United States v. Banks

Citation761 F.3d 1163
Decision Date04 August 2014
Docket Number11–1492.,11–1489,11–1488,Nos. 11–1487,11–1491,11–1490,s. 11–1487
PartiesUNITED STATES of America, Plaintiff–Appellee, v. David A. BANKS, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Kendrick Barnes, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Demetrius K. Harper, a/k/a Ken Harper, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Clinton A. Stewart, a/k/a C. Alfred Stewart, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Gary L. Walker, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. David A. Zirpolo, Defendant–Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)


Charles Henry Torres of Charles H. Torres, P.C., Denver, CO, on the briefs for DefendantAppellant David A. Banks.

Gwendolyn Maurice Solomon, Colorado Springs, CO, and Joshua Sabert Lowther of the National Federal Defense Group, Savannah, GA, on the briefs for DefendantsAppellants Kendrick Barnes, Demetrius K. Harper, Clinton A. Stewart, Gary L. Walker, and David A. Zirpolo.

John F. Walsh, United States Attorney, James C. Murphy, Assistant United States Attorney, and Matthew T. Kirsch, Assistant United States Attorney, Denver, CO, on the brief for PlaintiffAppellee.

Before HARTZ, BALDOCK, and HOLMES, Circuit Judges.

HOLMES, Circuit Judge.

DefendantsAppellants David A. Banks, Kendrick Barnes, Demetrius K. Harper, Clinton A. Stewart, Gary L. Walker, and David A. Zirpolo (collectively Defendants) were convicted following a jury trial in the District of Colorado of multiple counts of mail fraud and wire fraud in violation of 18 U.S.C. §§ 1341 and 1343, and conspiracy to commit mail fraud and wire fraud in violation of 18 U.S.C. § 1349.1 Defendants were sentenced to terms of imprisonment ranging from 87 to 135 months. Defendants assert the following four issues on appeal: (1) their right to a speedy trial was violated when the district court granted multiple continuances of the trial date (at Defendants' request); (2) the district court compelled co-Defendant Barnes to testify in violation of his Fifth Amendment privilege against self-incrimination and failed to give a proper curative instruction; (3) the district court abused its discretion in excluding the testimony of two witnesses Defendants sought to call at trial; and (4) the cumulative effect of the district court's otherwise harmless errors prejudiced them and requires reversal.2 Exercising our jurisdiction under 28 U.S.C. § 1291, we affirm.

I 3

Defendants operated or were associated with the entities Leading Team, Inc. (“LT”) and DKH, Inc. (“DKH”). LT and DKH were formed to produce and assist in the production of software. In 2003, Defendants stopped operating LT and began operating a third entity, IRP Solutions Corporation (“IRP”). IRP was formed to produce computer software, including a software program called Case Investigative Life Cycle (“CILC”), that would supposedly provide a nationally accessible database for law-enforcement agencies, “computerize their systems,” and “prevent hacking and identity theft.” R., Vol. 2, at 1288 (Jury Trial Tr., dated Sept. 29, 2011) (Test of Karen Chavez of Today's Office Staffing); see also id. at 845 (Jury Trial Tr., dated Sept. 27, 2011) (explanation of co-Defendant Harper that he intended the software to “help our men and women on the front lines against terrorism, against cyber crimes, to help them do their jobs better”); id. at 862–63 (explanation of co-Defendant Stewart that he expected the software to eliminate “process inefficiencies, like the ones that law enforcement officials did not connect the dots from one piece of intelligence information to another, which was the route that caused 9/11”). Mr. Walker was the President of IRP, Mr. Banks was the Chief Operating Officer, and the remaining Defendants held other executive positions.

Beginning around October of 2002, acting on behalf of DKH, LT, and IRP, Defendants contacted numerous staffing agencies to “assist in providing temporary services.” Id. at 1638 (Jury Trial Tr., dated Oct. 3, 2011) (Test. of Courtney Mullen of The Computer Merchants). Most of these staffing companies provide two core services: “staff augmentation and payrolling.” Id. at 2619 (Jury Trial Tr., dated Oct. 12, 2011) (Test. of Joseph Thurman of Innovar Group). In the first type of transaction—staff augmentation—“clients” like Defendants' entities “ask for certain skills,” and the staffing company's “recruiters ... find candidates” with those skills “and then place them on assignment.” Id. at 1015 (Jury Trial Tr., dated Sept. 28, 2011) (Test. of Donald Crockett of CTG, Inc.). By contrast, in the second type of transaction—payrolling—the client has already pre-selected individuals it would like the staffing company to retain. The staffing company therefore simply hires those individuals for the client and subsequently pays those employees' wages and handles their taxes and workers' compensation. Id. at 741–42 (Test. of Renee Rodriquez of Express Employment Professionals); see id. at 693 (Test. of Scott Tait of Adecco) (“Payrolling is where the company already knows who they want to hire, they run it through us as W2'd employees, so that they are covered under their insurance and workman's comp, unemployment and the risk liability.”). The staffing company receives a premium for its services in both of these transactions. However, because in a payrolling transaction the staffing company is “not doing as much work,” its “profit margin is significantly lower.” Id. at 1507 (Jury Trial Tr., dated Sept. 30, 2011) (Test. of Susan Slakey of ESG Consulting).

