United States v. Sapp ( 1998 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
DEC 18 1998
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 97-3384
(D.C. No. 97-CV-3181-DES)
FLETCHER SAPP; RONALD SAPP, (D. Kan.)
Defendants-Appellants.
ORDER AND JUDGMENT *
Before BRORBY , BRISCOE , and LUCERO , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1.9. The case is
therefore ordered submitted without oral argument.
Brothers Fletcher and Ronald Sapp were convicted of bank fraud in
violation of 18 U.S.C. § 1344(2), sentenced to serve twenty-one months in prison
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
and five years on supervised release, and ordered to pay $279,000 in restitution.
This court affirmed their convictions and sentences on direct appeal. See United
States v. Sapp , 53 F.3d 1100 (10th Cir. 1995) (“ Sapp I” ). Defendants
subsequently filed a motion to vacate, set aside or correct their sentences pursuant
to 28 U.S.C. § 2255 and a motion for a new trial pursuant to Fed. R. Crim. P. 33.
The district court consolidated the two motions and denied them. See United
States v. Sapp , 989 F. Supp. 1093 (D. Kan. 1997) ( “Sapp II” ). Because the
district court did not hold an evidentiary hearing and make factual findings, we
review its denial of defendants’ § 2255 motion de novo. See United States v.
Powell , ___ F.3d ___, No. 97-1449, 1998 WL 730159, *1 (10th Cir. Oct. 20,
1998). We review its denial of the motion for a new trial for an abuse of
discretion. See United States v. Patterson , 41 F.3d 577, 579-80 (10th Cir. 1994).
The district court summarized the background leading to defendants’
convictions as follows:
The defendants are brothers who jointly operated a number of
businesses. In 1990, the defendants began experiencing financial
difficulties. After the defendants defaulted on some of their loans at
First State Bank (“First State”), they began negotiating for
additional funds from Midland Bank (“Midland”) to pay off some of
their debts at First State. At the same time, defendants attempted to
persuade First State to discount some of their delinquent loans.
First State agreed to discount some of defendants’ outstanding
loans by approximately $279,000, leaving them $280,000 in debt on
the discounted loans, which First State thought would be paid by
funds that the Sapps were going to obtain from Midland. This
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agreement also allowed the defendants to bring other loans current
and to turn over the collateral in full satisfaction of other loans.
Meanwhile, defendants reached an agreement with Midland that
allowed “$850,000 to be made available to [defendants] to settle
pending litigation and their indebtedness at First State.” [1]
In order to
draw on the funds, the Midland agreement stated that the defendants
needed both Midland’s approval and releases of their indebtedness
with other creditors.
Defendants then forged a letter from First State to Midland.
The forged letter requested payment of approximately $405,000 to
settle defendants’ debt to First State, which was $125,000 more than
was needed to pay off the discounted loans. Before disbursing the
loan monies, however, Midland discovered the discrepancy between
the amount requested in the letter and the amount First State
expected the Sapps to request to pay off the discounted loans. When
confronted with the forgery, the defendants admitted forging the
letter.
Sapp II , 989 F. Supp. at 1097-98.
Defendants raise the following arguments on this appeal: (1) defendants
were denied their rights to effective assistance of trial counsel by counsel’s
failure to call certain rebuttal witnesses and to impeach a government witness;
(2) counsel was ineffective due to a conflict of interest resulting from his firm’s
past representation of Midland and one of its officers; (3) the government failed
to disclose material exculpatory evidence; (4) the government presented evidence
1
This transaction was only a portion of the overall loan agreement dated
February 7, 1991, between defendants, Ruth Sapp, Janet Sapp, businesses the
Sapps owned or controlled, and Midland. The overall loan agreement involved
four separate loans totaling $15,450,000. The $850,000 was made available to
Fletcher and Ron as part of a loan for $2,000,000 for which the borrowers were
Fletcher and Ruth Sapp.
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it knew or should have known was false; (5) the district court abused its
discretion in failing to grant a new trial based on newly discovered evidence; and
(6) the district court abused its discretion by refusing to allow discovery or hold
an evidentiary hearing.
