Welsh v. Holt ( 1996 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
RICHARD E. WELSH,
Petitioner-Appellant,
v.
No. 94-7351
GERALD S. HOLT, Sheriff, Roanoke
County, Commonwealth of Virginia,
Respondent-Appellee.
Appeal from the United States District Court
for the Western District of Virginia, at Roanoke.
James C. Turk, District Judge.
(CA-94-33-R)
Argued: December 8, 1995
Decided: February 28, 1996
Before MURNAGHAN, WILLIAMS, and MICHAEL,
Circuit Judges.
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Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Gerald Thomas Zerkin, GERALD T. ZERKIN & ASSO-
CIATES, Richmond, Virginia, for Appellant. Eugene Paul Murphy,
Assistant Attorney General, OFFICE OF THE ATTORNEY GEN-
ERAL, Richmond, Virginia, for Appellee. ON BRIEF: James S. Gil-
more, III, Attorney General of Virginia, OFFICE OF THE
ATTORNEY GENERAL, Richmond, Virginia, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Richard E. Welsh appeals an order of the district court dismissing
his request for habeas relief for failure to state a claim on which relief
can be granted. Welsh pleaded guilty in Virginia state court to viola-
tions of the Virginia Securities Act. See Va. Code Ann. §§ 13.1-501to -527.3 (Michie 1993 & Supp. 1995). On appeal, Welsh presents
three issues for review: (1) whether the Commonwealth of Virginia
proved that it would have prosecuted Welsh using evidence from
sources independent of Welsh's immunized testimony as required
under Kastigar v. United States, 406 U.S. 441 (1972); (2) whether the
trial court's denial of Welsh's motions to recuse denied him due pro-
cess of law; and (3) whether Welsh demonstrated sufficient cause and
prejudice to excuse the procedural default of certain claims. We
affirm the denial of habeas relief.
I.
The facts and procedural history of this case are well-documented
in the opinions of the Virginia courts that heard Welsh's direct
appeals, see Welsh v. Commonwealth, 416 S.E.2d 451 (Va. Ct. App.
1992), aff'd, 437 S.E.2d 914 (Va. 1993), and the district court, see
Welsh v. Holt, No. 94-33-R (W.D. Va. September 19, 1994). Accord-
ingly, we confine ourselves to a brief recitation of the facts.
From the late 1970s until his indictment in February 1987, Welsh
worked as an accountant for the National Caucus of Labor Commit-
tees (NCLC), an organization founded by Lyndon LaRouche, Jr., to
promote his political activities, and supervised the financial opera-
tions of a number of other LaRouche corporations. From 1984 to
1987, NCLC experienced financial troubles and operated with a large
deficit. To raise revenue, NCLC solicited loans from individuals, but
misinformed the lenders of its financial condition. In violation of the
2
Virginia Securities Act, Welsh executed and delivered letters of
indebtedness to the lenders knowing that they would not be paid.
In 1986, various federal and state law enforcement agencies com-
menced a multi-jurisdictional investigation of LaRouche's fundraising
activities. Beginning in February 1987, federal grand juries in Alex-
andria, Virginia; Boston, Massachusetts; and New York, New York;
and a state grand jury in Virginia indicted a number of LaRouche
associates on federal and state charges as a result of the investigation.
On February 17, 1987, a Loudoun County, Virginia, grand jury
indicted Welsh on four counts of violating the Virginia Securities Act.
Shortly thereafter, federal prosecutors contacted the Virginia Attorney
General's office to determine the feasibility of calling Welsh as a wit-
ness in the federal prosecutions under a grant of use and derivative
use immunity (use immunity) pursuant to 18 U.S.C.A.§ 6002 (West
1985 & Supp. 1995), which bars Welsh's testimony and any evidence
derived from it directly or indirectly from being used against him in
any subsequent prosecution. See Kastigar, 406 U.S. at 460; see also
United States v. Harris, 973 F.2d 333, 336 (4th Cir. 1992). The Vir-
ginia Attorney General's office concluded that the immunity grant
would not hinder its prosecution of Welsh provided those working on
the Virginia prosecution did not have access to the immunized testi-
mony.
On July 22, 1987, Welsh made the first of several appearances
before a federal grand jury in Alexandria pursuant to an order of use
immunity. Welsh continued to testify under a grant of use immunity
before federal grand juries and at the Alexandria and Boston trials of
the LaRouche associates until December 1988.
