Appeals from judgments of conviction entered in the United States District Court for the Southern District of New York (Motley, C.J.), following a joint jury trial, for making false and fraudulent representations to induce a bank to cash two stolen and forged checks, 18 U.S.C. §§ 2, 1344, and for conspiring to commit bank fraud, id. § 371. Reversed and remanded.
Before: PRATT and MINER, Circuit Judges, and RE, Chief Judge of the United States Court of International Trade, sitting by designation.
Jonathan B. Kohan and Daniel Lowery appeal from judgments of conviction entered in the United States District Court for the Southern District of new York, following a joint five-day jury trial before Chief Judge Constance Baker Motley, a conspiracy to commit bank fraud, 18 U.S.C. § 371, and of the underlying substantive offense of making false and fraudulent representations in defrauding a bank, id. §§ 2, 1344. The evidence tended to show that Steven Fellouris, a co-defendant who was a fugitive at time of trial, solicited and received defendants' assistance in inducing Chemical Bank in New York to cash two corporate checks he had stolen from his employer and forged.
On appeal defendants urge several grounds for reversal, two of which center on evidentiary rulings by the trial judge and have substantial merit. As discussed below, the trial judge erred both in excluding the testimony of Lowery's sole witness on hearsay grounds and in precluding Kohan from cross-examining government witnesses regarding a possible scheme by Fellouris and his employer to defraud Chemical Bank. Because we believe these rulings served to prejudice substantial rights of Kohan and Lowery, we reverse and remand for a new trial.
In February 1985 Fellouris, an employee of Brook Fuel Oil Corporation ("Brook Fuel"), devised a scheme to bilk Brook Fuel of $143,500. On February 26, 1985, Fellouris stole three checks payable to Brook Fuel in the aggregate amount of approximately $127,000, and deposited them into the company's account with Chemical Bank without recording them on the company's books. Fellouris then stole a sheet of blank checks from Brook Fuel's checkbook, filled in two of them in the amounts of $71,500 and $72,000, traced on both checks the signature of Robert Ragno-who, along with Fellouris's nephew John Colombos, owned Brook Fuel-and noted on each check that it was for "return of loan and interest".
In seeking to cash the checks, Fellouris turned to Lowery, an old friend who worked as a financial advisor. In an interview with new York City Detective Manzello during the investigation Lowery stated that during a dinner at Lowery's apartment, Fellouris had told him that he had loaned Brook Fuel approximately $127,000, which loan was still outstanding. Sometime after that dinner, Fellouris told Lowery that he would have two checks issued by Brook Fuel in the amounts of $71,500 and $72,000 in repayment of the loan plus interest, and that he intended to use the proceeds of these checks to open a restaurant with Lowery as his partner.
Defendant Kohan testified at trial that he was an attorney licensed to practice in Pennsylvania, was not yet admitted to practice in New York, but had been associated with a New York law firm where he worked on real estate and entertainment law matters. Kohan stated further that since 1978 he had promoted entertainment theatrical, and sporting events as well.
Kohan had worked on numerous mortgage brokerage projects with Diane Acker, a "venture capitalist". Acker had introduced Kohan to Lowery approximately two years before trial in connection with a mortgage financing project. On February 25, Acker contacted Kohan to relate that a client of Lowery sought to cash two checks he was receiving in repayment of a loan for the purpose of acquiring a restaurant. Acker asked Kohan to serve as escrow agent, explaining that she and Lowery had been working on the transaction and were to receive a fee of 10%. Kohan responded that he would require written instructions in order to do the transaction.
Kohan further testified that Acker telephoned the next day to explain that an escrow agreement had been prepared and that the checks were ready to be cashed. In addition, Kohan stated that Lowery called as well to confirm the transaction and put Fellouris on the line to explain about the restaurant deal and to state that he had signed an escrow agreement.
Kohan arranged to clear the two checks through his special attorney escrow account at the Grand Central Station branch of Chemical Bank. On February 25, he met with the manager of that branch, Pat Gonsalves, and told here that "he was doing the Prince concert" and that he would be getting a large check drawn on another Chemical branch. Trial testimony indicated that Gonsalves understood Kohan to mean that he would be promotion the upcoming Prince concert.
When Kohan met with Acker the next day, she gave him the escrow agreement, executed by Fellouris, as well as the two checks. The name of the payee on each check had been left blank; Kohan filled in the payee section to read "Jonathan Kohan, as escrow agent".
On February 27, Kohan called branch manager Gonsalves and told her he was bringing the two checks to the bank for deposit. Kohan made the deposit that afternoon, after which he called Gonsalves and asked when was the earliest time he could withdraw the proceeds in large bills. Gonsalves explained that the earliest she could provide the case would be Friday, March 1. ...