United States of America, Plaintiff-appellee, v. Billy H. Howton and Larry T. Lee, Defendants-appellants, 688 F.2d 272 (5th Cir. 1982)

These appeals had their genesis in an interstate confidence game whereby numerous well-known institutional investors were bilked out of millions of dollars. Since none of the points advanced for reversal turns on any feature of the scheme itself, only a general description of it is needed as background for our discussion. Additional facts of peculiar relevance to a particular point will be stated in our discussion of it.

The Scam Proper

In 1977 appellant Howton, together with one Reynolds, formed a corporation that ostensibly dealt in large packages of student loans guaranteed by the United States. Appellant Lee was a securities salesman in Memphis who, for a commission on all such sales there, handled transactions and touted the so-called "repos" as good investments. These were agreements by which appellants' corporation sold a loan package to a customer, agreeing to repurchase it after a stated time-usually 30 to 90 days-with interest. Failure to repurchase or extend the time for doing so was supposed to result in delivery of the actual student loans themselves to the customer.

And so the victims lined up, wiring their millions of dollars to the appellants and receiving "repo" agreements in return. These were not honored, and no one ever received any student loans; indeed, it is dubious that appellants ever had any. In time came the crash; indictments for mail, wire, and interstate travel fraud; and convictions on various counts. Reynolds has made his peace and is serving his time. Appellants draw before us various points that we consider one by one.

Joint Representation: Conflict of Interest?

Howton claims that the joint representation of himself and the other two defendants by one attorney denied his fifth and sixth amendment rights to conflict-free counsel. It is his contention that this joint representation permitted only one theory of defense, that no crime had been committed, and forced the abandonment of another, that one had been but Lee alone-who misrepresented the goods to investors-was responsible.

We have long held that, like the right to counsel of any kind, the right to conflict-free counsel can be waived. For this waiver to be effective, the record must show that the trial court ascertained that it was knowingly, intelligently, and voluntarily done:

In accordance with the foregoing principles, we instruct the district court to follow a procedure akin to that promulgated in F.R.Crim.P. 11 whereby the defendant's voluntariness and knowledge of the consequences of a guilty plea will be manifest on the face of the record. Cf. Boykin v. Alabama, 395 U.S. 238, 244, 89 S. Ct. 1709 (1712) 23 L. Ed. 2d 274, 280 (1969); McCarthy v. United States, 394 U.S. 459, 466, 89 S. Ct. 1166 (1170) 22 L. Ed. 2d 418, 425 (1969); United States v. Vera, 514 F.2d 102, 104 (5th Cir. 1975); United States v. Davis, 493 F.2d 502 (5th Cir. 1974). As in Rule 11 procedures, the district court should address each defendant personally and forthrightly advise him of the potential dangers of representation by counsel with a conflict of interest. The defendant must be at liberty to question the district court as to the nature and consequences of his legal representation. Most significantly, the court should seek to elicit a narrative response from each defendant that he has been advised of his right to effective representation, that he understands the details of his attorney's possible conflict of interest and the potential perils of such a conflict, that he has discussed the matter with his attorney or if he wishes with outside counsel, and that he voluntarily waives his Sixth Amendment protections. Cf. United States v. Foster, 469 F.2d 1 (1st Cir. 1972). It is, of course, vital that the waiver be established by "clear, unequivocal, and unambiguous language." National Equipment Rental v. Szukent, 375 U.S. 311, 84 S. Ct. 411, 11 L. Ed. 2d 354, 367-8 (1964). Mere assent in response to a series of questions from the bench may in some circumstances constitute an adequate waiver, but the court should nonetheless endeavor to have each defendant personally articulate in detail his intent to forego this significant constitutional protection. Recordation of the waiver colloquy between defendant and judge will also serve the government's interest by assisting in shielding any potential conviction from collateral attack, either on Sixth Amendment grounds or on a Fifth or Fourteenth Amendment "fundamental fairness" basis.

United States v. Garcia, 517 F.2d 272, 278 (5th Cir. 1975).

