U.S. v. Landerman
| Decision Date | 31 March 1997 |
| Docket Number | Nos. 94-10028,94-10403,s. 94-10028 |
| Citation | 109 F.3d 1053 |
| Parties | 46 Fed. R. Evid. Serv. 1055 UNITED STATES of America, Plaintiff-Appellee, v. Allen LANDERMAN, David Dewayne Hanks, a/k/a Ed Banks and Randall Boyd Zeigler, a/k/a/ Bo Zeigler, Defendants-Appellants. UNITED STATES of America, Plaintiff-Appellee, v. Rodney Lee HOLLOMAN, a/k/a/ Rod Weatherly and Walter Humbert Cushman, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
John R. Teakell, Fort Worth, TX, John Preston Bradford, Christopher Allen Curtis, Assistant U.S. Attorneys, Dallas, TX, for U.S.
Jack M. Pepper, Plano, TX, for Allen Landerman, Defendant-Appellant.
James Warren St. John, Ft. Worth, TX, for David Dewayne Hanks a/k/a Ed Banks, Defendant-Appellant.
Paul Gregory Croushore, Columbus, OH, for Randall Boyd Ziegler a/k/a Bo Ziegler, Defendant-Appellant.
Appeals from the United States District Court for the Northern District of Texas.
Before BENAVIDES, STEWART and DENNIS, Circuit Judges.
This direct criminal appeal involves, among other things, a challenge to the district court's refusal to allow a prosecution witness to be cross examined regarding his alleged bias. Finding that the limitation of cross examination resulted in a violation of the Confrontation Clause and that such error was not harmless, we vacate and remand.
The evidence at trial demonstrated that from 1989 to 1992 several companies were established to market oil and gas drilling projects. The projects were marketed through the use of written prospectuses sent by mail to potential investors and through the companies' sales brokers telephoning potential investors. The prospectuses contained inflated cost estimates for drilling the wells; misrepresentations regarding the qualifications of various persons involved in the projects; and false representations that certain individuals performed work for the companies. During the telephone solicitations, the brokers would make false representations and promises about the investment. Additionally, names of employees and affiliated companies were given as references to potential investors. These references are known as "in-house" references.
There are five appellants on this consolidated appeal: Walter Humbert Cushman III (Cushman), who essentially owned and operated the companies, but represented that he was only a consultant; Rodney Lee Holloman (Holloman), who initially was involved in establishing the companies but thereafter worked primarily at the drill sites; Allen Landerman (Landerman), who was an attorney representing the companies; David Dewayne Hanks (Hanks), who appraised a drilling rig and for a brief time was a sales manager; and Randall Boyd Zeigler (Zeigler), the personnel manager who interviewed and hired sales brokers for the companies.
In the latter part of 1989, Sam Hooper, who had been involved in the oil and gas business, met with Cushman, Holloman, and Rob Overstreet (Overstreet), 1 to discuss the development of two oil and gas wells, the Strickland and Parkman wells. Thereafter, Great Southwest Energy was incorporated, and the articles of incorporation listed Hooper as the initial director and incorporator. Neither Cushman's nor Holloman's name was listed in the articles of incorporation or in the company's mailings to potential investors. Cushman and Holloman represented that they were outside consultants for Great Southwest Energy.
Great Southwest Energy marketed the Parkman and Strickland wells. This project, known as the Twin Elephant, was offered to investors in a prospectus. Cushman, Holloman, and Hooper agreed to divide the profits among themselves. Richard Hewitt, an attorney, prepared the Twin Elephant prospectus, which disclosed the participation of Cushman and Holloman and their criminal records. Pursuant to Cushman's instructions, Daphne Bostick, a secretary, removed pages from the prospectus indicating that the company was the subject of an investigation by the State Securities Board.
Hooper resigned on December 31, 1989, because the investors' money was not being spent as represented in the prospectus. Despite his resignation, Great Southwest Energy continued to list Hooper as president on company mailings until April of 1990. After Hooper's name was removed, Overstreet was listed as president of Great Southwest Energy.
Meanwhile, Grant Ottesen (Ottesen) owned and operated Oil Consortium of Texas, Inc. 2 Because Ottesen's business was experiencing financial difficulties, he merged it with Great Southwest Energy in late 1989. Names of prospective investors were obtained primarily from "lead" lists. Using these lists, the brokers for Great Southwest Energy made telephone contact with prospective investors. For a short period of time, Ottesen recruited sales brokers for Cushman. Ottesen left the newly merged company in April of 1990 but returned in September of 1990.
