Opinion ID: 165851
Heading Depth: 1
Heading Rank: 3

Heading: Trial Objections and Jury Instructions

Text: 37 Naylor next argues that several of the district court's rulings during the course of the trial constituted reversible error. First, he asserts the court denied him the right to present a defense by excluding portions of the deposition testimony of two witnesses regarding the gold certificates. Second, he claims the court erred in refusing to continue the trial after a foreign witness became ill the last day of trial and was unable to testify. Finally, he claims the court erred in two of the instructions tendered to the jury. We reject each argument.
38 Naylor contends the district court violated his Fifth and Sixth Amendment rights by improperly excluding portions of the videotaped testimony of two witnesses, Bitu Bhalla and Edmund Miles. Naylor argues the excluded testimony would have bolstered his claim that he had a good faith belief in the validity of the gold certificates. 39 The district court has broad discretion in determining the admissibility of evidence. See United States v. Bautista, 145 F.3d 1140, 1151 (10th Cir.1998). Accordingly, [w]e review questions concerning the admission of evidence under an abuse of discretion standard such that [w]e will not disturb an evidentiary ruling absent a distinct showing that it was based on a clearly erroneous finding of fact or an erroneous conclusion of law or manifests a clear error in judgment. United States v. Jenkins, 313 F.3d 549, 559 (10th Cir.2002). The question of whether a constitutional violation has occurred is reviewed de novo. See United States v. Ramone, 218 F.3d 1229, 1234 (10th Cir.2000). 40 A defendant's right to due process of law under the Fifth Amendment and to compulsory process under the Sixth Amendment includes the right to present witnesses in his or her own defense. See Washington v. Texas, 388 U.S. 14, 18-19, 87 S.Ct. 1920, 18 L.Ed.2d 1019 (1967). The right to offer the testimony of witnesses. . . is in plain terms the right to present a defense. . . . This right is a fundamental element of due process of law. Id. at 19, 87 S.Ct. 1920. However, the right to present defense witnesses is not absolute. A defendant must abide the rules of evidence and procedure, including standards of relevance and materiality. Bautista, 145 F.3d at 1151-52. 41 To determine whether the district court violated Naylor's right to present witness testimony, we first determine whether the district court erred in excluding the testimony. If so, we examine whether the excluded testimony was relevant and material, i.e. whether it was of such an exculpatory nature that its exclusion affected the trial's outcome. Richmond v. Embry, 122 F.3d 866, 872 (10th Cir.1997). With this framework in mind, we discuss Naylor's objections to the partial exclusion of testimony by Bhalla and Miles.
42 Bitu Bhalla represented Naylor in his London action to recover the 3,500-metric ton certificate Arne Lundh supposedly stole. As a result of the proceedings, a British court issued an order requiring Lundh to return the certificate. Naylor introduced the court's order (but not the transcript of the proceedings) at trial. In addition, Naylor sought to introduce a videotape deposition of Bhalla discussing Bhalla's representation of Naylor in the action against Lundh. 43 Although the district court allowed the deposition to be shown, it excluded a portion of Bhalla's testimony regarding his recollection of the British judicial proceedings. The excluded testimony consisted of Bhalla's statements that during the London trial (1) Naylor was in the courtroom and became quite animated when Lundh testified he had found an expert who could authenticate the 3,500-metric ton gold certificate and (2) Lundh testified he used the certificate to obtain a line of credit from a bank. The district court concluded this testimony was hearsay and not relevant to whether the 3,500-metric ton gold certificate was genuine. 44 We find the district court erred in excluding this testimony as hearsay. We agree with Naylor that he did not offer the testimony for the truthfulness of Lundh's statements, but rather for the nonhearsay purpose of showing a basis for Naylor's belief in the authenticity of the certificate. See Hernandez v. United States, 608 F.2d 1361, 1364 (10th Cir.1979) (evidence properly admitted where offered to show lack of knowledge rather than truth of matter asserted). We also find the evidence was relevant because whether Naylor heard someone attest to the certificate's authenticity had some bearing on whether he had a good faith belief in its authenticity. See Miller v. United States, 120 F.2d 968, 970 (1941) (defendant can show lack of fraudulent intent by introducing statements of third persons). 45 Although the testimony was not excludable on hearsay or relevancy grounds, to establish constitutional error Naylor must also show the evidence was material to the extent its exclusion violated his right to present a defense. See Richmond, 122 F.3d at 872. To determine materiality, we examine the record as a whole and inquire as to whether the evidence was of such an exculpatory nature that its exclusion affected the trial's outcome. Id. at 874 (citing United States v. Valenzuela-Bernal, 458 U.S. 858, 868, 102 S.Ct. 3440, 73 L.Ed.2d 1193 (1982)). Two queries inform our analysis: first, whether the proffered testimony was the type that if believed would have, by necessity, exculpated the defendant; and second, whether the proffered testimony, even if admitted, would have created a reasonable doubt that did not exist without the evidence. Id. 46 The excluded testimony does not satisfy either query. Initially, Bhalla's