Bearing the rule of Garcia in mind, we have carefully examined the lengthy colloquy carried on between Howton-the only defendant raising this contention-counsel, and the court. We set it out in the margin.¹ 

The effectiveness of such waivers must be decided on the basis of the particular facts and circumstances of each case, including the background, experience, and conduct of the accused. Id. at 277 & n.5. Here the record reflects that at the time of trial Howton was 51 years of age, a graduate of Rice University, and a businessman of wide and varied experience. His testimony indicates intelligence, articulateness, and self-possession. Considering these things, along with the substance of the colloquy set out in the margin, we find ourselves unable to overturn the trial court's determination that Howton knowingly, intelligently, and voluntarily waived conflict-free counsel. In Rule 11 proceedings, to which Garcia, supra, likens such waivers, we review similar determinations under the clearly erroneous rubric. United States v. Dayton, 604 F.2d 931 (5th Cir. 1979) (en banc). We see no reason to apply a different standard here, especially in view of the Supreme Court's recent decision in Pullman-Standard v. Swint, --- U.S. ----, 102 S. Ct. 1781, 72 L. Ed. 2d 66 (1982).

The ruling below was not clearly erroneous. Since it was not and Howton was correctly determined to have waived any conflict or potential conflict of interest, we need not pass on the other contention of the United States under this head, that no actual conflict existed.

Withholding of the Report

In a much slighter point, Howton complains of the refusal of the trial court to order production of a report that a witness admitted he had reviewed several weeks before testifying. The witness, a peace officer, had participated in preparing the report, that of an investigation into the death of one Arbab (Bob) Kahn, an associate of Howton. Citing Rule 612, Fed.R.Evid., Howton called for production of the entire report. The court refused this, based upon objection that the report contained sensitive matter. It did, however, grant Howton's request that the court review the report in camera, doing so and concluding that it was not germane to the matter covered with the witness on direct.²  It therefore did not require disclosure of the report. Despite retention of the report by the court in case later testimony might implicate it, Howton never sought to subpoena it for use in his own presentation.

There is no error here. To the contrary, it appears that the court faithfully and correctly followed the provisions of Rule 612.³ 

The above disposes of Howton's points of error, and we now turn to those advanced by Lee.

Count 27: Obstruction of Justice

Lee was indicted and convicted of obstruction of justice grounded in false testimony that he gave the grand jury concerning commissions paid Memphis stock salesmen by him, commissions that he falsely characterized as loans. In pertinent part, the indictment charged:

1. The Federal Grand Jury for the Southern District of Texas, during May and June of 1980, was conducting an investigation into possible violations of the mail fraud and wire fraud statutes, Title 18, United States Code, Sections 1341 and 1343, concerning FFG and its president and vice-president, BILLY H. HOWTON and VINING TOWNER REYNOLDS, JR.

2. It was material to the aforesaid Grand Jury investigation to determine whether certain payments made to securities salesmen in Memphis, Tennessee, by LARRY T. LEE were fees or commissions related to repurchase agreements involving GSLs and FFG. It was further material to said Grand Jury investigation to determine whether two checks in the amount of one thousand two hundred fifty ($1,250) dollars each paid by LARRY T. LEE to Danny Stallings, containing the notation "fee" and "final on GSL transaction" were related to the repurchase agreements involving GSL and FFG.

3. On June 17, 1980, the defendant LARRY T. LEE appeared before the Grand Jury and corruptly endeavored to obstruct the due administration of justice by testifying falsely concerning the purpose of the two checks in the amount of one thousand two hundred fifty ($1,250) dollars each paid by LARRY T. LEE to Danny Stallings. That is, during his Grand Jury appearance on June 17, 1980, the defendant LARRY T. LEE responded to the questions listed below and testified falsely under oath as follows:

Q: And there is-Looking through the checking account, back there in that same period of time, I think the summer of '79, there is a couple of $1,250 checks to Daniel Stallings. What are these for?

A: I don't remember. I loaned Danny Stallings money, too. I loaned a lot of people money last year. I'd like to have it back right now.

