United States v. Gregory Bartko , 728 F.3d 327 ( 2013 )

Filed: August 23, 2013
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-4298
(5:09-cr-00321-D-1)
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
GREGORY BARTKO,
Defendant - Appellant.
O R D E R
The Court amends its opinion filed August 23, 2013, as
follows:
On page 17, in the citation to United States v. Bartko
slip op., “W.D.N.C.” is corrected to read “E.D.N.C.”
On page 30, Part III, second paragraph, line 4, the
spelling of “Jenks” is corrected to read “Jencks.”
For the Court – By Direction
/s/ Patricia S. Connor
Clerk
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-4298
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
GREGORY BARTKO,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. James C. Dever III,
Chief District Judge. (5:09-cr-00321-D-1)
Argued: May 17, 2013 Decided: August 23, 2013
Before KEENAN and FLOYD, Circuit Judges, and Henry E. HUDSON,
United States District Judge for the Eastern District of
Virginia, sitting by designation.
Affirmed by published opinion. Judge Floyd wrote the opinion,
in which Judge Keenan and Judge Hudson concurred.
ARGUED: Donald Franklin Samuel, GARLAND, SAMUEL & LOEB, Atlanta,
Georgia, for Appellant. Kristine L. Fritz, OFFICE OF THE UNITED
STATES ATTORNEY, Raleigh, North Carolina, for Appellee. ON
BRIEF: Amanda R. Clark-Palmer, GARLAND, SAMUEL & LOEB, Atlanta,
Georgia, for Appellant. Thomas G. Walker, United States
Attorney, Jennifer P. May-Parker, Assistant United States
Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North
Carolina, for Appellee.
FLOYD, Circuit Judge:
Appellant Gregory Bartko was charged by a superseding
indictment with conspiracy to commit mail fraud, launder money
instruments, engage in unlawful monetary transactions, make
false statements, and obstruct proceedings of the Securities and
Exchange Commission (SEC), in violation of 18 U.S.C. § 371 (Count
One); mail fraud and aiding and abetting, in violation of 18
U.S.C. §§ 1341 and 2 (Count Two through Count Five); sale of
unregistered securities and aiding and abetting, in violation of
15 U.S.C. §§ 77e, 77x, and 18 U.S.C. § 2 (Count Six); and making
false statements to a federal agent in January and October 2009,
in violation of 18 U.S.C. § 1001(a)(2) (Counts Seven and Eight).
Before trial, and pursuant to the government’s motion, the
district court dismissed Counts Seven and Eight, as well as two
of the objects of the conspiracy in Count One—making false
statements and obstructing SEC proceedings. After a thirteen-
day trial, the jury convicted Bartko of the remaining counts.
Thereafter, Bartko filed four motions for a new trial, all
of which the district court denied. The district court
subsequently sentenced Bartko to 272 months’ imprisonment. This
timely appeal followed.
In his appeal, Bartko maintains that the district court
erred in denying two of his motions for a new trial, improperly
considered an ex parte sealed document submitted by the
2
government, abused its discretion by not instructing the jury on
accomplice/informant testimony and on multiple conspiracies, and
improperly imposed Sentencing Guidelines enhancements based on
the amount of loss, the number of victims, and Bartko’s status
as a registered broker/dealer at the time of the offenses. We
have jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C.
§ 3742(a). Discerning no reversible error, we affirm both
Bartko’s conviction and sentence.
I.
From 2004 to 2005, Bartko was the leader and organizer of a
financial scheme that involved securing money from investors to
provide funding for two private equity funds, the Caledonian
Fund and the Capstone Fund. John Colvin, Scott Hollenbeck,
Darryl Laws, Rebecca Plummer, and Levonda Leamon participated in
the scheme. As a part of their scheme, the parties mailed,
faxed, and e-mailed correspondence to one another and engaged in
banking transactions.
Bartko was a securities attorney, investment banker, and
registered broker/dealer. Laws was also an investment banker
who, along with Bartko, created the Caledonian Fund. Colvin was
the president of Colvin Enterprises and a co-managing general
partner with Scott Hollenbeck of Franklin Asset Exchange.
3
Leamon and Plummer were financial advisors who owned and
operated Legacy Resource Management (LRM).
In January 2004, Bartko was seeking investors for the
Caledonian Fund. On January 15, 2004, Colvin sent to Bartko a
fax regarding an investment opportunity that one of Colvin’s
companies, Webb Financial Services, was offering. The articles
of incorporation for the company were attached. They listed
Scott Hollenbeck as the initial registered agent of Webb Group.
These materials made fraudulent claims that the principal and
interest were guaranteed and that the investments were insured.
On January 15 and 16, 2004, Bartko performed a record check on
Colvin with the National Association of Securities Dealers. On
February 17, 2004, he made the same record check on Hollenbeck.
According to those records, both had past allegations of forgery
and both had been fired from securities-related jobs.
Hollenbeck’s check also showed that his securities license had
been suspended for violations of securities rules.
Bartko sent a fax to Laws on January 19, 2004, which
detailed Colvin’s fraudulent fundraising methods. For example,
one page of the materials stated that “[p]rincipal investment is
secured & insured [and that the] [i]nterest rate declared is
guaranteed[.]” In a fax that Colvin sent to Bartko on February
9, 2004, proposing an agreement between Franklin Asset Exchange
and the Caledonian Fund, Hollenbeck was referred to in the
4
materials as a “Co-Managing General Partner” of Franklin Asset
Exchange and as “the founder and creator of both Franklin Asset
Exchange, LLC and The Webb Group Financial Services, Inc.”
Colvin ultimately agreed to raise $3 million for the
Caledonian fund through the Franklin Asset Exchange. Although
the March 30, 2004, agreement to raise the money was signed by
Colvin, it was Hollenbeck who actually solicited and secured the
money from the individual investors.
In April 2004, the North Carolina Securities Regulatory
Agency issued a cease and desist order directing Hollenbeck to
stop selling securities in North Carolina. This arose from his
involvement in a separate investment scheme regarding Mobile
Billboards of America (Mobile Billboards). Bartko, along with
his co-counsel, Wes Covington, provided legal representation to
Hollenbeck on this matter. During the course of that
representation, Hollenbeck provided Bartko with information
concerning how he had sold the Mobile Billboards investments.