Shortly before Welsh's trial on his Loudoun County, Virginia,
indictment was scheduled to begin in April 1990, Welsh moved to
dismiss the charges, or in the alternative to suppress the evidence to
be presented against him at trial pursuant to Kastigar. Following a
six-day Kastigar hearing, the trial court denied the motion.
After the denial of the motion to suppress, Welsh pleaded guilty to
several violations of the Virginia Securities Act, namely: one felony
violation -- selling unregistered securities with intent to defraud the
3
purchaser, and three misdemeanor violations -- one count of transact-
ing business as an unregistered agent and two counts involving the
sale of securities. As a condition of his plea agreement, Welsh
reserved the right to appeal certain issues. See Va. Code Ann. § 19.2-
254 (Michie 1995); see also North Carolina v. Alford, 400 U.S. 25(1970). The trial court sentenced Welsh to seven years imprisonment
for the felony conviction, with execution of the sentence suspended
upon certain conditions. For the misdemeanor convictions, Welsh
received concurrent terms of twelve months imprisonment, suspended
upon serving seventy-five days in jail and performing 250 hours of
community service. The Virginia Court of Appeals and the Virginia
Supreme Court affirmed Welsh's convictions. Welsh v.
Commonwealth, 416 S.E.2d 451 (Va. Ct. App. 1992), aff'd, 437
S.E.2d 914 (Va. 1993).
In January 1994, Welsh petitioned for a writ of habeas corpus in
the United States District Court pursuant to 28 U.S.C.A. § 2254 (West
1994). On September 10, 1994, the district court dismissed Welsh's
amended petition under Rule 12(b) of the Federal Rules of Civil Pro-
cedure for failure to state a claim. See Fed. R. Civ. P. 12(b)(6). Welsh
now appeals the dismissal.
II.
Welsh first claims that the Commonwealth failed to meet its burden
of proving that its prosecution of Welsh would have been based on
evidence independent of Welsh's immunized testimony. Welsh con-
tends that the Commonwealth did not satisfy its"heavy burden" under
Kastigar of proving that the evidence it proposed to use in Welsh's
prosecution was not tainted. See Kastigar, 406 U.S. at 460, 461. To
preserve a witness's Fifth Amendment right against compelled self-
incrimination, the Commonwealth is forbidden from using "the
immunized testimony or any evidence derived from it either directly
or indirectly" in the prosecution of a witness who received use immu-
nity in exchange for that testimony. Harris, 973 F.2d at 336. To sat-
isfy its burden, the Commonwealth must prove by a preponderance
of the evidence that "the evidence ``it proposes to use was derived
from legitimate independent sources.'" Id. (quoting Kastigar, 406
U.S. at 461-62).
4
In this appeal, Welsh asserts that the trial court originally, the Vir-
ginia Court of Appeals and the Virginia Supreme Court on direct
appeal, and the federal district court on habeas review, all erroneously
concluded that the Commonwealth satisfied its burden of proving by
a preponderance of the evidence that the evidence it planned to intro-
duce at Welsh's trial was not tainted. Welsh challenges the courts'
finding that the Commonwealth satisfied its burden under Kastigar by
(1) identifying numerous instances of alleged taint and opportunities
for taint to occur, and (2) arguing that the Commonwealth failed to
identify at the pre-trial Kastigar hearing each witness and document
it planned to introduce at trial.
As we stated in Harris, "[w]hen [a] court uses correct legal princi-
ples, its taint determination is a factual finding." Id. at 337. We accord
a presumption of correctness in habeas proceedings to the taint deter-
minations of the state courts if they arrived at their conclusions using
a proper legal analysis. See 28 U.S.C.A.§ 2254(d) (West 1994); see
also Sumner v. Mata, 455 U.S. 591, 591-97 (1982) (per curiam)
(Sumner II). The presumption of correctness applies equally to facts
found by state appellate as well as trial courts. See Sumner v. Mata,
449 U.S. 539, 545-47 (1981) (Sumner I). Before rejecting factual
determinations, we "must more than simply disagree" with a state
court's conclusions, Marshall v. Lonberger, 459 U.S. 422, 432
(1983); we "must conclude that the state court's findings lacked even
``fair support' in the record." Id. If we determine that the findings are
fairly supported, then "the burden shall rest upon the applicant to
establish by convincing evidence that the factual determination by the
State court was erroneous." 28 U.S.C.A. § 2254(d) (emphasis added);
see also Sumner I, 449 U.S. at 550.
