Thomas v. Georgia Coastal Federal Credit Union et al
Filing
83
ORDER denying in part 68 Motion in Limine to exclude unsubstantiated allegations of fraud allegedly perpetrated by David Knox, who was the former Chief Executive Officer for Defendant Georgia Coast Federal Credit Union. Signed by Magistrate Judge James E. Graham on 10/1/2013. (csr)
FILED
U.S. O1S1RCT COURT
R!J.t.VS OV.
IN THE UNITED STATES DISTRICT PqQr -I
I
FOR THE SOUTHERN DISTRICT OF dEORGIA
BRUNSWICK DIVISION
P 2:22i
, UT.
MARLA A. THOMAS,
Plaintiff,
CIVIL ACTION NO.: CV212-111
V.
GEORGIA COASTAL FEDERAL
CREDIT UNION; CECIL LITTLE;
and WAYNE NEAL,
Defendants
ORDER
Defendants filed a Motion in Limine to exclude unsubstantiated allegations of
fraud allegedly perpetrated by David Knox, who was the former Chief Executive Officer
("CEO") for Defendant Georgia Coast Federal Credit Union ("Defendant Credit Union")
Defendants assert that they and their counsel are unaware of the alleged scheme
involving a "David Knox" who reportedly collected portions of mortgage payments from
two (2) other people but kept the money for himself and did not make the mortgage
payments. Defendants aver that former Defendant David Knox was deposed for four
(4) hours, and Plaintiff's counsel asked David Knox about his background and business
activities, yet no fraudulent mortgage scheme came to light, nor did any evidence that
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the former Defendant David Knox is the same "David Knox" to which the undersigned
referred during mediation. Defendants contend that Plaintiff should not be allowed to
raise these allegations during the trial of this case, as these new allegations are based
on unsubstantiated rumors and should be excluded under Federal Rules of Evidence
404 and 608.
Plaintiff asserts that evidence concerning the alleged fraud David Knox
committed is admissible under Rule 404(b)(2). Specifically, Plaintiff asserts that David
Knox's involvement in a similar, earlier fraud scheme is admissible to show a common
plan or scheme, to prove the absence of mistake, or to show knowledge. Plaintiff
contends that Rule 608's exclusionary rule is applicable only when the evidence is
being offered to prove a witness' character for truthfulness.
I.
Rule 404(b)
A party cannot use evidence of a "crime, wrong, or other act" "to prove a person's
character in order to show that on a particular occasion the person acted in accordance
with the character." FED. R. EVID. 404(b)(1). However, this evidence "may be
admissible for another purpose, such as proving motive, opportunity, intent, preparation,
plan, knowledge, identity, absence of mistake, or lack of accident." FED. R. EVID.
404(b)(2). Rule 404(b) "is a rule of inclusion, and relevant prior bad acts evidence[,] like
other relevant evidence, should not lightly be excluded" if it is central to a party's case.
United States v. Abreu-Jimenez, No. 11-15517, 2013 WL 4731348, at *6 (11th Cir.
Sept. 4, 2013). The test for the admissibility of prior bad acts evidence is:
First, the evidence must be relevant to an issue other than the [witness']
character[.] Second, the act must be established by sufficient proof to
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permit a jury finding that the [witness] committed the extrinsic act[.] Third,
the probative value of the evidence must not be substantially outweighed
by its undue prejudice, and the evidence must meet the other
requirements of Rule 403.
