Genge, who was prosecuting the case. Jacoby
subsequently spoke to Frame’s lawyer, who notified the attorneys
for Scheer and the remaining co-defendant, Kenneth Treadwell.
Immediately following the trial, a representative from the law firm
of Treadwell’s lawyer asked the Office of Professional
Responsibility (“OPR”), a division of the United States Department
of Justice, to investigate the allegation. OPR referred the matter
to the Justice Department’s Office of Public Integrity to conduct a
criminal investigation, but the Justice Department declined to
18
press criminal charges against the prosecutor. Before this
investigation had been completed, however, the defendants had
filed with the district court a motion for a new trial based on these
same allegations.
Although we are cognizant both of the duty of a defendant
to bring to the trial court’s attention any perceived violations or
objections that potentially undermine the integrity of the
process and the concomitant probability that the defendant’s
failure to voice these challenges in a timely fashion may result
in waiver, see Watkins v. Bowen, 105 F.3d 1344, 1352 n.16
(11th Cir. 1997), we conclude that the facts of this case militate
against the formulaic application of this well-established
procedural principle. As noted by Scheer’s trial counsel at the
court’s hearing, Jacoby’s communication to one of Scheer’s co-
defendant placed the defendants in a peculiarly difficult
dilemma: On the one hand, they faced the prospect that, by
failing to raise this allegation, they might waive the issue
19
altogether. On the other hand, they also knew that (1) neither
Jacoby nor the prosecutor who allegedly issued the threat
would talk to defense counsel during the trial and, as a result,
there was no way to corroborate the allegation; (2) Jacoby may
have remained genuinely fearful that the prosecutor would
revoke his probation if he testified at an evidentiary hearing
regarding this threat; and (3) this entire trial had been
characterized by a considerable rancor between defense
counsel and the lead prosecutor, thereby rendering potentially
suspect any serious allegations of prosecutorial misconduct
that lacked substantiation or corroboration. See R64 at 15-16.
Bearing these particular facts in mind, it was reasonable for
defense counsel to attempt, in the first instance, to bring the
entire matter to the Justice Department in the hopes of
obtaining truthful testimony from Jacoby without fear of
retaliation or repercussion from the same prosecutor who had
issued the threat.
20
B. The Legal Principles Governing this Case
We determine, at the outset, that some version of the
comments by the assistant U.S. attorney, as described in
various accounts at the evidentiary hearing, actually occurred.
Genge, the assistant U.S. attorney who allegedly made the
remarks, was present at the evidentiary hearing but did not
testify. The government has never argued that the incident did
not occur. The district court, for purposes of its post-trial order,
assumed that the conversation did take place and, after hearing
Jacoby’s testimony at the evidentiary hearing, noted that “[t]he
Court has little doubt that Jacoby construed the prosecutor’s
statement as a threat.” R4-817 at 45. Although we
acknowledge that there are slightly different versions of what
Genge said to Jacoby on this particular occasion, the fact that
this assistant U.S. attorney made a remark to Jacoby that
reasonably could be construed as an implicit—if not an
21
explicit—threat regarding the nature of Jacoby’s upcoming
testimony remains uncontroverted.
As previously noted by both our court and the Supreme
Court “regardless of request, favorable, exculpatory or
impeachment evidence is material, and constitutional error results
from its suppression by the government, if there is a reasonable
probability that, had the evidence been disclosed to the defense,
the result of the proceeding would have been different.” United
States v. Noriega, 117 F.3d 1206, 1218 (11th Cir. 1997) (quoting
Kyles v. Whitley, 514 U.S. 419, 433, 115 S. Ct. 1555, 1565, 131
L.Ed.2d 490 (1995)) (internal markings and quotation marks
omitted). A reasonable probability of a different result is shown
when the government’s evidentiary suppression undermines
confidence in the outcome of the trial. Kyles, 514 U.S. at 434,
115 S. Ct. at 1566 (quotation marks and citation omitted). In the
case of impeachment evidence, a constitutional error may derive
from the government’s failure to assist the defense by disclosing
22
information that might have been helpful in conducting the cross-
examination. United States v. Bagley, 473 U.S. 667, 678, 105 S.
Ct. 3375, 3381, 87 L.Ed.2d 871 (1985). In rejecting any
distinction between impeachment evidence and exculpatory
evidence in the Brady context, the Supreme Court has observed
that “[t]he jury’s estimate of the truthfulness and reliability of a
given witness may well be determinative of guilt or innocence, and
it is upon such subtle factors as possible interest of the witness in
testifying falsely that a defendant’s life or liberty may depend.”
