U.S. v. Morris

• Citation: 18 F.3d 562
• Decision Date: 03 March 1994
• Docket Number: 93-1757,Nos. 93-1698,93-1706 and 93-1755,s. 93-1698
• Parties: UNITED STATES of America, Appellant/Cross-Appellee, v. Virginia T. MORRIS, Appellee/Cross-Appellant. UNITED STATES of America, Appellant/Cross-Appellee, v. William T. HIGGS, Appellee/Cross-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 562

18 F.3d 562

UNITED STATES of America, Appellant/Cross-Appellee, v. Virginia T. MORRIS, Appellee/Cross-Appellant.

UNITED STATES of America, Appellant/Cross-Appellee, v. William T. HIGGS, Appellee/Cross-Appellant.

Nos. 93-1698, 93-1757, 93-1706 and 93-1755.

United States Court of Appeals,

Eighth Circuit.

Submitted Nov. 8, 1993.

Decided March 3, 1994.

Rehearing and Suggestion for Rehearing En Banc Denied in

Nos. 93-1706, 93-1755 April 18, 1994.

Before McMILLIAN and MAGILL, Circuit Judges and JACKSON, ^* District Judge.

JACKSON, District Judge.

Following a jury trial, Virginia T. Morris ("Morris") and William T. Higgs ("Higgs") were found guilty of bank fraud and money laundering. The jury additionally found Morris guilty of making false entries in the books of a federally-insured bank and making a false material statement to a federal bank examiner. The United States appeals the sentences imposed by the district court. Higgs cross-appeals his conviction and Morris cross-appeals her conviction and sentence. We affirm the convictions but vacate the sentences and remand for resentencing.

I. BACKGROUND

Northwest National Bank was a financial institution located in Fayetteville, Arkansas, until its failure in 1991. Morris was an officer and director of Northwest National Bank and of its holding company, Northwest Bancorporation of Arkansas, Inc. Her husband, Joe Benton Morris, Sr., was a member of the board of directors of each entity.

Houston Taylor Motors, Inc. was an automobile dealership in Fayetteville, Arkansas. Morris, Joe Benton Morris, Sr. and Higgs, their nephew, were officers, directors and shareholders of Houston Taylor Motors, Inc. The dealership was operated by Joe Benton Morris, Sr. and Higgs.

On June 17, 1992 Morris, Higgs and Joe Benton Morris, Sr. were jointly charged in a seven-count indictment. Count One charged all three defendants with devising and executing a scheme and artifice to defraud Northwest National Bank during the period January 1, 1990 to January 17, 1991, in violation of 18 U.S.C. Secs. 1344 and 2. According to the indictment, the defendants' scheme included drawing insufficient funds checks on an account maintained in the name of Midwest Trading Co. ("Midwest Trading") at Northwest National Bank. At various times the defendants deposited into the Midwest Trading account insufficient funds checks drawn on Houston Taylor Motors' account at McIlroy Bank & Trust in order to make the Midwest Trading account reflect a positive balance and to conceal the overdraft status of the account from Northwest National Bank's board of directors. The defendants then "covered" the Houston Taylor Motors insufficient funds checks by depositing insufficient funds checks drawn on Midwest Trading's account at Northwest National Bank into the McIlroy Bank account. It was also part of the scheme that the defendants drew insufficient funds checks on Houston Taylor Motors' accounts at McIlroy Bank and at First State Bank and used them to obtain cashier's checks and other funds from Northwest National Bank. The issuance of the cashier's checks was approved by Morris.

Count Two charged Morris and Higgs with bank fraud, in violation of 18 U.S.C. Secs. 1344 and 2. According to the indictment, the defendants devised a scheme to defraud the First National Bank of Roland, Oklahoma by falsely representing to the bank that the purpose of a $200,000 loan to Higgs was for "Wholesale automotive trading stock, inventory and expansion" when, in fact, approximately $174,283.96 of the loan proceeds were to be used to cover overdraft checks that had been paid on the Midwest Trading account at Northwest National Bank.

Count Three charged Morris and Higgs with money laundering, in violation of 18 U.S.C. Secs. 1956(a)(1)(A)(i) and 2. It was alleged that on August 10, 1990 the proceeds of the $200,000 loan from the First National Bank of Roland were deposited in an account controlled by Higgs at Superior Federal Bank in Fayetteville, Arkansas and that $174,283.96 was thereafter withdrawn and transferred to Midwest Trading's account at Northwest National Bank. The indictment further alleged that Morris and Higgs conducted this financial transaction with the intent to promote the carrying on of a specified unlawful activity, i.e. bank fraud.

