Court Opinion

ID: 2995660
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:21:35.564352+00
Date Added: 2024-06-11T11:45:26.476377
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 01-2074

United States of America,

Plaintiff-Appellee,

v.

Sheila Britton,

Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of Illinois, Western Division.
No. 00 CR 50003-2--Philip G. Reinhard, Judge.

Argued November 7, 2001--Decided May 8, 2002

  Before Flaum, Chief Judge, and Posner and
Kanne, Circuit Judges.

  Kanne, Circuit Judge. Defendant Sheila
Britton was convicted of multiple counts
of mail fraud arising from her use of
client funds for her personal benefit.
She appeals, arguing that (1) there was
insufficient evidence to support her
conviction, (2) the district court erred
in denying her attorney’s motion to
withdraw, and (3) the district court
improperly refused to let her sister
testify as an expert. We affirm.

I.   History

  Sheila Britton and her husband Dan owned
and operated a collection agency in
Rockford, Illinois known as Commercial
Collection Company, Inc. ("CCC").
Businesses hired CCC to collect debts
owed to them, and CCC retained a
percentage commission on the amounts that
it collected. In addition to commissions
on payments made directly to CCC, CCC was
also entitled to receive commissions on
payments that debtors sent directly to
CCC clients ("direct payments"). When
clients received direct payments,
theynotified CCC of these payments so
that CCC could account for them and then
deduct the appropriate commission.

  CCC initially had two separate bank
accounts: an operating account and a
trust account. Eventually, CCC stopped
using the operating account, and all
deposits and disbursements were made into
and from the trust account. Payments
received from debtors were deposited into
the trust account and recorded into CCC’s
computer system. At the end of each
month, CCC’s computer system generated a
"Statement of Collection" for each of its
clients for whom money had been collected
that month. The Statements showed the net
amounts due to the clients after CCC’s
commissions were deducted. The Statements
were then supposed to be sent to the
client along with a check for the amount
due in order for clients to know their
financial standing with CCC.

  Britton’s responsibilities at CCC
initially consisted of bookkeeping while
Dan operated CCC. Specifically, she was
the person primarily responsible for
entering payments from debtors into CCC’s
computer system. Eventually, Britton
assumed more responsibilities at CCC and
began managing CCC’s daily business.
During this time, Britton supervised
employees, met with clients, and
personally reviewed and delivered
Statements and checks to several major
clients. By early 1996, Britton informed
CCC’s employees that she, and not Dan,
was running CCC.

  At the same time, Britton and her
husband began using funds belonging to
CCC’s clients to pay for various personal
and business expenses. For example,
Britton took cash to "run an errand," to
purchase a gift for her son or daughter,
and to take her children to a local
festival. Further, Britton and her
husband regularly wrote checks on CCC’s
trust account to pay for their personal
expenses, including a trip to Walt Disney
World and a trip to Mexico. Britton also
used CCC trust account funds to pay her
mortgage on her personal residence, to
pay for her lawn maintenance bills and
landscaping, and to pay for her salon
expenses.

  Due to the Britton’s extensive use of
clients’ funds, by 1996, there were
insufficient funds in CCC’s trust account
to pay the clients the amounts they were
owed. Britton and her husband thus ceased
paying many of CCC’s clients. Although
they had stopped paying these clients,
CCC continued to collect on these
clients’ accounts because debtors
continued to mail their checks to CCC for
debts owed to these clients. From August
1995 through November 1996, CCC’s
internal records established that CCC
owed several clients a total of over
$21,000, but had paid clients only
$739.02. In 1997, CCC failed to pay
clients over $32,000 that was due to
them.

  Britton and her husband were charged
with twenty-three counts of mail fraud in
violation of 19 U.S.C. sec. 1341 and with
one count of defrauding a local
government agency that received federal
funds in violation of 18 U.S.C. sec. 666
(a)(1)(A)./1 On November 17, 2000,
approximately two and one-half weeks
before the scheduled start of the trial,
Britton filed a motion to continue the
trial date in order to allow second-chair
defense counsel Christopher A. DeRango to
withdraw. The motion stated that DeRango
had a conflict of interest in that he had
previously represented a government
witness named Bruce Swanson.