A.
In support of his challenge, Welsh catalogs a voluminous list of
allegedly tainted evidence and opportunities for taint to occur. After
carefully considering the arguments of counsel and reviewing the
record, we agree with the district court that the occurrences Welsh
identifies amount to merely speculative opportunities for taint to
occur, and "[t]he government is not required to negate all abstract
``possibility' of taint." United States v. Byrd, 765 F.2d 1524, 1529
5
(11th Cir. 1985). Therefore, we reject Welsh's invitation to find error
in the district court's taint determination on these grounds.
B.
Welsh also argues that because the trial court failed to require the
Commonwealth to identify during the pre-trial Kastigar hearing each
and every witness and document it planned to introduce at trial, the
court erred in concluding that the Commonwealth carried its burden
under Kastigar. See United States v. North, 910 F.2d 843, 872 (D.C.
Cir. 1990) (per curiam). We disagree; the trial judge must engage in
a "``line-by-line and item-by-item'" inquiry only when he finds it
necessary in deciding whether the government carried its burden by
a preponderance of the evidence. See United States v. Kilroy, 27 F.3d
679, 686 (D.C. Cir. 1994) (quoting North, 910 F.2d at 872).
For example, in North, the District of Columbia Circuit reversed
the district court's decision not to make a more searching inquiry in
a Kastigar hearing during grand jury proceedings because the court
of appeals identified several instances of taint overlooked by the dis-
trict court, and other circumstances further indicated a strong possibil-
ity of taint. See North, 910 F.2d at 872. In particular, the court of
appeals first noted that a considerable number of witnesses had "``had
their memories refreshed by the immunized testimony.'" Id. at 855(quoting United States v. Poindexter, 698 F. Supp. 300, 313 (D.D.C.
1988)). Second, the record disclosed that "officials and attorneys from
the Department of Justice, the Central Intelligence Agency, the White
House, and the Department of State gathered, studied, and summa-
rized North's immunized testimony in order to prepare themselves or
their superiors and colleagues for their testimony before the investi-
gating committees and the grand jury." Id. at 863. Third, during the
two months when the grand jury was in recess without the supervision
of the court or counsel, North testified under a grant of immunity at
a Congressional hearing before a national television audience. Id. at
872. Finally, after North delivered the immunized testimony on tele-
vision, the district court qualified two replacement grand jurors with-
out "question[ing them] in any detail concerning any knowledge
either might have [had] of the content or nature of the immunized tes-
timony." Id.
6
Here, equivalently egregious circumstances simply do not exist. In
a six-day Kastigar hearing, the trial judge entertained extensive testi-
mony about the Commonwealth's elaborate precautions to prevent the
prosecution team from hearing Welsh's immunized testimony and to
segregate its investigation from the concurrent federal investigation.
See Welsh, 437 S.E.2d at 918-19 (recounting in detail the precautions
taken by the Commonwealth). Additionally, witnesses for the Com-
monwealth testified that by the time that Welsh was indicted, five
months before he testified before a federal grand jury under a grant
of immunity, the Commonwealth's prosecution file was ninety to
ninety-five percent complete. Specifically, by the time Welsh was
indicted, the Commonwealth had seized all of the incriminating docu-
ments and identified all but a "very, very few" of those which it
planned to introduce into evidence at trial. (J.A. at 240.) By then the
Commonwealth also had identified and interviewed the majority of
the "victim" witnesses; the remainder either were identified and inter-
viewed before Welsh gave his immunized testimony or were identi-
fied through sources other than Welsh's immunized testimony.
Finally, the Commonwealth had obtained the cooperation of its two
"insider" witnesses and determined the substance of their testimony
at least four months before Welsh gave his immunized testimony. See
Welsh, 437 S.E.2d at 919-20 (recounting in further detail the evidence
of independent sources introduced by the Commonwealth). Further-
more, while noting that the Commonwealth bore the burden of pro-
duction and persuasion at the Kastigar hearing, the trial judge
observed that Welsh was unable to identify any specific instances of
taint.
