U.S. v. Shaid

• Decision Date: 05 August 1991
• Docket Number: No. 88-2716,88-2716
• Citation: 937 F.2d 228
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Orrin SHAID, Jr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 228

937 F.2d 228

60 USLW 2191

UNITED STATES of America, Plaintiff-Appellee, v. Orrin SHAID, Jr., Defendant-Appellant.

No. 88-2716.

United States Court of Appeals, Fifth Circuit.

Aug. 5, 1991.

Mitchell Hatchell (court-appointed), Tyler, Tex., for defendant-appellant.

Dane Smith, Asst. U.S. Atty., Bob Wortham, U.S. Atty., Tyler, Tex., Kathleen A. Felton, Tom Booth, Attys., Dept. of Justice, Crim. Div., Washington, D.C., for plaintiff-appellee.

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

Before CLARK, Chief Judge, POLITZ, KING, WILLIAMS, GARWOOD, JOLLY, HIGGINBOTHAM, DAVIS, JONES, SMITH, DUHE, WIENER, BARKSDALE and EMILIO M. GARZA, Circuit Judges.

KING, Circuit Judge:

We consider this case en banc in order to determine whether a federal prisoner who shows the possibility of prejudice as a result of erroneous jury instructions may obtain collateral relief under 28 U.S.C. Sec. 2255 without demonstrating cause for his failure to raise the error at trial or on direct appeal. Because we find no exception to the Frady cause and prejudice standard that would allow us to grant collateral relief in this case absent a showing of cause, we affirm the district court's denial of the prisoner's Sec. 2255 motion. See United States v. Frady, 456 U.S. 152, 102 S.Ct. 1584, 71 L.Ed.2d 816 (1982) (applying the Wainwright v. Sykes, 433 U.S. 72, 97 S.Ct. 2497, 53 L.Ed.2d 594 (1977), cause and prejudice standard to Sec. 2255 motions).

I. BACKGROUND AND PROCEDURE

The details of Orrin Shaid Jr.'s (Shaid's) illicit banking activities can be found in United States v. Wilson, 500 F.2d 715, 718-20 (5th Cir.1974), cert. denied, sub nom. Levin v. United States, 420 U.S. 977, 95 S.Ct. 1403, 43 L.Ed.2d 658 (1975) (affirming the 1973 convictions at issue in the instant case), ¹ and in United States v Shaid, 730 F.2d 225 (5th Cir.), cert. denied, 469 U.S. 844, 105 S.Ct. 151, 83 L.Ed.2d 89 (1984) (affirming his 1982 convictions in connection with another fraudulent banking scheme). ² Briefly, the evidence at Shaid's 1973 trial showed that he conspired with a group of investors to purchase and then loot a bank by, among other things, filing false financial statements in order to obtain unsecured bank loans that were never repaid. Following his 1973 conviction, Shaid moved under 28 U.S.C. Sec. 2255 to vacate his sentence based on a challenge to the Parole Commission Guidelines. His motion was denied.

In 1984, Shaid filed a second motion under Sec. 2255 to vacate his 1973 sentence. After an evidentiary hearing, a magistrate recommended that relief be denied. The district court adopted the magistrate's findings and recommendations and denied relief. On appeal, a panel of this court affirmed except as to Shaid's claim that the trial court in 1973 incorrectly instructed the jury on the mens rea requirement for conviction under 18 U.S.C. Sec. 656. United States v. Shaid, 916 F.2d 984 (5th Cir.1990). That statute provides punishment for one who "willfully misapplies any of the moneys, funds or credits of such bank or any moneys, funds, assets or securities intrusted to the custody or care of such bank, or to the custody or care of any such agent, officer, director, employee or receiver." 18 U.S.C. Sec. 656 (1988). The trial judge instructed:

The general nature of the requisite intent has been expressed as a reckless disregard of the bank's interests, and proof of naturally foreseeable adverse consequences has been held sufficient to prove criminal intent. More specifically, proof that normal loan procedures were circumvented or facts concealed from the Board of Directors would be indicative of fraudulent intent. Proof of a failure to obtain insufficient collateral, proof of the repeated cashing of insufficient checks or proof of self-interest on the part of the bank officer or employee in an otherwise questionable transaction, all would be evidence of intent to injure or defraud.

Shaid contends that this instruction was improper because reckless disregard is not sufficient to show intent under the statute.

Shaid's attorney, however, did not object to this portion of the instruction either at trial or on appeal. Nevertheless, in our review of the case on direct appeal in 1974, we noted in our general discussion of the constitutionality of the instruction that "reckless disregard of the interest of a bank was, for the purpose of 'willful misapplication,' the equivalent of intent to injure or defraud." Wilson, 500 F.2d at 720. ³ We subsequently ruled in United States v. Welliver, 601 F.2d 203 (5th Cir.1979), that a defendant's reckless disregard for the interests of the bank is sufficient to satisfy the intent requirement of Sec. 656. In 1983, however, we considered the issue en banc and clarified the mens rea requirement under Sec. 656. United States v. Adamson, 700 F.2d 953 (5th Cir.1983). In Adamson, we concluded:

In order to convict a defendant for willfully misapplying funds with intent to injure or defraud a bank, the government must prove that the defendant knowingly participated in a deceptive or fraudulent transaction. The trier of fact may infer the required intent, i.e., knowledge, from the defendant's reckless disregard of the interest of the bank; however, jury instructions should not equate recklessness with intent to injure or defraud.

