The Honorable Richard H. Battey, United States District Judge 1

for the District of South Dakota.

 The Honorable Marshall P. Young, United States Magistrate

2

Judge for the District of South Dakota.

___________

No. 95-2240

___________

Steven C. Willis,

*

Appellant, *

* Appeal from the United States

v. * District Court for the

* District of South Dakota.

United States of America, *

*

Appellee. *

___________

 Submitted: March 15, 1996

 Filed: July 1, 1996

___________

Before FAGG, JOHN R. GIBSON, and WOLLMAN, Circuit Judges.

___________

WOLLMAN, Circuit Judge.

Steven C. Willis was tried for bank fraud, found guilty on all

counts, and sentenced to two concurrent terms of thirty-six months'

imprisonment and to thirty-six months' supervised release. He was also

ordered to pay restitution in the amount of $23,806.74. We affirmed his

conviction on direct appeal. United States v. Willis, 997 F.2d 407 (8th

Cir. 1993), cert. denied, 114 S. Ct. 704 (1994). 

 

Thereafter, Willis brought this section 2255 motion, which the

district court referred to a magistrate judge. The magistrate judge

1 2

recommended dismissing Willis's motion without an evidentiary hearing. The

district court accepted that recommendation and entered an order denying

the motion. Willis now appeals from that
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order, arguing by way of alternative relief that the order be reversed and

the case remanded for an evidentiary hearing.

 

I.

Willis is a well-educated man. He holds degrees in law (J.D.) and

business (M.B.A.) and is a certified public accountant. The scheme that

led to Willis's conviction began with his formation of a partnership called

Rec Co, with Steve Ettles and Charles Hopp, for the purpose of purchasing

a Sioux Falls bowling alley.

 

Willis's and Hopp's share of the purchase price was financed by First

Federal Savings Bank (First Federal), where Ettles worked as a loan

officer. The deception began immediately upon the formation of the

partnership when, contrary to bank policy, Ettles failed to inform the bank

of his affiliation with Willis and Hopp before extending loans to them.

The deception escalated when the partnership began to experience

financial difficulties and Ettles became reluctant to loan more of First

Federal's money directly to the partnership. The three partners began

recruiting friends and employees to borrow additional money for Rec Co's

benefit. The partners then guided the borrowers through the application

process, using Ettles' position at First Federal to ensure that the

applications would be successful. The nominee borrowers had no intention

of personally repaying the loans; they simply allowed the partners to use

their names and financial information to obtain the loans. To conceal from

First Federal the true purpose of these loans, false information was

provided on the loan application forms. 

The nominee borrowers were assured that the true beneficiaries of the

loans, Rec Co or the partners, would repay the loans. Some borrowers

received kickbacks for their role in obtaining money for Rec Co. When the

loans became due and the partners could not repay
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as promised, they secured new nominee loans to meet these obligations, thus

driving Rec Co deeper and deeper into debt. Finally, when several of the

loans became past due and the nominee borrowers began to face repercussions

from the outstanding loans, the bank was alerted to the scheme. 

Prior to Willis's indictment, Ettles pleaded guilty to three felony

counts and, pursuant to a plea agreement, agreed to testify for the

government. Hopp later pleaded guilty to one count of conspiracy to commit

bank fraud and agreed to testify against Willis.

II.

Willis alleges that he received ineffective assistance of counsel,

arguing that trial counsel failed to conduct an adequate investigation of

Ettles' plea agreement and failed to effectively cross-examine Ettles

concerning that agreement. On direct appeal, Willis's trial counsel

acknowledged that he knew of Ettles' plea agreement, which on its face

stated that it was the full agreement between the parties. He argued,

however, that the government had violated Brady v. Maryland, 373 U.S. 83

(1963), by failing to turn over Ettles' sentencing transcripts, which

showed that the government had dropped eighteen counts against Ettles in

exchange for his plea and further cooperation with the government. We

rejected this claim, holding that the government had no duty to turn over

documents that counsel could have discovered by investigating the district

court file. See Willis, 997 F.2d at 412. Willis now renews this claim on

collateral attack as the basis for a finding of ineffective assistance of

counsel.

To prevail on an ineffective assistance of counsel claim, Willis must

show that his attorney's performance was constitutionally deficient and

that his right to a fair trial was prejudiced by that deficient

performance. Strickland v.
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Washington, 466 U.S. 668, 687 (1984). 

