F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
APR 24 2001
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 00-6187
DAVID L. ARNEY,
Defendant - Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D. Ct. No. CR-99-104-L)
Stephen Jones, Stephen Jones & Associates, Enid, Oklahoma, appearing for Appellant.
Joe Heaton, First Assistant United States Attorney (Daniel G. Webber, Jr., United States
Attorney, with him on the brief), Office of the United States Attorney, Oklahoma City,
Oklahoma, appearing for Appellee.
Before TACHA, Chief Judge, BRORBY, and MURPHY, Circuit Judges.
TACHA, Chief Judge.
Appellant was convicted in a jury trial of four counts of bank fraud. Appellant
argues that the district court improperly administered an Allen instruction to the jury,
committed reversible error in excluding the testimony of an expert witness, admitted
evidence in violation of Rule 404(b) of the Federal Rules of Evidence, and improperly
redacted a note attached to an exhibit which was admitted into evidence. We exercise
jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.
I. Background
On June 15, 1999, appellant David L. Arney was indicted on four counts of bank
fraud. The indictment alleged that, during a four-year period between 1990 and 1993,
Mr. Arney submitted to two banks false federal income tax returns reflecting an inflated
income in an effort to secure lines of credit.
Mr. Arney did not deny that the tax returns submitted by him to the banks were
different from those filed with the IRS. He admitted that, at the time he submitted to the
banks the documents that appeared to be federal income tax returns, he had not filed his
tax returns. He argued, however, that his intent in delaying the filing of his tax returns
was not to defraud the banks, but to maximize his recovery from Koch Oil Company in a
previous litigation.1 While conceding that the documents submitted to the banks appeared
1
According to Mr. Arney, Koch Oil Company’s pipeline broke in 1989, causing an
oil spill on Mr. Arney’s property. Mr. Arney and his family filed suit against Koch Oil.
The parties ultimately settled in 1990. During his trial for bank fraud, Mr. Arney
acknowledged that he did not timely file his 1989 and 1990 federal tax returns because he
did not want to give Koch Oil access to his financial information. Koch Oil had formally
requested copies of Mr. Arney’s federal tax returns. Through past experience with an oil
spill on his grandfather’s land, he testified that he believed providing Koch Oil with his
financial information would impair his chance for a substantial recovery. In his bank
fraud trial, Mr. Arney testified that his decision to delay filing his tax returns was, in part,
in reliance on what he perceived as advice from his legal counsel. Mr. Arney testified
that he interpreted a “stick-um” from his counsel attached to the interrogatory as advice to
-2-
to be tax returns but were not, he argued that the information contained in the documents
was correct in all material respects. Furthermore, he argued that his delay in filing his
federal tax returns was not intended to defraud the banks, but was a strategic decision in
the Koch Oil litigation. Finally, he argued that the differences between the information
contained in the documents submitted to the banks and the information contained in the
federal tax returns that he subsequently filed are the result of a good faith mistake.2
Following various pretrial proceedings, Mr. Arney was tried in October 1999. The
jury in that case was unable to agree on a verdict. The district court declared a mistrial.
Mr. Arney’s retrial began on December 6, 1999. The jury heard testimony from
representatives of both banks and the IRS. In addition, Mr. Arney took the stand in his
own defense.
The case went to the jury on December 8. After deliberating for approximately
four hours, the jury sent a note stating: “Your Honor, we have been unable to reach a
unanimous decision. It does not appear that this will change. What should we do now?”
delay filing his returns because he would not have to produce tax returns that he had not
filed.
2
Mr. Arney testified that he prepared the documents submitted to the banks using
the modified accrual method of accounting. After receiving the financial settlement from
Koch Oil, Mr. Arney was audited by the IRS. The IRS agent performing the audit
insisted that Mr. Arney file his delinquent federal tax returns and that those returns be
prepared using the net bank deposit method. Mr. Arney testified that the difference
between these two methods explained the significant differences between the documents
he provided to the banks and his filed federal tax returns. At trial, he argued that he
believed in good faith that using the modified accrual method was permissible and that he
believed the documents prepared using this method were correct.
-3-
The district court then gave a supplemental Allen instruction and directed the jury to
continue deliberating. Approximately one hour later, the jury returned its verdict finding
Mr. Arney guilty on all four counts of the indictment.
On appeal, Mr. Arney argues that the district court committed reversible error in
four respects: (1) in administering the Allen instruction because it was coercive, (2) in
excluding the testimony of Mr. Arney’s expert, (3) in admitting evidence presented by the
government in violation of Rule 404(b) of the Federal Rules of Evidence, and (4) in
redacting a note from Mr. Arney’s counsel during the Koch Oil litigation attached to one
of Mr. Arney’s exhibits.