  On November 22, 2000, Britton’s motion
was initially presented to the district
court. The district court heard the
parties’ arguments and indicated that it
was inclined to deny the motion and to
rule that DeRango could continue on the
case, except that he would not be allowed
to participate in the cross-examination
of Swanson. DeRango then requested an
opportunity to make an in camera proffer
to the court, and later that same
afternoon, the court heard DeRango’s
proffer. This proceeding was off the
record. On November 27, 2000, the parties
reappeared before the district court on
the same issue. The judge cleared the
courtroom and then gave DeRango an
opportunity to repeat on the record the
proffer he had given to the court on
November 22.

  After the courtroom was cleared, DeRango
stated the following: Swanson had
admitted stealing $500 in cash from CCC
during a pre-trial interview with the FBI
and when he testified before the grand
jury. During their preparation for trial,
Britton and DeRango had discussed
Swanson’s potential testimony, including
those admissions. Britton had stated that
Swanson had admitted to her that the
reason he had stolen cash from CCC was to
pay his legal bills. DeRango then
realized that he had previously
represented Swanson while DeRango worked
at another law firm. This statement
prompted DeRango to obtain permission
from his prior firm to view Swanson’s
billing records. After he reviewed those
records, DeRango determined that he had
received in excess of $1,200 in cash from
Swanson. Thus, DeRango concluded that he
possessed information that could be used
to impeach Swanson about the amount of
money he had taken and that he should be
permitted to withdraw in order to testify
about these payments.

  The district court allowed the other
attorneys to return to the courtroom and
denied Britton’s motions for continuance
and for withdrawal. The court initially
ruled that because the potential
impeachment material related to a billing
record, it was not covered by the
attorney-client privilege. The court
noted that defendant’s lead counsel,
Daniel Cain, could obtain this record
with a trial subpoena. Additionally, in
order to avoid the "appearance of
impropriety" presented by an attorney
cross-examining his former client, the
court held that DeRango would not be
allowed to participate in the cross-
examination of Swanson or to disclose any
information related to the billing
record.
  Trial began on December 5, 2000, and
Britton conceded that CCC had failed to
make all the required payments due to
clients. The disputed issues consisted of
the extent of that failure and whether
Britton’s actions were due to lack of
business experience or whether they were
due to a fraudulent intent. Initially,
the government showed that Britton was
aware that CCC had experienced serious
overdrafts in its trust account. CCC
employees testified that although debtors
sent payments into CCC, the clients’
portion of that money was not remitted.
Several employees testified that the
checks that clients did receive were
returned by the bank for insufficient
funds. The government also argued that
Britton knew clients were not being paid
because the Statements of Collection with
the attached checks remained in her
possession instead of being distributed
to clients. Swanson testified that he saw
several months worth of Statements and
checks in Britton’s possession and urged
her to issue them to clients. Swanson
testified that they were never issued.

  Dorothy Kerestes testified concerning
Britton’s fraudulent intent. Kerestes
stated that she was a former CCC employee
with approximately twenty years of
experience in the collections field.
Kerestes testified that she confronted
Britton about a paycheck that she had
received that was drawn on the CCC trust
account. Kerestes explained to Britton
that the funds in the trust account
belonged to clients, not to Britton.
According to Kerestes, Britton responded
that the money was Britton’s money to
spend.

