United States v. Dupree, Watts , 620 F. App'x 49 ( 2015 )

13-2314(L)
United States v. Dupree, Watts
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007,
IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC
DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for
2 the Second Circuit, held at the Thurgood Marshall United States
3 Courthouse, 40 Foley Square, in the City of New York, on the
4 28th day of July, two thousand fifteen.
5
6 PRESENT: JON O. NEWMAN,
7 DENNIS JACOBS,
8 REENA RAGGI,
9 Circuit Judges.
10
11 - - - - - - - - - - - - - - - - - - - -X
12 UNITED STATES OF AMERICA,
13 Appellee,
14
15 -v.- 13-2314(L)
16 14-1651(CON)
17 COURTNEY DUPREE, RODNEY WATTS,
18 Defendants-Appellants.*
19 - - - - - - - - - - - - - - - - - - - -X
20
21 FOR APPELLANT DUPREE: Courtney Dupree, pro se,
22 Otisville, New York.
23
24 FOR APPELLANT WATTS: MARION BACHRACH (with Andy S. Oh,
25 on the brief), Thompson & Knight
26 LLP, New York, New York.
*
The Clerk of Court is directed to amend the case
caption as above.
1
1 FOR APPELLEE: CATHERINE M. MIRABILE (with Peter A.
2 Norling, on the brief), for Kelly T.
3 Currie, Acting United States Attorney
4 for the Eastern District of New York,
5 Brooklyn, New York.
6
7 Appeal from judgments of the United States District Court
8 for the Eastern District of New York (Matsumoto, J.).
9
10 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED AND
11 DECREED that the judgments of the district court be AFFIRMED.
12
13 In these consolidated appeals, Courtney Dupree and Rodney
14 Watts appeal from judgments of the United States District Court
15 for the Eastern District of New York (Matsumoto, J.),
16 sentencing Dupree chiefly to 84 months’ imprisonment and Watts
17 chiefly to 37 months’ imprisonment, after respective juries
18 found them guilty of one count each of bank fraud; two counts
19 each of false statements on a loan application; one count of
20 conspiracy to commit bank fraud as to Dupree; and one count of
21 conspiracy to commit bank, mail, and wire fraud as to Watts.
22 We assume the parties’ familiarity with the underlying facts,
23 the procedural history, and the issues presented for review.
24
25 This case arises from a loan procured by GDC Acquisitions,
26 LLC, and its subsidiary companies, which are in the businesses
27 of commercial lighting, office furniture, and office supplies.
28 Dupree was GDC’s Chief Executive Officer at all relevant times.
29 Watts was Chief Financial Officer until 2008 and then Chief
30 Investment Officer.
31
32 The evidence showed that, to obtain a loan, GDC and the
33 subsidiaries submitted documents to Amalgamated Bank that
34 misrepresented revenues and assets. The misrepresentations
35 included the booking of fictitious sales and the improper
36 accounting of invoices and receipts in order to inflate
37 accounts receivable. In August 2008, Amalgamated agreed to
38 issue a $21 million loan to GDC’s subsidiaries, with GDC as
39 guarantor. In the ensuing years the companies provided ongoing
40 financial reports, called borrowing base certificates, which
41 incorporated iterations of these misrepresentations.
42
43 Dupree and Watts were tried separately and raise distinct
44 appellate arguments, which we address seriatim.
45
2
1 Dupree’s Appeal
2
3 Dupree, pro se, challenges the sufficiency of the evidence
4 and various evidentiary rulings, and contends that he was
5 framed by the FBI. We review the sufficiency of the evidence
6 de novo, mindful that “a defendant mounting such a challenge
7 bears a heavy burden.” United States v. Harvey, 746 F.3d 87,
8 89 (2d Cir. 2014) (per curiam) (internal quotation marks
9 omitted). We view the evidence in the light most favorable to
10 the government, draw all inferences in the government’s favor,
11 and defer to the jury’s credibility determinations. Id. The
12 jury’s verdict will be sustained if “any rational trier of fact
13 could have found the essential elements of the crime beyond a
14 reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319
15 (1979).
16
17 We affirm for substantially the reasons stated in the
18 district court’s October 26, 2012 order denying Dupree’s post-
19 verdict motions. Many of Dupree’s sufficiency challenges rely
20 on the premise that his companies did not violate the loan
21 agreement’s negative covenant on acquisitions. But Dupree’s
22 convictions can be affirmed regardless of the alleged
23 acquisition, based on the other evidence of Dupree’s
24 involvement in the scheme to defraud.