Napue v. Illinois, 360 U.S. 264, 269, 79 S. Ct. 1173, 1177, 3
L.Ed.2d 1217 (1959).
In Hays v. Alabama, 85 F.3d 1492 (11th Cir. 1996), we
explicitly set forth the factors, as established by the Supreme
Court in Kyles, that necessarily must guide our determination as
to the materiality of evidence: First, “‘a showing of materiality does
not require demonstration by a preponderance that disclosure of
the suppressed evidence would have resulted ultimately in the
23
defendant’s acquittal,’” id. at 1498 (quoting Kyles, 514 U.S. at
434, 115 S. Ct. at 1566). “Thus, undisclosed evidence can
require a new trial even if it is more likely than not that a jury
seeing the new evidence would still convict.” Id. Second, “a
defendant need not show there was insufficient evidence to
convict in view of the suppressed evidence.” Id. Third, “there is
no harmless error review of Bagley errors.” Id. Fourth,
“materiality is to be determined collectively, not item-by-item.” Id.(internal citation and quotation marks omitted). We review de
novo the district court’s determination as to whether a reasonable
probability exists that the suppressed evidence would have
change the outcome. Id.We conclude that the district court did not properly apply
either the “materiality” or “reasonable probability” analysis
established by the Supreme Court in Kyles. The district court
found, for instance, that because Jacoby testified that he was
upset but not influenced by Genge’s remarks, “[t]he necessary
24
connection between the prosecutor’s threats and Jacoby’s
testimony, therefore, appears to be absent.” R4-817 at 45. The
court further observed that, even if Jacoby had altered his
testimony in response to a perceived act of intimidation, “other
evidence against Scheer . . . was sufficiently compelling to convict
[him].” Id. Under both Kyles and Hays, however, Scheer need
not prove that Jacoby in fact changed his testimony. Scheer also
is not required to show that, had the government not suppressed
this evidence, other evidence in the case standing alone would
have been insufficient to convict. The relevant inquiry, rather, is
whether the suppression of this information undermines our
confidence in the trial. See Kyles, 514 U.S. at 434, 115 S. Ct. at
1566.
Although an evaluation of whether there is a reasonable
probability of a different result may necessitate an examination of
the other evidence presented at trial, the Supreme Court
25
expressly has disavowed a simple “sufficiency of the evidence”
test in the Brady/Bagley context:
The possibility of an acquittal on a criminal
charge does not imply an insufficient
evidentiary basis to convict. One does not
show a Brady violation by demonstrating that
some of the inculpatory evidence should have
been excluded, but by showing that the
favorable evidence could reasonably be
taken to put the whole case in such a
different light as to undermine confidence in
the verdict.
See Kyles, 514 U.S. at 435, 115 S. Ct. at 1566. (footnote omitted).
Having reviewed the extensive record in this case with
respect to both the trial and the evidentiary hearing held to
explore the relevant Brady violation, we conclude not only that
Genge’s threatening remark to Jacoby constituted material
impeachment evidence but, moreover, that disclosure of this
evidence to Scheer’s counsel would have made a different result
reasonably probable. Our conclusion is informed by the
26
importance and specificity of Jacoby’s testimony, particularly
when compared with that of other prosecution witnesses.
C. Why the Prosecutor’s Undisclosed Remarks are Material and
Exculpatory
Jacoby’s testimony was critically important to the
government’s case. At trial, Jacoby testified that he had
discussed with Scheer the existence of the Frederick overdrafts,
see R. Supp. 5 at 1198; that Scheer had attended meetings at
Sunrise at which possible solutions to the overdrafts were
discussed, see id. at 1276; and that Scheer had given Jacoby
advice regarding federal regulations governing the amount of
credit a bank could extend to a single borrower (the “loan-to-one”
regulations)7, see R. Supp. 8 at 1907. Jacoby also testified that
Joe Taber, a Sunrise executive, had told Jacoby that Scheer had
7
In response to cross-examination revealing that Jacoby had testified at his own criminal
trial that he probably didn’t consult Scheer “much” about loans-to-one borrower regulations,
Jacoby subsequently stated that “I didn’t say I spoke much to him. I said I spoke to him about it,
yes.” R. Supp. 8 at 1907.
