United States v. Gallant

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit

FOR THE TENTH CIRCUIT April 23, 2014

Elisabeth A. Shumaker
Clerk of Court
UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v. No. 13-1041
(D.C. Nos. 1:12-CV-00136-RPM &
GLENN M. GALLANT, 1:03-CR-00232-RPM-4)
(D. Colo.)
Defendant-Appellant.
_________________________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v. No. 13-1048
(D.C. Nos. 1:12-CV-00175-RPM &
DOUGLAS R. BAETZ, 1:03-CR-00232-RPM-5)
(D. Colo.)
Defendant-Appellant.

ORDER AND JUDGMENT*

Before PORFILIO, ANDERSON, and BALDOCK, Circuit Judges.

*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
 Glenn M. Gallant, represented by counsel, and Douglas R. Baetz, proceeding

pro se (collectively, movants), appeal the district court’s denial of their 28 U.S.C.

§ 2255 motions to vacate, set aside, or correct their convictions asserting that their

trial attorneys were constitutionally ineffective. Exercising jurisdiction under

28 U.S.C. §§ 2255(d) and 2253, we affirm.

Background

The factual background is fully described in movants’ direct appeals,

see United States v. Gallant, 537 F.3d 1202, 1210-19 (10th Cir. 2008), and the parties

are aware of the facts, so we provide only a brief summary.

Movants owned and operated Century Financial Services, Inc. (Century). In

the mid-1990s, Century contracted with BestBank (the Bank), a Colorado bank

insured by the Federal Deposit Insurance Corporation (FDIC), to market to subprime

borrowers credit cards issued by the Bank. There were different programs, which

Century also managed for the Bank: first a secured-card program and later a

separate, unsecured-card program that offered borrowers membership in the All

Around Travel Club (AATC). In addition to the opportunity to apply for a BestBank

VISA card, membership in AATC offered the opportunity to take a reduced-price

cruise and other travel benefits. The Bank and Century split the fees from the

credit-card programs, which were very popular. The AATC program alone opened

approximately 500,000 credit-card accounts. The programs also had huge rates of

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default, however; many cardholders did not pay the amounts charged to their

accounts, including amounts the Bank had advanced to Century or had used for its

own operations. Ultimately, the losses exceeded the Bank’s ability to pay, and the

FDIC closed the Bank in July 1998.

The government blamed both movants and the Bank’s top officers for the

Bank’s failure. It named all the defendants in one indictment, but the two groups

(movants and the Bank officers) were tried separately. Mr. Gallant and Mr. Baetz

each had his own counsel at trial. By agreement of counsel, Mr. Baetz’s attorney

took the lead in opening, closing, and witness examination, and Mr. Gallant’s

attorney followed.

One of the government’s theories was that Century’s cover-up of

delinquencies caused the Bank to file inaccurate reports regarding reserves (known as

“call reports”) with the FDIC. Among other things, the evidence at trial showed that,

during the relationship between Century and the Bank, Century “opened a number of

[secured-card] accounts without receipt of the mandatory minimum $250 security

deposit,” but “did not issue cards or account statements to the purported

cardholders.” Id. at 1211. Century also took measures to disguise delinquencies in

the secured-card program, including “re-aging” the accounts (“removing their

delinquency status and making them appear current without any payments by the

cardholders”), and simultaneously crediting and debiting fees to make the account

appear current. Id. at 1211-12. With the AATC program, Century “concealed the

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existence of some accounts by not issuing plastic cards or sending account statements

to the purported cardholders”; posted $20 credits to delinquent accounts, which

caused them to appear current; and posted “paid ahead” notations on accounts that

had never received any payments from cardholders. Id. at 1213-15.

The jury convicted movants of the majority of the charges against them,

including conspiracy to commit bank fraud, wire fraud, and false reporting; bank

fraud; false bank reports; wire fraud; and continuing financial crimes enterprise.

Movants were sentenced to 120 months of imprisonment. On direct appeal, this court

reversed two of the wire-fraud convictions, see id. at 1228-30, and affirmed all the

other convictions, see id. at 1254-55. In the government’s cross-appeal, this court

remanded for resentencing because the district court erred in calculating the amount

of loss and in imposing sentencing enhancements without making required findings.

See id. at 1235-42, 1244-45. On remand, the district court sentenced movants to 135

months of imprisonment. Movants voluntarily dismissed their direct appeals from

their new sentences.

Movants then filed separate § 2255 motions, each claiming that his trial

attorney was ineffective in violation of his Sixth Amendment right to the assistance

of counsel. Without holding an evidentiary hearing, the district court denied relief.

