we will now move to the nd case of the morning united states versus arthur freedman this is case number nineteen dash two thousand and four and we're going to begin arguments this morning with mr greenberg morning your honour's this is a highly unusual case and when i say highly unusual i think that the fact pattern that i'm going to talk about not relating necessarily to the alleged criminal conduct but the circumstances of the case  is one that i've never seen and i doubt if if you've seen a similar fact pattern so it's a unique case in this particular case two men went to seek the advice and counsel of an attorney retained the attorney paid the attorney and were jointly represented by the attorney jeff stein back jeff did not caution them warn them tell them that there could be any problems as a result of this dual representation work with them met with them e mailed with them spoke on the phone to them and after a matter of months one of them are there friedman decided that he wanted to get a different attorney and he went out and engage michael what at that point j even sent a check to refunding some of the retainer that friedman had paid him freeman was represented by and so i came into the case maybe a year before jointly represented is going to be star witness in fact really the only fact witness in this case against three men and we move to bother him as a witness or dismiss the case the court just an impermissibly high bar for us the court at that point says we're going to have a hearing i don't think judge saying he really thought that that anything was wrong but should get  she expected arthur friedman to do exactly what he did not have to do she wanted him to tell her what he had told steinback without any protection similar we asked and she said no without any protection similar to a th amendment claim where that could not be introduced against him and so freeman was placed in the position of trying to protect his rights try to keep from being prejudiced by this conflict and given an impermissible a high of a done tree by to me that he should know because the law says that when an attorney represents someone and then represents someone with an adverse interest the conflict just presumed there was clearly a conflict now what did that do to the case well initially leon bilis when the case is investigated tells the buffalo girl police that he committed this fraud arthur was removed from it and that was true there was not involved in the day to day activities of the business but steinbeck knew that arthur had had a minor role or role and steinbeck knew the value of flipping bilis friedman billings who to this day by the way hasn't been sentenced and so and steinbeck knew what friedman had told me dead and regardless of what the court ruled in saying that steinbeck said he wasn't influenced by steinbeck said that friedman didn't really tell him anything the fact is that it's presumed the freeman told him things and it's presumed that he was influenced by it and those decisions that he wasn't are wrong now why is this even more messed up leon bilis goes to trial and in his mind now arthur freeman is the main guy he's the leader we talked about everything he knew everything he filled out documents he did this he did that although there's no witness who ever saw him sign anything there's no witness who that he ever filled out a document except for leon bilis the same person who was represented by steinbeck what also happens is a bank fraud there's a bank victim shortly before trial around the time the billis leads the victim bank loans to he and his wife seven hundred thousand dollars and that's not disclosed we find out about this after the trial we filed a rule thirty three dollars motion and the court by this point it's judge kendall says that we should have discovered this under due diligence and it was merely impeaching and so forth but it wasn't this was the victim bank of a multimillion dollar fraud giving money to one dollar of the alleged fraudsters someone that they had a one million dollar judgment against and putting in their bank documents one of the reasons they did this was because he was helping them to get arthur friedman to worse not though because trial we asked about any arrangements between the bank and leon and leon said there really are non and the bank people said there really are so we not only have the information we didn't discover it wasn't disclosed to us but we have them lying about it a trial and they said the judge said that we should have discovered this with due diligence again i can't imagine a scenario where how else does this play out at trial at trial the government's theory based on leon becomes arthur friedman is the president of this business and as the president he knows everything about the business and they capitalize on a improperly crafted pattern th circuit instruction now the government has said that we ha this issue i know that this court in the freed case looked at this issue and talked about what's waiver and said that if we're looking at a pattern instruction there are presumed to accurately state the law we looked at the pattern instruction it was the pattern instruction we assume frankly that it adequately or accurately stated the law and we were wrong that should not should not bother relief here because what the government did was they then made the argument they said he was the president he knew what was going on he was the president he knew about the loans he knew he knew he knew he knew and the jury was relieved of finding as required that he that he will fully engage in certain conduct a that freedom was was the because he was the president he knew everything that was going on but in freed freedom was actively involved he was submitting stuff to banks he was signing stop all of that was proven here none of that existed none of that existed how to do the government is someone asking