U.S. v. Kennedy, CIV. A. 97-B-816.

Decision Date02 November 1998
Docket NumberNo. CIV. A. 97-B-816.,No. CR. A. 92-CR-227-B.,CIV. A. 97-B-816.,CR. A. 92-CR-227-B.
PartiesUNITED STATES of America, Plaintiff-Respondent, v. William R. KENNEDY, Defendant-Petitioner.
CourtU.S. District Court — District of Colorado

Stacey Ross Goh, Charlotte J. Mapes, Assistant United States Attorneys, Denver, CO, for Plaintiff-Respondent.

James Rouse, Englewood, Craig L. Parshall, Fredricksburg, VA, for Defendant-Petitioner.


BABCOCK, District Judge.

Defendant-Petitioner, William R. Kennedy, petitions to vacate, set aside, or correct his sentence pursuant to 28 U.S.C. § 2255 (1997). Plaintiff-Respondent, United States of America ("the government"), objects to the petition on procedural and substantive grounds. The petition is adequately briefed and oral argument would not materially aid its resolution. Applying the relevant legal standards, I hold that, with the exception of Mr. Kennedy's claims for ineffective assistance of counsel and intrusion into his attorney-client relationship, Mr. Kennedy's claims are procedurally barred pursuant to United States v. Frady, 456 U.S. 152, 102 S.Ct. 1584, 71 L.Ed.2d 816 (1982). Because the petition, files, and records of the case conclusively show that Mr. Kennedy is entitled to no relief on his claims for ineffective assistance of counsel and intrusion into his attorney-client relationship, I deny his petition. Jurisdiction exists pursuant to 28 U.S.C. § 1331.


On July 2, 1992, a federal grand jury returned two separate indictments. One indictment, bearing case number 92-CR-228-M (the "Kuwait case" or "Kuwait trial") (assigned to Chief Judge Richard P. Matsch), alleged that Defendant-Petitioner William R. Kennedy ("Mr.Kennedy"), along with Sam Zakhem ("Mr.Zakhem"), former United States Ambassador to Bahrain, and Scott Stanley ("Mr.Stanley"), a journalist from Washington D.C., conspired to defraud the United States Department of Treasury in connection with their alleged failure to report money received from agents of Kuwait. Messrs. Kennedy, Zakhem, and Stanley allegedly received $7,700,000 from the Kuwaiti Ambassador to the United States and the Kuwaiti Emergency Finance Minister, which funds were to pay for an advertising campaign supporting the liberation of Kuwait, then occupied by Iraqi military forces.

The other indictment, bearing case number 92-CR-227-B (the "WMC case" or "WMC trial") (assigned to this Court), charged Mr. Kennedy and eighteen other defendants with one or more counts of racketeering, mail fraud, wire fraud, and/or money laundering in connection with their employment or association with Western Monetary Consultants, Inc. ("WMC"), the alleged racketeering enterprise. Mr. Kennedy was the President and owner of WMC. David Lane ("Mr.Lane") was Mr. Kennedy's court-appointed trial counsel in both the WMC case and the Kuwait case. The indictment in the WMC case charged Mr. Kennedy and nine other defendants with participating in a racketeering enterprise, mail fraud, wire fraud, and money laundering during the four-year time period from January 1, 1984 to March 28, 1988. Essentially, the indictment charged that those defendants operated a "Ponzi" scheme to defraud investors of their money and precious metals. The other defendants in the WMC case, primarily telemarketers, were each charged with multiple counts of mail and wire fraud.

WMC sold precious metals to the general public over the telephone and, beginning in 1984, at seminars conducted throughout the United States. The seminars consisted of sales presentations designed to convince clients that world events warranted precious metals purchases. WMC targeted wealthy, elderly people with conservative political and religious beliefs. WMC sold precious metals with the promise that the price would be "locked in" at or about the time of the sale, and that WMC would effect the purchase immediately. The government charged that, in fact, WMC diverted its clients' money to other undisclosed uses, in many instances delaying the purchase and, in other instances, failing to purchase the metal at all. The uses of diverted client money included, but were not limited to, payment of expenses necessary to run WMC, purchase of other business enterprises, payment of expenses necessary to run other business enterprises, personal use by Mr. Kennedy and his family, and the purchase, refurbishment, and transport of a helicopter for Nicaraguan "freedom fighters" in Central America.

In March 1988, Mr. Kennedy sent letters to some of WMC's customers, wherein he wrote that WMC's failure to fill client orders resulted from the business' inability to keep pace with its tremendously fast growth. During trial, the government presented evidence showing that unwise speculation and intentional diversion of client funds for unauthorized purposes caused WMC's inability to fill orders. On March 28, 1988, WMC petitioned for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Over 600 investors were listed as creditors with losses in excess of $18,000,000. When WMC filed its petition for bankruptcy, the market value of unfilled orders approximated $37,162,000.