Id. at 965 (emphasis in original). We explicitly overruled "that portion of United States v. Welliver which held that the proper mens rea standard for Sec. 656 was a reckless disregard of the interests of the bank." Id. (citation omitted). We did not overrule Wilson, however, reasoning that, although loosely worded, the dictum in Wilson meant only that willfulness can be inferred from reckless disregard of the bank's interest. Id. at 963.

Some of the language in the trial court's instruction on the mens rea requirement for willful misapplication of bank funds properly suggests that knowledge can be inferred from evidence of reckless disregard, but the general statement of the intent requirement appears improperly to equate knowledge with reckless disregard of the bank's interest. On review of Shaid's Sec. 2255 motion, therefore, the magistrate assumed that this instruction was erroneous under Adamson. ⁴ Nevertheless, the magistrate recommended denial of Shaid's motion because Shaid failed to show cause for failing to raise the error at trial or on direct appeal as required by United States v. Frady, 456 U.S. 152, 102 S.Ct. 1584, 71 L.Ed.2d 816 (1982). Shaid could not demonstrate cause for his failure to object, the magistrate reasoned, because the law concerning the proper mens rea requirement under Sec. 656 was not settled prior to Shaid's conviction. ⁵ Because she concluded that Shaid had not satisfied the cause prong of the test, the magistrate did not consider whether Shaid demonstrated actual prejudice.

On appeal, a panel of this court decided "that the magistrate reached the issue [of cause and prejudice] prematurely" because a "recognized exception" exists to the cause and prejudice standard when "a defendant has been convicted of a criminal act that becomes no longer criminal." Shaid v. United States, 916 F.2d 984, 987, 991 (5th Cir.1990). ⁶ The panel reasoned that the erroneous jury instructions might have allowed Shaid to be convicted on a finding of reckless disregard of the bank's interests rather than a knowing misapplication of funds and remanded for the district court to determine "whether in each questioned instance Shaid actually was convicted on a reckless disregard theory." Id. at 993. Because we find no exception to the Frady cause and prejudice standard that would allow collateral relief in this case, we affirm the district court's denial of Shaid's Sec. 2255 motion.

II. ANALYSIS

The Supreme Court has emphasized repeatedly that a "collateral challenge may not do service for an appeal." Frady, 456 U.S. at 165, 102 S.Ct. at 1593. After conviction and exhaustion or waiver of any right to appeal, "we are entitled to presume that [the defendant] stands fairly and finally convicted." Id. at 164, 102 S.Ct. at 1592. A defendant can challenge his conviction after it is presumed final only on issues of constitutional or jurisdictional magnitude, Hill v. United States, 368 U.S. 424, 428, 82 S.Ct. 468, 471, 7 L.Ed.2d 417 (1962), and may not raise an issue for the first time on collateral review without showing both "cause" for his procedural default, and "actual prejudice" resulting from the error. ⁷ Frady, 456 U.S. at 168, 102 S.Ct. at 1594. This cause and actual prejudice standard presents "a significantly higher hurdle" than the "plain error" standard that we apply on direct appeal. ⁸ Id. at 166, 102 S.Ct. at 1593. We apply this rigorous standard in order to ensure that final judgments command respect and that their binding effect does not last only until "the next in a series of endless postconviction collateral attacks." Id. at 165-66, 102 S.Ct. at 1593.

A defendant must meet this cause and actual prejudice test even when he alleges a fundamental constitutional error. Murray v. Carrier, 477 U.S. 478, 493, 106 S.Ct. 2639, 2648, 91 L.Ed.2d 397 (1986) (applying the test to fundamental defects affecting the court's truth finding function). The Court has held that the cause and prejudice standard applies to inadvertent attorney errors as well as deliberate tactical decisions, Smith v. Murray, 477 U.S. 527, 533, 106 S.Ct. 2661, 2665, 91 L.Ed.2d 434 (1986); to racial discrimination in the composition of the grand jury, Davis v. United States, 411 U.S. 233, 242-45, 93 S.Ct. 1577, 1582-84, 36 L.Ed.2d 216 (1973); and to claims that may affect the truth finding function of the trial, Engle v. Isaac, 456 U.S. 107, 129, 102 S.Ct. 1558, 1572, 71 L.Ed.2d 783 (1982). The Court recently demonstrated its continued commitment to this test by requiring its use in the context of abuse of the writ. McCleskey v. Zant, --- U.S. ----, 111 S.Ct. 1454,...