Hollenbeck informed Bartko that he had promised investors that
their money was guaranteed and insured. He also provided to
Bartko a copy of his promotional materials, including an
application for an insurance policy that he used to show that
the investment was insured.
From January 15, 2004, to May 6, 2004, Hollenbeck
fraudulently raised large amounts of money for the Caledonian
5
Fund, as well as for other investments, from a total of 171
investors. He then deposited the money into Franklin Asset
Exchange or some similar account. The money was not separated
but was instead comingled. He sent the money to various
entities, as directed by Colvin.
Hollenbeck and Colvin raised $701,000 for the Caledonian
Fund, which was wired to the Caledonian Fund on four separate
occasions between February and May 2004. Bartko and Laws used
the money to pay salaries and expenses. None of it was used for
investments or loans.
In late 2004, after Colvin failed to send Bartko the $3
million that he had promised, Bartko terminated their
relationship. In November 2004, the Caledonian Fund dissolved.
The $701,000 in the fund was not returned to the investors.
Almost immediately after dissolution of the Caledonian
Fund, Bartko began the Capstone Fund. Hollenbeck was the
primary fundraiser. Nevertheless, on December 8, 2004, during a
deposition with the SEC concerning Mobile Billboards,
Hollenbeck was asked what investments he was currently selling.
He failed to mention the Capstone Fund. Bartko and his co-
counsel, Wes Covington, were at the deposition representing
Hollenbeck, but neither one corrected Hollenbeck’s false
statement.
6
Although securities law disallowed it, Hollenbeck continued
selling securities and raising money for the Capstone Fund
through fraudulent means. Moreover, some of the investors were
not accredited or sophisticated investors, as required by
securities law. To be an accredited investor, one’s net worth
or net income must reach a certain threshold.
On January 11, 2005, Bartko met with potential investors at
LRM. Around the same time as this meeting, Bartko asked Plummer
and Leamon whether LRM would receive money from the Capstone
Fund’s investors and then send the money back to the Capstone
Fund. Because the money that Hollenbeck had raised—over $1
million at that point—was fraudulently obtained and because the
Capstone Fund was an unregistered fund, Bartko wanted LRM to
appear to be the investor. Plummer and Leamon agreed, and on
January 19, 2005, they opened a bank account with TriStone Bank
for the purpose of receiving the Capstone Fund money. TriStone,
however, eventually closed their account and so, at Bartko’s
suggestion, they opened an account with Wachovia.
Also on January 19, 2005, Bartko issued reimbursement
checks to several investors. But then Bartko instructed
Hollenbeck to have the investors receiving the reimbursements
endorse the checks and return them to LRM. Bartko sent some of
the checks to Hollenbeck to return to the investors because he
did not have their addresses. Instead, Hollenbeck forged the
7
signatures of the investors on the checks and embezzled the
proceeds.
The money that was sent to LRM was returned to the Capstone
Fund. Thus, with the exception of one individual, no refunds
were actually made to the investors. All told, Bartko received
$2,684,928.86 from forty Capstone Fund investors.
In February 2005, the North Carolina Secretary of State
learned that Hollenbeck was continuing to sell investments for
Bartko, and it advised the SEC of that fact. On March 14, 2005,
Alex Rue, an attorney for the SEC, confronted Bartko. Bartko
then filed an interpleader action in the Middle District of
North Carolina on May 26, 2005, and ultimately returned ninety-
four percent of the Capstone Fund money to the court.
Bartko eventually stood trial for conspiracy to commit mail
fraud, launder money instruments, and engage in unlawful
monetary transactions (Count One); mail fraud and aiding and
abetting (Count Two through Count Five); and sale of
unregistered securities and aiding and abetting (Count Six).
The district court dismissed Counts Seven and Eight, as well as
two of the objects of the conspiracy in Count One—false
statements and obstructing SEC proceedings. After a thirteen-
day trial, the jury convicted Bartko of the remaining counts.
Bartko then filed four motions for a new trial. The
district court denied them all in a comprehensive and well-
8
reasoned 120-page order. At the subsequent sentencing hearing,
Bartko objected to several of the Sentencing Guidelines
enhancements, including those based on the amount of loss, the
number of victims, and Bartko’s status as a registered
broker/dealer at the time of the offenses. The district court
overruled the objections and sentenced Bartko to 272 months’
imprisonment. This appeal followed.
II.
First, Bartko argues that the district court erred in
denying two of his motions for a new trial. Rule 33 of the
Federal Rules of Criminal Procedure provides, in relevant part,
that “[u]pon the defendant’s motion, the court may vacate any
judgment and grant a new trial if the interest of justice so
requires.” Fed. R. Crim. P. 33. “We review the district
court’s denial of a motion for a new trial under an abuse of
discretion standard.” United States v. Wilson, 624 F.3d 640,
660 (4th Cir. 2010).
A.
Bartko’s first motion for a new trial concerns a report on
Internal Revenue Agent Scott Schiller’s interview with Judge
Anderson Cromer, who presided over receivership litigation
involving Webb Group and Franklin Asset Exchange as plaintiffs
9
and Bull Mountain Project, Colvin, Colvin Enterprises, and
others as defendants. Bartko and Covington had represented the
plaintiffs and had obtained a substantial settlement. The
government failed to give this report to Bartko until after
trial.
In the fact section of Bartko’s opening brief, he states
the following:
This interview summary, referred to in Bartko’s new
trial motions as the Judge Cromer “302,” revealed that
the judge believed that Bartko had performed ethically
and professionally in connection with the coal company
litigation and that Bartko had made disclosure of his
prior relationship with Colvin, Hollenbeck and the
proposed receiver. Because that information had not
previously been furnished to the defense, the defense
did not know that Judge Cromer’s testimony would have
been favorable. He was, therefore, never called as a
witness and the topic of the coal company litigation
was never raised at trial. The jury never learned
that Bartko’s efforts on behalf of Hollenbeck’s
victims in other schemes resulted in a $20
million recovery for the people he—Bartko—supposedly
victimized.
The only mention that Bartko makes in the argument section of
his opening brief, however, is that the interview report
“related to Mr. Bartko’s actual innocence of the charges in this
case, because that information related to his behavior and state
of mind, rather than the credibility of any particular witness.”
