U.S. v. Strother

Decision Date01 March 1995
Docket NumberD,No. 1226,1226
Citation49 F.3d 869
Parties41 Fed. R. Evid. Serv. 807 UNITED STATES of America, Appellee, v. Richard T. STROTHER, Defendant-Appellant. ocket 94-1488.
CourtU.S. Court of Appeals — Second Circuit

Barry A. Bohrer, Morvillo, Abramowitz, Grand, Iason, & Silberberg, P.C., New York City (Christopher J. Gunther, Morvillo, Abramowitz, Grand, Iason, & Silberberg, P.C., on the brief), for defendant-appellant.

Leslie Cayer Ohta, Asst. U.S. Atty., D. of Conn., New Haven, CT (Christopher Droney, U.S. Atty., on the brief), for appellee.

Before: ALTIMARI, LEVAL and CALABRESI, Circuit Judges.

ALTIMARI, Circuit Judge:

Defendant-appellant Richard T. Strother ("Strother") appeals from a judgment of conviction entered in the United States District Court for the District of Connecticut (Covello, J.), following a jury trial, on one count of knowingly executing a scheme or artifice to defraud a financial institution by means of false representations, in violation of 18 U.S.C. Sec. 1344. The thrust of the government's case was that Strother, an attorney and businessman, induced Christine Wollschleager, an employee of Connecticut Bank and Trust ("CBT"), to authorize payment of a single CBT check despite insufficient funds in his account by falsely representing that he would provide funds to cover the check. Strother's principal contention on appeal is that the district court committed reversible error in excluding two internal bank memoranda and statements contained in a third that he claims should have been admitted as either business records or prior inconsistent statements of Wollschleager, the government's chief witness. For the reasons set forth below, we reverse the judgment of the district court and remand for a new trial.

BACKGROUND

The single check at issue was written for $82,500 on June 5, 1989 by Strother on an account at CBT in the name of Strother Film Partners I (the "CBT account"). The check was payable to Wall Street Clearing Co., a clearinghouse for Strother's brokerage firm, A.T. Brod ("Brod"). In mid-May 1989, Strother purchased $1,000,000 face value of bonds issued by Western Savings and Loan Association ("Western"), for $82,500. At that time, he also held $1,266,000 face value of Western bonds that he had purchased previously through Brod. On June 5, Strother received a telegram from Wall Street Clearing Co. demanding that Strother either pay the $82,500 by the following day or face liquidation of his Western bonds.

To pay for the Western bonds, Strother sent a check for $82,500 drawn on the CBT account (the "CBT check"), although that account held only $610. The following day, Strother wrote a second check for $82,500 drawn on his personal account at Citibank (the "Citibank account"), payable to Strother Film Partners. The government alleged that Strother was aware that neither the CBT account nor the Citibank account had adequate funds to cover either check.

On June 9, 1989, Strother called Wollschleager, the interim manager at the Saybrook branch of CBT. Wollschleager testified that she was familiar with Strother, who "[a]lways kept very, very high balances" and was an "[e]xcellent customer." [A. 251-52]. When asked about the phone conversation, she testified at trial that Strother "said that he had written a check for $82,500, he asked me to pay the check, and said he was wiring me money" from his available funds. [A. 244]. She also stated that she believed the wire would arrive shortly, and that Strother never asked her to "hold" the check, which would have been impossible and contrary to bank regulations.

Strother did not wire any funds to CBT. On June 12, however, the Citibank check was deposited at the CBT branch in Saybrook, although the funds were unavailable at that time. On the same day, the CBT check was presented for payment to CBT. Because the CBT account lacked sufficient funds to cover the check, it appeared on CBT's overdraft list prepared on the morning of June 13. The list indicated that $82,500 in unavailable funds had been deposited. Although Wollschleager was aware that the CBT account contained insufficient funds, she authorized payment on the CBT check. She testified that she did so because of Strother's request on June 9 and his assurance that he would wire funds to CBT. [A. 251]. Wollschleager testified that she knew that Strother had not wired the funds, but was not concerned because she assumed that Strother simply deposited the funds. [A. 252]. Had Strother wired the funds, she testified, they would have been available for deposit and the CBT check would not have appeared on the overdraft list. Wollschleager ordered payment on the CBT check even though she knew she was authorized to pay only up to $5000 on accounts with insufficient funds.