27
“chosen the individuals” later allegedly used by Sunrise as
nominee borrowers in the August 30th transactions.8 R. Supp. 5 at
1284. The government also used Jacoby as a vehicle for
introducing a memorandum written by Scheer that the
government suggested, through Jacoby’s testimony, constituted
evidence of Scheer’s efforts to conceal his involvement in the
August 30th transactions. That memorandum, dated August 29,
1984, and addressed to Scheer’s own file, stated, in pertinent
part:
I was requested by Rob Jacoby, in a
telephone conversation on this date, (Rob
Jacoby was in New York) to close each of
these loans. Mr. Jacoby indicated that he
8
Interestingly, Taber did not corroborate this assertion in his own testimony at Scheer’s
trial. In his direct testimony, Taber stated that he had spoken to Scheer on the telephone
regarding the August 30th transactions. According to Taber, Scheer had told him in that
conversation that Scheer was “having a hard time securing Sunrise’s mortgage interest in one of
the properties that was supposed to secure one of the loans.” R34 at 2924. Taber also testified
extensively about a meeting held at Sunrise on August 27th, 1984, that Jacoby attended at which
the plan to create loans to nominee borrowers for the purpose of covering Frederick’s and
Moye’s overdrafts was discussed. On cross-examination by Scheer’s counsel, Taber agreed that
the prospective borrowers (including Valosin, Wood, and Powell) were proposed at that meeting;
that Scheer did not attend the meeting; and that Jacoby “actively participated” in the meeting.
See R37 at 3438-39. Taber also agreed that Jacoby was present when the August 30th borrowers
were chosen. Finally, in response to a direct question as to whether Taber had ever told Mr.
Jacoby “that Dana Scheer picked the borrowers,” Taber responded “No.” Id. at 3440.
28
had presented these loans before executive
committee in evening session, August 28th,
1984, and had received their approval.
Mr. Jacoby indicated that upon his
return to Palm Beach, he would immediately
sign and forward a memo authorizing me to
close these loans, notwithstanding having no
surveys, appraisals, title commitments, utility
letters, permit, opinions of counsel, and
notwithstanding the fact that by making
several of these loans, we might be violating
doing business laws in the State of Maryland
and placing mortgages on parcels which were
not legally able to be subdivided in the event
of foreclosure.
Mr. Jacoby indicated that no board
approval would be necessary for any of these
loans, and that it was necessary to
immediately close as soon as possible.
A letter to file has been dictated by me
and is in Mr. Jacoby’s office awaiting his
return.
R. Supp. 8 at 1927-28. On direct examination, Jacoby read this
memorandum aloud and, in response to the prosecutor’s
questions regarding each paragraph, essentially discredited the
veracity of each statement in the memorandum. For example,
29
Jacoby testified that (1) he did not recall asking Scheer to close
the August 30th loans; (2) he did not believe that he had indicated
to Scheer that he had received the approval of the executive
committee for the loans; (3) he did not subsequently forward to
Scheer a memorandum authorizing the loans; and (4) he did not
receive a letter from Scheer when he returned from his trip to his
office.9 R. Supp. 5 at 1304-07.
Finally, Jacoby offered the following testimony on redirect
examination:
Q: Well, Mr. Jacoby, during the period of time
beginning 1983 and continuing through 1984,
sir, let me just ask you this:
9
It is interesting to note that at Jacoby’s own trial, at which Jacoby sought to shift
responsibility for many of Sunrise’s questionable transactions to bad (or nonexistent) legal
advice from Sunrise’s Blank, Rome lawyers, the government introduced the “Scheer
Memorandum” as evidence that Blank, Rome had acted in good faith with respect to Sunrise;
that Jacoby had not relied on his attorneys’ faulty legal judgment regarding the legality of these
transactions; and that the lawyers at Blank, Rome simply were executing the wishes of their
client, Sunrise. Indeed, it was Jacoby who sought unsuccessfully to exclude the Scheer
Memorandum from evidence at his trial, and the government that prevailed in introducing the
memorandum to demonstrate the law firm’s lack of culpability. Through Jacoby’s testimony at
Scheer’s trial, however, the government sought to demonstrate that, in composing this
memorandum, Scheer had attempted to “cover” his participation in the August 30th transactions
by making it appear that, notwithstanding Scheer’s legal advice to the contrary, Jacoby had
requested that he close the relevant loans.
