United States v. Walsh

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 95-1139

UNITED STATES OF AMERICA,

Appellee,

v.

WILLIAM H. WALSH,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Mark L. Wolf, U.S. District Judge]

Before

Boudin, Circuit Judge,

Bownes, Senior Circuit Judge,

and Keeton,* District Judge.

James L. Sultan with whom Rankin & Sultan was on briefs for

appellant.
Peter A. Mullin, Assistant United States Attorney, with whom

Donald K. Stern, United States Attorney, and Pamela Merchant, New

England Bank Fraud Task Force, Criminal Division, Department of
Justice, were on brief for the United States.

January 23, 1996

*Of the District of Massachusetts, sitting by designation.

BOUDIN, Circuit Judge. William Walsh was charged with

various offenses growing out of a bank fraud scheme and

convicted on a majority of the counts. His present appeal is

primarily directed at procedural issues. We affirm.

I.

Walsh was indicted in 1992, together with four co-

defendants, and charged with conspiracy, twenty-nine counts

of bank fraud, and twenty-nine counts of false statements.

18 U.S.C. 2, 371, 1344, 1014. The substance of the

indictment was that Walsh carried out a scheme to defraud

Dime Savings Bank of New York ("Dime-NY"). He did so,

according to the charge, by directing his employees to obtain

29 specific loans through the use of deceptions so that

customers could purchase condominiums from Walsh and his

associates.

Walsh's trial occurred in February and March 1994.

Taken in the light most favorable to the verdict, United

States v. Tuesta-Toro, 29 F.3d 771, 773 (1st Cir. 1994),

cert. denied, 115 S. Ct. 947 (1995), the evidence permitted

the jury to find the following. Walsh was a Cambridge,

Massachusetts, city councillor, lawyer, and real estate

developer. With a group of investors, he purchased apartment

buildings or complexes, converted the property into

condominiums, and sold the condominiums to customers, using

the unit sales to pay off the acquisition financing.

-2-
-2-

Walsh ordinarily served as a trustee of the realty trust

that acquired the building, acted as legal counsel to the

trust, and usually served as the trust's representative in

the sale of the individual condominium units. During 1986,

sales of units in one of the projects started to fall behind

schedule and the trust began to have difficulty repaying its

acquisition loan. Walsh then discovered that Dime-NY had

recently created a wholly owned subsidiary, called Dime Real

Estate Services of Massachusetts, Inc. ("Dime-MA"), to

originate mortgage loans in Massachusetts. Dime-MA made

mortgage loans available rapidly--with no verification of

income, assets or down payments--but the loans required a

twenty percent down payment and secondary financing was

prohibited.

On this failing project, and then on two others, Walsh

directed his employees to arrange loans from Dime-MA for unit

purchasers and to falsify documents submitted to Dime-MA to

conceal the existence of secondary financing (and in some

cases third mortgages as well). In the three projects,

approximately half the customers defaulted and Dime-MA

incurred substantial losses. An investigation ensued,

followed by the indictment already described. Three of the

four co-defendants pleaded guilty; charges against the fourth

co-defendant were abandoned.

-3-
-3-

Jury deliberations began on March 22, 1994. Following

the dismissal of a juror during deliberations, the jury (now

reduced to 11 members) continued deliberations, and on March

28, 1994, it returned 41 guilty and 18 not guilty verdicts.

Walsh was thereafter sentenced and now appeals. Most of the

claims of error concern the dismissal of the juror and its

aftermath, so we begin with that subject, starting with a

description of the pertinent events.

II.

On March 23, 1994, a note was received from the jury

indicating that one of the jurors wished to meet with the

judge, adding: "He has several questions and we cannot

relate to him in any way, shape, or form." The judge

declined to meet with an individual juror, but the following

day a court security officer reported that the foreperson was

concerned that one of the jurors had become "mentally

unstable." After consulting with counsel, the trial judge

interviewed the foreperson, and learned of constant

interruptions by "juror X", irrelevant statements by juror X

about events in his past life, and juror X's efforts to show

other jurors written materials consisting of a campaign

brochure and a newspaper clipping from his prior efforts to

win elective office.