25
26 When the government charges a scheme to defraud comprising
27 several misrepresentations, it need not prove each
28 misrepresentation. United States v. AMREP Corp., 560 F.2d 539,
29 546-47 (2d Cir. 1977); see United States v. Stirling, 571 F.2d
30 708, 726 (2d Cir. 1978) (“The real question, then, is not so
31 much whether there was sufficient evidence regarding each and
32 every specification but, rather, whether there was sufficient
33 overall proof of the alleged scheme to defraud and
34 conspiracy.”). There was ample evidence that Dupree knowingly
35 caused others to inflate his companies’ assets and income in
36 applying for the loan, and in reports to the bank thereafter.
37
38 The district court did not err in precluding expert
39 testimony about the obligations of the parties under the loan
40 agreement, because, as the district court reasonably
41 determined, that was a question for the jury to resolve. See
42 United States v. Duncan, 42 F.3d 97, 101-03 (2d Cir. 1994).
43
44 Dupree contends that the bank officer who negotiated the
45 agreement testified as an expert; however, that witness
46 provided only his understanding of the agreement’s terms, and
3
1 the court instructed the jury accordingly. Cf. United States
2 v. Ferguson, 676 F.3d 260, 294 (2d Cir. 2011).
3
4 Dupree also argues that the FBI framed him by directing
5 one of his employees to create fake invoices; that the
6 employee’s actions in providing the government with company
7 documents and information amounted to an illegal warrantless
8 search; that the court precluded Dupree from adducing the
9 motive for the FBI’s set-up; and that several witnesses
10 committed perjury. These claims are not supported by the
11 record:
12
13 ! The employee who approached the FBI about the fraud
14 testified that he created fake invoices at Dupree’s
15 direction before as well as after he contacted the
16 FBI. The jury considered and rejected Dupree’s
17 argument that the FBI concocted the scheme and
18 planted false evidence.
19
20 ! The FBI did not use the employee as a government
21 agent to obtain evidence but, rather, instructed the
22 employee to continue his work at the company in the
23 normal course. In any event, Dupree had no
24 legitimate expectation of privacy in the emails in
25 question, which he gave the employee explicit
26 permission to access.
27
28 ! The “perjured testimony” Dupree identifies amounts to
29 mere inconsistencies in the evidence, many of which
30 were brought out to the jurors. Dupree thus takes
31 issue with the jury’s credibility findings. Yet
32 “where there are conflicts in the testimony, we must
33 defer to the jury’s resolution of the weight of the
34 evidence and the credibility of the witnesses.”
35 United States v. Miller, 116 F.3d 641, 676 (2d Cir.
36 1997).
37
38 ! Dupree claims that evidence of the FBI’s motive was
39 improperly precluded, but he never sought to
40 introduce it, and the jury was properly instructed
41 with respect to the FBI’s investigation.
42
43 Watts’s Appeal
44
45 Watts contends that his conviction was based on the
46 invalid theory that he falsely inflated revenues by prematurely
47 counting invoices toward accounts receivable. According to
4
1 Watts, there was nothing inherently unlawful about the practice
2 of “pre-billing,” by which an invoice is recorded as a
3 receivable as soon as the invoice is issued and prior to
4 delivery of the purchased product.
5
6 The government did not argue that a fraud is necessarily
7 perpetrated by inclusion of an invoice in accounts receivable
8 prior to delivery of the purchased product. Rather, the
9 evidence permitted the jury to find that Watts’s conduct with
10 respect to accounts receivable (which went far beyond simply
11 including an invoice prior to delivery of goods) constituted a
12 scheme to defraud the lending bank. Watts’s own accounting
13 expert testified that inclusion of an invoice in accounts
14 receivable implies a reasonable expectation of payment.
15 Similarly, the financial statements submitted to the bank
16 asserted that “[a]ccounts receivable are stated at the amount
17 management expects to collect.” (Gov. Exh. 148 at 6.) Yet the
18 jury heard evidence that Watts and his co-conspirators included
19 invoices in accounts receivable long before payment was, or
20 could reasonably have been, expected. For example, some
21 invoices that were included in accounts receivable were
22 immediately filed away in a drawer in the billing department,
23 rather than actually sent to a customer. Watts and his
24 colleagues would later alter those invoices, forging details
25 post hoc to bring them into conformity with the details of
26 actual sales and deliveries. Agents from the bank and a
27 mezzanine lender testified at trial that they would not have
28 issued the loan had they been aware of these covert pre-billing
29 practices. This evidence supports the government’s theory that
30 the scheme to prematurely and secretly include invoices as
31 accounts receivable was a scheme to defraud the bank, and it
32 permitted the jury to convict Watts.