I granted severance of trial in the WMC case. Trial for the WMC telemarketers was ordered to follow trial for Mr. Kennedy and the other racketeering defendants. See United States v. Kennedy ("Kennedy I"), 819 F.Supp. 1510, 1513 (D.Colo.) (resolving pretrial motions), aff'd sub nom. United States v. Byron, 994 F.2d 747 (10th Cir.1993). At trial, Mr. Kennedy did not testify on his own behalf. Mr. Lane, as Mr. Kennedy's trial counsel, presented evidence in an attempt to persuade the jury that Mr. Kennedy had no intent to defraud investors but, rather, mismanagement and other business factors led to WMC's inability to fill customer orders.

On September 20, 1993, after a seven-week trial in the WMC case, the jury convicted Mr. Kennedy of one count of racketeering in violation of 18 U.S.C. §§ 1962(c) & 1963, nine counts of aiding and abetting mail fraud in violation of 18 U.S.C. §§ 2 & 1341, and seven counts of aiding and abetting money laundering in violation of 18 U.S.C. §§ 2 & 1956(a)(1)(A)(i). The other racketeering defendants tried with Mr. Kennedy were acquitted. In accordance with the applicable sentencing guidelines, I sentenced Mr. Kennedy to 240 months in prison on January 5, 1994.

Mr. Kennedy, represented by different counsel, appealed his conviction in the WMC case on October 3, 1994. He argued that: (1) this Court abused its discretion by denying his requests for additional litigation and financial support, in violation of the Due Process Clause of the Fifth Amendment of the United States Constitution and the Criminal Justice Act, 18 U.S.C. § 3006A; (2) eight of the mail fraud convictions derived from insufficient evidence; (3) all of the money laundering convictions derived from a legally inadequate indictment, improper jury instructions, and insufficient evidence; (4) this Court erred by excluding certain evidence at trial; and (5) Mr. Lane rendered ineffective assistance of counsel in violation of the Sixth Amendment of the United States Constitution. In affirming the judgment of conviction, the Court of Appeals rejected Mr. Kennedy's first four arguments and declined to address Mr. Kennedy's ineffective assistance of counsel argument because its resolution required factual determinations beyond the scope of the record on direct review. See, generally, United States v. Kennedy ("Kennedy II"), 64 F.3d 1465, 1474-1475 (10th Cir.1995) (argued January 25, 1995; issued August 30, 1995).

The Kuwait case proceeded to trial during February and March 1995, but as to Mr. Zakhem only. After Mr. Zakhem's acquittal, the government moved for dismissal of all charges against Mr. Kennedy and Mr. Stanley.

Because his conviction in the WMC case became final before the effective date of the Antiterrorism and Effective Death Penalty Act of 1996 ("AEDPA"), Pub.L. No. 104-132, 110 Stat. 1214 (April 24, 1996), Mr. Kennedy had until April 23, 1997 to file a § 2255 motion. United States v. Simmonds, 111 F.3d 737, 746 (10th Cir.1997). Mr. Kennedy filed this petition on April 22, 1997, asserting multiple claims that he categorizes variously as: (1) prosecutorial misconduct; (2) commission of error by this Court in allowing the prosecutor to read the contents of a prejudicial exhibit in the jury's presence, in violation of the Due Process Clause of the Fifth Amendment of the United States Constitution; (3) improper reference to Mr. Kennedy's religious activities during trial, in violation of the First and Fifth Amendments of the United States Constitution; and (4) ineffective assistance of trial counsel in violation of the Sixth Amendment of the United States Constitution.


Mr. Kennedy presents a tangled web of interrelated claims. Before addressing the government's procedural and substantive challenges to his claims, I first identify each of Mr. Kennedy's specific contentions, thereby providing context for the analysis that follows.

a. "Prosecutorial Misconduct"

Mr. Kennedy asserts five claims that he categorizes as "prosecutorial misconduct." He alleges that the prosecution: (1) intentionally, recklessly, or knowingly intruded into his attorney-client relationship in violation of the Fifth and Sixth Amendments of the United States Constitution; (2) failed to disclose exculpatory evidence as required by Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963); (3) misrepresented material facts to Mr. Kennedy's trial counsel and the district court during the WMC case; (4) informally assured prosecutorial immunity to a grand jury witness; and (5) imposed an obligation of secrecy on a grand jury witness regarding the scope of the grand jury process. I discuss each allegation separately.

1. "Prosecutorial Misconduct:" Intrusion of...

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