As the district court recognized, and the government on appeal emphasizes,
most of defendants’ arguments revolve around their claim that they had virtually
unfettered access to the $850,000 and that the ineffectiveness of their counsel and
the government’s improper actions prevented the jury from understanding this
fact. As we noted in rejecting defendants’ claim of insufficient evidence on
direct appeal, defendants presented this theory of defense and the jury rejected it:
Defendants argue that they could have properly withdrawn the
$850,000 from Midland for their personal use and therefore could not
be guilty of bank fraud. The jury considered and rejected this
contention. A bank officer [Bruce Rhoades] testified that two
conditions needed to be met before any funds were released to
defendants: (1) the bank had to approve the disbursement, and (2)
defendants had to submit the appropriate releases from their other
creditors. Although defendants disputed the bank officer’s testimony
at trial, their decision to forge a release supports the bank officer’s
position. After seeing the false document that claimed to “release”
defendants from their obligations, the jury could reasonably conclude
that defendants were required to submit appropriate documentation
before gaining access to the authorized funds and that they submitted
the forged document to obtain the additional funds.
Viewing the evidence in the light most favorable to the
government, we conclude that the forged letter could reasonably be
viewed as a false representation seeking to obtain funds from the
bank. We therefore hold that the evidence was sufficient to convict
defendants of bank fraud under section 1344(2).
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Sapp I , 53 F.3d at 1103. Thus, critical to our affirmance of defendants’
convictions, and our present analysis of their claims, were the jury’s findings that
they were required to submit valid and appropriate documentation to draw on the
loan, and that they submitted forged documentation.
1. Ineffective counsel for failure to present rebuttal or impeachment
testimony
To establish a claim of ineffective assistance of counsel, defendants must
show both that counsel’s representation fell below an objective standard of
reasonableness and that counsel’s deficient performance prejudiced their defense.
See Strickland v. Washington , 466 U.S. 668, 687, 690 (1984). To prove
prejudice, defendants must show that “there is a reasonable probability that, but
for counsel’s unprofessional errors, the result of the proceeding would have been
different. A reasonable probability is a probability sufficient to undermine
confidence in the outcome.” Rogers v. United States , 91 F.2d 1388, 1392 (10th
Cir. 1996) (citations and quotations omitted), cert. denied , 117 S. Ct. 1000
(1997).
Defendants contend that their trial counsel was ineffective for failing to
present the testimony of Lee Greif, Chris Henry, James Wirkin and Brian
McCallister, who they contend were the principal negotiators of the loan
agreement between the Sapps and Midland, and the testimony of certified public
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accountant Larry Morris. They contend that Greif, Henry, Wirkin and/or
McCallister would have testified that Midland agreed to loan the money to the
Sapps because it partially caused their financial problems, that the Sapps had a
right to the full $850,000, that any surplus remaining after First State and other
creditors were paid would be disbursed to the Sapps, and that Bruce Rhoades was
not involved in negotiating the Midland-Sapp agreement. They also contend that
counsel should have impeached Rhoades’ testimony generally with the fact that he
was being investigated by the FDIC and eventually was banned from banking, and
his specific testimony implying that Midland intended the entire $850,000 to go to
First State with contrary testimony.
Defendants fail to show, however, how this proposed testimony or
impeachment would have affected the jury’s findings that they were required to
submit appropriate documentation to obtain funds from Midland and they
submitted forged documentation. Rhoades did testify that Midland had to approve
loan disbursements and that releases were required, but he was essentially
repeating what the loan agreement stated. 2
Thus, his testimony on this point was
not seriously impeachable.
2
The loan agreement stated that disbursements of any part of the $850,000
“shall be subject to approval by Bank [Midland], and the submission by
Borrowers [the Sapps] of appropriate court orders or releases indicating
satisfaction of Borrowers’ debts to their creditors. The surplus shall be disbursed
to Borrowers.” Appellee’s Suppl. App. at 529.
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The only evidence directly relating to the release that defendants contend
counsel should have presented is Henry’s proposed testimony that “[i]t was
contemplated by the parties to the Loan Agreement that the ‘release’ language as
pertains to the Sapps debt at [First State] would be satisfied by copies of the notes
marked ‘Paid’ from [First State], in the normal course of business, after receipt by
[First State] of wired funds from [Midland].” Appellants’ App. Vol. I at 43.
Defendants thus do not challenge the jury’s finding that the agreement required
the submission of “appropriate documentation” as a material condition for
disbursement of the funds. At most, they contend that counsel could have
presented evidence indicating that documentation submitted after the
disbursement could satisfy this condition. They have not, however, shown that
the timing of the submission of the documentation was critical to the jury’s
decision (or our affirmance on direct appeal). More importantly, they have not
shown that anything counsel could have done would have affected the jury’s
implicit finding that they intended the forged release to serve as the required
documentation. Indeed, we can see no reason why defendants, who admit they
participated in the negotiation of the agreement themselves and presumably
understood its requirements, would have drafted the forged letter as a release had
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they not intended it to serve as the documentation required by the agreement. 3
We thus agree with the district court that defendants have not met their burden of
proving prejudice from counsel’s failure to call these witnesses or to further
impeach Rhoades.
