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.
-2-
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.
-4-
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).
-17-
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.
-18-
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).
-19-
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,
-20-
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).
-21-
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.
-23-
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).
-26-
“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.
-35-