Lovern v. US, Crim. No. 82-00023-01-R

CourtUnited States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
Citation689 F. Supp. 569
Decision Date22 June 1988
Docket Number87-0416-R.,Crim. No. 82-00023-01-R,82-00023-02-R,Civ. A. No. 86-0294-R
PartiesWilliam Michael LOVERN, Petitioner, v. UNITED STATES of America, Respondent. Kenneth Glen LUKE, Petitioner, v. UNITED STATES of America, Respondent.



S. Keith Barker, Richmond, Va., for Lovern.

Kenneth Glen Luke, Rex, Ga., pro se.

Robert W. Jaspen, Asst. U.S. Atty., Richmond, Va., for U.S.


ELLIS, District Judge.


In this Section 2255 case,1 petitioners challenge their convictions for misapplication of bank funds and related offenses, 701 F.2d 1104, on the grounds that (i) the government failed to produce certain documents to the defense prior to and during trial, in violation of 18 U.S.C. § 3500 (the Jencks Act) and Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), and (ii) their counsel rendered them constitutionally defective representation.2 Petitioner Luke also argues that his counsel's performance was so inadequate that it constituted ineffective assistance of counsel as a matter of law, as well as an independent violation of his Fifth and Sixth Amendment rights. After a full evidentiary hearing and a comprehensive review of the entire record, the Court is compelled to conclude that petitioners are not entitled to relief. Although the Court finds that the government did fail to comply with the Jencks Act and Brady v. Maryland with regard to certain documents, these errors did not prejudice the defense and do not undermine confidence in the result reached by the jury. Further, under the analysis articulated in Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984), the performance of petitioners' counsel does not warrant relief. Petitioners have not demonstrated that counsel's performance fell outside the "wide range of reasonable professional assistance" and that they suffered prejudice because of any of the alleged deficiencies. Id. at 689, 694, 104 S.Ct. at 2065, 2068.

A. The 1982 Proceedings

In February, 1982, petitioners Luke and Lovern were jointly indicted for (1) conspiracy to misapply bank funds and to make a false entry in bank records, 18 U.S.C. §§ 2, 371, 656, 1005; (2) aiding, abetting and causing the making of a false entry in bank records, 18 U.S.C. §§ 2, 1005; and (3) aiding, abetting and causing a misapplication of bank funds, 18 U.S.C. §§ 2, 656. A jury trial was held on May 12 and 13, 1982 and resulted in convictions of petitioners on all counts.

The charges against petitioners focused on their dealings with Charles P. Sheehy, an assistant vice president of Central Fidelity Bank (formerly Central National Bank) in Richmond, Virginia. Sheehy's duties included the approval and management of loans. His lending limit was $50,000 for each individual, plus an additional $50,000 if the individual owned a company and the corporate debt was independently secured. From the spring of 1978 until September, 1979, Sheehy was the bank officer who handled loans to petitioners and to certain carpet companies they controlled. Sheehy, who was the government's principal witness at trial and who earlier had pleaded guilty to making a false entry in bank records, testified that by the end of May, 1979, he had loaned Luke and Lovern and their related companies $122,000. Thus, by May, 1979, the bank's loans to petitioners exceeded Sheehy's loan limit. Petitioners' loans also had a history of being past due.

Sheehy had also exceeded his lending authority with respect to loans made to another borrower, Mastertrax, Inc., a recording company established by Rodney Seagream. In June, 1979, bank officials were under the impression that Sheehy had loaned only $75,000 to Mastertrax and Rodney Seagream. In fact, Sheehy had approved loans to Mastertrax, Rodney Seagream and related entities totalling approximately $271,000. Even the $75,000 sum, however, exceeded Sheehy's loan limit. Not surprisingly, therefore, Sheehy was summoned before the bank's loan review committee and was informed that the Mastertrax debt, which they assumed was only $75,000, exceeded his lending authority and that the committee considered the Mastertrax loans very risky. Sheehy assured his immediate supervisor, William Pruitt, that Mastertrax was anticipating the prompt sale of a record and, as a result, $30,000 of the debt would be liquidated within two to four weeks.

After the bank's discovery of the Mastertrax problem, Sheehy met with Luke and Lovern in his office. Luke and Lovern noticed that Sheehy seemed upset and asked the reason. Sheehy told them the Mastertrax loan was at risk and asked for their help. Specifically, he asked that they speak to Rodney Seagream to underscore the importance of Mastertrax paying the debt promptly. Sheehy had introduced petitioners to Seagream earlier that spring in the hope that they would offer Seagream their marketing assistance on the record project.