Bartko also states that the government agreed “when it moved to
exclude this evidence” that it “would have unfairly cast Bartko
in a favorable light.”
10
After reading Bartko’s opening brief, it first appeared to
us, as it did to the government, that Bartko was not raising
this issue on appeal. But, then in his reply brief, buried in a
footnote, he states that it is an issue in this appeal and that
“this Brady violation [was] a component of his argument that the
cumulative effect of the withheld evidence resulted in a trial
that was unfair.”
The argument section of an appellant’s opening brief must
contain the “appellant’s contentions and the reasons for them,
with citations to the authorities and parts of the record on
which the appellant relies.” Fed. R. App. P. 28(a)(9)(A).
Because Bartko has failed in this regard, we consider this issue
waived. See Wahi v. Charleston Area Med. Ctr., 562 F.3d 599,
607 (4th Cir. 2009) (concluding that those issues on which the
appellant failed to comply with the specific dictates of Rule
28(a)(9)(A) were waived).
B.
In Bartko’s second motion for a new trial, he protests that
the government allowed Scott Hollenbeck to testify falsely that
he had not received any promises or inducements in exchange for
his trial testimony. The Supreme Court long ago opined that “a
State may not knowingly use false evidence, including false
testimony, to obtain a tainted conviction.” Napue v. Illinois,
11
360 U.S. 264, 269 (1959). “This is true regardless of whether
the [g]overnment solicited testimony it knew or should have
known to be false or simply allowed such testimony to pass
uncorrected.” United States v. Kelly, 35 F.3d 929, 933 (4th
Cir. 1994). A new trial is required when the government’s
knowing use of false testimony could affect the judgment of the
jury. See Giglio v. United States, 405 U.S. 150, 154 (1972).
“We do not, however, automatically require a new trial whenever
‘a combing of the prosecutors’ files after the trial has
disclosed evidence possibly useful to the defense but not likely
to have changed the verdict. . . .’” Id. (quoting United States
v. Keogh, 391 F.2d 138, 148 (2d Cir. 1968)).
To obtain a new trial on the basis that Hollenbeck
testified falsely, Bartko must demonstrate that Hollenbeck gave
false testimony; he need not demonstrate that Hollenbeck
committed perjury. “[D]ue process is violated not only where
the prosecution uses perjured testimony to support its case, but
also where it uses evidence which it knows creates a false
impression of a material fact.” Hamric v. Bailey, 386 F.2d 390,
394 (4th Cir. 1967). Hence, “[e]vidence may be false either
because it is perjured, or, though not itself factually
inaccurate, because it creates a false impression of facts which
are known not to be true.” Id.12
In early 2009, as part of its investigation of the Capstone
Fund, as well as several other investment schemes, the United
States Attorney for the Eastern District of North Carolina
wanted to interview Scott Hollenbeck. Thus, the government
entered into a proffer agreement with him and his attorney,
Scott Holmes. The agreement, directed to Holmes but signed by
both Holmes and Hollenbeck, set forth the following:
As you have indicated, your client, Mr.
Hollenbeck, is interested in meeting with federal
agents currently investigating the sale of numerous
investments, including Webb Group, Franklin Asset
Exchange, Disciples Trust, and Capstone. I have
informed you that Mr. Hollenbeck is not a target of
this investigation. The parties will schedule an
interview of Mr. Hollenbeck to take place at the
Federal Correctional Institution in Coleman, Florida.
Mr. Hollenbeck, you, and the United States Attorney’s
Office (USAO) agree as follows concerning the “ground
rules” for this interview:
1. In any trial in this matter, the USAO will not
offer into evidence in its case in-chief or at
sentencing any statements made by Mr. Hollenbeck
at the interview; provided, however, this
Paragraph 1 shall not apply to any prosecution
for false statements, obstruction of justice, or
perjury that is based in whole or in part on
statements made by Mr. Hollenbeck at the
interview.
2. Notwithstanding Paragraph 1 above:
a. the USAO may use information derived
directly or indirectly from statements made
by Mr. Hollenbeck at the interview for the
purpose of obtaining other evidence, and
that evidence may be used in the prosecution
and sentencing of Mr. Hollenbeck by the
USAO; in any trial of this matter or at
sentencing, the USAO may use statements made
13
by Mr. Hollenbeck at the interview to cross-
examine him if he testifies or to rebut any
evidence offered by or on behalf of him.
3. This agreement is limited to statements made
by Mr. Hollenbeck at the interview and does
not apply to any other statements made by
Mr. Hollenbeck at any other time. No
understandings, promises, or agreements
exist with respect to the meeting other than
those set forth in this agreement, and none
will be entered into unless memorialized in
writing and signed by all parties.
4. The USAO will not share the statements made
by Mr. Hollenbeck during the interview with
any other state or federal prosecuting
entity unless the prosecuting entity agrees
to be bound by the terms of this agreement.
Please return the original signed copy of this letter
agreement prior to the interview.
Scott Hollenbeck’s wife, Crystal Hollenbeck, also entered into a
proffer agreement with the government. It is almost identical to
her husband’s agreement.
At trial, on direct examination, the government asked
Hollenbeck, “Mr. Hollenbeck, what if any promises has the
government made to you about your testimony here today?”
Hollenbeck responded, “None.” Despite any contrary suggestion
by Bartko, our review of the record convinces us that this was a
truthful statement.
Bartko makes much of the fact that the agreements stated
that the Hollenbecks were not targets of the investigation into
the sale of investments, including Webb Group, Franklin Asset
14
Exchange, Disciples Trust, and the Capstone Fund. From this,
Bartko concludes that Hollenbeck had some sort of incentive to
assist the government in its prosecution of Bartko. But that is
not how we interpret the agreement.
Paragraph three of the agreements make clear that “[n]o
understandings, promises, or agreements exist[ed] with respect
to the meeting other than those set forth in th[e] agreement[s],
and none will be entered into unless memorialized in writing and
signed by all parties.” Because nothing in the agreements
suggests that the Hollenbecks not being a target was conditioned
on their participation in the investigative interviews, or that
they would not be a target in the future, we decline to graft
such a provision into the agreements.
