U.S. v. Coleman ( 1993 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 92-8092
_______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
REUBEN COLEMAN, and MILTON R. PERRY,
Defendants-Appellants.
_________________________________________________________________
Appeals from the United States District Court
for the Western District of Texas
_________________________________________________________________
July 30, 1993
Before REYNALDO G. GARZA, WILLIAMS and JONES, Circuit Judges.
EDITH H. JONES, Circuit Judge:
Appellants Reuben Coleman and Milton Perry were convicted
of a variety of conspiracy and substantive offenses arising out of
a series of loan transactions at Lamar Savings Association where
they were employed as loan officer and an executive vice president.
After a jury trial they were both found guilty of
conspiracy to defraud the United States, misapply funds, make false
entries and statements to the FHLBB and of actually making such
statements and entries in violation of 18 U.S.C. § 1001, 18 U.S.C.
§ 657, and 18 U.S.C. § 1006.
Appellants now assert multiple errors involving the
disqualification of counsel and a certain juror, various
"inflammatory" statements by the government, limitations on cross-
examination by the defense, and a $9,265,829 restitution order.
This court finds no merit in the complaints relating to appellants'
convictions. We do conclude, however, that the restitution order
was barred by the previous civil settlement between the appellants
and FDIC.
BACKGROUND
In response to growing instability in the savings and
loan industry, the FHLBB--the federal regulatory agency for thrift
institutions--moved to tighten capitalization requirements in 1985.
Lamar Savings Association, where Coleman and Perry worked, found it
increasingly difficult to meet these requirements. Lamar was at
the time repossessing a variety of non-earning real estate
properties. The FHLBB required an institution to boost its net
worth by 20% of the value of each repossessed property (REO) on the
books. Lamar was therefore forced into a position of having to
increase its assets or reduce its liabilities by selling the REOs.
Lamar officers decided to try to bypass the
requirements.1 Pursuant to the conspiracy, the appellants
allegedly fashioned transactions that would appear as bona-fide
sales of REO properties but were, in fact, sham loans designed to
thwart FHLBB interference. These transactions involved the sale of
REO properties held by Lamar, paid with loans furnished by Lamar.
The purchaser-borrowers were assured they would have no personal
1
This court has previously considered the underlying
facts in U.S. v. Parekh, 926 F.2d 402 (5th Cir. 1991).
2
liability. The sale would remove the REO properties from the books
of Lamar and augment the apparent net worth of the institution.
The conspiracy ended on December 31, 1985, just before Lamar was
taken over by the federal authorities and became insolvent.
On August 7, 1990, a 14-count indictment was returned in
federal court for conspiracy and substantive offenses arising out
of five of these "sham" real estate transactions. After a
thirteen-day jury trial followed by eight days of deliberations,
Perry and Coleman were found guilty of seven counts and acquitted
of another seven. Both men received terms of imprisonment and
other penalties and were also ordered to pay restitution of
$9,265,829. The numerous issues they have raised on appeal will be
discussed one by one.
DISCUSSION
A.
Coleman asserts that the district court erroneously
disqualified his previous defense counsel David Botsford at a pre-
trial hearing in 1991. Coleman complains that the court's abrupt
action prejudicially subverted his sixth amendment right to
counsel. A district court's disqualification ruling is reviewed
for abuse of discretion. Wheat v. United States, 486 U.S. 153,
163-64, 108 S. Ct. 1692, 100 L. Ed. 2d 140 (1988); United States v.
Reeves, 892 F.2d 1223, 1227 (5th Cir. 1990).
Coleman's contention that the government did not follow
the proper procedure for disqualification is irrelevant. The
district court had the authority and duty to inquire sua sponte
3
into whether counsel should not serve because of a conflict with
another client. Such findings are within his prerogative. Wheat,
486 U.S. at 160, 108 S. Ct. at 1698; In re Gopman, 531 F.2d 262,
266 (5th Cir. 1976).
Coleman also contests the substantive basis for Judge
Nowlin's decision. The court stated that during the ongoing
criminal prosecution and parallel civil litigation against Lamar
Savings officials there developed a pattern of last-minute cross-
over substitutions of counsel.2 Botsford's prior representation of
Adams, the president of Lamar Savings and a codefendant with
Coleman, presented a conflict with Coleman's best interests and an
appearance of impropriety, and Botsford's involvement in the
earlier grand jury investigation made it likely that he would be
called to testify against his former client Adams. In the district
court's view, the waivers offered by Botsford and Adams could not
have cured these pervasive conflicts. Based on such reasonable
inferences and findings, we do not discern an abuse of discretion.
