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United States v. Tevis

United States District Court, Sixth Circuit

December 6, 2013

UNITED STATES OF AMERICA, Plaintiff,
v.
LEE C. TEVIS, Defendant.

MEMORANDUM OPINION & ORDER

GREGORY F. VAN TATENHOVE, District Judge.

To most builders, constructing and financing a home for a loan officer at a bank, would seem like a good idea. Loan officers, however, must follow the rules like everyone else. Here, the builder, Lee Tevis, was hired to construct a home for the banker, James Tate. When they created Two Amigos, LLC and conspired to commit bank fraud criminal charges ensued. Tate pled guilty to certain charges and after a six day trial, Tevis was convicted of all but one of the charges. He now seeks a judgment of acquittal, or, alternatively, a new trial. [R. 46 & 50.] For the reasons set out below the jury verdict will be allowed to stand.

I

After a jury has reached a verdict, a defendant is permitted to file a motion for judgment of acquittal challenging the sufficiency of the evidence pursuant to Federal Rule of Criminal Procedure 29. Fed.R.Crim.P. 29(a), (c). "A defendant making such a challenge bears a very heavy burden." United States v. Tocco, 200 F.3d 401, 424 (6th Cir. 2000); see also United States v. Kimbrel, 532 F.3d 461, 465 (6th Cir. 2008) (citing States v. Vannerson, 786 F.2d 221, 225 (6th Cir. 1986) ("A defendant mounting a sufficiency challenge bears a "heavy burden.")) When undertaking such review, the court "must decide whether, after viewing the evidence in a light most favorable to the government, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." United States v. Gardner, 488 F.3d 700, 710 (6th Cir. 2007); see also United States v. Kimbrel, 532 F.3d 461, 465 (6th Cir. 2008). Moreover, courts are precluded from weighing the evidence, considering witness credibility, or substituting its judgment for that of the jury. United States v. Chavis, 296 F.3d 450, 455 (6th Cir. 2002). "A judgment is reversed on insufficiency-of-the-evidence grounds only if [the] judgment is not supported by substantial and competent evidence upon the record as a whole.'" Gardner, 488 F.3d at 710 (quoting United States v. Barnett, 398 F.3d 516, 522 (6th Cir. 2005); United States v. Beddow, 957 F.2d 1330, 1334 (6th Cir. 1992)).

Rule 33 establishes that "[u]pon the defendant's motion, [a district] court may vacate any judgment and grant a new trial if the interest of justice so requires." U.S. v. Munoz, 605 F.3d 359, 373 (6th Cir. 2010); see also Fed.R.Crim.P. 33(a). The phrase "interest[ ] of justice" is not defined within the rule, and courts have had marginal success in trying to "generalize its meaning." Id. (quoting United States v. Kuzniar, 881 F.2d 466, 470 (7th Cir. 1989)). Still, several themes remain constant in the Rule 33 context. The conventional use of a Rule 33 motion "is to seek a new trial on the ground that the [jury's] verdict was against the manifest weight of the evidence.'" Id. (quoting United States v. Crumb, 187 Fed.Appx 532, 536 (6th Cir. 2006)); see also United States v. Legette-Bey, 147 Fed.App'x 474, 486 (6th Cir. 2005); United States v. Graham, 125 Fed.App'x 624, 628 (6th Cir. 2005); United States v. Solorio, 337 F.3d 580, 589 n. 6 (6th Cir. 2003). Finally, "[w]ith a Rule 33(a) motion for new trial on the ground that the verdict is against the weight of the evidence, the power of a court is much broader because a court may weigh the evidence and consider the credibility of the witnesses." U.S. v. Dimora, 879 F.Supp.2d 718, 724 (N.D. Ohio 2012).

II

A

Tevis assigns error to the Court's decision not to permit evidence of a civil settlement agreement between Founders and those allegedly involved in the bank fraud, including Tevis. [R. 46-1 at 4.] Tevis urges that this evidence would have established Founders "(1) had settled all claims in the Franklin Circuit Civil action, (2) had forgiven each of the allegedly "fraudulent" loans to Two Amigos, (3) had paid Mr. Tevis' substantial attorneys' fees as part of the settlement, and (4) had settled with all parties except James Tate..." [Id. (emphasis in original).] The Court ruled that the settlement agreement was inadmissible to the extent it would be introduced for purposes of establishing liability. [R. 45 at 223 (Tr Day 1).] Tevis also believes the Court erred when it denied admission of a copy of the insurance policy that covered Founders for lost funds associated with bad loans. [R. 46-1 at 7.] The United States argues that the settlement agreement was not relevant under FRE 401, more prejudicial than probative under FRE 403 and, finally, inadmissible under FRE 408. [R. 50 at 1-7.]

