Court: Court of Appeals for the Sixth Circuit; February 2, 1996; Federal Appellate Court
Gerald Michael Wiedyk appeals his conviction for receiving kickbacks and making false statements related to the Employee Retirement Income Security Act (ERISA). The court affirms the District Court's judgment, rejecting Wiedyk's claims of judicial error regarding hearsay admission and prosecutorial misconduct.
Wiedyk, after leaving National Health Labs, became the office manager for the Michigan Conference of Teamsters Welfare Fund (the “Fund”) in June 1980. While employed, he and his wife started Billing Specialists, Inc. (BSI) to handle medical billing for Dr. Nowosielski, a physician he had connections with from his previous job. Wiedyk influenced the Fund to classify Dr. Nowosielski as a "Plan A" provider, significantly increasing his patient load, and received a 20% commission on lab work referred to Metric Medical Laboratories, which was owned by his former boss. Despite transferring ownership of BSI to his wife, Wiedyk continued to benefit financially from its operations, failing to disclose this conflict of interest to the Fund for seven years.
As Executive Director of the Fund from 1983, he participated in the bidding process for a capitated lab program but did not disclose his commission. His non-participation in the bidding process diminished over time, leading him to instruct Fund officials to ensure Metric received the contract. Issues arose regarding the propriety of the bidding process, which prompted the Fund's attorney to recommend a re-bid after Metric was initially approved.
Prior to the finalization of a capitation contract with Metric, the defendant disclosed the existence of his billing company, BSI, to the Fund's attorney, misrepresenting his role and the company's income. In October 1987, the contract had not yet been executed, and the defendant dismissed the Fund officer overseeing the bidding process, who subsequently reported alleged improprieties related to BSI and Metric. An investigation was initiated by the Fund, which included hiring outside counsel; however, the defendant and his wife provided incomplete and false information. The investigation concluded with no findings of prohibited transactions under ERISA, leading the trustees to take no further action.
In November 1993, the defendant was indicted on three counts, ultimately convicted on two: soliciting and receiving kickbacks from Metric in violation of 18 U.S.C. § 1954, and making a false statement in a letter to the Fund in violation of 18 U.S.C. § 1027. The defendant claimed that the District Court wrongly admitted hearsay testimony, which he argued prejudiced his case. The government maintained that the testimony was not hearsay or, alternatively, that any error was harmless given the overwhelming evidence against the defendant.
The contested testimony came from Roger Towne, an employee of Delaware Professional Services, who stated that his deceased partner, Edward Brown, advised him not to seek more cost-effective lab service providers since the defendant was ensuring that Metric received the Fund's business. The District Court admitted this testimony under the hearsay exception for statements made by a party's agent, but the summary found that Brown was not an agent or servant of the defendant as defined by common law agency doctrine. Thus, while the testimony was deemed inadmissible hearsay, it was ultimately considered harmless error in the context of the case.
Brown was employed by DPS, which was contracted by the Fund. Even if Brown were considered an agent of the Fund, it remains necessary to determine if he was also an agent of the defendant. An agency relationship isn't solely established by a corporate officer's position; it can be demonstrated in two ways. First, if Brown is shown to be an agent of the Fund, and if the defendant exerted extensive control over the Fund, then the Fund's status as principal could be attributed to the defendant. However, the case of United States v. Paxson illustrates that such an imputation requires a significant level of control over the corporation, which the defendant lacked regarding the Fund, as it is governed by union and management trustees.
Despite the defendant's title of "Office Manager," he did not possess the necessary control to establish an agency relationship, particularly since he reported to Charles Collins, the executive director. The prosecution failed to provide evidence of the requisite control needed for an agency relationship to exist between the defendant and Brown. Additionally, factors traditionally indicating an agency relationship were absent in their interaction, meaning Towne's testimony was inadmissible hearsay.
The government cited Robert R. Jones Assoc. Inc. v. Nino Homes as a comparable case favoring their argument, but this was refuted as the circumstances were fundamentally different: both the corporate officer and the corporation were defendants in Nino Homes, and the defendant had direct hiring authority over the declarant. In contrast, the Fund was not a party to the case at hand, and the defendant did not have the authority to hire or fire Brown when the relevant statement was made. Thus, the findings concluded that no agency relationship existed between the defendant and Brown, invalidating the testimony in question.
