Bryan v. United States of America

Filing 146

MEMORANDUM OPINION AND ORDER adopting and incorporating except insofar as otherwise stated above respecting the analysis of Count One and Count Two 136 Proposed Findings and Recommendations; directing that this action is dismissed and stricken from the docket.ENTER: December. Signed by Judge John T. Copenhaver, Jr. on 12/19/2013. (cc: attys; any unrepresented party) (tmr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
ELTON E. BRYAN,
Petitioner,
v.

Civil Action No. 2:10-1196
(Criminal No. 2:93-00089)

UNITED STATES OF AMERICA,
Respondent.
MEMORANDUM OPINION AND ORDER
Pending is a petition for a writ of error coram nobis
pursuant to 28 U.S.C. § 1651, filed October 6, 2010.

I.

This action was previously referred to the Honorable
Mary E. Stanley, United States Magistrate Judge, for submission
to the court of her Proposed Findings and Recommendation
(“PF&R”) for disposition pursuant to 28 U.S.C. § 636.

On March

15, 2012, the magistrate judge filed her PF&R recommending that
the petition be granted in part and denied in part.

On May 10

and May 14, 2012, respectively, the petitioner and the United
States filed objections.

The magistrate judge has comprehensively recited the
procedural and substantive posture of the case.

To summarize,

on June 17, 1993, the United States filed a five-count second
superseding indictment charging petitioner with (1) mail fraud,
in violation of 18 U.S.C. §§ 1341 and 1346 (Counts One and Two),
(2) wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346
(Count Three), (3) securities fraud, in violation of 15 U.S.C.
§§ 78ff and 78j(b) (Count Four), and (4) perjury before a grand
jury, in violation of 18 U.S.C. § 1623 (Count Five).
On September 24, 1993, following what appears to have
been an eight-day trial, the jury returned a verdict of guilty
on all five counts.

On February 7, 1994, the presiding judge

sentenced the petitioner to (1) 51-months imprisonment running
concurrently as to each count, (2) a three-year term of
supervised release, and (3) an order of restitution in the total
amount of $120,000, with $60,000 being awarded respectively to
the two victims in the case, namely, The Arnold Agency and
International Game Technology.1

1

The court found that restitution was appropriate as to
these two victims, respectively, in the amounts of $1,531,000
and $461,808 as to Counts One and Two. It did not award the full
amount of restitution inasmuch as civil litigation then pending
in state court promised to more precisely ascertain the victims’
losses.

2

As noted in the court of appeals' opinion adjudicating
petitioner's direct appeal, the convictions on the first four
counts "stemmed from Bryan's fraudulent manipulation of two
government contracts and from Bryan's use of confidential,
nonpublic information in the purchase of securities of companies
doing business with the West Virginia Lottery."
v. Bryan, 58 F.3d 933, 936 (4th Cir. 1995).

United States

Respecting Count

One, the court of appeals additionally observed as follows:
As a result of Bryan's and Gunnoe's misrepresentations, the Purchasing Division ultimately approved the
proposed $2.8 million advertising contract, which was
signed by the Lottery and Fahlgren Martin on August 6,
1991. The Lottery immediately thereafter began sending
checks through the mail pursuant to the terms of the
contract. The mailing of these checks, in conjunction
with Bryan's conduct in manipulating the award of the
advertising contract, served as the basis for Bryan's
first mail fraud conviction.
Id. at 938 (emphasis added).2

2

Count Four was based upon what has come to be known as the
“misappropriation theory” of securities fraud liability. The
court of appeals concluded the theory was an insufficient basis
for conviction. See Bryan, 58 F.3d at 936 (“Our rejection of
the misappropriation theory certainly should not be taken as
approval of the kind of conduct of which Bryan was convicted,
nor should it be perceived as evidencing a view that such
conduct is not properly the subject of criminal liability.”).
The petitioner did not pursue a writ of certiorari. The Supreme
Court, in reviewing a later decision by the United States Court
of Appeals for the Eighth Circuit, subsequently concluded to the
contrary. See United States v. O'Hagan, 521 U.S. 642, 665
(1997) (“In sum, the misappropriation theory, as we have
examined and explained it in this opinion, is both consistent
with the statute and with our precedent.”).
3

The court has reviewed this matter de novo.