II. Discussion
A. The Allen Charge
An Allen charge derives its name from the supplemental jury instruction approved
by the Supreme Court in Allen v. United States, 164 U.S. 492, 501-02 (1896). “The
purpose of such a charge is to encourage unanimity (without infringement upon the
conscientious views of each individual juror) by urging each juror to review and
reconsider the evidence in the light of the views expressed by other jurors, in a manner
evincing a conscientious search for truth rather than a dogged determination to have one’s
way in the outcome of the deliberative process.” United States v. Smith, 857 F.2d 682,
683-84 (10th Cir. 1988).
-4-
This circuit has repeatedly urged caution in the use of Allen charges. See, e.g.,
United States v. Rodriguez-Mejia, 20 F.3d 1090, 1091 (10th Cir. 1994); United States v.
Butler, 904 F.2d 1482, 1488 (10th Cir. 1990). “In this circuit an Allen charge can be
given if it is not impermissibly coercive.” United States v. Porter, 881 F.2d 878, 888
(10th Cir. 1989). We review an Allen charge for coerciveness “in its context and under
all the circumstances.” Lowenfield v. Phelps, 484 U.S. 231, 237 (1988) (internal
quotation marks omitted); accord Porter, 881 F.2d at 888 (“In determining whether an
Allen instruction is permissible, the Tenth Circuit ‘has made a case by case examination
to determine whether the taint of coercion was present.’” (quoting Munroe v. United
States, 424 F.2d 243, 246 (10th Cir. 1970) (en banc))). Some of the factors we consider
in making this determination include: (1) the language of the instruction, (2) whether the
instruction is presented with other instructions, (3) the timing of the instruction, and (4)
the length of the jury’s subsequent deliberations. Mason v. Texaco, Inc., 948 F.2d 1546,
1557 (10th Cir. 1991) (factor 4); Porter, 881 F.2d at 888 (factors 1-3).
We turn first to the language of the Allen charge.3 “‘[T]he inquiry in each case is
3
The court instructed the jury as follows:
This is an important case. The trial has been extensive. Your failure
to agree upon a verdict will necessitate another trial and require the parties
once again to undergo the investment of time and effort and the stress of
trial. The court is of the opinion that the case cannot be again tried better or
more exhaustively than it has been on either side. It is therefore very
desirable that you should agree upon a verdict.
The court does not desire that any juror should surrender his or her
-5-
whether the language used by the judge can be said to be coercive, or merely the proper
exercise of his common law right and duty to guide and assist the jury toward a fair and
impartial verdict.’” Porter, 881 F.2d at 889 (quoting United States v. Winn, 411 F.2d 415,
416 (10th Cir. 1969)). Although the district court emphasized that a verdict was “very
desirable” and expressed an opinion that the case could not be tried better by either side,
the remainder of the instruction properly and clearly emphasized that no “juror should
surrender his or her conscientious convictions” and that each juror should consider his or
her opinion “with a proper regard and deference to the opinion of [the others.]”
Additionally, the charge given to the jury in this case was what we have referred to as a
“modified” Allen charge, differing from a traditional Allen charge by asking each juror,
rather than only those in the minority, to carefully reconsider the evidence. Id. at 888. By
being directed at all jurors rather than only those holding the minority view, a modified
conscientious convictions. Each juror should perform his or her duty
conscientiously and honestly according to the law and evidence. The
verdict to which a juror agrees must, of course, be his or her own verdict,
the result of his or her own convictions and not a mere acquiescence in the
conclusions of his or her fellow jurors. However, in order to bring 12
minds to a unanimous result you must examine the questions submitted to
you with candor and with a proper regard and deference to the opinion of
each other. You should consider that the case must at some time be
decided, that you are selected in the same manner and from the same source
from which any future jury must be, and there is no reason to suppose that
the case will ever be submitted to 12 men and women more intelligent,
more impartial or more competent to decide it; or that more or clearer
evidence will be produced on one side or the other. You may conduct your
deliberations as you choose, but I suggest you now retire and carefully
consider again the evidence in this case.
-6-
Allen charge reduces the possibility of coercion. Lowenfield, 484 U.S. at 237-38; United
States v. Reed, 61 F.3d 803, 805 (10th Cir. 1995); Porter, 881 F.2d at 889. We hold that
the language of the Allen charge was not coercive, but was a proper exercise of the
district court’s duty to guide and assist the jury.
