Court Opinion

ID: 2820777
Source: CourtListenerOpinion
Date Created: 2015-07-28 15:02:08.997537+00
Date Added: 2024-06-11T12:45:09.197726
License: Public Domain

13-2314(L)
     United States v. Dupree, Watts

                                  UNITED STATES COURT OF APPEALS
                                      FOR THE SECOND CIRCUIT

                                                 SUMMARY ORDER
     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007,
     IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
     CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC
     DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
     REPRESENTED BY COUNSEL.

 1               At a stated term of the United States Court of Appeals for
 2         the Second Circuit, held at the Thurgood Marshall United States
 3         Courthouse, 40 Foley Square, in the City of New York, on the
 4         28th day of July, two thousand fifteen.
 5
 6         PRESENT:         JON O. NEWMAN,
 7                          DENNIS JACOBS,
 8                          REENA RAGGI,
 9                               Circuit Judges.
10
11         - - - - - - - - - - - - - - - - - - - -X
12         UNITED STATES OF AMERICA,
13                        Appellee,
14
15                          -v.-                                                               13-2314(L)
16                                                                                             14-1651(CON)
17         COURTNEY DUPREE, RODNEY WATTS,
18                        Defendants-Appellants.*
19         - - - - - - - - - - - - - - - - - - - -X
20
21         FOR APPELLANT DUPREE:                             Courtney Dupree, pro se,
22                                                           Otisville, New York.
23
24         FOR APPELLANT WATTS:                              MARION BACHRACH (with Andy S. Oh,
25                                                           on the brief), Thompson & Knight
26                                                           LLP, New York, New York.

                   *
                 The Clerk of Court is directed to amend the case
           caption as above.
                                                                1
 1   FOR APPELLEE:           CATHERINE M. MIRABILE (with Peter A.
 2                           Norling, on the brief), for Kelly T.
 3                           Currie, Acting United States Attorney
 4                           for the Eastern District of New York,
 5                           Brooklyn, New York.
 6
 7        Appeal from judgments of the United States District Court
 8   for the Eastern District of New York (Matsumoto, J.).
 9
10        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED AND
11   DECREED that the judgments of the district court be AFFIRMED.
12
13        In these consolidated appeals, Courtney Dupree and Rodney
14   Watts appeal from judgments of the United States District Court
15   for the Eastern District of New York (Matsumoto, J.),
16   sentencing Dupree chiefly to 84 months’ imprisonment and Watts
17   chiefly to 37 months’ imprisonment, after respective juries
18   found them guilty of one count each of bank fraud; two counts
19   each of false statements on a loan application; one count of
20   conspiracy to commit bank fraud as to Dupree; and one count of
21   conspiracy to commit bank, mail, and wire fraud as to Watts.
22   We assume the parties’ familiarity with the underlying facts,
23   the procedural history, and the issues presented for review.
24
25        This case arises from a loan procured by GDC Acquisitions,
26   LLC, and its subsidiary companies, which are in the businesses
27   of commercial lighting, office furniture, and office supplies.
28   Dupree was GDC’s Chief Executive Officer at all relevant times.
29    Watts was Chief Financial Officer until 2008 and then Chief
30   Investment Officer.
31
32        The evidence showed that, to obtain a loan, GDC and the
33   subsidiaries submitted documents to Amalgamated Bank that
34   misrepresented revenues and assets. The misrepresentations
35   included the booking of fictitious sales and the improper
36   accounting of invoices and receipts in order to inflate
37   accounts receivable. In August 2008, Amalgamated agreed to
38   issue a $21 million loan to GDC’s subsidiaries, with GDC as
39   guarantor. In the ensuing years the companies provided ongoing
40   financial reports, called borrowing base certificates, which
41   incorporated iterations of these misrepresentations.
42
43        Dupree and Watts were tried separately and raise distinct
44   appellate arguments, which we address seriatim.
45