After consulting further with counsel, the trial judge

interviewed juror X; as in the judge's interview with the

-4-
-4-

foreperson, counsel and Walsh himself were present. The

judge cautioned juror X not to indicate his views on the

merits of the case. The interview, which began by focusing

on the material that the juror brought into the jury room,

involved disjointed and rambling comments by juror X. Juror

X also mentioned a self-described "nervous problem" and his

general discharge from the military. Some of the questioning

was based on questions that had been suggested by the

government and defense counsel.

Finally, out of the presence of juror X, the court asked

both sides for their position as to whether juror X should be

excused, and defense counsel after consultation with Walsh

indicated that he "would not object if the Court decided to

keep him or eliminate him. . . . [Either way] we would move

for a mistrial." The government said that it thought the

juror was disabled and should be excused. The trial judge

then excused the juror, agreeing that he was "not a person

capable of engaging in rational discussions based upon the

evidence."

Thereafter, the remaining jurors were sent home for the

rest of the day. The following morning Walsh filed a motion

for mistrial, arguing that the ability of the remaining

jurors to be impartial and open-minded had been undermined by

their exposure to juror X. No one at this point knew or

claimed to know how juror X had proposed to vote. The court

-5-
-5-

agreed to question the remaining jurors and solicited and

received proposed questions from counsel.

Then the district judge, in the presence of counsel and

the defendant, questioned each of the 11 jurors individually

as to whether juror X had discussed the merits prior to the

jury's deliberations, had brought material into the jury

room, and had discussed his own personal experiences--and

whether the juror being questioned could, to the extent that

these events had occurred, put them aside and decide the case

impartially based on the evidence presented. Eight of the

jurors had been exposed to a campaign brochure and an old

newspaper article about one of juror X's campaigns; all of

the jurors had heard juror X discuss his personal

experiences; and three jurors had heard comments from juror X

about the merits of the case prior to the start of

deliberations.

Each juror affirmed his or her ability to put aside the

campaign material, the personal experiences of juror X, and

any comments made by him before deliberations began. Defense

counsel challenged three jurors who had heard comments by

juror X before deliberations began, the substance of the

comments not being revealed. With respect to each of the

three jurors, the trial judge made findings that the juror

was credible in saying that the pre-deliberation comments of

-6-
-6-

juror X would have no effect. The trial judge then denied a

mistrial.

At the request of defense counsel, the trial judge told

the jury that it could begin its deliberations from the

beginning if it wished; the court also told the jury not to

discount a position taken "just because [juror X] took it."

The jurors then deliberated for the rest of the day.

Returning after a weekend break, they continued deliberations

and asked for reinstruction on substantive issues. Late in

the same day, they returned the 41 guilty and 18 not guilty

verdicts.

1. Walsh's first claim of error is that the trial

court erred in dismissing juror X. Walsh argues that there

was no psychological testing or psychiatric examination of

juror X, and the evidence did not show that he was either

mentally incompetent or otherwise incapable of engaging in

rational decision-making. In substance, Walsh says that

juror X was simply an unpopular, perhaps irritating

participant who probably sided with the defendant and whose

removal led to a prompt agreement to convict.

Walsh did not make a timely objection on this ground.

At the time of the dismissal, his counsel did not object to

excusing juror X, or argue for psychiatric testing, or

suggest that juror X could be dismissed only if a higher

degree of irrationality were shown. Instead, Walsh made

-7-
-7-

clear his intention to move for a mistrial; and when the

mistrial motion was filed, the ground--inconsistent with the

contention now made--was that juror X was someone whose

"psychiatric problems" had been "clearly demonstrated" and

whose "negative influence" on other jurors was apparent.

Although, for these reasons, the objection now made is

reviewable only for plain error, the dismissal of juror X was

not error at all. Federal Rule of Criminal Procedure 23(b)

permits the judge to excuse a juror "for just cause" during

deliberations and to allow the remaining 11 jurors to reach a

verdict. The trial judge has substantial discretion in

exercising this responsibility and may remove the juror when

"convinced that the juror's abilities to perform his duties

[have] become impaired." United States v. Huntress, 956 F.2d

1309, 1312 (5th Cir. 1992), cert. denied, 113 S. Ct. 2330

(1993). Similarly, in United States v. Molinares Charris,

822 F.2d 1213, 1223 (1st Cir. 1987), we permitted a judge to

excuse a juror who had taken a tranquilizer pill and appeared

somewhat unstable.

