Saying "a substantial miscarriage of justice may have occurred," a federal judge Tuesday threw out two October jury convictions against Little Rock businessman John Stacks and granted a retrial on his five other convictions from the same trial.
"I'm very pleased and humbled at the judge's decision," Stacks said Wednesday. "It certainly tends to restore my faith in the justice system."
In a 46-page ruling issued late Tuesday afternoon, U.S. District Judge Leon Holmes explained why he thought evidence presented at the trial over which he presided was insufficient to support convictions on two counts of making false statements to obtain a U.S. Small Business Administration loan after tornado damage at Stacks' Damascus property in 2008.
The statements concerned whether Stacks, 60, lied in 2009 in denying to a government agent that there had been any substantial change in his businesses' financial condition since the previous June, and whether he falsely certified that his original loan application was accurate.
"In short, the evidence does not support the jury's conclusion that the government had met its burden of proving Stacks was guilty" on that charge, Holmes wrote.
As to the other dismissed charge, Holmes noted, "The government has never specified any statement in the original loan application that was not true, correct, and complete. No witness testified that any statement in the loan application was false. Nor did the government address the issue in closing arguments or in [post-trial briefs]. The Court has reviewed the application and finds nothing that was proven false during the course of the trial."
In setting aside the jury's guilty verdicts on five other charges and leaving them for another jury to consider, but not acquitting Stacks on them, Holmes said the evidence was sufficient to enable a reasonable jury to convict Stacks when considering the evidence in a light most favorable to the government. Holmes noted that the law requires him to apply that standard in considering motions for acquittal, as opposed to motions for a new trial.
"If the evidence rationally supports both guilt and innocence, the court may not set aside the guilty verdict," he wrote of the acquittal requests, adding that judges have "very limited latitude" in deciding such motions "and may neither assess the witnesses' credibility nor weigh the evidence."
One of those charges alleges that Stacks submitted a fraudulent claim contending that hundreds of thousands of dollars' worth of equipment belonging to his Mountain Pure bottling operation was at his property in Damascus when the tornado struck and was destroyed.
Prosecutors contend that the equipment in question was never at the Damascus property. They say Stacks schemed to obtain a loan to replace the nonexistent equipment by making the false report and then backing it up with false statements about his financial situation, including making overly rosy revenue projections for a business he owns in Texas as proof that he would be able to repay the loan.
Mountain Pure is based in Little Rock but includes water-bottling facilities in Magee, Miss., and Palestine, Texas.
Three other charges accuse Stacks of wire fraud in connection with federal forms he submitted in support of his claim. The other remaining charge accuses Stacks of making a false statement.
During the trial, Holmes threw out one of three counts of making a false statement to a government agent, so the jury didn't consider that charge.
After six days of testimony and nearly three days of deliberations, jurors found Stacks guilty of seven charges -- three counts of wire fraud, one count of submitting a fraudulent claim and three counts of making false statements -- but couldn't reach a verdict on three money-laundering charges.
On Wednesday, U.S. Attorney Chris Thyer said his office was in the process of "digesting" Holmes' order and deciding whether to appeal Holmes' dismissal of the two false-statement charges or to simply retry the remaining charges. The money-laundering charges, for which a mistrial was declared after jurors became deadlocked and which are directly tied to the wire fraud charges, are scheduled to be retried by another jury July 27.
Thyer said that as of Wednesday, he is "leaning toward" appealing.
Holmes' ruling was critical of the government's case in several respects.
He credited the testimony of a former Mountain Pure employee, Johnny Hartwick, who lived near the Damascus property, as helping prove that despite the prosecution's assertions, Stacks used a shop at the Damascus farm to store, refurbish and build Mountain Pure machinery and equipment. Hartwick described helping build some of the equipment, and seeing and buying other equipment for the farm property. Hartwick also pointed out equipment in photographs, though he couldn't remember whether he had seen each of the items there that Stacks claimed was damaged in the tornado.
"The evidence proved that some items of Mountain Pure machinery and equipment were located at the Damascus farm before the tornado hit and that Stacks used the buildings to store, build and refurbish that machinery and equipment for his water bottling business," Holmes said. "The evidence failed to establish that any item on the list was not there when the tornado hit. It can be difficult to prove a negative, but that is what the government attempted to do to -- to prove that some or all of the items on the list submitted by Stacks were not at the Damascus farm when the tornado struck. The government failed in that attempt."
He also criticized the testimony of a government loan officer, Tony Bauer, a key witness. Holmes noted that Bauer relied on a chronological log sheet to document statements Stacks made to him, "but the accuracy of those entries is in serious doubt." Holmes noted that in one entry, Bauer repeatedly referred to Stacks as "Mr. Spikes," and also incorrectly identified the name of a business with which Mountain Pure had a contract. Because of the inaccuracies, Holmes said, "it is hard to credit Bauer's testimony over that of Stacks."
Metro on 12/04/2014