U.S. v. Sinclair

• Decision Date: 10 January 1996
• Docket Number: No. 94-3715,94-3715
• Citation: 74 F.3d 753
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. John SINCLAIR, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 753

74 F.3d 753

UNITED STATES of America, Plaintiff-Appellee, v. John SINCLAIR, Defendant-Appellant.

No. 94-3715.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 6, 1995.

Decided Jan. 10, 1996.

Barry Rand Elden, Chief of Appeals, Sheila Finnegan (argued), Office of United States Attorney, Criminal Appellate Division, Chicago, IL, for Plaintiff-Appellee.

David C. Thomas (argued), Chicago-Kent College of Law, Chicago, IL, for Defendant-Appellant.

Before CUDAHY, FLAUM, and EASTERBROOK, Circuit Judges.

CUDAHY, Circuit Judge.

John Sinclair appeals his conviction and sentence for three counts of violating 18 U.S.C. Sec. 215(a)(2), which prohibits the officers of financial institutions from soliciting or accepting anything of value in connection with the business of their institutions. A jury found Sinclair guilty on all three counts, and the district court sentenced him to serve twenty-one months in prison and to make restitution. Sinclair contends that the district court erred in its evidentiary rulings, its jury instructions and its determination of his sentence. Because our review of the record finds no such error, we affirm.

I.

Sinclair worked for Mellon Bank between May 1984 and February 1989, eventually rising to the position of assistant vice president. His responsibilities included developing and operating various programs that provided insurance to protect the bank's interest in its loans. One of those programs was the Collateral Protection Insurance Program (CPI program), which sought to guarantee that adequate auto insurance protected the cars in which Mellon had a collateral interest. The CPI program worked in two stages. In the first stage, an automated tracking system identified the borrowers who did not have enough car insurance and sent them a series of notices reminding them to purchase it. The second stage ensued if delinquent borrowers did not respond to the notices. At this point, Mellon Bank would "force place" a car insurance policy on the borrower by purchasing a policy from an insurance company, paying the premiums itself and adding the value of the premiums to the outstanding balance of the auto loan. The insurance company and the bank set the premiums for all borrowers at the highest rate, regardless of any borrower's actual driving record. The policies also included a number of potentially illegal endorsements that increased the premiums.

Mellon agreed to purchase the insurance policies from Transamerica and from Balboa Life and Casualty through an independent insurance broker. The broker received a commission of roughly 2% of all of the premiums that Mellon paid. In 1987, Sinclair dismissed the broker that Mellon had initially selected and went looking for a new one. To that end, he met with James Fortney, who had recently left a position at Transamerica. At Sinclair's trial, Fortney testified that Sinclair offered him the brokerage in return for his promise to give Sinclair an even split of the commissions. In his testimony, Sinclair maintained that he made Fortney a perfectly legitimate offer for the brokerage. Fortney served as broker from November 1987 until May 1988 when he returned to work for Transamerica.

During 1987 and 1988, Sinclair engaged in some business dealings that seemed to corroborate Fortney's allegations. At about the same time that he was making his overtures to Fortney, Sinclair and his wife took the first steps towards starting their own company; and in January 1988, they formally established Independent Training, Inc. (ITI). The Sinclairs envisioned ITI as an enterprise that would sell computer programs to train people in insurance sales. In his trial testimony, Sinclair asserted that James Fortney was one of ITI's first clients, but Fortney denied that the Sinclairs ever trained him for anything.

With or without the Sinclairs' training, Fortney "sold" a substantial amount of insurance for the CPI program, and he received his first commission payment of $78,740.46 from Transamerica on May 13, 1988. On that same day, he wrote a check to ITI for $39,370.23. One week later, Sinclair opened an account for ITI at the Gary-Wheaton Bank and deposited Fortney's check. Transamerica made a second payment to Fortney of $18,522.24 in October 1988, and Fortney then made a second payment to ITI of $9,261.12. Except for one other check in the amount of $49.95, these checks from Fortney constituted all of the deposits to ITI's account and all of its income in 1988.

The Sinclairs withdrew most of the money in ITI's bank account for their own use, and they took several thousand dollars from the account to pay credit card bills. On ITI's 1988 tax return, Sinclair claimed a little over $11,000 in travel, training and entertainment expenses for ITI, providing receipts for them and noting that three credit cards had been used exclusively for ITI's corporate expenses. The particular expenses recorded on the receipts did not match a great number of the charges on the credit card statements paid with ITI funds; but they did match many of the business expenses that Sinclair had charged to his employer, Mellon Bank.

