U.S. v. Tierney

• Decision Date: 23 December 1991
• Docket Number: No. 89-2479,89-2479
• Parties: -5742, 91-2 USTC P 50,509 UNITED STATES of America, Appellee, v. Thomas W. TIERNEY, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 854

947 F.2d 854

68 A.F.T.R.2d 91-5742, 91-2 USTC P 50,509

UNITED STATES of America, Appellee, v. Thomas W. TIERNEY, Appellant.

No. 89-2479.

United States Court of Appeals,

Eighth Circuit.

Submitted Oct. 10, 1990.

Decided Oct. 17, 1991.

Rehearing and Rehearing En Banc

Denied Dec. 23, 1991.

Willard B. Bunch, Kansas City, Mo., for appellant.

Robert E. Lindsay, Washington, D.C., for appellee.

Before McMILLIAN, Circuit Judge, ROSS, Senior Circuit Judge, and STUART, ^* Senior District Judge.

McMILLIAN, Circuit Judge.

Thomas W. Tierney ("defendant") appeals from a final judgment entered in the United States District Court ¹ for the Western District of Missouri upon a jury verdict, finding him guilty of one count of conspiracy to defraud the United States in violation of 18 U.S.C. § 371 (1988), and fifteen counts of assisting in the preparation of materially false income tax returns in violation of 26 U.S.C. § 7206(2). The district court sentenced him to three years in prison, a $10,000 fine, payment of the costs of prosecution, and two years of probation. For reversal, defendant argues that (1) the district court erred in denying certain motions, (2) the district court should have quashed the indictment because the prosecutor acted under a conflict of interest, (3) his conviction was not supported by sufficient evidence, (4) the district court erroneously provided the jury with an incomplete exhibit, and (5) the district court should have directed a mistrial due to jury misconduct. For the reasons stated below, we affirm the judgment of the district court.

I.

Between 1981 and 1984, defendant served as general counsel of the Midwestern Companies, Inc. ("Midwestern"). Between 1983 and 1984, he also served as a director of Midwestern. In 1982, Titan Energy Engineering, Inc. ("Titan"), a subsidiary of Midwestern, built and sold four ethanol plant facilities in New Mexico (known as "Clovis I through IV") to partnerships as tax shelters. Under Internal Revenue Service (IRS) regulations, the partners could not take advantage of relevant tax credits unless, inter alia, they provided documentation that the plants were "placed in service" by the end of 1982. See 26 C.F.R. § 1.46-3(d) (1991). The parties' versions of all other relevant facts differ dramatically.

The federal government (or "the government") claims that, in December 1982, defendant, Ronald Walker, Midwestern's executive vice-president, and Tom Jackson, a pilot and administrative assistant, visited the plants three times and observed that they were not operational. Defendant also drafted letters to the IRS certifying the plants as operational, which Paul Liscom (a independent chemical engineer hired to inspect the plants) was expected to sign after visiting the plants.

On December 29, 1982, Liscom inspected the plants and discovered that the plants were still under construction and that none of the plants was ready to produce ethanol. After completing his inspection, Liscom visited Larry Kruzie and Ken Sinks, two of Titan's cofounders, at Kruzie's house. Sinks gave Liscom the certification letter drafted by defendant and asked Liscom to sign it. Liscom refused to do so, because the plants were not operational. Sinks then telephoned Walker, who allegedly brought defendant into a conference call. Sinks and Liscom testified that defendant told Liscom that the plants were technically operational within the meaning of IRS regulations. Liscom testified that he then agreed to sign the certificates, on the condition that defendant create a glossary explaining his definitions of relevant terms and attach the glossary to the certificates. After the glossaries were prepared, Liscom signed the certificates. By contrast, Walker testified that Liscom prepared the glossaries and that defendant merely approved them.

In January 1983, defendant, Walker, and Carl Baron, one of Midwestern's accountants, visited New Mexico to see a demonstration of one of the plants. Walker later testified that the demonstration was a complete failure. In February 1983, defendant, Walker and Carl Wright, Midwestern's secretary-treasurer, allegedly decided not to inform the partnerships that the plants were incomplete and to prepare partnership tax returns falsely claiming tax credits. They also allegedly decided to leave a "paper trail" giving the appearance that the plants were complete, by backdating 1983 bills as 1982 bills and classifying construction work as repair work.

