U.S. v. Rubin

• Decision Date: 04 February 1988
• Docket Number: No. 86-5178,86-5178
• Citation: 836 F.2d 1096
• Parties: 24 Fed. R. Evid. Serv. 637 UNITED STATES of America, Appellee, v. William Mark RUBIN, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1096

836 F.2d 1096

24 Fed. R. Evid. Serv. 637

UNITED STATES of America, Appellee, v. William Mark RUBIN, Appellant.

No. 86-5178.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 2, 1987.

Decided Jan. 6, 1988.

Rehearing Denied Feb. 4, 1988.

Jack S. Nordby, Minneapolis, Minn., for appellant.

Thomas B. Heffelfinger, Minneapolis, Minn., for appellee.

Before JOHN R. GIBSON, Circuit Judge, HENLEY, Senior Circuit Judge, and FAGG, Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

William Rubin appeals his conviction of ten counts of securities fraud brought under 15 U.S.C. Secs. 77q(a) and 77x (1982) and 18 U.S.C. Sec. 2 (1982), and two counts of filing a false securities registration statement under 15 U.S.C. Sec. 77x and 18 U.S.C. Sec. 2. On appeal he argues (1) that the district court ¹ erred in quashing a subpoena duces tecum served on Ronald Sullivan, an officer of a Cayman Islands bank, and in restricting cross-examination of Sullivan; (2) that the evidence was insufficient to prove criminal acts, criminal knowledge, and criminal intent by Rubin; and (3) that the sentence imposed by the district court was an abuse of discretion. We affirm the judgment of the district court.

Rubin was Chief Executive Officer and Chairman of the Board of Directors of Flight Transportation Corporation and, together with Chief Financial Officer, Janet Karki and Financial Controller, Brian Miller, was charged in a twenty-nine count superseding indictment with securities fraud, wire fraud, filing a false bank loan application and filing false securities registration statements. The indictment charged that the fraud involved $51 million obtained from two public offerings of the sale of FTC securities and bank loans. The trial lasted two and a half months and more than fifty-five witnesses testified. Rubin was convicted of twelve of the twenty-eight counts in which he was charged, and acquitted of sixteen. Karki was convicted and did not appeal. Miller pled guilty before trial and testified on behalf of the government at trial. The general counsel of FTC, James McGovern, was charged separately and entered a guilty plea. ² Gary W. Nelson, FTC's employee in the Cayman Islands, was convicted of two counts of perjury before the grand jury and did not appeal his conviction.

FTC was formed in 1968 and Karki was hired as its bookkeeper in 1976 and soon thereafter allegedly began embezzling from the company and creating false corporate financial records. Rubin was hired by FTC as a consultant in 1977, shortly became manager of the company and finally its president. Rubin suggested to the two owners of FTC that FTC make a public stock offering. The initial offering was made in 1979 and was not the subject of the superseding indictment. The second offering was made in March, 1981 and successfully raised $7 million, and a third offering was made in June, 1982 which raised $24 million. A few days after the June 1982 offering, agents of the FBI and SEC suspended trading of FTC stock, seized its corporate records, and closed down the company. This criminal prosecution, based on the 1981 and 1982 offerings, along with a number of SEC actions and civil lawsuits, followed. ³

The fraud in this case was based in large part on representations contained in the registration statement and other SEC documents concerning FTC's group air charter operations. The documents represented that FTC was a young growth corporation earning the bulk of its revenues from a group air charter business, in which FTC acted as middleman, renting aircraft from major airlines to groups who would charter the aircraft. The indictment alleged, and substantial evidence was introduced at trial to show, that in fact the group charter operation was virtually nonexistent. Rubin was acquitted of the charges relating to the second offering but convicted of the charges relating to the third offering and sentenced to thirty-five years in prison and assessed a fine of $120,000.

I.

One of the key issues at trial concerned the revenues of FTC's group air charter operations. According to FTC's financial records, FTC had an account (FTC account # 2, or the "095" account) at Barclay's Bank, Grand Cayman Island, containing some $8 million representing profits from the group air charter operations. The government, through diplomatic channels, arranged for the testimony of Ronald Sullivan, a deputy manager of Barclay's Bank in the Cayman Islands. Operating under strict Caymanian bank secrecy laws, Sullivan could not reveal any bank information without waivers of the secrecy law. ⁴ The court-appointed receiver for FTC signed such waivers with respect to the six FTC accounts at Barclay's, including the critical FTC account # 2. The government filed a motion in limine to limit cross-examination of Sullivan to the several accounts of FTC for which waivers had been obtained and to preclude testimony as to all other accounts for which no waivers had been obtained. The district court conducted an in camera examination of Mr. Sullivan. It carefully weighed the options of limiting the testimony or of refusing to allow the government to call Sullivan as a witness and, after an extensive briefing, entered an order limiting both direct and cross-examination to the six accounts.

