* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### DEC 18 1998 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v. FLETCHER SAPP; RONALD SAPP,

Defendants-Appellants. No. 97-3384 (D.C. No. 97-CV-3181-DES)

(D. Kan.)

ORDER AND JUDGMENT *

Before BRORBY , BRISCOE , and LUCERO , Circuit Judges.

After examining the briefs and appellate record, th is panel has determined unanimously that oral argument would not materiallyassist the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1.9. Th e 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 serv e twenty-one months in prison-2-

and five years on supervised release, and ordered t o 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 orcorrect their sentences pursuant to 28 U.S.C. § 2255 and a motion for a new trial pu rsuant 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 (10 th Cir. Oct. 20, 1998). We review its denial of the motion for a ne w 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 leadin g to defendants’ convictions as follows:

The defendants are brothers who jointly operated a number of businesses. In 1990, the defendants began experien cing financial difficulties. After the defendants defaulted on so me of their loans at First State Bank (“First State”), they began negot iating for additional funds from Midland Bank (“Midland”) to pay off some of their debts at First State. At the same time, def endants attempted to persuade First State to discount some of their deli nquent 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 wou ld be paid by funds that the Sapps were going to obtain from Midl and. This1 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 overal l 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 f or which the borrowers were Fletcher and Ruth Sapp. -3- agreement also allowed the defendants to bring othe r loans current and to turn over the collateral in full satisfactio n of other loans. Meanwhile, defendants reached an agreement with Mid land that allowed “$850,000 to be made available to [defendan ts] 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 thei r indebtedness with other creditors. Defendants then forged a letter from First State to Midland. The forged letter requested payment of approximatel y $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 discre pancy between the amount requested in the letter and the amount F irst State expected the Sapps to request to pay off the discou nted loans. When confronted with the forgery, the defendants admitte d forging the letter. Sapp II , 989 F. Supp. at 1097-98. Defendants raise the following arguments on this ap peal: (1) defendants were denied their rights to effective assistance of trial counsel by counsel’s failure to call certain rebuttal witnesses and to i mpeach a government witness; (2) counsel was ineffective due to a conflict of in terest resulting from his firm’s past representation of Midland and one of its offic ers; (3) the government failed to disclose material exculpatory evidence; (4) the government presented evidence-4-

it knew or should have known was false; (5) the dis trict 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 ref using 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 inef fectiveness of their counsel and the government’s improper actions prevented the jury from understanding this fact. As we noted in rejecting defendants’ claim o f insufficient evidence on direct appeal, defendants presented this theory of defense and the jury rejected it: Defendants argue that they could have properly with drawn the $850,000 from Midland for their personal use and th erefore could not be guilty of bank fraud. The jury considered and r ejected this contention. A bank officer [Bruce Rhoades] testifi ed that two conditions needed to be met before any funds were r eleased to defendants: (1) the bank had to approve the disbur sement, and (2) defendants had to submit the appropriate releases f rom their other creditors. Although defendants disputed the bank o fficer’s testimony at trial, their decision to forge a release support s the bank officer’s position. After seeing the false document that cla imed to “release” defendants from their obligations, the jury could r easonably conclude that defendants were required to submit appropriate documentation before gaining access to the authorized funds and t hat 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 coul d reasonably be viewed as a false representation seeking to obtain funds from the bank. We therefore hold that the evidence was suff icient to convict defendants of bank fraud under section 1344(2).-5-

Sapp I , 53 F.3d at 1103. Thus, critical to our affirmanc e of defendants’ convictions, and our present analysis of their clai ms, 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 rebutta l or impeachment testimony To establish a claim of ineffective assistance of c ounsel, defendants must show both that counsel’s representation fell below an objective standard of reasonableness and that counsel’s deficient perform ance prejudiced their defense.
See Strickland v. Washington , 466 U.S. 668, 687, 690 (1984). To prove prejudice, defendants must show that “there is a re asonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probabili ty 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 ine ffective for failing to present the testimony of Lee Greif, Chris Henry, Ja mes Wirkin and Brian McCallister, who they contend were the principal ne gotiators of the loan agreement between the Sapps and Midland, and the te stimony of certified public2 The loan agreement stated that disbursements of anypart of the $850,000

“shall be subject to approval by Bank [Midland], an d the submission by Borrowers [the Sapps] of appropriate court orders o r releases indicating satisfaction of Borrowers’ debts to their creditors . The surplus shall be disbursed to Borrowers.” Appellee’s Suppl. App. at 529. -6- accountant Larry Morris. They contend that Greif, Henry, Wirkin and/or McCallister would have testified that Midland agree d to loan the money to the Sapps because it partially caused their financial p roblems, that the Sapps had a right to the full $850,000, that any surplus remain ing 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 agreem ent. They also contend that counsel should have impeached Rhoades’ testimony ge nerally with the fact that he was being investigated by the FDIC and eventually w as banned from banking, and his specific testimony implying that Midland intend ed the entire $850,000 to go to First State with contrary testimony. Defendants fail to show, however, how this proposedtestimony or impeachment would have affected the jury’s findings that they were required to submit appropriate documentation to obtain funds fr om Midland and they submitted forged documentation. Rhoades did testif y 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.-7-

