Court Opinion

ID: 9480856
Source: CourtListenerOpinion
Date Created: 2023-08-05 08:00:42.224456+00
Date Added: 2024-06-11T17:47:57.623271
License: Public Domain

LAY, Chief Judge,
with whom McMILLIAN and MAGILL, Circuit Judges, join, dissenting.
The fundamental premise upon which any criminal conviction must necessarily stand is that the accused receives a fair trial governed by fair procedures. This concept is rooted in English common law and guaranteed under the Constitution of the United States.
John A. Kroh has been convicted of thirteen counts relating to bank fraud and sentenced to prison for ten years. He was denied a fair trial.
I.
The majority condones the principle that when a defendant is charged with conspiracy the government may in its case-in-chief offer a guilty plea of a co-conspirator, even *336though the plea necessarily implicates the defendant, as long as the trial judge gives a cautionary instruction. The cautionary instruction informs the jury that the plea is not to be considered as substantive evidence of a defendant’s guilt but only goes to the witness’s credibility. The unfairness of such a superficial analysis obliterates any reasonable sense of fairness. This is particularly true when the obvious purpose of the government is not to adduce factual evidence of the conspiracy nor to supply other needed evidence, but simply to bring to the jury’s attention the guilty plea of the alleged co-conspirator of the defendant. This court now allows the prejudicial use of the guilty plea without any exacting analysis of the government’s tactic in calling an alleged co-conspirator for the primary purpose of eliciting the guilty plea.
As the Third Circuit observed over forty years ago, common sense dictates that “a plea of guilty by an alleged fellow conspirator is highly relevant upon the question of the guilt of another alleged coconspirator.” United States v. Toner, 173 F.2d 140, 142 (3d Cir.1949).1 This “logically probative” evidence of guilt, however, should be excluded for policy reasons:
The foundation of the countervailing policy is the right of every defendant to stand or fall with the proof of the charge made against him, not against somebody else. Acquittal of an alleged fellow conspirator is not evidence for a man being tried for conspiracy. So, likewise, conviction of an alleged fellow conspirator after a trial is not admissible as against one now being charged. The defendant had a right to have his guilt or innocence determined by the evidence presented against him, not by what has happened with regard to a criminal prosecution against someone else.
Id. (footnotes omitted).
Despite the potential prejudice to defendants, federal courts have generally recognized that when a witness testifies for the government, the government may in narrow circumstances question the witness on direct examination about a guilty plea or plea agreement. The balancing justification for this is to allow the prosecution to blunt expected defense cross-examination about possible witness bias and to prevent the jury from forming an unjustified impression that the prosecution is concealing the plea agreement. See e.g., United States v. Edwards, 631 F.2d 1049, 1051-52 (2d Cir.1980). All courts that have considered the question, however, hold that the jury may not use the guilty plea as substantive evidence of the defendant’s guilt. See, e.g., United States v. Dworken, 855 F.2d 12, 30-31 (1st Cir.1988); United States v. Wiesle, 542 F.2d 61, 62 (8th Cir.1976).
When the prejudice to the defendant may be great, such as in the case of a guilty plea of a co-conspirator, the law requires additional safeguards to ensure that the government does not offer such evidence for an improper purpose and the jury does not use such evidence improperly. Courts have recognized that “reference to the guilty pleas of [the] defendant’s alleged coconspirators, in the very case in which the defendant is then standing trial, is obviously capable of prejudicing his trial.” United States v. Handly, 591 F.2d 1125, 1128 n. 1 (5th Cir.1979). Courts have found that such an instance occurs when a co-defendant or co-conspirator’s guilty plea necessarily implicates the defendant. United States v. Harrell, 436 F.2d 606, 617 (5th Cir.1970); United States v. Hutchings, 751 F.2d 230, 239 (8th Cir.1984) (McMillian, J., specially concurring), cert. denied, 474 U.S. 829, 106 S.Ct. 92, 88 L.Ed.2d 75 (1985).