The trial judge carefully and repeatedly consulted with

counsel in determining the course of the inquiry and the

questions to be put to juror X. See United States v.

Chorney, 63 F.3d 78, 81 (1st Cir. 1995). The transcript of

juror X's voir dire, which need not be repeated in detail,

gave the trial judge ample basis for concluding that the

-8-
-8-

juror was not able to perform his duties. Whether or not

juror X was incompetent as a juror under 28 U.S.C.

1865(b)(4), "just cause" existed under Rule 23(b) for his

removal in this case. See United States v. Reese, 33 F.3d

166, 172-73 (2d Cir. 1994), cert. denied, 115 S. Ct. 756

(1995) (just cause not limited to incompetence).

There is no evidence that the trial judge knew that

juror X favored acquittal, if indeed juror X did. Nor did

defense counsel make any such suggestion when he acquiesced

in the dismissal of juror X. If anything, Walsh's mistrial

motion suggested that juror X might be hostile to Walsh

because Walsh was a lawyer and politician. Dismissal of a

known holdout juror raises an entirely different question.

Compare United States v. Hernandez, 862 F.2d 17 (2d Cir.

1988), cert. denied, 489 U.S. 1032 (1989).

2. Walsh's second objection is that even if juror X

was properly removed, the court erred in permitting the 11

remaining jurors to return a verdict. Walsh's broadest

grounds for this objection are legal: he claims that the

Constitution does not permit a jury with only 11 jurors to

decide a federal criminal case over the objection of a

defendant. He also asserts that Rule 23(b)--which does

permit this course--could not be lawfully enacted through the

-9-
-9-

Rules Enabling Act procedures. 18 U.S.C. 3771, 3772

(1982).1

Neither of these objections was made at the time that

the district court was determining whether to permit the 11

remaining jurors to deliberate and, accordingly, both

objections are subject to review only for plain error. It is

true that both issues were raised in the trial court after

the verdict by a post-verdict motion for dismissal or a new

trial. But the usual rule is that an objection must be made

known at the time that the court is making its decision to

act, e.g., United States v. Gonzalez-Torres, 980 F.2d 788,

791 (1st Cir. 1992), and here the proper time to raise the

objections was when the court was deciding whether to

continue with 11 jurors. In this case, in any event, the

standard of review does not matter as to the constitutional

claim because in Williams v. Florida, 399 U.S. 78, 103

(1970), the Supreme Court said that the 12-member jury was

not required by the Constitution and that Congress and the

states could select a different number. We think that

Williams effectively answers the claim that 11 jurors are too

few. A number of circuits have held that a jury of 11 can

1The separate provisions enabling the Supreme Court to
prescribe rules of criminal procedure were later repealed and
consolidated with the Rules Enabling Act provisions governing
the enactment of rules of civil procedure. Judicial
Improvements and Access to Justice Act, Pub. L. No. 100-702,
401-04, 102 Stat. 4642, 4648-52 (1988); 28 U.S.C. 2072-
74.

-10-
-10-

constitutionally decide a federal criminal case, without

consent of the parties, where a juror has been removed for

cause. E.g., United States v. Ahmad, 974 F.2d 1163, 1164

(9th Cir. 1992).

Williams directly rejects the argument that the

historical number of jurors is binding--how many would be too

few is not an issue in this case--and we think that this

conclusion is not altered by Walsh's attempt to rephrase the

challenge as a concern for a "unanimous" jury. The Supreme

Court has not said whether a less-than-unanimous verdict is

acceptable. Compare Apodaca v. Oregon, 406 U.S. 404 (1972).

But whether it is or not, we think that rendition of a

verdict agreed to by all jurors, after one juror with unknown

views has been dismissed for cause, is a unanimous verdict.

The gist of Walsh's claim under the Rules Enabling Act

is that Congress might be able to alter the requisite number

from 12 to 11 but that Rule 23(b) was adopted--under the

procedures specified by the Rules Enabling Act--by judicial

action coupled with Congress' failure to veto the change.