The

United States' objections are first addressed, followed by those
of the petitioner.

Prior to addressing those objections, a

brief review of the governing standards is warranted.

A.

The Nature of the Writ and the Governing Standard

As noted by the magistrate judge, the coram nobis
request arises from the Supreme Court's decision in Skilling v.
United States, 561 U.S. 358 (2010).

In sum, the Skilling

decision adopted a limiting construction of the "honest
services" portion of the wire fraud statute, which would apply
as well to the mail fraud statute.

The Supreme Court concluded

that undisclosed self-dealing and conflicts of interest do not
satisfy the "honest services" branch of the statute, but that
bribery and kickback schemes did qualify thereunder as criminal
misconduct.

In assessing whether the circumstances here warrant

relief, the court first analyzes the nature of the writ and then
the standard governing its award.
1.

The Nature of the Writ

Our court of appeals has recently observed that coram
nobis relief is reserved only for the most compelling of cases:

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As a remedy of last resort, the writ of error coram
nobis is granted only where an error is “of the most
fundamental character” and there exists no other
available remedy. United States v. Mandel, 862 F.2d
1067, 1075 (4th Cir. 1988). The writ is narrowly
limited to “‘extraordinary’ cases presenting
circumstances compelling its use ‘to achieve
justice.’” United States v. Denedo, 556 U.S. 904, 129
S.Ct. 2213, 2220, 173 L.Ed.2d 1235 (2009) (quoting
United States v. Morgan, 346 U.S. 502, 511, 74 S.Ct.
247, 98 L.Ed. 248 (1954)). Thus, the writ provides
relief in cases where the error “rendered the
proceeding itself irregular and invalid.” United
States v. Addonizio, 442 U.S. 178, 186, 99 S.Ct. 2235,
60 L.Ed.2d 805 (1979) (internal quotation marks and
citation omitted) (superseded by statute on other
grounds).
United States v. Akinsade, 686 F.3d 248, 252 (4th Cir. 2012);
Bereano v. United States, 706 F.3d 568, 576-77 (4th Cir.
2013)(noting the "circumscribed use of coram nobis" and quoting
the Supreme Court's observation that “'judgment finality is not
to be lightly cast aside; and courts must be cautious so that
the extraordinary remedy of coram nobis issues only in extreme
cases.'”)(quoting United States v. Denedo, 556 U.S. 904, 916
(2009) (quoting also Carlisle v. United States, 517 U.S. 416,
429 (1996), which states “[I]t is difficult to conceive of a
situation in a federal criminal case today where a writ of coram
nobis would be necessary or appropriate.” (internal quotation
marks omitted))); see also United States v. George, 676 F.3d
249, 253 (1st Cir. 2012) ("The metes and bounds of the writ of
coram nobis are poorly defined and the Supreme Court has not
developed an easily readable roadmap for its issuance.

5

But the

Court has indicated that caution is advisable and that
'[c]ontinuation of litigation after final judgment . . . should
be allowed through this extraordinary remedy only under
circumstances compelling such action to achieve justice.'”)
(citation omitted).

2.

The Governing Standard

As observed in the Akinsade decision, a petitioner
seeking coram nobis relief is obliged to demonstrate four
elements:
“(1) a more usual remedy is not available; (2) valid
reasons exist for not attacking the conviction
earlier; (3) adverse consequences exist from the
conviction sufficient to satisfy the case or
controversy requirement of Article III; and (4) the
error is of the most fundamental character.”
Akinsade, 686 F.3d at 252.
In Bereano, the court of appeals addressed a
petitioner's coram nobis request relating to multiple 1994 mail
fraud convictions.

