U.S. v. Cohen, 88-8386

• Decision Date: 15 November 1989
• Docket Number: No. 88-8386,88-8386
• Citation: 888 F.2d 770
• Parties: 29 Fed. R. Evid. Serv. 182 UNITED STATES of America, Plaintiff-Appellee, v. Robert COHEN and Samuel Cohen, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 770

888 F.2d 770

29 Fed. R. Evid. Serv. 182

UNITED STATES of America, Plaintiff-Appellee, v. Robert COHEN and Samuel Cohen, Defendants-Appellants.

No. 88-8386.

United States Court of Appeals, Eleventh Circuit.

Nov. 15, 1989.

E. David Rosen, Miami, Fla., Steven H. Sadow, Maloy Sadow & Jenkins, Atlanta, Ga., Joseph Beeler, Miami, Fla., for defendants-appellants.

Michael J. O'Leary, Asst. U.S. Atty., Atlanta, Ga., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before VANCE and ANDERSON, Circuit Judges, and ATKINS ^*, Senior District Judge.

ATKINS, Senior District Judge:

Robert M. Cohen and Sam L. Cohen appeal from their convictions for wire fraud, conspiracy, and tax evasion. For the reasons recited herein, the judgment of the district court is REVERSED and the case is REMANDED for a new trial.

PROCEDURAL HISTORY

On September 25, 1987, Robert Cohen, Sam Cohen, and Jerry Faw were indicted for wire fraud, conspiracy, and tax evasion. On November 6, Jerry Faw pled guilty to conspiracy to commit wire fraud and tax evasion and was sentenced to four years imprisonment to be followed by five years of probation. On December 23, 1987, a superseding indictment charged the Cohens with two counts of filing false tax returns, four counts of wire fraud, and one count of conspiracy to commit wire fraud and to defraud the United States. They were tried and convicted on all counts.

Each appellant received a sentence of six years imprisonment to be followed by five years probation. As a special condition of probation, the court ordered that each pay restitution to the Walter Heller Company in the amount of $180,000.00 in addition to all taxes owed by the company to the Internal Revenue Service.

The appellants urge three errors as a basis for reversal. They insist that the trial court erred when, during closing arguments, it admitted evidence of Faw's guilty plea which, to that point, had been excluded. The timing of this admission, the appellants argue, denied them the right of cross examination. The appellants also maintain that the trial court erred when it excluded evidence of Faw's prior involvement in similar conduct. These two errors, taken together, combined to deprive them of a fair trial. Finally, the appellants challenge the court's order of restitution as a condition of probation and argue that the court should have first determined the actual loss incurred by the victim or the actual taxes owed to the IRS. Although we find that admission of evidence of Faw's plea agreement was not an error, the court deprived the Cohens of an adequate defense when it refused to allow evidence of Faw's prior conduct. For that reason the judgment of the district court is reversed and the case remanded for a new trial. Because the appellants will receive a new trial it is unnecessary to consider the issue of restitution.

FACTS

Using tufting machines to weave yarn, the Phoenix Mill ("Phoenix") produced carpet in its Dalton, Georgia facility from 1979 through 1982. Once the carpet was woven, it was sent to outside jobbers who dyed it and applied its backing. ¹ After completion, the carpet was returned to Phoenix. Phoenix sold it to distributors for resale to retailers.

An important part of the manufacturing process and the industry at large is the financing or "factoring" of the different phases of production. An organization known as a factoring company advances money to each phase. ² The Walter Heller Company ("Heller") is in the business of "factoring" and in this case provided the financing for Phoenix. In 1980, Phoenix began to experience financial difficulties and in May of that year owed Heller over 6 million dollars. Heller sought new management for its company.

The Cohens owned a carpet distributorship in Hollywood, Florida known as Gayla Carpets which purchased 75% of Phoenix's output. Michael Daidone, Heller's field representative, approached the Cohens in the winter of 1980 to offer them the management of Phoenix and an "ownership" interest. Jerry Faw, who was then serving as vice-president of Phoenix under Joseph Richardson, was to be installed as the new president.