As is relevant here, witnesses from multiple staffing companies testified that a Defendant (or someone acting as Defendants' agent) approached them and expressed the desire for payrolling services. One exemplar transaction, as described by a representative of ESG Consulting, arose when Mr. Banks, on behalf of IRP, contacted ESG regarding “a project that [IRP] wanted ESG to support them with by bringing in a consultant to do some technical work.” Id. at 1476. In that particular transaction, Mr. Banks requested that ESG retain [t]he services of Kendrick Barnes for IRP.4Id. at 1477. No doubt aware that payrolling “isn't that lucrative for the [staffing] company,” id. at 1639, Mr. Banks assured ESG that IRP was developing software for “Homeland Security, FBI and [the] police,” id. at 1476. He did so presumably to signify that IRP's “business was to grow,” id. at 1639, and that, because IRP “had money coming in through the software they were developing for Homeland Security and other government entities,” id. at 1491, ESG (and the other staffing companies) could expect more lucrative transactions with IRP in the future. See also id. at 1400 (Test. of Gregory Krueger of Agile 1) (explaining that, from his company's perspective, if Defendants' companies “were actually in business and engaging in a source of revenue, then we knew we were going to be paid for providing our payrolling service”); id. at 1414 (noting that co-Defendants Stewart and Harper “led [his staffing company] to believe that the business was being conducted” and “that DKH was invoicing a [law-enforcement] client and getting paid for the work it was performing” vis-à-vis software development).

In other words, the staffing-company witnesses testified that they were induced into believing that Defendants' companies were either doing business with major law-enforcement agencies or were on the verge of selling CILC software to these agencies. These witnesses also testified that Defendants (or Defendants' agents) assured them that this alleged law-enforcement business would enable Defendants' companies to pay the staffing companies' invoices—and, critically, that they relied on these representations in choosing to do business with Defendants. See, e.g., id. at 726 (affirming that [we] made a decision to engage in business based on ... contacts [Defendants] may have had”); id. at 763 (noting that the effect of Defendants' representations concerning law-enforcement contacts was [a] large one” because those government agencies are considered “stable customers”). As a result, the staffing companies agreed to hire Defendants' pre-selected contract employees and pay their salaries. For example, in the situation detailed above, ESG hired Mr. Barnes “as a W2 employee, which means [ESG was] responsible for paying him, for paying all payroll taxes and statutory insurance and taxes on him.” Id. at 1482.

Trial testimony from representatives of the law-enforcement agencies with whom Defendants claimed to be doing business—including the Department of Homeland Security (“DHS”), the New York City Police Department (“NYPD”), and the Department of Justice (“DOJ”)—revealed the falsity of Defendants' representations to the staffing companies. These witnesses averred that Defendants' companies had not, in fact, sold CILC software to their respective agencies and, moreover, that Defendants lacked any basis for believing that any such sales were imminent. See id. at 1135 (Test. of Paul Tran of DHS) (answering “no” to the question, [D]id you make any representations that [DHS] would buy the CILC software?”); id. at 2977–78 (Jury Trial Tr., dated Oct. 17, 2011) (Test of Steven Cooper of DHS) (answering “no” to the question, [W]ould you have made any statements that would have suggested that [DHS] was going to buy their software?”).

The cracks in the foundation of misrepresentations constructed by Defendants began to show when the time came for the staffing companies to be compensated by Defendants' companies for having paid the contract employees' wages. Seeking remuneration for their services, the staffing companies would send invoices to Defendants' companies to cover the wages and a small markup. See, e.g., id. at 697 (“Adecco paid [the employees of] DKH.... And Leading Team was supposed to pay Adecco.”)...

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