30
Did you knowingly and intentionally cause
false internal reports, such as loan to one
borrower reports, to be filed at Sunrise. Yes
or no?
A: I participated in that, yes.
Q: And did you do that knowingly and
intentionally?
A: I was conscious of it, yes.
Q: Did you take those actions, sir, with intent
to defraud Sunrise?
A: Some of the actions I took I knew I was
doing something that was not to the benefit of
Sunrise.
Q: Did you know it was wrong?
A: I knew some of it was wrong, yes.
R. Supp. 10 at 2386. Jacoby further testified that he consciously
acted to misapply funds in connection with the August 30th loan
closings; that he intentionally misapplied funds in connection with
the Seawalk purchase. See id. at 2387-88. Jacoby noted that
31
Scheer was “involved” in these wrongful acts, “[m]ore so as to the
August 30th. I am not certain at all as to Seawalk.” Id. at 2388.
Although we do not apply a “sufficiency of the evidence” test
to the testimony of other witnesses at Scheer’s trial, we do note
that the importance of Jacoby’s testimony—and his credibility in
relation to that testimony—cannot be evaluated in isolation from
the less conclusive testimony offered by other witnesses. Several
of the individuals who borrowed money from Sunrise in relation to
the August 30th transactions, denominated by the government as
“nominee borrowers,” testified at Scheer’s trial. Virginia Valosin,
for instance, testified that, on August 31st, 1984, she signed a
series of documents at the office of Commercial Development
Corporation10 that effectively granted to her a line of credit of
$500,000.00. Valosin further stated that, at the time she signed
10
Valosin had gone to the office of Blank, Rome with Moye’s sister, Sandy, on the
previous day, August 30th, at Frederick’s direction, presumably to execute these same
documents. After arriving at the Blank, Rome offices, however, Moye and Treadwell had a
heated argument that caused Moye to inform Valosin that they would have to leave. By the next
day, Moye apparently had changed his mind about Valosin signing the documents necessary to
close the loan. See R40 at 3872-74.
32
these papers, her net worth was approximately $1,000.00; that
she had never actually applied for the loan she received, nor
provided any financial documentation to support the loan; and that
she signed a document stating that she, as the applicant of the
loan, was not acting as an agent or nominee on behalf of another
person, although she knew that this statement was false. On
cross-examination, however, Valosin indicated that she may
not have read most of the documents she signed and that she
assumed the transactions were valid because she trusted
Frederick. See R40 at 3918. In response to Scheer’s inquiry as
to whether Valosin believed that she was actually purchasing
property, identified as the “Greentree parcel,” Valosin stated that
she was familiar with the property in question; that she
understood that she “was borrowing $500,000.00 that would have
been guaranteed by a portion of property that they were
transferring to [Valosin’s] name,” id. at 3920; that she knew that
Frederick had guaranteed the loan; and that Frederick’s
33
guarantee of the loan made her “more secure” in signing the
documents. Id. at 3920-22. During Valosin’s testimony, the
government placed into evidence the closing papers on Valosin’s
loan indicating that Scheer was the closing attorney and had
witnessed Frederick’s signature as guarantor on the loan. Valosin
testified that she had no actual communication or contact with
Scheer regarding the loan documents she had signed. Id. at
3920.
Wood testified that, on August 30th, 1984, he met in a Blank,
Rome conference room with Scheer and Frederick to execute
what he believed to be a valid real estate transaction involving the
extension of credit to Wood for approximately $305,000.00.
Wood testified that Scheer and Frederick instructed him to sign or
initial a stack of documents; that he attempted to read the
documents but was instructed by Scheer, jokingly, to “sign. Don’t
read.” R39 at 3656-57. Wood also testified that, in response to
his request that he receive copies of the documents he had
34
signed, Scheer laughed. See id. Wood stated that, at the time he
signed these loan documents, Scheer knew that Wood was
Frederick’s yacht broker. Id. at 3658-59.
Powell’s account of his August 30th meeting with Scheer
differed sharply from that offered by Wood. Powell, a real estate
broker, testified that at the time he purchased the Frederick
properties, he understood that Frederick would be liable for the
interest on the loan in exchange for Powell giving him the option
to purchase back the property. See R48 at 6011. Powell further
noted that, based on his experience at numerous real estate
closings, this particular closing was not unusual; that Scheer and
Treadwell had suggested that Powell read the documents he was
signing; and that Powell did read the documents and found them
to be satisfactory. Id. at 6017-18. Powell also stated that, at the
time of the closing, he believed that he was receiving free and
clear title to the properties he had purchased. See R49 at 6363.
