U.S. v. Walters, s. 89-2352

• Decision Date: 29 November 1990
• Docket Number: 89-3285 and 89-3286,89-2353,Nos. 89-2352,s. 89-2352
• Citation: 913 F.2d 388
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Norby WALTERS and Lloyd Bloom, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 388

913 F.2d 388

UNITED STATES of America, Plaintiff-Appellee, v. Norby WALTERS and Lloyd Bloom, Defendants-Appellants.

Nos. 89-2352, 89-2353, 89-3285 and 89-3286.

United States Court of Appeals Seventh Circuit.

Argued May 8, 1990.

Decided Sept. 17, 1990.

Rehearing Denied Nov. 29, 1990.

Thomas M. Durkin, Robert S. Rivkin, Asst. U.S. Attys., Barry R. Elden, Asst. U.S. Atty., Crim. Receiving, Appellate Div., Office of the U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Tyrone C. Fahner, Mayer, Brown & Platt, Matthew F. Kennelly, Cotsirilos, Crowley, Stephenson, Tighe & Streicker, Chicago, Ill., Robert Gold, Gold & Wachtell, New York City, Andrew Frey, Kerry E. Cormier, Mayer, Brown & Platt, Washington, D.C., Stuart E. Abrams, Mayer, Brown & Platt, New York City, for Norby Walters.

Steven F. Molo, George C. Lombardi, Dan K. Webb, Winston & Strawn, Chicago, Ill., for Lloyd Bloom.

Before BAUER, Chief Judge, MANION, Circuit Judge, and ESCHBACH, Senior Circuit Judge.

BAUER, Chief Judge.

Norby Walters and Lloyd Bloom were sports agents who specialized in representing college football players. Walters and Bloom would recruit young players still in college and secretly sign them to exclusive representation contracts. The players would then lie about the existence of their contracts on the amateur athletic eligibility forms they submitted to their universities. The athletes would then continue to receive scholarships from these universities and play football on the schools' teams. Walters and Bloom were convicted on charges of mail fraud, RICO violations and conspiracy for their participation in this scheme. They now appeal to this court, contending that several errors were committed during their trial that should render their convictions invalid. We believe that fundamental errors occurred at trial which prejudiced the defendants' ability to receive a fair trial. We, therefore, reverse and remand with instructions for a new trial.

I. BACKGROUND

Norby Walters, a former nightclub owner, and Lloyd Bloom, a 25-year-old, self-described salesman, together formed World Sports & Entertainment ("WS & E") in August 1984. In the past, Walters had represented entertainers such as the Jackson Five, Dionne Warwick and The New Edition. With their new enterprise, Bloom and Walters hoped to make the transition from managing musical entertainers to representing professional athletes.

Walters and Bloom would entice talented college football players to sign exclusive representation contracts with WS & E by providing signing bonuses in cash, no-interest loans, sports cars and other incentives. As it was in the interest of both the agents and their clients for the players to retain their college eligibility, the contracts were post-dated and the agreements were kept secret by both sides.

The National Collegiate Athletic Association ("NCAA") forbids players from signing with an agent or receiving compensation for athletics before the expiration of collegiate athletic eligibility. An athlete who violates these rules is considered to have waived his eligibility in return for payment, and can no longer compete in college athletics. Schools who are members of the NCAA require their players to submit forms testifying to the lack of such restrictions on their eligibility. The forms are then filed with the NCAA. Thus, the players who had signed agreements with Walters and Bloom would lie to their colleges on these eligibility forms in order to continue to receive scholarships and to play for their school teams.

Prior to beginning their enterprise, in January 1985, Walters and Bloom consulted with attorneys at the law firm of Shea & Gould in New York concerning the possible legal ramifications of these agreements. Lonn Trost, the head of the sports law department at Shea & Gould, informed the agents that while they were violating NCAA rules by signing athletes who then continued to play for their college teams, they were not violating any laws. Trost and other attorneys at Shea & Gould admit that they were aware that athletes would probably have to conceal this arrangement from their universities. They contend, however, that they were not aware that the athletes would lie openly on their NCAA eligibility forms.