testimony would not have necessarily exculpated Naylor even if believed. Naylor's reaction at trial upon hearing Lundh's testimony could have been due to many things aside from a good faith belief in the 3,500-metric ton certificate's authenticity. Second, Naylor's belief regarding the validity of one of several gold certificates at issue in the trial would not by itself exculpate him from the overall scheme. The excluded testimony related to the 3,500-metric ton certificate, which itself did not figure prominently in any of the investment pitches described during trial. Rather, the testimony of investors suggests that Naylor primarily relied on the 1,000 metric ton certificate during the time period in question. In addition, even if Naylor did believe in the authenticity of the gold certificate, such a belief would not preclude a jury from finding that he nonetheless used fraudulent solicitations to obtain investor funds, for example by falsely indicating that the gold certificates would generate large returns in a short period of time or that Dowlin was a CPA. 47 The next inquiry, then, is whether the excluded testimony would have created a reasonable doubt as to Naylor's culpability. It would not. Naylor presented extensive evidence, through Bhalla and others, of the sincerity of his efforts to recover the gold certificate from Lundh in the British court proceedings. Naylor, Bhalla, Miles, and an FBI agent all testified about the British trial. Naylor even introduced the court order. Further, the FBI agent testified Naylor informed him that during the British court proceedings a witness testified to the authenticity of the 3,500-metric ton certificate. Naylor also presented substantial evidence of his good faith belief in his investment programs through the testimony of other witnesses who confirmed that Naylor appeared to honestly believe in the authenticity of the certificates. Finally, Naylor personally testified regarding all of these events. Nonetheless, after hearing hours of testimony and viewing considerable evidence purportedly demonstrating Naylor's belief in the certificates' authenticity, the jury convicted Naylor on all counts. 48 In light of the substantial evidence of guilt in the record, we find the district court's exclusion of portions of Bhalla's deposition testimony did not violate Naylor's right to present a defense. 6
49 Edmund Miles met Naylor in the late 1990's when Naylor asked him to obtain a line of credit on the 1,000-metric ton certificate. At trial, Naylor sought to introduce a video deposition of Miles discussing their business dealings. The district court admitted most of the deposition but excluded two parts of Miles's testimony: first, one instance in which Miles testified that he believed the certificate was genuine; and second, one instance in which Miles stated he informed Naylor that it was UBS's policy not to authenticate gold certificates until they reached their date of maturity. 50 Naylor argues the court erred in excluding this evidence. However, he failed to object to the exclusion of the evidence at trial and did not advance an argument before the district court demonstrating the evidence's admissibility. Therefore, he failed to adequately preserve the claim for appeal and our review is for plain error. See Allan v. Springville City, 388 F.3d 1331, 1335 (10th Cir.2004) (To adequately object to the exclusion of evidence, the proponent of the excluded evidence must explain [to the district court] what he expects the evidence to show and the grounds for which he believes the evidence is admissible. (quotations and citation omitted)); United States v. James, 257 F.3d 1173, 1182 (10th Cir.2001) (detailing elements of plain error review). 51 We find no error in the district court's ruling. Regarding Miles's excluded testimony about his belief in the authenticity of the 1,000-metric ton certificate, there is no showing he ever communicated this belief to Naylor. In fact, Miles testified in the excluded portions that this belief came into being a long time after he spoke with Naylor about UBS's policy regarding the authentication of gold certificates. Therefore, the testimony would not bolster Naylor's good faith defense. In addition, the portion of Miles's testimony admitted by the court established that both Miles and Naylor believed the certificate to be authentic. In light of the admitted testimony, we cannot conclude the court erred in excluding one more instance in which Miles stated he believed the certificate to be authentic. 52 With respect to Miles's testimony that he informed Naylor of UBS's policy not to authenticate gold certificates until they reached their date of maturity, the testimony is only marginally relevant to whether Naylor believed the certificate to be legitimate. Further, Naylor's pot of gold at the end of the rainbow defense was more than adequately explained through other evidence. For example, the admitted portions of Miles's testimony established that (1) he communicated to Naylor nothing could be done with the certificate until maturity unless Naylor located a private buyer, (2) no one could determine the validity of the certificates until the time of maturity, and (3) UBS had a policy not to verify or acknowledge until maturity, which was designed to limit public information about existence of the valuable holdings. In addition, the court allowed Naylor to present direct evidence of his good faith belief in the certificates through documentary and testimonial evidence. 53 Based on the evidence in the record, we cannot say the excluded portion of Miles's testimony affected the outcome of the trial. Therefore we hold that exclusion of the evidence was not plain error.