35
Lucy Holton, a Blank, Rome real estate paralegal, testified
that she had worked closely with Scheer on many real estate
transactions. Holton stated that she had been present during the
real estate closing with Wood but did not elaborate as to her
specific recollection of that meeting. Holton agreed when asked,
however, that Scheer customarily “explain[ed] to borrowers who
were asking questions, to answer their questions about the details
of their loans . . . [and to] give copies to borrowers of their loan
documents.” R33 at 2663-64. During Holton’s testimony, the
government introduced two series of checks pertaining to the
August 30th transactions that bore Scheer’s signatures; the first
set contained the description “Frederick Workout” and the name
of the borrower in the check legend, but this identification, along
with Scheer’s signature, had been removed. The second series
of checks identified in the same space the name of the borrower
and the purchased properties. See id. at 2599. The government
also introduced carbon copies of these checks, in which
36
information in the memorandum section had been crossed out.
See id. at 2607. These carbons did not contain Scheer’s
signature. In response to Scheer’s questions regarding the
duplicate set of checks, Holton testified that she had ordered new
checks from Blank, Rome’s bookkeeping department with respect
to the August 30th transactions to reflect the proper names of the
borrowers; that nobody had told her to obliterate information on
the checks; and that Scheer had never told her to conceal any
information regarding these closings. Id. at 2658-60.11
It is clear that the government presented some testimony
that implicated Scheer in the relevant Sunrise transactions. This
testimony, however, was neither uniform nor overwhelming in
showing that Scheer knowingly misapplied funds; more
importantly, it was not cumulative in relation to Jacoby’s
testimony. Jacoby was central to the government’s case precisely
11
Although many other witnesses testified at the trial of Scheer and his two co-
defendants, we have excerpted or summarized portions of the trial transcript containing
testimony described by both Scheer and the government as highly relevant (and, in some cases,
damaging) to Scheer.
37
because he was an “insider” with respect to each and every
aspect of this case. In theory, Jacoby, as president of Sunrise,
was uniquely positioned to know the precise involvement of each
banker or lawyer in each transaction alluded to by the
government. Moreover, by acknowledging on redirect full
culpability for his conduct at Sunrise (though reluctantly, to be
sure), Jacoby effectively undermined Scheer’s effort to distance
himself from any intentional scheme to misapply funds or to
argue that he was unaware that the loans he had closed were
illegitimate. Finally, Jacoby’s testimony discrediting Scheer’s
memorandum to Jacoby potentially invalidated a piece of
evidence that would have been critical in showing that Jacoby had
requested Scheer to close the August 30th loans notwithstanding
Scheer’s advice to the contrary.
In short, Jacoby was a crucial prosecution witness. Again,
we do not imply that he was the only witness who testified
against Scheer, nor do we suggest that there was not other
38
compelling testimony that could support Scheer’s conviction.
Rather, it is because of the relative importance of Jacoby’s
testimony that we view his credibility to the jurors as so
fundamental to Scheer’s convictions. See Kyles, 514 U.S. at436 115 S. Ct. at 1569 (where Court determined that
government’s non-disclosure of exculpatory statements by
eyewitnesses undermined confidence in verdict, Court
observed that “[d]isclosure of [these] statements would have
resulted in a markedly weaker case for the prosecution and a
markedly stronger one for the defense.”). It is worth observing
that the government chose to begin and end its summation with
a pointed recapitulation of Jacoby’s testimony. Toward the
beginning of his closing statement, Genge discussed in depth
the reasons why the jury should credit Jacoby’s testimony and,
shortly thereafter, read extensive quotations from Jacoby’s
testimony directly implicating Scheer. See R57 at 7777-80.
Genge concluded his summation by reading, again, directly
39
from Jacoby’s testimony, quoted earlier here, in which Jacoby
stated not only that he had acted with intent to defraud Sunrise
but, moreover, that he had done so with the “involvement” of
Scheer and his co-defendants. See id. at 7878-79. Finally,
after completing his reading of relevant portions of Jacoby’s
testimony, Genge stated:
That was Mr. Jacoby. You heard him.
You saw him. It is for you to judge his
testimony and to evaluate it in light of
everything else you have heard in this case.
