United States v. Dillman ( 1994 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 92-1541
_____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
GEORGE F. DILLMAN and
WILLIAM C. HATFIELD,
Defendants-Appellants.
_________________________________________________________________
Appeal from the United States District Court for the
Northern District of Texas
_________________________________________________________________
(February 16, 1994)
Before SNEED*, REYNALDO G. GARZA, and JOLLY, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
The appellants are former officers of a savings and loan
association. They challenge their convictions for conspiracy,
bank fraud, money laundering, and other crimes arising from an
elaborate scheme to improve artificially the financial condition
of the savings and loan association that they managed and to
enrich themselves at the association's expense. Because we find
no reversible error, we affirm the appellants' convictions.
*
Senior Circuit Judge of the United States Court of Appeals
for the Ninth Circuit sitting by designation.
I
George Dillman was the chairman and W. C. Hatfield was the
executive vice-chairman of Caprock Savings and Loan Association
("Caprock"), which had offices in Dallas and Lubbock, Texas.
Caprock experienced financial difficulties in late 1988. Dillman
wanted to remedy these difficulties in part by having Caprock
participate in a business deal, the Southwest Plan, that promised
handsome profits. To participate in the Southwest Plan, however,
Caprock would have to demonstrate a better financial position
than it actually had at that time.
In November 1988, Dillman met with Mukesh Assomull, a self-
styled "facilitator" of problem-solving for savings and loan
associations, to explore methods of improving the appearance of
Caprock's balance sheet. Assomull, who admitted his
participation in the scheme and testified for the government,
stated that he and Dillman discussed how they and the other
conspirators would use approximately $15 million of loans from
Caprock to produce approximately $5 million worth of capital for
the institution. The scheme, as initially envisioned by the
parties, involved three stages: removal, laundering, and
disbursement of Caprock's money. First, the conspirators would
remove money from Caprock through artificially large loans used
to fund fraudulent land deals. Second, the conspirators would
launder the money through several bank accounts in order to
disguise the original source of the money--Caprock. Third, the
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conspirators would disburse a portion of Caprock's own money to
be invested in Caprock as "capital" and keep a portion of the
money themselves. This injection of Caprock's own money back
into the savings and loan would make Caprock's balance sheet
appear to reflect a superior financial position than actually
existed.
Assomull testified that in later meetings in Dallas on
November 7, 1988, with Dillman, Hatfield, Louise Kopy, and other
persons not party to this appeal,1 Dillman outlined the above
general scheme to Hatfield who was agreeable. The conspirators
discussed the use of shell corporations to buy land from third
parties at fair market value and sell it to related shell
corporations for notes reflecting artificially high values.
These notes would then be sold to Caprock for their artificially
high face values, thus removing the funds from Caprock. Next,
the conspirators discussed the use of various domestic and
foreign bank accounts and entities through which they would
launder Caprock's money, thus disguising the true source of the
money. It was at this point that Commercial Capital Ltd.
("Commercial Capital"), a shell corporation controlled by
Assomull, became important to the scheme. According to Assomull,
1
Namely, Anthony Nims and Kevin Hird. The jury acquitted
Nims, who worked at Caprock's Lubbock office. Hird, Caprock's
chief lending officer, pled guilty to charges arising from the
fraudulent inflation of Caprock's net worth. Also, Robert
Savage, Caprock's chief financial officer, pled guilty to charges
arising from the fraudulent inflation of Caprock's net worth.
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Dillman and Hatfield agreed to launder a portion of Caprock's
funds through Commercial Capital and then disburse those funds
through "loans" to the defendants in order to fund the purchase
of the stock of Caprock's parent corporation, Great West Banc
Shares, Inc. ("Great West"), thus injecting Caprock's own money
back into Caprock.
From November 1988 to August 1989, Caprock distributed
approximately $20 million in the form of loans that ultimately
resulted in approximately $5 million in capital being infused
into Great West and thus, Caprock. In the removal stage of the
scheme, Dillman, Hatfield, and other conspirators removed
approximately $10 million (of the total $20 million) from Caprock
to fund two specific fraudulent land deals--the Maxtor deal and
the Santos deal. In each of these deals, one shell corporation
purchased land from a third party at fair market value, sold the
land to another shell corporation for a note that reflected an
artificially inflated price, and then sold the note to Caprock at
its artificially high face value.2 Once they removed the money
2
Maxtor Properties, Inc. ("Maxtor") purchased forty acres of
land for $750,000 cash from an unrelated third party.