Mr. Arney argues that giving the Allen instruction during the course of jury
deliberations unduly emphasized the importance of reaching a verdict, thereby coercing
the jury. “The use of a supplemental [Allen] charge has long been sanctioned.”
Lowenfield, 484 U.S. at 237. “This court has previously emphasized that there is no per
se rule against giving an Allen charge after a jury has commenced deliberations.” Porter,
881 F.2d at 889. Although this court has stated that the preferred practice is to issue an
Allen charge prior to jury deliberations along with other jury instructions, id., we have
found on numerous occasions that Allen charges given to a jury during its deliberations
were not unduly coercive. See, e.g., Reed, 61 F.3d at 805; Butler, 904 F.2d at 1487-88;
Porter, 881 F.2d at 889; United States v. McKinney, 822 F.2d 946, 950-51 (10th Cir.
1987); Munroe, 424 F.2d at 247.
In addition to looking to whether an Allen instruction was incorporated with other
instructions and given prior to the commencement of jury deliberations, we also look to
whether the Allen charge was given before the jury reached an impasse. Porter, 881 F.2d
at 889. Mr. Arney argues that the Allen instruction was coercive because it was given
after the jury had indicated that it was deadlocked and without any indication from the
-7-
jury that it could reach a verdict. While we have noted “the inherent danger in this type
of instruction when given to an apparently deadlocked jury” and have urged that, if given
at all, an Allen charge “be incorporated in the body of the original instructions,” we have
given this counsel “in the form of a suggestion.” Munroe, 424 F.2d at 246 (internal
quotation marks omitted). While the preference is that the Allen instruction be given
prior to impasse or deadlock, Smith, 857 F.2d at 684, we have not adopted this as a per se
rule.
Mr. Arney argues that an Allen instruction given to a deadlocked jury is coercive
unless the jury, after receiving the Allen charge, indicates that they are not hopelessly
deadlocked. Cf. Porter, 881 F.2d at 889 (noting juror’s indication, after receiving Allen
instruction, that they could reach verdict indicated they were not hopelessly deadlocked
and reduced possibility of coercion). While we agree that such an indication is
preferable, we have previously upheld Allen instructions even where the jury has
indicated that it could not reach a verdict and the district court did not inquire whether the
jury could overcome the impasse. See, e.g., Reed, 61 F.3d at 805; Butler, 904 F.2d at
1487-88; McKinney, 822 F.2d at 950; see also 2A Charles Alan Wright, Federal Practice
and Procedure § 502, at 530-31 (3d ed. 2000) (“The court is not required to accept the
judgment of a jury that it is hopelessly deadlocked, and may require it to continue
deliberating, but may not say anything having a coercive effect on the members of the
jury.” (footnote omitted)).
-8-
Additionally, Mr. Arney argues that other timing factors created a coercive context
for the jury deliberations. Specifically, he argues that the Allen instruction was coercive
because it was given between 5:00 and 5:30 in the evening. He argues that the time,
combined with the district court’s question about whether any of the jurors needed to
move their cars and assurance that the jurors would be accompanied to their cars once it
was dark, was coercive because it implied that the jurors would not be permitted to leave
until they reached a verdict. He argues further that the timing was even more coercive
because the district court did not ask the jurors questions such as whether they wanted a
break for dinner, or whether they needed to call home.
The district court advised the jury on the first day of trial that the jury would be
excused by approximately 6:00 p.m. on the first two days of trial. We discern no reason
why, on the third day of trial, the jury would find continued deliberations at 5:30 p.m.
unusual or coercive. Additionally, the jury was deliberating on December 8. We take
judicial notice of the fact that days are shorter and darkness comes earlier in December
than in other months. Thus, the jurors would have to walk in darkness to their cars at a
much earlier hour than during summer months. In context, we find that the district
court’s assurance that jurors would be accompanied to their cars after dark reduced the
possibility of coercion, rather than increased it, by alleviating any potential concern the
jurors may have felt for their safety after dark.
We next turn to the length of the jury’s deliberations following the Allen charge.
-9-
We are mindful that a jury returning with a verdict soon after receiving an Allen charge
“suggests the possibility of coercion.” Lowenfield, 484 U.S. at 240. In this case, the jury
deliberated for approximately one hour after receiving the Allen instruction.4 We have
approved Allen instructions in previous cases where the juries also deliberated for short
periods of time. See, e.g., Reed, 61 F.3d at 805 (one hour); McKinney, 822 F.2d at 950
(verdict on 29 counts in one hour and 20 minutes); Munroe, 424 F.2d at 246 (40 minutes).