Under these circumstances, we cannot say that the trial court erred
in deciding that proceeding "line-by-line and item-by-item" in the
Kastigar hearing was unnecessary. In addition to finding his argument
to be legally unavailing, we note that it would be unfair to allow
Welsh to prevail on this argument, given that Welsh himself caused
the absence of a concrete trial record identifying specific witnesses
and documents. At trial, Welsh "had the choice to plead not guilty and
face a trial at which he could reopen the question, or to enter a condi-
tional guilty plea and preserve the question for appeal on the then-
existing record." Kilroy, 27 F.3d at 687. Having chosen the latter,
Welsh must take "the record as to trial evidence as he finds it." Id.7
We also cannot say after reviewing the record that the taint deter-
mination was erroneous under the demanding standard of § 2254(d).
See Harris, 973 F.2d at 338 (noting that "``[t]he focus of the inquiry
under Kastigar . . . is not whether the prosecutor was aware of the
contents of the immunized testimony, but whether he used the testi-
mony in any way to build a case against the defendant'" (quoting
United States v. Caporale, 806 F.2d 1487, 1518 (11th Cir. 1986), cert.
denied, 482 U.S. 917 (1987))); see also United States v. Catalano,
491 F.2d 268, 272 (2d Cir.) (finding no taint where the prosecutor
"established that he had prior knowledge of substantially all the infor-
mation covered in the [defendant's immunized] testimony, thus fore-
closing the possibility that he made ``any use, direct or indirect, of the
compelled testimony and any information derived therefrom'" (quot-
ing Kastigar, 406 U.S. at 460)), cert. denied, 419 U.S. 825 (1974).
Thus, we reject Welsh's arguments and conclude that the factual find-
ings by the Virginia courts regarding absence of taint are fairly sup-
ported by the record and that Welsh is unable to muster the quantum
of evidence necessary for us to rule that the findings were erroneous.
See 28 U.S.C.A. § 2254(d).
III.
Welsh next claims that his due process rights were violated by the
trial judge's refusal to recuse himself. Welsh argues that the trial
judge's connections and correspondence with members of the Anti-
Defamation League of B'nai B'rith (ADL), an organization allegedly
hostile toward the NCLC, constituted prejudice against Welsh. As we
observed in Aiken County v. BSP Division of Envirotech Corp., 866
F.2d 661 (4th Cir. 1989), "[b]ias or prejudice on the part of a judge
. . . can be sufficiently pervasive as to implicate due process concerns.
Allegations of bias or prejudice, however, involve difficult subjective
determinations and ``only in the most extreme of cases would disquali-
fication on this basis be constitutionally required.'" Id. at 678 (quot-
ing Aetna Life Insurance Co. v. Lavoie, 475 U.S. 813, 821 (1986)).
Like the previous courts that have considered Welsh's claim of
bias, we conclude that it lacks merit. On habeas review, the district
judge aptly characterized Welsh's evidence of prejudice as follows:
[Welsh] has made no showing of any financial motive on
the trial judge's part. None of [the trial judge]'s correspon-
8
dence with members of the ADL or correspondence which
others subsequently forwarded to the ADL indicated any
bias against the LaRouche organization or, more impor-
tantly, against petitioner. By contrast, [the trial judge] took
special care not to read ADL literature regarding the LaRou-
che organization. Moreover, during the hearings in the trial
court, he stated repeatedly that he harbored no ill will
toward petitioner, that he had no interest in the outcome of
the case, and that he was completely impartial.
(J.A. at 75.) Thus, we find no violation of Welsh's due process rights
based on the trial judge's refusal to recuse himself.
IV.
Finally, Welsh argues that the district court should not have dis-
missed his procedurally defaulted claims of selective and bad-faith
prosecution and outrageous government misconduct. Welsh contends
that, under Coleman v. Thompson, 501 U.S. 722, 750 (1991), he dem-
onstrated through new evidence sufficient cause and prejudice to
excuse his failure to appeal these claims, which he first raised before
the trial court. Assuming, without deciding, that Welsh is able to
show cause, we find that Welsh cannot satisfy the prejudice prong and
thus affirm the district court's conclusion that Welsh has procedurally
defaulted these claims.
A.
Welsh contends that new evidence supports his selective and bad-
faith prosecution claims. In the Virginia proceedings, the trial judge
ruled that Welsh's claims of selective and bad-faith prosecution failed
because Welsh was unable to prove an improper purpose by the Com-
monwealth. To show improper purpose, Welsh must prove that the
decision to prosecute was "deliberately based upon an unjustifiable
standard such as race, religion, or other arbitrary classification,
including the exercise of protected statutory and constitutional rights."