  CCC’s accountant testified concerning
discrepancies in CCC’s bank accounts that
showed that Britton was not delivering to
clients checks issued by CCC’s computers.
Various government witnesses also
testified that clients called CCC to
complain that they were not receiving
their checks and that the checks they had
received had bounced. The government
presented testimony that showed that
despite Britton’s knowledge that clients
were not being paid, Britton continued to
spend large amounts of client funds on
her own personal expenses. For example,
the evidence established that trust
account funds had paid more than $21,000
on Britton’s personal credit cards,
$6,000 for furniture, $4,000 on
carpeting, and more than $18,000 in cash
withdrawals. Further, the evidence showed
that although CCC closed in early 1998,
CCC continued to collect more than
$40,000 in client collections but failed
to make a single payment to any of CCC’s
clients. Testimony also established that
Britton continued to mail CCC collection
bills to debtors ("payment cards"), even
though CCC had stopped paying CCC
clients. The government also introduced
evidence concerning Britton’s experience
in the collection field, which included
attending a training conference and semi
nar designed for supervisors and managers
of collection agencies. Finally, a
certified public accountant testified
that after reviewing the records, he
concluded that CCC had failed to pay
clients approximately $200,000 over the
three years of Britton’s active
involvement with CCC.
  In her defense, Britton attempted to
demonstrate that the CPA’s methodology
was flawed. In particular, Britton argued
that the CPA had failed to "set-off" for
commission and costs owed to CCC by the
clients. Britton argued that the amount
of the fraud was far less than $200,000
because the CPA had failed to take into
account commissions on direct payments
made by debtors after the contracts were
terminated ("post-termination
collections"), and reimbursement for
legal fees and court costs incurred to
obtain judgments against debtors ("legal
fees"). Several CCC clients testified
that they had failed to pay CCC any
commissions for post-termination
collections and disputed that they owed
CCC any legal fees.

  Additionally, Britton attempted to
present expert testimony from her sister,
Sheryl Kobussen, to establish (1) the
industry customs and practices regarding
post-termination collections and (2)
CCC’s right to reimbursement for legal
fees. Thus, Kobussen’s testimony was
designed to show that some of the clients
owed money to CCC. The government
objected to the proffered testimony on
the ground that Britton had not provided
notice of Kobussen’s testimony under
Federal Rule of Criminal Procedure 16.
Britton argued that she was not required
to give notice because the government
failed to provide notice of its experts.
Based on the government’s objection
regarding lack of notice, the district
court precluded Kobussen from offering
any opinion testimony. Britton moved for
a mistrial, which was denied./2
Finally, Britton presented evidence that
she attempted to repay portions of the
misspent funds with her own money.

  The jury convicted Britton of ten mail
fraud counts and acquitted her of eleven
counts, and failed to reach a verdict on
two mail fraud counts and on the single
embezzlement count. None of the counts on
which Britton was convicted involved
clients where there was evidence of post-
termination collections or legal fees.

II.   Analysis

  Britton   challenges her convictions and
sentence,   arguing that the evidence
presented   at trial was insufficient to
support a   finding that she intended to
defraud CCC’s clients. In addition,
Britton contends that the district court
erred by refusing to let one of her
attorneys withdraw in order to testify.
Finally, Britton asserts that the
district court committed reversible error
by excluding Kobussen from testifying as
an expert witness. We address each of
Britton’s claims in turn.

A.   Sufficiency of the Evidence

  The elements of mail fraud include (1)
the defendant’s participation in a scheme
to defraud; (2) the defendant’s intent to
defraud; and (3) the defendant’s use of
the mail in furtherance of the fraudulent
scheme. See United States v. Davuluri,
239 F.3d 902, 906 (7th Cir. 2001).
Britton contends that the government
failed to prove the intent to defraud
element beyond a reasonable doubt. Intent
to defraud requires a wilful act by the
defendant with the specific intent to
deceive or cheat, usually for the purpose
of getting financial gain for one’s self
or causing financial loss to another. See
id. As direct evidence of a defendant’s
fraudulent intent is typically
unavailable, "specific intent to defraud
may be established by circumstantial
evidence and by inferences drawn from
examining the scheme itself that
demonstrate that the scheme was
reasonably calculated to deceive persons
of ordinary prudence and comprehension."
United States v. Paneras, 222 F.3d 406,
410 (7th Cir. 2000). Britton cannot
prevail on her claim unless she
demonstrates that no rational jury could
have found an intent to defraud. See id.