a question so i'm getting ok how how is the government also  they capitalize on this reduced burden that they had a closing argument the government argues go with your gut and we object and the court says god is there just argument common sense and then the government repeatedly says go what you're got they say because there's more witnesses go with your gut they say because there's a lot of documents to go with your got going with your gut is the complete opposite of common sense going with your gut is a visceral reaction to things going with your gut is what we tell police officers that they should not do when when they're making a probable cause determination going with your gut is exactly what they shouldn't do when they're supposed to look at the evidence analyze the evidence determine whether the evidence meets reasonable doubt apply their common sense and their everyday experience to it not their gut feeling that's that's entirely what are juries not supposed to and the court although the court said well she's referring to common sense that common sense instruction doesn't say go with your gut and in fact the common meaning of it isn't to go with your gut and the the government and their briefs they rightly recognize that that's not proper argument just to say common sense is the same as got so we've got all of these fundamental problems with this case which was at best closely balanced because the jury acquitted friedman of two of the five counts that were out there how did they how did they capitalize on it also there was a a transaction  a person named blackmon one of the counts and they government want to stere he had to know he was the president business he had to know everything he knew everything because he was the president of the business well in the was written by leon after the business had lost so if failed there was no other evidence but they said he knew go with your gut he knew it was completely improper argument testimony at the hearing with steinbeck where he should have had to testify and it's very interesting because there were only two people who testified about that meeting steinbeck and friedman and steinbeck described the meeting in great and vivid detail even describing where their chairs were placed in the room and who was sitting in which chair and the meeting took place in his office the manana building on the th floor and he remembers it clearly remembers everything he was told and all that freeman said we met in rockford at a clock tower in a coffee shop stein that gets in his car after he finishes testifying while friedman is on the stand and calls the prosecutor and says and leaves a message that's part of the record and says you know what is i was thinking about the questions i got in cross examination by friedman's counsel i realize the meeting didn't take place and then on the meeting took place in rockford at the restaurant like the questions were suggesting so how can you believe anything steinbeck said if this meeting which he so vividly described the place in the setting and where people were sitting and so forth never even took place and how could you use that testimony visa v friedman's testimony about how they met which did take place to then unhandsome for obstruction how can you enhanced him for obstruction a hearing that never should have taken place the last thing on sentencing is that he also was given a substantial and has been for monies taken by the floor for planners that they lost out on and the reason he was given that and had spent was because the judge found the sentencing judge which then was judge kendall that he should have disclosed to the floor planners that he was engaged in a fraud which i don't know what that was based on no case law was cited for that proposition at all and she was apparently of the belief that every dime of revenue that the earn and every dime that was put into the business to run the business somehow must have been part of the fraud in fact how car dealerships work if you have the floor plan or you borrow money from the floor planners to buy the cars that's what they did in this case and then they sold the car so some of the floor planning money didn't get repaid when the business failed up to that point the people were getting paid it had absolutely nothing to do with the fraud because this particular fraud was after the cars were sold after the floor planners were paid back their money then the allegation was that sake transactions were entered into and fake loans  trial the district court here made factual findings that no conflict of interest existed and it could not clearly are and making those findings nor did it abused its discretion in denying the defendants many motions on that federal charges were brought in this case then after the defendant st raised this issue on a motion to dismiss the indictment less than a month before the trial the district court considered extensive briefing from both sides and also held the eviden ary hearing on this issue and importantly this hearing also included as part of take proceedings in order to protect any privilege and any privileged information that may arise nonetheless after hearing testimony from mr steinbeck as well as the defendant and including testimony that came in ex parte the district court found out the factual matter that there was no evidence that any conflict that the defendant had not shared any individual confidences with mr steinback as that no no privileged information had been used to the defendant's prejudice now contrary to defense counsel's contention but was clear that in claiming that his trial was tainted by an attorney a conflict of interest the defendant bore the burden of establishing an actual conflict and prejudice and the district court here found multiple times that the defendant had failed to do neither  instructive there the defendants had claimed that the potential use of