United States v. Newell

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 01-60397

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

CLIFFORD D. NEWELL; KIM GIANAKOS,

Defendants-Appellants.

Appeals from the United States District Court
For the Southern District of Mississippi

December 19, 2002

Before KING, Chief Judge, JOLLY, and HIGGINBOTHAM, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Clifford Newell, Kim Gianakos, Darrell Wayne Raley, and Kary

Graham were charged in a superceding indictment with mail and wire

fraud. In addition, Gianakos was charged with conspiracy to

launder money, Newell and Raley were charged with separate money

laundering and conspiracy to commit money laundering offenses, and

Newell was also charged with federal tax evasion for the years 1994

through 1996. Raley and Graham were acquitted of all charges,

Newell was found guilty on all charges, and Gianakos was convicted

of one count of mail fraud.
 Newell urges that his attorney, who also represented Raley,

manifested an actual conflict of interest during the course of the

trial that impaired Newell’s defense. We conclude that although

the district court before trial diligently complied with Rule 44(c)

of the Federal Rules of Criminal Procedure by warning Newell that

conflicts of interest might arise from sharing counsel with Raley,

it failed to take action when an actual conflict became clear at

trial.1 We therefore REVERSE Newell’s judgment of conviction and

REMAND for a new trial.2

Gianakos argues that the district court erred in overruling

her objections to two pieces of evidence, as well as to portions of

the prosecutor’s closing argument and to the jury instructions.

Finding no reversible error, we AFFIRM her conviction.

I

The scheme charged involved Comcast Corporation, a cable

television provider in Mississippi, and the use of an American

Express credit card. At trial the government maintained that

1
FED. R. CRIM. P. 44(c) (“Whenever two or more defendants have
been jointly charged ... or have been joined for trial ... and are
represented by the same retained or assigned counsel ..., the court
shall promptly inquire with respect to such joint representation
and shall personally advise each defendant of the right to the
effective assistance of counsel, including separate representation.
Unless it appears that there is good cause to believe no conflict
of interest is likely to arise, the court shall take such measures
as may be appropriate to protect each defendant’s right to
counsel.”).
2
Newell also attacked his sentence on several bases. Because
we find his conviction infirm, we need not address these
contentions.

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Gianakos falsely billed Comcast for services purportedly performed

by her advertising agency, Gianakos Associates (“GA”). Primestar,

the name under which Comcast offered satellite television services,

was GA’s largest client. According to the government, David Van

Colvin, Primestar’s general manager and the son of a Comcast

executive, had Gianakos pay his American Express (“AmEx”) bill.

Gianakos would, in turn, bill the payment to Comcast as a marketing

expense, with a markup that ranged from ten to thirty-three

percent. Although Gianakos argued at trial that she accepted

Colvin’s representations that the AmEx charges were for legitimate

marketing expenses, Colvin used the AmEx card for various personal

expenses and never submitted the statements to Gianakos so that she

could confirm the nature of the charges. Between 1994 and 1996,

Gianakos billed Comcast for almost $2.5 million; on these billings,

she was paid over $350,000 in markups.

Newell was a vice president of Trustmark National Bank in

Meridian and Colvin’s close friend. When Colvin wanted to build a

home next to Newell’s, Newell helped Colvin buy the lot and

introduced him to Raley, a home builder. He also arranged for

Trustmark to make the construction loan. As the construction loan

was depleted, Colvin began using his AmEx card to pay to complete

the home. The government urged at trial that Newell became a

willing participant in Colvin’s fraudulent AmEx billing scheme,

using the AmEx card for Newell’s own personal expenses.

There was evidence at trial that after Raley finished building

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Colvin’s house, Newell suggested that Raley become an AmEx vendor.

Raley applied for an AmEx vendor account under the name “Raley

Builders.” The account was set up so charges could run through

Colvin’s AmEx card. When Raley received his card imprinter, he

gave it to Newell, who kept it in his office at the bank. Newell

would imprint Colvin’s AmEx card and bill AmEx large amounts of

money for the charges. At times, Raley went to Newell’s office to

sign for the amounts submitted to AmEx, and at other times he

allowed Newell to sign his name. There was evidence at trial that

Newell used the card both to get money for projects in which he and

Colvin were involved, and for his own personal expenses. From

November 1994 until July 1996, AmEx paid Raley Builders over $1.1

million for charges on Colvin’s AmEx card.3

II

At trial, Newell and Raley were represented by the same

attorney, Henry Palmer.4 Raley was acquitted and Newell was

convicted. Although the judge questioned Newell before trial about

potential conflicts of interest and Newell elected to proceed, he

argues that he did not waive his right to conflict-free counsel.

3
The government also attempted to prove that Newell laundered
some of the AmEx funds in several ways, including his asking an
attorney friend, Charles Smith, to run some transactions through
Smith’s trust account “for record purposes.” The government
further contended that Newell committed tax fraud by failing to
report the funds he received through the AmEx transactions.
4
Additionally, co-defendant Graham, who was also tried in the
same proceeding, was represented by Palmer’s law partner.

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Alternatively, he contends that the actual conflict and its

dimensions did not surface until trial and were in any event so

egregious as to be at the least beyond the scope of any waiver

resulting from the court’s inquiry before trial, if waivable at

all.

“The [S]ixth [A]mendment right to effective assistance of

counsel derives from the defendant’s fundamental right to a fair

trial, a goal best achieved by ensuring that the process involves

vigorous partisan advocacy by both sides.”5 Thus, “[t]he right to

the effective assistance of counsel is ... the right of the accused

to require the prosecution’s case to survive the crucible of

meaningful adversarial testing.”6 When a defendant has been able

to show that his counsel “‘actively [represented] conflicting

interests and that [an] actual conflict of interest adversely

affected his lawyer’s performance,’ constitutional error has

occurred, and prejudice is inherent in the conflict.”7 A lawyer

places himself in an impossible situation when the defense of one

client is perforce to the detriment of another client.8

In cases where a defendant demonstrates such a conflict of

5
Haynes v. Cain, 272 F.3d 757, 761 (5th Cir. 2001).
6
United States v. Cronic, 466 U.S. 648, 656 (1984).
7
Hoffman v. Leeke, 903 F.2d 280, 286 (4th Cir. 1990) (quoting
Strickland v. Washington, 466 U.S. 668, 692 (1984) (some internal
quotation marks omitted)).
8
See Cuyler v. Sullivan, 446 U.S. 335, 349-50 (1980).