The petitioner alleged that Skilling

required vacatur of the convictions.
that a Skilling error was present.

The United States conceded
It further asserted,

however, that the petitioner could not have been convicted of
mail fraud under an honest services theory unless he was also
convicted under a separately alleged money and property fraud

6

theory as well.
The scheme to defraud alleged in Counts One through
Eight of the Bereano indictment accused petitioner of:
"(a) defraud[ing] his lobbying clients of money and
property by means of false and fraudulent pretenses,
representations and promises, by submitting to his
lobbying clients bills which included false statements
of expenses incurred . . . ; and
(b) defraud[ing] his lobbying clients of their right
to the loyal, faithful, honest, and unbiased service
and performance of the duties of the defendant in his
capacity as agent of said lobbying clients, free from
willful omission, deceit, dishonesty, misconduct,
fraud, self-dealing and conflict of interest . . . ."
Bereano, 706 F.3d at 570 (citation omitted).
The final paragraph of each count alleged a specific
mailing that was used to perpetrate the fraud scheme.

After

Count Eight was dismissed, the court instructed the jury, in
part, as follows:
[T]he court advised the jury . . . that “the first
element . . . [the fraud scheme] means that the
government must prove . . . that there was a scheme or
artifice to defraud or to obtain money or property or
the intangible right to honest services by means of
false or fraudulent pretenses, representations or
promises.” The court continued, explaining that “[a]
scheme to defraud is any plan, device or course of
action to obtain money or property or to deprive
another of the intangible right of honest services.”
Thus, in its explanation of the first element, and
again in defining a “scheme to defraud,” the court
instructed the jury, using the disjunctive “or,” that
it was entitled to convict Bereano if it found him
guilty under either the pecuniary fraud theory or the
honest services fraud theory.

7

Id. at 573-74 (citations and emphasis omitted).

The jury

returned general guilty verdicts on all charges.

The

instructions and the verdict form did not disclose whether the
petitioner was convicted under the money and property fraud
theory, the honest services fraud theory, or both.
The district court denied coram nobis relief.

It

reasoned that the petitioner was convicted not only under a
flawed honest services theory, but also an entirely proper money
and property fraud theory.

It consequently concluded that any

Skilling error was harmless beyond a reasonable doubt, opining
that “'[t]he core of the Government's case was the fraudulent
billing scheme, which is primarily about money.'” Id. at 575
(citation omitted).
After reciting the four prerequisites for coram nobis
relief in this circuit, and noting that the parties agreed the
first three requirements were satisfied, the court of appeals
examined whether the alleged error was of the most fundamental
character.

It turned its attention to the jury verdict and the

evidence at trial, using the following standard:
Pursuant to the Supreme Court's decision in Yates v.
United States, when a general verdict of guilty rests
on two alternative theories of prosecution, one valid
and the other invalid, the verdict should be set aside
if it is “impossible to tell which ground the jury
selected.” 354 U.S. 298, 312, 77 S.Ct. 1064, 1 L.Ed.2d

8

1356 (1957). As we later recognized in United States
v. Hastings, however, an alternative-theory error is
nevertheless subject to harmless error review. . . .
[T]he reviewing court
must attempt to ascertain what evidence the
jury necessarily credited in order to
convict the defendant under the instructions
given. If that evidence is such that the
jury must have convicted the defendant on
the legally adequate ground in addition to
or instead of the legally inadequate ground,
the conviction may be affirmed.
Id. at 577-78; see also United States v. Hastings, 134 F.3d 235,
242 (4th Cir. 1998)(stating, in a direct review context, the
quoted passage)).
Affirming the district court's denial of relief, the
court of appeals in Bereano analyzed the matter as follows:
Not only was the evidence of pecuniary fraud more than
sufficient, it was necessarily accepted by the jury,
as reflected in the verdict. Put succinctly, the jury
could not have found Bereano guilty of mail fraud
under either the honest services fraud theory or the
pecuniary fraud theory without concluding that the
alleged mailings -- false bills mailed to lobbying
clients and the clients' payments mailed in
satisfaction thereof -- were an integral part of the
fraud scheme. In other words, no reasonable jury could
have acquitted Bereano of pecuniary fraud for falsely
billing his clients, but convicted him of honest
services fraud for the same false billing scheme.
Bereano, 706 F.3d at 579.

