U.S. v. Fisher

Decision Date13 February 1997
Docket NumberNo. 95-10733,95-10733
Citation106 F.3d 622
Parties46 Fed. R. Evid. Serv. 546 UNITED STATES of America, Plaintiff-Appellee, v. James R. FISHER and John H. Carney, Defendants-Appellants.
CourtU.S. Court of Appeals — Fifth Circuit

Richard N. Wiedis, United States Department of Justice, Ellen R. Meltzer, Washington, D.C., for plaintiff-appellee.

James M. Murphy, Dallas, TX, for defendant-appellant Fisher.

William F. Ravkind, Ravkind & Ravkind, Dallas, TX, for John H. Carney, defendant-appellant.

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

Before POLITZ, Chief Judge, and SMITH and DUHE, Circuit Judges.

DUHE, Circuit Judge:

Defendants-Appellants James Fisher and John Carney appeal their convictions on several counts including bank fraud, mail fraud, wire fraud, conspiracy, and making false statements to the Federal Home Loan Bank Board and the Office of Thrift Supervision. For the reasons assigned, we reverse and vacate the convictions and remand for a new trial. 1

BACKGROUND

In 1984, James Fisher, John Carney and Jeff Noebel 2 formed Equisource Realty Corporation as a real estate investment company in Dallas, Texas. By 1987, Texas real estate was no longer a profitable investment, and the Equisource Realty partners began to investigate other business opportunities.

At that time, the savings and loan industry was in disastrous condition. Many S & Ls had declared bankruptcy, and the federal government was faced with the unappealing reality of bailing out numerous failed institutions. In an effort to curtail the disaster, the Federal Home Loan Bank Board ("FHLBB") sought private investors to aid in the bailout.

To induce investment, bankrupt S & Ls were allowed to recognize "regulatory goodwill" as an asset. This goodwill was not recognized under Generally Accepted Accounting Principles, but was instead a creation of federal regulators. The goodwill asset created artificial capital for S & Ls without requiring investors to contribute hard dollars.

Equisource Realty became interested in acquiring an S & L in the summer of 1987. It targeted Bayside Savings and Loan Association in Port Charlotte, Florida, and applied for regulatory approval to purchase the institution. In the fall of 1987, Bayside had zero value, was $1,000,000 in debt and was losing $50,000 a month.

To acquire Bayside, the defendants and Noebel formed Equisource Capital Corporation to act as the general partner of a newly formed bank holding company, U.S. Savings Associates ("USSA"). Davis Hughes served as president of a sister organization, Equisource Financial Corporation.

Originally, USSA proposed to regulators it raise $3,000,000 for the acquisition: $2,000,000 in equity and $1,000,000 in debt. This proposal received approval. However, before closing, USSA opted to instead raise $4,000,000 in equity, with $875,000 of that sum subject to repurchase agreements. To accomplish this goal, USSA sold 80 units in USSA for $50,000 a unit to approximately 37 investors.

Some of the investors in USSA were represented by Joe Courrege, an agent for the financial interests of several NFL football players ("Players"). Courrege had purchased several homes in Dallas in the early eighties and then sold the homes to the Players as investments. By 1988, however, changes in the tax laws and the general decline of the real estate market had contributed to extremely high interest rates on the loans made to acquire the homes. Courrege was interested in refinancing these homes to decrease the monthly loan payments.

Early in 1988, Courrege learned of the USSA investment. As incentive to have his Players invest, USSA promised Courrege it Jeff Walker was represented by Courrege and sought to purchase a USSA share. Jeff Walker's father Trent Walker deposited $10,000 with USSA for the purchase of one share, with the remaining $40,000 owed to be financed. Trent Walker was offered a repurchase agreement if the homes owned by his son were not refinanced by December 31, 1988. Both Walkers had trouble obtaining financing for the remaining $40,000 owed, so Trent Walker sent USSA a check for $40,000 in October 1988 to be placed in escrow until financing of the balance came through. That check was instead cashed by USSA.

would obtain refinancing on the Players' homes if the Players bought units in USSA.