Simultaneously, Maxtor sold this tract of land in two pieces for
approximately $3,500,000 in notes to a shell corporation
controlled by the conspirators. Maxtor then sold the notes to
Caprock for face value in cash. In a similar transaction, Santos
Associates, Inc. ("Santos") purchased thirty acres of land for
$2,300,000 in cash from an unrelated third party. Santos
simultaneously sold the land in tracts for notes totalling
$6,700,000 to other business entities. Santos then sold the
notes at face value to Caprock for cash. Thus, after these
transactions, Caprock had paid out approximately $10,200,000 in
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from Caprock, the conspirators launched the laundering stage of
the scheme in which various portions of the $10 million passed
through different accounts, including the Hoover-Eggleston III
Trust ("H-E III Trust") and the Broadline account in New York,
prior to ultimate disbursement. The conspirators placed a portion
of the funds removed from Caprock in Commercial Capital.
Finally, in the disbursement stage of the scheme, Commercial
Capital loaned the conspirators some of the funds originally
removed from Caprock in order to fund the purchase of Great West
stock. Of the total $10 million, the conspirators disbursed
approximately $1.5 million from Commercial Capital as stock-
purchase loans, approximately $3.3 million to pay the actual
purchase price of the parcels of land bought from third parties
and the related closing costs, and approximately $5.4 million to
pay themselves for their personal benefit. The Commercial
Capital loans constituted a significant step in the overarching
plan because it helped to create the appearance that the money
the conspirators would use to inject into Caprock was not
Caprock's own money but, instead, had come from an independent
and legitimate third-party lender. In order to enhance this
appearance of legitimacy, Dillman and Hatfield executed "loan"
cash in exchange for notes secured by property with a fair market
value of only approximately $3,050,000.
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documents with Commercial Capital in conjunction with obtaining
the stock purchase money.3
The balance of the $20 million removed from Caprock passed
through the H-E III Trust and the Broadline account, and provided
the remaining approximate $3.5 million of capital, which was
injected into Great West and thus, Caprock. The indictment,
however, did not mention the second $10 million of the overall
$20 million removed from Caprock.
On August 1, 1989, regulatory authorities closed Caprock and
placed it in a conservatorship. After an examination of
Caprock's financial records, federal authorities indicted
Dillman, Hatfield, and several other defendants not parties to
this appeal.
II
The defendants were indicted and pled not guilty to all
counts. They were then tried and found guilty by a jury of: (1)
violating 18 U.S.C. § 371, conspiring to (a) misapply Caprock's
funds, (b) participate improperly in a transaction involving
Caprock, (c) commit bank fraud, and (d) engage in money laundering;
(2) violating 18 U.S.C. § 1344, committing bank fraud; (3)
violating 18 U.S.C. § 657, misapplying money belonging to a
3
The "loan" documents, however, only provided Commercial
Capital full recourse to Dillman's and Hatfield's personal assets
for a portion of the total amount loaned. Further, although
Hatfield made one interest payment on his loan, neither Dillman
nor Hatfield ever paid any of the principal on their loans.
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federally insured financial institution; (4) violating 18 U.S.C. §
1006, unlawful participation in a transaction involving a federally
insured financial institution; and (5) violating 18 U.S.C. § 1956
for money laundering. Additionally, the jury found Dillman guilty
of violating 18 U.S.C. § 215--accepting a bribe in return for
exercising influence on a federally insured financial institution.
Dillman and Hatfield then brought this appeal.
III
The appellants argue numerous grounds for reversal. We have
carefully examined each ground asserted by the appellants, and find
no reversible error.
A
First, the appellants argue that the district court committed
error under Federal Rule of Criminal Procedure 15 in refusing to
order the deposition of Kevin Finch.4 Finch was the manager of
Commercial Capital from which Dillman and Hatfield obtained the
"loans" that they used to purchase the Great West stock and, thus,
inject capital into Caprock. Dillman and Hatfield contend that
Finch's testimony will support the central claim of their defense--
that they did not know the money that they borrowed from Commercial
Capital to purchase Great West stock originally came from Caprock.
4
Dillman and Hatfield made several Rule 15 motions regarding
Finch. The district court denied two of these motions before the
trial and the last motion eight days into the trial. Thus, the
district court, when last ruling on the motion, had substantial
exposure to the facts in the case and to the significance of
Finch's potential testimony.
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To this end, Dillman and Hatfield contend that Finch would testify
that he had represented to them that the money Commercial Capital
loaned them came from independent sources with no relation to
Caprock.
