U.S. v. Dula ( 1993 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 92-7131
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UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
LANDEN MAX DULA and ACCRABOND CORPORATION,
Defendants-Appellants.
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Appeal from the United States District Court
for the Northern District of Mississippi
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April 16, 1993
Before KING and EMILIO M. GARZA, Circuit Judges, and HALL*,
District Judge.
SAM B. HALL, JR., District Judge:
Landen Max Dula and Accrabond Corporation were convicted by
a jury of wire fraud, mail fraud, and false statements.
Defendants now appeal their convictions, alleging a Brady
violation, a comment on the failure of Dula to testify, and a
violation of Fed. R. Evid. 404(b). Defendants also allege that
the evidence was insufficient to prove Dula's intent to defraud,
and that the trial court erred in denying a motion for new trial
because the verdict was against the weight of the evidence. As
*
District Judge of the Eastern District of Texas, sitting
by designation.
the Brady claim is not presented in the record, it is dismissed
without prejudice to the defendants' right to raise it in an
action under 28 U.S.C. § 2255. As to all other issues, we find
no error, and affirm.
I. FACTS AND PROCEDURAL HISTORY
Landen Max Dula is the founder and president of Accrabond
Corporation, which is engaged in the sale of industrial sealants,
adhesives, coatings, and other chemical products for military,
government, and commercial aerospace use. Accrabond manufactured
its own line of products, and distributed products of other
manufacturers.
On May 16, 1991, Dula and Accrabond were indicted in the
Northern District of Mississippi on charges of wire fraud, mail
fraud, and false statements. The 32 count indictment charged that
between January 1988 and September 1989, the defendants devised a
scheme to defraud and obtain money under false pretenses by
representing that products sold and supplied conformed to the
purchaser's specifications when they did not. Defendants were also
charged with fraudulently substituting falsely identified and
nonconforming products,2 relabeling stale, outdated, and expired
products as fresh, recently acquired products with extended shelf
2
Many aerospace products carry manufacturer's lot numbers
to provide a mechanism for a manufacturer to trace and recall
defective lots. Accrabond provided its own lot numbers, or
purchased small quantities of a product in order to obtain an
authentic lot number.
2
life,3 coloring, thinning, and altering the appearance of products
to conform to the appearance of other products and substituting the
for other products,4 and using false labels, shipping documents,
and certificates of compliance to conceal the fraudulent
substitution of products.5
The indictment alleged eighteen instances of the use of
interstate wire communications in violation of 18 U.S.C. §§ 2,
1343, and one of the mail in violation of 18 U.S.C. §§ 2, 1341 in
execution of a scheme to defraud thirteen aerospace and defense
supply companies.6 The indictment further charged the defendants
with thirteen counts of falsely certifying products for use in
defense contracts in violation of 18 U.S.C. §§ 2, 1001.
3
Most aerospace products such as those sold by Accrabond
carry a shelf life, beyond which they must be retested to
determine whether they still meet the standards of performance
prescribed by military specifications.
4
Any alteration of a product after manufacture, such as
thinning, dying, etc. may also change performance, and therefore
also requires retesting to determine if the product still meets
the military specifications.
5
Most of Accrabond's business was conducted by telephone
or fax transmissions, which were then entered into a computer,
which generated a sales order and a manufacturing order. The
order form also had a space for entering "blind notes," which
were used to instruct Accrabond employees on what substitute to
send for the product ordered, or what substitute had been
supplied to the customer on a previous order. The documents sent
to the customer, however, all described the product ordered, and
did not reveal that a substitute had been supplied.
6
The defendants were charged with illegally using wire
communications when accepting telephone purchase orders from
various customers. Further, the defendants allegedly submitted
false statements or entries by supplying fraudulent certificates
of compliance indicating that a particular product conformed to a
particular military specification.
3
After a ten day jury trial in December, 1991, Accrabond was
convicted on all but one count of wire fraud, and Dula was
convicted on six counts of wire fraud and five counts of false
statements. On February 18, 1992, Accrabond was sentenced to pay
a fine of $248,000, and restitution in the amount of $8,238.32.
Dula was sentenced to a term of imprisonment of thirty-six months
on each count, to be served concurrently, as well as a fine of
$27,500. The defendants filed a notice of appeal February 24,
1992, from the judgments entered by U.S. District Judge Neal B.
Biggers, Jr., and the court stayed execution of the judgment
pending appeal.
