Patrick Joseph Kiley v. United States

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 17-2428
___________________________
Patrick Joseph Kiley
lllllllllllllllllllllPetitioner - Appellant
v.
United States of America
lllllllllllllllllllllRespondent - Appellee
____________
Appeal from United States District Court
for the District of Minnesota - Minneapolis
____________
Submitted: October 17, 2018
Filed: January 31, 2019
____________
Before WOLLMAN, COLLOTON, and BENTON, Circuit Judges.
____________
WOLLMAN, Circuit Judge.
Patrick Joseph Kiley moved to vacate, set aside, or correct his sentence
pursuant to 28 U.S.C. § 2255, claiming that he had received ineffective assistance of
counsel at trial. The district court denied the motion.1 We affirm.
I. Background
Following an eight-week trial, Kiley was found guilty of twelve counts of mail
and wire fraud under 18 U.S.C. §§ 2, 1341, and 1343, one count of conspiracy to
commit mail and wire fraud under 18 U.S.C. § 1349, and two counts of money
laundering under 18 U.S.C. §§ 2 and 1957. We affirmed Kiley’s conviction and 240-
month sentence on direct appeal. See United States v. Beckman, 787 F.3d 466, 499
(8th Cir. 2015).
The charges arose from a partial Ponzi scheme (the currency program) started
by Trevor Cook in 2006, in which Cook and Kiley conspired with others to steal more
than $193 million from investors. When the conspiracy began to unravel in 2009,
investors filed a civil lawsuit against several of the co-conspirators (the Phillips
litigation). Henry Nasif Mahmoud was retained to represent Kiley and forestall his
being named as a defendant in that litigation. As a retainer, Kiley caused $100,000
to be wired to Mahmoud’s account at a bank in Naperville, Illinois. The $100,000
transfer, consisting of victims’ stolen funds, served as the basis for one of Kiley’s
money laundering convictions. Following Kiley’s indictment in 2011, Mahmoud
began to represent him in his criminal proceedings.
Before trial, the government moved for inquiry, alleging that Mahmoud
suffered from three conflicts of interest, two of which concerned Mahmoud’s prior
representation of two individuals, Duke Thietje and Stephen Nortier, who would be
1
The Honorable Michael J. Davis, United States District Judge for the District
of Minnesota.
-2-
called as witnesses at trial. The government also suggested that Mahmoud himself
might be a necessary witness at trial because of his receipt of the $100,000 retainer.
Kiley opposed the government’s motion. After a hearing, the district court
determined that Mahmoud was not a necessary witness, but it required Kiley to
execute a waiver of the other two conflicts if he wished to be represented by
Mahmoud. Kiley waived the conflicts and was represented at trial by Mahmoud and
local counsel.
At trial, the government presented evidence that Mahmoud was the recipient
of Kiley’s laundered funds. A government investigator explained how the money had
traveled in interstate commerce when it was wired from an account composed entirely
of victim funds to Mahmoud’s Illinois bank. Mahmoud himself later mentioned the
retainer when he asked a witness about Kiley’s mental condition “[i]n July of 2009,
about the time you sent that wire to me.”
The government also produced emails in which Kiley mentioned Mahmoud’s
name to an investor. The government introduced during Duke Thietje’s testimony an
email thread from 2006 in which Thietje asked Kiley for information about his
investments, to which Kiley responded that he was waiting to hear back from
Mahmoud regarding Thietje’s inquiries. The jury subsequently heard testimony from
three attorneys that they had immediately recognized the currency program as
fraudulent after reviewing its operations in 2008.
Following Kiley’s convictions, Kiley and Mahmoud parted ways and new
counsel was appointed for Kiley at sentencing. Kiley thereafter began asserting that
he had received ineffective assistance of counsel because Mahmoud’s receipt of
laundered funds and entanglement in the conspiracy subjected him to potential
liability, creating a conflict of interest. On direct appeal, we concluded that the
district court’s failure to notice and address sua sponte Kiley’s previously unraised
-3-
conflict-based challenge did not violate Kiley’s Fifth Amendment due process rights.
See Beckman, 787 F.3d at 490.