Therefore, Hollenbeck’s answer that he had not been
promised anything in return for his testimony at trial was true.
But, his answer to the follow-up question by his counsel was
not. During cross-examination of Hollenbeck, Bartko’s counsel
asked, “Now, one of the things that you said when you took the
stand was that the government has made you no promises, correct?
You said that?” Hollenbeck replied, “That is exactly right.”
Then defense counsel followed up: “And the government has not,
as of this time, made you any promises, have they?” Hollenbeck
answered, “They have not.” The district court held that
Hollenbeck’s answer to this question was not false. However, it
15
provided an alternative analysis on the assumption that
Hollenbeck’s testimony on this point was false.
From our review of the record, we conclude that the
government had made a promise to Hollenbeck. In fact, it made
to him several promises concerning how the information that he
gave at the investigatory interview would and would not be used
against him. And, because the government made those promises,
it had a duty to correct Hollenbeck’s answers when he testified
falsely that it had not made any promises. But this it
regrettably failed to do. Therefore, we must now decide whether
that testimony could have affected the jury’s judgment.
Had Hollenbeck testified truthfully when asked whether the
government had made any promises to him up to that time, Bartko
arguably could have used that fact to impeach Hollenbeck. But,
having made an exhaustive review of the record, we do not think
that impeachment could have made an iota of difference in the
jury’s final judgment. As explained by the district court,
[d]efense counsel thoroughly impeached Hollenbeck on
the subject of bias in favor of the government and on
Hollenbeck’s motive to lie to please the government.
Defense counsel thoroughly impeached Hollenbeck
concerning his desire to avoid prosecution for his
fraud involving Colvin, Webb Group, Franklin Asset
Exchange, Disciple Trust, the Caledonian Fund, and the
Capstone Fund. Defense counsel thoroughly impeached
Hollenbeck about his desire to receive a cooperation-
based reduction in his 168-month prison sentence
stemming from the Mobile Billboards fraud.
Furthermore, defense counsel explored at great length
and with absolutely devastating effect Hollenbeck’s
16
character for untruthfulness. Defense counsel
recounted the many lies Hollenbeck had told and the
many frauds he had committed throughout his life. In
fact, this court has never seen a witness more
thoroughly impeached than Hollenbeck. In the face of
such blistering impeachment and the other evidence in
the trial, one more false statement by Hollenbeck
could not have possibly affected the jury’s judgment.
United States v. Bartko, No. 5:09-CR-321-D, slip op. at 101-02
(E.D.N.C. Jan. 17, 2012) (citations omitted). Consequently, the
district court did not err in refusing to grant to Bartko a new
trial on this issue.
C.
In Bartko’s second motion for a new trial, he also contends
that the government’s failure to disclose the agreements between
it and Scott and Crystal Hollenbeck amounts to a Brady
violation.
As this Court recognized in United States v. Wilson, 624
F.3d 640 (4th Cir. 2010):
In Brady, the Supreme Court held “that the suppression
by the prosecution of evidence favorable to an accused
upon request violates due process where the evidence
is material either to guilt or to punishment,
irrespective of the good faith or bad faith of the
prosecution.” 373 U.S. at 87, 83 S. Ct. 1194. In
order to prove that the [g]overnment’s failure to
tender certain evidence constitutes a Brady violation,
the burden rested on [the defendant] to show that the
undisclosed evidence was (1) favorable to him either
because it is exculpatory, or because it is
impeaching; (2) material to the defense, i.e.,
“prejudice must have ensued”; and (3) that the
prosecution had materials and failed to disclose them.
17
United States v. Stokes, 261 F.3d 496, 502 (4th Cir.
2001).
Id. at 660-661. “Evidence is ‘exculpatory’ and ‘favorable’ if
it ‘may make the difference between conviction and acquittal’
had it been ‘disclosed and used effectively.’” Id. at 661
(quoting United States v. Bagley, 473 U.S. 667, 676 (1985)).
And, it is “‘material’ if it is ‘likely to have changed the
verdict.’” Id. (quoting Moseley v. Branker, 550 F.3d 312, 318
(4th Cir. 2008)). “It is an abuse of discretion for the
district court to commit a legal error—such as improperly
determining whether there was a Brady violation—and that
underlying legal determination is reviewed de novo.” Wilson,
624 F.3d at 661 n.24.
There is no dispute that factors one and three of the test
set forth in Stokes are satisfied—namely that the proffer
agreements were favorable to Bartko because they were impeaching
and that the prosecution had the materials and failed to
disclose them. See Stokes, 261 F.3d at 502. Thus, our inquiry
here will focus on only the second element: whether the
agreements were material to the defense. In other words, was
Bartko prejudiced by the non-disclosure? See id.The district court held that the Hollenbecks’ proffer
agreements constituted cumulative impeachment evidence. In the
alternative, it stated that there is no reasonable probability
18
that the jury’s verdict would have been different if the
government had disclosed the agreements.
If Bartko had had the Hollenbecks’ proffer agreements, he
could have used them in an attempt to attack Scott Hollenbeck’s
credibility. But, as the district court noted, “Bartko’s
impeachment of Hollenbeck was devastatingly thorough and
thoroughly devastating.” Bartko, No. 5:09-CR-321-D, slip op. at
103. It encompassed:
(1) Hollenbeck’s felony convictions, (2) his bias in
favor of the government due to his desire to receive a
Rule 35 motion and a reduction in his 168-month prison
sentence for his involvement in Mobile Billboard’s
fraud, (3) his bias in favor of the government due to
his desire to avoid being prosecuted for the fraud
that he committed with Colvin, Webb Group, Franklin
Asset Exchange, Disciples Trust, and others, (4) his
bias in favor of the government due to his desire to
avoid being prosecuted for the fraud he committed
while raising money for the Caledonian Fund and the
Capstone Fund, (5) myriad specific instances of lying,
fraud, and forgery throughout Hollenbeck’s adult life,
(6) prior inconsistent statements to prosecutors, (7)
contradictions within his trial testimony, and (8) his
inability to recall certain facts.
