U.S. v. Cheatham

• Court: U.S. Court of Appeals — Eighth Circuit
• Writing for the Court: Before McMILLIAN, JOHN R. GIBSON, and BOWMAN; BOWMAN
• Citation: U.S. v. Cheatham, 899 F.2d 747 (8th Cir. 1990)
• Decision Date: 02 April 1990
• Docket Number: 89-5095,Nos. 89-5094,s. 89-5094
• Parties: UNITED STATES of America, Appellee, v. Martin L. CHEATHAM, Appellant. UNITED STATES of America, Appellee, v. Jack P. CUNNINGHAM, Appellant.

Page 747

899 F.2d 747

UNITED STATES of America, Appellee, v. Martin L. CHEATHAM, Appellant.

UNITED STATES of America, Appellee, v. Jack P. CUNNINGHAM, Appellant.

Nos. 89-5094, 89-5095.

United States Court of Appeals Eighth Circuit.

Submitted Dec. 11, 1989.

Decided April 2, 1990.

Paul Engh, Minneapolis, Minn., for appellant Cheatham.

Charles Hawkins, Minneapolis, Minn., for appellant Cunningham.

Joan E. Lancaster, Minneapolis, Minn., for appellee.

Before McMILLIAN, JOHN R. GIBSON, and BOWMAN, Circuit Judges.

BOWMAN, Circuit Judge.

Martin L. Cheatham and Jack P. Cunningham appeal their convictions on counts of aiding and abetting mail fraud, a violation of 18 U.S.C. Sec. 1341 (1988). Cheatham was convicted on five counts; Cunningham was convicted on twenty-three counts. We affirm.

Cheatham and Cunningham both were employed by "CAN-AM." CAN-AM refers collectively to three corporations: CAN-AM Development Corp.; CAN-AM Mint and Trading, Ltd.; and Vets for Vets, Inc. The driving force behind CAN-AM was a man named Michael Crosby. Through its principals and employees, CAN-AM was responsible for the sale of a variety of products.

In the spring of 1986, CAN-AM moved to a leased office in a prestigious Northland Plaza office building in Bloomington, Minnesota. From this office, CAN-AM recruited and employed salesmen to telemarket three ounce silver commemorative Vets for Vets medallions to military veterans and other potential buyers. The medallions were to be produced by the Johnson-Matthey Mint in Toronto, Canada and were priced initially at $85.00 each. The silver content of each medallion was worth approximately $21.00.

Buyers were told that 50% of the profits from the sale of these medallions would be used to fund a park in the Black Hills of South Dakota to commemorate the living and dead veterans of all wars, particularly the war in Vietnam. Marketing of the medallions was aided by a promotional video about the memorial park featuring retired Air Force General Chuck Yeager.

CAN-AM sold the medallions in typical boiler room fashion, relying on high-pressure sales. The standard sales pitch began with an initial call, after which a packet of information was mailed to the potential customer. A brochure, picturing an impressive-looking office building at Northland Plaza with the caption "CAN-AM World Headquarters," touted CAN-AM as a company of international flavor, claiming falsely that the company was involved in the development of real estate and the acquisition of insurance companies and banks. A few days after the mailing of the packet of information, a salesman would call the potential buyer and follow a prepared sales script. Stressing the veterans' memorial park project, the salesman promised that each purchaser would have his or her name inscribed on a monument as a supporter of this "American Cause." The medallions, represented to be 99.9% silver, were guaranteed to have a 12-month yield of 12%. Claiming that the medallions soon would be a collectors' item, the salesman urged the potential buyer to purchase quantities of 10, 50, or 100. Prompt delivery was assured.

The aggressive sales pitch worked. Approximately 5,900 medallions were sold to 412 persons, many of them elderly or veterans, for a total price of approximately $550,000.00. Once a customer agreed to purchase, a Federal Express messenger would be sent immediately to pick up the customer's check. The customer then was mailed a "Certificate of Authenticity" confirming the order.

Martin Cheatham was CAN-AM's second leading salesman. During his time at CAN-AM, from late May 1986 through November 1986, Cheatham was paid approximately $14,679.00 on a ten percent commission and was made a sales captain for his efforts. His successful sales techniques included calling a prospect several times a day claiming that he owned 100 medallions himself, which he did not, and that their value was sure to double or triple in a short time.

Jack Cunningham worked at the company from approximately May 1986 through September 1986. He came to CAN-AM at its inception with the founder of the organization, Michael Crosby, with whom he had worked previously. Cunningham first was a medallion salesman. Often using the name Jack Owens, he would convince customers that the value of the medallions was going to increase. Cunningham later was a sales manager and a "compliance officer," handling complaints from customers.