Finally, Botsford was not deprived of the opportunity to
dispute his disqualification with the judge. Botsford presented
his position both in open court and by means of a sealed ex parte
affidavit that the court reviewed in camera. Additionally, after
2
Attorney Henry Novak originally represented Coleman
after his indictment and represented Adams and Perry as grand
jury targets. He represented all three men in the related civil
case. Botsford also represented Adams at the time. Novak
withdrew from representing Coleman, and Coleman sought to retain
Botsford, a motion initially approved by the district court.
Botsford also represented a grand jury witness who had been a
public relations representative for Adams.
4
the initial order of disqualification, Botsford filed two motions
to reconsider his disqualification, which the court addressed in a
written order. Neither of Botsford's motions to reconsider alleges
lack of notice, nor is there any evidence that the court lacked any
relevant information in making his decision.
B.
The next issue raised by appellants is the effect of the
introduction of evidence suggesting that government witness Vijay
Parekh was convicted for his part in the conspiracy. We review the
admission of evidence at trial for abuse of discretion. United
States v. Lindell, 881 F.2d 1313 (5th Cir. 1989), cert. denied, 496
U.S. 926, 110 S. Ct. 2621, 110 L. Ed. 2d 642 (1990); United States v.
Anderson, 933 F.2d 1261, 1268 (5th Cir. 1991). Although evidence
of an accomplice's guilty plea may be prejudicial, United States v.
Miranda, 593 F.2d 590, 594 (5th Cir. 1979), it is admissible if the
evidence serves a legitimate purpose and is coupled with a
cautionary jury instruction. United States v. Valley, 928 F.2d
130, 133 (5th Cir. 1991). Such an instruction was delivered here.
One legitimate purpose of this testimony is to "blunt the
sword" of the defense counsel's cross examination. United States
v. Leach, 918 F.2d 464, 467 (5th Cir. 1990), cert. denied, 111 S.
Ct. 2802, 115 L. Ed. 2d 976 (1991). In this case, the government
asked Parekh if he was a felon in order to preempt defense
counsel's impeaching his credibility before the jury. Details of
the conviction were not elicited. Coleman asserts that the
government may not rely upon Leach because he did not intend to
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impeach Parekh. Coleman's mere intention, however, is not enough
to trump the government's rights under Leach. United States v.
Valley, 928 F.2d 130, 134 (5th Cir. 1991) (defense counsel must
make "unequivocal commitment not to raise the convictions of co-
defendants").
The other reference to Parekh's conviction arose during
testimony of another defense witness who expressed his opinion
about Parekh's ownership of certain property. After stating his
belief that Parekh was the owner, the witness was asked during
cross-examination if he was aware that twelve people were of a
different opinion. The witness answered affirmatively. In fact,
it was on re-direct that Coleman's attorney elicited that a jury
had found Parekh had not been the owner. The only questions which
showed that a jury convicted Parekh of a related transaction were
propounded by the defense counsel. This cannot therefore be
reversible error. Leach, 918 F.2d at 467. The admission of
testimony about Parekh's criminal conviction was not erroneous.
C.
Appellants next argue that the court erred in limiting
their cross-examination of two witnesses, Louis Reese and Mary
Arnette. Rulings limiting the scope or extent of cross-examination
are committed to the sound discretion of the trial court and are
reviewed only for abuse of discretion. United States v. Barksdale-
Contreras, 972 F.2d 111 (5th Cir. 1992), cert. denied, 113 S. Ct.
1060, 122 L. Ed. 2d 366 (1993); Delaware v. Van Arsdall, 475 U.S.
6
673, 679, 106 S. Ct. 1431, 89 L. Ed. 2d 674 (1986) (listing factors
a judge may examine in limiting cross examination).
Coleman's complaint that he could not effectively cross-
examine Reese because the court eventually cut off cross-
examination altogether is meritless. The record indicates that the
questioning of Reese was repetitive and cumulative of other
evidence. Coleman fully presented his defensive theory and argued
it to the jury, and he was given ample opportunity to challenge
Reese's credibility. The court's action did not prejudice him.
