Covey v. U.S.

• Decision Date: 30 July 2004
• Docket Number: No. 02-3332.,02-3332.
• Citation: 377 F.3d 903
• Parties: Charles I. COVEY, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

377 F.3d 903

Charles I. COVEY, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.

No. 02-3332.

United States Court of Appeals, Eighth Circuit.

Submitted: January 15, 2004.

Filed: July 30, 2004.

Appeal from the United States District Court for the Western District of Missouri, Gary A. Fenner, J Cheryl A. Pilate, argued, Kansas City, MO (James R. Wyrsch and Rebecca M. Hain on the brief), for appellant.

Lajuana M. Counts, argued, Asst. U.S. Attorney, Kansas City, MO, for appellee.

Before MELLOY, BRIGHT, and HANSEN, Circuit Judges.

MELLOY, Circuit Judge.

Petitioner-Appellant Charles Covey brings this action to vacate, set aside, or correct his sentence pursuant to 28 U.S.C. § 2255. The district court¹ denied his motion, and we granted a certificate of appealability on the issue of whether counsel's alleged conflict of interest rendered his assistance ineffective in violation of Mr. Covey's Sixth Amendment right to counsel. For the reasons stated herein, we affirm the district court's decision.

I. BACKGROUND²

In 1999, a jury convicted Mr. Covey of conspiracy to commit money laundering and aiding and abetting money laundering in violation of 18 U.S.C. §§ 1956(a)(1)(B)(i), 1956(h), and 1956(a)(2). The district court entered preliminary judgment on the forfeiture count in the amount of $70,000 pursuant to 18 U.S.C. § 982, denied Mr. Covey's post-trial motions, sentenced Mr. Covey to fifty-seven months imprisonment, and fined Mr. Covey $19,118.44. Mr. Covey appealed his conviction and the preliminary order of forfeiture. In United States v. Covey, 232 F.3d 641 (8th Cir.2000) (Covey I), we affirmed the district court's judgment and dismissed the forfeiture appeal as premature.

Mr. Covey was a certified public accountant, and he owned a corporation that specialized in making high risk loans. His conviction arose out of a loan he made to drug traffickers, Gary and Darrell Hart. The Harts were brothers and aspired to open a motorcycle business. The Harts had ample cash derived from their illegal drug activities to fund the business. However, federal law requires that certain cash transactions be reported to federal authorities. In order to disguise the source of funding for the motorcycle business, the Harts entered into an agreement with Mr. Covey. Through his corporation, Mr. Covey loaned the Harts $50,000 in exchange for a $70,000 cash payment. Mr. Covey and the Harts agreed that $10,000 of the loan was an origination fee, another $10,000 was collateral for interest on the loan, and the remaining $50,000 was collateral on the principal. The loan agreement documentation did not express these terms, however. Instead, the documentation represented that the Harts' motorcycle business inventory was to be collateral for the loan, even though the inventory did not yet exist. Furthermore, Mr. Covey did not take a security interest in the later-acquired inventory.

The Harts transferred the $70,000 cash payment for the loan to Mr. Covey in a restaurant parking lot. This large sum of cash was bound by rubber bands and was delivered to Mr. Covey in a paper bag. In keeping with the loan agreement, the Harts made monthly payments on the loan. However, their business failed, and after only six months, they ceased making payments. Consequently, Mr. Covey began taking payments from the cash collateral.

At some point, Mr. Covey contacted a lawyer about concluding the loan. Mr. Covey's attorney advised him to deposit the remaining principal in Mr. Covey's corporate account and to return the excess collateral to the Harts. Mr. Covey attempted to return the excess collateral by mail, but the Harts suspected that they were under investigation and that Mr. Covey was cooperating with law enforcement. Therefore, they refused to retrieve their mail. In addition, counsel advised Mr. Covey to belatedly file the proper federal form, Internal Revenue Service Form 8300, to report his receipt of over $10,000 in cash. Mr. Covey complied and checked the "suspicious transaction" box on the federal form. A federal grand jury returned a superseding indictment in August of 1999, charging Mr. Covey with money laundering offenses arising out of these facts.

At trial, Mr. Covey sought to establish the legitimacy of the Harts' loan, and he testified to this effect. In returning a guilty verdict, the jury rejected his testimony. In this § 2255 petition, Mr. Covey alleges that trial counsel rendered ineffective assistance because counsel had a conflict of interest. Because trial counsel advised Mr. Covey how to conclude the loan, Mr. Covey claims that an advice-of-counsel defense should have been presented to the jury to rebut the government's attempt to paint his actions in concluding the loan as criminal. The government disagrees that a conflict of interest existed and contends that, even assuming a conflict did exist, it did not adversely affect the proceedings. The district court rejected Mr. Covey's arguments and found that, even if Mr. Covey's trial attorney had a conflict, Mr. Covey waived his right to be represented by conflict-free counsel.

