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United States of America v. Daniel Estes Crook

December 8, 2010

UNITED STATES OF AMERICA
v.
DANIEL ESTES CROOK



The opinion of the court was delivered by: Mag. Judge Karen L. Hayes

JUDGE ROBERT G. JAMES

RULING

Pending before the Court is a Motion for New Trial [Doc. No. 81] filed by Defendant Daniel Estes Crook ("Crook"). For the following reasons, the motion is DENIED.

I. Introduction and Procedural History

This case arises from Crook's participation in rice farming activities. In 1998, a drought caused major crop losses for rice farmers in the Northeast Louisiana area. Affected farmers could apply to the Government for payments from the Crop Loss Disaster Assistance Program ("CLDAP"). Affected farmers could also apply to the Government for emergency loans to continue farming.

In April 1999, Crook Farms Partnership ("CFP") applied for disaster benefits and an emergency loan. Although he was not a partner, Crook held a power of attorney for CFP and submitted an application for CLDAP payments on its behalf, stating that CFP was only able to harvest approximately 29,106.94 cwt (hundredweight) of rice during the 1998 crop year. CFP also applied for an emergency loan. As part of the application process, Crook stated in the "Certification of Disaster Losses" that CFP had a rice yield of 23.98 cwt (hundredweight) per acre for a total of 1,558.20 acres for the 1998 crop year.

On October 10, 2003, Assistant United States Attorney ("AUSA") Martha Levardsen ("Levardsen") wrote Crook a letter in which she asserted that he had committed violations of 18 U.S.C. § 1001 and offered him the opportunity to plead guilty to a bill of information. Hoping to resolve the matter, on February 10, 2004, Crook signed a Waiver of Statute of Limitations, agreeing to waive the statute of limitations set to run on March 15 and April 8, 2004. Crook and his counsel, Thomas Davenport ("Davenport"), also met with Levardsen on April 6, 2004. After that meeting and further investigation, in a May 3, 2004 letter to Davenport, Levardsen stated that "the Government would be unable to prove its case against [Crook] beyond a reasonable doubt" and, thus, the Government was declining prosecution. [Proffer 4].

Between January and August 2005, Crook either sold or traded farm equipment which had been mortgaged or pledged to the Farm Service Agency ("FSA") to benefit Crook Planting Company ("CPC"), an entity in which he was a partner. Cook then disposed of the subsequent equipment or proceeds of the sale without notifying and obtaining the consent of the FSA.

In a March 23, 2006 letter, AUSA Mignonne Griffing ("AUSA Griffing") notified Davenport that then-United States Attorney Donald Washington had concerns that Levardsen improperly declined prosecution. The Government reopened the case to investigate Crook's possible violations of 18 U.S.C. §§ 1014 and 1001.

On June 25, 2009, Crook was indicted and charged with two counts of violating 18 U.S.C. § 1014 by knowingly making false statements to the FSA regarding CFP's rice production for the 1998 crop year to support its application for CLDAP payments (Count 1) and for an emergency loan (Count 2). He was also charged with six counts of violating 18 U.S.C. § 658 by converting farm equipment which was collateral for an FSA loan to CPC. Each of the six counts addressed a piece or pieces of farm equipment: (1) Count 3 alleged that Crook traded equipment and received a Case 2388 Combine in return, which he then disposed of; (2) Count 4 alleged that Crook sold a John Deere 9965 Cotton Picker; (3) Count 5 alleged that Crook traded equipment and received a Case 7140 Tractor in return, which he then disposed of; (4) Count 6 alleged that Crook sold a John Deere 9960 Cotton Picker; (5) Count 7 alleged that Crook sold two Shelborne Rice Headers; and (6) Count 8 alleged that Crook traded equipment and received a Case 2188 Combine in return, which he then disposed of.

On September 28, 2009, Crook filed a Motion to Dismiss Indictment on Counts 1 and 2. After briefing was complete, on November 10, 2009, the Court issued a ruling denying Crook's motion because the Indictment on those counts did not violate the Ex Post Facto Clause and neither the charges being pursued nor the time delay in prosecuting constituted a Due Process violation. [Doc. Nos. 34 & 35].

