U.S. v. Kennedy

Citation64 F.3d 1465
Decision Date30 August 1995
Docket NumberNo. 94-1026,94-1026
PartiesComm. Fut. L. Rep. P 26,490 UNITED STATES of America, Plaintiff-Appellee, v. William R. KENNEDY, Jr., Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Hamilton P. Fox, III of Sutherland, Asbill & Brennan, Washington, DC (Lovida H. Coleman, Jr. and Kevin P. Jenkins of Sutherland, Asbill & Brennan, with him, on the brief) for defendant-appellant.

Linda S. Kaufman, Asst. U.S. Atty., Denver, CO (Henry L. Solano, U.S. Atty., with her, on the brief) for plaintiff-appellee.

Before BALDOCK, McKAY, and EBEL, Circuit Judges.

EBEL, Circuit Judge.

Defendant-Appellant William R. Kennedy, Jr. ("Kennedy") was charged in a 109-count indictment for a massive scheme to defraud precious metals investors. A jury convicted Kennedy of one count of racketeering, 18 U.S.C. Secs. 1962(c) & 1963, nine counts of mail fraud, 18 U.S.C. Secs. 1341 & 2 (aiding and abetting), and seven counts of money laundering, 18 U.S.C. Secs. 1956(a)(1)(A)(i) & 2 (aiding and abetting). Kennedy challenges his convictions in this direct appeal, arguing that: (1) the district court abused its discretion under the Criminal Justice Act and violated his Fifth Amendment due process rights by denying his requests for additional support services; (2) he received ineffective assistance of counsel in violation of the Sixth Amendment; (3) insufficient evidence supported eight of his nine mail fraud convictions; (4) his money laundering convictions were based on a legally inadequate indictment, improper jury instructions, and insufficient evidence; and (5) the court erred by excluding certain evidence at trial. We exercise jurisdiction under 28 U.S.C. Sec. 1291 and affirm in all respects.

BACKGROUND

In 1979, Kennedy helped found Western Monetary Consultants, Inc. ("WMC"). He served as WMC's president from the corporation's inception through his indictment in this case. WMC marketed itself as a largescale seller of precious metals and coins. Through various literature mailings and a series of seminars, referred to as "war colleges," WMC advocated the purchase of tangible precious metals as a hedge against inflation caused by certain world events. Investors could purchase the metals from WMC either through cash transactions or through cash down-payments coupled with bank-financed loans.

When an investor agreed to purchase a certain quantity of metal from WMC, a WMC consultant would quote the investor an approximate price. The consultant would then contact the WMC trading department, which would locate the best price for the metal from one of its dealers. The consultant would then inform the investor of the exact price, which was to be "locked-in" at that point in time, and the investor would then transfer funds to WMC via check, often supplemented with funds from a bank loan. If WMC did not in turn provide the dealer with the purchase price within 48 hours of ordering, the dealer typically nullified the contract with WMC, requiring WMC to reorder at a new price.

Between 1984 and 1987, WMC increased its sales rapidly and began to experience serious cash shortages. Kennedy nevertheless continued to promote sales to new investors, without informing them that WMC was between ten to thirteen million dollars behind in filling backlogged orders. By March of 1988, WMC's cash shortages were so great that WMC filed for Chapter 11 bankruptcy protection, listing over 600 creditors from whom WMC had received over $18,000,000 towards orders that remained unfilled. United States v. Kennedy, 819 F.Supp. 1510, 1513 (D.Colo.), aff'd, United States v. Byron, 994 F.2d 747 (10th Cir.1993). WMC continued to operate thereafter under a confirmed reorganization plan.

In July of 1992, after a five year investigation of WMC's practices, the government indicted Kennedy and numerous other WMC participants. The 109-count indictment against Kennedy alleged a massive Ponzi scheme to defraud numerous precious metals investors. The government alleged that when WMC "locked-in" a price for an investor, it did so under the false pretenses that it would purchase the investor's metal immediately.

However, rather than purchasing immediately, the government alleged that WMC frequently delayed purchases or failed to fill orders altogether. Specifically, the government alleged that WMC diverted many investors' funds to other uses, including speculating in futures markets, operating the Conservative Digest magazine, and financing personal endeavors.