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interest, we ask whether the defendant freely and validly waived

his right to representation by a conflict-free attorney.9 Applying

Cuyler, we do not ask whether the actual conflict prejudiced the

appellant’s defense.10 Prejudice is presumed upon a showing of an

actual conflict, not waived by the defendant.11

In Beets v. Scott, we explained that “[n]ot all conflicts of

interest that affect the attorney’s ‘duty of loyalty’ have the same

consequences, and they are not all suited to Cuyler’s stringent

rule.”12 Rather, “Strickland more appropriately gauges an

attorney’s conflict of interest that springs not from multiple

client representation but from a conflict between the attorney’s

personal interest and that of his client.”13 The reason for the

distinction was as clear then as it is today:

When multiple representation exists, the source and
consequences of the ethical problem are straightforward:
“counsel represents two clients with competing interests
and is torn between two duties. Counsel can properly
turn in no direction. He must fail one or do nothing and
fail both[”] .... Conflicts between a lawyer’s self-
interest and his duty of loyalty to the client, however,
fall along a wide spectrum of ethical sensitivity from

9
United States v. Rico, 51 F.3d 495, 508 (5th Cir. 1995).
10
Beets v. Scott, 65 F.3d 1258, 1265 (5th Cir. 1995) (en
banc).
11
Id.
12
Id. at 1269.
13
Id. at 1260.

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 merely potential danger to outright criminal misdeeds.14

Thus, the standard we employ here is confined to claims such as

Newell’s that challenge an attorney’s divided loyalties due to

multiple representation, a conflict which in the most literal sense

demonstrates a denial of the “right to have the effective

assistance of counsel.”15 Strickland’s two-pronged analysis,

including its requirement of a showing of prejudice, governs all

other attorney-client conflicts, their range being “virtually

limitless.”16

A

That there was an actual conflict of interest in Palmer’s

representation of both Newell and Raley is plain. Start to finish,

Palmer presented at trial a lop-sided defense strategy centering on

Raley’s simple-minded trust of Newell and Newell’s confederacy with

Colvin, the undisputed mastermind of the illegal operation. In his

opening statement, Palmer first asserted that “[w]hat happened here

... is not a crime unless there’s guilty knowledge on [the

defendants’ parts] that David Colvin is a thief.” He then

proceeded to explain,

David Colvin said that he didn’t know if Wayne [Raley]

14
Id. at 1270 (quoting Beets v. Collins, 986 F.2d 1478, 1492
(1993) (Higginbotham, J., concurring)).

15
Id. at 1266.
16
Id. at 1271.

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 knew anything about the stealing scheme or not.... if
that’s what [Raley] knows, the government should
apologize for indicting Wayne Raley. Wayne Raley treated
David Colvin and this relationship as if it were a
business. Bubba Newell, David Colvin’s close friend, was
the messenger. David, it was said, was eccentric, hard
to deal with from a business standpoint. He was Bubba’s
neighbor, friend, godfather to his children and Bubba
would do that. So Wayne’s contact primarily was with
Bubba through David.
.... Bubba Newell’s relationship with David Colvin
was entirely different [from Raley’s]. [Colvin] had known
[Newell] since the ‘80s .... He was a friend of the
Newell family, a close friend ... David and Bubba [got]
to know one another through [a third party] and became
close friends, dearest friends.
[Colvin] spent Christmas Eve night in their home.
He said that he would never marry again, would never have
children and [Newell’s children] were his....

Palmer then admitted that, in regard to Colvin, “Bubba made some –

probably you may consider them errors in judgment,” adding, “many

times ... I think the Newells’ judgment may have been clouded

because of the fact that their children were involved.” Later on

in the opening, Palmer asserted that Newell kept the AmEx card

imprinter in his office because Newell was the “go-between” between

Colvin and Raley, and reemphasized that “[t]here were an awful lot

of gifts that the Newells got....”

In his cross-examination of Colvin, Palmer attempted to weave

in his theme of Raley’s distance from and Newell’s closeness to

Colvin:

Q. And your relationship with Bubba Newell and the
Newell family goes back a long time, and it’s a friendly
relationship as opposed to Wayne Raley, which was a
business relationship, wasn’t it? Would that be fair to
characterize it?

A. I would have to say that I considered the Newells

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 very, very close friends and family, and Mr. Raley I
would consider a good friend when I was dealing with him.

Q. But you didn’t spend Christmas Eve with Wayne Raley,
did you?

A. No, sir, that was with the Newells most likely.

Q. Your relationship with Mr. Raley was purely him as
a contractor and a man that paid your bills through this
American Express vendor’s arrangement, and that’s all.
You didn’t have any –

A. I had worked with him on a contractor relationship,
yes, sir.

Consistent with this theory, after the government rested,

Palmer moved for a directed verdict on Raley’s behalf, explaining

that the evidence suggested that Raley had no guilty knowledge

unless it came “though Bubba Newell.” Only after the court stated

that it was denying the “motion of Mr. Newell and Mr. Raley” did

Palmer add, apparently as an afterthought, “I had just made that on

behalf of Mr. Raley, but I would also do – make one for Mr. Newell

and adopt the arguments that have been made here.”

Newell did not testify; Raley took the stand in his own

defense. Palmer’s direct examination of Raley largely consisted of

Raley’s pointing the finger at Newell. Upon prompting by Palmer,

Raley testified that it was Newell who introduced Raley to Colvin;

Newell who acted as the intermediary between Raley and Colvin;

Newell who suggested that Raley become an AmEx vendor; and Newell

who thought they should keep the AmEx card imprinter in his office.

