A federal judge in Little Rock had valid reasons for throwing out two 2014 jury convictions against Little Rock businessman John Stacks and granting him a new trial on his other five convictions, a three-judge panel of the 8th U.S. Circuit Court of Appeals said Monday.
In upholding the rulings of U.S. District Judge Leon Holmes, the St. Louis-based appellate court cleared the way for the case to return to Holmes' court to be scheduled for a second trial.
On Feb. 25, an 8th Circuit panel also affirmed U.S. District Judge Kristine Baker's dismissal of a related civil lawsuit. In it, workers at the Mountain Pure Bottling Co. in Little Rock, which Stacks operates, claimed federal agents violated their rights during the execution of a search warrant at the business in 2012. Baker said there was no evidence of that.
In the criminal case, Stacks is facing eight charges regarding an alleged attempt to obtain U.S. Small Business Administration disaster-assistance loans under false pretenses. Stacks applied for the loans after he said company equipment in Damascus was damaged in a 2008 tornado.
In his first trial in October 2014, Stacks faced 10 charges. Jurors convicted him on seven of them and deadlocked on the other three. Holmes later threw out two of the convictions, each of which accused Stacks of making false statements, and granted Stacks a new trial on the other five charges for which the jury had convicted him. Federal prosecutors appealed.
The appellate panel said Holmes correctly held that the allegedly false statements that were the subject of the first two charges weren't proved to be false.
One of them alleged that Stacks lied when he signed a loan document saying there had been "no substantial adverse changes" in his financial condition since a previous loan application. But Holmes found, and the 8th Circuit panel agreed, that there was no definition in the document of what constituted "substantial adverse changes." Although the document gave examples of situations that would qualify as "substantial adverse changes," the panel said no reasonable juror could find that the actions cited by federal prosecutors were "comparable" to the examples listed on the document.
As for the second false-statement charge, the panel agreed that prosecutors didn't prove that Stacks falsely certified in a loan agreement that his original application was true and complete. Prosecutors said Stacks' assertion that his loans were current, not delinquent, constituted a crime. But Holmes said the terms "current" and "delinquent" weren't defined in the application, and he said loan officers testified that their definitions of the terms varied. One officer said a loan can be delinquent if a payment is one day late, while another said Small Business Administration loans aren't delinquent until they are 90 days past due.
"At trial, Stacks proved that he consistently made payments shortly after the due date, and that the bank never reported the loans as delinquent to any credit agencies," according to the panel of 8th Circuit judges -- Diana Murphy of Minneapolis, Duane Benton of Kansas City, Mo., and Jane Kelly of Cedar Rapids, Iowa.
The panel also found that Holmes didn't abuse his discretion in taking the somewhat extraordinary measure of vacating Stacks' convictions on three wire-fraud charges, one count of making a false and fraudulent claim to the Small Business Administration and one count of making a false statement to a government agency.
The panel observed that district judges have broader discretion to grant a new trial than they do to grant a motion for acquittal, but that the authority to grant a new trial is "reserved for exceptional cases in which the evidence preponderates heavily against the verdict."
The appellate judges cited Holmes' "thorough, well-reasoned opinion" for showing why he thought the evidence presented at trial undermined the inference that Stacks intentionally schemed to defraud the Small Business Administration. They said Holmes weighed evidence that prosecutors considered to be "overwhelming" against exculpatory evidence, "before concluding in a thorough, reasoned manner that a miscarriage of justice may occur if the verdicts were allowed to stand."
Holmes discredited the testimony of a key prosecution witness, loan officer Tony Bauer, who the judge said relied on a log sheet of questionable accuracy to documents statements Stacks made to him. The judge also noted that Bauer repeatedly referred to Stacks as "Mr. Spikes."
In addition to the five charges on which Holmes granted Stacks a retrial, the businessman will face the three money-laundering charges on which the previous jury became hopelessly deadlocked.
Metro on 05/10/2016