But it granted movants’ applications for certificates of appealability (COA) on two

issues: whether the district court erred in denying movants’ claims of ineffective

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assistance of counsel, and whether the district court erred in deciding the § 2255

motions without conducting an evidentiary hearing.

Analysis

On appeal, movants have filed a joint opening brief arguing that the district

court erred in denying them relief under § 2255, and that it erred in deciding their

motions without holding an evidentiary hearing. See United States v. Weeks,

653 F.3d 1188, 1200 (10th Cir. 2011) (“Review in a section 2255 . . . action entails a

two-step inquiry: (1) whether the defendant is entitled to relief if his allegations are

proved; and (2) whether the district court abused its discretion by refusing to grant an

evidentiary hearing.” (alteration and internal quotation marks omitted)). Generally,

“[i]n considering the denial of a § 2255 motion for post-conviction relief, we review

the district court’s findings of fact for clear error and its conclusions of law de novo.”

United States v. Rushin, 642 F.3d 1299, 1302 (10th Cir. 2011). “But where, as here,

the district court does not hold an evidentiary hearing, but rather denies the motion as

a matter of law upon an uncontested trial record, our review is strictly de novo.” Id.

We review the denial of an evidentiary hearing for abuse of discretion. United States

v. Moya, 676 F.3d 1211, 1214 (10th Cir. 2012).

Under Strickland v. Washington, 466 U.S. 668, 687 (1984), movants have a

two-part burden: they must show that (1) “counsel’s performance was deficient,” and

(2) “the deficient performance prejudiced the defense.” For the first prong, they

“must show that counsel’s representation fell below an objective standard of

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reasonableness,” considering all the circumstances. Id. at 688. We “must indulge a

strong presumption that counsel’s conduct falls within the wide range of reasonable

professional assistance; that is, the defendant must overcome the presumption that,

under the circumstances, the challenged action might be considered sound trial

strategy.” Id. at 689 (internal quotation marks omitted). “It is ‘all too tempting’ to

‘second-guess counsel’s assistance after conviction or adverse sentence.’ The

question is whether an attorney’s representation amounted to incompetence under

‘prevailing professional norms,’ not whether it deviated from best practices or most

common custom.” Harrington v. Richter, 131 S. Ct. 770, 788 (2011) (citations

omitted) (quoting Strickland, 466 U.S. at 689, 690).

To satisfy the second prong, movants “must show that there is a reasonable

probability that, but for counsel’s unprofessional errors, the result of the proceeding

would have been different. A reasonable probability is a probability sufficient to

undermine confidence in the outcome.” Strickland, 466 U.S. at 694. “It is not

enough ‘to show that the errors had some conceivable effect on the outcome of the

proceeding.’ Counsel’s errors must be ‘so serious as to deprive the defendant of a

fair trial, a trial whose result is reliable.’” Harrington, 131 S. Ct. at 787-88 (citation

omitted) (quoting Strickland, 466 U.S. at 693, 687).

This court may elect to decide an ineffective-assistance claim on either the

performance or the prejudice prong. See Strickland, 466 U.S. at 697. “Even under

de novo review, the standard for judging counsel’s representation is a most

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deferential one.” Harrington, 131 S. Ct. at 788. “[T]he ultimate focus of inquiry

must be on the fundamental fairness of the proceeding whose result is being

challenged.” Strickland, 466 U.S. at 696.

I. Issues That Movants Believe Counsel Should Have Explored

Movants’ opening brief identifies a number of specific issues that, movants

contend, would have created reasonable doubt had their counsel presented them to

the jury. The district court did not err, however, in concluding that these alleged

failures do not establish ineffective assistance of counsel.

Movants insufficiently support their allegations that the ignored issues would

have helped their defense. They assert that counsel should have called Harold

Hendrickson, John Schmalzer, and Keith McDaniel as witnesses; should have asked

Charles Wolfschlag additional questions in cross-examination; should have preserved

A.J. Felton’s testimony before his death or at least offered testimony he gave in a

deposition in a civil case that preceded the criminal case; and should have better

prepared defense witnesses Richard Huddleston and John Low. But in support of

these contentions, movants offer nothing but their own descriptions of these

witnesses’ prospective testimony (or, in the case of Mr. Huddleston, their civil

counsel’s conclusory descriptions regarding anticipated testimony in a separate civil

case). These unsupported descriptions, which also fail to show that the uncalled

witnesses would have testified at trial, are insufficient to show prejudice. See Snow

v. Sirmons, 474 F.3d 693, 730 n.42 (10th Cir. 2007) (to show prejudice, habeas

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petitioner “must show not only that the testimony of an uncalled witness would have

been favorable, but also that the witness would have testified at trial” (brackets and

internal quotation mark omitted)); United States v. Cervini, 379 F.3d 987, 994

(10th Cir. 2004) (“District courts are not required to hold evidentiary hearings in

collateral attacks without a firm idea of what the testimony will encompass and how

it will support a movant’s claim.”); Neill v. Gibson, 278 F.3d 1044, 1056 (10th Cir.