                                    2
 1                           Dupree’s Appeal
 2
 3        Dupree, pro se, challenges the sufficiency of the evidence
 4   and various evidentiary rulings, and contends that he was
 5   framed by the FBI. We review the sufficiency of the evidence
 6   de novo, mindful that “a defendant mounting such a challenge
 7   bears a heavy burden.” United States v. Harvey, 746 F.3d 87,
 8   89 (2d Cir. 2014) (per curiam) (internal quotation marks
 9   omitted). We view the evidence in the light most favorable to
10   the government, draw all inferences in the government’s favor,
11   and defer to the jury’s credibility determinations. Id. The
12   jury’s verdict will be sustained if “any rational trier of fact
13   could have found the essential elements of the crime beyond a
14   reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319
15   (1979).
16
17        We affirm for substantially the reasons stated in the
18   district court’s October 26, 2012 order denying Dupree’s post-
19   verdict motions. Many of Dupree’s sufficiency challenges rely
20   on the premise that his companies did not violate the loan
21   agreement’s negative covenant on acquisitions. But Dupree’s
22   convictions can be affirmed regardless of the alleged
23   acquisition, based on the other evidence of Dupree’s
24   involvement in the scheme to defraud.
25
26        When the government charges a scheme to defraud comprising
27   several misrepresentations, it need not prove each
28   misrepresentation. United States v. AMREP Corp., 560 F.2d 539,
29   546-47 (2d Cir. 1977); see United States v. Stirling, 571 F.2d
30   708, 726 (2d Cir. 1978) (“The real question, then, is not so
31   much whether there was sufficient evidence regarding each and
32   every specification but, rather, whether there was sufficient
33   overall proof of the alleged scheme to defraud and
34   conspiracy.”). There was ample evidence that Dupree knowingly
35   caused others to inflate his companies’ assets and income in
36   applying for the loan, and in reports to the bank thereafter.
37
38        The district court did not err in precluding expert
39   testimony about the obligations of the parties under the loan
40   agreement, because, as the district court reasonably
41   determined, that was a question for the jury to resolve. See
42   United States v. Duncan, 42 F.3d 97, 101-03 (2d Cir. 1994).
43
44        Dupree contends that the bank officer who negotiated the
45   agreement testified as an expert; however, that witness
46   provided only his understanding of the agreement’s terms, and

                                    3
 1   the court instructed the jury accordingly. Cf. United States
 2   v. Ferguson, 676 F.3d 260, 294 (2d Cir. 2011).
 3
 4        Dupree also argues that the FBI framed him by directing
 5   one of his employees to create fake invoices; that the
 6   employee’s actions in providing the government with company
 7   documents and information amounted to an illegal warrantless
 8   search; that the court precluded Dupree from adducing the
 9   motive for the FBI’s set-up; and that several witnesses
10   committed perjury. These claims are not supported by the
11   record:
12
13       !    The employee who approached the FBI about the fraud
14            testified that he created fake invoices at Dupree’s
15            direction before as well as after he contacted the
16            FBI. The jury considered and rejected Dupree’s
17            argument that the FBI concocted the scheme and
18            planted false evidence.
19
20       !    The FBI did not use the employee as a government
21            agent to obtain evidence but, rather, instructed the
22            employee to continue his work at the company in the
23            normal course. In any event, Dupree had no
24            legitimate expectation of privacy in the emails in
25            question, which he gave the employee explicit
26            permission to access.
27
28       !    The “perjured testimony” Dupree identifies amounts to
29            mere inconsistencies in the evidence, many of which
30            were brought out to the jurors. Dupree thus takes
31            issue with the jury’s credibility findings. Yet
32            “where there are conflicts in the testimony, we must
33            defer to the jury’s resolution of the weight of the
34            evidence and the credibility of the witnesses.”
35            United States v. Miller, 116 F.3d 641, 676 (2d Cir.
36            1997).
37
38       !    Dupree claims that evidence of the FBI’s motive was
39            improperly precluded, but he never sought to
40            introduce it, and the jury was properly instructed
41            with respect to the FBI’s investigation.
42
43                           Watts’s Appeal
44
45        Watts contends that his conviction was based on the
46   invalid theory that he falsely inflated revenues by prematurely
47   counting invoices toward accounts receivable. According to

