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Kiley v. United States

United States Court of Appeals, Eighth Circuit

January 31, 2019

Patrick Joseph Kiley Petitioner - Appellant
United States of America Respondent - Appellee

          Submitted: October 17, 2018

          Appeal from United States District Court for the District of Minnesota - Minneapolis

          Before WOLLMAN, COLLOTON, and BENTON, Circuit Judges.


         Patrick Joseph Kiley moved to vacate, set aside, or correct his sentence pursuant to 28 U.S.C. § 2255, claiming that he had received ineffective assistance of counsel at trial. The district court denied the motion.[1] We affirm.

         I. Background

         Following an eight-week trial, Kiley was found guilty of twelve counts of mail and wire fraud under 18 U.S.C. §§ 2, 1341, and 1343, one count of conspiracy to commit mail and wire fraud under 18 U.S.C. § 1349, and two counts of money laundering under 18 U.S.C. §§ 2 and 1957. We affirmed Kiley's conviction and 240-month sentence on direct appeal. See United States v. Beckman, 787 F.3d 466, 499 (8th Cir. 2015).

         The charges arose from a partial Ponzi scheme (the currency program) started by Trevor Cook in 2006, in which Cook and Kiley conspired with others to steal more than $193 million from investors. When the conspiracy began to unravel in 2009, investors filed a civil lawsuit against several of the co-conspirators (the Phillips litigation). Henry Nasif Mahmoud was retained to represent Kiley and forestall his being named as a defendant in that litigation. As a retainer, Kiley caused $100, 000 to be wired to Mahmoud's account at a bank in Naperville, Illinois. The $100, 000 transfer, consisting of victims' stolen funds, served as the basis for one of Kiley's money laundering convictions. Following Kiley's indictment in 2011, Mahmoud began to represent him in his criminal proceedings.

         Before trial, the government moved for inquiry, alleging that Mahmoud suffered from three conflicts of interest, two of which concerned Mahmoud's prior representation of two individuals, Duke Thietje and Stephen Nortier, who would be called as witnesses at trial. The government also suggested that Mahmoud himself might be a necessary witness at trial because of his receipt of the $100, 000 retainer. Kiley opposed the government's motion. After a hearing, the district court determined that Mahmoud was not a necessary witness, but it required Kiley to execute a waiver of the other two conflicts if he wished to be represented by Mahmoud. Kiley waived the conflicts and was represented at trial by Mahmoud and local counsel.

         At trial, the government presented evidence that Mahmoud was the recipient of Kiley's laundered funds. A government investigator explained how the money had traveled in interstate commerce when it was wired from an account composed entirely of victim funds to Mahmoud's Illinois bank. Mahmoud himself later mentioned the retainer when he asked a witness about Kiley's mental condition "[i]n July of 2009, about the time you sent that wire to me."

         The government also produced emails in which Kiley mentioned Mahmoud's name to an investor. The government introduced during Duke Thietje's testimony an email thread from 2006 in which Thietje asked Kiley for information about his investments, to which Kiley responded that he was waiting to hear back from Mahmoud regarding Thietje's inquiries. The jury subsequently heard testimony from three attorneys that they had immediately recognized the currency program as fraudulent after reviewing its operations in 2008.

         Following Kiley's convictions, Kiley and Mahmoud parted ways and new counsel was appointed for Kiley at sentencing. Kiley thereafter began asserting that he had received ineffective assistance of counsel because Mahmoud's receipt of laundered funds and entanglement in the conspiracy subjected him to potential liability, creating a conflict of interest. On direct appeal, we concluded that the district court's failure to notice and address sua sponte Kiley's previously unraised conflict-based challenge did not violate Kiley's Fifth Amendment due process rights. See Beckman, 787 F.3d at 490.

         Kiley then filed this § 2255 motion alleging that he was deprived of his Sixth Amendment right to effective representation by conflict-free counsel. Kiley argued that Mahmoud's potential liability caused his and Mahmoud's interests to diverge prior to trial and that the conflict adversely affected Mahmoud's representation, particularly when the jury learned that Mahmoud had received stolen funds. During a hearing on the motion, the district court heard testimony from a number of witnesses, including a criminal defense expert and Mahmoud. In denying Kiley's motion, the court found no evidence of wrongdoing by Mahmoud and insufficient evidence to show that Mahmoud had exposed himself to liability by accepting the retainer. Finding Mahmoud's testimony credible, the court concluded that Mahmoud had neither actual nor constructive knowledge that the currency ...

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