2001) (district court did not abuse its discretion in disregarding affidavits, submitted

by investigators looking into juror misconduct, which contained inadmissible

hearsay); see also United States v. Ashimi, 932 F.2d 643, 650 (7th Cir. 1991)

(“[E]vidence about the testimony of a putative witness must generally be presented

in the form of actual testimony by the witness or on affidavit. A defendant cannot

simply state that the testimony would have been favorable; self-serving speculation

will not sustain an ineffective assistance claim.” (footnote omitted)).

In any event, several of movants’ issues actually did arise at trial, including the

Bank’s control of the Century operating account; that Century was required to

purchase all accounts that were delinquent; that the $20 credits were transparent and

were known or apparent to various Bank officials1; that Century, as a guarantor of the

1
On direct appeal, we rejected this argument in part, stating that “Baetz and
Gallant are not absolved from bank fraud by having successfully recruited BestBank
officers and directors to participate in their scheme.” Gallant, 537 F.3d at 1225.
Also, in addition to the movants’ joint argument on this point, Mr. Gallant
asserts that counsel should have shown that he had nothing to do with the initial
decision to apply the $20 credits to cardholder accounts. Michael Mansueto’s
(continued)
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cardholders’ accounts, had the right to make payments to those accounts2; that

movants were trying to make the businesses succeed, while the Bank’s officers were

taking large bonuses and demanding more and more concessions from Century; and

that movants had no responsibility for the Bank’s call reports.3 Even if counsel did

not explore these issues as vigorously as movants, in hindsight, would wish, we

cannot conclude that movants have shown either deficient performance or prejudice.

testimony placed that evidence before the jury, so Mr. Gallant was not prejudiced.
But in any event Mr. Gallant’s hands are not entirely clean with regard to the $20
credits; he admits in his declaration in this § 2255 proceeding that he had an ongoing
role in applying the credits, in that he “determine[d] whether money was available to
make these payments and . . . authorize[d] the disbursement of the funds.” R. Vol. III
at 699.
2
At trial, counsel requested an instruction on this theory, which the district
court refused, and counsel also argued for acquittal under Fed. R. Crim. P. 29 on this
ground. On direct appeal, this court held that “the proposed jury instruction did not
fit the facts of the case,” in that “the government did not contend that each individual
credit was, somehow, inherently illegal. Rather, the government’s case against Baetz
and Gallant centered on the aggregate number of cardholder delinquencies and the
increase in that number over time.” Gallant, 537 F.3d at 1233. Thus, even if counsel
had not presented this theory, movants could not show prejudice.
3
In addition to movants’ joint argument on this point, each movant makes his
own argument. Mr. Gallant states that counsel should have shown his utter lack of
knowledge and involvement regarding the call reports, but he does not specify how
counsel should have accomplished this task. Particularly, it appears that the most
direct evidence of what Mr. Gallant did not know would have been his own
testimony, but he waived his right to testify, due to his health. Mr. Baetz asserts that
his counsel should have proved that Mr. Baetz was unaware of the information that
went into the call reports. As discussed in Section III below, Mr. Baetz asserts that
he wanted to testify on his own behalf, but it does not appear that his failure to testify
prejudiced him.

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 Two other issues movants identify—that accounts could be opened and

charges for AATC membership and fees applied immediately after verification and

credit approval, and that AATC members did not need vouchers to exercise their

right to take a reduced-price cruise—also arose at trial, but the evidence was

equivocal. Evaluating all the circumstances, however, it does not appear that there is

any reasonable probability that the results of the trial would have been different had

counsel further explored these issues.

Finally, movants also assert that counsel was ineffective in not researching,

understanding, and correctly presenting (1) concepts such as reaging, and, (2) with

regard to cross-examining government witnesses Marion Harris and Jeffrey Opp,

“banking regulations and terms as they applied to credit card programs, call reports,

and reserves.” Aplt. Br. at 50. As part of this argument, movants also state that

counsel was ineffective for not challenging the government’s characterization of the

instructions for the call reports. We are not convinced that movants’ interpretations

of the call report instructions are sound. Also, as the government asserts, these

arguments involve “abstract propositions” that ignore the “[a]bundant evidence” of

fraud that was introduced at trial. Aplee. Br. at 35; see also Gallant, 537 F.3d at

1228 (rejecting a direct-appeal argument relating to the call report instructions). And

with regard to the cross-examinations, movants’ unspecific description of counsels’

alleged failures is insufficient to require reversal for an evidentiary hearing.