Defendants also contend that counsel should have presented testimony from
Wirkin, Henry, McCallister and Morris to impeach the testimony of David
Herndon, First State’s president. They contend that Wirkin, Henry and
McCallister would have testified that it was immaterial to Herndon where the
Sapps obtained the funds to pay off their various First State loans. They also
contend that Morris would have testified that the forged letter accurately reflected
3
The letter defendants forged stated in part as follows:
For the payment of $405,014.88 dollars [sic], the following loans
will be paid off, or brought current. Upon receipt of this payment,
both parties hereby mutually release each party from any and all
claims each may have, liquidated or unliquidated, known or unknown
through the date of payment . . . .
....
The above numbers and agreements are hereby acknowledge [sic] and
agreed to, and this request is hereby submitted for payment to
Midland Bank of Kansas.
Appellee’s Suppl. App. at 548-49.
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the terms of their agreement with First State, although they fail to explain what
Morris’ specific testimony would have been. Counsel did present evidence and
argument to this effect at trial, including correspondence from Herndon indicating
that the source of funds did not matter and that First State subsequently settled
some of defendants’ delinquent loans on terms similar to those contained in the
forged letter. Counsel is not ineffective for failing to present cumulative
evidence. See Medina v. Barnes , 71 F.3d 363, 367 (10th Cir. 1995). Again,
defendants have failed to show that presentation of this evidence would likely
have changed the outcome of the trial, and we agree with the district court that
this ineffective counsel claim fails because they have not met their burden of
proving prejudice.
2. Ineffective counsel due to conflict of interest
Defendants claim that their trial counsel was ineffective because of a
conflict of interest due to his firm’s prior representation of Midland and Midland
officer, Lee Greif. Because they did not raise this objection at trial, they must
show that an actual conflict of interest adversely affected their counsel’s
performance. See Cuyler v. Sullivan , 446 U.S. 335, 348 (1980). “An actual
conflict of interest results if counsel was forced to make choices advancing other
interests to the detriment of his client. Without a showing of inconsistent
interests, any alleged conflict remains hypothetical, and does not constitute
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ineffective assistance.” United States v. Alvarez , 137 F.3d 1249, 1252 (10th Cir.
1998) (citation omitted). “[C]ounsel’s performance is adversely affected by an
actual conflict of interest if a specific and seemingly valid or genuine alternative
strategy was available to defense counsel, but it was inherently in conflict with
his duties to others . . . .” United States v. Migliaccio , 34 F.3d 1517, 1526 (10th
Cir. 1994) (quotation omitted).
Defendants contend that because of his conflict of interest, counsel failed
to present evidence regarding the reason that Midland agreed to loan the money to
the Sapps in the first place--i.e., “that the Sapps’ indebtedness at First State Bank
was only part of the mutual consideration [for the loan]; the funds were intended
to enable the Sapps to pay other creditors and to compensate them for damage
they suffered through [Midland officer] Greif’s unlawful conduct.” Appellants’
Br. at 31. In other words, defendants contend that counsel should have thrown
some mud at Midland to show that, in agreeing to loan money to the Sapps, it was
not “an innocent business institution motivated by a desire to save a financially
troubled customer.” Id. at 32. We agree with the district court that this strategy
“would not negate the defendants’ conduct in forging the letter,” and that given
the basis for defendants’ convictions, they “have not shown how this would be a
plausible alternative defense strategy.” Sapp II , 989 F. Supp. at 1101. We thus
reject their claim of ineffective counsel due to a conflict of interest.
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3. Brady violation
Defendants contend that the government violated the dictates of Brady v.
Maryland , 373 U.S. 83 (1963), by failing to disclose evidence favorable to them.
To establish a Brady violation, defendants must prove that “the prosecution
suppressed the evidence, the evidence would have been favorable to [them], and
the suppressed evidence was material.” Smith v. Roberts , 115 F.3d 818, 820 (10th
Cir. 1997) (quotation omitted). Evidence is material “if there is a reasonable
probability that, had the evidence been disclosed to the defense, the result of the
proceedings would have been different.” Kyles v. Whitley , 514 U.S. 419, 433-34
(1995) (quotation omitted).