Kiley then filed this § 2255 motion alleging that he was deprived of his Sixth
Amendment right to effective representation by conflict-free counsel. Kiley argued
that Mahmoud’s potential liability caused his and Mahmoud’s interests to diverge
prior to trial and that the conflict adversely affected Mahmoud’s representation,
particularly when the jury learned that Mahmoud had received stolen funds. During
a hearing on the motion, the district court heard testimony from a number of
witnesses, including a criminal defense expert and Mahmoud. In denying Kiley’s
motion, the court found no evidence of wrongdoing by Mahmoud and insufficient
evidence to show that Mahmoud had exposed himself to liability by accepting the
retainer. Finding Mahmoud’s testimony credible, the court concluded that Mahmoud
had neither actual nor constructive knowledge that the currency program was
fraudulent when he accepted Kiley’s retainer in 2009. The court found that
Mahmoud’s credibility before the jury was not harmed and determined that Kiley’s
representation thus had not been adversely affected.
II. Discussion
We review the denial of Kiley’s § 2255 claim as a mixed question of law and
fact, affirming the district court’s factual findings absent clear error and considering
de novo its legal conclusions. Noe v. United States, 601 F.3d 784, 789 (8th Cir.
2010). “[A] defendant who raised no objection at trial must demonstrate that an
actual conflict of interest adversely affected his lawyer’s performance.” Cuyler v.
Sullivan, 446 U.S. 335, 348 (1980). “This standard does not require an ‘inquiry into
actual conflict as something separate and apart from adverse effect.’” Noe, 601 F.3d
at 790 (quoting Mickens v. Taylor, 535 U.S. 162, 172 n.5 (2002)). “An ‘actual
conflict,’ for Sixth Amendment purposes, is a conflict of interest that adversely
affects counsel’s performance.” Mickens, 535 U.S. at 172 n.5. Before the district
-4-
court, Kiley argued that Mahmoud’s potential liability created a conflict of interest.
On appeal, we will examine whether the conflict adversely affected the adequacy of
his representation of Kiley at trial. We conclude that it did not.
To show adverse effect, a defendant must show that his attorney failed to
pursue a reasonable alternate defense strategy because of the conflict. See Noe, 601
F.3d at 790. We have also said in a concurrent representation case that when a
conflict of interest causes both the attorney as well as the client to look less credible
before the jury, the conflict has a Cuyler-type adverse effect. See Dawan v. Lockhart,
31 F.3d 718, 722 (8th Cir. 1994). Kiley argues that both theories apply in this case.
He first contends that Mahmoud should have pursued alternate defense
strategies at trial. Specifically, he asserts that Mahmoud should either have cross-
examined Thietje about the email thread in which Mahmoud was mentioned or
pursued a different defense against the money-laundering charge at issue. Mahmoud
testified at the § 2255 hearing that he did not cross-examine Thietje because he
thought it would elicit testimony harmful to Kiley. The district court found this
testimony to be credible. Because Mahmoud’s strategy was reasonable in the
circumstances, Kiley has not shown an adverse effect. See Caban v. United States,
281 F.3d 778, 786 (8th Cir. 2002) (“[I]f a reasonable attorney would have adopted the
same trial strategy absent a conflict, Caban cannot show McGlennen’s performance
was adversely affected by that conflict.” (emphasis in original)). The district court
also found that the evidence of Kiley’s guilt on the money-laundering charge was
“overwhelming,” and Kiley’s expert witness testified that he would not have pursued
the theory which Kiley now advances. Because the district court’s findings are
supported by the record and are not clearly erroneous, see Johnson v. Norris, 207 F.3d
515, 520 (8th Cir. 2000), Kiley has failed to establish that the alternate defense
strategy he proposes was objectively reasonable. See Noe, 601 F.3d at 791 (“Because
these alternate strategies, the presentation of which would strain credulity in the
-5-
absence of any supporting evidence, were not objectively reasonable, Noe has not
established that he was denied the effective assistance of counsel under Cuyler.”).
Kiley’s primary argument, however, is that Mahmoud’s very presence at trial
adversely affected him after Mahmoud was allegedly implicated in the charged
criminal conduct. Relying on Dawan, he asserts that Mahmoud’s potential
involvement diminished both Mahmoud’s and his credibility and thus satisfied
Cuyler.2 In Dawan, Stout and Dawan were charged with burglary. 31 F.3d at 719.
Both were represented by the same attorney. Id. Stout pleaded guilty and provided
a sworn statement implicating Dawan. Id. When Stout thereafter testified at Dawan’s
trial, however, he denied Dawan’s involvement. Id. at 720. On cross-examination,
Stout admitted that he had lied under oath in his statement and, at the prosecution’s
request, identified Dawan’s attorney as his own counsel. Id. To drive home the point
of counsel’s earlier representation of the now-discredited Stout, the prosecutor
physically pointed to defense counsel’s presence in the courtroom. Id. at 722. On
redirect, defense counsel merely asked, “But your testimony here today’s true?” Id.
at 720.