II. ANALYSISA. BRADY VIOLATION
Defendants contend that the government violated the disclosure
requirements of Brady v. Maryland, 373 U.S. 83 (1963), by failing
to reveal test results showing that the product sold by Accrabond
performed as well as was required.7 Defendants claim that the
government was in possession of numerous reports of such tests,
which it failed to disclose despite repeated requests prior to
trial. Specifically, Defendants pointed to inspection and testing
done by Martin-Marietta, as stated by a company spokesman the day
after the convictions. See Northeast Mississippi Daily Journal,
7
In Brady v. Maryland, 373 U.S. 83, 87 (1963), the United
States Supreme Court held that the due process clause requires
the government to disclose all information that is favorable to
the accused and is material to either guilt or punishment. See
generally 3 Wright, Federal Practice and Procedure: Criminal 2d,
§ 557.2 (1982). The rule covers impeachment as well as
exculpatory evidence. See Giglio v. United States, 405 U.S. 150,
154 (1972).
4
Sunday, December 15, 1991. Defendants allege that this violation
prejudiced them by denying them exculpatory materials in trial
preparation and presentation, and by permitting the prosecutor to
make false statements in closing argument regarding the
impossibility of inspecting the products supplied by Accrabond.8
The government argues that it has not violated the
requirements of Brady since the information was equally available
to the Defendants,9 and the information is not material.10 We
8
In closing argument, counsel for the Defendants argued
that while the government had alleged that faulty products sold
by Accrabond had endangered the performance of weapons such as
the cruise missile, the demonstration of the effectiveness of our
country's military technology in the Persian Gulf War, including
missiles made with materials sold by Accrabond, showed that the
products were not deficient. (Tr. 1755). In response, the
prosecutor stated in rebuttal that only an inspection of the
materials could have revealed what problems there might have been
with Accrabond products, and asserted that such an inspection
would have been impossible. (Tr. 1775-1776).
9
Brady does not oblige the Government to provide
defendants with evidence that they could obtain from other
sources by exercising reasonable diligence. When evidence is
available equally to the defense and the prosecution, the
defendants must bear the responsibility for their failure to
diligently seek its discovery." See, e.g., United States v.
McKenzie, 768 F.2d 602, 608 (5th Cir. 1985), cert. denied, 474
U.S. 1086 (1986)
10
A defendant must establish that withheld evidence
favorable to the accused is "material" in order to succeed on a
Brady claim. See United States v. Ellender, 947 F.2d 748, 756
(5th Cir. 1991). Suppressed evidence is material only if "there
is a reasonable probability that, had the evidence been disclosed
to the defense, the result of the proceeding would have been
different. A 'reasonable probability' is a probability
sufficient to undermine confidence in the outcome." United
States v. Bagley, 473 U.S. 667, 682 (1985)."
In this case, the government argues that whether or not some
of Accrabond's products were not fraudulent or nonconforming was
not at issue, and is in fact irrelevant. Rather, the issue was
whether the products were falsely represented and certified.
See, e.g., United States v. Grimm, 568 F.2d 1136, 1138 (5th Cir.
5
decline to address these arguments at this time because, as
indicated by oral argument, there is no evidence in the record
concerning the test results that the government is alleged to have
withheld in violation of Brady. In the absence of a record, we
cannot fairly evaluate the merits of the defendants' claim. We
therefore dismiss the defendants' Brady claim without prejudice to
their right to raise the issue in a proceeding under 28 U.S.C. §
2255.11 See 3 Wright, Federal Practice and Procedure: Criminal 2d
§ 594 p. 453.
B. COMMENT ON DULA'S FAILURE TO TESTIFY
Dula also contends that the trial court erred when it denied
a motion for mistrial following a statement by the prosecutor in
closing argument that it claims called the jury's attention to the
fact that the Dula had elected not to testify. Dula argues that
the failure of the trial court to declare a mistrial, or at least
give a curative instruction, denied him his Fifth Amendment rights.
The Fifth Amendment prohibits a prosecutor from commenting
directly or indirectly on a defendant's failure to testify.
Griffin v. California, 380 U.S. 609 (1965); United States v.
1978) (evidence of noncriminal conduct to negate the inference of
criminal conduct is generally irrelevant); United States v.
Marrero, 904 F.2d 251, 260-261 (5th Cir. 1990), reh. denied, 909
F.2d 1479, cert. denied, 498 U.S. 1000.
11
This is similar to our procedure for ineffective
assistance of counsel claims. Where such claims are not raised
before the trial court, they cannot be resolved on direct appeal
since the district court has had no opportunity to develop the
record as to the merits of the allegations. See, e.g., United
States v. Higdon, 832 F.2d 312, 313-314 (5th Cir. 1987), cert.
denied, 484 U.S. 1075 (1988); United States v. Bounds, 943 F.2d
541 (5th Cir. 1991).
