Court Opinion

ID: 5845
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:10:18+00
Date Added: 2024-06-11T12:04:37.831333
License: Public Domain

UNITED STATES COURT OF APPEALS
                        FOR THE FIFTH CIRCUIT

                            _______________________

                                  No. 92-8092
                            _______________________

                        UNITED STATES OF AMERICA,

                                                           Plaintiff-Appellee,

                                      versus

              REUBEN COLEMAN, and MILTON R. PERRY,

                                                        Defendants-Appellants.

_________________________________________________________________

          Appeals from the United States District Court
                for the Western District of Texas
_________________________________________________________________

                                   July 30, 1993

Before REYNALDO G. GARZA, WILLIAMS and JONES, Circuit Judges.

EDITH H. JONES, Circuit Judge:

          Appellants Reuben Coleman and Milton Perry were convicted

of a variety of conspiracy and substantive offenses arising out of

a series of loan transactions at Lamar Savings Association where

they were employed as loan officer and an executive vice president.

          After    a    jury      trial   they   were   both   found   guilty    of

conspiracy to defraud the United States, misapply funds, make false

entries and statements to the FHLBB and of actually making such

statements and entries in violation of 18 U.S.C. § 1001, 18 U.S.C.

§ 657, and 18 U.S.C. § 1006.

          Appellants        now    assert   multiple    errors   involving      the

disqualification       of    counsel      and    a   certain   juror,    various
"inflammatory" statements by the government, limitations on cross-

examination by the defense, and a $9,265,829 restitution order.

This court finds no merit in the complaints relating to appellants'

convictions.     We do conclude, however, that the restitution order

was barred by the previous civil settlement between the appellants

and FDIC.

                                BACKGROUND

             In response to growing instability in the savings and

loan industry, the FHLBB--the federal regulatory agency for thrift

institutions--moved to tighten capitalization requirements in 1985.

Lamar Savings Association, where Coleman and Perry worked, found it

increasingly difficult to meet these requirements.              Lamar was at

the   time   repossessing   a   variety    of     non-earning    real   estate

properties.     The FHLBB required an institution to boost its net

worth by 20% of the value of each repossessed property (REO) on the

books.    Lamar was therefore forced into a position of having to

increase its assets or reduce its liabilities by selling the REOs.

             Lamar   officers   decided      to     try   to     bypass   the

requirements.1       Pursuant   to   the   conspiracy,     the    appellants

allegedly fashioned transactions that would appear as bona-fide

sales of REO properties but were, in fact, sham loans designed to

thwart FHLBB interference. These transactions involved the sale of

REO properties held by Lamar, paid with loans furnished by Lamar.

The purchaser-borrowers were assured they would have no personal

      1
          This court has previously considered the underlying
facts in U.S. v. Parekh, 926 F.2d 402 (5th Cir. 1991).

                                     2
liability. The sale would remove the REO properties from the books

of Lamar and augment the apparent net worth of the institution.

The conspiracy ended on December 31, 1985, just before Lamar was

taken over by the federal authorities and became insolvent.

              On August 7, 1990, a 14-count indictment was returned in

federal court for conspiracy and substantive offenses arising out

of   five    of   these    "sham"    real       estate    transactions.       After     a

thirteen-day jury trial followed by eight days of deliberations,

Perry and Coleman were found guilty of seven counts and acquitted

of another seven.          Both men received terms of imprisonment and

other penalties         and   were   also       ordered    to     pay   restitution    of

$9,265,829. The numerous issues they have raised on appeal will be

discussed one by one.

                                     DISCUSSION

                                            A.

              Coleman     asserts    that       the    district    court   erroneously

disqualified his previous defense counsel David Botsford at a pre-

trial hearing in 1991.         Coleman complains that the court's abrupt

action      prejudicially     subverted          his   sixth    amendment    right    to

counsel.      A district court's disqualification ruling is reviewed

for abuse of discretion.             Wheat v. United States, 486 U.S. 153,

163-64, 108 S. Ct. 1692, 100 L. Ed. 2d 140 (1988); United States v.

Reeves, 892 F.2d 1223, 1227 (5th Cir. 1990).

              Coleman's contention that the government did not follow

the proper procedure for disqualification is irrelevant.                              The

district court had the authority and duty to inquire sua sponte

                                            3
into whether counsel should not serve because of a conflict with

another client.    Such findings are within his prerogative.      Wheat,
486 U.S. at 160, 108 S. Ct. at 1698; In re Gopman, 531 F.2d 262,

266 (5th Cir. 1976).

