U.S. v. Brown
943 F.2d 1246
C.A.10 (Colo.),1991.
Sept. 3, 1991
SETH, Circuit Judge.
This appeal involves various charges arising out of the representation of Gary and Marcee Levine by the law firm of Zimmerman & Schwartz. The grand jury returned a 50 count indictment charging the Levines, the law firm, certain members of the law firm, and other participants of conspiring to defraud the United States by concealing the financial transactions of the Levines. Appellant, who was an associate with the law firm, was named in 18 of the counts. In a joint trial with Steven Zimmerman, one of the senior partners of the law firm, appellant was convicted of four counts, conspiracy in violation of 18 U.S.C. §371, two counts of bankruptcy fraud in violation of 18 U.S.C. §§2 and 152, and mail fraud in violation of 18 U.S.C. §§2 and 1341. On appeal, he challenges the sufficiency of the evidence as to each of those counts as well as various rulings by the trial court. For the reasons that follow, we reverse the trial court and remand for a new trial.
STATEMENT OF FACTS
Due
to the complex nature of the transactions, we limit our discussion of the facts
to those relevant to this appellant and incorporate by reference the statement
of facts in
United States
v, Zimmerman,
943 F.2d 1204. Viewing the evidence in the light most favorable to the
government, the following events occurred in relation to this appeal.
Gary and Marcee Levine operated a retail furniture store known as Levines Home
Furnishings in Denver. The store's corporate name was Sofa Gallery, Inc. In
1985, they sought advice from David Schwartz, of Zimmerman & Schwartz, regarding
payment of creditors and filing bankruptcy.
Based upon the advice of Schwartz, the Levines hired Sales Results and its
principal, Stanley Lansing, to conduct a liquidation sale. Lansing and Sales
Results were to receive 10% of the gross retail revenues and the net proceeds
were to be paid to the Levines' creditors. Cherry Creek National Bank and
Westinghouse Credit Corporation, two of Sofa Gallery's principal creditors,
agreed to the sale. They released their secured interests in the unsold
inventory and financed the acquisition of over two million dollars additional
inventory for the sale.
During this time, the Levines and Lansing entered into an undisclosed kickback
agreement whereby Lansing agreed to pay Marcee Levine one-third of his 10%
commission. Upon the advice of Schwartz, Gary Levine received none of this money
because of his impending bankruptcy.
The
liquidation sale was conducted from July through December 1985. The sale
resulted in a reported loss, with no proceeds paid to the creditors except for
O. Wesley Box and the Rocky Mountain News. During the course of the sale,
however, Marcee Levine received an undisclosed kickback of approximately
$100,000 from Sales Results. This payment along with $150,000 from
pre-liquidation sale accounts receivable was deposited in the law firm trust
account for the Levines' personal use. No evidence was introduced that any of
these financial transactions appeared in the law firm's ledger.
In
1985, Schwartz delegated two tasks relevant to the Levine transactions to
appellant. Schwartz requested that appellant draft a quitclaim deed granting
Gary Levine's interest in the house to Marcee Levine and draw up the Articles of
Incorporation for a business known as Action Sales Group, Inc. for Stephen
Forsey.
On
February 19, 1986, Schwartz asked appellant to attend a meeting at the Marriott
to take notes. During this meeting, Schwartz proposed that the Levines use money
from the Sofa Gallery's employee pension plan to capitalize Action Sales Group,
Inc. At trial, appellant testified that he stated at the meeting that this would
be an improper use of pension funds and refused to draft the documents. Forsey,
however, testified that appellant did not object to the use of the funds.
Thereafter, the Levines withdrew $425,000 from the pension plan and gave
$300,000 to Forsey to fund Action Sales Group, Inc. The Levines put the other
$125,000 in a secret trust account at the accounting firm of William C.
Schlapman, P.C. This money was supplemented by corporate tax refunds and used
for the Levines' personal use. In addition, the Levines and Schlapman entered
into a plan to delay filing amended tax returns.
On
April 17, 1986, Schwartz drafted a letter to the Levines stating that "Tom Brown
has been fully briefed on all aspects of all of our transactions and is fully
cognizant of all the problem areas in the event that there is any problem with
either the new business or with the old negotiations." Supp. Vol. XXIII at
88-89.