54 Naylor next maintains the district court impeded his ability to present a defense by denying him a continuance when a listed foreign defense witness, Eugenio Macacabayao, fell ill. 55 Prior to trial, the parties anticipated the case would take about two weeks to try. The government rested its case on Monday, February 3, 2003. Macacabayao, however, did not arrive in Cheyenne from the Philippines until Friday, February 7, 2003, the last scheduled day of trial. Because Macacabayao did not arrive in time to testify on Friday, the district court continued the trial until the following Monday, February 10, 2003. Unfortunately, upon arrival in Wyoming, Macacabayao experienced chest pains and was admitted to a local hospital. Although he was interviewed by defense counsel over the weekend, the illness apparently left Macacabayao in no condition to testify or even to give a deposition under oath. 56 Naylor moved for a continuance to allow Macacabayao time to recover sufficiently to either testify in open court or to be deposed in his hospital room. In support of the motion, counsel proffered that Macacabayao would testify he was a practicing attorney and chairman of the Foundation; Major Rolando Miranda, a board member of the Foundation, had given a gold certificate to Naylor; Miranda represented to Naylor the certificate was a valuable and authentic document; and Naylor was enlisted to use the certificate to obtain funding to assist the Foundation with its humanitarian projects. 57 In the district court, the government argued the testimony was largely irrelevant and cumulative because the only relevant fact it supported was whether Naylor believed the certificates were real. The government also pointed out that Naylor's counsel provided no showing as to when Macacabayao would be sufficiently recovered to testify. The court agreed and denied the continuance, noting the testimony would consist largely of inadmissible hearsay. 58 On appeal, Naylor argues Macacabayao's testimony was important to his defense because it corroborated Naylor's testimony regarding how he obtained the 1,000-metric ton gold certificate and why he believed it was authentic. He maintains the exclusion of this testimony was especially damaging because he testified at trial that a Filipino would corroborate his version of the events and the jury was left to speculate as to the reason for Macacabayao's non-appearance. 7 59 We review the denial of a motion for continuance of trial for abuse of discretion and `will find error only if the district court's decision was arbitrary or unreasonable and materially prejudiced the defendant.' United States v. Diaz, 189 F.3d 1239, 1247 (10th Cir.1999) (quoting United States v. Simpson, 152 F.3d 1241, 1251 (10th Cir.1998)). In determining whether a district court arbitrarily or unreasonably denied a motion for a continuance, we examine: 60 (1) the diligence of the party requesting the continuance; (2) the likelihood that the continuance, if granted, would accomplish the purpose underlying the party's expressed need for the continuance; (3) the inconvenience to the opposing party, its witnesses, and the court resulting from the continuance; [and] (4) the need asserted for the continuance and the harm that appellant might suffer as a result of the district court's denial of the continuance. 61 United States v. Wynne, 993 F.2d 760, 767 (10th Cir.1993) (citations omitted). 62 Furthermore, because Naylor sought the continuance to obtain witness testimony, he was required to show who the witness was, what his testimony would be, and that the testimony would be competent and relevant. See United States v. Harris, 441 F.2d 1333, 1336 (10th Cir. 1971). 63 Applying these factors, we conclude that Naylor has not made a sufficient showing to justify relief. First, although Naylor sought the continuance as soon as it was clear Macacabayao would not be able to testify, he did not use diligence in procuring Macacabayao's presence at the trial. Even without the witness's illness, Naylor had already caused a delay of the trial because Macacabayao did not arrive in Cheyenne in time to testify on February 7. 64 Second, if granted, the continuance would have seriously inconvenienced the court, the prosecution and the jury. At the time of Naylor's request for a continuance, no alternate jurors existed. 8 Had the court granted a continuance, it would have risked having to retry the entire case if any additional juror needed to be excused. Furthermore, the case had already lasted two weeks and, excluding Macacabayao's testimony, each side had presented its entire case, including out-of-state witness testimony. 65 On the other hand, the denial of the continuance caused only minimal harm to Naylor. He sought the testimony for two purposes. First, to corroborate his own testimony regarding how he came into possession of the 1,000-metric ton certificate. Naylor's proffer outlining Macacabayao's proposed testimony, however, did not establish whether Macacabayao was present when Naylor received the certificate. If Macacabayao learned of the transaction from a third party, his testimony would have been hearsay. 