          Coleman also contests the substantive basis for Judge

Nowlin's decision.      The court stated that during the ongoing

criminal prosecution and parallel civil litigation against Lamar

Savings officials there developed a pattern of last-minute cross-

over substitutions of counsel.2 Botsford's prior representation of

Adams, the president of Lamar Savings and a codefendant with

Coleman, presented a conflict with Coleman's best interests and an

appearance   of   impropriety,   and   Botsford's   involvement   in   the

earlier grand jury investigation made it likely that he would be

called to testify against his former client Adams. In the district

court's view, the waivers offered by Botsford and Adams could not

have cured these pervasive conflicts.        Based on such reasonable

inferences and findings, we do not discern an abuse of discretion.

          Finally, Botsford was not deprived of the opportunity to

dispute his disqualification with the judge.         Botsford presented

his position both in open court and by means of a sealed ex parte

affidavit that the court reviewed in camera.        Additionally, after

     2
          Attorney Henry Novak originally represented Coleman
after his indictment and represented Adams and Perry as grand
jury targets. He represented all three men in the related civil
case. Botsford also represented Adams at the time. Novak
withdrew from representing Coleman, and Coleman sought to retain
Botsford, a motion initially approved by the district court.
Botsford also represented a grand jury witness who had been a
public relations representative for Adams.

                                   4
the initial order of disqualification, Botsford filed two motions

to reconsider his disqualification, which the court addressed in a

written order. Neither of Botsford's motions to reconsider alleges

lack of notice, nor is there any evidence that the court lacked any

relevant information in making his decision.

                                      B.

           The next issue raised by appellants is the effect of the

introduction of evidence suggesting that government witness Vijay

Parekh was convicted for his part in the conspiracy.            We review the

admission of evidence at trial for abuse of discretion.                   United

States v. Lindell, 881 F.2d 1313 (5th Cir. 1989), cert. denied, 496
U.S. 926, 110 S. Ct. 2621, 110 L. Ed. 2d 642 (1990); United States v.

Anderson, 933 F.2d 1261, 1268 (5th Cir. 1991).              Although evidence

of an accomplice's guilty plea may be prejudicial, United States v.

Miranda, 593 F.2d 590, 594 (5th Cir. 1979), it is admissible if the

evidence   serves    a   legitimate    purpose   and   is    coupled     with   a

cautionary jury instruction.          United States v. Valley, 928 F.2d
130, 133 (5th Cir. 1991).        Such an instruction was delivered here.

           One legitimate purpose of this testimony is to "blunt the

sword" of the defense counsel's cross examination.              United States

v. Leach, 918 F.2d 464, 467 (5th Cir. 1990), cert. denied, 111 S.

Ct. 2802, 115 L. Ed. 2d 976 (1991).            In this case, the government

asked Parekh if he was a felon in order to preempt defense

counsel's impeaching his credibility before the jury.                 Details of

the conviction      were   not   elicited.     Coleman      asserts    that   the

government may not rely upon Leach because he did not intend to

                                       5
impeach Parekh.   Coleman's mere intention, however, is not enough

to trump the government's rights under Leach.     United States v.

Valley, 928 F.2d 130, 134 (5th Cir. 1991) (defense counsel must

make "unequivocal commitment not to raise the convictions of co-

defendants").

          The other reference to Parekh's conviction arose during

testimony of another defense witness who expressed his opinion

about Parekh's ownership of certain property.    After stating his

belief that Parekh was the owner, the witness was asked during

cross-examination if he was aware that twelve people were of a

different opinion.   The witness answered affirmatively.   In fact,

it was on re-direct that Coleman's attorney elicited that a jury

had found Parekh had not been the owner.   The only questions which

showed that a jury convicted Parekh of a related transaction were

propounded by the defense counsel.      This cannot therefore be

reversible error.    Leach, 918 F.2d at 467.     The admission of

testimony about Parekh's criminal conviction was not erroneous.

                                C.

          Appellants next argue that the court erred in limiting

their cross-examination of two witnesses, Louis Reese and Mary

Arnette. Rulings limiting the scope or extent of cross-examination

are committed to the sound discretion of the trial court and are

reviewed only for abuse of discretion. United States v. Barksdale-

Contreras, 972 F.2d 111 (5th Cir. 1992), cert. denied, 113 S. Ct.
1060, 122 L. Ed. 2d 366 (1993); Delaware v. Van Arsdall, 475 U.S.
6
673, 679, 106 S. Ct. 1431, 89 L. Ed. 2d 674 (1986) (listing factors

a judge may examine in limiting cross examination).

               Coleman's complaint that he could not effectively cross-

examine    Reese       because    the     court    eventually      cut   off     cross-

examination altogether is meritless. The record indicates that the

questioning      of    Reese     was    repetitive   and    cumulative      of    other

evidence.      Coleman fully presented his defensive theory and argued

it to the jury, and he was given ample opportunity to challenge

Reese's credibility.           The court's action did not prejudice him.