The appellants argue that reversal is required because, just
as in United States v. Farfan-Carreon, 935 F.2d 678, 680 (5th Cir.
1991), there were "exceptional circumstances" compelling the
district court to order Finch's deposition: (1) the anticipated
witness was outside the subpoena power of the district court; and
(2) the witness was threatened with prosecution if he entered the
United States. Finch, who at the time was living in London,
England, apparently had no intention of coming to this country
because he was the subject of an investigation being conducted by
United States' authorities. Further, the appellants argue that--
even though not a required element--Finch's deposition would have
been material to the determination of whether the appellants
believed the stock-purchase loans to come from independent sources
instead of Caprock.
Rule 15(a) provides in pertinent part:
Whenever due to exceptional circumstances of the case it
is in the interest of justice that the testimony of a
prospective witness of a party be taken and preserved for
use at trial, the court may upon motion of such party and
notice to the parties order that testimony of such
witness be taken by deposition . . . .
(Emphases added).
-8-
The word "may" signifies that the district court retains broad
discretion in granting a Rule 15(a) motion and that the court
should review these motions on a case-by-case basis, examining
whether the particular characteristics of each case constitute
"exceptional circumstances." United States v. Bello, 532 F.2d 422,
423 (5th Cir. 1976). The words "exceptional circumstances" bespeak
that only in extraordinary cases will depositions be compelled. We
have held, however, that circumstances such as those confronting us
in this case--Finch is an unservable deponent who is unlikely to
return to the United States--can be extraordinary. Farfan-Carreon,
935 F.2d at 680.
Although, as we indicated in dicta in Farfan-Carreon, 935
F.2d at 680, the textual words of Rule 15 do not expressly require
"materiality," it is emphatically clear to us that the words "in
the interest of justice" call for the deposition to offer evidence
that is material. United States v. Drogoul, 1 F.3d 1546, 1552
(11th Cir. 1993) (requiring materiality); United States v.
Ontiveros-Lucero, 621 F. Supp. 1037, 1038 (W.D. Tex. 1985)
(requiring materiality), aff'd, 790 F.2d 891 (5th Cir. 1986).
Indeed, in Farfan-Carreon, 935 F.2d at 680, we stated that the
deposition was material. In this case, Finch's potential testimony
could have been material as to the execution of the loan documents
and his subsequent dealings with Dillman and Hatfield regarding the
Commercial Capital loans.
-9-
Even assuming materiality, however, we find that any error
committed by the district court to be harmless. Unlike the
potential deponent's critical involvement with the defendant in
FarFan-Carreon, 935 F.2d at 679, there was no evidence in this case
that Finch attended the key meetings at Caprock in which Dillman
and Hatfield discussed and agreed to the illegal scheme, including
the purchase of Great west stock with Caprock's own funds.5 Thus,
even assuming the greatest benefit to the defendants from Finch's
testimony, that testimony still could not have exculpated Dillman
or Hatfield from their agreement to inflate unlawfully Caprock's
net worth with its own money. Further, Finch could not have
testified regarding the defendants' culpability in the actual
removal of money from Caprock through the fraudulent land deals or
the laundering of money through accounts that did not involve
Commercial Capital. Finch's testimony, therefore, could only have
focused on the acts of the defendants after they agreed to the
illegal scheme--subsequent representations regarding the legitimacy
of the loans, preparation of the loan documents, and the loan
closing meetings where he may have been present. Even as it might
relate to this part of the scheme, however, Finch's testimony would
be cumulative in the light of Hatfield's own testimony regarding
5
Dillman's brief indicates that Assomull admitted that Finch
was present at a crucial time when the transaction was closed.
The transcripts reveal, however, that Finch arrived in Dallas
more than ten days after the key November 7 meetings at Caprock
and possibly attended only the subsequent closing meetings that
took place at the law offices of Caprock's counsel.
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these documents and events, the testimony of Caprock's attorney,
Nims, who was present at the meetings in which the Commercial
Capital loans were closed and who was acquitted, the documentary
evidence of the loans, and the vigorous cross-examination of
Assomull by Dillman's and Hatfield's respective counsel. In view
of the substantial documentary and testimonial evidence presented
regarding all phases of the overarching scheme and the limited
scope and cumulative nature of Finch's potential testimony, we hold
that this case is not the rare one in which denial of a Rule 15
motion warrants reversal.6 See Bello, 532 F.2d at 423 (refusing to
reverse on Rule 15 grounds when the weight of evidence of guilt was
such that potential testimony would not have had a "significant
impact"); United States v. Hernandez-Escarsega, 886 F.2d 1560,
1570 (9th Cir. 1989) (refusing to reverse denial of Rule 15 motion
due, in part, to cumulative nature of potential evidence), cert.
denied, 497 U.S. 1003, 110 S. Ct. 3237, 111 L. Ed. 2d 748 (1990).