66 Second, Naylor offered the proposed testimony to show his good faith belief in the certificate's validity. However, as noted above, Naylor put forth extensive other evidence of his beliefs, including documents from the Foundation that attest to the bona fides of the certificates. In addition, as above, the proffer does not establish that Macacabayao was present when the Foundation made the alleged representations to Naylor regarding the certificate. Without such evidentiary groundwork, the district court properly excluded the proposed testimony as hearsay. 67 In any event, having reviewed the record in its entirety we conclude that Macacabayao's testimony would have done little to exculpate Naylor because it was mainly cumulative and, even if believed, would not have precluded the jury from finding him guilty. Thus, the district court's decision not to grant the continuance did not materially prejudice Naylor in the presentation of his good faith defense. See United States v. McKneely, 69 F.3d 1067, 1077 (10th Cir.1995); see also United States v. Rodriguez, 15 F.3d 408, 411 (5th Cir.1994) (holding that when a continuance is sought because a witness is unavailable, the movant must show, among other things, that the witness would provide substantial favorable evidence). 68 Finally, the district court specifically instructed the jury not to speculate as to the reason for Macacabayao's absence, thereby alleviating any prejudice caused by his failure to appear at trial. For these reasons, we hold that the district court did not err in denying a continuance.
69 Naylor contends the court tendered two erroneous instructions to the jury regarding the government's burden of proof and the elements of fraud under the 1935 Securities Act.
70 Naylor argues the district court's reasonable doubt instruction misled the jury into believing it could convict him by only a preponderance of the evidence. Typically, [t]he appropriate standard of review for challenges to jury instructions is whether the jury, considering the instructions as a whole, was misled. United States v. Smith, 13 F.3d 1421, 1424 (10th Cir.1994). Similarly, the constitutional question implicated by concerns over the adequacy of jury instructions is whether there is a reasonable likelihood that the jury understood the instructions to allow conviction based on proof insufficient to meet the Winship standard. Victor v. Nebraska, 511 U.S. 1, 6, 114 S.Ct. 1239, 127 L.Ed.2d 583 (1994) (referring to In re Winship, 397 U.S. 358, 364, 90 S.Ct. 1068, 25 L.Ed.2d 368 (1970), which held that the government must prove beyond a reasonable doubt every element of a charged offense). Here, however, Naylor did not object to the instruction at trial. Therefore, our review is for plain error. See United States v. Hernandez-Garcia, 901 F.2d 875, 876 (10th Cir.1990). 71 On appeal, Naylor raises three specific objections to Instruction 12, which read in part: 72 If you, as jurors view the evidence in the case as reasonably permitting either of two conclusions — one of innocence, the other of guilt — you should of course adopt the conclusion of innocence. 9 73 The first objection is that the instruction used the term should instead of the term must. Naylor's second objection is that the instruction improperly interchanged the terms innocence and not guilty. Finally, Naylor claims the instruction unlawfully diluted the burden of proof by suggesting there is a standard below beyond a reasonable doubt on which the jury could convict. Although we disapprove of a portion of the tendered instruction, viewing the instruction in its entirety we hold that it did not compromise Naylor's right to a fair trial. 74
75 Naylor first argues that the instruction improperly used the non-mandatory term should in instructing the jury to return a not guilty verdict if the evidence reasonably permitted a finding of innocence. The penultimate sentence of the instruction, however, stated, [If] after careful and impartial consideration of all the evidence in the case, you as jurors retain a reasonable doubt that a defendant is guilty of the charge, you must acquit. In light of this language, as a whole, the instruction made clear that the jury was only allowed to convict if it found Naylor guilty beyond a reasonable doubt. We thus discern no error. 76
77 Naylor next argues that the instruction was also misleading because it used the terms not guilty and innocent interchangeably. He relies on a First Circuit case concluding that interchanging the terms could confuse a jury and risks undercutting the government's burden by suggesting that they should find the defendant guilty if they think he is not innocent—regardless of how convincing the government's proof has been. United States v. Mendoza-Acevedo, 950 F.2d 1, 4 (1st Cir.1991). 78 We disagree with this assessment. Although the instruction used mixed terminology, in light of the instruction as a whole we do not see how the jury was misled concerning its obligation to apply the presumption of innocence. As a practical matter, in the context of this jury instruction not guilty and innocence are equivalent. Taking a step back, on this record the instruction's overall structure and language are not misleading. The two terms—not guilty and innocent—were not likely to confuse the jury in applying the proper burden of proof. 79