After a continuance, trial was set on July 12, 2010. Prior to trial, on June 18, 2010, the Government filed a Notice of Intent to Introduce 404(b) Evidence [Doc. No. 42]. The Government notified the Court and Crook that it intended to introduce evidence at trial that Crook fraudulently disposed of collateral that had been pledged to the FSA to secure the emergency loan to CFP, conduct for which he had not been charged. Crook filed a memorandum [Doc. No. 43] opposing the introduction of this evidence.

On July 5, 2010, the Government filed its first Motion in Limine [Doc. No. 44], moving the Court to exclude from evidence the letters from AUSA Levardsen, identified as Exhibit 1026 and 1027. On July 9, 2010, Crook filed a memorandum in opposition [Doc. No. 45].

On July 12, 2010, trial commenced. On that day, the Court granted the Government's

Motion in Limine and excluded the Levardsen letters from evidence. The Court indicated that it was not inclined to allow the Government to introduce evidence of Crook's alleged fraudulent disposition of collateral pledged to secure an emergency loan from the FSA to CFP. Thereafter, the Government filed a Supplemental Request to Use 404(b) Evidence [Doc. No. 48], urging the Court to allow it to introduce the evidence and citing authority for its position.

On the second day of trial, July 13, 2010, the Court heard further argument on the Rule 404(b) evidence and then ruled that the Government would be permitted to introduce the evidence, subject to review and consideration as the witnesses were presented. Crook objected to that ruling. Testimony then commenced, but trial was recessed when Crook's counsel became ill.

The following day, July 14, 2010, during an in-Chambers conference, the Court was informed that Crook's counsel was still unable to continue with trial, but hoped to be ready the next day.

The trial continued on July 15, 2010. Because of a family emergency, lead Government counsel, AUSA Robin McCoy ("McCoy"), was unable to continue trying the case. Her co-counsel, AUSA Griffing, became the lead counsel, and the Court granted the motion of AUSA Alex Van Hook ("Van Hook") to enroll as co-counsel.

The trial continued until July 20, 2010, when the jury returned a verdict of guilt against Crook on all counts.

On July 30, 2010, Crook sought an extension of time to file post-trial motions. The Court granted his motion, and Crook's deadline was extended to August 18, 2010. After a second extension of time, on August 23, 2010, Crook timely filed a Motion for New Trial [Doc. No. 81]

and supporting memorandum [Doc. No. 83]. After moving for and receiving an extension of time, the Government filed its memorandum in opposition to the Motion for New Trial on September 9, 2010 [Doc. No. 86]. Although he was granted an extension of time to do so, Crook did not file a reply memorandum.

II. Law and Analysis

Federal Rule of Criminal Procedure 33 provides, in pertinent part: Upon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires. . . FED. R. CRIM. P. 33(a). "The interest of justice is not an independent ground for granting a Rule 33 motion, but rather is the standard for granting any Rule 33 motion." United States v. Wall, 389 F.3d 457, 468 (5th Cir. 2004) (citing United States v. Villarreal, 324 F.3d 319, 325 (5th Cir. 2003)). The trial judge's determination in the interest of justice may be based on his evaluation of witnesses and weighing of the evidence. Wall, 389 F.3d at 465-66. Generally, however, the Fifth Circuit Court of Appeals has held "that the trial court should not grant a motion for new trial unless there would be a miscarriage of justice or the weight of evidence preponderates against the verdict. A new trial is granted only upon demonstration of adverse effects on substantial rights of a defendant." Id. 466 (citations omitted). "[A]ny error of sufficient magnitude to require reversal on appeal is an adequate ground for granting a new trial." Id. at 474 (citing WRIGHT, FEDERAL PRACTICE & PROCEDURE§ 556 (3d ed. 2004)).

In this case, Crook identifies four alleged errors by the Court to support his Motion for New Trial: (1) failure to charge the jury concerning the effect of the assignment of a creditor's right; (2) permitting the Government's introduction of Rule 404(b) evidence; (3) refusal to allow the testimony of banking expert, William Gary Brannon ("Brannon")*fn1 ; and (4) refusal to allow the introduction of banking records and the Levardsen letters. Additionally, Crook identifies three instances of prosecutorial misconduct, which he contends also support his Motion for New Trial: (1) AUSA Griffing's erroneous statements during closing argument concerning 62ó per bushel rice; (2) AUSA Griffing's erroneous statements during closing arguments concerning Dr. Louie Crook, Jr.'s employment at the Willis-Knighton Hospital Emergency Room; and (3) the Government's releasing of witness Tom Casey without notifying counsel for Crook. Finally, Crook argues that the jury's verdict is against the weight of the evidence on all counts.