On
May 20, 1986, D. Bruce Coles, an attorney representing Colorado National
Leasing, deposed Gary Levine. During his deposition, Gary Levine failed to
disclose any of the trust accounts or interest in Action Sales Group, Inc.
Although Schwartz attended the deposition with Gary Levine, the evidence showed
that appellant met with Gary Levine prior to the deposition and met with
Schwartz afterwards. Gary Levine subsequently filed for bankruptcy on September
26, 1986.
Schwartz continued his representation of the Levines until 1987 when he turned
the Levine file over to appellant. On January 29, 1987, appellant met with Gary
Levine to discuss his deposition concerning the bankruptcy proceedings. The
following day, he attended the deposition with Gary Levine. Those present at the
deposition were appellant, Gary Levine, Coles, and H. Christopher Clark, the
bankruptcy trustee. They discussed the use of the employee pension plan funds to
capitalize Action Sales Group, Inc.; however, Gary Levine denied any ownership
or stock interest in Action Sales Group, Inc. He also failed to disclose either
the law firm trust account or the Schlapman trust account.
After the liquidation sale, the Levines put their financial records in a storage
locker. During the bankruptcy proceedings, they allowed numerous inspections of
the records contained in the storage locker. In 1986, Cherry Creek National Bank
reviewed, inspected and removed 20-25 boxes of documents. At his deposition in
January 1987, Gary Levine agreed to turn over his storage locker key to the
trustee. In March 1987, appellant wrote to the trustee and offered him the
opportunity to inspect the records for the creditors.
On April 14, 1987, a creditors' meeting was held
where Coles expressed his dissatisfaction with discovery. In an attempt to
obtain more information about the Levines' assets, Coles made several discovery
requests. On May 19, 1987, the bankruptcy court issued an order for Marcee
Levine to appear at a deposition on June 9, 1987, and produce copies of all
financial bookkeeping or accounting records and related documents.
During this time, Gary Levine told appellant that he did not want to pay rent on
the storage locker and was going to destroy the remaining records. On May 23,
1987, appellant reviewed the records, determined that they were of no value to
the bankruptcy proceedings and destroyed them at a landfill site.
On May 27, 1987, appellant wrote a letter to Coles
advising him that he had filed a motion with the court to vacate the order
authorizing the examination and that the court would not be able to act before
the June 9 deposition date. Thereafter, Marcee Levine was served with two
subpoenas dated June 2 and June 15, 1987.
Without the court ruling on appellant's motion, Marcee Levine was deposed on
June 18, 1987. Marcee Levine, through appellant, did not produce all of the
documents requested by Coles, asserting attorney-client privilege. Thereafter,
appellant filed a motion for a protective order of the records until the court
could make a determination of this issue. Coles did not oppose this motion
because appellant subsequently agreed to supply Coles with the records he had
requested.
During the course of the bankruptcy proceedings, the bankruptcy trustee
requested information concerning the Levines' 1986 tax return. In response to
these requests, appellant drafted a letter dated February 10, 1988 stating that:
"The reason for the delay has
been that the accountant wants a wealth of information and documents which the
Levines have not entirely been able to locate. Many of their financial records
were in the storage locker and seem to have disappeared into the hands of the
numerous attorneys and banks who were interested in those documents."
SUFFICIENCY OF THE EVIDENCE
Appellant challenges the sufficiency of the evidence to sustain his conviction on all four counts. We address each of these counts in turn. In reviewing a sufficiency of the evidence claim, we "view the proof presented in the light most favorable to the government to ascertain if there is sufficient substantial proof, direct and circumstantial, together with reasonable inferences to be drawn therefrom, from which a jury might find a defendant guilty beyond a reasonable doubt." United States v. Sullivan, 919 F.2d 1403, 1431 (10th Cir. 1990).
Count 1
Count 1 charged appellant with conspiracy to defraud the United States under 18
U.S.C. §371. Under this statute, the government was required to establish beyond
a reasonable doubt that: (1) there was an agreement between two or more people,
(2) to defraud the United States and (3) an overt act was committed by one of
the conspirators in furtherance of that agreement. See United States v.
Schmick, 904 F.2d 936, 941 (5th Cir. 1990). The defendant need
not have knowledge of all the details or all the members of the conspiracy,
United States v. Savaiano, 843 F.2d 1280, 1294 (10th Cir. 1988),
and the jury may presume that a defendant is a knowing participant in the
conspiracy when he acts in furtherance of the objective of the conspiracy.
