United States Court of Appeals, Eleventh Circuit
United States Court of Appeals, Eleventh Circuit
United States Court of Appeals, Eleventh Circuit
2d 314
Kenneth W. Lipman, Siegel & Lipman, Boca Raton, Fla., for Montgomery.
Appeals from the United States District Court for the Southern District of
Florida.
Before RONEY, Chief Judge, VANCE, Circuit Judge, and PITTMAN* , Senior
District Judge.
PITTMAN, Senior District Judge:
All parties to this criminal prosecution appeal portions of the judgment adverse
to them. For the reasons discussed below, we AFFIRM all aspects of the district
court's judgment.
The defendants were charged with filing false tax returns for the years 1981
and 1982. Specifically, they were charged with failing to fully disclose their
gross business receipts for those years. O'Keefe's unreported income was
money withdrawn by him from Nob Hill Realty accounts. Montgomery's
unreported income in 1981 consisted of checks written to him from Nob Hill
accounts; for 1982, some unreported income came from Nob Hill Realty, but
the greatest portion consisted of a $32,500.00 consulting fee paid to B & J
Associates.
The defendants' primary defense to the tax charges was that the unreported
income consisted of loans to and from Nob Hill Realty and B & J Associates.
Alternatively, they maintained that they were sloppy bookkeepers and any
discrepancy between their income and the returns was the result of negligence,
not willfulness. Montgomery also maintained that he relied on O'Keefe to
accurately report his Nob Hill income to their tax preparer. To the extortion
charges, the defendants assert that the money they received was reasonable
compensation for legitimate services rendered.
10
11
William McKettrick and Thomas Allgood, who had been partners in nursing
home projects in Georgia, decided to erect a nursing home in Broward County,
Florida, through a company they formed, Richmond Health Care (Richmond).
In May, 1981, a realtor introduced McKettrick to defendants Montgomery and
O'Keefe, who were partners in Nob Hill Realty of Sunrise, Inc. Montgomery
located a suitable site for the nursing home within Sunrise and an option
contract was signed with the property's owner. Montgomery and O'Keefe
ultimately received a sales commission of $36,900.00 from this transaction. The
real estate commission was not charged in the indictment.
12
The State of Florida must approve all nursing home applications by issuing a
"certificate of need," after a local advisory board holds hearings and makes
recommendations. Montgomery lobbied the state, which later issued the
certificate on September 29, 1981. The certificate would expire unless
construction was commenced within one year.
13
Due to high interest rates then prevailing, it soon became apparent that
conventional financing was unfeasible for Richmond. For this reason, they
turned to tax-exempt industrial revenue bonds to finance the project. The City
of Sunrise, through its city council, had to approve the issuance of these bonds.
A Letter of Inducement and resolution authorizing the bonds were required of
the city. Richmond also had to obtain a special exception use ordinance, as well
as final site plan approval.
14
15
16
17
Under the Florida law then in effect, FSA Sec. 112.3143, a public official may
vote on any matter in which he has a private interest, provided he discloses the
"nature of his interest" in a public memorandum within 15 days of the vote.
After each vote, the defendants filed the conflict of interest forms (Form 4),
which disclosed the real estate commissions, but did not describe the other fees.
However, once the other fees were paid, both defendants made the appropriate
disclosures.
18
The nursing home project was closed in Atlanta, Georgia on August 25, 1982.
At that time, the real estate commission was paid to Nob Hill and a $32,500.00
check was issued to Montgomery and O'Keefe's corporation, B & J Associates,
for consulting fees. The fee paid to B & J was disclosed on the bond disclosure
documents, and a portion of the consulting services were described on an
invoice submitted at the closing.
19
The defendants filed motions to dismiss the indictment based upon allegations
of prosecutorial misconduct. After an extensive pretrial hearing before Judges
Roettger and Paine (who had a related case involving the mayor of Sunrise),
Judge Roettger denied the motions to dismiss. Then Judge Roettger transferred
the case to newly-invested Judge Thomas E. Scott, who presided over all
subsequent proceedings.