Evidentiary rulings of the Court are reviewed for an abuse of discretion. Argentine v. United Steelworkers of America, AFL-CIO, 287 F.3d 476, 486 (6th Cir. 2002). The Sixth Circuit "will reverse only when [ ] find[ing] that such abuse of discretion has caused more than harmless error." United Steelworkers of America, 287 F.3d at 486 (citing Cooley v. Carmike Cinemas, Inc., 25 F.3d 1325 (6th Cir.1994)).

At trial, after hearing the arguments from parties, the Court ruled that the settlement agreement was inadmissible under Federal Rule of Evidence 408 which prohibits the admission of evidence of compromise offers and negotiations to "prove or disprove the validity or amount of a disputed claim." Fed.R.Evid. 408(a). The rule provides that the evidence might be admitted for another purpose, "such as proving a witness's bias or prejudice." Fed.R.Evid. 408(b). The defense, however, sought to introduce the Settlement agreement for purposes of showing that the bank did not impute liability to Tevis. [R. 60 at 23 (Tr. Day 1).] A strong argument exists that the evidence is irrelevant per Rule 401. The Government argued at trial, and now, that the crime was committed when the false statements were made to the bank. An after-the-fact settlement agreement has no bearing on whether the underlying false statements were made.

As explained at trial, admission of this agreement is in clear contravention of the Federal Rule of Evidence 408, which prohibits the introduction of a settlement agreement to "disprove the validity or amount of a disputed claim." FRE 408(b). The draft settlement agreement[1] which Tevis sought to admit states it is not "an admission of liability on the part of any party hereto." [R. 46, Exhibit B at 3.] Nevertheless, this is the very reason Tevis sought its admission. There are many reasons for parties to settle disputes in the civil context and to argue the civil settlement exonerated Tevis of liability in the mind of the bank is presumptive. Even if it did, this has no impact on the question of criminal liability. Finally, the Court properly left open the possibility of using the agreement for other purposes. The Court was even willing to allow limited references to the agreement in opening statements, although defense counsel made the calculated decision not to discuss the settlement agreement without being able to fully describe its circumstances and to argue the settlement proved Tevis' innocence. [R. 60 at 226 (Tr. Day 1).]

Tevis misinterprets a flurry of case law in support of his position. First, Tevis refers the Court's attention to United States v. Gonzalez, 748 F.2d 74 (2nd Cir. 1984). In that case, the Second Circuit permitted statements made during the course of a civil settlement into a criminal trial. These statements, however, were distinct from the case at hand as they did not address the issue of liability but, rather, "were admitted to establish that Gonzalez committed a crime." Id. This does not help Tevis. Under this Court's holding at trial, statements introduced for a purpose other than proving liability through the settlement agreement, as in Gonzalez, would be admissible. Second, Tevis cites to the Second Circuit's holding in Manko v. United States, 87 F.3d 50, 54 (2nd Cir. 1996), where the Court cites approvingly to their earlier decision in Gonzalez. As has already been discussed, Gonzalez is distinct. Finally, Tevis argues that the Sixth Circuit has resolved the issue in his favor. To support this proposition, he misreads McAuliffe v. United States, 514 Fed.App'x. 542, 549 (6th Cir. 2013). In McAuliffe, the Sixth Circuit explained that a 2006 rule amendment abrogated the Circuit's earlier holding in United States v. Logan, 250 F.3d 350, 367 (6th Cir. 2001) and applied FRE 408 in criminal proceedings. Id. The Sixth Circuit's explanation makes it clear that FRE 408, which prohibits the use of settlement agreements to prove liability, applies in criminal proceedings. As such, the settlement agreement is inadmissible.

Tevis' argument that the government opened the door to the settlement agreement when it introduced Exhibit 109, a cover letter dated July 11, 2007 and signed by multiple parties to the bank's future settlement, also fails. The Government points out that Exhibit 109 was introduced to show Tevis obtained the signature of a five year old child, J.M., not to show evidence of compromise. Used for this purpose, as it clearly was, it cannot be said to open the door to the settlement agreement.

The insurance policy that reimbursed Founders for the fraud was not relevant to the question of whether Tevis defrauded Founders. Tevis suggests that the insurance policy is relevant as it provides evidence that his conviction was necessary for the bank to recover loan losses. [R. 46-1 at 7.] Relevant evidence is defined as evidence that "has any tendency to make a fact more or less probable than it would be without the evidence." FRE 401 (a). The facts provided in the insurance agreement have no bearing on the evidence provided to prove the guilt of Tevis.

Finally, Tevis seems to attack the validity of the indictment when he suggests the settlement agreement and insurance policy "offers a motive as to why Mr. Tevis was suddenly indicted more than five (5) years after the civil litigation" commenced. [R. 46-1.] Tevis makes this accusation without support. He has made no suggestions of misconduct and provided no evidence that Founders had any control over whether the case was presented to the grand jury. Either way, this motivation is not relevant as to whether or not Tevis ...


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