United States v. Tranakos, 911 F.2d 1422, 1430 (10th Cir. 1990).
" ' "The connection of the defendant to the conspiracy need only be slight, if
there is sufficient evidence to establish that connection beyond a reasonable
doubt." ' " Id. (quoting Savaiano, 843 F.2d at 1294
(quoting United States v. Batimana, 623 F.2d 1366, 1368 (9th
Cir. 1980)). However, " 'caution must be taken that the conviction not be
obtained "by piling inference upon inference." ' " United States v. Fox,
902 F.2d 1508, 1513 (10th Cir. 1990) (quoting United States v.
Butler, 494 F.2d 1246, 1252 (10th Cir. 1974)) (quoting Direct
Sales Co. v. United States, 319 U.S. 703, 711, 63 S.Ct. 1265, 1269, 87 L.Ed.
1674 (1943)).
Appellant claims that the evidence was insufficient to support his
conviction because he was not a knowing participant in the conspiracy.
Specifically, he claims that the government's case was built on inferences
involving his role as attorney for the Levines. He argues that any task
performed by him in relation to the bankruptcy proceedings could not constitute
an overt act in furtherance of the conspiracy to defraud the United States
without his knowing participation.
We
agree with appellant's argument that the government's case centers around his
role as the Levines' attorney. While there is little direct evidence of
appellant's involvement, we must conclude that there was sufficient
circumstantial evidence for a jury to have found beyond a reasonable doubt that
appellant knowingly and actively participated in the conspiracy to defraud the
United States.
Viewing the evidence in the light most favorable to the government, a reasonable
jury could infer that appellant was aware of the misuse of Sofa Gallery's
employee pension plan funds, the Levines' interest in Action Sales Group, Inc.,
the misuse of the law firm trust account to hide the proceeds from the
liquidation sale and the Schlapman trust account from the following evidence
presented at trial.
The
evidence showed that appellant began working on the Levine bankruptcy case in
1985. His involvement in the Levine case gradually increased in 1986 when he
attended a meeting at the Marriott with Schwartz, Forsey, and the Levines.
During this meeting, it was suggested that Gary Levine use the Sofa Gallery's
employee pension plan funds to capitalize Action Sales Group, Inc. Although
appellant denies that he acquiesced to the use of those funds in that manner,
Forsey testified that appellant did not object. Further, Forsey's testimony was
corroborated by the letter dated April 17, 1986, which stated that appellant had
been fully briefed on all aspects of the Levine transactions.
In
addition to the letter drafted by Schwartz concerning appellant's knowledge of
the Levine transactions, a reasonable jury could possibly infer that Schwartz
"prepped" appellant on the Levine financial transactions when he turned the file
over to him in 1987. Appellant's knowledge of Gary Levine's assets during the
bankruptcy proceedings would be crucial to effective representation given the
existing conspiracy to conceal a number of Gary Levine's assets.
Further, appellant met with
Gary Levine to discuss his assets and go over "ground rules" for his deposition.
Appellant also discussed Gary Levine's assets with Schlapman. A reasonable jury
could infer that appellant was aware of Gary
Levine's undisclosed assets from these discussions.
While we have previously held that knowledge or
mere association is insufficient to convict on a charge of conspiracy, Fox,
902 F.2d at 1514, we believe that appellant's actions constitute more than mere
knowledge given the following events and the inferences which may be derived
therefrom.
During his first deposition, Gary Levine failed to disclose any information
regarding his interest in Action Sales Group, Inc., the law firm trust account
or the Schlapman trust account. While appellant did not attend this deposition,
he did meet with Gary Levine prior to the deposition to discuss "ground rules."
Appellant represented Gary Levine at his second
deposition which took place on January 30, 1987. Again, Gary Levine failed to
disclose any of the trust accounts. While they discussed the embezzlement scheme
of the employee pension plan to fund Action Sales Group, Inc., Gary Levine
denied any ownership or stock interest in the company. From this evidence, a
reasonable jury could infer that appellant discussed Gary Levine's assets with
him and how to conceal them during the deposition. They could further conclude
that appellant was aware of the conspiracy to conceal Gary Levine's assets and
actively participated in the conspiracy by failing to reveal the undisclosed
assets to the bankruptcy trustee.