Wayte v. United States, 470 U.S. 598, 608 (1985) (selective prosecu-
tion) (internal quotation marks and citation omitted); see also United
States v. P.H.E., Inc., 965 F.2d 848, 853 (10th Cir. 1992) (stating that
in the context of a bad-faith prosecution claim, the defendant must
9
prove that the prosecution was "motivated by a desire to discourage
expression protected by the First Amendment"). This is a factual find-
ing, and thus we presume that it is correct under 28 U.S.C.A.
§ 2254(d). Evans v. Thompson, 881 F.2d 117, 122 (4th Cir. 1989),
cert. denied, 497 U.S. 1010 (1990).
Welsh's new evidence is insufficient to support a finding that the
prosecution was commenced for an improper purpose. We dismiss as
inconsequential to our inquiry Welsh's litany of allegations regarding
the investigating officers because Welsh fails to prove that the offi-
cers had any influence on the Virginia Attorney General's decision to
prosecute him. See United States v. Smith, 812 F.2d 161, 163 (4th Cir.
1987). After dismissing these arguments, the following of Welsh's
contentions remain for us to examine:1 (1) a statement by the Federal
Bureau of Investigation (FBI) that Mary Sue Terry, the Virginia
Attorney General, was politically motivated demonstrates that the
Commonwealth prosecuted Welsh deliberately to stifle his exercise of
his First Amendment rights; and (2) the Commonwealth failed to
reveal to Welsh that witnesses who were to testify at trial had been
"deprogrammed."
Welsh's arguments are unavailing. First, the statement by the FBI
that Attorney General Terry was politically motivated does not show
that Terry sought to prevent people associated with the LaRouche
organization from exercising their First Amendment rights; it was a
transparent reference to the possibility that the LaRouche investiga-
tion and prosecutions could generate favorable publicity for the Attor-
ney General's office if they were conducted successfully.2 Second, the
_________________________________________________________________
1 We have attempted to summarize the new evidence as argued by
Welsh, but we have been stymied by inartful drafting on the part of
Welsh's counsel. We have found it difficult, if not impossible, to deter-
mine what is "new" and what is "old" evidence from a reading of
Welsh's brief and the materials in the joint appendix. We have
attempted, however, to err on the side of overinclusion.
2 Examining the statement in context reveals how meritless Welsh's
contention is:
The [FBI] document cites Terry's obdurate insistence on the
Commonwealth being the lead agency in securing buildings dur-
10
alleged failure to reveal the deprogramming of witnesses, if true, may
show some deceptive trial tactics by the Commonwealth, but it does
not suggest that the earlier decision to prosecute Welsh was based on
an improper motive. Thus, we must reject Welsh's appeals of his
selective and bad-faith prosecution claims because he is unable to
show sufficient prejudice to excuse his procedural default.
B.
Welsh also posits that new evidence sufficiently supports his claim
of governmental misconduct. To violate Welsh's right to due process
of law, "the government's conduct must be so outrageous as to shock
the conscience of the court." United States v. Osborne, 935 F.2d 32,
36 (4th Cir. 1991). After carefully considering the arguments of coun-
sel and reviewing the record, though we would not condone the con-
duct of the Commonwealth's investigators if Welsh's allegations were
true, we find that the alleged misconduct does not reach the "high
shock threshold" necessary for us to find a due process violation. See
id. (citing United States v. Simpson, 813 F.2d 1462 (9th Cir. 1987),
cert. denied, 484 U.S. 898 (1987), favorably for failing to find a due
process violation where the "FBI manipulated[a] woman into provid-
ing sexual favors to a targeted person in order to lure him into selling
heroin to undercover agents"). Therefore, we find that Welsh has
failed to make a showing of prejudice sufficient to excuse his proce-
dural default and affirm the district court's dismissal of Welsh's gov-
ernmental misconduct claim.
_________________________________________________________________
ing the . . . law enforcement raid of LaRouche associated compa-
nies in Leesburg . . . . After multiple consultations between
Terry, her staff, and high ranking federal officials, during which
the federal officials attempted to impress upon her the danger in
having state agents untrained in such operations leading the raid,
the latter had to plainly emphasize to Terry "that there was much
more involved in this case than just mere temporary political
mileage to be gained from favorable publicity deriving from this
case."
(J.A. at 45 (excerpt from Welsh's habeas petition).)
11
V.
We have reviewed all of Welsh's other arguments and find them
meritless. Accordingly, we affirm the decision of the district court to
dismiss Welsh's habeas petition.
AFFIRMED
12