  Britton asserts that lack of business
acumen, not fraudulent intent, was the
reason she improperly spent client funds.
Britton contends that she did not realize
that she was spending clients’ funds or
that her actions were improper. Britton
further argues that the evidence showed
that she attempted to repay some of the
misspent funds and that she kept track of
many of the transactions, thus negating
any criminal intent. However, a review of
the record makes clear that Britton has
not met the heavy burden she bears in
making a sufficiency of the evidence
argument on appeal.

  The jury’s conclusion that Britton knew
she was spending clients’ funds is
supported by Kerestes’ testimony.
Kerestes, a CCC employee, testified that
in January 1996, she told Britton that by
paying CCC business expenses out of the
trust account, Britton was spending money
that belonged to CCC’s clients. Further,
the jury’s conclusion that Britton knew
that her actions were improper is
supported by evidence that for three
years after her conversation with
Kerestes, Britton continued to spend
clients’ funds on her personal expenses.
Moreover, Britton continued to collect on
clients’ debts long after Britton and her
husband had stopped remitting funds to
these clients. More importantly, Britton
continued to mail CCC payment cards to
debtors-- thus encouraging debtors to
send her more money--even though CCC had
stopped paying clients. The evidence also
clearly establishes that Britton
benefitted financially from her actions,
and that these benefits
werecontemporaneous with her misdeeds.
See id. (finding an intent to defraud
when misrepresentations were
contemporaneous with benefits received by
defendant). This evidence is more than
adequate to establish Britton’s intent to
defraud beyond a reasonable doubt, and we
therefore conclude that Britton’s
sufficiency of the evidence claim fails.

B.   Denial of Motion to Withdraw

  Britton next contends that the district
court erred by denying DeRango’s motion
to withdraw due to his conflict of
interest. In the alternative, Britton
contends that the district court erred by
prohibiting DeRango from questioning
Swanson. We have previously noted that
"[d]istrict courts have been given broad
discretion to fashion remedies to avoid
conflicts of interest." United States v.
Messino, 181 F.3d 826, 830 (7th Cir.
1999). Further, "[w]here evidence is
easily available from other sources and
absent ’extraordinary circumstances’ or
’compelling reasons,’ an attorney who
participates in the case should not be
called as a witness." United States v.
Dack, 747 F.2d 1172, 1176 n.5 (7th Cir.
1984) (citation omitted). In Dack, the
defendant subpoenaed the prosecutor to
testify concerning the Supreme Court’s
holding in a recent case. See id. We held
that the district court properly quashed
the subpoena because the defendant could
have easily made the same point by
entering the United States Reports into
evidence. See id.

  In the present case, the government
contends that the district court’s remedy
was appropriate because DeRango’s
proffered testimony was easily available
through another source--a billing record.
DeRango’s motion to withdraw was based
upon knowledge that DeRango possessed and
could be used to impeach government
witness Swanson. DeRango told the
district court that based upon his review
of certain billing records, he knew that
Swanson had paid his legal bill with more
than $1,200 in cash. However, in his
previous testimony Swanson had admitted
stealing only $500 from CCC. Thus, the
impeachment value of DeRango’s testimony
consisted of the inference that Swanson
was lying when he stated he did not steal
more than $500 in cash from CCC. Based on
DeRango’s proffer, the court denied
DeRango’s motion on the ground that lead
counsel Cain could obtain the impeachment
information through a trial subpoena of
DeRango’s former firm’s billing records,
and thus, DeRango’s testimony was not
necessary. We agree with the district
court that the information that DeRango
could have provided was easily provided
by the billing record and through the
cross-examination of Swanson./3 As in
Dack, we see no err in the district
court’s actions as the testimony that
DeRango sought to give was easily
available through another source, and we
conclude that neither "extraordinary
circumstances" nor "compelling reasons"
existed to find otherwise./4 We also
see no problem with the district court’s
screening off of DeRango as we have
previously approved the use of such
measures in order to avoid potential
ethical violations. See, e.g., United
States v. Goot, 894 F.2d 231, 235-37 (7th
Cir. 1990).