               Perry's   complaints       against    Arnette     are     also    easily

resolved.      Defense interrogation of Arnette was only limited about

unidentified misconduct after she testified to her animosity toward

Perry.    The court held that to impeach her on other matters was

collateral and cumulative of her hostility.                     The court did not

abuse    his    discretion       in    limiting   cross-examination;        the   jury

received adequate information with which to evaluate her bias,

credibility and vindictive proclivities.

                                           D.

               The    jury   instructions,        Coleman   next     asserts,      were

erroneous because, by including suggestive illustrations of conduct

that could "point to" intent to defraud, the instruction somehow

eviscerated the requirement of finding such intent.                             Coleman

specifically complains that some of the examples the court gave

concerning the necessary intention to commit fraud under 18 U.S.C.

§§ 657 and 1006 precisely tracked the government's proof.                            We

review the instructions to the jury for abuse of discretion, United

                                            7
States v. Chaney, 964 F.2d 437, 444 (5th Cir. 1992) and taken as a

whole, United States v. Leal, 547 F.2d 1222-23 (5th Cir. 1977).                  A

conviction    will   not   be    reversed      unless     the   error    in    jury

instructions incorrectly states the law or fails to instruct on

applicable principles.          Id.    As a whole, the district court's

instructions were correct.            Only by stripping the illustrations

from their context does the charge appear biased.                Any advantage

the government may have enjoyed from the listed examples considered

in isolation was, however, limited by other instructions making it

plain that willful, knowing intent to deceive or cheat is the

appropriate standard.

                                        E.

            Appellants challenge the court's decision to disqualify

juror William Lord during the trial. Lord, originally a substitute

juror himself, was removed after the government informed the court

that Lord, a "bedroom" firearms dealer, was the subject of an

investigation   by   the   ATF    as    well   as   the   subject   of    an   ATF

regulatory check in May 1990 concerning his sale of over 400

firearms.

            A trial judge may "remove a juror whenever the judge

becomes convinced that the juror's abilities to perform his duties

have become impaired."     United States v. Dominguez, 615 F.2d 1093,

1095 (5th Cir. 1980).      We will not disturb the judge's finding on

appeal except for "want of any factual support or for a legally

irrelevant reason."    United States v. Rodriguez, 573 F.2d 330, 332

(5th Cir. 1978).      No evidentiary hearing is necessary, United

                                        8
States v. Huntress, 956 F.2d 1309, 1312 (5th Cir. 1992) and the

scope of the investigation is committed to the district court's

sound discretion, United States v. Fryar, 867 F.2d 850 (5th Cir.

1989).    In this case, Lord never mentioned his encounter with ATF

during voir dire despite the government's questions about past

troubles with any agency of the government. This omission supplied

a sound basis for the court to strike him.                       Lord's failure to

reveal his dispute with ATF deprived the government of its chance

to   effectively        exercise    a     peremptory     strike    and    might      have

demonstrated an anti-government bias.

                                            F.

               Perry    contests    the     government's       failure   to    disclose

certain information concerning an offer made by the government

witness,       Harold    Klinger,     to    federal     prosecutors      in    Houston.

Although he has cited no authority, Perry seems to be alleging a

violation of Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10
L. Ed. 2d 215 (1963).           To prove a Brady violation, defendant must

show    that    the     prosecution      suppressed     evidence    that       was   both

favorable and material to the defense.                  United States v. Lanford,

838 F.2d 1351, 1355 (5th Cir. 1988).                      Appellants were given

information about Klinger's offer the day after he testified.

               There    is   no   indication     that    the    subject       matter   of

Klinger's offer in Houston, which concerned another savings and

loan company, had any relation to the transactions involved in this

prosecution or any effect upon his willingness to testify in this

case.      Nor     is    there     any     suggestion    that     Klinger      received

                                             9
consideration   for     his    offer     in    Houston,     let     alone   for   his

testimony.    Since there is no evidence that cross-examination of

Klinger would have been more effective if appellants had earlier

been given the information, there is no violation of Brady. United

States v. Tarantino, 846 F.2d 1384, 1417, cert. denied, 488 U.S.
867, 109 S. Ct. 174, 102 L. Ed. 2d 83 (1988).

                                         G.

           Appellants'        final      arguments        concern     the    court's

restitution order.      We agree with their position that the FDIC's

mutual release executed at the conclusion of a civil case against

appellants and others foreclosed the government from obtaining a

restitution order in this criminal prosecution.