One well-recognized safeguard against such unfair prejudice is the use of a cautionary instruction that directs the jury not to use the co-offender’s guilty plea as substantive evidence of the defendant's guilt. The majority opinion makes much of the fact that the trial judge in this case gave such an instruction. See Majority Opinion at 330, 331-32, 334. A cautionary instruction alone however, can hardly prevent an *337unfairly prejudicial trial.2 It is an inescapable fact that in certain cases jurors are incapable of ignoring highly prejudicial evidence, particularly when they have little other evidence to rely on. “The naive assumption that prejudicial effects can be overcome by instructions to the jury all practicing lawyers know to be unmitigated fiction.” Krulewitch v. United States, 336 U.S. 440, 453, 69 S.Ct. 716, 723, 93 L.Ed. 790 (1949) (Jackson, J., concurring). See also Bruton v. United States, 391 U.S. 123, 129, 88 S.Ct. 1620, 1624, 20 L.Ed.2d 476 (1968) (“[T]oo often such admonition against misuse is intrinsically ineffective in that the effect of such a nonadmissible declaration cannot be wiped from the brains of the jurors”) (quoting Della Paoli v. United States, 352 U.S. 232, 247, 77 S.Ct. 294, 302, 1 L.Ed.2d 278 (1957) (Frankfurter, J., dissenting)). Given the lack of other probative evidence establishing John Kroh’s guilt on the conspiracy charge, this case demonstrates an instance when even “the strongest corrective instruction would be insufficient” to erase the prejudicial effect to the defendant. United States v. Richardson, 504 F.2d 357, 360 (5th Cir.1974), cert. denied, 420 U.S. 978, 95 S.Ct. 1406, 43 L.Ed.2d 659 (1975) (quoting United States v. Baete, 414 F.2d 782, 783-84 (5th Cir.1969)); United States v. Harrell, 436 F.2d at 617. See also United States v. Miranda, 593 F.2d 590, 595-96 (5th Cir.1979) (doubtful that any curative instruction could have erased prejudice from the minds of jurors resulting from improperly used guilty plea of co-conspirator).
The Third Circuit has explained the special case presented by a conspiracy trial:
The guilty plea to a conspiracy charge carries with it more potential harm to the defendant on trial [i.e. more potential harm than a guilty plea to a substantive count] because the crime by definition requires the participation of another. The jury could not fail to appreciate the significance of this.... A plea by a co-conspirator thus presents a unique situation which may require the courts to scrutinize more closely the purported remedial effect of instructions to the jury.
United States v. Gullo, 502 F.2d 759, 761 (3d Cir.1974).
In discussing these judicially created safeguards aimed at preventing unfair prejudice to defendants, the Ninth Circuit has stated that “both trial and reviewing courts have responsibility to insure that evidence of the [guilty] plea is being offered by the prosecutor and used by the jury only for a permissible purpose.” United States v. Halbert, 640 F.2d 1000, 1005 (9th Cir.1981) (per curiam) (emphasis added). Further, the Fifth Circuit has observed that in evaluating the prosecution’s use of a witness’s guilty plea:
“[W]e must carefully examine all the facts and circumstances of the case in their proper context. The presence or absence of [a limiting] instruction is an important factor, but it is also essential to consider other factors, such as whether there was a proper purpose in introducing the fact of the guilty plea, whether the plea was improperly emphasized or used as substantive evidence of guilt, [and] whether the introduction of the plea was invited by the defense counsel....”
United States v. Fleetwood, 528 F.2d 528, 532 (5th Cir.1976), (quoting United States v. King, 505 F.2d 602, 608 (5th Cir.1974)) (emphasis added). See also United States v. Casto, 889 F.2d 562, 567 (5th Cir.1989) (same), cert. denied, — U.S. -, 110 S.Ct. 1164, 107 L.Ed.2d 1067 (1990).
Another judicial safeguard aimed at eliminating possible prejudice to the defendant in these situations is for the district court to use a motion in limine before trial begins. When the defendant agrees in such a motion not to question the government’s witness about the guilty plea or plea arrangement or to use the plea to impeach the witness’s credibility, then the government is left with no legitimate pur*338pose in using the guilty plea during direct examination. See S. Saltzburg & K. Redden, Federal Rules of Evidence Manual 469 (4th ed. 1986).
John Kroh was not provided these important safeguards. In his pretrial motion in limine, he vigorously objected to the government's plan to elicit from George Kroh that George had pleaded guilty to a conspiracy to defraud banks. Although John Kroh specified that the defense would not attack George Kroh's credibility or in any way refer to the plea agreement with the government, the trial judge allowed the government in its case-in-chief to question George — the only named co-conspirator in the case — about his plea. The impact on the jury could not have been anything short of devastating.3