We held that Dawan had shown an adverse effect “even if counsel’s decision
not to question Stout about the prior statement was, in fact, purely a matter of trial
strategy, and even if that decision had nothing to do with the conflict of interest.” Id.
at 722. Because the prosecutor showed the jury that “the same attorney currently
representing Dawan had also represented the witness who changed his story[,] . . .
[t]he prosecutor’s comments made Dawan’s attorney look less credible and, by
extension, made Dawan look less credible as well.” Id.2
Kiley argues that to avoid this adverse effect, Mahmoud should have pursued
the reasonable alternate strategies of withdrawing as counsel or seeking a protective
stipulation. Because we conclude that Kiley has failed to show any adverse effect,
we need not offer any opinion regarding that argument.
-6-
We have not applied Dawan to a case of sole-client representation. We decline
to extend Dawan here because Kiley has not shown that Mahmoud’s credibility was
diminished in the jury’s eyes. In Dawan, the jury could reasonably infer that the
defense attorney had suborned perjury. That inference went to the very heart of the
attorney’s credibility, and, as the court held, by extension to the client’s credibility.
In this case, the jury learned only that Mahmoud had been paid with funds that were
later determined to have been stolen, which carried no hint of illegality absent
Mahmoud’s knowledge of the nature of the funds at the time he received them. See
18 U.S.C. § 1957. The district court’s finding that Mahmoud did not know that the
funds were stolen is not clearly erroneous in light of the testimony presented during
the § 2255 hearing. Likewise so with respect to the district court’s finding that there
was insufficient evidence to support a reasonable inference that Mahmoud knew, or
should have known, that the funds at issue were illegitimate.
Kiley argues that the court’s underlying factual findings were clearly erroneous
and that it incorrectly applied the law when distinguishing Dawan. He notes that
Mahmoud’s name was mentioned in the Thietje emails and argues that the jury could
have inferred on that basis that Mahmoud was entangled with the currency program
itself. The Thietje emails are not sufficient to show Mahmoud’s entanglement,
however, because they reveal nothing nefarious about Mahmoud’s activities. The
emails show Kiley claiming to correspond with Mahmoud regarding Thietje’s
investment. The record nevertheless reveals an innocent explanation for Kiley’s
mentioning Mahmoud in correspondence with Thietje—Mahmoud had represented
Thietje in a separate legal matter, which was reflective of a prior relationship between
the two. Moreover, the government did not offer the emails as standalone evidence
of unlawful activity. Thietje’s money was invested in an entity that Kiley admits was
“an apparently legitimate business unconnected to Cook’s scheme” that went
bankrupt. The government conceded at trial that Kiley himself did not know that the
entity would go bankrupt. Therefore, even if the jury assumed that the emails showed
Mahmoud’s involvement with Thietje’s investment, that involvement alone would not
-7-
have implicated Mahmoud in the conspiracy. The district court thus did not clearly
err by finding the emails insufficient to raise an inference that Mahmoud was
entangled with the conspiracy.
Kiley also argues that the jury could have inferred Mahmoud’s knowledge that
the retainer funds were stolen from the testimony of the three attorneys who had
reviewed the operations of the currency program in 2008 and immediately recognized
it as fraudulent. According to Kiley, the jury could have “reasonably inferred that . . .
Mahmoud reviewed some of the same documents and asked some of the same
questions.” Appellant’s Br. 43. Kiley further contends that Mahmoud’s knowledge
could have been inferred from the allegations of fraud in the Phillips litigation, which
were widely publicized before Mahmoud accepted his retainer.
Kiley’s suggestion that the jury could have assumed that Mahmoud had
reviewed the same records reviewed by the testifying attorneys fails for want of any
trial testimony regarding Mahmoud’s review of any records associated with the
currency program. Kiley also seems to argue that if the jury knew that Mahmoud was
aware of the fraud allegations against Kiley, then it would have assumed that
Mahmoud knew that the retainer money was stolen. This argument is belied by the
failure of the district court, the attorneys, and the parties themselves to notice the
issue Kiley now claims was apparent to the jury. The district court thus did not
commit clear error when it found that the jury was not presented with sufficient
evidence from which it could reasonably have inferred that Mahmoud knew, or
should have known, that the retainer money was illegitimate.
Because Kiley has not met the Cuyler standard of actual conflict, we affirm the
district court’s judgment.
______________________________
-8-