Several days later, Citibank refused to honor the Citibank check because Strother had insufficient funds in that account. Strother had also written a check for $82,500 dated June 12 on his account at European American Bank ("EAB"), for deposit at Citibank. EAB refused to make payment on this check because of insufficient funds in the EAB account. On June 20, Strother wrote a second check on the EAB account for the same amount for deposit with Citibank, which EAB again refused to honor because of insufficient funds.

Accordingly, the only bank to make payment on any of the four checks was CBT. On June 20, Strother, Wollschleager, and Rose Sbalcio, the new branch manager at Saybrook, met to discuss the CBT check. Sbalcio testified that Strother said that his broker had purchased the Western bonds without his permission, and that Strother had to make immediate payment to avoid trouble with the SEC. According to Sbalcio, Strother stated that he planned on covering the check with a large interest payment that was scheduled on the Western bonds on June 15. Those interest payments were never made, however, because on June 14 federal regulators seized Western, which was insolvent. [A. 343-45]. Ethel Lees, an assistant vice-president at CBT, testified that at a subsequent meeting on June 23, Strother said that he did not ask Wollschleager to pay the check, but instead asked her to hold it. [A. 284]. Strother never covered the CBT check, and CBT thereby incurred a loss of $82,500.

At trial, in addition to proof of the June 9 phone conversation and surrounding events, the government produced substantial evidence regarding allegedly false exculpatory statements that Strother made to bank employees, including Sbalcio and Lees, and to FBI officials. Strother sought to introduce three internal bank memoranda as either business records or prior inconsistent statements. The district court excluded two of the memoranda, and admitted the third as a business record, but redacted most of the relevant portions. Strother, who did not testify or present any witnesses, was convicted after a three-day trial on the single count in the indictment. He was sentenced principally to twelve months' imprisonment, and now appeals.

DISCUSSION
1. Exclusion of Memoranda

Strother's principal contention on appeal is that the district court erroneously excluded from evidence two internal bank memoranda and statements from a third that were essential to his defense. He contends that each should have been admitted as either a business record or a prior inconsistent statement of Wollschleager. Through these memoranda, Strother sought to establish: that Wollschleager's testimony regarding the phone call was unreliable; that Strother never expressly or impliedly requested that CBT make payment on the check; and that Wollschleager authorized payment not based on Strother's assurances, but instead because of her own mistaken belief that sufficient funds had been wired into the CBT account. As the government conceded at oral argument, had Strother merely asked Wollschleager to hold, rather than pay, the check, no crime would have occurred. We will first review each of the memoranda, and then consider whether the district court erred in its rulings.

Wollschleager Memorandum

Wollschleager prepared a memorandum at Sbalcio's direction, which was dated June 22, 1989, thirteen days after her phone conversation with Strother (the "Wollschleager Memorandum"). Wollschleager testified that it was "the ordinary business of the bank to keep such" memoranda. [A. 262]. Similarly, Lees testified that it was the regular part of CBT banking practices to have reports generated by the employees involved in such incidents. [A. 278]. The Wollschleager Memorandum provided in relevant part that Strother called,

stating he expected a check to hit his account, but he was having a deposit wired in--the deposit was credited 6/12/89 and at the same time a check was presented in the amount of $82,500.00, the account showed that it was using unavailable funds. Because of the phone call, and Richard Strother being a known customer, and the deposit being made the check was paid and charged. [A. 142].

The memorandum did not make any reference to a request by Strother that Wollschleager pay the CBT check.

Probation Memorandum

CBT placed Wollschleager on probation because she failed to follow bank policy when approving payment on the CBT check. Sbalcio prepared a memorandum dated August 29, 1989 (the "Probation Memorandum") recounting the incident, which Wollschleager signed, confirming that she "discussed this memo to my file." [A. 143]. The memorandum states that Strother

told Christine that he was wiring funds into his account ... to cover a check that was to be presented for payment on that day.... On June 13, 1989, the morning overdraft report showed that one item was submitted for payment of $82,500 against unavailable funds of $82,500. Mr. Strother had not wired the funds to CBT but had deposited a check drawn on Citibank, N.A. Since Christine was unaware of this transaction, she approved payment of the overdraft. (emphasis added). [A. 143].

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