Was he, is he, did he lie before you? He is
trying to pull the wool over your eyes, or
somebody else?
I respectfully submit to you and I leave
you with this final thought. In assessing Mr.
Jacoby’s testimony, assess his by the same
standards that you are going to apply to Mr.
Powell’s testimony, and if you do that in all
respects, I am confidant that you will return
a true and just verdict in this case and we
cannot ask for anything more. Thank you
very much.
Id. at 7879.
40
It is thus reasonable to infer that the government, too,
viewed both the content of Jacoby’s testimony and his
credibility before the jury as vital for obtaining convictions
against the defendants. At the close of a trial that lasted more
than three months and involved numerous witnesses, it was of
Jacoby’s testimony that the prosecutor sought to remind the
jury as deliberations began.12
For the sake of clarity, we observe, again, that Genge’s
intimidating remarks to Jacoby were potentially exculpatory in
nature because knowledge of this incident would have allowed
Scheer powerfully to impeach the credibility of Jacoby—a
witness whose credibility was central to the prosecutorial effort
here. In fact, the extent to which the jury should credit Jacoby’s
testimony was a recurring theme at different points in the trial.
12
Indeed, it is interesting that Jacoby testified that Scheer was more involved in the
August 30th loans than in the Seawalk purchase and, consistent with this characterization, the
jury convicted Scheer of the August 30th transactions but acquitted him of any involvement in
Seawalk. Similarly, Jacoby testified that one of Scheer’s co-defendants, Treadwell, was less
involved in the August 30th loans but very involved in Seawalk; the jury convicted Treadwell of
the events surrounding Seawalk but acquitted him of the August 30th deals.
41
Jacoby testified repeatedly that he had been given immunity
from future prosecution if he testified truthfully at Scheer’s trial,
but had no other agreement with the government in exchange
for testimony. Jacoby testified extensively as to false
statements he had given at his own trial, see R. Supp. 6 at
1428-32, and conceded that Genge had referred to him as “a
brazen perjuror” in a sentencing memorandum, id. at 1563.
Jacoby testified that, although he hoped his testimony at
Scheer’s trial would result in a reduction in his probation,
neither he nor his lawyers had, thus far, discussed this
possibility with the government. See R. Supp. 7 at 1644-45. In
the context of Jacoby’s testimony before the grand jury, Jacoby
also stated that, although he had an expectation that Genge
would report his cooperation to the district court, he was
unaware that he would not get a reduction in sentence without
the government’s support.13 See R. Supp. 6 at 1579. As
13
Jacoby’s assertion that he did not necessarily understand the importance of receiving
government support in obtaining a reduction in sentence or probation strains credulity. Jacoby
42
alluded to earlier, Genge spoke for several minutes during his
closing argument at Scheer’s trial explicitly about Jacoby’s
credibility. As part of his discussion regarding Jacoby’s
credibility, Genge stated, for example:
And also, you will recall Mr. Nathan
[Treadwell’s lawyer] pointed out for you that
at Mr. Jacoby’s sentencing, I referred to him
or I characterized his own testimony at his
trial as perjurious and I characterized him
as a perjurious witness at that point.
And Mr. Nathan is going to make a big
issue out of that, but again, ultimately, it
isn’t. That’s sort of a side issue in a sense,
because ultimately it is important for you to
determine whether Mr. Jacoby testified
truthfully before you in this case. That’s
going to be for you really to decide.
Now, clearly, I mean, Mr. Jacoby did
commit perjury at his first trial and no one
can condone that, but I think we can all to
some extent perhaps understand that
someone is going to lie to protect himself,
but will that person also like [sic] under oath
had already received a substantial reduction in his sentence after the government filed a motion
under Federal Rules of Criminal Procedure 35(b), based on Jacoby’s substantial cooperation. It
is therefore unlikely that Jacoby did not comprehend the crucial role that the government plays
in sentence reductions.
43
to protect—not to protect, but, in fact, to
convict innocent people?
R57 at 7758. Bearing in mind the considerable importance of
Jacoby’s testimony, Jacoby’s credibility thus was a focal point
for both the prosecution and the defense. The prosecution
expressly presented Jacoby as someone who had lied at his
own trial but, in this case, had no reason, motive, or inclination
to lie. The defense, in its attempts to impeach Jacoby’s
credibility, was armed with little more than a reiteration of the
prosecution’s openly acknowledged characterization of Jacoby
as a “brazen perjuror” at his criminal proceeding. Given the
fact that the government had elicited from Jacoby information
regarding his previous history of giving perjured testimony, it
was reasonable for the jury to assume that it now knew the
most damaging available information about Jacoby’s
believability.
