Quantcast
Home / Opinion Digests / Criminal Law / Court Sees Discovery Abuse, But Upholds Conviction

Court Sees Discovery Abuse, But Upholds Conviction

A securities lawyer convicted of crimes arising from a fraudulent investment scheme cannot win a new trial based on his claims that the government withheld information favorable to his case; the 4th Circuit upholds the lawyer’s convictions, but admonishes the prosecutors in this district about a pattern of discovery abuse.

Securities attorney Gregory Bartko was convicted of conspiracy to commit mail fraud, launder money, engage in unlawful monetary transactions and related crimes in a scheme in which he and investment banker Darryl Laws created and solicited investors for the Caledonian Fund. John Colvin was president of Colvin Enterprises and co-managing general partner with Scott Hollenbeck of Franklin Asset Exchange. Although Bartko’s record check on Colvin revealed he and Hollenbeck both had past allegations of forgery and had been fired from securities-related jobs, and Hollenbeck had been suspended for violations of securities rules, the parties nevertheless agreed to engage in fund-raising.

During 2004, Hollenbeck fraudulently raised large amounts of money for the Caledonian Fund, as well as for other investments, from a total of 171 investors. Money distributed to defendant was used to pay salaries and expenses, not for investments or loans. In November 2004, the Caledonian Fund dissolved and the $701,000 transferred to the Caledonian Fund was not returned to investors. Hollenbeck later was the primary fundraiser for the Capstone Fund, also started by Bartko. Bartko received over $2.6 million from 40 Capstone Fund investors. A lawyer for the Securities and Exchange Commission confronted Bartko about Hollenbeck’s continued sale of securities. Bartko then filed an interpleader action in a North Carolina federal court, and ultimately returned 94 percent of the Capstone Fund money to the court.

In defendant’s first motion for a new trial, he argued the government withheld information that would have cast him in a favorable light: an FBI agent’s interview with a judge who presided over receivership litigation involving some of the same parties, in which defendant won a $20 million recovery for people defendant supposedly victimized. However, defendant did not raise this issue in his opening brief, but mentioned it only in a footnote in his reply brief, and the court considers the issue waived.

In his second motion for a new trial, Bartko protests that the government allowed Hollenbeck to testify falsely that he had not received any promises or inducements in exchange for his trial testimony. Federal prosecutors entered into proffer agreements with Hollenbeck and his wife prior to interviewing them. Our review of the record convinces us Hollenbeck answered truthfully at trial. Nothing in the agreements suggests the Hollenbecks not being a target was conditioned on their participation in the investigative interviews, or that they would not be a target in the future. His statement that the government had not made any promises “as of this time” was not true, and should have been corrected by the government. But, having made an exhaustive review of the record, we do not think that impeachment could have made an iota of difference in the jury’s final decision. Bartko could have used the Hollenbecks’ proffer agreements to attack Scott Hollenbeck’s credibility, but the agreements would have been cumulative.

In his third motion for a new trial, defendant contends the government violated Brady v. Maryland by failing to disclose tolling agreements it had entered into in 2010 with Levonda Leamon, regarding her involvement in the fraudulent sale of investments in 2005. Her testimony was not material, and the district court did not err in denying a new trial on this ground.

We note that a cursory review of this court’s opinions, including unpublished opinions, reveals recent consideration of at least three cases involving discovery abuse by government counsel in the Eastern District of North Carolina. The frequency of the “flubs” by this office raises questions regarding whether the errors are fairly characterized as unintentional. We may find such practices “harmless” as to a specific defendant’s verdict, but as to litigants in this district and our justice system at large, they are anything but harmless. We direct the Clerk of Court to serve a copy of this opinion on the U.S. Attorney General and the Department of Justice’s Office of Professional Responsibility.

Finally, we reject Bartko’s additional claims of error: that the trial court should have instructed the jury on multiple conspiracies and on accomplice/informant testimony and on multiple conspirators, and should have told the jury to consider testimony of certain witnesses “with great care and scrutiny.”

Defendant’s conviction and 272-month sentence are affirmed.

U.S. v. Bartko (Floyd) No. 12-4298, Aug. 23, 2013; USDC at Raleigh, N.C. (Dever) Donald F. Samuel for appellant; Kristine L. Fritz, AUSA, for appellee. VLW 013-2-172, 40 pp.

VLW 013-2-172

Leave a Reply