A. Judicial Error

1. Jury Charges

Crook first argues that the Court committed judicial error by failing to give the following jury instruction based on Louisiana Civil Code article 2643:

A creditor's assignment or transfer of a right is effective against the debtor only from the time the debtor has actual knowledge, or has been given notice of the assignment.

Crook contends that the instruction was crucial to his defense to Counts 3-8 which alleged that he converted farm equipment subject to a lien by the FSA. Cook asserts that when he traded and/or sold the equipment identified in those counts, he did not intend to defraud the FSA, but turned over the proceeds to CPC's lender, Bank One, which he believed held a first lien on the equipment.

A district court's failure to give a jury instruction is reversible error only if the requested

instruction:

(1) was a substantially correct statement of the law,

(2) was not substantially covered in the charge as a whole, and

(3) concerned an important point in the trial such that the failure to instruct the jury on the issue seriously impaired the defendant's ability to present a given defense.

United States v. Richards, 204 F.3d 177, 204 (5th Cir. 2000). The parties and the Court agree that the requested instruction was a substantially correct statement of law and that this law was not substantially covered in the charge as a whole. Thus, the issue is whether the Court's refusal to include this instruction seriously impaired Crook's ability to present his defense.

At trial, the Court permitted Crook to testify as to his knowledge about the liens on the equipment he was accused of converting. Crook testified that he was aware that Bank One*fn2 and the FSA both had liens on the equipment, but he believed that Bank One remained the first lienholder. He further testified that he was unaware that the FSA had become the first lienholder and presented other testimony and evidence that supported his defense. Although Crook's counsel cited article 2643 at trial, Crook did not testify that he was aware of this article prior to the conversion of the equipment.

Crook requested that the Court instruct the jury based on article 2643. The Government requested a different instruction that also addressed this issue. However, based on United States

v. McClatchy, 249 F.3d 348 (5th Cir. 2001), the Court declined to give either instruction. In McClatchy, the defendant had been convicted by a jury of six counts of a seven-count indictment involving conversion of pledged crops, money laundering, engaging in a monetary transaction involving criminally derived property greater than $10,000 in value, and crop insurance fraud. Like Crook, McClatchy defended the allegations against him, in part, by citing to various state lien statutes and pointing out that he had "legitimately exhausted the crop proceeds, leaving nothing for the [Farmer's Home Administration's]*fn3 lien." Id. at 355. The Fifth Circuit found McClatchy's arguments "unavailing" because the "state statutes in no way provide a defense to the federal crimes of which McClatchy was convicted." Id. While McClatchy's "reliance on the state statutes at the time he converted the pledged crops may raise a question regarding his intent to defraud," id., the Fifth Circuit found that the Government presented other evidence from which the jury could have found intent.

Addressing McClatchy's argument that the trial court erred in refusing his requests for certain jury instructions, the Fifth Circuit ruled that "[t]he substance of the good faith and specific intent instructions that McClatchy requested was adequately covered in the [trial] court's charge." Id. at 356. The trial court "did not abuse its discretion in refusing McClatchy's requested instructions containing quotes from various sections of the Mississippi Code pertaining to statutory liens and security interests . . . [because] those statutes do not provide a defense to the crimes of which McClatchy was convicted and thus are irrelevant." Id. at 356-57.

Applying McClatchy, this Court refused to give either of the instructions requested by Crook and the Government about the state lien statutes because those statutes did not provide a defense and were irrelevant to the jury's determination. The Court agreed that Crook's belief as to his duties under the state statutes could be relevant to his specific intent to defraud, but Crook did not claim that he knew about article 2643 and paid Bank One (instead of the FSA) based on that article. Crook was permitted to testify as to his knowledge and actions, and the jury was given instructions on both good faith and intent. In pertinent part, the jury instructions stated:

Good faith is a complete defense to the charges in the Indictment since good faith on the part of the Defendant is inconsistent with intent to defraud, which is an essential part of the charges. . . With respect to each of the counts charging fraud, if Defendant believed in good faith that he was acting properly, even if he was mistaken in his belief and even if others were injured by his conduct, you cannot convict him of the specific charge being considered.