                                    4
 1   Watts, there was nothing inherently unlawful about the practice
 2   of “pre-billing,” by which an invoice is recorded as a
 3   receivable as soon as the invoice is issued and prior to
 4   delivery of the purchased product.
 5
 6        The government did not argue that a fraud is necessarily
 7   perpetrated by inclusion of an invoice in accounts receivable
 8   prior to delivery of the purchased product. Rather, the
 9   evidence permitted the jury to find that Watts’s conduct with
10   respect to accounts receivable (which went far beyond simply
11   including an invoice prior to delivery of goods) constituted a
12   scheme to defraud the lending bank. Watts’s own accounting
13   expert testified that inclusion of an invoice in accounts
14   receivable implies a reasonable expectation of payment.
15   Similarly, the financial statements submitted to the bank
16   asserted that “[a]ccounts receivable are stated at the amount
17   management expects to collect.” (Gov. Exh. 148 at 6.) Yet the
18   jury heard evidence that Watts and his co-conspirators included
19   invoices in accounts receivable long before payment was, or
20   could reasonably have been, expected. For example, some
21   invoices that were included in accounts receivable were
22   immediately filed away in a drawer in the billing department,
23   rather than actually sent to a customer. Watts and his
24   colleagues would later alter those invoices, forging details
25   post hoc to bring them into conformity with the details of
26   actual sales and deliveries. Agents from the bank and a
27   mezzanine lender testified at trial that they would not have
28   issued the loan had they been aware of these covert pre-billing
29   practices. This evidence supports the government’s theory that
30   the scheme to prematurely and secretly include invoices as
31   accounts receivable was a scheme to defraud the bank, and it
32   permitted the jury to convict Watts.
33
34         For the same reasons, we reject Watts’s challenge to the
35   jury instructions. We review de novo challenges to jury
36   instructions “but will reverse only if all of the instructions,
37   taken as a whole, caused a defendant prejudice.” United States
38   v. Applins, 637 F.3d 59, 72 (2d Cir. 2011) (quoting United
39   States v. Bok, 156 F.3d 157, 160 (2d Cir. 1998)). The
40   defendant bears the burden of showing that the jury charge as
41   issued “misle[d] the jury as to the correct legal standard or
42   [did] not adequately inform the jury on the law,” Bok, 156 F.3d
43   at 160 (quoting United States v. Dinome, 86 F.3d 277, 282 (2d
44   Cir. 1996)), and that his requested instruction, by contrast,
45   “accurately represented the law in every respect,” United
46   States v. Nektalov, 461 F.3d 309, 314 (2d Cir. 2006) (quoting
47   United States v. Wilkerson, 361 F.3d 717, 732 (2d Cir. 2004)).

                                    5
 1   Watts requested a charge that his pre-billing conduct was
 2   immaterial as a matter of law, or in the alternative, that the
 3   loan agreement’s supposed ambiguity (the definition of accounts
 4   receivable does not include the word “delivery”) must be
 5   resolved in Watts’s favor. The first request was properly
 6   denied because, as explained above, the jury was entitled to
 7   find that pre-billing was material. The alternative request
 8   was properly denied because it was based on the false premise
 9   that, simply because the loan agreement did not explicitly
10   define accounts receivable according to deliveries, the loan
11   agreements must be read to contemplate pre-billing. In
12   contrast to these deficient requests, the district court’s jury
13   instructions, viewed as a whole, accurately represented the
14   law.
15
16        Also on the subject of pre-billing, Watts argues that the
17   district court erred by admitting evidence of a 2007 instance
18   of pre-billing, which he insists was irrelevant to the 2008
19   loan. We “review evidentiary rulings for abuse of the district
20   court’s broad discretion, reversing only when the court has
21   ‘acted arbitrarily or irrationally.’” Nektalov, 461 F.3d at
22   318 (quoting United States v. SKW Metals & Alloys, 195 F.3d 83,
23   88 (2d Cir. 1999)). Two witnesses who worked for then-CFO
24   Watts in 2007 testified that he changed or instructed them to
25   change the company’s books to suddenly reflect as accounts
26   receivable three to four million dollars of invoices that were
27   attributable to early-stage orders unripe for invoicing.
28   Another witness testified that she provided the company’s 2007
29   financial data, including accounts receivable, to the bank as
30   part of the loan application. The evidence of the 2007 pre-
31   billing episode therefore presented “a question of conditional
32   relevance.” United States v. Coplan, 703 F.3d 46, 81 (2d Cir.
33   2012); see Fed. R. Evid. 104(b). That is, it was relevant only
34   to the extent the jury could reasonably believe that the
35   premature accounts receivable were later submitted to the bank.
36   Since the jury could reasonably find that condition as fact,
37   the district court did not err.
38
39        Watts further challenges the exclusion of evidence, in
40   particular a spreadsheet from a GDC subsidiary showing invoices
41   issued prior to delivery of goods during a time interval that
42   preceded GDC’s acquisition of the company. Watts attempted to
43   admit the spreadsheet through witnesses who were not competent
44   to attest to its authenticity as a business record.
45   Specifically, Watts’s counsel sought to use the spreadsheet to
46   cross-examine government witnesses who had never before seen
47   the spreadsheet, and who even noted aspects of the spreadsheet