information from their former attorney in violated their constitutional rights the district court in white had also held and at the end sherry hearing offering an opportunity for the defendant  show a violation and found that they had failed to do so this court explained and why that the issue on appeal was not whether th amendment rights had been violated but whether the defendant's former attorney had violated his ethical obligation this court then ruled that the defendants had failed to meet their burden of establishing privileged and an actual ethical violation or conflict and although the defendant here continues to claim that the circumstances in his case ar primary government witness in the defendant's federal trial and like the defendant here macneill allege that his former counsel had violated ethical rules of professional conduct and will note that the circumstances in mcneil were more serious as a prior state proceeding was presumably more extensive then a three month joint representation from several years prior to federal charges which is what we have here nonetheless the th circuit in mcneil also ruled that there was no violation  the defendant's fair trial rights where the defendant had again failed to show an actual conflict of interest and resulting prejudice or impairment of his interest the six circuit explained if the conflict is merely hypothetical there is no violation here where the district court conducted a full evidentiary hearing and found as a factual matter that there was no breach of privilege no conflict and no prejudice this court should affirm with respect to the bank  agreements that the defendant contends constitute newly discovered evidence warranting a new trial these agreements could have been discovered before or during the trial was due diligence the defendant can you prior to the trial the financial arrangements between phyllis and american eagle bank before trial moreover during the trial both bank witnesses and mr belin testified regarding his agreement to repay the bank and mr  existence of these arrangements the defendant could have questioned could have further questions mr bell s and the bank witnesses about these agreements and their terms on cross examination he failed to do  additionally as the jury had already heard about these financial agreements that trial and further information regarding these agreements would have been in material cumulative and impeaching again the jury heard from these witnesses about the arrangement and with respect to mr bell if he had already been thoroughly impeached that trial in relation to his cooperation agreement with the government indeed the jury was instructed by the court to consider mr bell a th and other witnesses testimony with caution and great care taking into account witnesses possible bias prejudice and any other reasons why the jury nonetheless credited mr phillips as and the bank witnesses testimony as was evidenced by the included in addition to mr bill if the testimony about the fraud scheme and in addition to the bank witnesses testimony about their discovery of the fraud and the defendant's admissions regarding his involvement extensive documentary evidence of the fraudulent loan defendant's responsibility for the finance that the company and testimony of floorplan investors and customers about other fraudulent transactions aparisim the district courts conclusion here that the bank agreement would not have affected the results of the trial instruction the defendant consented three times to the instruction before it was given st at the pretrial conference nd during the trial when the defendant challenged a different instruction but not the one challenge here on appeal  and rd just before the defense rested when after the court had specifically asked the parties to go through each instruction and ensure that they confirm that they were appropriate the defendant again confirmed i that he had no changes to the instructions this court explained in lobo that although passive silence with regard to a jury instruction permit appellate review a defendant's affirmative approval of the proposed instruction results in a waiver here the defendant's repeated approval of the instruction as defense counsel of knowledge the challenge instruction mirrored a pattern instruction which is presumed accurate and the pattern instruction five point zero six doesn't fact accurately state the law with respect to the st paragraph instruction accurately states the general principle general principle of vicarious or scheme liability namely that a person is responsible for acts that he knowingly causes another person to carry out now the defendant assume that five  defines that to include aiders and abettors and under to be someone who willfully causes someone else to do what if done personally would be an offense against the united states the section to be applied where the act being caused is itself  crime most obviously where for example it would be illegal for the defendant to commit the act but would not be where an intermediary who lacked the requisite mental state or prohibited status did so unlike section t trial as section to be liability was not relevant to the prosecution the government's case proved to the that the defendant devised participated in and personally executed the fraud scheme the reference to the aiding and abetting instruction was made only once in over fifty five dollars pages of closing arguments here and after closing the district court thoroughly instructed the jury regarding each element of the crime including the required months and the government's burden of proof beyond a reasonable doubt as to each element any error here did not affect the outcome of the trial with respect to the government's statements on rebuttal the references to using to the jury using its got in reviewing those references in context it is clear that the government meant