B
Next, the appellants argue that the district court committed
reversible error by not requiring the government to provide
appellants with the grand jury transcript of Ms. Kopy regarding her
recollection of the meetings at which the conspirators agreed to
6
2 CHARLES ALLEN WRIGHT, FEDERAL PRACTICE AND PROCEDURE § 243, p. 17
(1982) ("On appeal from a judgment of conviction defendant is
entitled to review of an order on a Rule motion, but it will be
rare that he will be able to persuade the appellate court that
the trial court committed reversible error in denying defendant's
motion to take a deposition . . .") (emphasis added).
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the illegal scheme to inflate Caprock's net worth with its own
money. See Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10
L. Ed. 2d 215 (1963). The appellants contend that Ms. Kopy's
testimony would have supported their claim that they had a solid
basis for believing that the Commercial Capital loans were
legitimate instead of being disguised disbursements of Caprock's
own funds. They claim that the transcript of Ms. Kopy's testimony
would have refuted Assomull's testimony regarding the incriminating
meetings. When asked about Ms. Kopy's grand jury testimony
regarding the meeting that Assomull and Hatfield attended, the
government read from the transcript to the court that Ms. Kopy
stated that she "didn't remember" and "[did not] recall that
happening." The district court then denied the appellants' Brady
request for the transcript.
We will overturn this verdict based on this alleged discovery
violation only if the appellants show that granting the Brady
request would have produced a reasonable "probability sufficient to
undermine the confidence in the outcome." United States v.
Ellender, 947 F.2d 748, 756 (5th Cir. 1991). Although exculpatory
and impeachment evidence fall within the purview of Brady, neutral
evidence does not. United States v. Johnson, 872 F.2d 612, 619
(5th Cir. 1989). See United States v. Rhodes, 569 F.2d 384, 388
(5th Cir.), cert. denied, 439 U.S. 844, 99 S. Ct. 138, 58 L. Ed. 2d
143 (1978) (holding prosecutor had no Brady duty to disclose that
a certain witness could not positively identify the defendant).
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Ms. Kopy's statement--to the effect that she did not remember the
meeting--is neutral, not exculpatory or impeaching in nature.
Therefore, we hold that the evidence was not Brady material. In
any event, the district court's refusal to grant the Brady request
certainly does not undermine our confidence in the jury's
verdicts.7
C
Next, the appellants argue that the district court committed
reversible error by denying their motion to exclude evidence--which
they claim is extrinsic--regarding the removal of the second $10
million, which was used to fund the balance of the $5 million of
capital that the conspirators originally planned to inject back
into Caprock. The first $10 million generated from the Maxtor and
Santos land deals had only resulted in approximately $1.5 million
7
Similarly, we hold that neither the district court's
failure to examine the transcripts in camera nor its refusal to
grant a second continuance to locate Ms. Kopy require reversal.
First, the district court's refusal to grant in camera review of
Ms. Kopy's statement that she could not recall an event does not
require reversal because, even if the statement were Brady
evidence, it would not be material but, instead, is simply
inconclusive. See United States v. Gaston, 608 F.2d 607, 612
(5th Cir. 1979); United States v. Dinitz, 538 F.2d 1214, 1224
(5th Cir. 1976), cert. denied, 429 U.S. 1104, 97 S. Ct. 1133, 51
L. Ed. 2d 556 (1977). Second, the district court's refusal to
grant a second continuance to locate Ms. Kopy does not require
reversal because Dillman and Hatfield did not show that Ms. Kopy
was "available and willing to testify." United States v. Shaw,
920 F.2d 1225, 1230 (5th Cir.), cert. denied, ___ U.S. ___, 111
S. Ct. 2038. 114 L. Ed. 2d 122 (1991). United States v. Botello,
991 F.2d 189, 193 (5th Cir. 1993) (citations omitted), cert.
denied, ___ U.S. ___, ___ S.Ct. ___, ___ L.Ed.2d ___ 62 U.S.L.W.
3471 (U.S. Jan. 18, 1994) (No. 93-5835). Indeed, the record here
shows plainly that Ms. Kopy was unwilling to testify.