Walters and Bloom were much more successful recruiters than agents or negotiators. In all, 58 college football players entered into representation agreements with WS & E. Only two players, however, continued the relationship after graduation from college. The vast majority felt cheated by Walters' and Bloom's clandestine tactics and signed with other agents prior to the NFL draft. Walters and Bloom again consulted with Shea & Gould to consider enforcement of the contracts. The agents were out not only their anticipated representation fees, but the loans they had made to the players up front. Their attorneys believed that the contracts were enforceable, but recommended against litigation. The government alleges, and several former clients testified, that Walters and Bloom personally threatened them in an attempt to enforce these contracts. One player, Maurice Douglas, was told his legs would be broken before the NFL draft if he did not repay his loan to WS & E.

On August 24, 1988, Walters and Bloom were charged in a seven-count indictment with mail fraud, RICO violations, and conspiracy in the Northern District of Illinois. ¹ Count I alleged conspiracy to engage in a pattern of racketeering activity, and Count VII alleged substantive violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), specifically 18 U.S.C. Sec. 1962(c) & (d). The predicate acts for these RICO charges included extortion, attempted extortion, mail fraud, wire fraud, collection of credit by extortionate means, and the use of interstate facilities in the furtherances of unlawful activity. Counts II-V separately charged the defendants with substantive mail fraud counts against the University of Michigan, Michigan State University, the University of Iowa and Purdue University, respectively, in violation of 18 U.S.C. Sec. 1341. Count VI alleged conspiracy to commit mail fraud in violation of 18 U.S.C. Sec. 371.

A jury trial was held before Judge George M. Marovich from March 6, 1989 through April 6, 1989. After a week of deliberation, the jury found Walters and Bloom guilty on five of the seven counts. The defendants were found not guilty of mail fraud against two of the universities under Counts III and IV. In a special verdict, the jury indicated that it did not find that Walters or Bloom had committed the extortion-related charges. On June 19, 1989, Judge Marovich sentenced Walters to five years in custody to be followed by five years probation. Bloom received a three-year sentence to be followed by five years probation. Both defendants moved for a new trial and upon the denial of this motion filed a timely notice of appeal.

II. DISCUSSION

On appeal, Walters and Bloom raise a series of challenges to the procedures followed at their trials. Two of these issues--the refusal by the court to tender an instruction that Walters' actions may have been predicated on the advice of counsel and the denial of Bloom's motion for severance--were sufficiently prejudicial to the defendants to warrant reversal of their convictions and a new trial.

A. Walters' Advice-of-Counsel Instruction

The linchpin of Walters' defense was that his actions were taken in good faith based upon the advice of his attorneys. If the jury accepted this characterization of the events, Walters could not have been considered to have formed the specific intent necessary to commit fraud upon the universities. See United States v. Martin-Trigona, 684 F.2d 485, 492 (7th Cir.1984) ("good faith, or the absence of an intent to defraud, is a complete defense to a charge of mail fraud.") This court has often stated, "[t]he defendant in a criminal case is entitled to have the jury consider any theory of the defense which is supported by the law and which has some foundation in the evidence, however tenuous." United States v. Briscoe, 896 F.2d 1476, 1512 (7th Cir.1990). See also United States v. Boucher, 796 F.2d 972, 975 (7th Cir.1986); United States v. Grimes, 413 F.2d 1376, 1378 (7th Cir.1969). On appeal, therefore, we must determine whether the evidence supports Walters' theory of good faith reliance on the advice of his counsel. See United States v. Kelley, 864 F.2d 569, 572 (7th Cir.1989).

In January of 1985, Walters met with attorneys at Shea & Gould. In March of that year, he began signing his first clients. Walters' discussions with counsel, therefore, predated the actions taken in violation of the NCAA rules. The government vigorously contends that Walters did not reveal to his attorneys that his clients would lie on eligibility forms. By not revealing this material fact, the prosecution argues, Walters cannot now raise the advice-of-counsel defense. Walters, however, stresses that he was not aware of these forms.

Both sides admit that Walters' counsel informed him that although he would be violating NCAA rules by concealing the early recruiting of these athletes, he would not break the law by signing these concealed arrangements. It is not unreasonable to assume that the sports law experts at Shea & Gould would be aware of the eligibility forms required of athletes by universities and the NCAA. Nor would it have been unreasonable for those attorneys to have considered how these forms might be addressed by Walters' technically ineligible clients. The lack of discussion could signal that Walters was unaware of the forms or that the Shea & Gould attorneys tacitly considered these forms in issuing their legal opinion.

The one possibility accepted by the court--that Walters simply chose to lie to his attorneys about his plans--seems patently unreasonable. Walters, by all accounts, was a rather unethical and unsavory businessman. He frequently operated outside the...