common sense the government affirmatively explained as much to the jury twice saying look at the evidence and you're got your common sense use your common sense check your gut then when the defendant st object ensuring read bottle the government explained in the jury's present to the court that the government meant comments that i when the defendant objected a nd time the court then that in the jury's presence that it w  after the objection was overruled that the prosecutor went back to using that time perhaps the concern may be that the owners were use of the term god resulted in its definition broadening that it was more than just common sense but it was your response to the my response to that is st that although the term got continued to be used after the suggestions and clarification that these clarifications and instructions nonetheless applied the jury was instructed that they must make their decision based only on the evidence seen and heard in court that the lawyer statements are not evidence that they should use their common sense and draw reasonable inferences from the evidence that the defendant is presumed innocent and that they are to be impartial judges of the facts whose sole interest is to determine whether the government has proven its case beyond a reasonable doubt and there were multiple other instructions again reiterating and referencing the government's burden here these were repeatedly after the government's rebuttal and in addition in addition to the references to gotch being explained by the surrounding marks of the government and the court and the district court repeatedly and accurately defense counsel characterized ation was not the only fact witness at the trial but also testimony from the purported borrowers and whose names the fraudulent loans were taken out from witnesses from the victim bank from customers and for plan investor witnesses who and to support a guilty verdict and you find the defendant guilty beyond a reasonable doubt here at the district court in considering the defendant's arguments with respect to the statements and rebuttal reasonably determined that there was no misconduct and its ruling should be affirmed with respect to the sufficiency of the evidence that's to count seven the trial record includes more than sufficient evidence from which a rational jury could find that the defendant knowingly executed the being asked testified to by mr bellis and as evidenced by additional payment record shown for other fraudulent loans in addition the evidence showed that prior to the blackman loan application to the bank for steve had also accepted money from the floorplan investor for the same car accepted payment from another customer for the very same vehicle and had been exported had exported the vehicle and never delivered it to mr blackman nor to anyone else and that in total received received approximately three hundred thousand dollars for this vehicle and that several of the pain that came in after the car was exported all of the above is in addition to the other extensive evidence about just the defendant's fraud scheme more generally and his involvement with with respect to the sentencing enhancement for obstruction of justice again this was based on the evidentiary hearing how below on the question of the attorney conflict of interest and under guidelines three hundred and thirty one dollars an application to that guideline it applies where the defendant committed perjury that is where the court determines that the defendant lied in court about crucial matters the district court here did just that it found that the defendant had been at base if his demeanor was not transcript of the evidentiary hearing and its review of the audio recording of that hearing that there was no question that the defendant has falsely testified to benefit his defense these are factual findings of special deference which are supported by the record and do conceal the fraud and undertaken without disclosing the an ongoing bank fraud to the investors and the trial testimony and evidence for their support at that in addition to the factual basis and  which again corroborated and stated in established all of that information there was trial testimony that the defendant was responsible for aleisha in shifts with the floor plan investors testimony from the investors about how they later learned that the cars they had reportedly financed w missing and that they were never repay and that a number of cars that were the subject the floorplan investments were also sold to other customers the subject of fraudulent bank loans and exported in light of all of this evidence the district court did not clearly are in finding that more likely than not the losses to the floorplan investors were all part of the scheme to defraud that they were all part of the musical chair circulation a fund that was keeping the business afloat and for the same reason the district court did not abused its discretion in including this and its restitution calculation as these were actual losses caused by the offense conduct and required to be paid to the floor plan investors as victims who were harmed in the course of the defendant's fraud scheme u case the court nec a says that the information that had been disclosed to the attorney was intended to be shared with rd parties so again we're not dealing with necessarily privileged information here we have a situation where the law quite clearly says that the information is privileged the information is sacrosanct the information is not supposed to be shared with anyone else and more importantly the attorney who represents a defendant is not supposed to flip someone else on that defendant this is not something where i don't know where this this came from in the arguments where the trial court advised the two  defendants about separate counsel and then mr friedman turned around and three months later got a different