C. Exclusion of Kobussen’s Opinion
Testimony

  Finally, Britton contends that reversal
is required because the district court
erroneously found a Rule 16 violation and
thus improperly excluded Kobussen from
testifying as an expert. We review a
decision to exclude expert testimony
based upon a Rule 16 violation for abuse
of discretion. See United States v. Yoon,
128 F.3d 515, 526 (7th Cir. 1997). Even
if we find that the district court abused
its discretion, we will affirm the jury’s
verdict if the error is harmless. See
United States v. Harvey, 117 F.3d 1044,
1048-49 (7th Cir. 1997). Under the
Federal Rules of Criminal Procedure, a
defendant is required to disclose her
expert testimony only if: (1) the
defendant asks the government to disclose
its experts; (2) the government complies
with the defendant’s request; and (3) the
government then asks the defendant to
disclose her experts. See Fed. R. Crim. P.
16(b)(1)(C). On appeal, the government
concedes that the second Rule 16
precondition for expert disclosure was
not met, and that the district court
erroneously excluded Kobussen’s testimony
on notice grounds. However, the
government contends that the exclusion of
her testimony was harmless because that
testimony would only have addressed
counts on which Britton was acquitted.

  We faced a similar situation in United
States v. Bolton, 977 F.2d 1196, 1199-
1200 (7th Cir. 1992). In Bolton, the
defendant was convicted of three counts
of extortion, and acquitted on one count
of extortion. See id. at 1198. During the
trial, the judge made a series of
evidentiary rulings restricting the
defendant’s use of photographic evidence.
See id. at 1200. On appeal, the defendant
argued that reversal was required because
the government had violated Rule 16 in
its handling of this evidence and that
the judge’s rulings had compounded the
problems. See id. We began by noting that
the evidence at issue only addressed one
count of the indictment. See id. As the
defendant was acquitted on that one
count, we held that any error by the
trial court was therefore harmless. See
id.

  Here, there is no dispute that
Kobussen’s opinion testimony only
addressed a collection agency’s general
right to post-termination collections or
legal fees. At trial, Britton presented
evidence that several CCC clients owed
CCC money for post-termination
collections and legal fees, and Britton
was acquitted of those counts. However,
on the conviction counts, there was no
evidence that the CCC clients associated
with those counts owed CCC any post-
termination collections or legal fees.
Thus, because Kobussen’s testimony only
addressed the counts on which she was
acquitted, the exclusion of that
testimony would not have affected the
jury’s guilty verdicts on the other
counts. See id. Therefore, as in Bolton,
the exclusion of her testimony was
harmless. See id.

III.   Conclusion

  For the forgoing reasons, the
convictions of the defendant are AFFIRMED.

FOOTNOTES

/1 Dan Britton pled guilty on November 16, 2000.

/2 After the trial, Britton again raised the issue
in her motion for a new trial, which was also
denied.

/3 Indeed, the record indicates that Cain did obtain
the billing record and then used the billing
record to impeach Swanson. The transcript shows
the following exchange between Cain and Swanson:

Q: Do you remember, as a matter of fact, on or
about February 20th of 1996 giving your lawyer at
that time who was representing you . . . a
thousand dollars cash?

A: Yes.

/4 On appeal, Britton argues at length that DeRango
would have testified to more than the information
in the billing record. We find this argument
unpersuasive as DeRango’s detailed proffer to the
district court makes clear that the billing
record was sufficient, and any attempt to argue
outside the record must be rejected. See, e.g.,
United States v. Hoover, 246 F.3d 1054, 1064 (7th
Cir. 2001) (J. Rovner, concurring) ("We do not
allow parties to stray beyond the bounds of the
record for reasons so obvious and familiar that
they scarcely require mention.").