Inaction, says Walsh, is not enough for a fundamental change.

The Second Circuit has concluded, however, that this change

can be accomplished through the enabling procedures. United

States v. Stratton, 779 F.2d 820, 831 (2d Cir. 1985), cert.

denied, 476 U.S. 1162 (1986).

-11-
-11-

Rules that are "strictly procedural" can be adopted

through the Rules Enabling Act without an affirmative vote by

Congress, Burlington Northern Railroad Company v. Woods, 480

U.S. 1, 5 (1987), and this extends to rules that fall "within

the uncertain area between substance and procedure, [but] are

rationally capable of classification as either." Id.

(quoting Hanna v. Plumer, 380 U.S. 460, 472 (1965)). In view

of the defendant's failure to make a timely objection, we

need not decide this claim outright but are satisfied that

the use of the 11-member jury did not constitute "clear

error" based on the Rules Enabling Act claim.2

3. Walsh did make in timely fashion an objection that

this jury was not capable after juror X's discharge of

rendering a fair and impartial verdict. When this issue was

raised by Walsh immediately after the discharge, the district

court properly undertook "an adequate inquiry to determine

[what had happened and] . . . whether it was prejudicial."

United States v. Ortiz-Arrigoitia, 996 F.2d 436, 442 (1st

Cir. 1993), cert. denied, 114 S. Ct. 1368 (1994). A trial

judge enjoys discretion to determine the scope of the inquiry

in deciding whether the jury has been tainted. United States

2Since the issues were first raised in a motion for a
new trial and rejected on the merits, one could argue that
the customary abuse of discretion standard is irrelevant
because the issues are strictly legal. But we do not see why
rejection of an untimely legal claim should be reviewed for
anything more than plain error. See Gonzalez-Torres, 980

F.2d at 791.

-12-
-12-

v. Boylan, 898 F.2d 230, 258 (1st Cir.), cert. denied, 498

U.S. 849 (1990).

As already noted, the district court judge separately

examined each of the jurors, asking his own questions as well

as various questions suggested by counsel. In each instance,

the judge received a forthright declaration that the juror

was not going to be affected by the personal comments made by

juror X, by materials he had brought into the jury room, or--

in the case of three jurors--by the comments that juror X

made about the merits before deliberations began. The

judgment of the trial judge, who can appraise the jurors face

to face, deserves great weight.

Although Walsh now complains that the district judge

limited his own questioning unduly--in an effort to avoid

learning how the jurors were leaning--Walsh did not press for

more detailed inquiry at the time. The trial judge treads a

delicate line in this kind of inquiry. Assuming arguendo

that Walsh is right in saying that Fed. R. Evid. 606(b) does

not apply prior to the verdict, there are still obvious good

reasons for a trial judge to avoid learning how an individual

juror is leaning. United States v. Rengifo, 789 F.2d 975,

985 (1st Cir. 1986).

Although Walsh now argues that there is a substantial

chance that the jurors were prejudiced by juror X, nothing in

the record makes this at all likely. In addition to the

-13-
-13-

jurors' own denials, we note that the brochure had nothing

directly to do with the trial; there is no reason to believe

that a newspaper article brought in by a juror regarding his

prior political campaign contained anything material; and

judging by the voir dire of juror X, his personal experiences

were also not germane to the trial.

Walsh now argues that juror X was hostile to lawyers and

politicians (Walsh was both) and that this view may have been

passed on to the other jurors. In fact, juror X's brochure

was more qualified, expressing (in a description of X's

"positions") objections to "the [unspecified] unethical

ethics practiced by certain members of the bar" and "machine

controlled politics and . . . [unspecified] dirty tricks."

The jurors said that they paid little attention to the

pamphlet. Further, it is Walsh who now takes the position

that juror X favored Walsh, which hardly suggests that juror

X was denigrating Walsh.

Finally, Walsh now complains that by discharging juror X

the court led the jury to think that juror X's views should

be disregarded. In fact, the judge expressly cautioned the

jury not to discount views simply because they were earlier

expressed by juror X. Walsh also says that the jury should

have been directed to start its deliberations anew. The

judge told the jury that it was entitled to start anew. We

think that this was all that was either useful or necessary.