II. DISCUSSION

A district court's decision in a habeas claim of ineffective assistance of counsel presents a mixed question of law and fact. Laws v. Armontrout, 863 F.2d 1377, 1381 (8th Cir.1988) (en banc). We review the ineffective assistance issue de novo, but findings of underlying predicate facts are reviewed for clear error. Id.; accord Lynn v. United States, 365 F.3d 1225, 1232 (11th Cir.2004) ("In a Section 2255 proceeding, we review legal issues de novo and factual findings under a clear error standard." (quoting United States v. Walker, 198 F.3d 811, 813 (11th Cir.1999))).

The Supreme Court has long-recognized the critical role that assistance of counsel plays in protecting the Sixth Amendment's guarantee of a fair trial. See Strickland v. Washington, 466 U.S. 668, 685, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984). "Unless a defendant charged with a serious offense has counsel able to invoke the procedural and substantive safeguards that distinguish our system of justice, a serious risk of injustice infects the trial itself." Cuyler v. Sullivan, 446 U.S. 335, 343, 100 S.Ct. 1708, 64 L.Ed.2d 333 (1980). "For that reason, the Court has recognized that `the right to counsel is the right to the effective assistance of counsel.'" Strickland, 466 U.S. at 686, 104 S.Ct. 2052 (quoting McMann v. Richardson, 397 U.S. 759, 771 n. 14, 90 S.Ct. 1441, 25 L.Ed.2d 763 (1970)). This right "embraces the right to conflict-free counsel." Dawan v. Lockhart, 31 F.3d 718, 720-21 (8th Cir.1994).

An ineffective-assistance claim generally requires two showings. "First, the defendant must show that counsel's performance was deficient." Strickland, 466 U.S. at 687, 104 S.Ct. 2052. This entails "showing that counsel made errors so serious that counsel was not functioning as the `counsel' guaranteed the defendant by the Sixth Amendment." Id. Second, the defendant must show prejudice. Id. To show prejudice, he or she must prove that "counsel's errors were so serious as to deprive [him or her] of a fair trial, a trial whose result is reliable." Id.; accord Lockhart v. Fretwell, 506 U.S. 364, 372, 113 S.Ct. 838, 122 L.Ed.2d 180 (1993) (admonishing that the prejudice prong encompasses more than mere outcome determination; rather, the focus of the question of prejudice is "whether counsel's deficient performance renders the result of the trial unreliable or the proceeding fundamentally unfair").

However, there are three classes of ineffective-assistance claims, described in Strickland, in which we presume prejudice rather than require a defendant to demonstrate it. See Strickland, 466 U.S. at 692, 104 S.Ct. 2052. One such class encompasses ineffective-assistance claims where counsel labored under an actual conflict of interest. Id. In Cuyler v. Sullivan, the Supreme Court held that if a defendant who raised no objection at trial can show "an actual conflict of interest [that] adversely affected his lawyer's performance," prejudice may be presumed. 446 U.S. at 348, 100 S.Ct. 1708.

The Supreme Court recently noted that some circuits have "unblinkingly" applied Cuyler to "all kinds of alleged attorney ethical conflicts." Mickens v. Taylor, 535 U.S. 162, 174-75, 122 S.Ct. 1237, 152 L.Ed.2d 291 (2002) (citation and quotation omitted) (collecting cases). The Court made clear, however, that it had never extended the Cuyler standard to conflicts other than those arising from joint representation at trial. Id. Mickens itself involved a successive representation conflict, and the Court assumed that the case properly proceeded under Cuyler in the lower courts. Id. The Court cautioned, however, that its decision should not be misconstrued as extending the Cuyler rule to conflicts other than joint representation: "In resolving this case on the grounds on which it was presented to us, we do not rule upon the need for the [Cuyler] prophylaxis in cases of successive representation. Whether [Cuyler] should be extended to such cases remains, as far as the jurisprudence of this Court is concerned, an open question." Id. at 176, 122 S.Ct. 1237.

The parties have proceeded under the assumption that the Cuyler standard applies to the conflict alleged by Mr. Covey. This is so even though Mr. Covey does not allege a conflict arising out of multiple or successive representation. Instead, he argues that his lawyer gave him faulty advice concerning how to properly "wind up" the Harts' loan. Mr. Covey argues that the government painted his actions in complying with counsel's advice as evidence of criminal behavior. Therefore, he contends that either he or his lawyer should have been able to testify as to this pre-indictment advice to show the legitimacy of the Harts' loan and Mr. Covey's actions. Mr. Covey claims that he could not present such testimony without waiving the attorney-client privilege, and his lawyer was ethically...