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of capital for Caprock, thus, leaving an approximate shortfall of
$3.5 million below original goal of inflating Caprock's net worth
by approximately $5 million.8 The government submitted voluminous
documentary evidence of the money laundering activities of Assomull
and certain unindicted individuals and a chart showing the money
flowing out of Caprock through the H-E III Trust, through the
Broadline account, and finally into Great West, Caprock's parent.9
We review this evidentiary ruling under an abuse of discretion
standard. United States v. Jackson, 978 F.2d 903, 912-13 (5th Cir.
1992), cert. denied, ___ U.S. ___, 113 S. Ct. 3055, 125 L. Ed. 2d 739
(1993). The admission into evidence of facts that do not concern
the defendants, that are not inextricably intertwined with the
overall criminal episode is reversible error if the admission
prejudices the defendants. United States v. Williams, 900 F.2d 823
(5th Cir. 1990); United States v. Torres, 685 F.2d 921, 924 (5th
Cir. 1982). Here, however, our review of the record shows that the
path of the second $10 million was inextricably intertwined with
the overall criminal scheme, and especially the use of the
8
The funds not used to inflate Caprock's capital were used
to pay for the purchase of the land from independent third
parties, to pay for closing costs, and to enrich the various
conspirators.
9
The record is unclear as to whether the second $10 million
also passed through Commercial Capital or through a different
entity, Pacific Capital. Nonetheless, the original source and
ultimate destination of the funds and their undeniable path
through the Broadline account show that the second $10 million
was an important part of the overall scheme to inflate Caprock's
net worth with $5 million of its own money.
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Broadline account as the main laundering vehicle for the funds
removed from Caprock. The second $10 million came from Caprock
while Dillman served as the institution's chairman and Hatfield
served as its executive vice-chairman, just as with the first $10
million. The money passed through the H-E III Trust and the
Broadline account as did portions of the first $10 million. And,
most importantly, this money provided the balance of the $5 million
that Dillman, Hatfield, and Assomull originally schemed to inject
into Caprock. Thus, we hold that the district court did not err in
allowing the jury to see the entire scheme and its results.
D
Next, the appellants argue that the district court committed
reversible error by denying their motion for a specific unanimity
instruction regarding the particular criminal purpose of the
conspiracy and, instead, giving only a general unanimity
instruction with respect to all the charges.10 Specifically, each
10
The district court instructed the jury with respect to the
conspiracy count as follows:
For you to find a defendant guilty of conspiracy, you
must be convinced that the government has proved each
of the following beyond a reasonable doubt:
First: That two or more persons made an agreement to
commit at least one of the following crimes: bank
fraud, misapplication of funds, unlawful participation,
or money laundering . . .
Second: That the defendant under consideration knew of
the unlawful purpose of the agreement and joined in it
willfully, that is, with the intent to further the
unlawful purpose; and
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appellant contends on appeal that notwithstanding the general
unanimity instruction given by the district court, there is the
possibility that while all twelve jurors could agree that the
defendant under consideration conspired to violate a statute, some
of the twelve jurors could have believed that he only conspired to
violate one particular statute, e.g., 18 U.S.C. § 1344, bank fraud,
while others of the twelve jurors could have believed that he only
conspired to violate another particular statute, e.g., 18 U.S.C. §
1956, money laundering. Thus, there could have been a less than
unanimous agreement among all twelve jurors as to which of the four
substantive statutes the defendant under consideration conspired to
violate. See United States v. Holley, 942 F.2d 916, 925-29 (5th
Cir. 1991), cert. denied, ___ U.S. ___, 114 S. Ct. 77, 126 L. Ed. 2d
45 (1993) (reversing for lack of unanimity instruction on
nonconspiracy count with several potential alternative violative
acts).
Third: That one of the conspirators during the
existence of the conspiracy knowingly committed at
least one of the overt acts described in the indictment
. . . .
(Emphasis added).
With respect to all the charges, the district court instructed
the jury:
To return a verdict, it is necessary that each juror
agree thereto. In other words, your verdict must be
unanimous.
