Source: http://openjurist.org/312/f3d/1109
Timestamp: 2014-04-19 08:17:36
Document Index: 121090529

Matched Legal Cases: ['§ 1962', '§ 1962', '§ 371', '§ 78', '§ 1343', '§ 1956']

312 F3d 1109 United States v. Shwayder G | OpenJurist
312 F. 3d 1109 - United States v. Shwayder G	Home312 f3d 1109 united states v. shwayder g
312 F3d 1109 United States v. Shwayder G 312 F.3d 1109
UNITED STATES of America, Plaintiff-Appellee,v.Keith SHWAYDER, Michael G. Swan, and Kevin Orton, Defendants-Appellants.
No. 01-10156.
No. 01-10176.
No. 01-10186.
Argued and Submitted May 16, 2002.
John D. Cline, Freedman, Boyd, Daniels, Hollander, Goldberg & Cline P.A., Albuquerque, NM; Alan Ellis and Karen Landau, Law Offices of Alan Ellis, Sausalito, CA; Douglass A. Mitchell, Dickerson, Dickerson, Consul & Pocker, Las Vegas, NV, for the defendants-appellants.
J. Gregory Damm and Bruce M. Bettigole, Office of the United States Attorney, Las Vegas, NV, and Kirby A. Heller, Appellate Section, Criminal Division, United States Department of Justice, Washington, DC, for the plaintiff-appellee.
Appeal from the United States District Court for the District of Nevada, Philip M. Pro, District Judge, Presiding. D.C. No. CR-96-00288-PMP/RJJ.
Before HUG and BERZON, Circuit Judges, and LASNIK,* District Judge.
Keith Shwayder appeals his convictions for racketeering, RICO conspiracy, conspiracy, securities fraud, wire fraud, and money laundering. He argues that he was deprived of his Sixth Amendment right to effective assistance of counsel because his trial counsel had an actual conflict of interest. Although there was such a conflict, Shwayder has not shown that the conflict adversely affected his counsel's representation.
Shwayder further contends that the prosecution asked his character witnesses guilt-assuming hypothetical questions, in violation of his right to due process. The prosecution's use of guilt-assuming hypothetical questions did constitute error, but this error did not affect Shwayder's substantial rights.
Lastly, Shwayder contends that the factual findings used to increase his base offense level for sentencing purposes should have been made by a jury rather than a judge. The law of this circuit is to the contrary.
Because none of these contentions warrants reversal or remand, we affirm Shwayder's convictions and sentence.1
Keith Shwayder was president of Teletek, Inc. ("Teletek"), a telephone sales and installation company listed on the NASDAQ stock exchange. Michael G. Swan contacted Shwayder about the possibility of merging Teletek with United Payphone ("UPAY"), a telephone company in which Swan had a controlling interest.
UPAY, traded on bulletin boards rather than a major stock exchange, was heavily in debt and in need of cash. Unlike bulletin-board-traded stock, NASDAQ-listed stock can be traded in large volumes, thereby generating substantial amounts of cash. Therefore Swan decided to pursue a merger with Teletek, a NASDAQ-listed company.
Shwayder agreed to merge Teletek with UPAY. In February 1992, Swan purchased a controlling interest in Teletek and became the chief executive and chairman of the Board of Directors of Teletek. Once he acquired Teletek, Swan entered into agreements with stockbrokers. Some of the agreements promised the stockbrokers cash payments by Teletek in exchange for promotion of UPAY and Teletek stock to their customers. Teletek would also issue its stock to the stockbrokers under Securities and Exchange Commission (SEC) Regulation S-8, which permits stock to be issued in exchange for consulting services. None of the stockbrokers receiving such stock provided consulting services for Teletek or UPAY. Instead, they principally issued and promoted Teletek stock, thereby generating cash for the companies through increased stock sales that in turn drove up the price of Teletek's shares. Shwayder signed several documents filed with the SEC representing that these stock issues were for consulting services.
Shwayder remained involved with Teletek for about nine months after the merger. He then resigned. At about the time that Shwayder left Teletek, Teletek issued stock to Prinfan, a company owned by Shwayder's business associate, Neil Feinstein. According to Shwayder: Feinstein received the stock in exchange for consulting services. Feinstein then loaned money back to Shwayder. Shwayder repaid the loan in part by providing consulting services to Prinfan, and Feinstein forgave the rest. The government's theory was that the consulting agreement with Feinstein, the stock issued to Prinfan, and the loan to Shwayder were all sham transactions designed to pay Shwayder substantial sums to leave Teletek.
For several years after Shwayder left Teletek, Swan continued paying bribes to induce brokers to sell Teletek stock. Ultimately, the price of Teletek collapsed and the company went bankrupt. Several investors were left with worthless stock or sold their Teletek stock at a significant loss.