Far more troubling than the trial court’s decision to allow the government to question George Kroh about his guilty plea in the first instance is the majority’s ready acceptance of the government’s superficial explanation that it had a legitimate motive for using the guilty plea. Cf. United States v. Fleetwood, 528 F.2d 528, 533 (5th Cir.1976) (close scrutiny reveals that there was no proper purpose for government to offer guilty plea); United States v. Calafati, 569 F.Supp. 50, 52 (E.D.Penn.1983) (same). The majority fails to show what the Fifth Circuit describes as their “deep sensitivity to the possibilities of prejudice caused by allowing a jury in a criminal case to consider evidence of a co-defendant’s guilty plea.” United States v. Richardson, 504 F.2d 357, 360 (5th Cir.1974), cert. denied, 420 U.S. 978, 95 S.Ct. 1406, 43 L.Ed.2d 659 (1975). “What may facially appear as a legitimate introduction of evi-deuce of a plea becomes something else and on the level of prejudicial error when ... offered as substantive evidence of [the defendant’s] guilt.” United States v. Halbert, 640 F.2d 1000, 1005 (9th Cir.1981) (per curiam). I believe the record, taken as a whole, clearly shows that the government offered George Kroh’s guilty plea as evidence of the defendant’s guilt.
Of significance here is that the government’s direct examination of George Kroh did not disclose any evidence of a scheme between him and his brother to defraud banks.4 The only evidence of the conspiracy the government could put before the jury in their case-in-chief was that John’s brother had pleaded guilty to the same conspiracy. The obvious inference is that the government was primarily interested in introducing George’s plea as evidence of John Kroh’s guilt, an improper purpose. Cf. United States v. Miller, 664 F.2d 94, 97 (5th Cir. Unit B 1981) (prosecutor may not introduce evidence for the primary purpose of placing before the jury substantive evidence otherwise inadmissable), cert. denied, 459 U.S. 854, 103 S.Ct. 121, 74 L.Ed.2d 106 (1982).
Obscuring the fact that the government had no legitimate motive for bringing out George Kroh’s guilty plea, the majority takes great pains to show that the government’s use of that plea was limited. The government argues that it was careful not to reveal in its case-in-chief that John’s co-conspirator was actually his brother George. It argues that there was another unnamed co-conspirator, Mondschein, and therefore the jurors would not know (until redirect) that George’s conspiracy plea necessarily implicated the defendant. If we *339believe in this, we believe in tooth fairies. How strange that the government not once in the district court mentioned Mondschein to the jury or to the trial court as a co-conspirator. Never once in its final argument did it mention Mondschein as a co-conspirator. The only co-conspirator the government zeroed in on was George Kroh, because it had a guilty plea from George which directly provided the facile and prejudicial evidence of the defendant’s alleged scheme to defraud the three banks. The majority’s argument overlooks the government’s concession that even before the opening statements, the trial court read the indictment which stated that John Kroh had been charged with his brother George for conspiracy to commit bank fraud.5 The fact that it “takes two to tango” in a conspiracy could not have escaped the jury’s attention. United States v. Gullo, 502 F.2d 759, 761 (3d Cir.1974). Thus from the outset the jurors were aware that George already had pleaded guilty to conspiring with the defendant to defraud the three banks.6 This, of course, was the same crime for which John Kroh was now standing trial.
By the time of redirect, the government’s questioning about the plea was simply icing on the cake. The government nonetheless wasted no time in once again informing the jury on redirect that George had pleaded guilty to conspiring with his brother John to defraud several banks. The government accomplished this under the guise of impeachment. After uneventful direct testimony by George, the defense attorney elicited equivocal answers from him tending to show that there had been no agreement between George and the defendant to defraud banks. During redirect examination, the prosecutor for the third time highlighted George’s guilty plea, specifically pointing out that George had pleaded guilty to conspiring with his brother, the defendant in the present Action. (Tr. Yol. V. at 880; Majority Opinion at 330).
The government thus wants to have it both ways. The government initially claims it wanted to use the plea of George to bolster his credibility before the defense could attack it, knowing the defendant had already informed the court that he would not use the plea to impeach George. Yet, in the planned finale, the entire plea was brought out on redirect as impeachment. Under these circumstances, to urge that the government’s planned motive was not to use the plea as substantive evidence ignores the reality of prosecutorial overkill in the real world. This Court’s endorsement of the government’s strategy undermines the basic right of the defendant to have his guilt determined upon the evidence against him, not on whether a co-offender pleaded guilty to the same charge. See United States v. Fleetwood, 528 F.2d 528, 532 (5th Cir.1976).