Mr. Arney also argues that the jury was coerced because it was forced to take a
shortened lunch period. He provides no citation to the record, however, and we have
been unable to locate any reference in the record to shortened lunches. Therefore, we do
not include this allegation in our analysis.
Finally, Mr. Arney argues that the Allen instruction was coercive because the case
was being tried against the clock. The district judge informed counsel that the trial had to
be concluded by 10:45 a.m. on December 9 because he had an emergency meeting out of
state. It is clear from the record, however, that this deadline was not communicated to the
jury. While the parties may have felt coerced, we find no indication that the jury was
coerced by, or even aware of, this deadline.
4
It is unclear from the record exactly how long the jury deliberated after receiving
the Allen instruction. In his brief, Mr. Arney asserts that the jury deliberated for less than
45 minutes. Elsewhere he asserts that the Allen instruction was given at 5:30 or 5:15 in
the evening. The record indicates that the jury returned its verdict at 6:30. In any event,
we reach the same conclusion whether deliberations were 45 minutes or one hour and 15
minutes.
-10-
Considering the overall context of the Allen instruction given here, we find that it
was not coercive in a way that undermined the integrity of the jury’s deliberation. We
hold that the district court did not err in submitting the Allen charge to the jury.
B. Expert Witness
Mr. Arney argues that the district court erred in excluding the testimony of his
expert witness. We review the admission or exclusion of expert testimony for abuse of
discretion. United States v. Rice, 52 F.3d 843, 847 (10th Cir. 1995). The district court
“has wide discretion in making these determinations.” Id. “[U]nder Rule 702, the inquiry
of whether expert testimony will assist the trier of fact is essentially a question of
relevance.” Id.
Mr. Arney sought to admit the testimony of Nelson Bonifeld, a CPA and former
IRS agent. Mr. Arney argues that the district court abused its discretion in excluding this
testimony because Mr. Bonifeld’s testimony would have included: (1) testimony
concerning accounting methods, IRS requirements for farmers, income reporting, and the
significance of undergoing an IRS audit; and (2) testimony that the banks would not have
materially relied on the documents Mr. Arney submitted as tax returns. The district court
excluded the testimony because it concluded that the first issue was irrelevant and that
Mr. Arney had already testified at length on those subjects, and because Mr. Bonifeld was
not sufficiently qualified to testify as an expert on the second issue.
-11-
With respect to the first issue, Mr. Arney had already testified to his understanding
of accounting methods, tax reporting requirements, IRS requirements for farmers, and the
significance of undergoing an IRS audit. The district court concluded that Mr. Bonifeld’s
testimony on these issues would be unnecessarily cumulative and could confuse the jury.
Even assuming that Mr. Arney’s intent to avoid taxes rather than defraud the banks is
relevant, he had the opportunity to testify to that issue in his own behalf. Surely he is
better qualified to testify regarding his own intent than is Mr. Bonifeld. We cannot
conclude that the district court erred when it decided that additional testimony regarding
accounting methods and IRS requirements was unnecessarily cumulative and would serve
only to confuse the jury.
Furthermore, the district court concluded that testimony on these issues was of
questionable relevance. The issue in this case was based on the documents Mr. Arney
submitted to the banks, not his previous litigation, his audits, or his reasons for selecting
one accounting method over another. Regardless of his strategy in previous litigation and
his dealings with the IRS, Mr. Arney conceded that he submitted documents to the banks
that he asserted were his federal tax returns when, in fact, he had not filed those returns.
The district court concluded that testimony regarding accounting methods and IRS
requirements was not relevant to the question of whether Mr. Arney made false
representations to the banks. We agree. The government’s straightforward legal theory
in this case – that Mr. Arney’s submission of false tax returns was a material
-12-
misrepresentation – undermined Mr. Arney’s need for expert testimony on the accounting
and tax issues. Cf. United States v. Vreeken, 803 F.2d 1085, 1091 (10th Cir. 1986)
(excluding expert testimony on tax and banking law where government’s straightforward
theory undermined need for expert testimony). We find that the district court did not
abuse its discretion in excluding Mr. Bonifeld’s testimony on relevancy grounds.
With respect to the second issue, the district court excluded Mr. Bonifeld’s
testimony because it determined that his expertise did not extend to knowing the types of
documents on which banks rely when extending credit. Mr. Arney argues that Mr.
Bonifeld’s service on the board of directors of a credit union qualifies him as an expert in
this area. Mr. Bonifeld’s own resume, however, describes him as a “tax consultant” and
makes no reference to his being an expert in bank practices. Indeed, Mr. Arney does not
cite, nor have we discovered, any evidence in the record beyond Mr. Bonifeld’s service
on the credit union board of directors that would qualify him as an expert in this subject.