                                    6
 1   inconsistent with their memory of the company’s business
 2   records. Watts’s counsel eventually put on a witness who
 3   testified that she had seen a similar spreadsheet on a
 4   colleague’s desk, but could not attest to its contents. The
 5   district court therefore admitted the spreadsheet for the fact
 6   of its existence but not for the truth of its contents. Our
 7   cases call for “a very broad interpretation” of the rules
 8   governing qualification of a witness to lay a foundation for
 9   admission of business records. United States v. Lauersen, 348
10 F.3d 329, 342 (2d Cir. 2003) (quoting 5 Weinstein’s Federal
11   Evidence § 803.08[8][a] (2d ed. 2003)); see Phoenix Assocs. III
12   v. Stone, 60 F.3d 95, 101 (2d Cir. 1995). This interpretation
13   “favors the admission of evidence rather than its exclusion,”
14   subject to the “principal precondition . . . that the record
15   has sufficient indicia of trustworthiness to be considered
16   reliable.” Phoenix Assocs. III, 60 F.3d at 101 (internal
17   quotation marks and alterations omitted). Even employing this
18   lenient standard, the district court did not abuse its
19   discretion when it limited the purpose for which the
20   spreadsheet could be admitted.
21
22        Finally, Watts raises several issues surrounding unrelated
23   bad acts by a government witness, Frank Patello, who replaced
24   Watts as CFO. Patello allegedly exploited an elderly, sickly,
25   and medicated woman, referred to as “R.A.” On April 12, 2013,
26   R.A.’s son complained to the FBI that Patello had befriended
27   R.A. in order to trick her into distributing money from her
28   IRA--money that her son would otherwise inherit. On April 19,
29   after a cursory investigation that included interviews with
30   Patello and R.A., the government disclosed the complaint
31   pursuant to Giglio v. United States, 405 U.S. 150 (1972).
32   Watts viewed the complaint as impeachment evidence, arguing
33   that Patello was lying to curry favor with the government in
34   hope of avoiding prosecution. The district court allowed
35   Watts’s counsel to cross-examine Patello about this unrelated
36   bad act, but limited the scope of that cross-examination.
37   Among other limitations, the district court barred Watts’s
38   counsel from asking about R.A.’s age and medical state. The
39   district court also prevented Watts’s counsel from calling as a
40   witness R.A.’s financial advisor to rebut Patello’s denial of
41   the exploitation narrative. As to this evidence, Watts argues
42   that: (1) the government violated its obligation under Giglio
43   by stalling unreasonably before disclosing its knowledge of
44   Patello’s bad acts, and (2) the district court erred by
45   limiting the scope of his counsel’s exploration of Patello’s
46   bad acts at trial, such as by limiting his cross-examination
47   and by excluding testimony of the financial advisor.

                                    7
 1        We have declined “to specify the extent or timing of
 2   disclosure Brady and its progeny [including Giglio] require,
 3   except in terms of the sufficiency, under the circumstances, of
 4   the defense’s opportunity to use the evidence when disclosure
 5   is made.” Leka v. Portuondo, 257 F.3d 89, 100 (2d Cir. 2001).
 6   In Leka, for example, the prosecution had evidence favorable to
 7   the defense “early on in th[e] case,” id. at 99; nonetheless,
 8   until nine days before trial “the prosecution failed to
 9   disclose [the evidence], and for a critical time actively
10   suppressed it,” id. at 91. Watts relies on Leka to show a
11   Giglio violation, because he did not know of R.A.’s son’s
12   complaint until ten days before trial. In this case, however,
13   information about Patello was late-breaking even to the
14   government. The government undertook a one-week-long, cursory
15   investigation before disclosing what it knew. After the
16   disclosure, Watts experienced no difficulty in investigating
17   further, including issuance of a subpoena to R.A.’s financial
18   advisor and examining him in a hearing before the district
19   court. The government performed its Brady and Giglio
20   obligations.
21
22        As to the limitations on Watts’s cross-examination and the
23   exclusion of testimony by R.A.’s financial advisor, the
24   district court was entitled to preclude the additional
25   testimony, under Federal Rule of Evidence 403. The extrinsic
26   evidence through the financial advisor would have resembled a
27   mini-trial regarding conduct unrelated to this case, and
28   evidence of R.A.’s frailty would have had little probative
29   value and much risk of prejudice. The district court achieved
30   a sensible compromise, allowing Watts’s counsel to cross-
31   examine Patello without creating a sideshow of R.A.’s personal
32   and familial misfortunes.
33
34                                * * *
35
36        For the foregoing reasons, and finding no merit in
37   appellants’ other arguments, we hereby AFFIRM the judgments of
38   the district court.
39
40                                FOR THE COURT:
41                                CATHERINE O’HAGAN WOLFE, CLERK
42

                                    8