Bartko, No. 5:09-CR-321-D, slip op. at 107-08. Thus, the
proffer agreements would have been cumulative and, as such, we
are unable to fathom how the jury’s knowing about them could
have further damaged Hollenbeck’s credibility. The “proffer
agreement[s] had nothing to add and would not have shed any new
light on the depth of Hollenbeck’s wrongdoing, the magnitude of
his incentive to cooperate with the government, or the absence
19
of his credibility.” Bartko, No. 5:09-CR-321-D, slip op. at
103. Hence, we are confident that there is no reasonable
probability that the jury would have reached a different verdict
if Bartko had been given and effectively used the Hollenbecks’
proffer agreements.
D.
In Bartko’s third motion for a new trial, he contends that
the government committed a Brady violation in failing to
disclose the tolling agreements that it had entered into in 2010
with Levonda Leamon. The agreements tolled the statute of
limitations “for potential federal criminal violations regarding
Ms. Leamon’s involvement in the fraudulent sale of investments
during the year 2005, including conspiracy, mail fraud, the sale
of unregistered securities, and money laundering.” The purpose
of the agreements was “to allow additional time for the parties
to present facts and discuss the matter . . . [and] to evaluate
and discuss potential resolutions to [the] case.” The January
5, 2010, agreement tolled the statute of limitations on Leamon’s
crimes until July 5, 2010; and the July 2, 2010, agreement
tolled the statute of limitations until December 5, 2010. It
appears from the record that, without these agreements, the
statute of limitations on some of Leamon’s alleged crimes would
have run before she gave her testimony at Bartko’s trial.
20
As already enumerated, we consider three factors in
determining whether a Brady violation has occurred: whether the
undisclosed evidence was “(1) favorable to [the defendant]
either because it is exculpatory, or because it is impeaching;
(2) [whether the evidence was] material to the defense, i.e.,
‘prejudice must have ensued’; and (3) [whether] the prosecution
had materials and failed to disclose them.” Stokes, 261 F.3d at
502. The government acknowledges that the Leamon agreements are
impeaching and that it had the materials but failed to disclose
them. Thus, as before, because factors one and three are met,
we need focus on only the second factor—the materiality factor.
We “discard[] as immaterial . . . undisclosed impeachment
evidence where it was cumulative of evidence of bias or
partiality already presented ‘and thus would have provided only
marginal additional support for [the] defense.’” United States
v. Cooper, 654 F.3d 1104, 1120 (10th Cir. 2011) (second
alteration in original) (quoting Douglas v. Workman, 560 F.3d
1156, 1174 (10th Cir. 2009)).
“In general, evidence whose function is impeachment may be
considered to be material where the witness in question supplied
the only evidence linking the defendant to the crime.” United
States v. Avellino, 136 F.3d 249, 256 (2nd Cir. 1998).
Likewise, we may find impeaching evidence to be “material where
the witness supplied the only evidence of an essential element
21
of the offense.” Id. at 257. “This is especially true where
the undisclosed matter would have provided the only significant
basis for impeachment.” Id..
Leamon testified at trial that she was a seventy-year-old
high school graduate and former flight attendant. She became a
co-owner of LRM in 2003 or 2004 with her role primarily being
community involvement. She also attested to Bartko’s use of
LRM’s office for the January 11, 2005, meeting and how LRM
received money from the Capstone Fund, as well as Hollenbeck’s
other investors, and then sent the money back to Capstone.
According to Leamon, she spoke with Hollenbeck and Bartko about
pooling the money that came in from investors and the potential
round trip of the refund checks as the investors endorsed them
to LRM. Leamon also stated that LRM received a six-percent
commission from the Capstone Fund.
Leamon further testified about LRM’s process of mailing
statements and letters to investors, as well as corrected
statements and letters, the closing of the account at TriStone
Bank and the opening of an account with, as Bartko put it, “a
larger bank like a Wachovia.”
As the district court noted, “This testimony served
primarily as summary evidence of [LRM’s] bank activity,
mailings, and meetings, which was corroborated by substantial
documentary evidence, the testimony of victims, the testimony of
22
Plummer, and the testimony of Bartko.” Bartko, No. 5:09-CR-321-
D, slip op. at 111. “In short, Bartko’s admissions and a
mountain of other evidence independently corroborate Leamon’s
testimony.” Id. at 112. As such, Leamon’s testimony was not
material. And, because it was not material, the district court
did not err in its refusal to grant Bartko a new trial on this
issue.
E.
Although “courts of necessity examine undisclosed evidence
item-by-item, their materiality determinations must evaluate the
cumulative effect of all suppressed evidence to determine
whether a Brady violation has occurred.” United States v.
Ellis, 121 F.3d 908, 916 (4th Cir. 1997). When “the net effect
of the evidence withheld by the [government] in [a] case raises
a reasonable probability that its disclosure would have produced
a different result, [the defendant] is entitled to a new trial.”
Kyles v. Whitley, 514 U.S. 419, 421-22 (1995). “A reasonable
probability does not mean that the defendant ‘would more likely
than not have received a different verdict with the evidence,’
only that the likelihood of a different result is great enough
to ‘undermine[] confidence in the outcome of the trial.’” Smith
v. Cain, 132 S. Ct. 627, 630 (2012) (quoting Kyles, 514 U.S. at
434).
23
Here “the likelihood of a different result is [not] great
enough to ‘undermine[] confidence in the outcome of [Bartko’s]
trial.’” See id. As the district court aptly noted,
In so finding, the court stresses that Bartko’s case
was not a close one. The trial record reveals
overwhelming evidence of Bartko’s guilt. The jury
carefully heard the evidence over a three-week period.
The jury received detailed jury instructions. After
deliberating approximately four hours, the jury
unanimously convicted Bartko on all six counts.
. . . .
Circumstantial this case was; tenuous it absolutely
was not. The mountain of evidence marshaled against
Bartko demonstrated his guilt beyond any shadow of a
doubt. Moreover, if the jury had had any doubts,
Bartko’s testimony destroyed them. The jury was
permitted not only to disbelieve Bartko’s testimony,
but to believe the opposite.
Bartko, No. 5:09-CR-321-D, slip op. at 118. Therefore, having
reviewed the omitted evidence “in the context of the entire
record.” United States v. Agurs, 427 U.S. 97, 112 (1976), and
finding that there is no reasonable probability that the
disclosure of the withheld evidence or the correction of
Hollenbeck’s false testimony could have produced a different
result, we conclude that the district court did not err in
refusing to grant Bartko a new trial.