-14-
-14-

At the time, Walsh raised no objection to the instructions

given. 4. Walsh's last claim of error based on the juror

X episode relates to a post-trial event. According to an

affidavit from Walsh's secretary, she received a call a week

or so after the verdict from someone identifying himself as

juror X who said he had been on the defendant's side, that

the defendant had been "railroaded," and that she (the

secretary) "would not believe what went on in the jury room."

About a month later, Walsh submitted this affidavit in

support of a request that the jury and juror X be subject to

further voir dire or authorized inquiry by counsel.

The district court declined to hold such a post-verdict

inquiry or to authorize discussions with the jurors or to

grant a new trial based on the affidavit. Walsh now argues

that because the parties were barred from unsupervised

contact with the jurors after the verdict, United States v.

Kepreos, 759 F.2d 961, 967 (1st Cir.), cert. denied, 474 U.S.

901 (1985), the trial court had an obligation to conduct an

investigation itself. The abuse of discretion standard

governs this claim, see Boylan, 898 F.2d at 258, and we think

that there was no such abuse in this case.

The restrictions on post-verdict contact and the

limitations on juror testimony about deliberations, Fed. R.

Evid. 606(b), exist to protect important interests in the

finality of the verdict and the privacy of the deliberations.

-15-
-15-

See Tanner v. United States, 483 U.S. 107, 120 (1987). The

affidavit contains only general rhetoric from juror X and no

specific allegations of misconduct. Given what the district

court already knew about juror X, the telephone call--

assuming (as we do) that it came from juror X--did not

require any further inquiry.

III.

Walsh's brief raises two further issues, both unrelated

to juror X. The first claim relates to the government's

admitted failure to turn over certain documents in a timely

fashion. The documents related to Frances Schwartz, a senior

attorney working for Walsh who was assigned to the three

development projects involved in this case. Schwartz was

indicted with Walsh and was one of the co-defendants who pled

guilty to the conspiracy count and testified against Walsh at

trial.

On direct examination, Schwartz gave damaging testimony

against Walsh. In addition to identifying a number of

documents and describing the operations of Walsh's office,

Schwartz testified to discussions and correspondence with

Walsh that--as recounted and interpreted by Schwartz--

confirmed Walsh's knowing participation in and direction of

the fraud. Schwartz' testimony was thus quite damaging,

although another co-defendant who pled guilty also testified

that Walsh knowingly directed the concealment of the

-16-
-16-

secondary financing. Early in her cross-examination,

Schwartz mentioned that she had "daytimers" or calendars that

she had used to refresh her recollection. Later, on re-

cross, she mentioned that she had allowed the government to

review the daytimers and make copies of them. The defense

immediately objected that it had never received the

daytimers. The government said that these daytimers should

have been disclosed earlier but had been overlooked when

other materials from Schwartz had been made available to

Walsh's counsel. Copies of the daytimers were provided to

the defendant later that day.

Following a timely motion by Walsh to dismiss the case

because of this delay, the trial court denied the motion,

finding that Walsh's strategy would not have been

substantially different if the daytimers had been disclosed

earlier. The court instructed the jury that the government

had failed in its discovery obligation, and it allowed Walsh

to recall Schwartz to continue her examination, using the

daytimers to try to establish inconsistencies between

Schwartz' prior testimony and the daytimers. Walsh now

complains that this was inadequate.

This court previously considered the issue of delayed

disclosure of impeachment material required to be disclosed

under the Jencks Act. United States v. Arboleda, 929 F.2d

858, 862-65 (1st Cir. 1991). We said that the critical

-17-
-17-

question was whether the delay had "prevented [the

material's] effective use by the defense," id. at 862, and

that some showing of prejudice was required beyond mere

assertions that the defendant would have conducted cross-

examination differently. Id. at 864. Cf. United States v.

Lanoue, No. 95-1140, slip op. at 34 (1st Cir. 1995). Delayed

disclosure of Brady material is subject to the same rule.