Counts Four, Five and Six charged Morris alone with causing false entries to be made in the books and records of Northwest National Bank, in violation of 18 U.S.C. Sec. 1005. Count Four related to Morris causing five checks totalling $155,848.41 to be issued on the bank holding company's checking account when there were insufficient funds in the account. Morris then caused the checks to be entered in the "Unposted Suspense Debits--DDA" account which resulted in a misstatement of the position of the bank holding company's account and, consequently, a misstatement of Northwest National Bank's financial position. Count Five related to Morris causing the purpose of a $100,000 loan made by Northwest National Bank to Vance Harp to be recorded on the bank's records as "property improvements" when the loan proceeds were actually used for the benefit of the bank holding company. Count Six related to Morris causing the purpose of a $300,000 loan from Northwest National Bank to Levoy Pat Demaree to be recorded on the bank's records as "balance refinancing loans, increase wattage, tower, bldg. etc.--(RLPD, Inc.) capital investment, equipment purchases, additional tax money" when two-thirds of the loan proceeds were actually used to buy stock in the bank holding company.

Finally, Count Seven charged Morris with making a false material statement to a bank examiner, in violation of 18 U.S.C. Sec. 1001. It was alleged that Morris falsely told the bank examiner that she did not know how the proceeds of the Demaree loan had been used.

The presentence report for Morris reflected a total offense level of 28 and a criminal history category of I, resulting in a guideline range with respect to imprisonment of 78 to 97 months. The district court exercised a downward departure, treating the money laundering charge in Count Three the same as bank fraud. The district court further reduced Morris' total offense level to 20 based upon the finding that she was not an organizer or a leader within the meaning of Sec. 3B1.1(c) of the United States Sentencing Guidelines (U.S.S.G.) (Nov. 1992). The district court's actions resulted in an imprisonment range of 33 to 41 months. Morris was sentenced to a thirty-six month term of imprisonment.

The presentence report for Higgs reflected a total offense level of 22 and a criminal history category of I, resulting in a guideline range with respect to imprisonment of 41 to 51 months. The district court exercised a downward departure with respect to Higgs, again treating the money laundering count the same as bank fraud. The district court found Higgs' total offense level to be 13, with a consequent guideline range of 12 to 18 months' imprisonment. Higgs was sentenced to a term of twelve months.

II. DISCUSSION

A. Ineffective Assistance of Counsel

Morris first argues that she was denied her Sixth Amendment right to effective assistance of counsel because her attorney: (1) failed to seek a separate trial from the co-defendants; (2) failed to object to the prosecutor's leading questions; (3) failed to object to inflammatory and prejudicial evidence; (4) failed to request specific instructions; (5) failed to file a motion for judgment of acquittal within seven days of the verdict; (6) failed to apprise the court of mitigating matters not included in the presentence report; and (7) failed to file certain written objections to the presentence report.

Morris' claim of ineffective assistance of counsel is not properly before us. The claim was neither presented to nor addressed by the district court. Consequently there has been no opportunity to develop an adequate record with respect to any of the issues Morris now raises. If the claim of ineffective assistance of counsel is to be pursued, it should be raised in the district court in a motion made pursuant to 28 U.S.C. Sec. 2255 and not in a direct appeal. United States v. Petty, 1 F.3d 695, 696-97 (8th Cir.1993); United States v. Davis, 882 F.2d 1334, 1345 n. 14 (8th Cir.1989), cert. denied, 494 U.S. 1027, 110 S.Ct. 1472, 108 L.Ed.2d 610 (1990); United States v. Gray, 464 F.2d 632, 634 n. 1 (8th Cir.1972).

B. Severance

Morris next argues that the district court erred by failing to grant her a severance from Higgs or, alternatively, by failing to give a cautionary instruction limiting the jury's consideration of certain evidence to only the co-defendant against whom it was properly admitted. Morris, however, did not file a motion for severance and she made no request for a cautionary instruction. Because this issue was not presented to the trial court, we review it for plain error. See United States v. Munoz, 894 F.2d 292, 294 (8th Cir.1990).

Because Morris and Higgs were alleged to have participated in interrelated bank fraud and money laundering offenses, their joinder was proper under Fed.R.Crim.P. 8(b). However, even when joinder is appropriate on the face of the indictment the district court may grant a severance where it appears that joinder would prejudice a defendant. Fed.R.Crim.P. 14.

Upon review of the record, we conclude that none of the reasons asserted by Morris establish the type of prejudice warranting severance. The fact that Higgs gave testimony implicating Morris did not constitute grounds for severance, particularly in light of the corroborating evidence presented by other witnesses. One defendant's efforts to exonerate himself at the expense of another is not sufficient to require separate trials. United States v. Jones, 880 F.2d 55, 63 (8th Cir.1989); United States v. Boyd, 610 F.2d 521, 526 (8th Cir.1979), cert. denied, 444 U.S. 1089, 100 S.Ct. 1052, 62 L.Ed.2d 777 (1980). Further, contrary...