F.
Having analyzed the Brady and Giglio issues that Bartko
raises, we pause here to address the discovery practices of the
24
United States Attorney’s office in the Eastern District of North
Carolina. 1 A cursory review of this Court’s opinions reveals
recent consideration of at least three cases involving discovery
abuse by government counsel in this district. See, e.g., United
States v. Flores-Duran, No. 11-5167, 2013 WL 3286248, *2-4 (4th
Cir. July 1, 2013) 2 (noting that (1) “[d]uring the week prior to
trial, . . . the [g]overnment sent over one thousand pages of
additional discovery, the bulk of which was due no later than
fourteen days prior to trial” and that the government argued its
“discovery violation” was excusable because it “misread[] . . .
the discovery order; a power outage [occurred] at the courthouse
in Raleigh; and [it made a] last minute decision to present
certain evidence” and (2) that on the Saturday immediately prior
to the Monday on which trial was to begin, the government faxed
key information obtained approximately twenty-four hours earlier
to defense counsel’s office, but it did nothing to ensure that
counsel received the fax, even though it sent the information
1
We note that the current United States Attorney for the
Eastern District of North Carolina did not assume office until
2011, which is after some of the conduct described herein
occurred.
2
We recognize that unpublished cases have no precedential
value in this circuit. We rely on them here not for their legal
conclusions, but only to demonstrate that certain conduct has
occurred repeatedly.
25
outside of normal business hours); United States v. Burkhardt,
484 F. App’x 801, 802 (4th Cir. 2012) (considering a defendant’s
appeal of his civil commitment as a sexually dangerous person
and citing as a “matter of concern” the government’s failure to
disclose prior to the commitment hearing that one of the
defendant’s victims would testify); United States v. King, 628
F.3d 693, 701-04 (4th Cir. 2011) (vacating and remanding the
defendant’s conviction for felony possession of a firearm
because the government “specifically rebuffed both . . . written
and oral demands [by the defendant] that it disclose”
potentially exculpating grand jury testimony and “refused to
disclose” the testimony, even after the district court
“suggest[ed] that it do so”). And this case, which confronts us
with three alleged constitutional violations—two instances of
withholding discoverable evidence and one choice to leave
uncorrected a witness’s false testimony—only adds to the list.
Mistakes happen. Flawless trials are desirable but rarely
attainable. Nevertheless, the frequency of the “flubs”
committed by this office raises questions regarding whether the
errors are fairly characterized as unintentional. Cf. Oral
Argument at 24:50-25:10, Flores-Duran, 2013 WL 3286248 (No. 11-
5167), available at http://www.ca4.uscourts.gov/OAaudioop.htm.
(referencing the government’s late disclosure of pages of
discovery in violation of the judge’s discovery order and
26
stating, “This is a repeat offense by the government. The order
is entered by the court requiring disclosure by a certain date,
and the government simply ignores it. And their explanation for
ignoring it is, ‘I missed it. So what. There’s no prejudice.’
And it just happens again and again.”). Moreover, the
government’s responses to queries regarding its practices are
less than satisfactory. For example, in this case, when asked
at oral argument about its failure to correct Scott Hollenbeck’s
testimonial misstatement regarding promises he had received, the
government suggested that at the time Hollenbeck made the
misstatement, trial counsel had no recollection of the promises
made to him. But as Judge Keenan aptly noted, such an idea
“just strains credulity.” Oral Argument at 21:54-21:56, United
States v. Bartko (No. 12-4298), available at
http://www.ca4.uscourts.gov/OAaudiotop.htm. Similarly artless
responses have been given in other cases. See, e.g., Oral
Argument at 11:20-14:30, Flores-Duran, 2013 WL 3286248 (No. 11-
5167), available at http://www.ca4.uscourts.gov/OAaudiotop.htm.
And here, when we gave counsel an opportunity to correct her
farfetched assertion, she refused. Faced with such behavior, we
must conclude that this office is uninterested in placating
concerns about its practices.
As detailed above, our confidence in the jury’s conviction
of Bartko was not undermined by the government’s misconduct in
27
this case. And such is the result in many cases. Remedies
elude defendants because discovery violations ultimately prove
immaterial to the verdict. But that is not the true problem.
The problem is that the government appears to be betting on the
probability that reams of condemning evidence will shield
defendants’ convictions on appeal such that at the trial stage,
it can permissibly withhold discoverable materials and ignore
false testimony. Make no mistake, however. We may find such
practices “harmless” as to a specific defendant’s verdict, but
as to litigants in the Eastern District of North Carolina and
our justice system at large, they are anything but harmless.
“No [one] in this country is so high that [she or] he is above
the law. No officer of the law may set that law at defiance
with impunity. All the officers of the government, from the
highest to the lowest, are creatures of the law and are bound to
obey it.” United States v. Lee, 106 U.S. 196, 220 (1882). The
law of this country promises defendants due process, U.S. Const.
amend. V, and the professional code to which attorneys are
subject mandates candor to the court, see Model Rules of Prof’l
Conduct R. 3.3., and fairness to opposing parties, see id. R.
3.4. Yet the United States Attorney’s office in this district
seems unfazed by the fact that discovery abuses violate
constitutional guarantees and misrepresentations erode faith
that justice is achievable. Something must be done.
28
We urge the district court in the Eastern District of North
Carolina to meet with the United States Attorney’s Office of
that district to discuss improvement of its discovery procedures
so as to prevent the abuses we have referenced here. Moreover,
if this sort of behavior continues in subsequent cases, this
Court may wish to require that the United States Attorney for
the Eastern District of North Carolina, as well as the trial
prosecutor, be present at oral argument so that the panel can
speak directly to her or him about any alleged misconduct.
Sanctions or disciplinary action are also options.
To underscore our seriousness about this matter, and to
ensure that the problems are addressed, we direct the Clerk of
Court to serve a copy of this opinion upon the Attorney General
of the United States and the Office of Professional
Responsibility for the Department of Justice. The transmittal
letter should call attention to this section of the opinion.