With Palmer’s guidance, Raley portrayed himself as an innocent dupe

who, upon Newell’s request, continually gave Newell AmEx checks for

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tens of thousands of dollars, which Newell usually claimed were for

Colvin’s expenses. With regard to one such check, Palmer’s

questioning of Raley proceeded as follows:

Q. This last one, American Express check to Bubba,
25350?

A. It was – $33,045 is what it was .... That was a
check to – [Newell] said that David had given him
permission to run – give a check to [Newell] to pay his
bills....

Q. This is when Mr. Newell was without a job?

A. Right.

Q. And what did you do with that check?

A. I endorsed it and put on the back of it to pay to
the order of C.D. Newell.

Q. And did you have anything to do with it thereafter?

A. I had nothing to do with it thereafter.

Q. Now, this is an awful lot of money that’s going to
Mr. Newell, is it not?

A. It is.

Q. Did you – were you concerned or suspicious or
problemed by that in any way?

A. Well, all of it I didn’t know was going to him.

Q. Well, what [did you know] about it?

A. What I knew about, no, it didn’t. I just had a good
friend, I thought. I didn’t know – I didn’t think
nothing about it.

Palmer was placed in a particularly precarious situation during

Raley’s cross-examination, during which the government attempted to

further implicate Newell. The government emphasized that Raley

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made out several checks for Newell’s benefit. In one instance, the

government pointed to “$89,553.13 on your account, that’s checks

that were cashed and money given to Bubba Newell, right?” which

Raley confirmed. Additionally, the government emphasized:

Q. .... Now, you know that Bubba and David had a close
relationship, don’t you?

A. Yes, sir.

Q. And all the finances that you’ve testified about,
every time you said David needed something paid, Bubba
was in the loop there, wasn’t he?

A. Right.

Q. Bubba was involved. And we looked at some of these
payments, some of them were actually – they may have been
described to you, according to your testimony, as David’s
bills, but in reality they were Bubba’s bills, weren’t
they?

A. It looked that way.

On redirect, Palmer implied that Newell had misled Raley about

these expenses, asking, “Was it your understanding that those

[checks] were [for] the benefit of David Colvin when you got them?”

Raley replied, “[a]s from Mr. Newell, it was.”

Palmer’s strategy of sacrificing Newell to save Raley

culminated in his closing argument, in which he spent forty-five

minutes defending Raley, only realizing that he needed to mention

a reason to acquit Newell after the court warned him that his time

was coming to an end, to which he replied, “I’m going to have to

hurry some now for Bubba.” In advocating Raley’s innocence, Palmer

actually admitted that even though the jury had a basis in the

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evidence for finding all of the other defendants guilty – including

Newell – they could not convict Raley:

The government can argue that Ms. Gianakos falsified an
invoice. The government can argue that Cary Graham
falsified an invoice. The government will argue that
David Colvin told Bubba Newell about this scheme that he
was in and Bubba was aware of it. But there’s not one
iota of evidence in the record that Wayne Raley did
anything wrong during this entire procedure.

In attempting to minimize Raley’s involvement in the scheme, Palmer

several times stressed that Raley simply wrote the check and “gave

it to Bubba,” and “[w]hat happened after that Wayne didn’t know”;

he had “[n]o other involvement.”

Palmer also used the closing argument as another opportunity

to contrast the nature of Raley’s relationship to Colvin with

Newell’s, reasserting that “Wayne’s relationship with David was

totally different from anyone else’s. He wasn’t a vendor for

David. He wasn’t a close personal friend like the Newells were.

He didn’t spend holidays with David.... It was with David as a

business arrangement.”

These excerpts reveal that, throughout the trial, Newell “was

in the unacceptable position of having his own attorney help the

state procure a witness against him.”17 This demonstration of

partiality on the part of Palmer more than suffices to show that

the defense of Raley was at the expense of the defense of Newell.

The conflict at trial was palpable. We turn to the question of

17
Hoffman v. Leeke, 903 F.2d 280, 286 (4th Cir. 1990).

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waiver.

B

“Waivers of constitutional rights not only must be voluntary

but must be knowing, intelligent acts done with sufficient

awareness of the relevant circumstances and likely consequences”;18

in other words, such a waiver must constitute an “intentional

relinquishment or abandonment of a known right or privilege.”19 In

discerning whether Newell waived his right to conflict-free

counsel, we must search the record for a basis upon which to

conclude whether Newell had “actual knowledge of the existence of

the right or privilege, full understanding of its meaning, and

clear comprehension of the consequence of the waiver.”20

At the time of the Rule 44(c) hearing, the district court did

not have sufficient information to inform Newell adequately of the

full consequences of his waiver. Although the trial court

explained, in general terms, the possibility of conflict when an

attorney represents two co-defendants, it did not describe the

potential for conflict in Palmer’s dual representation given the

particular facts of the case. Thus, although the district court’s

18
Brady v. United States, 397 U.S. 742, 748 (1970).
19
Johnson v. Zerbst, 304 U.S. 458, 464 (1938).
20
Hatfield v. Scott, 306 F.3d 223, 230 (5th Cir. 2002)
(emphasis added).

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advice and inquiry served to warn Newell of the general dangers of

dual representation, the scope of the waiver did not include the

actual conflicts that arose during trial.

After twenty-seven years the requirements of United States v.