Because Kennedy was indigent, the court appointed him counsel in August, 1992, one year before Kennedy's trial in August, 1993. During pretrial discovery, the government provided the defense access to the 800 bankers boxes of documents that it had amassed during its investigation, 539 of which contained WMC records. The boxes were placed in a repository in two rooms of a government building in Denver, Colorado, and were available for viewing as of August 14, 1992.

During this pretrial period, Kennedy's counsel made numerous requests for additional support services to supplement the services of his one paralegal assistant. The court granted Kennedy funds for an investigator, and funds to retain Philip Bolles ("Bolles"), who had served as WMC's chief financial officer from 1989 to 1992 and was an expert on the inner workings of WMC. The court additionally authorized funds for Kennedy to hire Ray Thomas ("Thomas") as an expert witness on the metal industry, and to hire Richard McCormack ("McCormack") as an expert witness on Ponzi schemes. On December 15, 1992, the court also appointed a co-counsel to work on Kennedy's case.

However, the court denied Kennedy's request for additional paralegals to help review and index the 800 boxes of documents. The court also denied Kennedy's request for airfare to fly himself and Bolles from California to Denver to prepare for trial. And the court denied Kennedy's request to hire the accounting firm, Arthur Anderson, to audit WMC's financial records and to review the conclusions and analysis of one of the government's key expert witnesses. Five months before trial, Kennedy moved to dismiss the indictment altogether, arguing that his inability to obtain these resources prevented him from adequately defending his case. The court denied the motion and the case went to trial in August, 1993.

At trial, the government relied in part on the testimony of Douglas Campbell ("Campbell"), from the National Futures Association, as an expert on precious metals and commodity markets. Campbell concluded from reviewing WMC's records that WMC had not purchased enough metal to cover its obligations to numerous investors and had lost money speculating in metals futures trading. The government also called numerous individual investors to testify about the losses they had suffered by investing in WMC. Kennedy's primary defense to these allegations was that WMC had failed to fill investors' orders not because of fraud, but simply because of poor business practices and mismanagement. The jury, however, ultimately was persuaded by the government's case and convicted Kennedy of one racketeering count, nine mail fraud counts, and seven money laundering counts. Kennedy now appeals those convictions, and we affirm.

DISCUSSION

In this appeal, Kennedy challenges his convictions on numerous grounds. First, Kennedy argues that the district court's denial of some of his requests for additional support services rendered him unable to defend himself in violation of the Criminal Justice Act and his Fifth Amendment due process rights. Second, Kennedy argues that he was provided ineffective assistance of counsel in violation of the Sixth Amendment. Third, he contends that the government presented insufficient evidence to support eight of his nine mail fraud convictions. Fourth, he argues that his money laundering convictions were based on a legally inadequate indictment, improper jury instructions, and insufficient evidence. Lastly, he argues that the court committed reversible error by excluding evidence of specific WMC investors who had not lost money investing in WMC. We address and reject each of these contentions in turn.

I. Denial of Support Services

Kennedy first argues that the district court erred in denying his requests for paralegals,

airfare for himself and Bolles to fly to Denver to prepare for trial, and the services of the Arthur Anderson accounting firm. Kennedy asserts that without these resources he was unable to defend himself at trial. Accordingly, he argues that the court violated his rights under the Criminal Justice Act ("CJA") and the Fifth Amendment Due Process Clause.

A. Criminal Justice Act, 18 U.S.C. Sec. 3006A

The CJA creates a plan for furnishing representation to those who lack the financial ability to obtain it on their own. In relevant part, it provides that

[c]ounsel for a person who is financially unable to obtain investigative, expert, or other services necessary for adequate representation may request them in an ex parte application. Upon finding, after appropriate inquiry in an ex parte proceeding, that the services are necessary and that the person is financially unable to obtain them, the court ... shall authorize counsel to obtain the services.

18 U.S.C. Sec. 3006A(e)(1) (emphasis added). In order to obtain services under this provision, the defendant must do more than allege that the services would be helpful. United States v. Ready, 574 F.2d 1009, 1015 (10th Cir.1978). The defendant bears the burden of showing that the requested services are "necessary" to present an adequate defense. United States v. Greschner, 802 F.2d 373, 376 (10th Cir.1986), cert. denied, 480 U.S. 908, 107 S.Ct. 1353, 94 L.Ed.2d 523 (1987). The denial of such a request is reviewed only for an abuse of discretion. United States v. Nichols, 21 F.3d 1016, 1017 (10th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 523, 130 L.Ed.2d 428 (1994).

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