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See Cervini, 379 F.3d at 994. Accordingly, these arguments satisfy neither the

performance nor the prejudice prong.

II. Failure of Mr. Gallant’s Counsel to Act Independently

Mr. Gallant asserts that his counsel failed to exercise independent judgment

and provide independent representation, instead deferring too much to Mr. Baetz’s

counsel. As examples, he points to his counsel’s failure to bring out the evidence in

the areas discussed above, failure to convince Mr. Baetz’s counsel to allow Mr. Baetz

to testify, and failure to meet with Mr. Gallant sufficiently to prepare for trial.

As discussed above, the alleged failure to further explore certain areas did not

constitute ineffective assistance. It also does not show that Mr. Gallant’s trial

counsel sacrificed his judgment to the judgment of Mr. Baetz’s counsel. Rather, the

record tends to contradict this allegation. In his opening statement, Mr. Gallant’s

counsel made sure that the jury knew that the defense had been cautioned to avoid

duplication, stating, “I’ve been cautioned not to be repetitive, so please don’t

misinterpret my brevity in cross-examination [as] not passion for the question.”

R. Vol. VIII at 75. He was successful in establishing that some evidence did not

involve Mr. Gallant, and then he moved for Mr. Gallant’s acquittal under Fed. R.

Crim. P. 29, arguing, as summarized by the district court during trial, “separately and

independently that in all of these counts, there’s not sufficient evidence with respect

to Mr. Gallant’s participation to warrant submission of these counts to the jury with

respect to him[.]” Id. Vol. XXIV at 2541. In his closing argument, counsel noted,

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“[I]f you look at the totality of evidence in this case, there is so little evidence that

came in about conversations with my client, Mr. Gallant . . . .” Id. Vol. XXVI at 145.

He then went on to highlight specific testimony. He also reminded the jury that they

had to examine the evidence against Mr. Gallant separately.

With regard to Mr. Gallant’s second example, the decision whether to testify

belonged to Mr. Baetz, not to his counsel or to Mr. Gallant’s counsel. See Cannon v.

Mullin, 383 F.3d 1152, 1171 (10th Cir. 2004). And as discussed in Section III below,

it does not appear that Mr. Baetz’s failure to testify prejudiced the defense. We

cannot conclude that Mr. Gallant’s counsel performed deficiently on this ground.

Finally, Mr. Gallant’s third example only states without elaboration that

counsel failed to meet with Mr. Gallant sufficiently before trial. He fails to cite any

legal authority and fails to explain how this alleged failure prejudiced his defense.

Accordingly, the argument is waived by inadequate briefing. See United States v.

Cooper, 654 F.3d 1104, 1128 (10th Cir. 2011).

III. Failure of Mr. Baetz’s Counsel to Allow Him to Testify

Mr. Baetz asserts that his counsel was ineffective by denying him his right to

testify on his own behalf. In his declaration, he states that he and his counsel

disagreed on whether he should testify. He asserts:

On the last day of testimony, I insisted that I wanted to testify.
[Counsel] stated that he would not allow me to do so, and that if I did
take the stand, I’d ‘better find another lawyer, because [he would]
withdraw.’ I found myself in the position of not knowing whether
[counsel] would follow through on his threat and also knowing that,
even if I did take the stand, I hadn’t been prepared by [counsel] for

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 testimony. . . . Under these circumstances, due to his inaction and
threats I believed that if I chose to testify it would be a disaster.

R. Vol. V at 142-43. We assume that, if his assertions are true, Mr. Baetz has

satisfied Strickland’s performance prong.4 See Cannon, 383 F.3d at 1171. However,

we cannot conclude that he has shown prejudice sufficient to remand for an

evidentiary hearing. As discussed above, many of the theories he discusses in his

declaration were explored during the trial. Moreover, had he testified, he

undoubtedly would have been subject to a damaging cross-examination. In these

circumstances, even though “[w]e are . . . cognizant of the power of a face-to-face

appeal,” id. at 1172, we cannot conclude that there is a reasonable probability that

Mr. Baetz’s proposed testimony would have altered the outcome of the trial.

For these reasons, movants have failed to show that they are entitled to relief

under § 2255. That being so, the district court did not abuse its discretion in denying

an evidentiary hearing.

4
We note, however, that during the trial, outside the presence of the jury, the
district court personally addressed Mr. Baetz regarding his right to testify, and
Mr. Baetz waived that right without raising any concerns regarding his counsel’s
alleged coercion.

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 Conclusion

Mr. Baetz’s motion to proceed on appeal without prepayment of costs or fees

is granted. The judgment of the district court is affirmed.

Entered for the Court

Bobby R. Baldock
Circuit Judge

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