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The appellants' argument fails because it is based on a
fundamental misunderstanding of the crux of a conspiracy charge
under 18 U.S.C. § 371: The defendant's voluntary agreement with
another or others to commit an offense against or to defraud the
United States. It does not matter that a single conspiracy was
comprised of several objects to which the defendant did not
specifically agree to accomplish, if those acts were reasonably
foreseeable. See United States v. All Star Indus., 962 F.2d 465,
478 (5th Cir.), cert. denied, ___ U.S. ___, 113 S. Ct. 377, 121
L. Ed. 2d 288 (1992). Once the defendant had joined the agreement,
the acts of the other conspirators became his acts irrespective of
whether he physically participated in those particular acts or
expressly agreed to the various specific objectives that
constituted the respective stages of the overarching conspiracy.
See id. When twelve jurors believe beyond a reasonable doubt that
the defendant under consideration agreed to achieve an ultimate
criminal purpose against the United States, all jurors need not
agree on which particular offenses that defendant intended
personally to commit as long as there is but one conspiracy that
encompasses the particular offenses charged.
The evidence here showed one overarching conspiracy that
embodied a scheme encompassing several illegal acts to inflate
Caprock's net worth with its own money. See United States v.
Ellender, 947 F.2d 748, 759 (5th Cir. 1991) (stating that similar
time frame, locations, co-conspirators, offenses, and overt acts
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indicate one conspiracy). There is no question but that this
object was in violation of the law of the United States--the
inflation of Caprock's net worth with its own fraudulently obtained
money. 18 U.S.C. § 1956 (1988 & Supp. IV 1992) (knowing use of
proceeds from unlawful activity in a financial transaction--here,
the inflation of Caprock's net worth with its own fraudulently
removed and laundered money). The jury was instructed,
effectively, that it must find with respect to each defendant that
he joined this illegal conspiracy. This instruction was in
accordance with the law. See Braverman v. United States, 317 U.S.
49, 54, 63 S. Ct. 99, 102, 87 L. Ed. 23 (1942); United States v.
Lyons, 703 F.2d 815, 821 (5th Cir. 1983); United States v. Elam,
678 F.2d 1234, 1250 (5th Cir. 1982); United States v. Murray, 618
F.2d 892, 898 (2d Cir. 1980); United States v. Bolts, 558 F.2d 316,
326 n.4 (5th Cir. 1977), cert. denied, 439 U.S. 898, 99 S. Ct. 262,
58 L. Ed. 2d 246 (1978).11
E
11
Hatfield tangentially argues that the jury should also
have been instructed that it must unanimously agree on which
overt act, or acts, he committed in furtherance of the
conspiracy. Hatfield admitted that he purchased stock from Great
West even though he denied having knowledge that the stock
purchase money came from Caprock. Given his agreement to the
overall conspiracy, the stock purchase was a sufficient overt act
to warrant a conviction by the jury. See United States v.
Khamis, 674 F.2d 390, 393 (5th Cir. 1982) (stating that "overt
act" need not be illegal itself in order to be sufficient to
sustain conspiracy conviction). Because Hatfield admitted to
this and other overt acts, we find any error with respect to the
overt act requirement harmless beyond a reasonable doubt. See
Holley, 942 F.2d at 929.
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Next, Dillman argues that the district court erred in
instructing the jury on the requisite mental state for bank fraud,
18 U.S.C. § 1344, and for unlawful participation, 18 U.S.C. § 1006,
respectively. We find both of these contentions without merit.
With respect to the bank fraud count, the district court
instructed the jury as follows:
A statement or representation is "false" or
"fraudulent" within the meaning of this statute when it
pertains to a material fact; it is known to be untrue or
is made with reckless indifference to its truth or
falsity; and is made or caused to be made with intent to
defraud.
Dillman contends this instruction did not require the jury to find
that the defendants acted with specific intent as required by
United States v. Saks, 964 F.2d 1514, 1518 (5th Cir. 1992).
We review this instruction to determine whether the district
court's charge, as a whole, is a correct statement of the law and
whether it clearly instructs jurors as to the principles of law
applicable to the factual issues confronting them. United States
v. Stacey, 896 F.2d 75, 77 (5th Cir. 1990). In United States v.
Gunter, 876 F.2d 1113, 1120 (5th Cir.), cert. denied, 493 U.S. 871,
110 S. Ct. 198, 107 L. Ed. 2d 152 (1989), we approved the same jury
instruction with respect to 18 U.S.C. § 1344 that the district
court used in this case. Similarly, in this case, the "reckless
indifference" language in the instruction defined the degree of the
defendant's knowledge of falsity of the statement--not the motive
or mental state of the defendant in making and using the statement.
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The "intent to defraud" language defined the mens rea. This
instruction was a correct statement of the law.