The only evidence directly relating to the release that defendants contend counsel should have presented is Henry’s proposed t estimony that “[i]t was contemplated by the parties to the Loan Agreement t hat the ‘release’ language as pertains to the Sapps debt at [First State] would b e satisfied by copies of the notes marked ‘Paid’ from [First State], in the normal cou rse of business, after receipt by [First State] of wired funds from [Midland].” Appe llants’ 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 su bmitted after the disbursement could satisfy this condition. They have not, however, shown that the timing of the submission of the documentation w as critical to the jury’s decision (or our affirmance on direct appeal). Mor e importantly, they have not shown that anything counsel could have done would h ave affected the jury’s implicit finding that they intended the forged rele ase to serve as the required documentation. Indeed, we can see no reason why de fendants, who admit they participated in the negotiation of the agreement th emselves and presumably understood its requirements, would have drafted the forged letter as a release had3 The letter defendants forged stated in part as foll ows:

For the payment of $405,014.88 dollars [sic], the f ollowing loans will be paid off, or brought current. Upon receiptof this payment, both parties hereby mutually release each party fro m any and all claims each may have, liquidated or unliquidated, k nown or unknown through the date of payment . . . .

. . . . The above numbers and agreements are hereby acknowl edge [sic] and agreed to, and this request is hereby submitted forpayment to Midland Bank of Kansas. Appellee’s Suppl. App. at 548-49.

-8- they not intended it to serve as the documentation required by the agreement. 3 We thus agree with the district court that defendan ts have not met their burden of proving prejudice from counsel’s failure to call th ese witnesses or to further impeach Rhoades. Defendants also contend that counsel should have pr esented testimony from Wirkin, Henry, McCallister and Morris to impeach th e testimony of David Herndon, First State’s president. They contend that Wirkin, Henry and McCallister would have testified that it was immate rial to Herndon where the Sapps obtained the funds to pay off their various F irst State loans. They also contend that Morris would have testified that the f orged letter accurately reflected-9-

the terms of their agreement with First State, alth ough they fail to explain what Morris’ specific testimony would have been. Counse l did present evidence and argument to this effect at trial, including corresp ondence from Herndon indicating that the source of funds did not matter and that Fi rst State subsequently settled some of defendants’ delinquent loans on terms simil ar to those contained in the forged letter. Counsel is not ineffective for fail ing 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 h ave not met their burden of proving prejudice.
2. Ineffective counsel due to conflict of interest Defendants claim that their trial counsel was ineff ective because of a conflict of interest due to his firm’s prior repres entation of Midland and Midland officer, Lee Greif. Because they did not raise thi s 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 hypothetica l, and does not constitute-10-

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 seemi ngly valid or genuine alternative strategy was available to defense counsel, but it w as 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 Midla nd 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 c ompensate them for damage they suffered through [Midland officer] Greif’s unl awful conduct.” Appellants’ Br. at 31. In other words, defendants contend thatcounsel should have thrown some mud at Midland to show that, in agreeing to lo an 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 forgin g the letter,” and that given the basis for defendants’ convictions, they “have n ot 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.-11-

3. Brady violation Defendants contend that the government violated the dictates of Brady v. Maryland , 373 U.S. 83 (1963), by failing to disclose eviden ce favorable to them. To establish a Brady violation, defendants must prove that “the prosecu tion suppressed the evidence, the evidence would have b een favorable to [them], and the suppressed evidence was material.” Smith v. Roberts , 115 F.3d 818, 820 (10th Cir. 1997) (quotation omitted). Evidence is materi al “if there is a reasonable probability that, had the evidence been disclosed t o 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 B ruce 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 crossexamination of Herndon.” Appellants’ Br. at 36. I n the district court, the government contended that defendants were procedura lly barred from raising this issue under United States v. Frady , 456 U.S. 152, 167-68 (1982), because they-12-

failed to show cause for failing to raise it on dir ect appeal and could not show resulting prejudice. See Appellants’ App. at 189-90. In response to the government’s contention, defendants did not attemptto 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 inve stigated at the time of trial and whether the government had any evidence o n this matter to disclose. Defendants therefore want discovery on this issue. However, as we noted earlier and the district court concluded, using this inform ation 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 te stimony by Rhoades and Herndon that it knew or should have known was f alse. Again, while the district court addressed defendants’ claims on the merits--and we have no reason to question its analysis in this regard--the govern ment argued in the district court that this claim was procedurally barred because def endants failed to raise it on direct appeal. In response, defendants did not pre sent any reason justifying this failure. We therefore conclude this claim is proce durally barred and will not consider it.4 As noted earlier, the $850,000 loan was only a relatively small part of the

entire February 7, 1991 loan agreement. -13- 5. Newly discovered evidence Defendants contend that three pieces of evidence ar e 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 no t 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 discove red evidence relating to Bruce Rhoades’ testimony warrant a new trial. T he 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 withd rew or repudiated, any trial testimony. He did say that he was not a party to t he negotiation or drafting of the loan agreement, while at trial, he answered “[b]asi cally, 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 tria l-14-

testimony and could not be considered newly discove red evidence. Defendants also contend that the evidence that Rhoades was ban ned 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 t o impeach Rhoades and therefore could not justify a new trial. We also n ote that, given our previous discussion regarding the basis of defendants’ convi ctions, 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 answer s 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 di strict court found that the answers to the interrogatories were not inconsistent with Herndon’s trial testimony. Additionally, as we noted earlier, othe r evidence to this effect was presented at trial, and this evidence would therefo re be merely cumulative. Again, defendants have failed to demonstrate that the court abused its discretion in denying a new trial on this basis.-15-

6. Request for discovery and evidentiary hearing Defendants contend that the district court should h ave 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 c ourt did not abuse its discretion in denying their requests for discovery and an evid entiary 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