Q: Stallings never paid you back?

A: Not all of it; some of it.

Q: How much did he pay you back?

A: I don't know. I'd have to look at my records.

Q: That was-Those are two loans?

A: To the best-to the best of my knowledge, both of those were loans.

Q: You can't think of anything else that possibly could have been?

A: No.

Q: Except loans?

A: No.

Lee makes two complaints connected with his conviction on this count.

The first, sufficiently meritless as properly to be characterized as frivolous, is that by instructing the jury that the above testimony was "material" the court partially directed a verdict of guilty. To the contrary, it is settled that the issue of materiality in such and similar prosecutions is "a question of law for determination by the court." United States v. Baker, 626 F.2d 512, 514 n.4 (5th Cir. 1980).

The second, of somewhat more substance, is that Lee's testimony mischaracterizing the commissions, though perhaps false, did not have the effect of closing off avenues of inquiry entirely to the grand jury. Assuming, without deciding, that "merely false" testimony might not furnish a proper basis for a charge of obstruction of justice, we conclude that Lee's testimony was not "merely false." See United States v. Griffin, 589 F.2d 200 (5th Cir. 1979). As the United States correctly points out, had the grand jury believed Lee's false testimony that the payments in question represented loans rather than sales commissions, the Memphis dimension of the scam might never have been uncovered, and Lee might never have been prosecuted. Thus it represented a bold effort to abort that phase of the investigation entirely. This aspect of it therefore removes it from the realm of "mere" perjury and places it squarely in the Griffin line as obstruction of justice.

Prejudicial Evidence

Lee's final complaint is of the admission of evidence related to the murder of Arbab (Bob) Kahn, an associate of the conspirators with whom funds derived from the scam were placed for investment in precious metals. Kahn, subpoenaed by the grand jury to testify regarding the scheme and the funds he had received from it, was found shot to death in a remote area near Houston a few days before he was to appear. This evidence was received in connection with another count (26) of the indictment, one of which Lee was subsequently acquitted, charging that he obstructed justice by falsely testifying to the grand jury that he did not know Kahn and believed he was not in Houston on the weekend of Kahn's murder.

It is Lee's theory that this evidence was both irrelevant to any issue in the case and so highly prejudicial that it tainted his convictions on the other two counts, that just discussed and one of mail fraud. A major difficulty with accepting this contention, however, arises from the circumstance that Lee is able to point out no objection made at trial referable to any such theory. He could have objected to the receipt of evidence of Kahn's death on Rule 403 grounds,⁴  moved for severance or separate trial of the count, or perhaps objected to the jury charge. Since he did none of these things, our review may notice only plain error-one "so obvious that our failure to notice it would seriously affect the fairness, integrity, or public reputation of (the) judicial proceedings and result in a miscarriage of justice." United States v. Graves, 669 F.2d 964, 971 (5th Cir. 1982).

No such error is present here. In the first place, the evidence was not, as Lee asserts, irrelevant to any issue in the case. The grand jury was concerned with the murder of its subpoenaed witness Kahn and, though it was not strong, there was evidence indicating a connection between Lee and that witness. Lee, however, in grand jury testimony denied knowing Kahn and denied being in Houston at the time of his death. The grand jury, therefore, indicted Lee for obstruction of justice on the basis of these denials. We cannot say that this indictment was groundless, though in the event it failed of proof; and the evidence that Kahn was killed and when was relevant to it. In the second, the evidence connecting Lee to Kahn was, as we have said, very weak-sufficiently so that the court granted a motion for acquittal on count 26. We cannot presume that, though the government failed in its attempt to connect Lee to Kahn, the jury acted so irrationally as even so to convict Lee of two unrelated crimes because it knew that someone with whom the prosecution failed to connect Lee significantly was killed. Especially is this so when the evidence properly supporting these convictions was ample, sufficiently so that it is not drawn in question on this appeal.

Conclusion

Since neither Howton's nor Lee's claims on appeal present reversible error, their convictions on all counts are

AFFIRMED.