It was not long before purchasers began to sense that something was wrong at CAN-AM. Customers received mailings telling of delays in shipments due to a two-week annual summer shutdown at the Johnson-Matthey Mint, explaining a packaging problem at the Mint, describing delays caused by a Minnesota Department of Commerce inquiry, promising the direct shipment of the medallions, and, finally, allowing the customer to rescind the order.

Responding to customer complaints of nondelivery and an inquiry from the Pennsylvania Securities Commission, the Minnesota Department of Commerce began an investigation into CAN-AM's activities. Ultimately, cease-and-desist orders were issued against CAN-AM in Minnesota, Iowa, and North Dakota. The Minnesota cease and desist order prohibited further sales of the medallions in an investment manner. Sales could continue so long as delivery was made within 20 days and no representations were made to purchasers about the investment potential of the medallions. The Department of Commerce investigator personally ordered Cunningham to stop telling people that the Department was preventing delivery of the medallions, which it was not. Cunningham, however, continued to use this excuse.

Undaunted by the investigation, CAN-AM began selling Australian Nugget proof coin sets and Chinese Panda proof coin sets. Investors were promised prompt delivery upon receipt of funds. However, many received nothing but excuses for nondelivery.

In the final reckoning, no Vets for Vets commemorative medallions were shipped until January or February 1988, when only approximately 400 were sent to customers. Further, only a very small percentage of those who requested their money back actually received it. No Chinese Panda coins were delivered, and the Australian Gold Nugget proof sets that were delivered turned out to be far less valuable uncirculated sets.

The memorial park never was built. The land that Crosby had contracted to purchase was foreclosed upon and the project architect was paid with a bad check. CAN-AM, never having paid its rent, moved out of its Northland Plaza office without notice while eviction proceedings were pending. Many unpaid bills were left behind.

In April 1988, an indictment was filed in the District of Minnesota against, among others, Michael Crosby, Martin Cheatham, and Jack Cunningham charging multiple violations of 18 U.S.C. Secs. 1341, 1342. Cunningham moved for severance of his trial from that of his co-defendants on the ground that he would be prejudiced by the joinder. The District Court ¹ denied the motion. Three co-defendants entered plea agreements with the government, the government dismissed two co-defendant corporations from the case, and the lead defendant Michael Crosby absconded and was tried in absentia.

Following a four-week jury trial, Cheatham was found guilty on five counts of aiding and abetting mail fraud, a violation of 18 U.S.C. Secs. 1341, 1342. He was sentenced to three years on each count, to be served concurrently. Cunningham was found guilty on twenty-three counts of violating the same statute and was sentenced to four years on each count, to be served concurrently.

For reversal, Cheatham and Cunningham contend that the District Court erred: (1) by restricting cross-examination of Michael Crosby's brother concerning the alleged fact that Crosby had committed a fraud upon his family by absconding after having persuaded them to provide collateral on his bond; (2) by denying the motion for mistrial made after government witnesses stated their opinion as to guilt; (3) in instructing the jury as to the good faith theory of the defense; and (4) by denying the motion for mistrial made as a result of the government's allegedly untimely Brady disclosure. Cunningham also argues that the district court erred by denying his motion for severance.

I.

Cheatham and Cunningham first claim that the District Court violated their Sixth Amendment confrontation clause rights by restricting cross-examination of Michael Crosby's brother concerning the alleged fact that Crosby had committed a fraud upon his family by absconding after persuading them to provide collateral on his bond. Appellants argue that Crosby's alleged fraud upon his family is evidence of a continuing pattern of betrayal and of his extraordinary persuasive powers and, thus, supports their good faith defense. "Cross-examination of a witness is a matter of right." Alford v. United States, 282 U.S. 687, 691, 51 S.Ct. 218, 219, 75 L.Ed. 624 (1931). "It does not follow, of course, that the Confrontation Clause of the Sixth Amendment prevents a trial judge from imposing any limits on defense counsel's inquiry...." Delaware v. Van Arsdall, 475 U.S. 673, 679, 106 S.Ct. 1431, 1435, 89 L.Ed.2d 674 (1986). "Generally speaking, the Confrontation Clause guarantees an opportunity for effective cross-examination, not cross-examination that is effective in whatever way, and to whatever extent, the defense might wish." Delaware v. Fensterer, 474 U.S. 15, 20, 106 S.Ct. 292, 294, 88 L.Ed.2d 15 (1985).

We are convinced that the Sixth Amendment was satisfied in this instance. On cross-examination of Michael Crosby's brother, Cheatham and Cunningham attempted to discuss Crosby's whereabouts, his bond, and his family's assistance to him in making bond. The District Court allowed evidence of Crosby's flight, but refused inquiry into the bond, counsel's offer of proof consisting of somewhat speculative assertions concerning the witness's behavior prior...