II.
The majority would have us believe that even without the evidence of George Kroh’s guilty plea, the government presented the jury with sufficient evidence of a conspiracy between the two brothers. I disagree. In attempting to show that there was other evidence of the conspiracy between George and John Kroh, the majori*340ty goes to great lengths to quote portions of the transcript. In all due respect, the selective editing of the testimony omits those portions that demonstrate George Kroh’s complete isolation from the defendant’s loan activities. For example, George stated he did not involve himself at all in the financial aspects of KBDC (Tr. Yol. Y at 794); that he could only “assume” what the defendant did with his (George’s) signed financial statements (Tr. Vol. V at 798); that he did not know, in August, 1986, what their associate Mond-schein was doing to deal with the cash flow problems (Tr. Vol. V at 801); that he did not know anything about the Southwest Bank loan (Tr. Vol. Vol. V at 812-13); that he did not know about the Norbank loan, or using the loan proceeds for the Hall Farm project (Tr. Vol. V at 821-22); and that he did not know anything, in November, 1986, about the Firstate Savings loan (Tr. Vol. V at 827). Although George Kroh’s secretary had been authorized to sign his wife’s name in the past, George did not know who signed his wife’s name to the Norbank guaranty, and did not have anything to do with getting the guaranty signed (Tr. V at 825-26).
George Kroh did not testify to any contemporaneous knowledge of a scheme to defraud banks, but only gave a hindsight analysis of the events.7 George’s knowledge of KBDC’s financial difficulties is not evidence of an illegal agreement with his brother John to defraud banks. Such an agreement is crucial to a finding of a conspiracy. See, e.g., United States v. Austin, 823 F.2d 257, 259 (8th Cir.1987), cert. denied, 484 U.S. 1044, 108 S.Ct. 778, 98 L.Ed.2d 864 (1988). George testified that his response to the financial crisis was to push harder on rent collections and equity sales (Tr. Vol. V at 801, 810), not to engage in a conspiracy to defraud banks. In light of this testimony, it is difficult for me to understand the majority’s argument that the government did not rely on George’s guilty plea for proof of the conspiracy.
One may argue that George’s factual denials of a conspiracy with his brother to defraud banks did not have to be believed by the jury. This is true. The government guaranteed that by producing his guilty plea in their case-in-chief. Lack of credibility, however, does not establish affirmative evidence. Surely the inference from a negative statement does not prove the positive. The acknowledgement, emphasized in the majority opinion, that George signed false statements after the Commerce Bank incident is taken completely out of context. This acknowledgement is made after the fact and does not in any way contradict the undisputed evidence of George’s non-involvement.
Even assuming, however, that there exists some scintilla of evidence or bare inference that shows George conspired with the defendant, the mere paucity of it all, and the strain to reach such a conclusion, clearly demonstrates the prejudice caused by the use of George’s guilty plea.
The majority now suggests that any prejudice was harmless error because there was such overwhelming evidence of John Kroh’s guilt, especially on the substantive counts. Once again, the doctrine of harmless error is elevated to override constitutional fairness. This essentially overlooks the maxim that the jury is the trier of fact and the sole judge of credibility. John Kroh raised a credibility defense to his actions. Without the unfairly prejudicial guilty plea of his brother, it is certainly within the realm of reason to say that reasonable jurors could have found a reasonable doubt as to his guilt on both the conspiracy and the substantive counts. The admission of George Kroh’s guilty plea tainted the entire trial. See United States v. Calafati, 569 F.Supp. 50, 53-54 (E.D.Penn.1983) (Pollack, J.) (despite government’s “very, very strong case” against defendant, admitting co-conspirator’s guilty *341plea was so prejudicial as to require new trial).
John Kroh claimed he was not responsible for the understated liabilities.8 His claim was supported by the testimony of an independent CPA who worked on KBDC matters, who testified that she received pertinent personal financial information from the accounting department employees. The defendant also correctly points out that the format of the personal financial statements, designed by a former employee, did not accurately account for all liabilities within the liability section.9 Thus John Kroh’s testimony at trial, if believed, supports his claim that he was relying on the asset and liability figures that others were responsible for updating.