We first address Willis's claim that counsel was ineffective for

failing to adequately cross-examine Ettles. Counsel's cross-examination,

which spans forty-two pages of the record, provided the jury with a

detailed picture of where Ettles' loyalties lay. Counsel began by inducing

Ettles to admit that he had refused to speak with an investigator sent by

Willis's counsel before trial because he did not want to give the defense

"any ammunition." He further questioned Ettles regarding his plea

agreement, eliciting an admission from Ettles that his guilty plea involved

charges unrelated to his partnership with Willis. Willis's attack on

counsel's cross-examination in substance boils down to counsel's failure

to follow up his questions concerning the plea agreement with the question,

"Isn't it true that if you do not testify as the government wishes, you

might be subject to prosecution for claims that have been dropped?" Even

if an affirmative answer to this question would have been certain, and it

is not a foregone conclusion that it would have been, counsel's failure to

ask it is not the type of error, if indeed it was error at all, that the

Sixth Amendment functions to correct. In hindsight, there are a few, if

any, cross-examinations that could not be improved upon. If that were the

standard of constitutional effectiveness, few would be the counsel whose

performance would past muster. Accordingly, we conclude that trial

counsel's cross-examination did not fall short of effective assistance.

 Turning to the failure-to-investigate claim, on direct appeal we

characterized counsel's actions as a "fail[ure] to exercise diligence in

investigating the file." Willis, 997 F.2d at 413. We need not decide

whether this failure rose to the level of constitutionally deficient

performance, because we find, as we will discuss below, that even if

counsel's performance was deficient, Willis was not prejudiced by it. See

Schneider v. Delo, No. 95-2969, slip op. at 3 (May 30, 1996). 
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To establish prejudice, Willis must show that counsel's alleged

errors were "so serious as to deprive defendant of a fair trial, a trial

whose result is reliable." Strickland, 466 U.S. at 687. 

Willis attempts to characterize the trial as a simple credibility

contest between himself and Ettles--Ettles claiming that Willis had

knowledge of the fraud, and Willis claiming that he did not. Willis argues

that despite counsel's exhaustive cross-examination of Ettles, further

impeachment of Ettles would likely have tilted the credibility balance in

Willis's favor by alerting the jury to the possibility that the dropped

charges could have been revived had Ettles not cooperated sufficiently.

Although Willis's intent to defraud was a key issue at trial, his claim

that this issue turned entirely on his and Ettles' testimony is belied by

the record, which contains other evidence of Willis's knowledge of and

participation in the fraud.

For example, Ettles' testimony that Willis had knowingly falsified

loan documents was supported by Becky Hewitt, one of the nominee borrowers

and an employee of Willis's drycleaning business. Hewitt testified that

Willis brought the loan application to her to sign and paid her $250 for

her role as nominee borrower. The loan application submitted to the bank

contained false information, which Hewitt denied providing, including false

entries regarding her income, savings, the value of her house, and the

purpose of the loan. A handwriting expert identified some of false entries

as being in Willis's handwriting.

Moreover, additional evidence supports Ettles' testimony that Willis

knew of the fraudulent nature of the irrevocable letters of credit that

were prepared by Ettles without the bank's knowledge and thereafter

provided to several of the nominee borrowers to induce them to borrow money

for Rec Co. These letters stated that the bank guaranteed payment of the

loans in the event that the
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beneficiary (Rec Co) failed to pay. Typically, the bank would provide such

letters only when the loan beneficiary had a line of credit at the bank.

Willis clearly knew that Rec Co had no such credit line with First Federal,

as the company's credit deficiency was the sole reason for the nominee

loans. Willis's claim that he did not understand the nature of letters of

credit sufficiently to know that these were not legitimate is belied both

by Willis's extensive education and by codefendant Hopp's testimony that

Willis had admitted to him concern over a letter of credit that he had

written to support one of the nominee loans.

Although Willis argues that his case is the mirror image of Reutter

v. Solem, 888 F.2d 578 (8th Cir. 1989), we think that there are significant

differences between the two cases. Unlike Reutter, in which the state's

case "depended almost entirely on Trygstad's testimony," 888 F.2d at 581,

the government's case against Willis did not rest almost entirely upon

Ettles' testimony. True, Ettles was an important witness for the

government--indeed, probably the principal witness--but, as pointed out

above, there was other evidence tending to establish Willis's guilt.

Moreover, and most significantly, Ettles had pleaded guilty, had been

sentenced, and was serving time in the penitentiary at the time of Willis's

trial. There were no more charges to be dropped and no further concessions

to be made by the government in return for his testimony. In contrast,

unbeknownst to Reutter's counsel, witness Trygstad in Reutter was slated

to appear at a commutation hearing soon after Reutter's trial, a hearing

that was of utmost importance to Trygstad and from which he stood to reap

a specific, substantial benefit depending upon the state's recommendation

to the parole board, a recommendation that could only have been influenced

by the nature of Trygstad's testimony at Reutter's trial. Thus, Willis's

case is not Reutter redux.

