U.S. v. Brekke, s. 97-2938

• Decision Date: 26 August 1998
• Docket Number: 97-2939,Nos. 97-2938,s. 97-2938
• Citation: 152 F.3d 1042
• Parties: UNITED STATES of America, Appellee, v. Lauree Anne BREKKE, Appellant. UNITED STATES of America, Appellee, v. James Stanley BREKKE, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1042

152 F.3d 1042

UNITED STATES of America, Appellee, v. Lauree Anne BREKKE, Appellant.

UNITED STATES of America, Appellee, v. James Stanley BREKKE, Appellant.

Nos. 97-2938, 97-2939.

United States Court of Appeals Eighth Circuit.

Submitted June 11, 1998.

Decided Aug. 26, 1998.

Sarah A. Aho, Minneapolis, MN, argued (Peter Thompson, Minneapolis, MN, on the brief), for Lauree Brekke.

Richard H. Kyle, Minneapolis, MN, argued, for James Brekke.

Lizabeth A. McKibben, Asst.U.S.Atty., Minneapolis, MN, for United States of America.

Before BOWMAN, Chief Judge, HEANEY, and LOKEN, Circuit Judges.

BOWMAN, Chief Judge.

James and Lauree Brekke, husband and wife, were charged in a seven count indictment with bank fraud in violation of 18 U.S.C. § 1344 (1994), making false statements to a financial institution in violation of 18 U.S.C. § 1014 (Supp. II 1996), mail fraud in violation of 18 U.S.C. § 1341 (1994), and conspiracy to commit bank fraud and mail fraud in violation of 18 U.S.C. § 371 (1994). The District Court dismissed the indictment, ruling that an earlier settlement in a civil action precluded criminal prosecution. We reversed and remanded for reinstatement of the indictment. See United States v. Brekke, 97 F.3d 1043, 1050 (8th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 1281, 137 L.Ed.2d 356 (1997). Upon trial, a jury convicted Lauree Brekke of bank fraud, making a false statement, and mail fraud, and convicted James Brekke of bank fraud and mail fraud. ¹ Both James and Lauree were sentenced to 27 months' imprisonment. The Brekkes appeal.

The Brekkes argue that their attorney's joint representation of them at trial violated the Sixth Amendment and that the District Court erred in its application of the sentencing guidelines. We affirm.

I.

James and Lauree Brekke operated Brekke Construction, Inc., in Fargo, North Dakota. In 1989, the Brekkes sought to obtain a loan to save their troubled business. After several failed attempts at getting a loan, the Brekkes contacted DeWayne Lesmeister at Heartland Services, Inc., to assist them in finding a lender. Lesmeister contacted Rudell Oppegard, president of Twin Valley State Bank (Twin Valley) in Twin Valley, Minnesota, and negotiated a $350,000 loan for the Brekkes. In return for his services, the Brekkes agreed to pay Lesmeister a $10,000 fee. To secure the loan, the Brekkes executed personal guaranties and granted Twin Valley mortgages on certain parcels of real estate. In addition, the Small Business Administration (SBA) agreed to guaranty 83% of the loan. In March 1990, as soon as the Brekkes received the loan proceeds, they paid the $10,000 fee to Lesmeister and used $50,000 to purchase a certificate of deposit from Twin Valley in the name of "Edith Flaa," Lauree Brekke's mother, to compensate the bank for the balance, or non-guaranteed portion, of the loan.

As part of the SBA application process, the Brekkes certified that they had pledged to Twin Valley mortgages they owned on certain properties and that no liens or encumbrances existed against those properties except those referred to and disclosed in the loan application. The Brekkes further represented that no payments of compensation in connection with the loan were made, that Twin Valley would not receive a compensating balance or certificate of deposit for the loan, and that the loan proceeds would be used exclusively for working capital. In July 1990, when the Brekkes defaulted on the loan, the SBA discovered that the properties pledged as security were subject to a number of undisclosed prior liens. As a result, none of the collateral pledged in support of the loan could be liquidated. The SBA reduced its guarantee to less than 50% and settled with Twin Valley, reserving the right to pursue claims for reimbursement against the Brekkes. In 1994, the SBA brought a civil suit against the Brekkes, alleging that the Brekkes had made false representations to the SBA and had conspired to defraud the United States. In a settlement, the Brekkes agreed to pay $130,000 in exchange for the SBA's dismissal of the civil action.

In 1995, a grand jury investigated the loan transaction and returned an indictment against the Brekkes and Rudell Oppegard. ² The grand jury charged that the Brekkes fraudulently obtained from Twin Valley, through the assistance of Oppegard, a $350,000 loan guaranteed by the SBA by misrepresenting the lien positions on their collateral; misrepresenting that the loan proceeds would be used exclusively for working capital; and misrepresenting that Twin Valley would not receive any benefit in connection with the loan.