33
34 For the same reasons, we reject Watts’s challenge to the
35 jury instructions. We review de novo challenges to jury
36 instructions “but will reverse only if all of the instructions,
37 taken as a whole, caused a defendant prejudice.” United States
38 v. Applins, 637 F.3d 59, 72 (2d Cir. 2011) (quoting United
39 States v. Bok, 156 F.3d 157, 160 (2d Cir. 1998)). The
40 defendant bears the burden of showing that the jury charge as
41 issued “misle[d] the jury as to the correct legal standard or
42 [did] not adequately inform the jury on the law,” Bok, 156 F.3d
43 at 160 (quoting United States v. Dinome, 86 F.3d 277, 282 (2d
44 Cir. 1996)), and that his requested instruction, by contrast,
45 “accurately represented the law in every respect,” United
46 States v. Nektalov, 461 F.3d 309, 314 (2d Cir. 2006) (quoting
47 United States v. Wilkerson, 361 F.3d 717, 732 (2d Cir. 2004)).
5
1 Watts requested a charge that his pre-billing conduct was
2 immaterial as a matter of law, or in the alternative, that the
3 loan agreement’s supposed ambiguity (the definition of accounts
4 receivable does not include the word “delivery”) must be
5 resolved in Watts’s favor. The first request was properly
6 denied because, as explained above, the jury was entitled to
7 find that pre-billing was material. The alternative request
8 was properly denied because it was based on the false premise
9 that, simply because the loan agreement did not explicitly
10 define accounts receivable according to deliveries, the loan
11 agreements must be read to contemplate pre-billing. In
12 contrast to these deficient requests, the district court’s jury
13 instructions, viewed as a whole, accurately represented the
14 law.
15
16 Also on the subject of pre-billing, Watts argues that the
17 district court erred by admitting evidence of a 2007 instance
18 of pre-billing, which he insists was irrelevant to the 2008
19 loan. We “review evidentiary rulings for abuse of the district
20 court’s broad discretion, reversing only when the court has
21 ‘acted arbitrarily or irrationally.’” Nektalov, 461 F.3d at
22 318 (quoting United States v. SKW Metals & Alloys, 195 F.3d 83,
23 88 (2d Cir. 1999)). Two witnesses who worked for then-CFO
24 Watts in 2007 testified that he changed or instructed them to
25 change the company’s books to suddenly reflect as accounts
26 receivable three to four million dollars of invoices that were
27 attributable to early-stage orders unripe for invoicing.
28 Another witness testified that she provided the company’s 2007
29 financial data, including accounts receivable, to the bank as
30 part of the loan application. The evidence of the 2007 pre-
31 billing episode therefore presented “a question of conditional
32 relevance.” United States v. Coplan, 703 F.3d 46, 81 (2d Cir.
33 2012); see Fed. R. Evid. 104(b). That is, it was relevant only
34 to the extent the jury could reasonably believe that the
35 premature accounts receivable were later submitted to the bank.
36 Since the jury could reasonably find that condition as fact,
37 the district court did not err.
38
39 Watts further challenges the exclusion of evidence, in
40 particular a spreadsheet from a GDC subsidiary showing invoices
41 issued prior to delivery of goods during a time interval that
42 preceded GDC’s acquisition of the company. Watts attempted to
43 admit the spreadsheet through witnesses who were not competent
44 to attest to its authenticity as a business record.