The defendant contends he did not misrepresent to the banks how the loan proceeds would be used. He informed Southwest Bank that the loan proceeds were for a “personal investment,” and later suggested the funds were for an investment with “Herb Allen.” Southwest Bank’s documentation noted only “personal investment” as the purpose of the loan. The defendant contends, and the bank official testifying agreed, that placing the money in his largest asset, KBDC, was a personal investment. The bank official also testified it did not matter to the bank how the money was used. This testimony supports the claim that Kroh did not make statements with the intent to influence the bank’s decision about the loans by promising that the loans would be used only for personal investment with Herb Allen.
Norbank and Firstate were told the loans were for investment in the Hall Farm project. John and George were limited partners in this commercial-retail development with the Hall family. KBDC was the general contractor for the project. As limited partners, John and George had an obligation to pay for development costs. By July, 1986, KBDC had advanced approximately $500,000 in development costs, and substantially more by the end of 1986, for which it was entitled to be reimbursed by the limited partners. Thus, John Kroh argued that the turning over to KBDC of loan proceeds was literally a true statement since John and George owed the company money for this project.
John Kroh also claimed the government did not prove he made a false “statement” by submitting to Norbank his wife’s guaranty with his secretary’s signature. There was testimony that it was standard practice for the secretary to sign Mary Lou Kroh’s name, and that his wife had previously acquiesced in this practice. The defendant contended that in light of this evidence of authority to sign, he could not be convicted for making a false statement since the statement made, his wife’s signature, was authorized. This claim of authority to sign, if believed, supports Kroh’s contention that the statement was not made with the intent to influence the bank’s decision.
John Kroh’s credibility was therefore crucial to deciding all thirteen counts, and nothing could have been more unfairly prejudicial to him than George Kroh’s accusatory guilty plea that he had conspired with John to commit the bank fraud in question. When the defendant’s credibility is such a vital issue, as in this case, I do not believe the trial judge’s cautionary instruction diminishes the prejudicial impact of the erroneously admitted plea. See United States v. St. Clair, 855 F.2d 518, 523 (8th Cir.1988) (since credibility was critical to outcome, cautionary instructions insufficient to erase prejudice from minds of jurors); United States v. American Grain & Related Indus., 763 F.2d 312, 319-20 (8th Cir.1985) (prejudicial impact of erroneously admitted evidence not harmless error).
*342CONCLUSION
George Kroh did not prepare financial statements; all figures were filled in by-John Kroh and their associate Mondschein, who directed the financial affairs. The evidence is undisputed that George Kroh, upon finding out about the check kiting scheme of Mondschein with the Bank of Commerce, denounced the plan and stated unequivocally he wanted no part of it. With his guilty plea, obviously made to avoid other felony charges, George made his own bed and has to lie in it. But the fact remains that at John Kroh’s trial the government produced no evidence of a conspiracy between the two brothers. The only means to show the conspiracy was to place George’s guilty plea, as a co-conspirator, before the jury. Once questioning about that plea was allowed, the whole trial became tainted.
John Kroh did not get a fair trial. This dissent is written vigorously with the hope that trial judges exercise great care and oversight when the government attempts to use guilty pleas of co-conspirators. Each case must turn on its own facts. When, however, the government’s obvious purpose in calling a co-conspirator is not to adduce necessary evidence but simply to introduce a guilty plea which directly implicates a defendant, the plea should be excluded. Obviously, if the defendant preliminarily reveals to the court that he or she will attempt to impeach a co-conspirator by use of the guilty plea, then the government may use the plea in anticipating such impeachment. Trial courts, however, should make a thorough analysis of the situation and not rely on cautionary instructions alone. Notwithstanding the result in this ease, trial judges still retain the obligation to provide fair trials free of the unfair prejudice that occurred in this case. The need for a fair trial should always be paramount to the government’s quest to obtain a conviction at any cost.