The indictment was dismissed and subsequently reinstated. See Brekke, 97 F.3d at 1050. After the arraignment, the government moved under Federal Rule of Criminal Procedure 44(c) to inquire as to the potential conflict arising out of attorney Jonathan Garaas's joint representation of the Brekkes. The presiding magistrate judge held a hearing at which the Brekkes both were represented by separate counsel. At the hearing, the court individually questioned James and Lauree about their desire to be jointly represented by counsel. The court explained that a conflict might arise and gave several illustrative examples. The court reminded James and Lauree that they each had a right to appointed counsel if they could not afford an attorney. The court also informed them that, by waiving any potential conflict, "[Y]ou will not be heard at anytime in the future either on appeal or any post conviction remedies if you are convicted of any crime to say that you didn't get a fair trial because you had one lawyer who represented the both of you." Tr. of Criminal Mot. Proceedings at 8. Finally, the court opined:

I will tell you that in my experience, as a general proposition, individuals who are charged with a crime by the United States and are facing prosecution by all of the powers and forces that the United States has to bring to a prosecution, that defendants are generally better served by having individual lawyers as opposed to joint representation. But, the Court recognizes that each defendant has a right to choose his or her own lawyer.

Id. at 14-15. The Brekkes then reiterated their desire to be jointly represented. The court found them to have knowingly and intelligently waived any conflict that might exist in joint representation.

On the first day of trial, before the jury was assembled, the District Court questioned the Brekkes on their continued desire to be jointly represented. Both James and Lauree asserted that they wished to proceed with joint representation and that they waived any potential conflicts. The Court reminded the Brekkes that there might be a conflict of interest and that they each had a right to appointed counsel. Finally, the court instructed the Brekkes to notify the court if a conflict developed or if they did not wish to have Mr. Garaas continue to jointly represent them during trial. The trial thus proceeded with Mr. Garaas representing the Brekkes.

The Brekkes were tried and convicted. A sentencing hearing followed, at which the court found the amount of loss for sentencing guidelines purposes to be $350,000, reasoning:

Assuming, for the sake of argument, that there was no actual loss to the SBA, based on the evidence presented at trial the court finds that the amount of the intended loss is approximately $350,000. In addition, when the fraud was discovered by the SBA, the entire balance of the $350,000 loan was outstanding.

Sentencing Tr. at 49 & 83. The court increased both James and Lauree's sentences by adding a two-level enhancement for obstruction of justice. The court found that both had committed perjury during their testimony at trial. With respect to James Brekke, the court stated:

Based on the great weight of evidence presented against him at trial, the court finds that the defendant knowingly and willfully lied under oath regarding several matters that were material to the charges before the jury in an effort to substantially affect the outcome of the case.

Id. at 80. The District Court also made an identical finding with respect to Lauree's obstruction of justice. Id. at 46.

II.

James and Lauree Brekke first argue that Mr. Garaas's joint representation violated their Sixth Amendment right to effective assistance of counsel. The Brekkes assert that they did not knowingly and intelligently waive their right to conflict-free counsel and that an actual conflict of interest during trial affected Mr. Garaas's performance. We review for clear error a district court's factual findings that underlie a determination of whether a defendant waived his right to conflict-free counsel, but we review de novo the ultimate determination of whether a waiver occurred. Cf. United States v. Caldwell, 954 F.2d 496, 504 (8th Cir.), cert. denied, 506 U.S. 819, 113 S.Ct. 65, 121 L.Ed.2d 32 (1992).

Joint representation clouded by conflict of interests may violate the Sixth Amendment's right to effective assistance of counsel. A defendant, however, "may waive his right to the assistance of an attorney unhindered by a conflict of interests." Holloway v. Arkansas, 435 U.S. 475, 483 n. 5, 98 S.Ct. 1173, 55 L.Ed.2d 426 (1978). The waiver must be knowing, voluntary, and intelligent. See United States v. Poston, 727 F.2d 734, 738 (8th Cir.), cert. denied, 466 U.S. 962, 104 S.Ct. 2179, 80 L.Ed.2d 561 (1984). Specifically, the trial court must conduct a pretrial inquiry into the propriety of joint representation and advise both defendants of their right to separate representation. See Fed.R.Crim.P. 44(c). This circuit specifically requires:

"The court should address each defendant personally and advise him of the potential danger of dual representation. The defendant should have an opportunity and be at liberty to question the trial court on the nature and consequences of dual representation and the entire procedure should be placed on the record for...