45 Specifically, Watts’s counsel sought to use the spreadsheet to
46 cross-examine government witnesses who had never before seen
47 the spreadsheet, and who even noted aspects of the spreadsheet
6
1 inconsistent with their memory of the company’s business
2 records. Watts’s counsel eventually put on a witness who
3 testified that she had seen a similar spreadsheet on a
4 colleague’s desk, but could not attest to its contents. The
5 district court therefore admitted the spreadsheet for the fact
6 of its existence but not for the truth of its contents. Our
7 cases call for “a very broad interpretation” of the rules
8 governing qualification of a witness to lay a foundation for
9 admission of business records. United States v. Lauersen, 348
10 F.3d 329, 342 (2d Cir. 2003) (quoting 5 Weinstein’s Federal
11 Evidence § 803.08[8][a] (2d ed. 2003)); see Phoenix Assocs. III
12 v. Stone, 60 F.3d 95, 101 (2d Cir. 1995). This interpretation
13 “favors the admission of evidence rather than its exclusion,”
14 subject to the “principal precondition . . . that the record
15 has sufficient indicia of trustworthiness to be considered
16 reliable.” Phoenix Assocs. III, 60 F.3d at 101 (internal
17 quotation marks and alterations omitted). Even employing this
18 lenient standard, the district court did not abuse its
19 discretion when it limited the purpose for which the
20 spreadsheet could be admitted.
21
22 Finally, Watts raises several issues surrounding unrelated
23 bad acts by a government witness, Frank Patello, who replaced
24 Watts as CFO. Patello allegedly exploited an elderly, sickly,
25 and medicated woman, referred to as “R.A.” On April 12, 2013,
26 R.A.’s son complained to the FBI that Patello had befriended
27 R.A. in order to trick her into distributing money from her
28 IRA--money that her son would otherwise inherit. On April 19,
29 after a cursory investigation that included interviews with
30 Patello and R.A., the government disclosed the complaint
31 pursuant to Giglio v. United States, 405 U.S. 150 (1972).
32 Watts viewed the complaint as impeachment evidence, arguing
33 that Patello was lying to curry favor with the government in
34 hope of avoiding prosecution. The district court allowed
35 Watts’s counsel to cross-examine Patello about this unrelated
36 bad act, but limited the scope of that cross-examination.
37 Among other limitations, the district court barred Watts’s
38 counsel from asking about R.A.’s age and medical state. The
39 district court also prevented Watts’s counsel from calling as a
40 witness R.A.’s financial advisor to rebut Patello’s denial of
41 the exploitation narrative. As to this evidence, Watts argues
42 that: (1) the government violated its obligation under Giglio
43 by stalling unreasonably before disclosing its knowledge of
44 Patello’s bad acts, and (2) the district court erred by
45 limiting the scope of his counsel’s exploration of Patello’s
46 bad acts at trial, such as by limiting his cross-examination
47 and by excluding testimony of the financial advisor.
7
1 We have declined “to specify the extent or timing of
2 disclosure Brady and its progeny [including Giglio] require,
3 except in terms of the sufficiency, under the circumstances, of
4 the defense’s opportunity to use the evidence when disclosure
5 is made.” Leka v. Portuondo, 257 F.3d 89, 100 (2d Cir. 2001).
6 In Leka, for example, the prosecution had evidence favorable to
7 the defense “early on in th[e] case,” id. at 99; nonetheless,
8 until nine days before trial “the prosecution failed to
9 disclose [the evidence], and for a critical time actively
10 suppressed it,” id. at 91. Watts relies on Leka to show a
11 Giglio violation, because he did not know of R.A.’s son’s
12 complaint until ten days before trial. In this case, however,
13 information about Patello was late-breaking even to the
14 government. The government undertook a one-week-long, cursory
15 investigation before disclosing what it knew. After the
16 disclosure, Watts experienced no difficulty in investigating
17 further, including issuance of a subpoena to R.A.’s financial
18 advisor and examining him in a hearing before the district
19 court. The government performed its Brady and Giglio
20 obligations.
21
22 As to the limitations on Watts’s cross-examination and the
23 exclusion of testimony by R.A.’s financial advisor, the
24 district court was entitled to preclude the additional
25 testimony, under Federal Rule of Evidence 403. The extrinsic
26 evidence through the financial advisor would have resembled a
27 mini-trial regarding conduct unrelated to this case, and
28 evidence of R.A.’s frailty would have had little probative
29 value and much risk of prejudice. The district court achieved
30 a sensible compromise, allowing Watts’s counsel to cross-
31 examine Patello without creating a sideshow of R.A.’s personal
32 and familial misfortunes.
33
34 * * *
35
36 For the foregoing reasons, and finding no merit in
37 appellants’ other arguments, we hereby AFFIRM the judgments of
38 the district court.
39
40 FOR THE COURT:
41 CATHERINE O’HAGAN WOLFE, CLERK
42
8