Garcia are at the hand of every trial judge in the circuit.21 It

commands that the district court “address each defendant personally

and forthrightly advise him of the potential dangers of

representation by a counsel with a conflict of interest” and detail

specifics about potential conflicts that are then foreseeable.22

The trial court should then seek to elicit a response from each

21
517 F.2d 272, 278 (5th Cir. 1975).
22
Id.; see also United States v. White, 706 F.2d 506, 508 (5th
Cir. 1983). In White, we reversed a conviction based on our finding
that an actual conflict had manifested itself during the trial of
the defendant and that the district court had failed to at any time
“inform the defendant of the precise manner” in which he was
prejudiced by his attorney’s representation. Id. at 508. In that
case, White had requested that his attorneys be allowed to
represent him against charges that he had escaped from federal
custody. Id. at 507. The government asked for a hearing on its
assertion that White’s attorneys were operating under a conflict of
interest in that they were suspected of participating in the
defendant’s escape. Id. During the hearing, the district court
reviewed in general terms the perils of representation by an
attorney with a conflict of interest and questioned the defendant
regarding his wish to waive the conflict. Id. at 508 n.2. It also
described the general nature of the conflict, explaining that “your
lawyers are targets of an investigation into the matters
surrounding your escape” and that it was therefore “possible that
a conflict does exist between [the] interests of your lawyers and
your interests.” Id. Despite the district court’s efforts in
ensuring that White understood the nature of the conflict and was
knowingly and voluntarily relinquishing his right to conflict-free
counsel, we found the conflicts that emerged were beyond this
waiver. Id. at 509-10.

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defendant “that he understands the details of his attorney’s

possible conflict of interest and the potential perils of such a

conflict.”23 The difficulty is that Garcia is not a complete

answer. At the outset of a criminal case a district court can

often offer little more than a general warning of possible harm.

Such an inquiry does not end the matter of conflicted counsel and

the court remains under a continuing obligation during the course

of trial to remedy an actual conflict if it emerges.

As we have observed, during Newell’s conflict waiver hearing

the trial court diligently attempted to comply with the procedure

required in Rule 44(c) and Garcia. The court advised the

defendants in general terms of their Sixth Amendment right to

conflict-free counsel, and told them that “there could be a

potential conflict in that there could be a defense that is in the

best interest of the two of you,” and that Palmer “could be put in

the position of choosing which of you to more effectively

represent”; that if evidence existed “that would tend to exculpate

one of you and not the other of you ... then there might be a

tendency to be incriminated and ... your attorney would be in the

position of having to offer the evidence in order to defend your

codefendant to your detriment.” The district judge explained

during the colloquy that he did not know whether a conflict

actually existed, but that it was conceivable.

23
Garcia, 517 F.2d at 278.

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 These expressions by the court did not stand alone. Prior to

the hearing, the court denied a motion to sever filed by Raley and

Newell. The motion had requested severance in part on the basis

that the defenses of the two men might conflict. The court denied

the motion, observing,

Newell and Raley appear to complain that they will be
prejudiced because Palmer will have the responsibility of
representing two defendants at trial .... [T]here is no
indication that Newell and Raley will employ defenses
which are antagonistic to each other[; thus] the fact
that they are represented by a single attorney is not
sufficiently prejudicial to warrant severance.

In short, the trial court, necessarily unaware of Palmer’s trial

strategy or the details of the case, did not explain to Newell – or

even contemplate itself – that Palmer’s conflict could injure him

by forcing Palmer to implicate Newell in order to save Raley. We

cannot conclude that Newell validly waived the actual conflict that

surfaced at trial, since he “could not waive what he did not

know.”24

24
Hoffman v. Leeke, 903 F.2d 280, 289 (4th Cir. 1990). In
Hoffman, the Fourth Circuit declared Hoffman’s conflict waiver
invalid because during the pretrial waiver hearing the trial court
had not explained to Hoffman the potential conflicts engendered in
Hoffman’s sharing of counsel with his co-defendant, Moose, and had
not secured a further waiver from Hoffman during trial when an
actual conflict surfaced. Id. Before Hoffman’s trial, Moose
pleaded guilty to the charges and agreed to testify against Hoffman
at trial. Id. Although the district court attempted to comply
with Rule 44(c) by conducting a pretrial conflict waiver hearing,
during the hearing the trial court did not inform Hoffman that
Moose would testify against him at trial and that his attorney’s
joint representation of Moose and Hoffman might present special
difficulties in combating Moose’s testimony. Id. This was most
likely because the trial judge may have been unaware of Moose’s

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 As we explained, the trial judge remained under a duty to act

when at trial what were unexpected possibilities became quite

clear. At that juncture he was required to again inquire and

either obtain a knowing waiver, disqualify counsel and mistry the

case, or, if appropriate, grant the severance that was earlier

denied and require separate counsel. That failure to act at trial

is the error that compels this reversal, and it cannot be saved by

the general advice and inquiry made at the outset and eroded by the

court’s skepticism expressed before the Rule 44(c) hearing that

there was any conflict. As the Advisory Committee Notes to Rule

44(c) provide:

[T]he mere fact that a rule 44(c) inquiry was conducted
at the early stages of the case does not relieve the

plea bargain during the hearing. Id. However, the Hoffman court
reasoned that the trial judge

clearly became aware of the agreement[] at the start of
the ... trial, and at that point his obligation to insure
a fair trial became apparent. When it became obvious
that [the attorney] had negotiated a plea bargain for
Moose that required him to incriminate Hoffman, the judge
had a duty to conduct further inquiry and secure a
further waiver if Hoffman wished to make one. If Moose’s
agreement to testify against Hoffman did not come out
during the court's acceptance of [Moose’s plea], the
judge became aware of it when the state called Moose to
the witness stand. At that time, when the particular
nature of the conflict came into sharp focus, further
inquiry should have been made. Thus, even if Hoffman
waived his right to conflict-free counsel at the
[pretrial] hearing ..., he did not waive that right when
he became aware that Moose was going to testify against
him.

Id. (emphasis added).

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 court of all responsibility in this regard thereafter.
The obligation placed upon the court by rule 44(c) is a
continuing one, and thus in a particular case further
inquiry may be necessary on a later occasion because of
new developments suggesting a potential conflict of
interest.25

The difficulties posed by a conflict emerging at trial that

was not sufficiently foreseeable as to be explained to a defendant

before trial can be mitigated only by probing inquiry at the time

the conflict surfaces or by great caution in allowing joint

representation at the outset. The risk of unforeseen events must

fall on one side or the other. And the principle that waiver

requires an intentional relinquishment of known rights implicitly

rejects placing that risk upon the defendant.

We do not suggest that a trial court cannot at the outset of

any case obtain a waiver of the right to conflict-free counsel.