. As Judge Goodrich cogently observed: "If A’s admission that he conspired with B is believed it is pretty hard to avoid the conclusion that B must have conspired with A." Id.

. The trial judge had little choice in whether to give the cautionary instruction as it would have been reversible error for the judge to withhold it. See, e.g., Bisaccia v. Attorney General of New Jersey, 623 F.2d 307, 309 (3d Cir.1980); United States v. Wiesle, 542 F.2d 61, 62 (8th Cir.1976); United States v. Harrell, 436 F.2d 606, 617 (5th Cir.1970).

. As Judge Weinstein has pointed out:
The impact on the jury [of the government bringing out the guilty plea of a co-offender] is quite substantial: the obvious inference is that if one of several persons alleged to be co-offenders pleads guilty and exposes himself to imprisonment, he must have been telling the truth, and if one is guilty, all are guilty.
2 J. Weinstein & M. Berger, Evidence ¶ 410[07] at 410-49 (1988).

. On appeal, the government apparently concedes that it did not call George Kroh to establish evidence of a conspiracy between him and his brother. In its brief, the government points to seven reasons George was called, none of them being to testify about any agreement between the two brothers. (G. Brief, p. 37). As the defendant points out, the seven matters that the government ostensibly did call George to testify about were undisputed or uncontradicted by the testimony of other witnesses. (D. Reply Brief, p. 13). Even a cursory perusal of the transcript of George’s trial testimony demonstrates that his testimony was not helpful or necessary to the government’s case.

. The indictment began:
Beginning on or about May 1, 1986, and continuing to on or about January 29, 1987 ... John A. Kroh, Jr., and George P. Kroh did unlawfully, knowingly, and willfully conspire and agree with each other, and with others known and unknown to the grand jury, to commit an offense against the United States ... by making and causing to be made false statements of material facts to influence the actions of banks and other financial institutions
In this, the conspiracy count of the indictment, George Kroh was named ten additional times in connection with alleged illegal activities with his brother John. Subsequent counts of the indictment mentioned George Kroh six additional times.

. In Gullo, the prosecutor's questioning and statements had not specifically informed the jury that the co-conspirator had pleaded guilty to a conspiracy with the defendant. The court, however, correctly reasoned that the jury could infer from the indictment — which listed both the defendant's and the co-conspirator’s names — that the co-conspirator had pleaded guilty to conspiring with the defendant. Gullo, 502 F.2d at 761 n. 3.

. See quoted portions of George’s testimony Majority Opinion at 333 (Tr. Vol. 5 at 845-46, 874-75). Contrary to the majority’s assertion, this testimony does not evidence contemporaneous knowledge. Any doubt was resolved on cross examination when George Kroh stated that he had no knowledge that John had filed false financial statements on his behalf "until after the fact.” See Majority Opinion at 330 (quoting transcript Vol. V at 875-76).

. For a more detailed background of the financial transactions underlying the charges in this case, see the panel opinion, 896 F.2d 1524, 1526-28 (8th Cir.1990).

. For example, John Kroh’s house was listed as an asset, but the outstanding mortgage was simply identified in the asset section without being included in the liability calculation. Kroh also points out that his assets and net worth were severely undercalculated. This claim is supported by the financial statements prepared for estate planning purposes by an outside-the-company CPA.