80 Naylor's third argument has merit. He contends that by allowing two inferences, guilt and innocence, where the evidence does not decisively favor one outcome, the instruction improperly diluted the government's burden of proof by suggesting there is a quantum of proof sufficient to convict above innocent but below beyond a reasonable doubt. 81 The Second Circuit has long disapproved of the instruction: 82 The two-inference language, that if the jury believes the evidence permits either the inference of innocence or of guilt, the jury should adopt the former, is obviously correct as far as it goes. But such an instruction by implication suggests that a preponderance of the evidence standard is relevant, when it is not. . . . It instructs the jury on how to decide when the evidence of guilt or innocence is evenly balanced, but says nothing on how to decide when the inference of guilt is stronger than the inference of innocence but no[t] strong enough to be beyond a reasonable doubt. . . . Therefore, . . . the two-inference language should not be used because, standing alone, such language may mislead a jury into thinking that the government's burden is somehow less than proof beyond a reasonable doubt. 83 United States v. Khan, 821 F.2d 90, 93 (2d Cir.1987) (emphasis added); see also United States v. Jacobs, 44 F.3d 1219, 1226 (3d Cir.1995) (disapproving use of two-inference language). 84 Our circuit has yet to address the narrow question as to the propriety of using this two-inference language. We agree with the Second and Third Circuits that, standing alone, the language is imprecise and should not be used. The mischief from the instruction comes from the risk that a jury may focus on narrow portions of the instruction and not its overall thrust. In light of this risk, we agree that the instruction should be modified to delete the two-inference language. 85 The saving grace for the instruction is that overall it adequately directed the jury to the applicable burden of proof. Applying the plain error standard, there is little doubt the jury properly understood its constitutional duty. The instructions as a whole told the jury not to convict Naylor unless the government proved his guilt beyond a reasonable doubt. For example, Instruction 12 explained to the jury that the government had the burden of proving guilt beyond a reasonable doubt, specifically defined reasonable doubt, and distinguished reasonable doubt from a preponderance of the evidence. Considered in context, we cannot conclude the jury was misled by the instruction. See Victor, 511 U.S. at 6, 114 S.Ct. 1239. 86 Accordingly, the district court did not plainly err when it issued this instruction.
87 Naylor's last argument is that the district court inappropriately instructed the jury it could find securities fraud under 15 U.S.C. § 77q without finding Naylor had an intent to defraud. Naylor objected to this instruction at trial. Therefore we review the instructions de novo to determine whether, as a whole, the instructions correctly state the governing law and provide the jury with an ample understanding of the issues and applicable standards. United States v. Cecil, 96 F.3d 1344, 1347 (10th Cir.1996). 88 The portion of Instruction 51 to which Naylor objected provided: 89 A statement which is untrue or a representation which is false rises to the level of fraud when the person making it knew the statement to be untrue or knew the representations to be false at the time that the statement or representation was made. 90 Naylor asserts this instruction allowed a jury to make a finding of fraud based solely on whether he knowingly made an untrue statement or representation, without requiring the jury to also find that he had an actual intent to defraud. 91 Once again, Naylor's argument fails because it improperly isolates one part of the jury instruction, rather than taking into account the instructions as a whole. Instruction 51 consisted of seven full paragraphs describing the meaning of fraud, fraudulent, and defrauding. Other parts of the instruction explained: 92 — If the evidence has established beyond a reasonable doubt that the defendants. . . acted with a fraudulent intent. . . it is unimportant whether the defendants were successful and accomplished the plan; 93 — [E]ven though some individual may have lost money in the transactions . . ., this does not rise to the level of fraud unless the evidence establishes beyond a reasonable doubt that the transaction was designed and intended by the defendant to deceive, or trick, or injure, or damage; and 94 — An honest belief or `good faith' belief by the defendants that the statements or representations made were true is a complete and total defense to the charge of securities fraud. 95 Viewed as a whole, the instruction required the jury to find intent to defraud before it could convict Naylor. Consequently, Naylor's contention is without merit and the district court did not err.