Such a waiver obtained before trial will be valid against conflicts

that emerge at trial in cases where they were sufficiently

foreseeable that the judge can bring them home to the defendants in

concrete terms. Nor is the trial judge powerless to prevent

abusive use of common counsel such as an effort to force a

severance or to control codefendants whose individual interest may

25
FED. R. CRIM. P. 44 advisory committee’s note; see also
United States v. Hall, 200 F.3d 962 (6th Cir. 2000). In Hall, the
Sixth Circuit reasoned that, “[e]ven though both Rex and Stanley
Hall waived their rights to separate counsel” before trial, during
trial an actual conflict surfaced “such that the trial judge should
have intervened and at that stage severed the case against Stanley
Hall.” Id. at 963, 967.

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be to cooperate with the prosecution. We remind, in these

circumstances the trial judge has the discretion in such

circumstances to reject a proffered waiver.26

Given our finding that Palmer’s representation of Newell and

Raley was conflicted as measured by Cuyler – where to defend one

was to prosecute the other – and that Newell’s waiver before trial

did not reach the conflict that was unforeseen and did not emerge

until trial, we must reverse Newell’s judgment of conviction and

remand for a new trial.

III

Kim Gianakos also appeals her conviction, arguing that the

trial court erred in admitting certain pieces of evidence, allowing

the prosecution to engage in certain arguments in its closing, and

providing the jury with a deliberate ignorance instruction. We

analyze each in turn.

A

Gianakos first argues that the district court abused its

discretion in admitting the handwritten notes of Rebecca Cooper,

Gianakos’s in-house accountant. The government called Cooper to

the stand in its case-in-chief. She testified to concerns she had

about billing Comcast for Colvin’s AmEx expenses without proper

documentation. Cooper explained that she confronted Gianakos about

this on July 10, 1995. Sometime thereafter, Cooper prepared a set

26
United States v. Wheat, 486 U.S. 153, 163 (1988).

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of notes that expressed her concerns and described what had

prompted her to confront Gianakos. She did not remember when she

had written the notes; only that they were prepared sometime

following the July 10 meeting. The notes contained twelve points.

The last two points read:

(11) Kim [Gianakos] caused me confusion by telling me “I
want to do things right, pay my taxes, etc.” so I found
it difficult to accept that perhaps things were not being
“done right.”
(12) When I started hearing rumors that Kim was bragging
about what she was doing with Comcast Satellite I
expressed my concerns to Kim verbally 7/10/95[.]

The government introduced these notes into evidence during Cooper’s

testimony. Gianakos objected to them on the basis that they were

hearsay, irrelevant, and prejudicial. The government responded

that they were not hearsay because they fell under the state of

mind exception, as “they go to [Cooper’s] concern about this whole

American Express billing process” and were “the best evidence of

her concerns, the memorialization of her concerns.” The trial

court overruled her objection. Gianakos also expressed particular

concern about the “rumors” comment and unsuccessfully requested

that the comment in the notes be redacted.

Gianakos argues that the notes were offered to prove the truth

of the matters asserted and do not satisfy Federal Rule of Evidence

803(3)’s exception for state of mind evidence, since the government

did not prove that they were made contemporaneous with the July 10,

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1995 meeting or that Cooper’s state of mind was relevant.27

Gianakos specifically attacks the “rumors” remark, which she

requested be redacted from the notes, as highly prejudicial.

“The decision whether to admit testimony or other evidence is

committed to the sound discretion of the trial judge.”28 Rule

803(3) allows an exception to the exclusion of hearsay evidence for

“[a] statement of the declarant’s then existing state of mind ...

but not including a statement of memory or belief to prove the fact

remembered or believed.”29 We find that the district court did not

abuse its discretion in admitting the notes. The notes were

admitted to prove Cooper’s state of mind around the time she

confronted Gianakos. Although Cooper could not identify the

specific date on which she wrote the notes, she testified that she

authored them when the events were still “fresh in her mind.”

Furthermore, although Gianakos urges that the notes bore no

relevancy to the case, we are persuaded otherwise. Whether Cooper

became concerned about the AmEx billing practices was relevant to

whether Colvin’s expenses were of such a suspicious nature that

27
United States v. Jackson, 780 F.2d 1305, 1315 (7th Cir.
1986) (explaining that, to fall under the 803(3) state of mind
exception, “(1) ‘the statements must be contemporaneous with the
... event sought to be proven;’ (2) ‘it must be shown that the
declarant had no chance to reflect – that is, no time to fabricate
or to misrepresent his thoughts;’ and (3) ‘the statements must be
shown to be relevant to an issue in the case.’”).
28
United States v. Virgen-Moreno, 265 F.3d 276, 295 (5th Cir.
2001) (internal quotation marks omitted).
29
FED. R. EVID. 803(3).

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Gianakos had to have known of their falsity.

Gianakos specifically objects to the district court’s refusal

to redact the “rumors” comment from the notes. The district

court’s denial of the motion to redact was premised on its

conclusion that the rumors comment “provides the context for the

inquiry that Ms. Cooper made of Ms. Gianakos.” We find that the

district court was within its discretion in denying the motion, as

the rumors comment was a statement of memory or belief used to show

why Cooper was confused and confronted Gianakos, and was not used

to prove the truth of the rumors.