Lastly, the jury heard testimony concerning
appellant's destruction of business records contained in the Levines' storage
locker. A reasonable jury could conclude that appellant's destruction of records
relating to the Levines' bankruptcy proceedings was probative of his involvement
in the conspiracy and could infer from his actions that he actively participated
in the conspiracy to defraud the United States.
Given the evidence presented and the reasonable inferences therefrom, a jury could have found beyond a reasonable doubt that appellant was aware of all of the Levines' financial transactions; that he agreed to defraud the United States by concealing their financial transactions; and that he aided the conspiracy in its objectives in violation of 18 U.S.C. §371.
Count 44
Count 44 charged appellant with "knowingly, fraudulently, and unlawfully"
concealing the assets and property of Gary Levine from D. Bruce Coles during the
bankruptcy proceedings of Gary Levine on January 30, 1987, in violation of 18
U.S.C. §§ 2 and 152. The indictment specifically alleged that appellant failed
to disclose Gary Levine's interest in Action Sales Group, Inc. and the proceeds
derived therefrom, as well as the law firm and Schlapman trust accounts.
Appellant claims that the evidence was insufficient because there was no direct
evidence that appellant knew about the law firm trust account or the Schlapman
trust account; therefore, he could not have counseled, aided and abetted Gary
Levine during the deposition as to the concealment of those accounts. He further
contends that Coles was fully aware of the employee pension plan scheme because
it was discussed during Gary Levine's deposition on January 30, 1987.
After carefully reviewing the evidence in the light most favorable to the
government, we conclude that a jury could have found beyond a reasonable doubt
that appellant committed bankruptcy fraud in violation of 18 U.S.C. §152 for
substantially the same reasons as discussed above.
From the evidence, a reasonable jury could infer that appellant was aware of all of the Levines' undisclosed assets; that appellant aided Gary Levine in the concealment of those assets; and that appellant failed to disclose the existence of those assets during the proceedings of January 30, 1987. We believe that the evidence presented was sufficient.
Count 46
Count 46 charged appellant with "knowingly and fraudulently" destroying, mutilating, and concealing the corporate accounting records of the Sofa Gallery and Gary and Marcee Levine after Gary Levine had filed bankruptcy in violation of 18 U.S.C. §§ 2 and 152.
Appellant claims that the evidence was insufficient to convict him of
destroying the records because he complied with all of the discovery demands.
Further, he claims that all of the records necessary to reconstruct the
beginning inventory of the liquidation sale and the proceeds from that sale were
contained in the government's document room and produced at trial.
Although we agree with appellant that he was very accommodating in permitting
the inspection of the records contained in the storage locker, the timing of the
destruction in relation to the following events is suspect.
At the time appellant destroyed the records, Gary
Levine's bankruptcy schedules had been filed and his case was pending;
therefore, no records relating to his financial transactions should have been
destroyed. While the two subpoenas were not issued until after the records had
been destroyed, appellant had received the May 19 order requesting that Marcee
Levine produce records relating to her bankruptcy proceedings. He also knew that
Coles was dissatisfied with discovery. Given this information, he should have
given Coles or any other interested creditor the opportunity to review the
records prior to destroying them.
While appellant claims that the records destroyed were insignificant and that
all of the records necessary to reconstruct the beginning inventory and results
of the liquidation sale were produced at trial, without benefit of viewing those
records, we cannot reach that same conclusion.
Viewing the evidence in the light most favorable to the government and the reasonable inferences therefrom, the evidence presented established that the Levines stored records relating to their financial transactions in the storage locker; that Gary Levine had filed bankruptcy; and that appellant destroyed these records. A jury could have found beyond a reasonable doubt that appellant committed bankruptcy fraud in violation of 18 U.S.C. §152.
Count 49
Count 49 charged appellant with mail fraud under 18 U.S.C. §§ 2 and 1341. The
thrust of this count was that appellant falsely responded to a request by the
bankruptcy trustee for information concerning the filing of the Levines' 1986
tax returns in a letter sent through the United States mail. The government
asserts that he responded falsely because the actual filing of the 1986 tax
return would have revealed that the Levines received proceeds from Action Sales
Group, Inc.
In
order to obtain a conviction under 18 U.S.C. § 134, the government was required
to establish the existence of two elements: "(1) a scheme or artifice to defraud
or obtain money or property by false pretenses, representations or promises; and
(2) use of the United States mails for the purpose of executing the scheme."
United States v. Cardall, 885 F.2d 656, 679 (10th Cir.1989).