In late 1988, one of Mellon's in-house lawyers circulated a memorandum raising questions about the legality of the CPI program. Sinclair testified that he took these questions seriously and attempted to address any legal problems with the program. Sinclair insisted that his scrupulousness about the CPI program's legality led his superiors at Mellon to charge him with insubordination and to dismiss him in February 1989. Sinclair's subordinates testified that he defended the legality of the program and at all times advocated its continuation.

After his dismissal from the bank, Sinclair and his wife devoted themselves to ITI. Sinclair also devoted himself to exposing the legal problems with the CPI program. In early 1989, he leaked the internal legal memorandum about the CPI program to the Pittsburgh Press which used it as the basis for a front-page story. This publicity precipitated two class action lawsuits, one against Mellon Bank and one against Transamerica. In preparing its defense, Transamerica interviewed James Fortney, who revealed his kickback arrangement with Sinclair. The parties to the civil suits eventually settled, and Mellon and Transamerica agreed to pay more than $6,000,000 to Mellon's borrowers who had been affected by the CPI program.

Fortney's allegations did not disappear with the end of the civil suit. They led to these criminal charges against Sinclair in which the United States alleged that Sinclair violated 18 U.S.C. Sec. 215(a)(2) on three different occasions: when he solicited the kickbacks from Fortney, and both times he accepted a portion of Fortney's commissions. A jury convicted Sinclair on all three counts.

II.

Sinclair finds four errors in the district court's evidentiary rulings. He contends that the court excluded two pieces of evidence that it should have admitted: the testimony of an expert witness, and a hearsay statement. He also contends that it admitted two sets of documentary evidence that it should have excluded: one relating to his Mellon Bank expense accounts and ITI's financial records, and the other pertaining to his compliance with Mellon Bank's code of conduct. In making these contentions, Sinclair faces a formidable abuse of discretion standard of review. United States v. Gill, 58 F.3d 334, 337 (7th Cir.1995). There is an abuse of discretion only when no reasonable person could agree with the court's ruling. United States v. Valona, 834 F.2d 1334, 1340 (7th Cir.1987).

A.

Sinclair first argues that the district court erred in excluding the testimony of Alexander Wayne, an expert witness who would have testified that both the CPI program and the contractual relationship between Fortney and Transamerica were illegal. To a considerable extent, the government's case turned on the credibility of Fortney and Mellon Bank employees. Sinclair wanted Wayne to tell the jury that these witnesses had engaged in illegal conduct of their own, hoping that this showing would raise an inference that some of the crucial witnesses against him sought to shift blame away from themselves by falsely implicating him in a crime.

The district court ruled that Sinclair could establish the bias of government witnesses without Wayne's testimony. The proposed testimony would involve legal issues raised in the civil suits against Mellon Bank and Transamerica. The district court thought that this evidence could confuse or distract the jury. Moreover, the court thought that Sinclair could raise an inference of bias in other ways. Mellon Bank's employees were arguably biased because of the $6,000,000 judgment against the bank that Sinclair had helped to engineer; Fortney could be impeached by the grant of immunity that he received in return for his testimony against Sinclair. The court ruled under Federal Rule of Evidence 403 that the prejudicial effect of Wayne's testimony would outweigh its probative value.

Rulings on the admissibility of expert testimony are entitled to the same deference as evidentiary rulings generally. See Deimer v. Cincinnati Sub-Zero Prods., Inc., 58 F.3d 341, 344 (7th Cir.1995). The potential for jury confusion may be substantial when the evidence refers to legal issues at the heart of other litigation; such evidence can create a distracting trial within a trial. In such cases, the trial court may exclude the evidence if the purpose for which it is offered can be accomplished through other means. See International Surplus Lines, Inc. v. Fireman's Fund Ins. Co., 998 F.2d 504, 508 (7th Cir.1993). Here, the district court exercised precisely this kind of discretion, concluding that Sinclair could effectively impeach the witnesses against him without offering potentially confusing testimony. Our cases tell us that we should defer to such discretionary judgment. Id.

Sinclair urges us to do otherwise....