In March 1983, the Curry County, New Mexico, district attorney investigated Midwestern, because Midwestern had built the plants with industrial revenue bonds, and the district attorney was concerned about possible misuse of bond funds. Based on defendant's assurances that bond funds had been properly spent, the district attorney closed his investigation. In the fall of 1983, the district attorney reopened the investigation, because Midwestern had failed to provide information about its expenditures. Defendant was eventually convicted in a New Mexico state court of fraud, conspiracy to commit fraud, criminal solicitation and racketeering.

By contrast, defendant claims that the government's witnesses committed perjury, and that he did not participate in the preparation of the partnerships' 1982 tax returns. Defendant also denies visiting the ethanol plants in December 1982 and denies that he participated in the December 29, 1982, conference call. Defendant also claims that even if he was involved in the 1982 certification, he believed in good faith that the plants were "placed in service" as defined by IRS regulations. In this context, defendant notes that the regulations were ambiguous and alleges that by the end of 1982 the plants had begun to produce some ethanol.

Finally, defendant denies committing any acts of fraud in 1983. For instance, defendant claims that his co-workers were to blame for any fraudulent billing, and for any alleged misrepresentations made to the government officials.

In 1987, defendant, Walker, Wright and Sinks were indicted. The indictment charged defendant with securities fraud, insider trading, overvaluation of assets, conspiracy to defraud the United States, and aiding the preparation of false tax returns. Specifically, the government claimed that defendant had repeatedly attempted to mislead the IRS by falsely claiming that the ethanol plants were "placed in service" at the end of 1982 and by overvaluing the plants.

Shortly thereafter, defendant moved to quash the indictment, based on an alleged conflict of interest by the prosecutor. The district court denied this motion. See United States v. Tierney, No. 87-00007-01/04/CR-W-6 (W.D.Mo. Mar. 18, 1987) (Tierney I ). After a three-week jury trial, the district court entered a directed verdict for defendant on the issue of overvaluation. The jury then acquitted defendant of all securities-related offenses and convicted him of conspiracy to defraud the United States and fifteen counts of assisting in the preparation of false tax returns.

Defendant then appealed his conviction to this court. Shortly after oral argument, defendant filed a motion for a new trial, based on newly discovered evidence. As a result, we dismissed defendant's appeal without prejudice and remanded to the district court for consideration of defendant's motion. See United States v. Tierney, No. 88-1111WM (8th Cir. Feb. 13, 1989). The district court denied the motion and a subsequent motion for reconsideration. See United States v. Tierney, No. 87-00007-01-CR-W-6 (W.D.Mo. Aug. 1, 1989) (Tierney II ) (order denying motion for new trial); United States v. Tierney, 718 F.Supp. 748 (W.D.Mo.1989) (Tierney III ) (order denying motion for reconsideration). This appeal followed.

II.

On appeal, defendant argues that (1) his motions for a new trial and for reconsideration should have been granted, (2) the prosecutor labored under a conflict of interest, (3) his conviction was not supported by sufficient evidence, (4) a partial copy of § 1.46-3(d) was inappropriately submitted to the jury, and (5) he was denied due process because of jury misconduct. Each of these issues will be addressed in turn.

A.

In his motion for a new trial, defendant alleged that newly discovered evidence proved that his conviction was obtained by the prosecution's negligent use of perjured or erroneous testimony. Specifically defendant challenges (1) various witnesses' testimony regarding the December 29, 1982, conference call and (2) testimony by Jackson and Walker alleging that defendant was present at the ethanol plant sites in December, 1982. ² Each issue will be addressed below.

1.

As noted above, several government witnesses claimed that on December 29, 1982, defendant participated in a conference call with Sinks, Walker, Liscom and Larry Skelley, the general contractor who built the plants. In the conference call, defendant allegedly persuaded Liscom to sign certificates which falsely described the ethanol plants as operational, and which included a glossary redefining relevant terms. By contrast, defendant testified that he did not participate in the December 29 conference call at all. Thus, the government witnesses' testimony damaged defendant's credibility and established that defendant was aware that the plants were not yet operational under a dictionary definition of that term.

Fifteen months after trial, defendant discovered Walker's telephone billing records in a repository used by a law firm in related civil litigation. These records revealed that "no call from Walker to Tierney in Kansas City was billed to the Walker home telephone number," Tierney II, slip op. at 6. Defendant accordingly moved for a new trial on the basis that the telephone records showed that he did not participate in the December 29 call. The district court denied the motion because the December 29 call could have been billed to Walker's office number. Id.

Shortly thereafter, defendant discovered...