Appellant claims that the evidence was insufficient to prove that he was
involved in any scheme to conceal Gary Levine's assets or delay the filing of
the Levines' taxes at the time he sent the letter to the bankruptcy trustee
because all of the documents concerning Action Sales Group, Inc. had been
disclosed and the bankruptcy trustee was aware of the employee pension plan
scheme.
While appellant correctly argues that the
bankruptcy trustee was aware of the misuse of the employee pension plan funds,
there is no evidence indicating that he was aware of Gary Levine's ownership
interest in Action Sales Group, Inc. At his deposition, Gary Levine denied any
ownership or stock interest in Action Sales Group, Inc. He also failed to
disclose the proceeds he received from this venture in his bankruptcy schedules.
Further evidence of this scheme is apparent from the fact that when the Levines
actually filed their tax return, they failed to report the proceeds from Action
Sales Group, Inc. as income.
Although appellant disclosed part of the Action
Sales Group, Inc. agreement to Coles in July 1987, Coles did not receive a
complete copy of the agreement until the fall of 1988, several months after the
letter was sent to the bankruptcy trustee. In addition, a reasonable jury could
possibly infer that appellant's letter to the bankruptcy trustee was not
entirely accurate given appellant's destruction of some of the Levines'
financial records.
Therefore, at the time the letter was sent, a reasonable jury could conclude that the bankruptcy trustee was unaware of Gary Levine's interest in Action Sales Group, Inc. In an effort to conceal this information from the bankruptcy trustee and perpetuate the scheme to delay the filing of the Levines' 1986 tax return, appellant represented to him that not all of the records to complete the tax return were available. Based upon this evidence, a jury could have found beyond a reasonable doubt that appellant committed mail fraud in violation of 18 U.S.C. §§ 2 and 1341.
CO-CONSPIRATOR STATEMENTS
Appellant challenges the admission of co-conspirator hearsay statements under
Fed.R.Evid. 801(d)(2)(E). He argues that he was not a member of the conspiracy
when those particular statements were made. He further claims that the trial
court placed an imprimatur on the evidence.
The government began its presentation of the
evidence in chronological order by establishing the underlying basis of the
conspiracy. It presented evidence of the kickback agreement, the misuse of the
law firm trust account to hide the proceeds received from the liquidation sale,
the Schlapman trust account, the collection of Sofa Gallery's accounts
receivable, and a plan to delay the filing of the Levines' corporate income tax
return.
Through two government witnesses, the trial court admitted the hearsay
statements of the Levines and Schwartz which were allegedly made prior to
appellant's involvement in the conspiracy. Appellant objected to their
admissibility because it had not been established that he was a member of the
conspiracy when the statements were made. The trial court overruled his
objection but agreed to his request for a limiting instruction. The trial court
gave the following limiting instruction:
"THE COURT: Please be seated. Members of the jury, I am going to give you a
limiting instruction at this time. I want to explain to you that we deal with
evidence based upon what is known as the Federal Rules of Evidence.
"And Rule 104(b) states that when the relevancy of
evidence depends upon the fulfillment of a condition of fact, the Court shall
admit it upon or subject to the introduction of evidence sufficient to support a
finding of the fulfillment of the condition.
"Now what that means in here in terms of the exhibits that are to be admitted in
the government's case-in-chief is this: Each of the exhibits that will be
offered and those which may be admitted by the Court are going to be admitted
conditionally, and that condition is that the government prove otherwise the
existence of the conspiracy alleged.
"So
that as these exhibits are received into evidence during the course of the
government's case-in-chief, bear in mind that until and unless the Court
otherwise admits them unconditionally, they are not admitted to establish the
existence of the conspiracy, rather the conspiracy will have to be established
otherwise."
Appellant did not object to this instruction. Thereafter, the trial court
expressed its concern that if the hearsay statements were subsequently admitted,
this would convey to the jury that the trial court believed that the government
had established the existence of a conspiracy.
Although appellant had not requested a James hearing, the trial court
held a hearing to determine the admissibility of the statements. It concluded
that the evidence was sufficient to show that a conspiracy existed and that
appellant was a member of that conspiracy. Appellant renewed his objection that
the statements were inadmissible against him because he was not a member of the
conspiracy when the statements were made. The trial court overruled appellant's
objection, stating that "[o]nce a conspiracy is proven and once a person is
hooked up to the conspiracy, even though it's at the tail end, the admission of
co-conspirator statements at the front end are admissible against all the
co-conspirators." Supp. Vol. VII at 16.