We do not mean to be unduly harsh here. But “there comes a
point where this Court should not be ignorant as judges of what
we know as men [and women].” Rumsfeld v. Padilla, 542 U.S. 426,
465 n.10 (2004) (Stevens, J., dissenting) (quoting Watts v.
Indiana, 338 U.S. 49, 52 (1949)). What we know is that we are
repeatedly confronted with charges of discovery abuse by this
office. What we know is that our questions regarding this abuse
remain unanswered. And what we know is that such conduct is
29
unacceptable. Appropriate actions need to be taken to ensure
that the serious errors detailed herein are not repeated.
Whatever it takes, this behavior must stop.
III.
Next, Bartko contends that the district court improperly
considered an ex parte sealed document submitted by the
government. Bartko had filed a motion asking the district court
to unseal the document, but the court denied his motion.
At our request, the government provided to us a copy of the
sealed document, which asks the district court to make an in
camera review of grand jury testimony in another case to
determine whether that testimony contained any Jencks materials.
The district court concluded that the sealed document did not,
and we agree. Thus, we need not decide whether the district
court erred in considering the document in that it caused no
harm to Bartko.
IV.
Bartko also maintains that the district court erred by not
instructing the jury on accomplice/informant testimony and on
multiple conspiracies. A district court’s “decision to give (or
not to give) a jury instruction . . . [is] reviewed for abuse of
discretion.” United States v. Russell, 971 F.2d 1098, 1107 (4th
30
Cir. 1992). A district court’s decision not to give a requested
instruction by the criminal defendant amounts to reversible
error only if the proffered instruction: (1) was correct, (2)
was not substantially covered by the charge that the district
court actually gave to the jury, and (3) involved some point so
important that the failure to give the instruction seriously
impaired the defendant’s defense. United States v. Lewis, 53
F.3d 29, 32 (4th Cir. 1995). Even if these factors are met,
however, failure to give the defendant’s requested instruction
is not reversible error unless the defendant can show that the
record as a whole demonstrates prejudice. See Ellis, 121 F.3d
at 923.
A.
Bartko complains that the district court abused its
discretion in its refusal to instruct the jury that it “should
consider the testimony of Hollenbeck, Leamon and Plummer with
great care and scrutiny.” It appears that Bartko asked for an
instruction regarding the testimony of an accomplice, informer,
or witness with immunity. But, the district court declined and
gave the following instruction instead:
You, as jurors, are the sole and exclusive judges of
the credibility of each of the witnesses called to
testify in this case, and only you can determine the
importance or weight that their testimony deserves.
After making your assessment concerning the
31
credibility of a witness, you may decide to believe
all of that witness’[s] testimony, only a portion of
it, or none of it.
In making your assessment of each witness, you
should carefully scrutinize all of the testimony given
by each witness, the circumstances under which each
witness has testified, and all of the other evidence
which tends to show whether a witness, in your
opinion, is worthy of belief.
Consider each witness’[s] intelligence, motive to
falsify, state of mind, and appearance and manner
while on the witness stand. Consider each witness’[s]
ability to observe the matters as to which he or she
testified and consider whether he or she impresses you
as having an accurate memory or recollection of these
matters. Consider also any relation each witness may
bear to either side of the case, the manner in which
each witness might be affected by your verdict, and
the extent to which, if at all, each witness is either
supported or contradicted by other evidence in the
case.
This instruction certainly encompasses any specific
instruction that the jury “should consider the testimony of
Hollenbeck, Leamon and Plummer with great care and scrutiny.”
And, as detailed herein, the record fails to support any
argument that the three were promised something in exchange for
their testimony. Thus, in our judgment, we are unable to say
that the district court’s decision denying Bartko’s request to
give an accomplice/informer instruction was an abuse of
discretion in that Bartko was not prejudiced by the omission.
32
B.
Bartko also insists that the district court erred in
refusing to give his requested multiple conspiracy charge. “A
court need only instruct on multiple conspiracies if such an
instruction is supported by the facts.” United States v. Mills,
995 F.2d 480, 485 (4th Cir. 1993). Hence, “[a] multiple
conspiracy instruction is not required unless the proof at trial
demonstrates that appellants were involved only in ‘separate
conspiracies unrelated to the overall conspiracy charged in the
indictment.’” United States v. Kennedy, 32 F.3d 876, 884 (4th
Cir. 1994) (quoting United States v. Castaneda-Cantu, 20 F.3d
1325, 1333 (5th Cir. 1994)). And, even if one overarching
conspiracy is not evident, the district court’s failure to give
a multiple conspiracies instruction is reversible error only
when the defendant suffers substantial prejudice as a result.
United States v. Tipton, 90 F.3d 861, 883 (4th Cir. 1996). For
us to find such prejudice, “the evidence of multiple
conspiracies [must have been] so strong in relation to that of a
single conspiracy that the jury probably would have acquitted on
the conspiracy count had it been given a cautionary multiple-
conspiracy instruction.” Id.Bartko proposed that the district court give the following
multiple conspiracy charge:
33
You must determine whether the conspiracy charged
in the indictment existed, and, if it did, whether the
defendant was a member of it. If you find that the
conspiracy charged did not exist, then you must return
a not guilty verdict, even though you find that some
other conspiracy existed. If you find that a
defendant was not a member of the conspiracy charged
in the indictment, then you must find that defendant
not guilty, even though that defendant may have been a
member of some other conspiracy.
According to Bartko, “the [g]overnment’s evidence, at best,
would show that there were two separate and independent
conspiracies: the Caledonian Fund and Capstone Fund. . . .
There was no testimony that the activities of either fund
overlapped or coexisted. The only connection between the Funds
was Bartko.”
But, “a single overall conspiracy can be distinguished from
multiple independent conspiracies based on the overlap in
actors, methods, and goals.” United States v. Stockton, 349
F.3d 755, 762 (4th Cir. 2003). Here, we have all three. The
actors in both conspiracies were the same: Bartko, Franklin
Exchange, and Scott Hollenbeck. The methods of investor
recruitment and the handling of their money were also the same.
And, the goals of raising money for investing and personal gain
were the same. Moreover, we are unable to say that “the
evidence of multiple conspiracies was so strong in relation to
that of a single conspiracy that the jury probably would have
acquitted on the conspiracy count had it been given a cautionary
34
multiple-conspiracy instruction.” Tipton, 90 F.3d at 883.