Shwayder was named in a 110-count indictment charging him with racketeering in violation of 18 U.S.C. § 1962(c); RICO conspiracy in violation of 18 U.S.C. § 1962(d); conspiracy in violation of 18 U.S.C. § 371; securities fraud in violation of 15 U.S.C. §§ 78j(b), 78ff(a); wire fraud in violation of 18 U.S.C. § 1343; and money laundering in violation of 18 U.S.C. §§ 1956, 1957. The alleged racketeering conspiracy involved the commission of various illegal acts, including: bribing stock promoters and stock brokers to sell shares of UPAY and Teletek; fraudulently issuing shares of stock to entities controlled by the defendants; participating in insider trading; manipulating the volume and price of stocks; filing false financial reports and statements and other public documents; and concealing and laundering the illegal proceeds from the scheme.
B. Retention of Counsel
Before the indictment issued in November 1996, Shwayder sought representation from an attorney, John Schlie, regarding any legal proceedings that might arise out of Teletek's activities. When Shwayder asked Schlie to represent him, Schlie initially declined because of his prior representation of Swan.
Schlie had represented Swan from October 1994 to May 1995. The representation concerned a grand jury investigation of bribes Swan allegedly paid to stockbrokers who agreed to promote UPAY and Teletek stock. During the course of his representation Schlie had confidential communications with Swan regarding certain bribes that became part of the conduct charged in this case. In response to letters accusing Swan of bribing brokers, Schlie conducted an investigation on Swan's behalf, met with a prosecutor to discuss a grand jury investigation regarding the bribes, and learned of allegations that Swan had committed perjury during a SEC deposition by lying about bribing brokers. Swan repeatedly told Schlie that he had never bribed brokers.
Following Schlie's initial refusal, Shwayder persisted in attempting to retain him. Schlie ultimately agreed to represent Shwayder, after he obtained Swan's permission and both Swan and Shwayder signed waivers. Shwayder's waiver states: "Neither [Schlie] nor I am aware of any real conflicts of interest between my defense and that of Michael Swan." Swan's waiver states that Swan "did not, however, authorize the law firm to disclose any information subject to[his] attorney-client privilege."
The joint trial of Shwayder, Swan and Kevin Orton, Teletek's accountant, lasted two months. The three defendants initially entered into a joint defense agreement. Almost one month into the trial, Swan pleaded guilty and agreed to testify for the prosecution. During trial, neither Schlie nor the prosecution informed the court of the conflict potentially posed by Schlie's prior representation of Swan.
Swan testified that he and other individuals had told Shwayder on several occasions of their bribery scheme. Swan also testified that Shwayder was present at meetings where agreements were made to bribe stockbrokers to sell Teletek stock and that Shwayder controlled a bank account that received illicit proceeds from the scheme.
Schlie cross-examined Swan on Shwayder's behalf. (Orton's counsel had already cross-examined Swan and vigorously attacked his credibility.) During cross-examination, Swan assented to Schlie's statement that Swan was somewhat of "a lone ranger," because he made deals and talked to people without communicating that information to others in the organization. Swan also agreed that "in a lot of circumstances" he would not tell Shwayder what was going on and admitted that he had told Shwayder that many of the issuances of stock were for legitimate purposes when they were not.
Schlie also asked questions designed to elicit the information that Swan was testifying as part of his plea agreement with the government; that his decision to plead guilty had reduced his sentence significantly; and that the government could later make a motion for downward departure to reduce his sentence further.
The government called 44 witnesses, including several of the stockbrokers who participated in the bribery scheme. Shwayder's former secretary, Annette Rosenberg, testified and implicated Shwayder in the scheme. The government also introduced a tape recording of a conversation in which Shwayder asked another participant how much of the money "he got to keep," and told that person how to explain a large payment received from Teletek.
Shwayder testified in his own defense. He maintained that he did not know the illegal purpose behind the acts in which he participated. To support this contention, Shwayder presented two character witnesses, both of whom gave positive opinions of Shwayder's honesty.
On cross-examination, the government questioned each of these witnesses regarding whether his opinion would change if Shwayder had committed certain acts alleged in the indictment. Shwayder's counsel never objected to the form of the questions. Character witness Jack Shaffer, a former director of Teletek, steadfastly answered these guilt-assuming questions with statements such as: "That does not match up with the man I know," "I don't think he would do something like that so I don't ... think it applies," "I can't believe that that's true," and "I just don't believe Mr. Shwayder would do anything like that."2 The government asked similar questions of Shwayder's other character witness, Dr. James Sorensen, a business associate that Shwayder had known for 15 years.3
In his closing argument, Schlie recalled Swan's testimony as follows:
Who signs all the documents filed with the [SEC]? Michael Swan. Who makes all the decisions on funding with all these brokers? Michael Swan....
And I asked him, "You would tell Mr. Shwayder that these things were for promotional services, consulting services, investment banking agreements?" "That's right." That's what he was telling Mr.
Shwayder and he covered it with agreements that made the transactions, every one of them, look legitimate. There isn't one shred of evidence in his testimony or in this record that he told Keith Shwayder what was going on....
... Keith Shwayder's a 60 year old man who ne