Rather than address the issue of the conditionally admitted statements, the
trial court admitted them unconditionally, without further instruction to the
jury. Appellant did not object to the trial court's resolution of this issue.
We
first address appellant's claim that the trial court erred in admitting the
hearsay statements of the co-conspirators which were made before it was
established that he was a member of the conspiracy. In United States v.
Mobile Materials, Inc., 881 F.2d 866 (10th Cir.1989), we said:
"[A] trial court may admit statements of co-conspirators under Fed.R.Evid.
801(d)(2) after finding, by a preponderance of the evidence, that: 1) a
conspiracy existed, 2) the declarant and the defendant against whom the
declarations are offered were members of the conspiracy, and 3) the statements
were made in the course of and in furtherance of the conspiracy."
Id. at 869. In making
this determination, the trial court may consider independent evidence as well as
the hearsay statements themselves. Id. (citing Bourjaily v. United
States, 483 U.S. 171, 181, 107 S.Ct. 2775, 2781, 97 L.Ed.2d 144 (1987)). The
determination of whether to admit such hearsay evidence is within the discretion
of the trial court, Mobile Materials, 881 F.2d at 869, and will not be
reversed absent an abuse of discretion. United States v. Wolf, 839 F.2d
1387, 1393 (10th Cir.1988).
Such an abuse of discretion did not occur in this instance. In its case, the
government presented the hearsay statements of the Levines and Schwartz
primarily through the testimony of two government witnesses. The evidence, as a
whole, established that a conspiracy existed; that the Levines, Schwartz and
appellant were members of that conspiracy; and that the statements of the
Levines and Schwartz were made during the course and in furtherance of the
conspiracy.
Appellant contends that for these statements to be admissible, the government
was required to prove that he was a member of the conspiracy at the time the
statements were made. In support of his argument, he directs us to United
States v. Andrews, 585 F.2d 961 (10th Cir.1978). In Andrews, we
stated that "if it is more likely than not that a declarant and coconspirator
were members of a conspiracy when hearsay statements were made and the
statements were in furtherance of a conspiracy, that hearsay is admissible."
Id. at 965 (citing United States v. Petrozziello, 548 F.2d 20 (1st
Cir.1977)). This statement, as set out in Andrews, is not dispositive of
the issue raised by appellant. Whether the defendant would have to be a member
of the conspiracy at the time the statements were made for the co-conspirator
statements to be admissible was not there an issue. Further, the Petrozziello
case which Andrews relied on was clarified and substantially limited in
United States v. Baines, 812 F.2d 41, 42 (1st Cir.1987).
The
prevailing view among the circuits is that previous statements made by co-
conspirators are admissible against a defendant who subsequently joins the
conspiracy. See United States v. Murphy, 852 F.2d 1 (1st Cir.1988);
United States v. Badalamenti, 794 F.2d 821 (2d Cir.1986); United States
v. Osgood, 794 F.2d 1087 (5th Cir.1986); United States v. Balistrieri,
778 F.2d 1226 (7th Cir.1985); United States v. Jackson, 757 F.2d 1486
(4th Cir.1985); United States v. Leroux, 738 F.2d 943 (8th Cir.1984);
United States v. Jannotti, 729 F.2d 213 (3d Cir.1984); United States v.
Tombrello, 666 F.2d 485 (11th Cir.1982); United States v. Anderson,
532 F.2d 1218 (9th Cir.1976). We join in that holding. The fact that appellant
may have joined the conspiracy after its inception does not make his
co-conspirators' previous statements inadmissible. Therefore, the hearsay
statements were properly admitted.
We
next address appellant's claim that the trial court placed an imprimatur on the
evidence. Appellant argues that any reasonably attentive jury could have
inferred from the trial court's subsequent admission of these co-conspirator
statements that it believed that a conspiracy existed. Because he failed to
object to the trial court's resolution of this issue, we review for plain error.
United States v. Lonedog, 929 F.2d 568, 570 (10th Cir.1991).
We cannot say that this constituted plain error.
The hearsay statements admitted prior to the James hearing did not
implicate appellant in any way. They were merely introduced as background
information concerning the commencement and overall objectives of the
conspiracy.