Hence, we are unconvinced that the district court committed
reversible error in its refusal to give a multiple conspiracy
charge.
V.
Bartko next complains that the district court improperly
imposed Sentencing Guidelines enhancements based on the amount
of loss, the number of victims, and his status as a registered
broker/dealer at the time of the offenses. When deciding
whether the district court properly applied the Guidelines, “we
review the court’s factual findings for clear error and its
legal conclusions de novo.” United States v. Allen, 446 F.3d
522, 527 (4th Cir. 2006). The district court’s decision
concerning a role adjustment is a factual determination,
reviewable for clear error. United States v. Kellam, 568 F.3d
125, 147-48 (4th Cir. 2009). “A finding of fact is clearly
erroneous when, ‘although there is evidence to support it, the
reviewing court on the entire evidence is left with the definite
and firm conviction that a mistake has been committed.’” In re
Mosko, 515 F.3d 319, 324 (4th Cir. 2008) (quoting United States
v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).
35
A.
Bartko argues that the district court erred in determining
the amount of loss attributed to him. The district court
imposed an eighteen-level increase to his base offense level
pursuant to U.S.S.G. § 2B1.1(b)(1)(J) (providing an eighteen-
level increase for a loss of more than $2,500,000).
But Bartko claims that he should have been able to take
advantage of a Guidelines-provided credit against loss for the
amount of money he caused to be returned “to the victim[s]
before the offense was detected.” U.S.S.G. § 2B1.1 cmt.
n.3(E)(i). The Guidelines provide, however, that “[t]he time of
detection of the offense is the earlier of (I) the time the
offense was discovered by a victim or a government agency; or
(II) the time the defendant knew or reasonably should have known
that the offense was detected or about to be detected by a
victim or government agency.” Id.
First, Bartko contends that none of the refund checks
should be counted in the loss amount. But, as detailed above,
and as observed by the district court during the sentencing
hearing, “the part [of the refund checks] that wasn’t embezzled
ended up being filtered back through LRM as part of the
conspiracy,” with the exception of investor Danny Briley, who
decided not to endorse his refund check over to LRM. Thus,
36
because the money was not ultimately returned to the investors,
the district court did not clearly err on this point.
Second, Bartko avers that the loss amount should be reduced
by the money that was returned to the investors through the
interpleader. As noted above, the SEC knew of Bartko’s offense
when Alex Rue, an attorney from that office, met with him on
March 14, 2005. But, Bartko did not file his interpleader
action until after that, on May 26, 2005. Consequently, he is
unable to avail himself of Guidelines-provided credit against
loss for the amount of money he caused to be returned “to the
victim[s] before the offense was detected.” U.S.S.G. § 2B1.1
cmt. n.3(E)(i). Thus, the district court did not err in
overruling Bartko’s objection to this enhancement.
B.
Bartko also avers that the district court erred by finding
that there were more than fifty victims of his crimes. Bartko
posits “that none of the money invested in Caledonian should be
counted towards [his] loss amount . . . . Therefore, the number
of victims is limited to those people who invested in Capstone,
which is fewer than 50.” The import of this objection is that,
under U.S.S.G. § 2B1.1(b)(2)(B), the district court is to impose
a four-level enhancement if the offense that the defendant was
convicted of “involved 50 or more victims.” The commentary
37
accompanying this Guideline provides, in relevant part:
“‘Victim’ means . . . a person who sustained any part of the
actual loss determined under subsection (b)(1) [the amount of
loss chart].” U.S.S.G. § 2B1.1 cmt. n.1. Neither party
disputes that there were at least thirty-nine investors in
Capstone. So, we are left to decide if there were at least
eleven investors in Caledonian. We think that there were.
As we have already observed, from January 15, 2004, to May
6, 2004, Hollenbeck fraudulently raised large amounts of money
from a total of 171 investors for the Caledonian Fund, as well
as other investments. The money was not separated, but was
comingled. He sent the money to various entities, including the
Caledonian Fund, as directed by Colvin.
If one’s money is combined with other funds and, as here,
$701,000 is lost from the total, then each individual or entity
who contributed to the total loses a pro-rata share of her
contribution. And, because each of those who contributed
“sustained [a] part of the actual loss determined under
subsection (b)(1),” id., they are a victim pursuant to U.S.S.G.
§ 2B1.1(b)(2)(B). Accordingly, the district court did not
commit clear error in its refusal to sustain Bartko’s objection
to the imposition of this enhancement.
38
C.
Finally, Bartko asserts that the district court erred in
imposing an enhancement pursuant to U.S.S.G. § 2B1.1(b)(18)(A)
inasmuch as, according to him, he was part-owner of a registered
broker-dealer, but it was not used to commit the crime.
Pursuant to U.S.S.G. § 2B1.1(b)(18), “[i]f the offense
involved . . . a violation of securities law and, at the time of
the offense, the defendant was . . . a registered broker or
dealer, or a person associated with a broker or dealer[,] . . .
increase by 4 levels.” The accompanying comment to this
Guideline defines a “registered broker or dealer” as “a broker
or dealer registered or required to register.” U.S.S.G. § 2B1.1
cmt. n.14(A) (incorporating 15 U.S.C. § 78c(a)(48)).
Without citation, Bartko maintains that “[t]he purpose of
this enhancement is not to increase the punishment for anybody
who happened to have a broker-dealer license who commits a
securities law violation.” He is mistaken. The meaning of the
Guideline is clear. Under § 2B1.1(b)(18), the district court is
to impose a four-level enhancement when a broker or dealer’s
criminal offense involves a securities law violation. There is
no dispute that Bartko was a broker and that his offense
involved a securities violation. Thus, the four-level
enhancement was proper.
39
D.
The government states that, even if we find any procedural
sentencing error in our review, the error is harmless. But,
because we find no error in the district court’s sentencing of
Bartko, we need not engage in a harmless error review.
VI.
For the foregoing reasons, we affirm Bartko’s conviction
and sentence.
The Clerk of Court shall serve a copy of this opinion upon
the Attorney General of the United States and the Office of
Professional Responsibility for the Department of Justice. The
transmittal letter should call attention to Section II(F) of
this opinion.
AFFIRMED
40