44
In reaching a determination that the prosecutor’s remarks
in this instance constituted material impeachment evidence that
affected the integrity of these proceedings, it is important to
emphasize what the case is not about: Although Jacoby
testified under immunity, this case does not involve any other
type of cooperation agreement that Jacoby might have
breached while on the witness stand. Indeed, Jacoby
repeatedly disavowed the existence of any agreement or
promise by the government in exchange for his testimony. To
be sure, Jacoby may have hoped for or expected to derive
some future benefit from giving testimony favorable to the
government, but there was no outstanding agreement between
Jacoby and the government at the time of his testimony. We
reiterate this point for the following reason: Although we do not
countenance prosecutorial threats or intimidation of witnesses
under any circumstances, we do acknowledge that, where a
witness has agreed to cooperate with the government and give
45
certain testimony in exchange for a reduction in sentence or
probation, for instance, but fails to give the proffered testimony,
it would hardly be unusual or inappropriate for the prosecutor to
remind the witness of the terms of their agreement. In this
instance, however, there was no agreement or promise about
which the prosecutor may have been “reminding” Jacoby. The
record is devoid of any reference or indication that Jacoby
reasonably should have feared that his probation would be
revoked entirely based on the nature of his testimony. It is
therefore difficult for us to construe Genge’s comments as
anything other than an attempt to intimidate Jacoby into
testifying “correctly.”
It is also critical to observe that, whether Genge intended
his remark to intimidate Jacoby or, as Jacoby later testified, to
be a “joke” is immaterial to our analysis. The record supports
the inference that Jacoby understood the remark to be a threat,
and we have little difficulty concluding that Scheer could have
46
used this information to undermine the credibility of a witness
whose credibility was already a prominent issue in the case.
Moreover, it is worth noting that the record also supports the
inference that Jacoby had ample reason to take Genge’s
remarks seriously. Jacoby testified at the evidentiary hearing
that he was aware, while in prison, that the government had at
first given Treadwell, a Blank, Rome partner and one of
Scheer’s co-defendants, full immunity in exchange for his
cooperation but, subsequently, revoked the immunity and
indicted him along with Scheer. R64 at 133-34. For purposes
of this discussion, the fact that Jacoby knew—prior to his
conversation with Genge regarding the necessity that Jacoby
provide “cooperative” testimony---that the government had
revoked its promised immunity to Treadwell lends credence to
47
the possibility that Jacoby genuinely was fearful that Genge
could–and might–carry out his threat to return Jacoby to jail.14
In sum, we are convinced that Scheer’s knowledge of the
incident between Genge and Jacoby, at which Genge intimated
that Jacoby’s failure to testify in a “cooperative” fashion might
result in his return to prison, was material information that might
have substantially undermined the critical value of Jacoby’s
testimony. As a result, the government’s failure to
communicate this information to Scheer effectively undermines
our confidence in the integrity of the verdict. See Kyles, 514
U.S. at 434, 115 S.Ct. 1566 (“One does not show a Brady
violation by demonstrating that some of the inculpatory
evidence should have been excluded, but by showing that the
favorable evidence could reasonably be taken to put the whole
case in such a different light as to undermine confidence in the
14
In its post-trial order, the district court found that the government had nullified
Treadwell’s immunity agreement in bad faith and had breached the terms of the agreement. R4-
817 at 20 & 28. Consistent with this determination, the court reinstated Treadwell’s immunity
and dismissed the indictment against him.
48
verdict.”). Had Scheer been able to use knowledge of this
incident to impeach the credibility of this critically important
witness, whose credibility had already been called into question
by the government, there is a reasonable probability that the
outcome of the proceeding would have been different.
III. CONCLUSION
Scheer asks that we set aside his convictions for
misapplication of bank funds and making false statements on
an application for funds to a bank. Having reviewed the
extensive record in this case, we conclude that the prosecutor’s
potentially intimidating remarks to a critical government witness
undermines our confidence in the verdict such that, had
information regarding this incident been known to Scheer at the
time the incident allegedly occurred, there is a reasonable
probability that the result of the proceeding would have been
49
different. We therefore REVERSE Scheer’s convictions and
REMAND this case for a new trial.
50