9

B.

The United States' Objections

The United States asserts that the magistrate judge
erred in recommending that the convictions on Count One and
Count Two be set aside.

Its position is similar to that taken

by the government in Bereano:
The Findings and Recommendation does not confront the
question that all of the cases judging similar
alternative-theory situations hold to be controlling:
did the jury necessarily find facts that constitute a
mail fraud offense under a valid theory? In this case,
where there is no factual basis for a conviction under
either count other than the charged bid-rigging
schemes whereby innocent, legitimate bidders were
defrauded out of money, the answer to the question is
“yes.”
(U.S. Objecs. at 2-3).
In assessing the accuracy of this assertion, the court
must review the trial record, a task considerably simplified by
the magistrate judge's thorough compilation.

In conducting the

analysis, the facts are taken in the light most favorable to the
United States.

See United States v. Jefferson, 674 F.3d 332,

341 n.14 (4th Cir. 2012).
First, the potential jurors in the petitioner’s case
were read the second superseding indictment.

They learned that

the scheme to defraud alleged in Count One, as in Bereano,
involved two separate matters as follows:

10

[Petitioner] did devise and intend to devise a scheme
and artifice . . . (A), to defraud the State of West
Virginia, [the] West Virginia Lottery commissioners,
the purchasing division of the Department of
Administration of the State of West Virginia, and the
citizens of the State of West Virginia of his loyal,
honest and faithful service as an employee . . . .;
and, (B), to defraud a certain advertising agency,
that is the Arnold Agency, of the money expended in
preparing and presenting proposals for an advertising
campaign in pursuit of a certain contract and to
further defraud that agency of the award of that
certain contract with the State of West Virginia.
(Tr. Trans. 4:8-9)).

They were additionally told of the similar

dual-forked scheme found in Count Two:
[Petitioner] . . . did devise and intend to devise a
scheme and artifice . . . (A), to defraud the State of
West Virginia, the State of West Virginia Lottery, and
the citizens of the State of West Virginia of his
loyal, honest and faithful service as an employee . .
. .; and, (B), to defraud certain gaming equipment
companies of the money expended in preparing and
presenting proposals in pursuit of a statewide lottery
contract and further to defraud those companies of the
award and of the income from that certain contract to
be let by and on behalf of the West Virginia Lottery.
(Tr. Trans. at 4:19)).

The same duality is found in the United

States' opening statement, as more fully set forth in the PF&R
at page 21.
At volume 4, page 23, of the trial transcript, the
United States adduced evidence from Linda Arnold of the Arnold
Agency respecting the efforts devoted by her to the bid process
and the failure to receive the advertising contract.

The

magistrate judge recites similar testimony from Kerry Reppert, a

11

sales manager with International Game Technology, respecting the
video lottery contract.

(See PF&R at 53-55).

The same theme concerning the harm visited upon the
two victims continued into the United States' closing argument:
Ladies and gentlemen, what’s wrong here? This –on the outside this bid process appeared to be a
legitimate bona fide state bid process. On the inside
there is a little secret track running all down there.
In other words, it is something other than what it
appears to be. That is fraud.
Who suffered because of these frauds? The Arnold
Agency? Obviously. IGT? Obviously. The State of West
Virginia and the Lottery Commission?
(Tr. Trans. 9:60 (emphasis added)).
Following closing arguments, the court instructed the
jury.