Although Gianakos urges that the district court should have

provided a limiting instruction restricting the jury’s

consideration of the “rumors” comment to its purpose as a basis for

Cooper’s subsequent actions, Gianakos never requested such an

instruction. In such instances, our review of the district court’s

failure to sua sponte provide a limiting instruction is restricted

to plain error, and we consider only whether “the need for the

instruction is obvious and the failure to give it so prejudicial as

to affect substantial rights of the accused.”30 Substantial rights

are affected only if the evidence for which the district court

declined to provide a limiting instruction “had a ‘substantial

30
United States v. Waldrip, 981 F.2d 799, 805 (5th Cir. 1993)
(internal quotation marks omitted).

-22-
impact’ on the jury’s verdict.”31

The potential for prejudice occasioned by introduction of the

rumors remark was lessened by the fact that the prosecution did not

specifically highlight the rumors comment except to show that it

was the basis for Cooper’s confrontation of Gianakos.32 Given the

small part the notes, and especially the rumors comment, played in

the prosecution’s case against Gianakos, the remark could not have

had a substantial impact on the jury’s verdict.33 Gianakos asserts

that the central issue at trial was her state of mind and

knowledge, and that the government honed in on that issue by

calling attention to the rumors comment, which acted as the primary

proof of her actual knowledge. However, direct evidence of

Gianakos’s knowledge of Colvin’s defrauding of Comcast was not

required to find that she was also guilty, as the government was

proceeding under a deliberate ignorance theory. A wealth of

31
United States v. El-Zoubi, 993 F.2d 442, 446 (5th Cir.
1993).
32
The only point during the trial the prosecutor focused on
the “rumors” statement was in a few brief questions during redirect
examination of Cooper. During this exchange, the prosecutor asked
Cooper whether she had heard the “rumors” that she had mentioned in
her notes and further inquired, “And that’s part of what you
expressed to Ms. Gianakos sometime in July of ‘95?” Although
Gianakos takes issue with the prosecutor’s focus on the rumors
remark during his closing, the prosecutor did not specifically
mention the comment, other than in his reading of the entire text
of the notes to the jury and in his statement, “when [Cooper]
started hearing these rumors about what Kim was doing with the
account, she expressed her concern. She got so upset that she
started writing letters [of resignation] to Ms. Gianakos.”
33
See id.

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evidence at trial supported that theory. Cooper affirmed that

Gianakos continually billed Comcast for Colvin’s AmEx expenses

while falsely claiming they were for marketing tasks performed by

GA. Gianakos also instructed Cooper to “arbitrarily” break up the

large amounts Colvin submitted for payment into much smaller

increments – never of the same size and always under $5,000 – so

that Comcast would pay the amounts without asking questions.

Gianakos also directed Cooper to randomly attach different labels

to the broken-down amounts, such as “advertising and promotion,”

“direct mail,” or “television,” so that the amounts would appear to

be for actual marketing tasks performed by GA. Gianakos admitted

to Cooper that she “blithely” made up the amounts until she got

“close to the end” and saw “how much I ha[d] left.”

Additionally, although Gianakos claimed that Colvin always

told her the expenses were for marketing tasks he performed, she

never requested proof of the expenses even though, near the end of

the operation, Colvin was submitting bills to GA for hundreds of

thousands of dollars. Cooper testified that she became so

concerned about these billing practices that she confronted

Gianakos and threatened to resign. Even after the confrontation,

during which Cooper urged Gianakos to talk to an attorney about the

legality of the billing practices, Gianakos hesitated for some time

before following Cooper’s advice.

Given the prosecutor’s limited use of the notes, particularly

the rumors reference, and the substantial evidence on the record

-24-
signaling Gianakos’s willing participation in Colvin’s scheme to

defraud Comcast, the trial court did not commit reversible error in

admitting the notes, refusing to redact that rumors reference, and

in not proffering a limiting instruction.

B

Gianakos also submits that the trial court erred in admitting

a letter from Cooper to Cooper’s attorney, Loeb, that disclosed the

substance of certain communications between Gianakos and her

counsel, Trapp. After the July 10, 1995 confrontation, Cooper

consulted Loeb about the billing problems. Cooper finally

persuaded Gianakos to seek the advice of an attorney on the matter,

which Gianakos did by consulting Trapp in mid-August 1995. After

meeting with Trapp, Gianakos held a meeting with senior associates

at GA, including Cooper, in which she discussed her communications

with Trapp and how the company would alter the billing procedure to

avoid liability. After this meeting occurred, Cooper wrote a

letter to Loeb explaining what Gianakos had told her. Cooper’s

letter to Loeb came into evidence over Gianakos’s objection that it

was hearsay and was protected by attorney-client privilege because

it contained a summary of Trapp’s communications to Gianakos. The

court overruled Gianakos’s objection by explaining that “the issue

is Ms. Gianakos’s good faith and this could have been regarded as

bearing on that good faith defense.”

The court apparently believed that Gianakos had waived the

-25-
privilege that attached to her communications with Trapp by

asserting a good faith defense. However, review of the record

makes clear that Gianakos’s good faith defense was not based on

advice of counsel, but rather on a simple lack of knowledge of the

wrongdoing and absence of intent to participate in it. In United

States v. White, the D.C. Circuit encountered a similar error,

explaining:

The district court apparently equated White’s denial of
criminal intent with a reliance-on-advice-of-counsel
defense, which would have waived the privilege. Reliance
on advice of counsel is an affirmative defense, an
assertion more positive and specific than a general
denial of criminal intent. To be acquitted for lack of
criminal intent, White did not need to introduce any
evidence of communications to and from [his attorney],
and he did not do so.34

We similarly find merit in Gianakos’s contention that she did not

waive her attorney-client privilege by asserting good faith as a

defense.

Defending the district court’s decision, the government

primarily relies on its theory that Gianakos waived the privilege

by communicating Trapp’s advice to Cooper. Gianakos denies that

there was any waiver, urging that the two shared a common legal

interest. The government replies that Cooper’s and Gianakos’s

interests diverged, as Cooper had urged Gianakos to change their

billing practices and Gianakos knew Cooper’s concerns had led her

to seek separate counsel and consider resigning.

34
887 F.2d 267, 270 (D.C. Cir. 1989).

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 “A party asserting a privilege exemption ... bears the burden

of demonstrating its applicability.”35 In a recent case, In re

Santa Fe International Corp., we clarified the law relating to the

common legal interest rule.36 There we stated, “[a]ccording to our

circuit precedents, the two types of communications protected under

[this rule] are: (1) communications between co-defendants in actual

litigation and their counsel; and (2) communications between

potential co-defendants and their counsel.”37 Communications

between potential codefendants and their counsel are only protected

if there is “a palpable threat of litigation at the time of the

communication, rather than a mere awareness that one’s questionable

conduct might some day result in litigation.”38 Thus, a cognizable

common legal interest does not exist if a group of individuals

seeks legal counsel to avoid conduct that might lead to litigation,

but rather only if they request advice to “prepar[e] for future

litigation.”39

Here, Gianakos sought advice to protect herself and her

employees from possible – not imminent – civil or criminal action.