20
At the close of the Government's case, both defendants moved for judgment of
acquittal on all counts. After expressing some reservations about the
Government's extortion case, the district court denied the motions. The jury
returned a verdict of guilty on all counts. Subsequently, O'Keefe filed a motion
for judgment of acquittal, which Montgomery adopted.
21
Prosecutorial Misconduct
22
The defendants argue that the district court erroneously denied their motion to
dismiss the indictment due to the prosecutor's misconduct before the grand
jury. Similar allegations of misconduct were raised in other cases involving this
prosecutor and grand jury. An extensive evidentiary hearing was held before
Judge Roettger, to whom this case was assigned initially, and Judge Paine, who
tried the related cases. At the conclusion of the hearing, Judge Roettger
announced that he found "considerable substance" to the defendants' charges,
but refused to dismiss the indictment because he found that the defendants had
demonstrated no prejudice as a result of the prosecutor's misconduct. Supp.Rec.
4 at 924-25.
23
24
The defendants complain that during the testimony of some witnesses the
prosecutor made gestures and comments indicating disbelief of or exasperation
with their testimony. They argue that this conduct was intentionally calculated
to discredit these witnesses' testimony. These and other witnesses were
threatened with prosecution as co-conspirators unless their testimony more
closely conformed to the Government's theory of the case. The defendants point
to the prosecutor's "inappropriate" behavior toward Barbara O'Keefe, the
defendant's wife, after she invoked her spousal and fifth amendment privileges
during her grand jury appearance. O'Keefe, himself, was paraded before the
grand jury under the ruse of being a records custodian, in order to show the
grand jury that he would invoke his fifth amendment privilege. The prosecutor
made an unrecorded appearance before the grand jury, in violation of
Fed.R.Crim.P. 6(e)(1).
25
The defendants also contend that the Government deliberately leaked every
step of this grand jury's investigation. In support of this charge, they submitted
newspaper clippings which appear to detail each aspect of the grand jury's
investigation. Of particular concern are quotes and statements from "unnamed
FBI sources" and a source "close to the grand jury."
26
The Government admits that the prosecutor's conduct toward Mrs. O'Keefe was
inappropriate. Several witnesses were told that their uncooperative attitude
could result in an indictment for mail fraud conspiracy. However, these threats
were not made with the intent to have the witnesses change their testimony, and
no one, in fact, falsely testified to the grand jury in response to these statements.
The prosecutor's brief, unrecorded visit to the grand jury room was a casual
incident which does not rise to the dignity of a "proceeding," and, therefore,
Rule 6(e)(1) does not apply. O'Keefe's subpoena as a records custodian was no
ruse. The Government actually sought some documents involved in the tax
case. Lastly, the Government argues that it was not the source of the media
leaks. Numerous persons, including the defendants, could have disclosed
It is well established that federal courts have the inherent power to dismiss an
indictment if a sufficiently egregious case of misconduct is shown. E.g., United
States v. Holloway, 778 F.2d 653, 655 (11th Cir.1985). However, we are
mindful that "dismissal of an indictment for prosecutorial misconduct is an
'extreme sanction which should be infrequently utilized.' " United States v.
Pabian, 704 F.2d 1533, 1536 (11th Cir.1983), quoting United States v. Owen,
580 F.2d 365, 367 (9th Cir.1978).
28
The law of this circuit establishes that prejudice to the defendant is required
when dismissal of an indictment is sought based on violations of the
constitution. See e.g., United States v. Merlino, 595 F.2d 1016, 1018 (5th
Cir.1979), cert. denied, 444 U.S. 1071, 100 S.Ct. 1014, 62 L.Ed.2d 752 (1980).
The question of whether prejudice to the defendant is required before the court
may exercise its supervisory power has been deferred on several occasions.
E.g., Holloway, 778 F.2d at 658; Pabian, 704 F.2d at 1540. In both of these
cases, the question was not reached because the court found no prosecutorial
misconduct.