Perry's complaints against Arnette are also easily
resolved. Defense interrogation of Arnette was only limited about
unidentified misconduct after she testified to her animosity toward
Perry. The court held that to impeach her on other matters was
collateral and cumulative of her hostility. The court did not
abuse his discretion in limiting cross-examination; the jury
received adequate information with which to evaluate her bias,
credibility and vindictive proclivities.
D.
The jury instructions, Coleman next asserts, were
erroneous because, by including suggestive illustrations of conduct
that could "point to" intent to defraud, the instruction somehow
eviscerated the requirement of finding such intent. Coleman
specifically complains that some of the examples the court gave
concerning the necessary intention to commit fraud under 18 U.S.C.
§§ 657 and 1006 precisely tracked the government's proof. We
review the instructions to the jury for abuse of discretion, United
7
States v. Chaney, 964 F.2d 437, 444 (5th Cir. 1992) and taken as a
whole, United States v. Leal, 547 F.2d 1222-23 (5th Cir. 1977). A
conviction will not be reversed unless the error in jury
instructions incorrectly states the law or fails to instruct on
applicable principles. Id. As a whole, the district court's
instructions were correct. Only by stripping the illustrations
from their context does the charge appear biased. Any advantage
the government may have enjoyed from the listed examples considered
in isolation was, however, limited by other instructions making it
plain that willful, knowing intent to deceive or cheat is the
appropriate standard.
E.
Appellants challenge the court's decision to disqualify
juror William Lord during the trial. Lord, originally a substitute
juror himself, was removed after the government informed the court
that Lord, a "bedroom" firearms dealer, was the subject of an
investigation by the ATF as well as the subject of an ATF
regulatory check in May 1990 concerning his sale of over 400
firearms.
A trial judge may "remove a juror whenever the judge
becomes convinced that the juror's abilities to perform his duties
have become impaired." United States v. Dominguez, 615 F.2d 1093,
1095 (5th Cir. 1980). We will not disturb the judge's finding on
appeal except for "want of any factual support or for a legally
irrelevant reason." United States v. Rodriguez, 573 F.2d 330, 332
(5th Cir. 1978). No evidentiary hearing is necessary, United
8
States v. Huntress, 956 F.2d 1309, 1312 (5th Cir. 1992) and the
scope of the investigation is committed to the district court's
sound discretion, United States v. Fryar, 867 F.2d 850 (5th Cir.
1989). In this case, Lord never mentioned his encounter with ATF
during voir dire despite the government's questions about past
troubles with any agency of the government. This omission supplied
a sound basis for the court to strike him. Lord's failure to
reveal his dispute with ATF deprived the government of its chance
to effectively exercise a peremptory strike and might have
demonstrated an anti-government bias.
F.
Perry contests the government's failure to disclose
certain information concerning an offer made by the government
witness, Harold Klinger, to federal prosecutors in Houston.
Although he has cited no authority, Perry seems to be alleging a
violation of Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10
L. Ed. 2d 215 (1963). To prove a Brady violation, defendant must
show that the prosecution suppressed evidence that was both
favorable and material to the defense. United States v. Lanford,
838 F.2d 1351, 1355 (5th Cir. 1988). Appellants were given
information about Klinger's offer the day after he testified.
There is no indication that the subject matter of
Klinger's offer in Houston, which concerned another savings and
loan company, had any relation to the transactions involved in this
prosecution or any effect upon his willingness to testify in this
case. Nor is there any suggestion that Klinger received
9
consideration for his offer in Houston, let alone for his
testimony. Since there is no evidence that cross-examination of
Klinger would have been more effective if appellants had earlier
been given the information, there is no violation of Brady. United
States v. Tarantino, 846 F.2d 1384, 1417, cert. denied, 488 U.S.
867, 109 S. Ct. 174, 102 L. Ed. 2d 83 (1988).
G.
Appellants' final arguments concern the court's
restitution order. We agree with their position that the FDIC's
mutual release executed at the conclusion of a civil case against
appellants and others foreclosed the government from obtaining a
restitution order in this criminal prosecution.
