U.S. v. Smith

• Decision Date: 10 November 1994
• Docket Number: Nos. 94-1326,s. 94-1326
• Citation: 46 F.3d 1223
• Parties: UNITED STATES, Appellee, v. James K. SMITH, Defendant, Appellant. UNITED STATES, Appellee, v. Robert COHEN, Defendant, Appellant. UNITED STATES, Appellee, v. Ambrose DEVANEY, Defendant, Appellant. to 94-1328. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1223

46 F.3d 1223

UNITED STATES, Appellee, v. James K. SMITH, Defendant, Appellant.

UNITED STATES, Appellee, v. Robert COHEN, Defendant, Appellant.

UNITED STATES, Appellee, v. Ambrose DEVANEY, Defendant, Appellant.

Nos. 94-1326 to 94-1328.

United States Court of Appeals First Circuit.

Heard Nov. 10, 1994.

Decided Feb. 10, 1995.

Charles W. Rankin, with whom Rankin & Sultan, Boston, MA, Sheldon Krantz, and Piper & Marbury, Washington, DC, were on brief, for appellant Robert Cohen; Joseph J. Balliro, with whom Balliro, Mondano & Balliro, P.C., Boston, MA, were on brief, for appellant James K. Smith; and Emmanual N. Papanickolas, Peabody, MA, for appellant Ambrose Devaney.

Paul G. Levenson, Asst. U.S. Atty., with whom Donald K. Stern, U.S. Atty., and Victor A. Wild, Asst. U.S. Atty., Boston, MA, were on brief, for appellee.

Before SELYA, Circuit Judge, BOWNES, Senior Circuit Judge, and STAHL, Circuit Judge.

BOWNES, Senior Circuit Judge.

After a joint trial, defendants James Smith, Robert Cohen, and Ambrose Devaney were convicted of defrauding two federal credit unions and other related offenses. Although some aspects of the trial give us pause, we affirm the convictions and sentences.

I. FACTS

We review the facts in the light most favorable to the government. United States v. Ford, 22 F.3d 374, 382 (1st Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 257, 130 L.Ed.2d 177 (1994). Between December 1985 and March 1991, James Smith, Richard Mangone, Robert Cohen, and Ambrose Devaney fraudulently obtained tens of millions of dollars in real estate loans from the Barnstable Community Federal Credit Union (BCCU) and the Digital Employees Federal Credit Union (Digital). Smith, a real estate developer, and Mangone, President of Digital, were co-founders of BCCU. Robert Cohen was general counsel to both credit unions. Smith and Mangone controlled much of BCCU's lending through Lynn Vasapolle, a coconspirator who was BCCU's manager. Devaney was a real estate developer, the only defendant who was an outsider to the credit unions.

The loans were used in part to finance the purchase of commercial real estate on Cape Cod. To circumvent the credit unions' policies restricting "insider" loans or limiting maximum borrowing by an individual, Smith, Mangone, and Devaney formed more than a dozen nominee trusts to create the impression that the loans were going to many different borrowers. Cohen, who served as closing attorney for the credit unions, prepared the trust instruments and closing binders. He also instructed Vasapolle what documents to include in her BCCU files.

The conspirators concealed their interest in the trusts by representing the trustees as putative owners. At Mangone's direction, Vasapolle prepared false certificates of beneficial interest on a blank form that Cohen had provided. There was evidence that in some cases Cohen directly submitted false certificates to BCCU, while maintaining parallel sets of genuine and false certificates in his files. In one case where he served as trustee, Cohen signed a certificate misrepresenting himself and his wife as the beneficiaries of the trust.

For their part, Smith and Vasapolle prepared false financial statements for BCCU showing that the trustees qualified for the loans. Smith altered the purchase and sale agreements, sometimes inflating the purchase price by millions of dollars, in order to obtain larger loans. The excess loan proceeds were usually deposited in Cohen's client account, transferred to one of Smith's accounts, and then distributed to Smith, Mangone, and Devaney.

In the late 1980's, the real estate market on Cape Cod collapsed. Unable to sell the properties and faced with mounting debts, Smith, Mangone, and Devaney resorted to a pyramid scheme. Cohen created new trusts that purported to buy subdivisions from the old trusts; the sham "sales" were in turn financed by new loans from the credit unions. By March 1991, when BCCU was seized by regulators from the National Credit Union Administration (NCUA), the outstanding balance on the Smith-Mangone-Devaney loans had reached forty to sixty million dollars.