Ottesen testified that the following misrepresentations were made to investors: Hooper was president of the company during the Twin Elephant program; projects were already producing oil; almost all units had been sold; and the return on the investment was nearly immediate. Ottesen heard Cushman admit that he knew the Twin Elephant would not have any production and that he did not intend to spend any more money than had already been spent. Ottesen also testified that in-house references were given to investors, false drilling reports were given to salesmen, drilling costs were inflated, 3 investor funds were used to pay salaries and expenses of the office, and that completion funds 4 were called early and used for purposes other than drilling. Ottesen also testified that Zeigler, Hanks, Holloman, Cushman, and Don Cronn (also known as Tom Green) were all part of conversations in which this conduct was discussed.
Tom Grace began working as a sales broker for Great Southwest Energy in December 1989. Grace advised the investors that the wells were going to be horizontally drilled. In fact, the wells were never horizontally drilled. According to Holloman, they attempted to horizontally drill the Strickland well but could not reach the bottom of the hole because the well had been sitting dormant for seven or eight years. Grace testified that he resigned in May 1990 because the company did not procure a management license for the oil and gas brokerage and also because he learned "about the backgrounds of Mr. Cushman and Holloman."
Jo Beth Smith (Smith) performed accounting work for Great Southwest Energy in the early part of 1990. Holloman had Smith cash $5,000-$6,000 checks for expenses or "to go on a trip." Neither Cushman nor Holloman received salaries or paychecks. The evidence revealed that, instead of receiving salaries or being on the company payroll, the company paid the expenses of Cushman and Holloman.
Lisa Holdge (Holdge) began working as a receptionist for Great Southwest Energy in February 1990. Cushman subsequently asked her to become secretary-treasurer of the company, and she agreed. The position was in name only. Cushman instructed Holdge to create false invoices for oil field services. After the Securities Board investigated the company, Cushman directed Holdge to place rescission letters in all the investor files. The recision letter explained to the investors that they could obtain a return of the money they invested. Cushman, however, told her to send the recision letter to certain selected investors, and she complied. Holdge resigned after discovering that her name had been listed as a reference in one prospectus.
In June 1990, Hartford Oil and Gas (Hartford) 5 was incorporated to market the Silver Fox and Slover Beever wells. After that time, the name Hartford was used in place of Great Southwest Energy. Glen Chambers was later named president of Hartford. David Card (Card), a codefendant who pleaded guilty to wire fraud, worked as a sales broker. Hanks was sales manager at Hartford for a short time, and Ottesen, after returning to the company, became sales manager in spring of 1991.
Jeff Everett (Everett), Cushman's son-in-law, bought Foxridge Securities (Foxridge), a company that was a licensed brokerage, for Cushman. 6 At Cushman's request, Card began working at Foxridge. Cushman and Card actually operated Foxridge. Cushman made Card president of Foxridge. Hartford used Foxridge as a reference in the prospectus for the Slover Beever project. Investors would call Foxridge to obtain information regarding the project, and Card "told them that [Foxridge was] doing due diligence on [Hartford.]" Foxridge closed in November of 1990, and upon Foxridge's closing, Card returned to Hartford.
In June 1990, Card hired Grace to work for Foxridge Securities. Grace typed the prospectus for the Silver Fox well, including the criminal backgrounds of Cushman and Holloman in the prospectus. He observed Cushman remove that information from a prospectus. Grace worked for Allen Landerman, an attorney, from December 1990 until August 1991. It was Landerman's opinion that the joint ventures were not securities. Grace put together the prospectus for the Slover Beever well, the Grand Slam No. 1, and the Grand Slam No. 2. Cushman did not want the criminal histories disclosed in the prospectus because it "made sales very difficult."
Ulrike Bell (Bell) worked for Cushman at Hartford as a bookkeeper from July 1990 to February 1991. She regularly signed checks in blank for Cushman, and Cushman asked her to make false invoices. Several of the representations about Bell's qualifications listed in the prospectus were false. 7
Zeigler was the personnel manager and interviewed and hired sales brokers. He knew that Foxridge's name was being given as a reference. According to Kevin Rose, who worked for Hartford, sales brokers at the companies made whatever representations were necessary to persuade investors, and the...
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