We conclude, therefore, that the alleged deficiencies in trial

counsel's performance do not undermine our confidence in the jury's
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verdict.

III.

Willis argues that instruction #11 violated his due process rights,

that counsel's failure to object to this instruction amounted to

ineffective assistance, and that counsel was ineffective for failing to

offer an instruction on good faith.

Because Willis failed to challenge the contested portion of

instruction #11 both at trial and on direct appeal, he cannot obtain relief

on his due process claim unless he shows cause and prejudice for his

procedural default. See Ried v. United States, 976 F.2d 446, 448 (8th Cir.

1992). As cause, Willis offers his counsel's alleged ineffective

assistance.

Jury instruction #11 reads, in relevant part:

Intent to defraud a bank exists whenever the defendant acts

knowingly and the result of his or her conduct would be to

defraud the bank, regardless of motive. Reckless disregard of

the interests of the bank is equivalent of intent to defraud.

A majority of circuits that have addressed the question whether

reckless disregard of the interests of the bank is sufficient to prove

intent to defraud have answered in the affirmative. See United States v.

Crabtree, 979 F.2d 1261, 1269 (7th Cir. 1992) (holding that reckless

disregard of bank's interests is equivalent to intent to defraud under 18

U.S.C. § 656, the parallel bank fraud statute applicable to bank

employees), cert. denied, 114 S. Ct. 216 (1993); United States v. Hoffman,

918 F.2d 44, 46 (6th Cir. 1990) (per curiam) (same); United States v. Cyr,

712 F.2d 729, 732 (1st Cir. 1983) (same); United States v. Krepps, 605 F.2d

101, 104 (3rd Cir. 1979) (same); United States v. Larson, 581 F.2d 664, 667

(7th Cir. 1978) (same). But see United
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States v. Adamson, 700 F.2d 953, 965 (5th Cir.) (en banc), cert. denied,

464 U.S. 883 (1983). Moreover, the minority position articulated by the

Fifth Circuit merely holds that the intent to defraud should not be equated

with reckless disregard. Rather, the jury should be instructed that it may

infer the intent to defraud from a reckless disregard of the bank's

interests. See Adamson, 700 F.2d at 965. As the Adamson dissent points

out, such a distinction is mere semantics, and the chance that it will

influence the outcome of the trial is "so tenuous as to be more meaningful

in the classroom than the courtroom." Id. at 969.

In United States v. Beran, 546 F.2d 1316 (8th Cir. 1976), cert.

denied, 430 U.S. 916 (1977), a case involving a violation of 18 U.S.C.

§ 656, we said:

Criminal intent may be inferred from all the facts and

circumstances of the case. It "exists if a person acts

knowingly and if the natural result of his conduct would be to

injure or defraud the bank even though this may not have been

his motive."

Id. at 1321 (citations omitted) (quoting United States v. Schmidt, 471 F.2d

385, 386 (3rd Cir. 1972)).

The Sixth Amendment right to counsel functions to ensure that

defendants receive a fair trial, not a perfect one. It does not require

counsel to argue for an instruction that is supported by only a minority

of circuits and which, in effect, appears to make only a semantic

difference. Counsel was not ineffective for failing to challenge an

instruction that finds support in our holding in Beran, as well as in the

decisions of the majority of the circuits that have ruled upon the

question.

Willis contends that his trial counsel was ineffective for failing

to proffer an instruction on good faith. It is true that good faith

constitutes a complete defense to a charge of fraudulent
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intent and that a defendant is entitled to a good faith instruction where

one has been requested and finds support in the evidence. See United

States v. Casperson, 773 F.2d 216, 222-23 (8th Cir. 1985). We find,

however, that the instructions in the present case, which set out the

elements of bank fraud and stated that a specific intent to defraud was

required, were adequate to convey to the jury that if it found that Willis

acted in good faith it could not find him guilty of bank fraud. Moreover,

Willis's counsel asserted this good faith defense repeatedly in his closing

argument, arguing that Willis did not knowingly participate in Ettles'

deception of the bank and thus did not have the requisite intent to

defraud. Accordingly, counsel's failure to proffer a specific instruction

on good faith did not fall outside the wide range of professionally

competent assistance. See Strickland, 466 U.S. at 689.

IV.

We hold that the district court did not err in denying the section

2255 motion. Likewise, we hold that the district court did not abuse its

discretion in denying the motion without an evidentiary hearing. See,

e.g., Payne v. United States, 78 F.3d 343, 347 (8th Cir. 1996).

Accordingly, we deny Willis's alternative prayer that the case be remanded

to the district court for an evidentiary hearing.

The district court's order is affirmed.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.