Based on Plaintiffs representations of her claims, it appears that assertions that
David Knox, who was the former CEO for the Defendant Credit Union, engaged in a
fraudulent scheme on at least one (1) occasion prior to the Plaintiffs termination is
relevant to Plaintiff's claims. According to Plaintiff, Mark W. Miller, a golf pro at Sea
Palms (or Sapelo Hammock), applied for and was given a loan by Defendant Credit
Union in the amount of $617,590.50, to purchase a house and property located at 410
Bonaventure, Saint Simons Island, Georgia. At the time, Miller's debt-to-income ratio
exceeded one hundred percent, his credit score was below 500, and the loan exceeded
the single family household limit under Defendant Credit Union's loan policy. Although
Mr. Miller did not qualify for the loan, former CEO and Defendant Knox approved this
loan. The loan in question was made in 2004 prior to Plaintiffs hire by Defendant Credit
Union. Subsequently, former Defendant Knox, Mr. Miller, and another gentleman,
Markland Aultman, lived in the house. Messrs. Miller and Aultman apparently were
paying rent to former Defendant Knox who was to make the payments on the loan at
Defendant Credit Union. Former Defendant Knox, however, did not make payments to
Defendant Credit Union. Just before foreclosure, the property was sold to Robert
Laroche, another member of Defendant Credit Union. Mr. Laroche also had a close
relationship with former Defendant Knox. Apparently, after the property was sold, Miller
and Aultman filed for bankruptcy protection, which also resulted in losses to Defendant
Credit Union based on their respective defaults on unsecured loans. Upon information
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Plaintiff received, Defendant Credit Union's loan officer who handled most of these
loans was Jeremy Davis, Mr. Knox's nephew, and the individual who replaced Plaintiff
as Chief Financial Officer after she was terminated. The National Credit Union
Administration ("NC UA") apparently discovered/learned about the scheme/loan through
an audit in approximately 2005-06. At the time, Plaintiff had only recently been hired,
and former Defendant Knox was handling most of the loans and overseeing the lending
department. The NCUA took exception to and informed Defendant Credit Union of the
Miller loan, observing that Mr. Miller had an excessive debt-to-income-ratio, maintained
a very weak credit score, and held loans exceeding the loan policy aggregate limit per
household. The only way the loan was made was the authorization by former
Defendant Knox, who obtained a direct financial benefit from it.
In the case at bar, the key facts surround a "land deal" in the Royal Oaks
subdivision in Brunswick, Georgia. Specifically, Plaintiff claims that former Defendant
Knox informed her of a scheme whereby Defendant Credit Union would use Board
Secretary and Defendant Wayne Neal or his company to construct a home on a lot
which Neal (personally) previously owned and had deeded back to Defendant Credit
Union in lieu of foreclosure. Former Defendant Knox was to reside in the home, and his
income was to be raised to cover the payments on the loan. A construction loan would
be granted, although not authorized under Defendant Credit Union's loan policy at the
time. Plaintiff contends that her report of this land deal to the NCUA, Defendants'
Supervisory Committee, and others precipitated the NCUA's investigation of Defendant
Credit Union which ultimately resulted in Plaintiff being terminated.'
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The undersigned used Plaintiff's version of these alleged occurrences.
4
It does not appear that Plaintiff wishes to present the evidence relating to the
Saint Simons' land deal as character evidence under Rule 404(b)(1). Rather Plaintiff
seemingly wishes to present this evidence as an indication of the manner in which
Defendant Credit Union operated while Defendants Little and Neal were on the board
and Knox was the CEO there. Plaintiff may not rely on unsubstantiated allegations of
fraud. She must present evidence of "sufficient proof' which would permit a jury to find
that David Knox did commit fraud on at least one (1) prior occasion and that the events
described indicate the manner in which Defendant Credit Union conducted or conducts
its business. Finally, the probative value of evidence that David Knox committed
fraudulent acts while he was the CEO of the Defendant Credit Union is not substantially
outweighed by the prejudicial value. Defendants' counsel may present contrary
evidence. This portion of Defendants' Motion is DENIED.
II.
Rule 608
Under Rule 608(b)(1), "extrinsic evidence is not admissible to prove specific
instances of a witness'[] conduct in order to attack or support the witness'[] character
for truthfulness. But the court may, on cross-examination, allow them to be inquired into
if they are probative of the character for truthfulness or untruthfulness of the witness[.]"
Plaintiff is entitled to present evidence regarding David Knox's character for truthfulness
or untruthfulness on cross-examination, should David Knox be called by Defendants to
provide direct testimony. United States v. Davis, 491 F. App'x 48, 50 (11th Cir. 2012)
(citing United States v. Novaton, 271 F.3d 968, 1006 (11th Cir. 2001), for the statement
that acts probative of a witness' character for Rule 608(b) purposes include fraud). As
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noted above, Defendants are entitled to present evidence countering Plaintiffs
evidence. This portion of Defendants' Motion is DENIED.
Is ),-
SO ORDERED, this /_tIay of October, 2013.
liES E. GRAHAM
ITED STATES MAGISTRATE JUDGE
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iRe.
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