The government seeks restitution pursuant to the Victim
and Witness Protection Act, 18 U.S.C. § 3663. Although the
government asserts that the purpose of section 3663 is exclusively
punitive and does not depend on whether the victim waived or
compromised its rights, this is not consistent with the text of the
statute. Not only is the award of restitution discretionary with
the court, § 3663(a)(1), but the amount of the award may be reduced
to the extent a victim's property has been returned, §
3663(b)(1)(B)(ii), or to the extent a victim has received
compensation, § 3663(e)(1). Whether restitution is punitive or
compensatory, its imposition is subject to the trial court's broad
discretion.
Further, in light of section 3663(e)(2)(A), which
requires a setoff against a restitution order of damages paid in
10
any federal or state civil proceeding, this court has considered
the effect of release and settlement agreements pursuant to those
proceedings on subsequent liability for restitution. In United
States. v. Allstar Industries, 962 F.2d 465, 477 (5th Cir. 1992),
cert. denied 113 S. Ct. 377, 121 L. Ed. 2d 288 (1992), this court
stated that:
While a court may offset restitution in a
criminal's case by the amount of a civil
settlement to avoid double recovery by
victims, the availability of such an offset
depends upon what payment was made
in the settlement, whether the
claims settled involved the same
acts of the defendants as those that
are predicates of their criminal
convictions, and whether the payment
satisfies the penal purposes the
district court sought to impose.
United States v. Rico Industries, Inc.,854
F.2d 710, 715 (5th Cir. 1988), cert. denied,
489 U.S. 1078, 109 S. Ct. 1529, 103 L. Ed. 2d
834 (1989).
In Rico Industries, the court examined a restitution award
following a civil settlement agreement. There the court held that
"[i]f [the settlement] is based on the same acts, the object of
restitution--to restore the property the party harmed--would
indicate that [the Defendant] be credited with the amount of the
settlement." 854 F.2d 710, 715 (1988).
The intent of FDIC's settlement with Coleman and Perry is
clear and self-explanatory:
Whereas, the FDIC and Perry desire to settle
fully and finally all differences between
them, relating to all claims and demands which
are based in whole or in part upon the facts
alleged in the FDIC case and/or upon directly
11
or indirectly Perry's tenure as an officer at
Lamar.3
The settlement agreement then describes at length the types of
charges, complaints, claims, and liabilities from which both
parties are discharged. The government does not deny that claims
arising from the transactions for which Coleman and Perry were
criminally prosecuted were at issue and settled by this agreement
in the civil case. The government's contention that the FDIC did
not intend to settle all claims by the government including
criminal restitution flies in the face of the unambiguous and all-
inclusive language of the agreement. Further, the FDIC's
contention that this did not serve the penal nature of a
restitution award is contrary to the stipulation that FDIC and the
parties desired to settle fully and finally all differences between
them.
The government cites United States v. Cloud, 872 F.2d 846
(9th Cir. 1989), cert. denied, 493 U.S. 1002, 110 S. Ct. 561, 167
L. Ed. 2d 556 (1989), for the proposition that stipulations in a
settlement agreement concerning an indebtedness are not binding on
the government's quest for restitution. In Cloud, however, the
restitution was not ordered on behalf of a government agency which
had signed a settlement agreement with the defendants covering the
same transactions involved in the criminal case. Nor was the
settlement agreement in Cloud adopted and signed by the government
with the approval and participation of the same prosecutor who
3
There is no dispute that Coleman's settlement agreement
contained the same language.
12
prosecuted the criminal action. In this case, the same parties
were involved in both criminal and civil proceedings. FDIC
cooperated closely with the U.S. Attorney's office to approve the
settlement agreement with its broad, all-inclusive language.
Although "the law will not tolerate privately negotiated
end runs around the criminal justice system" in the use of the
VWPA, United States v. Savoie, 985 F.2d 612, 618 (1st Cir. 1993),
that is not what happened here. If there is any end run around the
law, it is an end run fostered by FDIC in conjunction with the
criminal prosecutors in this case. We cannot affirm a restitution
order that contradicts a carefully negotiated settlement agreement
between the government and these defendants in a parallel matter.4
In conclusion, we AFFIRM the convictions of appellants
and REVERSE that portion of the punishment that orders restitution
of $9,265,829. AFFIRMED in PART, REVERSED in PART.
4
We do not reach the question of the effect of a full
release in a civil suit not involving the government on a
subsequent criminal prosecution. See e.g. U.S. v. Bruchey, 810
F.2d 456, 460 (4th Cir. 1987); U.S. v. Cloud, supra.
13