           The government seeks restitution pursuant to the Victim

and Witness Protection Act, 18 U.S.C. § 3663.                         Although the

government asserts that the purpose of section 3663 is exclusively

punitive and does not depend on whether the victim waived or

compromised its rights, this is not consistent with the text of the

statute.   Not only is the award of restitution discretionary with

the court, § 3663(a)(1), but the amount of the award may be reduced

to   the   extent   a    victim's        property     has    been     returned,     §

3663(b)(1)(B)(ii),      or    to   the       extent   a    victim    has    received

compensation, § 3663(e)(1).            Whether restitution is punitive or

compensatory, its imposition is subject to the trial court's broad

discretion.

           Further,     in    light     of     section     3663(e)(2)(A),     which

requires a setoff against a restitution order of damages paid in

                                         10
any federal or state civil proceeding, this court has considered

the effect of release and settlement agreements pursuant to those

proceedings on subsequent liability for restitution.                In United

States. v. Allstar Industries, 962 F.2d 465, 477 (5th Cir. 1992),

cert. denied 113 S. Ct. 377, 121 L. Ed. 2d 288 (1992), this court

stated that:

                 While a court may offset restitution in a
            criminal's case by the amount of a civil
            settlement to avoid double recovery by
            victims, the availability of such an offset
                 depends upon what payment was made
                 in the settlement, whether the
                 claims settled involved the same
                 acts of the defendants as those that
                 are predicates of their criminal
                 convictions, and whether the payment
                 satisfies the penal purposes the
                 district court sought to impose.
            United States v. Rico Industries, Inc.,854
F.2d 710, 715 (5th Cir. 1988), cert. denied,
            489 U.S. 1078, 109 S. Ct. 1529, 103 L. Ed. 2d
834 (1989).

In   Rico   Industries,   the    court      examined    a   restitution   award

following a civil settlement agreement.           There the court held that

"[i]f [the settlement] is based on the same acts, the object of

restitution--to    restore      the   property    the   party   harmed--would

indicate that [the Defendant] be credited with the amount of the

settlement."    854 F.2d 710, 715 (1988).

            The intent of FDIC's settlement with Coleman and Perry is

clear and self-explanatory:

            Whereas, the FDIC and Perry desire to settle
            fully and finally all differences between
            them, relating to all claims and demands which
            are based in whole or in part upon the facts
            alleged in the FDIC case and/or upon directly

                                       11
            or indirectly Perry's tenure as an officer at
            Lamar.3

The settlement agreement then describes at length the types of

charges,    complaints,       claims,    and   liabilities     from     which   both

parties are discharged.         The government does not deny that claims

arising from the transactions for which Coleman and Perry were

criminally prosecuted were at issue and settled by this agreement

in the civil case.      The government's contention that the FDIC did

not intend    to     settle    all    claims   by   the    government    including

criminal restitution flies in the face of the unambiguous and all-

inclusive    language     of    the     agreement.         Further,    the     FDIC's

contention    that    this     did    not   serve    the    penal     nature    of   a

restitution award is contrary to the stipulation that FDIC and the

parties desired to settle fully and finally all differences between

them.

            The government cites United States v. Cloud, 872 F.2d 846

(9th Cir. 1989), cert. denied, 493 U.S. 1002, 110 S. Ct. 561, 167
L. Ed. 2d 556 (1989), for the proposition that stipulations in a

settlement agreement concerning an indebtedness are not binding on

the government's quest for restitution.               In Cloud, however, the

restitution was not ordered on behalf of a government agency which

had signed a settlement agreement with the defendants covering the

same transactions involved in the criminal case.                      Nor was the

settlement agreement in Cloud adopted and signed by the government

with the approval and participation of the same prosecutor who

     3
          There is no dispute that Coleman's settlement agreement
contained the same language.

                                         12
prosecuted the criminal action.         In this case, the same parties

were involved    in   both   criminal   and   civil   proceedings.   FDIC

cooperated closely with the U.S. Attorney's office to approve the

settlement agreement with its broad, all-inclusive language.

          Although "the law will not tolerate privately negotiated

end runs around the criminal justice system" in the use of the

VWPA, United States v. Savoie, 985 F.2d 612, 618 (1st Cir. 1993),

that is not what happened here.     If there is any end run around the

law, it is an end run fostered by FDIC in conjunction with the

criminal prosecutors in this case.       We cannot affirm a restitution

order that contradicts a carefully negotiated settlement agreement

between the government and these defendants in a parallel matter.4

          In conclusion, we AFFIRM the convictions of appellants

and REVERSE that portion of the punishment that orders restitution

of $9,265,829.   AFFIRMED in PART, REVERSED in PART.

     4
          We do not reach the question of the effect of a full
release in a civil suit not involving the government on a
subsequent criminal prosecution. See e.g. U.S. v. Bruchey, 810
F.2d 456, 460 (4th Cir. 1987); U.S. v. Cloud, supra.

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