The district court may have been skeptical that Mr. Bonifeld’s experience was sufficient
to qualify him as an expert. The district court has wide discretion in this area. We cannot
conclude that it abused its discretion in excluding Mr. Bonifeld’s testimony on this issue.
C. Rule 404(b)
Mr. Arney also appeals the admission of evidence of his cattle inventory under
Rule 404(b) of the Federal Rules of Evidence. We review for abuse of discretion
-13-
evidentiary determinations under Rule 404(b). United States v. Green, 175 F.3d 822, 831
(10th Cir. 1999).
Mr. Arney argues that the evidence of his cattle inventory was improperly admitted
because it is extrinsic to the crime charged. In admitting such extrinsic evidence, he
argues, the district court must make a determination from the bench that the probative
value of the evidence substantially outweighs the potential for undue prejudice. See, e.g.,
United States v. Jefferson, 925 F.2d 1242, 1258 (10th Cir. 1991). Because the district
court did not make such a determination from the bench, Mr. Arney argues that it
committed reversible error.
The government argues that the district court was not obligated to make the
determination required by Jefferson because Rule 404(b) is inapplicable. “Rule 404(b)
only applies to evidence of acts extrinsic to the crime charged.” Green, 175 F.3d at 831
(internal quotation marks omitted) (emphasis added). “It is well settled that Rule 404(b)
does not apply to other act evidence that is intrinsic to the crime charged . . . .” United
States v. O’Brien, 131 F.3d 1428, 1432 (10th Cir. 1997). Evidence is direct or intrinsic to
the crime charged if “both acts are part of a single criminal episode or the other acts were
necessary preliminaries to the crime charged.” United States v. Lambert, 995 F.2d 1006,
1007 (10th Cir. 1993) (internal quotation marks omitted). The government argues that
inaccuracies in Mr. Arney’s cattle inventory reports are intrinsic to the charged crime of
bank fraud because they are part of the same transaction on which the charges against Mr.
-14-
Arney are based. We agree.
Mr. Arney’s misrepresentations to the banks were allegedly made to get loans for
his cattle operations and these loans were secured by Mr. Arney’s cattle. The banks
suffered substantial losses because the loans were not repaid and, by 1994, Mr. Arney had
fewer cattle than indicated by his inventory reports to the banks. Given the close
connection between Mr. Arney’s misrepresentations to acquire loans and his cattle
inventory, we find that the district court did not abuse its discretion in determining that
the cattle inventory reports were intrinsic to the crimes charged and that Rule 404(b) was
therefore inapplicable.
D. Exhibit Redaction
Finally, Mr. Arney appeals the district court’s redaction of a handwritten note
attached to an exhibit. We review decisions to exclude evidence for abuse of discretion.
Pierce v. Shorty Small’s of Branson, Inc., 137 F.3d 1190, 1192 (10th Cir. 1998).
Mr. Arney argues that the district court erred in redacting a handwritten “stick-um”
note from his legal counsel attached to a discovery request from the Koch Oil litigation.
Mr. Arney argues that this note supports his assertion that he relied on counsel when he
was delinquent in filing his 1989 and 1990 federal income tax returns. This note, he
argues, is essential to explain why he had not filed his tax returns and to rebut the
government’s Rule 404(b) evidence of the delinquent filing of the returns. We disagree.
-15-
Mr. Arney misconstrues the nature of the evidence of his delinquent filing of his
federal income tax returns. These returns were not admitted as Rule 404(b) evidence.
Rather, they were admitted to show that the documents provided by Mr. Arney were not
his filed federal income tax returns because he had not filed his tax returns at that time.
Thus, the delinquent tax returns were offered as proof of Mr. Arney’s misrepresentations
to the banks and, therefore, were intrinsic to the crimes charged. See Lambert, 995 F.2d
at 1007. Consequently, whether Mr. Arney delayed filing his tax returns on the advise of
counsel is of questionable relevance to this case. We find that the district court did not
abuse its discretion in redacting this note from Mr. Arney’s exhibit.
III. Conclusion
We find that the district court did not err in submitting the Allen charge to the jury.
We also find that the district court did not abuse its discretion in excluding the testimony
of Mr. Arney’s expert witness. Finally, we find that the district court did not abuse its
discretion in admitting evidence of Mr. Arney’s cattle inventory and redacting a note
attached to one of Mr. Arney’s exhibits. Accordingly, we AFFIRM.
-16-