35
In re Santa Fe Int’l Corp., 272 F.3d 705, 710 (5th Cir.
2001).
36
Id.
37
Id. (citations omitted).
38
Id. at 711.
39
Id. at 713.

-27-
Gianakos is not claiming that an investigation had commenced or

that there was a threat of prosecution at the time she consulted

Trapp. We see no common legal interest between herself, Cooper,

and the other GA employees at the time Gianakos disclosed Trapp’s

advice to Cooper. It follows that Gianakos waived her personal

privilege by communicating Trapp’s advice to her employees.

Gianakos’s better argument is that the letter was triple

hearsay, a statement by Trapp to Gianakos included in a letter

authored by Cooper. The government’s assertion that the letter was

not used to prove the truth of its contents is belied by the

record. The portion of Cooper’s letter with which Gianakos takes

issue is the statement, “Mr. Trapp ... seems satisfied that

[instituting a new billing procedure] removes Kim and Gianakos

Associates from liability.” In his closing, the prosecutor

specifically highlighted that language in the letter:

David Colvin testified ... [that Gianakos] changed her
bills because she thought it might be mail fraud.... The
defense wanted to keep you away from that notion of this
being mail fraud, and so they used these kind of lawyer
terms, these weasel words, if you will, about liability.
We know what kind of liability they’re talking
about. It is right here in this letter that Rebecca
Cooper writes to Ronnie Loeb. She says, “We changed our
billing process and we feel like this new method – this
new method after August ‘95 removes us from liability.”
You understand what “removes” means. You can’t remove
somebody from liability if they didn’t have liability to
start with, can you? You can’t pull her out of this
mess, this fraud, this scheme if she wasn’t in it to
begin with.

This excerpt makes clear that the prosecutor used the letter to

prove the truth of its statements. He did not use the letter to

-28-
prove that the new billing procedures removed Gianakos from

liability, but he did utilize it to prove the truth of an inference

to be taken from Trapp’s purported statement that the new

procedures would remove her from liability: that Gianakos was

liable for a crime at the time she consulted with Trapp.

The letter was hearsay within hearsay, and the trial court

abused its discretion in admitting the evidence. Again, we

conclude there was no reversible error given that the government

proceeded primarily on the theory that Gianakos remained

deliberately ignorant of the fact that Colvin’s AmEx expenses were

not marketing-related, and substantial evidence supported its

theory. Therefore, we conclude that the admission of this letter

did not have a substantial impact on the jury’s verdict.40

C

Gianakos next complains that the district court abused its

discretion in overruling her objection to the prosecutor’s

40
Gianakos also asserts that the trial court cut short the
portion of her attorney’s argument where he attempted to respond to
the prosecutor’s references to the Cooper letter. In his closing,
Trapp tried to defuse the letter by explaining how Gianakos and
Cooper “were trying to do the right thing.” He continued by
stating, “If a lawyer, the lawyer you’re looking at, dropped the
ball in this case, and there’s no question the lawyer you’re
looking at ... miscalculated ....” At that point, the government
objected. The court sustained the objection because “there’s not
any testimony or any reference about” Trapp’s miscalculations on
the record. Gianakos urges that the court should have overruled
the objection, because Trapp was simply trying to explain the
substance of the letter, but clearly the court was correct in
sustaining this objection since Trapp was attempting to testify in
his closing.

-29-
reference, in closing argument, to a purportedly well-known

Mississippi felon, Lewis Nobles. Throughout the trial, Gianakos’s

counsel argued, and presented witnesses to attest to Gianakos’s

good character, including her participation in many charitable

organizations. In his closing, the prosecutor attempted to rebut

Gianakos’s assertions of good character by referencing Lewis

Nobles, a white collar criminal who, the prosecutor explained to

the jury, stole over $3,000,000 from Mississippi College while at

the same time establishing scholarships for needy students. The

prosecutor stated that, like Nobles, Gianakos “wants you to

remember all of the good things she was doing for the community

while she was scheming with ... Colvin and stealing money from

Comcast.” The court overruled Gianakos’s objection to the

argument, explaining that it was a legitimate response to “the

argument that good character ... is indicative that [the

defendants] didn’t commit the crime.”

Gianakos argues that the court erred in overruling her

objection to the Nobles references and for not providing a limiting

instruction. She states that the prosecutor wrongly argued that

the jury should discredit her good character evidence because a

particular notorious person unrelated to the case at some time

committed a crime. She urges that the argument also inflamed the

jurors against Gianakos because of their likely disgust for Nobles.

Gianakos also asserts that in labeling the argument “legitimate,”

the trial judge let the jury know that he believed the comparison

-30-
between Nobles and Gianakos was valid, which amounted to a signal

to reject Gianakos’ character evidence.

In determining whether prosecutorial argument is so

inappropriate as to warrant reversal, we must weigh “(1) the

magnitude of the prejudicial effect, (2) the efficacy of any

cautionary instruction, and (3) the strength of the evidence

supporting the defendant’s guilt.”41 Analysis of these factors

militates against a finding of error here. The magnitude of the

prejudicial effect was minimal; in the context in which it was

used, the argument only responded to Gianakos’s character evidence

argument and demonstrated, by example, that even a person of

stellar character may stray into criminal conduct. Furthermore,

in overruling Gianakos’s objection, the court reminded the jury

that “[t]he case is not about” Lewis Nobles, and also later told

the jurors that attorney arguments were not evidence. Finally, the

substantial evidence of Gianakos’s guilt lessened the prejudicial

effect of the challenged remarks. We are not persuaded that the

remarks “cast serious doubt on the correctness of the jury

verdict.”42

41
United States v. Fletcher, 121 F.3d 187, 196 (5th Cir.
1997).
42
Id. (internal quotation marks omitted); cf. United States
v. Papajohn, 212 F.3d 1112, 1121 (8th Cir. 2000) (“[W]e [cannot]
say that the prosecutor’s comparison of Ms. Papajohn’s defense to
the defense used in the O.J. Simpson case, although it might better
have been left unexpressed, was inflammatory to a degree that would
require a mistrial. Although courts have found that repeated
comparisons between the defendant and figures such as Charles