Faw testified that the Cohens were only willing to take over Phoenix if they could "steal a little" from the company. They instructed Faw to make an arrangement with the carpet finishers that serviced Phoenix. Faw immediately established a "kick-back" from at least three of Phoenix's finishers including Reliance Industries, B & D Carpet Finishing Company, and Masterpiece Finishing. The finishers overcharged Phoenix and then kicked back the excess. Because Heller financed Phoenix's production process, Heller paid the bills and hence the overcharges. Faw, Daidone, and the Cohens were to share equally in the spoils but, when Daidone was fired in March of 1982, the money was divided among Faw and the Cohens in equal parts.

I. PLEA AGREEMENT

Jerry Faw entered into a plea agreement a condition of which required that he testify truthfully at trial. He was sentenced under Rule 35 of the Federal Rules of Criminal Procedure ³ and testified against the Cohens. When the government announced its intention of introducing Faw's plea agreement into evidence, the defense strenuously objected. The objection was sustained and the court excluded from evidence any mention of Faw's agreement or sentence.

In his opening statement, counsel for Robert Cohen stated:

We will attempt to show you from this point on that the charges are not based on true facts but are based on the testimony of witnesses that have a reason, a motive for testifying falsely. That's the essence of what we will present to you through our evidence....

Now, Jerry Faw got caught at what he did. [A]t that point in time, Jerry Faw started thinking, I'm not going to be able to pay $400,00. Someone else is going to have to take all of this. So then the scheme to point the finger at other people began to take rise.

And these are the witnesses that the Government is going to ask you in closing argument to believe. Every one has a motive to deal for himself, each and every one. And the Judge will instruct you, I believe, on final argument--final instructions that when there is a motive like this, you've got to give careful, special scrutiny to what they have to say because if the government didn't like what they had to say, they'd be sitting where the Cohens are sitting.

Counsel for Sam Cohen followed this opening statement with:

And running this business in Dalton was Jerry Faw and his cohorts up in Dalton, and they could do anything they chose. And when push came to shove, when these gentlemen and their various agencies stepped in and conducted an investigation, and I suggest that at the behest of a multi, multi-million dollar company of Heller, they needed some fall people. Well, are you going to fall on your friends in your little community with the camaraderie that existed up there in Dalton, or are you going to pick on two people, so called outsiders in Fort Lauderdale who had nothing to do with actual day-to-day operation.

Just as certain as [the prosecution] suggested to you that at the conclusion of this case you would find either of the Cohens guilty, I respectfully suggest to you that you're not going to buy the pig in poke that he is selling, and you're not going to believe witnesses who have their own benefits and reasons to perjure themselves, and you'll see their perjury.

The issue of admission of the plea agreement was again raised by the government after Jerry Faw had testified. The government proposed recalling him to question him about the agreement but the defense objected that, had they known earlier of this evidence, their cross examination of Faw and the other Dalton witnesses would have been different. The court again excluded the evidence but stated I think that I'm going to leave the record where it is, gentlemen, but I will tell you now that there is a doctrine of fair reply in closing argument and if there are the generalized statements in closing argument that appear in opening statement, if you are not absolutely precise, I am going to let the prosecutor tell them all. Is that clear?

If I hear the word "they" with reference to lying one time, [Mr. prosecutor], have at it.... I said in closing argument, if I hear a general allegation against the incredibility of the witnesses from Dalton, of the government witnesses generally--you're in a position where you have got to argue clearly to this jury that Faw is a liar because of his inconsistencies and not because of any treatment to the government, and any inference to the contrary will allow [the prosecutor] to read the plea bargain to the jury.

In his closing argument, counsel for Robert Cohen asked "Why do they do that? ... Is there another reason that just hasn't come to light?" Again he argued that "The prosecutor asked you, well, why would they lie? Well, he first told you something different. He said that they were all criminals, but not a single one has been prosecuted." On the government's motion and over objection of the appellants' counsel, the court allowed the government to use the evidence of the plea agreement and the defense was given ten extra minutes to argue in rebuttal.

The appellants argue that, although the trial court has discretion to reopen a case to admit additional evidence, a court abuses its discretion when a defendant is able to show resulting prejudice. In this instance, the appellants were denied the opportunity to cross examine Faw and the other Dalton witnesses on the newly admitted evidence and were thus severely prejudiced. In addition, the appellants continue, such failure to allow cross examination denied the appellants their sixth amendment right of cross examination and the fundamental right to present a defense.

The government argues that the trial court did not abuse its discretion when it reopened the case to admit...