It not only provided the common instructions for mail

fraud offenses but specifically drew the jury’s attention to the
second superseding indictment at multiple points.
Tr. Trans. 9:95; 9:98; 9:104).

(See, e.g.,

The court additionally provided

the jury a copy of the charging instrument and encouraged the
jurors “to compare it with the charges and the proof in the
case.”

(Tr. Trans. at 95).

It then tied the instructions to

the second superseding indictment:
First, the government has to prove to you that the
defendant knowingly devised or knowingly participated
in a scheme or artifice to defraud as is set forth in
counts one and two of the indictment.

12

(Tr. Trans. 9:97 (emphasis added)).

The court also defined the

words “scheme” and “artifice” as “includ[ing] any plan or course
of action intended to deceive others and to obtain by false or
fraudulent[] pretenses money or property from the person or
organization so deceived,” adding that “the terms ‘scheme or
artifice to defraud’ includes a scheme or artifice to deprive
another of the intangible right of honest services.”

(Tr.

Trans. at 103).
The following two observations are apparent from the
record.

First, from jury selection to deliberations, the fraud

visited upon the Arnold Agency and International Game Technology
was front and center.

Second, the petitioner was convicted on

Count One and Count Two, as the court of appeals noted, based
upon his "fraudulent manipulation of two government contracts."
United States v. Bryan, 58 F.3d 933, 936 (4th Cir. 1995).
Indeed, pursuant to the body of evidence as to each Counts One
and Two, it was only by virtue of the acts of the petitioner
that served to defraud the two victims of pecuniary interests
that the petitioner thereby deprived the state agencies of his
honest services.

When those considerations are filtered through

the Yates harmless error analysis, the appropriate result
readily materializes.

13

In light of Skilling, it was error to submit the
honest-services prong of Count One and Count Two to the jury.
At the same time, the jury, in these bid-rigging schemes, also
then had under consideration a separate, and entirely valid,
run-of-the-mill property fraud branch in both Count One and
Count Two respecting the victimization of The Arnold Agency and
International Game Technology.

It was only by defrauding these

victims that the honest services denial arose in the first
place.

Under these circumstances, the court must conclude that

no reasonable jury could have acquitted the petitioner of
property fraud for victimizing The Arnold Agency and
International Game Technology but convicted him of honest
services fraud for the same bid-rigging schemes.

Beyond a

reasonable doubt, the Skilling error was harmless.
Coram nobis is reserved for those extraordinary cases
warranting equitable intervention to achieve justice.
jury clearly found bid rigging to have occurred.

Here, the

In so finding,

it necessarily also found the rigged bid schemes to have
successfully defrauded the Arnold Agency and International Game
Technology.

As in Bereano, an error of the most fundamental

sort is absent from this case.

The petitioner cannot

demonstrate that the ends of justice will be served by granting
the extraordinary relief requested.

14

The court consequently

declines to upset these longstanding convictions under Counts
One and Two.

C.

The Petitioner's Objections

The court next considers petitioner's objections.

The

petitioner asserts error in the magistrate judge's recommended
conclusion that he procedurally defaulted, without a curative
showing of cause and prejudice, any claims he makes respecting
the integrity of either the Count Three or Count Five
conviction.

Having considered the objections, the court

concludes they are not meritorious in light of the thorough
analysis conducted by the magistrate judge at pages 140 to 161
of the PF&R.
II.

Based upon the foregoing discussion.

It is,

accordingly, ORDERED as follows:
1.

That the magistrate judge's PF&R be, and it hereby is,
adopted and incorporated herein except insofar as
otherwise stated above respecting the analysis of
Count One and Count Two; and

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2.

That this action be, and it hereby is, dismissed and
stricken from the docket.
The Clerk is directed to transmit a copy of this

written opinion and order to counsel of record and any
unrepresented parties.
ENTER: December 19, 2013
John T. Copenhaver, Jr.
United States District Judge

16