-31-
 D

Gianakos last argues that the evidence was insufficient to

justify the district court’s inclusion of a deliberate ignorance

instruction in the jury charge. Gianakos timely objected to the

instruction. We have explained,

The deliberate ignorance instruction presents the danger
that a jury will convict a defendant on the basis of the
lesser mens rea of negligence – punishing the defendant

Manson, and Pontius Pilate and Judas Iscariot, may warrant relief
on appeal, these cases are clearly distinguishable: The comments in
our case were fleeting, did not draw a direct comparison between
Ms. Papajohn and Mr. Simpson, and, whatever may be said about Mr.
Simpson's public stature, surely did not involve a comparably
notorious figure.” (citations omitted)); United States v. Frost,
914 F.2d 756, 771 (6th Cir. 1990) (concluding that the prosecutor’s
references to Benedict Arnold and Judas Iscariot in closing
argument were not reversible because the prosecutor “used Benedict
Arnold and Judas Iscariot as examples of men with good characters
who had ‘gone bad’ rather than as direct comparison models for
defendants.”).
Gianakos also complains that the prosecutor committed
misconduct by uttering certain other statements in his closing.
These included comparing David Colvin to the “teacher’s pet”
because his father was a Comcast executive and stating that
Gianakos and the other defendants “rode his shirttails thinking the
law would not apply”; arguing that Colvin having pleaded guilty to
conspiracy was tantamount to him admitting that “I conspired with
these people to steal money from my company. I did it. They did
it with me. They helped me do it”; arguing that “as we alleged and
as I believe we’ve proved, they are guilty”; asserting that “[t]his
is not a woman who operates in the dark and I don’t believe she
operated in the dark in this case either,” and “I don’t know
anybody in the real world who gets that kind of mark-up”;
contending that during Gianakos’s conversation with Colvin, in
which she confronted him about the Comcast scheme, “I think what
she probably said is ‘I’m not going to lie for you anymore.’”
Gianakos objected to certain of these remarks and not others.
Regardless of the standard to be applied, however, we conclude that
none is so serious as to require reversal, especially in light of
the district court’s instruction that attorney arguments are not
evidence.

-32-
 for what he should have known. Circumstances rarely
warrant the use of this instruction. Nevertheless, when
the defendant claims he lacks the requisite guilty
knowledge, such an instruction is appropriate if the
trial evidence raises two inferences: “(1) the defendant
was subjectively aware of a high probability of the
existence of the illegal conduct; and (2) the defendant
purposely contrived to avoid learning of the illegal
conduct.”43

We have further noted, “[t]he key aspect of deliberate ignorance is

the conscious action of the defendant – the defendant consciously

attempted to escape confirmation of conditions or events he

strongly suspected to exist.... [D]eliberate ignorance is reflected

in a criminal defendant’s actions which suggest, in effect, ‘Don’t

tell me, I don’t want to know.’”44

Gianakos urges that the evidence did not support the

instruction because she asked Colvin if the AmEx expenses were

business expenses, and he lied to her. Gianakos explains that she

eventually began to insist on purchase orders for the expenses, and

required written verification of Colvin’s authority, thereby

showing she did not attempt to escape confirmation of Colvin’s

fraud.

The government asserts that the district court did not err in

giving the instruction because ample evidence suggested that

Gianakos agreed to pay Colvin’s AmEx expenses and billed the amount

43
United States v. Gray, 105 F.3d 956, 967 (5th Cir. 1997).
44
United States v. Lara-Velasquez, 919 F.2d 946, 951 (5th Cir.
1990).

-33-
to Comcast as advertising-related expenses without ever once seeing

the AmEx bills; she accepted without question Colvin’s request to

break up the amounts billed to avoid Comcast’s corporate approval

process; she instructed Cooper to prepare bills representing that

her firm had provided a variety of advertising-related services

that her firm never performed for Comcast, helping disguise her

payment of Colvin’s AmEx; and she persisted in these practices even

though Cooper questioned her about them.

“When a challenge to jury instructions is properly preserved

for appeal, we review the challenged instructions for abuse of

discretion.”45 A deliberate ignorance instruction can be given

“when a defendant claims a lack of guilty knowledge and the proof

at trial supports an inference of deliberate indifference.”46 In

deciding whether the evidence reasonably supports the jury charge,

the court “reviews the evidence and all reasonable inferences that

may be drawn therefrom in the light most favorable to the

government.”47

Viewing the evidence in the light most favorable to the

government, it reveals both Gianakos’s awareness of a high

probability of Colvin’s illegal conduct and her attempts to avoid

learning of the conduct. Of particular importance is the fact that

45
United States v. Daniels, 281 F.3d 168, 183 (5th Cir. 2002).
46
United States v. Wells, 262 F.3d 455, 465 (5th Cir. 2001)
(internal quotation marks omitted).
47
United States v. Wise, 221 F.3d 140, 147 (5th Cir. 2000).

-34-
at no time did Gianakos request proof that Colvin’s expenses were

marketing-related and that Gianakos hesitated in seeking legal

advice and changing the billing procedure after being confronted by

Cooper. We have recognized before that whether a defendant “was

questioned by her own employees about the legitimacy” of the

situation is a factor in determining the propriety of the

deliberate ignorance instruction.48 Taken together, the evidence

reveals that the district court did not abuse its discretion in

including the instruction.

III

In conclusion, we REVERSE Newell’s conviction and REMAND for

a new trial, and AFFIRM Gianakos’s conviction.

48
Gray, 105 F.3d at 967.

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