Other investors were also promised repurchase agreements. Another Courrege client, Gary Hogeboom, invested $100,000 in USSA with the understanding his homes would be refinanced, and that his shares would be repurchased if such refinancing did not come through. Michael Barlerin purchased one unit in USSA in October 1988. Barlerin testified he was promised a repurchase agreement. Ramesh Mahtani, an investor who joined the Bayside Board of Directors, paid $250,000 for five units in USSA in October 1988. He also testified USSA promised him he could "put" the investment back to USSA within 18 months of the investment. Theodore Taub, another investor who joined the Bayside Board of Directors, purchased one unit for $50,000, and testified USSA promised him a repurchase agreement. Dennis Noebel, USSA partner Jeff Noebel's brother, bought a half unit with the understanding he could "put" the investment back.

Bradley Branson, a professional basketball player living abroad, purchased two units of USSA through his accountant Michael Tannery. In September 1988, Tannery sent USSA a check for $20,000 on Branson's behalf, with the remainder of the purchase price to be financed. Tannery then sent another Branson account check to USSA in October for $20,000. Tannery claimed the check was sent by mistake. That check was cashed by USSA.

The USSA investment was beset with problems from the start. After promising refinancing to the Players as an incentive to investment, USSA discovered that their homes had dropped significantly in value since their original financing, and that refinancing could only be obtained based upon the new worth of the homes. The Players believed that the homes could be refinanced without any out of pocket expense. In reality, large loan shortfalls would result, necessitating a hefty payment from the Players. Refinancing on the terms the Players had expected was not forthcoming.

The Bayside investment itself also received a severe blow. In 1989, Congress passed the Financial Institution Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. 101-73, 103 Stat. 183. FIRREA eliminated the regulatory goodwill offered by regulators as an incentive to purchase S & Ls. This severely restricted the amount of capital available in S & Ls using regulatory goodwill, and also limited the size of the S & Ls since their ability to lend was contingent on their capital reserves. 3 Bayside had used much of its original cash investment to pay off Bayside's debts to federal regulators, and had relied on the goodwill to support its capital base until the institution had recouped some of its losses. Bayside's capital base was reduced by FIRREA from close to $4,000,000 to around $800,000.

As well as vastly reducing operating capital, FIRREA greatly diminished the attractiveness of S & L investment. Many USSA investors were understandably nervous, and some of those with repurchase agreements with USSA sought to exercise them. However, after FIRREA, USSA no longer had surplus capital, and could not make good on all the repurchase agreements. Some of the parties involved sued USSA to enforce the buy back provision.

Michael Tannery, Bradley Branson's accountant, had difficulty obtaining a refund of his $20,000 overpayment for Branson's account. He testified that Fisher told him to apply for a loan from Bayside in Branson's name, and that Fisher and Carney would then repay the loan.

In its indictment against Carney, Fisher, Noebel and Hughes, the Government charged they conspired to commit mail fraud, wire fraud, and bank fraud, and also conspired to make false statements to and obstruct the operation of the FHLBB and Office of Thrift Supervision. The indictment then charged separate counts of mail fraud, wire fraud, making false statements, and bank fraud.

At trial, Fisher and Carney were found guilty of all charges against them. Hughes was acquitted. Fisher and Carney were sentenced to 87 months in prison, followed by five years' supervised release, and ordered to pay $895,000 in restitution. They now appeal.

Discussion

The defendants assign numerous points of error to their trial proceedings. We discuss certain of those points below.

I.

Carney alleges the district court erred when it denied his motion for new trial because the Government impermissibly impeached him on cross examination with a constitutionally infirm conviction.

Several months before his trial in this case, a Texas court found Carney guilty of criminal contempt for failure to comply with a state court's turnover order. 4 The judge in the contempt hearing also made many factual findings implying Carney had acted in a deceitful and unscrupulous manner. Carney sought a writ of habeas corpus from the Texas Supreme Court.

While Carney's habeas application was pending, the present action went to trial. Before Carney testified, the Government obtained a ruling allowing it to impeach Carney with the conviction and factual findings from the turnover action. The district court held that Carney could have both the conviction and factual findings used against him if he chose to testify in his defense.

Notwithstanding this ruling, Carney chose to testify to explain his version of the events the Government was prosecuting. Because the Government had already obtained a ruling from the trial court allowing it to introduce the contempt conviction if Carney testified, Carney's attorney asked him about the contempt hearing and conviction on direct in an effort to ameliorate any forthcoming negative cross examination. Carney tried to explain his version of the events leading...

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