The evidence defendants claim the government should have produced was a
criminal report regarding their forgery filed by David Herndon with the FDIC and
evidence regarding FBI and FDIC investigations of Bruce Rhoades. Although the
district court addressed the Herndon report on the merits, we may affirm on any
basis supported by the record. United States v. Sandoval , 29 F.3d 537, 542 n.6
(10th Cir. 1994). Defendants admit they were aware of the report during the trial,
as there were “passing references to the report by defense counsel in cross-
examination of Herndon.” Appellants’ Br. at 36. In the district court, the
government contended that defendants were procedurally barred from raising this
issue under United States v. Frady , 456 U.S. 152, 167-68 (1982), because they
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failed to show cause for failing to raise it on direct appeal and could not show
resulting prejudice. See Appellants’ App. at 189-90. In response to the
government’s contention, defendants did not attempt to show cause for failing to
raise this issue earlier. See Appellants’ App. Vol. I at 285-87. We therefore
conclude that the issue is procedurally barred and will not consider it.
It is not clear whether Rhoades was even being investigated at the time of
trial and whether the government had any evidence on this matter to disclose.
Defendants therefore want discovery on this issue. However, as we noted earlier
and the district court concluded, using this information to impeach Rhoades
would not have affected the outcome of the trial. The evidence therefore was not
material under Brady .
4. Presentation of perjured testimony
Defendants contend that the government presented testimony by Rhoades
and Herndon that it knew or should have known was false. Again, while the
district court addressed defendants’ claims on the merits--and we have no reason
to question its analysis in this regard--the government argued in the district court
that this claim was procedurally barred because defendants failed to raise it on
direct appeal. In response, defendants did not present any reason justifying this
failure. We therefore conclude this claim is procedurally barred and will not
consider it.
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5. Newly discovered evidence
Defendants contend that three pieces of evidence are newly discovered and
warrant a new trial. To justify a new trial based on newly discovered evidence,
“the alleged newly discovered evidence [must] be (1) more than impeaching or
cumulative, (2) material to the issues involved, (3) such that it would probably
produce an acquittal, and (4) such that it could not have been discovered with
reasonable diligence and produced at trial.” United States v. Trujillo , 136 F.3d
1388, 1394 (10th Cir.), cert. denied , 119 S. Ct. 87 (1998).
Defendants contend that two pieces of newly discovered evidence relating
to Bruce Rhoades’ testimony warrant a new trial. The first is his affidavit in
which, they contend, he recanted his trial testimony. In his affidavit, Rhoades did
not recant, in the sense that he specifically withdrew or repudiated, any trial
testimony. He did say that he was not a party to the negotiation or drafting of the
loan agreement, while at trial, he answered “[b]asically, yes” to the question “[d]o
you remember negotiating the terms of this [overall] agreement with the
defendants.” Appellee’s Suppl. App. at 566. 4
The district court found that,
because Rhoades admitted on cross-examination that he was not “a party to all
those negotiations,” id. at 579, the affidavit was consistent with his trial
4
As noted earlier, the $850,000 loan was only a relatively small part of the
entire February 7, 1991 loan agreement.
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testimony and could not be considered newly discovered evidence. Defendants
also contend that the evidence that Rhoades was banned from the banking
industry by the FDIC is newly discovered and warrants a new trial. The district
court found that this evidence could only be used to impeach Rhoades and
therefore could not justify a new trial. We also note that, given our previous
discussion regarding the basis of defendants’ convictions, presentation of this
evidence would not likely result in an acquittal. We thus conclude that the court
did not abuse its discretion in denying the motion for a new trial on these bases.
Defendants also contend that David Herndon’s answers to interrogatories in
separate litigation, in which he indicated that the source and amount of funds the
Sapps could borrow to pay the First State debt did not matter to him, is newly
discovered evidence warranting a new trial. The district court found that the
answers to the interrogatories were not inconsistent with Herndon’s trial
testimony. Additionally, as we noted earlier, other evidence to this effect was
presented at trial, and this evidence would therefore be merely cumulative. Again,
defendants have failed to demonstrate that the court abused its discretion in
denying a new trial on this basis.
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6. Request for discovery and evidentiary hearing
Defendants contend that the district court should have allowed them to
conduct discovery on certain issues and should have held an evidentiary hearing.
Both of these matters are subject to the district court’s discretion. See Castro v.
Ward , 138 F.3d 810, 833 (10th Cir.) (discovery), cert. denied, No. 98-5936, 1998
WL 635781 (U.S. Nov. 2, 1998); United States v. Whalen , 976 F.2d 1346, 1348
(10th Cir. 1992) (evidentiary hearing). Defendants have identified no areas of
discovery likely to affect our preceding analysis. Similarly, they have failed to
identify any material factual issues in dispute that would warrant an evidentiary
hearing. We therefore conclude that the district court did not abuse its discretion
in denying their requests for discovery and an evidentiary hearing.
Defendants’ motion to file a reply brief is GRANTED. The judgment of
the district court is AFFIRMED.
Entered for the Court
Carlos F. Lucero
Circuit Judge
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