See United States v. Osorio, 929 F.2d 753, 758 (1st Cir.

1991).

On this appeal, Walsh argues that if his trial counsel

had received the daytimers earlier, he would have focused at

the outset on the alleged inconsistencies between Schwartz'

testimony and the daytimers instead of attempting to cast

doubt on the reliability of her memory. In fact, the initial

cross-examination did not focus on Schwartz' memory but

rather on her veracity, which the defense counsel sought to

undermine by emphasizing her prior drug use and her desire

for a lenient sentence. And when Schwartz was subject to

further cross after the daytimers had been produced, Walsh's

counsel paid minimal attention to the supposed

inconsistencies.

Walsh says that when Schwartz was recalled for further

cross after the daytimers had been produced, it was too late

to cross-examine effectively on inconsistencies because she

had been "well prepared by the government to explain away any

-18-
-18-

inconsistencies." As it happens, there is no evidence of any

such discussion after the daytimers first became an issue.

As to preparation prior to the original direct examination,

the government was entitled to prepare the witness, and the

risk of facing an initially prepared witness would have

existed whether or not the daytimers had been produced.

Walsh's final claim of error, a claim raised in the

district court and rejected there, is that the evidence

failed to show that the victim was a federally insured

financial institution. At the time of the fraudulent

filings, 18 U.S.C. 1344 aimed at schemes to defraud "a

federally chartered or insured financial institution" or to

obtain property owned by, or under the custody or control of

such an institution through falsehoods. See United States v.

Brandon, 17 F.3d 409, 424 n.11 (1st Cir.), cert. denied, 115

S. Ct. 81 (1994). Walsh's argument turns on the fact that

Dime-NY was a federally insured bank, but Dime-MA--the

immediate maker of the loans--was not. The government quotes

to us in response a statement from Brandon, 17 F.3d at 426,

that

the government does not have to show the alleged
scheme was directed solely toward a particular

institution; it is sufficient to show that
defendant knowingly executed a fraudulent scheme
that exposed a federally insured bank to a risk of
loss.

That language, however, was directed to the scienter

requirement, and not to the nexus claim made here. As it

-19-
-19-

happens, the Brandon court also rejected a nexus argument

somewhat similar to Walsh's argument here but on different

facts. The intermediaries with whom defendants in Brandon

dealt were mortgage brokers who forwarded the fraudulent

applications to the federally insured bank which individually

approved the loans and forwarded the money back to the

mortgage brokers. See id. at 423, 426-27 & n.16.

While the nexus in Brandon was different--one can argue

about whether it was closer or more remote--Brandon does

confirm that a defendant can violate section 1344 by

submitting the dishonest loan application to an entity which

is not itself a federally insured institution. Here, Dime-MA

was practically an alter ego of Dime-NY: it was a wholly

owned subsidiary of Dime-NY; all of the subsidiary's

directors and principal officers were officers of the parent;

and Dime-MA was subject to examination by the same federal

bank examiners as Dime-NY and reported its result on a

consolidated basis.

Further, focusing on the loan process, the connection

between the defendant and the federally insured victim is

even tighter. Dime-NY provided all of the funds for Dime-MA

both for its operating expenses and to fund mortgage

closings. Dime-NY determined what loan products should be

offered and, on the closing of a loan by Dime-MA, the

mortgage was immediately assigned to Dime-NY, which then

-20-
-20-

serviced the loan. For most practical purposes, and

certainly for the purposes underlying section 1344, the

mortgage fraud perpetrated against Dime-MA was effectively a

fraud against Dime-NY.

We agree that there must be some outer limits to section

1344. For example, ruinous fraud directed against a major

bank customer, but unrelated to a customer's deposits in or

loans from the bank, might ultimately harm the bank itself,

if only through loss of a valued customer. But here, as in

Brandon, "this case presents a situation of direct harm to [a

federally insured bank] resulting from a scheme specifically

designed to fraudulently avoid the requirements of that

federally insured bank in order to obtain funds originating

directly from [that bank]." 17 F.3d at 427 n.16. As in

Brandon, we confine our affirmance to the present facts and

decline to contrive general rules to govern myriad

variations.

Affirmed.

-21-
-21-