On September 12, 1992, Smith, Mangone, Cohen, and Devaney were indicted for conspiracy (18 U.S.C. Sec. 371) to commit bank fraud (18 U.S.C. Sec. 1344); unlawful receipt of monies by a credit union officer (18 U.S.C. Sec. 1006); and unlawful monetary transactions (money laundering) (18 U.S.C. Sec. 1957). Each defendant was also charged with various offenses underlying the conspiracy. The case was tried on a redacted indictment that included a conspiracy count, seven bank fraud counts, seven parallel unlawful receipt counts (which concerned Mangone alone), and the money laundering charges. Vasapolle testified under a plea agreement and explained the workings of the conspiracy.

Smith and Mangone were convicted on all counts. Cohen was convicted on all counts except for four money laundering counts. Devaney was convicted of conspiracy, three counts of bank fraud and one count of money laundering. Mangone fled before sentencing. Smith was sentenced to fifteen years imprisonment and three years supervised release, and ordered to pay up to twenty million dollars in restitution. Cohen was sentenced to ten years imprisonment. Devaney was sentenced to thirty-seven months imprisonment and three years supervised release, and was ordered to pay up to ten million dollars in restitution.

II. DISCUSSION

These appeals turn largely on whether the defendants should have been severed for separate trials under Fed.R.Crim.P. 14. Cohen also argues that certain evidentiary rulings and jury instructions deprived him of a fair trial. Devaney argues that various counts of the indictment were multiplicitous, and that the evidence was insufficient to support his convictions. Each defendant challenges his sentence on various grounds.

A. Bruton error

We begin with Smith's claim of error under Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968)--the heart of his argument for severance. Bruton held that, because of the substantial risk that a jury, despite contrary instructions, will look to a codefendant's incriminating extrajudicial statement in determining a defendant's guilt, admission of the codefendant's statement in a joint trial violates the defendant's right of cross-examination under the Confrontation Clause of the Sixth Amendment. Id. at 126, 88 S.Ct. at 1622-23. As the Court emphasized in Richardson v. Marsh, 481 U.S. 200, 208, 107 S.Ct. 1702, 1707-08, 95 L.Ed.2d 176 (1987), Bruton error occurs where the codefendant's statement " 'expressly implicate[s]' " the defendant, leaving no doubt that it would prove " 'powerfully incriminating' " (quoting Bruton, 391 U.S. at 124 n. 1, 135, 88 S.Ct. at 1622 n. 1, 1628). There is no Bruton error if the statement becomes incriminating "only when linked with evidence introduced ... at trial." Richardson, 481 U.S. at 208, 107 S.Ct. at 1707. See United States v. Limberopoulos, 26 F.3d 245, 253 (1st Cir.1994) (Bruton protects against the "powerfully incriminating effect of [a nontestifying] accomplice pointing the finger directly at another"; by contrast, "inferential incrimination ... can be cured by limiting instructions").

Against this backdrop, we turn to the claimed Bruton error. The trial began on May 17, 1993. During the government's case, Vasapolle testified that she, Cohen, Smith, and Mangone met twice after the BCCU takeover to discuss the possibility of removing or destroying loan documents from the BCCU's and Cohen's files. Cohen allegedly agreed to remove some of his documents, but advised his coconspirators that it would be impossible to purge all of the files. He also refused to destroy any documents because to do so would be an obstruction of justice.

On June 28, 1993, the last day of testimony, Cohen called Professor Richard Huber, an authority on professional responsibility. Huber testified subject to a limiting instruction that his testimony "has nothing to do with ... Mr. Smith [and] Mr. Devaney." According to Huber, Cohen called him in late March of 1991 and "indicated that he had a serious problem with professional responsibility that was facing him and he would like to have an opportunity to discuss it." Cohen met with Huber on April 4, 1991. Huber testified:

Mr. Cohen explained that he had been involved as a lawyer for a banking institution.... [O]n the 23rd of March [1991], a former officer of the bank, a former director of the bank, and a bank manager came in and spoke to him ... concerning activities that involved them and their work at the bank.

* * *

[E]ssentially it amounted to the issue that certain documents had been changed, the information had been changed, figures had been changed, data had been changed, that this had been done after preparation by Mr. Cohen and after they had been presumptively completed, as far as he was concerned, and were in file--in his files, the bank files. He indicated that it was a possibility, though he wasn't certain, as I can recall this, that there may have been also forgeries, in terms of signatures including possibly his own.

But the main thrust ... was that documentation which he had prepared and which was complete and on file, had been changed by these three people in their indication to him when they met with him.

Cohen asked "whether he could reveal any of this information, which had been received from these persons as clients." Huber advised him that "there was no way in which he could reveal confidences at that point in time," but that he could do so "if it was necessary to protect himself, that is, where he would be charged with crime or where he would be sued civilly."

After Huber testified, Cohen's codefendants moved for a mistrial, citing Bruton. The court deferred its ruling until Cohen's next witness had testified. Just before Cohen's closing argument, the court instructed counsel "[not to] argue what Cohen said to...