At a subsequent meeting with Sheehy on June 19, petitioners again expressed concern that Sheehy appeared upset. Sheehy responded that the Mastertrax situation was deteriorating rapidly. The prospect of Sheehy failing to salvage the Mastertrax loan was singularly unappealing to petitioners. They had a strong interest in Sheehy's continued employment with the bank because Sheehy had also exceeded his loan limit for them and because they viewed him as an important source of future loan funds. Understandably, therefore, petitioners then offered Sheehy their assistance.

In response, Sheehy proposed a scheme whereby the Mastertrax debt would be paid with loan funds funneled through the petitioners and their entities. Specifically, the plan involved lending money to one of petitioner's corporations, but depositing the proceeds into Luke's personal savings account and then debiting that savings account to reduce the Mastertrax debt. Petitioners' Sun Carpet Co. was nominated as the company which would, on paper, receive the loan. When Mastertrax actually repaid the loan, the money would be remitted to Sun Carpet Co. Rodney Seagream was not to know the source of the money used to pay the Mastertrax loan. In effect, therefore, petitioners agreed to help Sheehy in a fraudulent scheme designed to conceal the true borrower and, ultimately, the full extent of the Mastertrax debt.

The scheme was implemented. Bank documents reflect (i) that Luke signed a note on behalf of Sun Carpet Co. for a $30,000 loan which Sheehy arranged and approved, (ii) that on June 20, 1979, one day later, $30,000 was credited to Luke's personal savings account and (iii) that on June 21, Sheehy debited Luke's savings account to reduce Mastertrax's debt by $30,000. Significantly, from the time of these events until he left the bank on September 7, 1979, Sheehy loaned petitioners' companies an additional $50,000. As of October, 1979, petitioners and their companies owed the bank $196,000. Thus Sheehy, with the active cooperation of petitioners, was able to conceal from the bank the true extent of the Mastertrax loans and the source of the partial repayment, as well as the true extent of loans to petitioners.

Sheehy's testimony about the fraudulent scheme was corroborated by the testimony of Rodney Seagream, who pleaded guilty to misrepresentation of information on a loan application. According to Seagream, Lovern contacted him on June 18, 1979 and asked that Seagream meet him later that day at a McDonald's restaurant. The topic of conversation during the meeting, at which Luke was also present, was Mastertrax's precarious financial condition and its potential effect on Sheehy's position at the bank. In this connection, Lovern stated that Sheehy's position at the bank was "very important to several south side Richmond businessmen,"4 including the petitioners. Lovern then advised Seagream not to be "a bit surprised if you should wake up one morning and find that your loans have been liquidated with Central National Bank. You won't know who or why they were liquidated, but you may find a receipt in the mail indicating that they had been indeed paid in full."5

Seagream did not learn until September, 1979 that the Mastertrax loan had been partially paid. Until that time, Seagream testified that he had never heard of Sun Carpet Co. Thereafter, in October of 1979, Seagream received a call from Lovern, during which Lovern reported that he had paid the Mastertrax loan and that he, Lovern, was supposed to be repaid. This testimony, together with the other evidence summarized above, manifestly supported the government's theory of the case, namely that Sheehy was a goose laying golden eggs for petitioners. Petitioners therefore had an interest in fraudulently concealing the true extent of the loans to Mastertrax and themselves to ensure Sheehy's continued employment as a loan officer at the bank.

The defense attempted to convince the jury that Sun Carpet Co. was a legitimate enterprise and that petitioners did not have prior knowledge that the loan to Sun Carpet would be used to pay the Mastertrax debt. Alternatively, the defense argued that even if petitioners had knowledge of the Sun Carpet Co. transaction, the transaction was not illegal because petitioners intended to remain liable on the Sun Carpet Co. note in the event that Mastertrax failed to repay its loan. In support of the first theory, the defense presented testimony indicating that the concept for Sun Carpet Co. had been in existence since early 1978. Further, Luke testified that he and Lovern were not aware of, nor did they approve, the use of the Sun Carpet Co. loan to pay the Mastertrax debt. Luke stated that, in fact, he asked for only $20,000 for Sun Carpet Co. and told Sheehy that he did not need the money until the fall of 1979. Luke stated that Sheehy, nevertheless, insisted on loaning Sun Carpet $31,000 on June 19, explaining to...

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