With respect to the unlawful participation count, the district
court instructed the jury that it must find that the defendants
acted with "intent to defraud." The district court instructed the
jury that to act with intent to defraud is "to act knowingly and
voluntarily" and then referred the jury to the following definition
of "intent to defraud" that was contained in another count:
[T]o act . . . with the specific intent to deceive,
ordinarily for the purpose of causing some financial loss
to another or bringing about some financial gain to one's
self. It also means to act knowingly and with specific
intent to deceive such that the natural tendency of the
act causes injury to a financial institution, even though
such act may not have been the defendant's motive.
(Emphases added).
Dillman contends that district court confused the jury by including
the term "willfully" in its instructions for other specific intent
counts but failing to include the term "willfully" in the unlawful
participation charge. In United States v. Rochester, 898 F.2d 971,
979 (5th Cir. 1990), we upheld a jury instruction regarding section
1006 that used cross-references instead of defining the requisite
mens rea in each count separately because the instructions taken as
a whole properly stated the specific intent requirement of section
1006. Similarly, we find that the exclusion of the term
"willfully" did not detract from the accuracy of the instruction or
confuse the jury because the clear language of the instructions,
taken as a whole, properly stated the applicable law: Section 1006
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requires specific intent. Id. Thus, the specific section 1006
instruction serves as no basis for reversal.
F
Finally, Hatfield argues that the district court committed
reversible error in denying his motion for severance. In support
of his motion for a separate trial, Hatfield submitted Dillman's
affidavit, stating that if a separate trial were held, Dillman
would testify at Hatfield's trial to the effect that Hatfield had
no involvement in the illegal transactions.12 Dillman further
averred that he would testify that Hatfield was not present at any
meeting where the illegitimacy of the Commercial Capital loans--by
which Caprock's own money was transferred effectively to Hatfield
and used to purchase the Great West stock--was mentioned and that
he always represented to Hatfield that the transactions at issue
were legitimate. Hatfield cites Abbott v. Wainwright, 616 F.2d 889
(5th Cir. 1980), in support of his contention that we should
reverse for denial of severance because: (1) his central defense
12
Fed. R. Crim. P. 14 provides in pertinent part:
If it appears that a defendant or the government is
prejudiced by a joinder of offenses or of defendants in
an indictment or information or by such joinder for
trial together, the court may order an election or
separate trial of counts, grant a severance of
defendants or provide whatever other relief justice
requires.
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was that he did not know the transactions were illegal; (2) the
only direct evidence of such knowledge was Assomull's testimony
that Hatfield attended meetings where the illegal portion of the
scheme were discussed and that Dillman had told Hatfield of the
illegality of the scheme; and (3) the denial of his motion for
severance deprived him of the only testimony, besides his own, that
could have exculpated him.
To make out a prima facie case for severance to the district
court, Hatfield must demonstrate a bona fide need for Dillman's
testimony, and that Dillman would in fact testify at Hatfield's
separate trial. United States v. Rocha, 916 F.2d 219, 232 (5th
Cir. 1990), cert. denied, ___ U.S. ___, 111 S. Ct. 2057, 114 L. Ed. 2d
462 (1991). We review the district court's denial of a motion for
severance only for abuse of discretion. Rocha, 916 F.2d at 227.
To demonstrate an abuse of discretion on a severance motion,
Hatfield must bear the heavy burden of showing that he suffered
"specific and compelling prejudice" against which the district
court did not protect him and, as a result, his trial was unfair.
Id.; United States v. Salomon, 609 F.2d 1172, 1175 (5th Cir. 1980).
In making this determination, we consider, inter alia, the extent
of the prejudice caused by the denial of the motion to sever and
the impact of severance on judicial administration and economy.
United States v. Daly, 756 F.2d 1076, 1080 (5th Cir.), cert.
denied, 474 U.S. 1022, 106 S. Ct. 575, 88 L. Ed. 2d 558 (1985).
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First, Hatfield's evidence that he had a bona fide need of
severance to obtain Dillman's testimony and that Dillman would in
fact testify at his trial is not persuasive. Prior to the joint
trial, Dillman stated only that he "may not" testify at a joint
trial; it would depend, he said, "on testimony and evidence brought
forth at that trial." Thus, the need for severance was not obvious
prior to trial because there was the admitted possibility that
Dillman might testify at a joint trial. Further, Dillman was not
positive that he would testify for Hatfield even if a separate
trial was granted: Dillman asserted that his willingness to testify
at Hatfield's separate trial was conditioned on the facts and legal
advice that he had prior to trial and, thus, could change after
separate trials had begun. See Daly, 756 F.2d at 1080. Thus, that
Dillman would testify as Hatfield's separate trial was by no means
certain.