attorney mr freeman got a different attorney before they were ever charged in federal court and fact before they ever had any federal court proceedings any wind of any federal court proceedings one of the things that mr herman and i discussed we're talking about this is why should the government we kept at we asked if the testimony by well that's a harsh remedy for the government but there are other situations where the government has to suffer sometimes of something out of their own doing typically in a motion to suppress the government itself is not not the party that's committed the wrongful act and when you look at the law you look at it things are written to help a defendant to ensure that a defendant has a fair trial a therapy seating start to finish that's why the defendant has the right to confront witnesses that's why the defendant has the th amendment right that's why the defendant gets to decide whether or not he should plead guilty is a unique case but this is so outrageous so outrageous what has occurred here that this court sh unique wet muddy phyllis's testimony should have been marred at a minimum or the case should have been dismissed regarding the bank and mr bilis i again disagree with the characterization of what the se transactions were we were given documents i was the trial attorney we were given documents about the bank's lawsuit with us and what had gone on when they sued him we were not given any documents showing that he had made another or received another loan and when they testified to people from the bank and believe that he was making regular restitution payments and the government says well i should have discovered that was false testimony he wasn't making regular restitution payments he owed the bank almost two million dollars in total by that point and he paid three hundred dollars one month and four months later he paid a few one hundred dollars even this new l that they gave him to help them get friedman as they wrote in their documents he wasn't making the payments he was supposed to and that the government says that the evidence in this case just wrong so none of this matters that's  the jury acquitted mr friedman of two of the five counts there was yes there was documentary evidence and you know we knew from that documentary evidence we knew the friedmans name wasn't on any of it anything even with the floor planners they say that he had this extensive dealing with the floor planners and sack the testimony was that they primarily dealt with us every once in awhile they say how and buys to friedman the evidence was they dealt with billets the floorplanning agreements were signed by billet even though friedman was the president of the business the extensions of the agreements were signed by bill as the loan documents that were admitted into evidence in this sure he testified and he was severely impeached testifying under a graft of the munity so he's the great care and caution witness the got the got argument i  know there was a question about that did it go beyond common sense in fact they differentiated in the argument from common sense the prosecutor in her rebuttal as she concluded after saying got several times of my objections getting overall she concludes by telling the jurors do these two things the st just look at the evidence look at it closely because we're not afraid of a look at the actual stuff because that will prove the defendant's guilty  exactly what we're talking about but the nd thing is trust your gut ok trust it go back there and if your gut is telling you the president of a two man company we're not talking about g m the president of a two mack company knew exactly w going on the company's failing but is still taking money out go with it if your gut is telling you that there were just too many people a game in error and told you he knew go with it if your gut is telling you if your gut if your gut if your gut he just english is that from common sense and well we like to presume that the jurors are reading instructions and following the instructions were there jurors are being told that that common sense and got are two different things and they go back during the jury room and my objections have been overruled saying that there are two different things you can expect the jurors to think that they are anything b two different things so so to say that an instruction would cure this kind of an argument of telling the jurors to go with their hunch to go if they're feeling in the in the pit of their stomach to go with whatever they th ink after they've looked at the evidence put that aside and then search your gut for what's what that's what they were telling the jurors to do as far as the instruction your honor the instruction in freed and freed the court specifically said that the instruction was supposed to be based on the statute and eighteen u s c to be  it wasn't a common law expansion or anything like that that they were talking about it wasn't this that's liability it wasn't just if you knew something was wrong it was you have to willfully take steps you have to intend to do things and say that the floor plan or should be part of the law simply because that's how the business was being funded that's not what the law requires so unless there's any questions  pointed out with respect to the instruction the argument given by the prosecutor in his in his closing argument was that he said that he thought that the judge was going to say that if you knowingly aid counsel command ind or procure the commission of an offense you can be found guilty of the offense if you participate and try to make it succeed and if you knowingly cause the acts of another there was never any discussion of willfully they went on to explain that that if he was the president of the company if he knew what was going on almost implying that he had an obligation to stop it and if he didn't do that that he was he