6
Borchardt, 809 F.2d 1115 (5th Cir. 1987). In deciding whether a
comment made by the government in its closing argument is a comment
on the defendant's failure to testify, a court must determine if
"the prosecutor's manifest intention was to comment on the
accused's failure to testify [or] was... of such character that the
jury would naturally and necessarily take it to be a comment on the
failure of the accused to testify." United States v. Smith, 890
F.2d 711, 717 (5th Cir. 1989).
However, the comments complained of must be viewed within the
context of the trial in which they are made. United States v.
Bright, 630 F.2d 804, 826 (5th Cir. 1980). In this case, one of
the defenses set forth by Dula and Accrabond was that the
prosecution was instigated and directed by a rival, Products
Research Chemical Corporation (PRC), to carry out the "corporate
murder" of Accrabond in order to take over its market. Against
this background, Government counsel stated in closing argument:
Well, let me talk about PRC just a minute. There's
been nobody on this witness stand that really knows about
what happened between PRC and Accrabond Corporation.
(Tr. 1784). The government argues that the context makes clear
that the intent of the argument was not to comment on Dula's
failure to testify, but to make the point that none of the
witnesses who had testified about the existence of a lawsuit by PRC
against Accrabond actually knew anything about it.
It is not error to comment on the defendant's failure to
produce evidence on a phase of the defense upon which he seeks to
rely. See, e.g., United States v. Bright, 630 F.2d 804, 825 (5th
7
Cir. 1980). Thus, the government's argument to the jury that "no
one has given you any reasonable explanation" in response to the
defendant's contentions is not error. See United States v. Warren,
550 F.2d 219, 227 (5th Cir. 1977), cert. denied, 434 U.S. 1016
(1978).
In any case, the district court's instructions to the jury
emphasized that the defendant need not testify, and that no
inference could be drawn from his failure to testify. (Tr. 1082).
Therefore, even if there was harm created by counsel's comments, it
was offset by the court's instructions. See, e.g., United States
v. Smith, 890 F.2d 711, 716 (5th Cir. 1989)
C. VIOLATION OF FED. R. EVID. 404(B)
Defendants next contend that the trial court violated Fed. R.
Evid. 404(b)12 by permitting the introduction of testimony
concerning an alleged prior bad act of Dula and Accrabond which was
not charged in the indictment. During the trial, the government
elicited testimony regarding a sale of materials by Accrabond to
Pan Metals, a Korean corporation. Rick Drexler, a former
laboratory manager at Accrabond, told the jury that Pan Metals had
12
Federal Rule of Evidence 404(b) provides:
Evidence of other crimes, wrongs, or acts is not admissible
to prove the character of a person in order to show action
in conformity therewith. It may, however, be admissible for
other purposes, such as proof of motive, opportunity, intent
preparation, plan, knowledge, identity, or absence of
mistake or accident, provided that upon request by the
accused, the prosecution in a criminal case shall provide
reasonable notice in advance of trial, or during trial if
the court excuses pretrial notice on good cause shown, of
the general nature of any such evidence it intends to
introduce at trial.
8
ordered a Dow Corning adhesive, but had been sent a substitute
product, which "did not get by" Pan Metals. (Tr. 969-971). This
transaction was not among those alleged in the indictment.
This court has set forth a two-part test for determining the
propriety of admitting evidence of "bad acts" not alleged in the
indictment. United States v. Beechum, 582 F.2d 898, 911 (5th Cir.
1978), reh. granted, 563 F.2d 1782, opinion superseded, 582 F.2d
898, cert. denied, 440 U.S. 920 (1979). First, it must be
determined that the extrinsic offense evidence is relevant to an
issue other than the defendant's character. Second, the evidence
must possess probative value that is not substantially outweighed
by its undue prejudice and must meet the other requirements of rule
403.13 Id.
Evidence of an uncharged offense arising out of the same
transaction or series of transactions as the charged offense is not
an "extrinsic" offense within the meaning of Rule 404(b), and is
therefore not barred by the rule. See, e.g., United States v.
Simpson, 709 F.2d 903, 907 (5th Cir. 1983), cert. denied, 464 U.S.
942. The defendants were charged with conducting a continuing
scheme to defraud, characterized by the substitution of products,
and it was necessary for the government to prove that the
defendants had intentionally devised a scheme and artifice to
13
Federal Rule of Evidence 403 states:
Although relevant, evidence may be excluded if its probative
value is substantially outweighed by the danger of unfair
prejudice, confusion of the issues, or misleading the jury,
or by considerations of undue delay, waste of time, or
needless presentation of cumulative evidence.