Additionally, with regard to the six counts of Crook's knowing disposition of pledged property, the jury was instructed that the Government must prove beyond a reasonable doubt that Crook "acted with the intent to defraud the United States Secretary of Agriculture, acting through the FSA," and defined "'intent to defraud'" to mean that Crook acted "with intent to deceive or cheat someone."

The jury instructions, when viewed in their totality, properly instructed the jury as to the Government's burden and Crook's available defense. The Court finds no error that would require reversal on appeal, or that had an adverse effect on Crook's substantial rights. Crook was able to present his defense adequately without the instruction he requested, and his Motion for New Trial is DENIED on this basis.

2. Government's Rule 404(b) Evidence

Crook's next assignment of error is the Court's ruling which allowed the Government to introduce evidence pursuant to Federal Rule of Evidence 404(b) concerning the sale of his cotton gin and airplane.

Rule 404(b) provides that evidence of other crimes, wrongs, or acts is admissible "as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident." In United States v. Beechum, 582 F.2d 898, 911 (5th Cir. 1978) (en banc), the Fifth Circuit laid out the two-step test for admission of extrinsic evidence of prior offenses or other misconduct under rule 404(b). "First, it must be determined that the extrinsic offense evidence is relevant to an issue other than the defendant's character. Second, the evidence must possess probative value that is not substantially outweighed by its undue prejudice and must meet the other requirements of rule 403." Id.

Crook was charged in Count 2 with intentionally under-reporting CFP's rice yield for the 1998 crop year, so as to secure an emergency loan from the FSA. In order to obtain the loan, CFP also had to provide collateral, but it had only $26,000.00 in farm equipment, and the FSA would not have made the loan without additional collateral. CFP's partners--Crook's father, brother, and cousin--pledged a security interest in a Cessna airplane and cotton gin without disclosing that Crook owned both. Because Crook's ownership was not disclosed, the FSA did not asked Crook to execute a security agreement.

Crook subsequently disposed of the pledged collateral and proceeds. In 2000, the airplane was destroyed in a storm, and Crook received $25,000.00 from his insurer, but did not report the destruction of the airplane or the insurance payment to the FSA. Also, in 2000, Crook disassembled and sold the cotton gin. He did not report to the FSA four payments for cotton gin parts totaling $97,000.00.

At trial, the Government sought to introduce evidence of (1) the security agreement and note for the emergency loan to CFP and (2) Crook's actions with regard to selling the gin and airplane. While the security agreement and note were not signed by Crook, the Government contended that Crook knowingly and intentionally failed to disclose that he, not CFP, was the true owner of the airplane and cotton gin listed as collateral on the agreement. As part of the evidence in support of this claim, the Government presented the testimony of an FSA employee, Colby Flint ("Flint"), who testified that either Crook or his farm manager, Philip Sivils ("Sivils"), added these items as collateral. Flint further testified that, even if Sivils added the items, Sivils did not act without Crook's approval, based on his experience. While Sivils testified that he did not remember adding the cotton gin and airplane as collateral, he testified that he would not have pledged Crook's personal property without his consent. Additionally, Paula Davis, a bank employee, testified that Crook told her that FSA had made him pledge his airplane to get loans. In defense, Crook contended that he had no knowledge that his property was listed as collateral for the loan to CFP.

Under the broad relevance standard, the Court found that this evidence was relevant to Crook's intent or lack of mistake in allegedly under-reporting CFP's 1998 rice production to obtain an emergency loan, as set forth in Count 2. The Court found that the evidence was also relevant to his intent or lack of mistake with regard to his conversion of collateral pledged for loans to another entity, CPC, as set forth in Counts 3-8. That is, Crook's actions in alienating collateral pledged to the FSA for a loan to CFP was relevant to his actions in alienating collateral pledged to the FSA for loans to CPC. While the evidence was indeed prejudicial to Crook, the Court found that the probative value of the documents and Crook's actions with regard to the cotton gin and airplane was not substantially outweighed by undue prejudice.

Having fully reviewed the record, the Court finds no reversible error in its ruling, and Crook's Motion for New ...


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