Second, Hatfield fails to show "compelling prejudice." We
reach this conclusion because of the lack of candor reflected in
Dillman's affidavit and because of the availability of other
exculpating evidence. In Abbott, 616 F.2d at 890, the
codefendant's exculpatory affidavit was entitled to significant
weight in showing prejudice to Abbott because the codefendant
acknowledged his own criminal conduct while exonerating Abbott.
See Tifford v. Wainwright, 588 F.2d 954, 957 (5th Cir. 1979). In
the instant case, Dillman's affidavit was in no sense self-
incriminatory; it was in fact self-serving in that it states that
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Assomull told Dillman that Commercial Capital was a legitimate
entity with ample supply of cash from independent sources to loan
to Caprock's officers in order to fund their purchases of Great
West stock. See Daly, 756 F.2d 1076, 1080 (stating that self-
serving nature of affidavit weighed against the defendant's claim
of compelling prejudice due to lack of severance). Furthermore,
Dillman's affidavit does not reflect the only exculpatory evidence
available to Hatfield. Hatfield's counsel extensively cross-
examined Assomull and examined other evidence regarding the
incriminating meetings, and Hatfield testified fully on his own
behalf regarding his involvement in the transactions that
constituted the conspiracy at trial.13 Moreover, even if the jury
accepted that Dillman never explained the illegal portions of the
scheme to Hatfield, the evidence of Hatfield's integral involvement
in Caprock's management and, specifically, his approval of the
fraudulent Maxtor and Santos loans, his partially nonrecourse
borrowings from Commercial Capital, and his purchase of Great West
stock was sufficient in and of itself to support conviction. See
United States v. Coveney, 995 F.2d 578, 594 (5th Cir. 1993)
13
The government suggests that Hatfield could have called
Kevin Hird, Caprock's chief lending officer who was involved in
the key meetings, as a witness. We find Hatfield's statement
that he was unable to locate Hird and serve him with a subpoena
unpersuasive. Hird had pled guilty to crimes arising out of the
scheme to inflate Caprock's net worth with its own money and was
either incarcerated or on probation at the time of the trial.
Hatfield did not explain why he could not have located Hird
through law enforcement or corrections authorities and obtained
pertinent testimony from him.
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(stating that conspiracy does not require proof of a specific
agreement when such agreement can be inferred from the concert of
action of the conspirators); United States v. Warner, 441 F.2d 821,
830 (5th Cir.) (stating that a conspiratorial agreement is
generally not susceptible to direct proof and, instead, must be
proven by competent circumstantial evidence including the acts of
the conspirators themselves), cert. denied, 404 U.S. 829, 92 S. Ct.
65, 30 L. Ed. 2d 58 (1971). In the light of this evidence, we cannot
say that Hatfield has established compelling prejudice by being
denied the uncertain opportunity to proffer Dillman's possible
testimony that Dillman never personally told Hatfield that the
scheme involved Caprock's own money and was thus illegal.
In short, Hatfield has not borne his heavy burden of proving
the need for a separate trial and the compelling prejudice caused
by the lack of Dillman's potential testimony. Further, we note
that the district court instructed the jury to consider the
evidence against each defendant separately.14 See United States v.
14
With respect to the requirement to consider the evidence
against each defendant separately, the district court instructed
the jury as follows:
A separate crime is charged against one or more of
the defendants in each count of the indictment. Each
count, and the evidence pertaining to it, should be
considered separately. Also, the case of each
defendant should be considered separately and
individually. The fact that you may find one or more
of the defendants guilty or not guilty of any of the
crimes charged should not control your verdict as to
any other crime or any other defendant. You must give
separate consideration to the evidence as to each
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Thomas, No. 91-8583, slip op. 2510, 2526 [___ F.3d ___, ___] (5th
Cir. Jan. 25, 1994) (affirming denial of motion to sever where
district court gave cautionary instruction to consider each
defendant individually). Finally, the voluminous record and
extensive transcripts indicate that judicial economy was served by
a joint trial. See Daly, 756 F.2d at 1080. Thus, the district
court did not abuse its discretion in denying Hatfield's motion for
severance.
IV
For the reasons stated above, the appellants' convictions are
A F F I R M E D.
defendant.
We note that the jury apparently followed this instruction in
acquitting other defendants.
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