Sullivan testified at trial and provided complete records of the six FTC accounts at Barclay's for which waivers had been obtained. The records of FTC account # 2 revealed FTC had never had the $8 million on deposit and, in fact, the maximum balance in the account was only $595.24. Sullivan also identified as forgeries the Barclay's bank statements provided to FTC's auditors. Rubin's counsel thoroughly examined Sullivan within the scope of the direct examination concerning these accounts and then attempted to examine Sullivan on bank accounts of two Cayman Island residents, James Bodden and Steven McField. ⁵ Sullivan had no waivers for those accounts and when Sullivan appeared to testify, he was served with a subpoena duces tecum to furnish records of these accounts. A motion was filed by Sullivan and the government to quash these subpoenas which, after hearing, was sustained. Rubin filed an affidavit and later testified that Bodden had operated the FTC group charter operation in the Caymans and had stolen millions of dollars in profits by removing the money from FTC's account at Barclay's and altering Barclay records. Bodden was called as a rebuttal witness and testified that neither he nor Cayman Airways had operated any group charter operations with Rubin or FTC. He denied the specific charges made by Rubin, and Rubin's defense counsel was advised that Bodden expressed a willingness to waive secrecy of his own bank records. Rubin's counsel did not cross-examine Bodden about his bank records or ask to have the records disclosed.

A.

Rubin argues that the district court erred in restricting the cross-examination of Sullivan. He contends that this error violated his constitutional right to confront and cross-examine the witnesses against him.

Cross-examination is the principal means by which the credibility of a witness and the truth of testimony are tested, and therefore must be accorded great respect. Davis v. Alaska, 415 U.S. 308, 316, 94 S.Ct. 1105, 1110, 39 L.Ed.2d 347 (1976). Where the witness the defendant seeks to cross-examine is the chief government witness providing the crucial link in the prosecution's case, the importance of full cross-examination is necessarily increased. United States v. Nunez, 668 F.2d 1116, 1121 (10th Cir.1981) (citing Davis, 415 U.S. at 317-18, 94 S.Ct. at 1110-11). Nonetheless, courts long have recognized that the trial judge must retain discretion to limit the scope of cross-examination. Fed.R.Evid. 611(b); Alford v. United States, 282 U.S. 687, 694, 51 S.Ct. 218, 220, 75 L.Ed. 624 (1931); United States v. Lee, 743 F.2d 1240, 1249 (8th Cir.1984). Reversal is warranted only when there has been a clear abuse of discretion and a showing of prejudice to the defendant. Lee, 743 F.2d at 1249; United States v. Peyro, 786 F.2d 826, 828 (8th Cir.1986).

Rubin concedes that there are instances in which the trial court may limit cross-examination but argues that these limits are based on concerns not present in this case. The district court was correct, however, in finding the situation analogous to those in which a witness invokes his fifth amendment privilege against self-incrimination, and refuses to answer certain questions on cross-examination. ⁶ The Supreme Court has recognized that cross-examination may be restricted in this instance. See Davis, 415 U.S. at 320, 94 S.Ct. at 1112; Ellis v. Black, 732 F.2d 650, 656 (8th Cir.1984). A balance must be struck between the witness' fifth amendment privilege against self-incrimination and the defendant's sixth amendment right to cross-examination. United States v. Singer, 785 F.2d 228, 242 (8th Cir.1986) (citing Ellis, 732 F.2d at 656). In balancing these interests, the court must consider the significance of the witness' testimony and the prejudice to the defendant. Prejudice has generally been found only in those instances in which the defendant is precluded from inquiring into substantive matters about which the witness testified on direct examination. When the defendant is unable to test the truth and accuracy of the witness' direct testimony, his sixth amendment right to cross-examination is violated. Ellis, 732 F.2d at 656; United States v. Humphrey, 696 F.2d 72, 75 (8th Cir.1982), cert. denied, 459 U.S. 1222, 103 S.Ct. 1230, 75 L.Ed.2d 463 (1983); United States v. Gould, 536 F.2d 216, 222 (8th Cir.1976), accord, Nunez, 668 F.2d at 1122. However, where the witness' invocation of the privilege precludes the defendant from inquiring only as to matters collateral to the direct examination, the defendant's sixth amendment right is not violated. Ellis, 732 F.2d at 656; Humphrey, 696 F.2d at 75; Gould, 536 F.2d at 221; accord, ...