The government did not establish the necessary agency relationship to admit Brown's statement under FED.R.EVID. 801(d)(2)(D). The government contends that even if Towne's testimony is considered inadmissible hearsay, any error would only be reviewed for plain error since the defendant did not adequately state the basis for his objection at trial. The government highlights a discrepancy between defense counsel's trial argument, which asserted that Brown was Towne's partner and not an agent, and the argument made on appeal. Despite potential errors, the court indicated it would not reverse unless the errors were shown to be harmful, noting that the impact of hearsay cannot be judged solely by its brevity. The court acknowledged that while the hearsay testimony was limited to twelve lines, its prejudicial potential could be significant. However, the defendant's effective cross-examination of Towne mitigated any adverse effects by demonstrating the witness's lack of substantial knowledge. Additionally, there was overwhelming evidence indicating that defendant Wiedyk violated 18 U.S.C. § 1954 by concealing financial ties and improperly steering business. The court concluded that the judgment was not significantly affected by the alleged error.
The second ground for appeal involves two improper questions posed by the prosecution to witness Michael Lavoie regarding the felony convictions of Metric and Marcus. The defendant failed to object to the first question and only reserved a motion after the second question was asked. The court allowed the proceedings to continue, and the defendant later moved for a mistrial. As neither Metric nor Marcus testified, their convictions were inadmissible for impeachment, and the questions raised the potential for prejudicial implications of guilt by association for the defendant.
The trial judge acknowledged the impropriety of certain questions but denied the motion for mistrial, instead instructing the jury to disregard the questions as irrelevant. The denial is reviewed for abuse of discretion, with the standard derived from United States v. Carroll involving the application of Leon factors to assess whether the impropriety was flagrant. Flagrant improprieties warrant reversible error, while non-flagrant improprieties are evaluated under the Bess test, which requires a new trial if the proof of guilt is not overwhelming, the defendant objected, and the court failed to adequately address the error.
The Leon factors include: (1) the potential to mislead the jury and prejudice the accused; (2) whether the comments were isolated or excessive; (3) the intent behind the remarks; and (4) the strength of evidence against the accused. In this case, the first factor was mitigated by the judge’s clear curative instructions. The comments were deemed isolated, and the defense's lack of objection to the first question suggests they did not perceive it as improper at the time. The prosecution did not persist in using improper questions after the judge's ruling, countering assertions that the questions were a response to defense impeachment efforts. Furthermore, while the government argued that prior convictions were part of the record, they were not formally admitted as evidence.
Ample evidence supported the defendant's guilt, indicating that only the third factor weakly favored the defense. Overall, the misconduct was not deemed flagrant according to the Leon test.
The Bess test determines that the appellant is entitled to a new trial only if three conditions are met: proof of guilt is not overwhelming, the appellant objected to improper remarks, and the court failed to address the errors with jury instructions. The defense's objection to a second improper question was not recognized by the judge, who did not rule on it, as the objection was not clearly articulated. Consequently, with the overwhelming evidence of guilt and effective curative instructions provided by the court, the denial of the mistrial motion was not an abuse of discretion.
The defense's final appeal point revolves around alleged prosecutorial misconduct, specifically references to prior criminal convictions, mobster Allen Dorfman, describing the Fund as a "den of iniquity," and urging the jury to "send a message" to the defendant and the Fund. Determining if these actions rendered the trial "fundamentally unfair" involves mixed legal and factual questions and is reviewed de novo. Although the improper questions were insufficient to reverse the mistrial denial, their cumulative effect, alongside other improprieties, could impact the fairness of the trial.
One significant issue was the introduction of evidence regarding Allen Dorfman's death. The defense objected to its relevance, and the standard for review is whether there was an abuse of discretion. The court found that this testimony was relevant to establish the credibility of a government witness, Charles Collins, who had a history of perjury. The prosecution argued that Collins' prior perjury was influenced by threats from Dorfman, and with Dorfman's death, Collins could be truthful. The court affirmed the relevance of this testimony to support the witness's credibility.
The appellate court evaluated the defendant's objections to the prosecution's closing arguments, determining that they would only consider claims of plain error due to the defendant's lack of objection during the trial. The court referenced established precedents indicating that improper conduct does not constitute reversible error unless it is egregious, the evidence of guilt is overwhelming, or the trial judge intervenes to address it. Individually, none of the prosecutor's statements were deemed to constitute reversible error, nor did they collectively compromise the fairness of the trial.
Specifically, statements characterizing the Fund as a "den of iniquity" were found to be supported by the record, as numerous associates had been convicted of illegal activities, making them not improper despite their excessive rhetoric. Similarly, references to the defendant's actions while Executive Director were part of the trial record and permissible for the prosecution to mention.
Regarding the "send a message" remarks, the court noted that prior rulings established that urging a jury to deliver a guilty verdict to convey a message is not reversible error, distinguishing this case from others where such remarks inflamed juror passions regarding significant societal issues. The court concluded that there was no similar appeal to community interests in this case.
Ultimately, the trial judge's decision not to grant a mistrial based on the prosecutor's improper questions was upheld, as it was not an abuse of discretion, leading to the affirmation of the defendant's convictions.