9
defraud. In developing proof of intent and motive, the prosecution
may offer all of the surrounding circumstances that were relevant.
See, e.g., United States v. Mancuso, 444 F.2d 691, 695 (5th Cir.
1971) (other transactions connected with the offenses charged have
long been used to show a general pattern, the necessary criminal
intent, or the guilty knowledge of the defendant).
In this case, the existence of a scheme to defraud is an
element of the offense of wire fraud under 18 U.S.C. § 1343.
Although Pan Metals' order was not one of those charged in the
indictment, it was relevant to the existence of a scheme and
therefore was independently admissible as direct proof of the
scheme charged. United States v. Santagata, 924 F.2d 391, 393-394
(1st Cir. 1991). In addition, the admission of the testimony did
not violate Rule 403, which allows a trial judge to exclude
probative evidence that is substantially outweighed by its
prejudicial effect. The balancing of probative value against
prejudicial effect is committed to the sound discretion of the
trial judge, a decision that is final in the absence of abuse of
discretion. United States v. Maceo, 947 F.2d 1191 (5th Cir. 1991)
(citations omitted). We find no such abuse here.
D. SUFFICIENCY OF THE EVIDENCE OF DULA'S INTENT TO DEFRAUD
Dula also argues that a review of the trial demonstrates that
the government failed to establish its wire fraud allegations
because it introduced no evidence that the use of the wires was
preceded by an intent to defraud.
To obtain Dula's convictions for the crimes of wire fraud
10
alleged in the indictment, the government was required to prove
beyond a reasonable doubt that he aided and abetted the use of the
wires in furtherance of a scheme to defraud. United States v.
Shively, 927 F.2d 804 (5th Cir. 1991), cert. denied sub nom Johnson
v. United States, 111 S. Ct. 2806 (to obtain mail fraud conviction,
government must prove scheme or artifice to defraud, specific
intent to defraud, and use of mails for purpose of executing
scheme); United States v. Shaw, 555 F.2d 1295 (5th Cir. 1977) (same
elements as to wire fraud). Dula argues that the proof adduced by
the Government at trial that the orders were taken by phone, and
following these orders a decision may have been made to substitute
an alternative product, is inadequate.
The above proof is sufficient, even standing alone, because
the sequence and timing of the phone calls is immaterial. Once
membership in a scheme to defraud is established, a knowing
participant is liable for any wire communication which subsequently
takes place or which previously took place in connection with the
scheme. See United States v. Westbo, 746 F.2d 1022, 1025 (5th Cir.
1984). The crime of wire fraud did not terminate with the
telephone call, and acts occurring after the use of the wires can
be evidence "from which a jury could infer participation of the
scheme to defraud." Id.; see also United States v. McDonald, 837
F.2d 1287, 1293 (5th Cir. 1988) (intent can be proven by the scheme
to defraud, and may be inferred from other facts).
E. VERDICT AGAINST THE WEIGHT OF THE EVIDENCE
Finally, appellants contend that the trial court abused its
11
discretion by denying a motion for new trial which asserted that
the weight of the evidence supported the defendants' acquittal.
The decision to grant or deny a motion for new trial based on
the weight of the evidence is within the sound discretion of the
trial court. An appellate court may reverse only if it finds the
decision to be a "clear abuse of discretion." United States v.
Martinez, 763 F.2d 1297, 1312 (11th Cir. 1985). Where the defense
has had an opportunity to question witnesses as to their biases,
and the jury has concluded that the witnesses are credible, the
trial court has broad discretion. "It is the sole province of the
jury, and not within the power of this Court, to weigh conflicting
evidence and evaluate the credibility of witnesses." United States
v. Ivey, 949 F.2d 759, 767 (5th Cir. 1991), cert. denied sub nom
Wallace v. United States, 113 S. Ct. 64 (1992). "This court's
review does not encompass weighing the evidence or judging the
credibility of witnesses.... [This court] must affirm the
conviction if a rational jury could have found the essential
elements of the crimes beyond a reasonable doubt." United States
v. Thorn, 917 F.2d 170, 173 (5th Cir. 1990).
Defendants argue that the Government's witnesses were not
credible witnesses because they were disgruntled former employees
of the defendants. However, as stated above, that credibility
determination is best left for the jury. The district court did
not abuse its discretion in accepting the jury's assessment of the
credibility of the witnesses and denying a motion for new trial on
the ground that the verdict was against the weight of the evidence.
12
III. CONCLUSION
For the foregoing reasons, we AFFIRM the judgments of the
district court, but DISMISS the defendants' Brady claims, without
prejudice to their right to raise them in an action under 28 U.S.C.
§ 2255.
13