29
In this case, the question is squarely presented. We agree with the district court
that the prosecutor's behavior in this case was far less than exemplary. We note,
however, that the defendants failed to demonstrate any prejudice as a result of
this misconduct, though they had ample opportunity to do so. The mere fact
that they were indicted for crimes on which they were later granted judgments
of acquittal is insufficient, standing alone, to lead to the conclusion that the
prosecutor had subverted the grand jury's will to his own, or that the grand
jury's independent judgment was overcome. We conclude, therefore, that
prejudice to the defendant is an essential element when a criminal defendant
seeks dismissal of an indictment due to prosecutorial misconduct. These
defendants had ample opportunity to demonstrate prejudice. Having failed to
show prejudice, we find no error in the district court's denial of their motions to
dismiss the indictment.
Montgomery argues that the trial court erroneously denied his motion for
judgment of acquittal on the tax and conspiracy counts of the indictment. He
admits that he underreported his income, but argues that the evidence does not
demonstrate that he acted "willfully," since he completely relied upon O'Keefe
and his tax preparer to handle these matters.
32
Evidentiary Issues
33
Both defendants challenge the district court's ruling which excluded the
defendants' accountant's opinion that the defendants did not intend to defraud
the Government. The defendants argue that since intent to defraud was an issue
in this case, the trial court abused its discretion in excluding the proffered
testimony.
34
The defendants likewise challenge the trial court's ruling which limited the
testimony of their second tax expert, Ellrich. The defendants sought to elicit
from Ellrich the opinion that their first expert's methodology was correct. The
district court refused to allow this testimony, but allowed Ellrich to criticize the
methodology of the Government's experts. The district court ruled that the
second expert's testimony was cumulative and "nothing more than a personal
vouching of one expert for another expert." Rec. 16 at 61.
35
Evidentiary rulings are committed to the broadest discretion of the trial court
and will not be overturned except for clear abuse of that discretion. United
States v. Hurley, 755 F.2d 788, 790 (11th Cir.1985). The conclusory opinions
were of little probative value, and both experts were permitted to testify to all
facts necessary to establish their good faith argument. We find no abuse of
discretion in the trial court's rulings.
Jencks Act
36
O'Keefe complains that the district court's refusal to order disclosure of the
entire Special Agent's Report, prepared by the Internal Revenue Service,
unduly restricted his right to cross-examine Government witnesses. IRS Agent
Robert Stahl admitted on cross-examination that he relied on the Special
Agent's Report in understanding the case. The defendants' moved, pursuant to
the Jencks Act, 18 U.S.C. Sec. 3500, for production of the report. The court
examined the document in camera and permitted a redacted version of the
report to be disclosed.
37
The Jencks Act, 18 U.S.C. Sec. 3500, requires the Government to disclose "any
statement ... of the witness in the possession of the United States which relates
to the subject matter as to which the witness has testified." 18 U.S.C. Sec.
3500(b). An examination of this report discloses that much of the material
consists of summaries of memoranda of interviews, and summaries of
documents. The district court ordered disclosure of verbatim statements of the
defendants' accountant Mamo. We find no error in the district court's refusal to
order disclosure of the remainder of the report.
The Government argues that the district court erroneously granted the
defendants' post-verdict motion for judgment of acquittal on the Hobbs Act and
Travel Act convictions. It argues that the district court viewed the evidence in
the light most favorable to the defendants and credited testimony which the jury
rejected. It argues that McKettrick's testimony alone was sufficient to support
the jury's verdict. We disagree.
40
41
42
1195 (7th Cir.1980), cert. denied, 450 U.S. 965, 101 S.Ct. 1481, 67 L.Ed.2d
614 (1981).
43
Boiled to its essentials, the Government's burden was to show that the
$32,500.00 was received by Montgomery and O'Keefe in exchange for their
votes on city matters. The Government proved the votes and the payments, but
the question remains whether the payment was for official acts or legitimate
services to which the defendants were entitled compensation.
44
45
46
Conclusion
47
Honorable Virgil Pittman, Senior U.S. District Judge for the Southern District
of Alabama, sitting by designation