Further, appellant does not dispute the fact that a conspiracy existed. He only
disputes his involvement in it. Even if we accepted appellant's argument, the
most that a reasonable jury could infer is that the trial court believed that a
conspiracy existed. The trial court did not comment on appellant's involvement
in the conspiracy or convey to the jury that it believed appellant was a member
of the conspiracy. The jury was still required to determine beyond a reasonable
doubt that appellant was a knowing and active member of that conspiracy.
Lastly, the trial court instructed the jury that "you should not assume from anything I may have said that I have any opinion concerning any of the issues in this case." Supp. Vol. XIV at 7-8. A fundamental premise of our judicial system is that the jury can and will follow the instructions given by the trial court. Cardall, 885 F.2d at 668 (citing Parker v. Randolph, 442 U.S. 62, 73, 99 S.Ct. 2132, 2139, 60 L.Ed.2d 713 (1979)). Absent evidence to the contrary, we must conclude that the jury followed the instructions provided by the trial court.
BANKRUPTCY OPINIONS
During the government's case in chief, the trial court allowed the government to
introduce the statements of two bankruptcy judges made in earlier proceedings
involving the same bankruptcy. Both statements contained conclusions by the
judges regarding the law firm's possible involvement in the same conspiracy here
charged. No basis for the conclusions was offered. Appellant challenges their
admission on the basis that they constituted hearsay and were so prejudicial as
to constitute reversible error.
The
argument presented by appellant essentially duplicates that made by the
defendant in the companion case, United States v. Zimmerman, 943 F.2d
1204, 1210-1213 (10th Cir. Aug. 28, 1991). The only difference is that this
appellant was actually mentioned by name in one of the statements. For
substantially the same reasons as articulated in Zimmerman, we conclude
that the trial court abused its discretion in admitting the statements and
conclusions made by the two judges about the same issues as in the case being
tried. Their admission constituted reversible error.
The admission of the conclusions of the two bankruptcy judges as to the basic issue of the trial of appellants Zimmerman and Brown was exactly the same as having the judges appear as expert witnesses--experts who gave their opinions and conclusions as to the matters the jury properly was to decide. We can see no difference in using the judges' statements and having them make the statements as witnesses at the trial.
QUESTIONS PRESENTED TO THE COURT BY THE JURY
On
the third day of deliberations, the jury sent a note to the trial court
containing three questions. The questions were direct, well written and clearly
described the jury's problem. The jury's inquiry stated:
"If a person observes an act that is obviously, to
him or her, a crime, (1) does the observer have a legal responsibility to report
the crime; (2) does the observer have a legal responsibility to intervene to
stop it; (3) does failure to report or otherwise intervene make the observer a
participant or in any way responsible?"
A
conference was held to determine what the trial court's response should be.
After some discussion, the trial court indicated that the jury's questions went
to the "heart of the conspiracy concept" and that the jury instructions as a
whole adequately addressed the questions posed. Supp. Vol. XVI. Appellant stated
that in the absence of his tendered instruction on mere knowledge and
association, rejected by the trial court, the trial court should refer the jury
to instruction No. 5 with respect to defining the act of conspiracy and intent,
and instruction No. 6 with respect to specific intent. The trial court rejected
such a specific instruction stating that by referring them to the instructions
as a whole, the jury would necessarily be referred to instructions Nos. 5 and 6.
Appellant challenges the trial court's instructions to the jury claiming that
his tendered instructions would have remedied the jury's confusion. We have
reviewed appellant's proposed instructions and find that they were similar to
those given by the trial court. Further, we find that they did not specifically
answer the jury's questions regarding appellant's duty to report a crime.
Although we find appellant's argument unpersuasive,
some additional instruction was required. Because appellant has not raised the
issue of an additional instruction before this court, we raise our own motion
and review for plain error. See United States v. Kline, 922 F.2d 610, 613
(10th Cir.1990).
We addressed this issue in
Zimmerman, 943 F.2d at 1213-1214, and for essentially the same reasons
expressed therein, we conclude that the jury may have been confused and
convicted appellant on an improper basis. It was plain error not to resolve or
attempt to resolve the jury's confusion.
GRAND JURY ABUSE
Appellant challenges the
government's presentation of evidence to the grand jury. He claims that the
government presented misleading and untruthful statements to the grand jury
regarding his involvement with the other co-conspirators which interfered with
the grand jury's independence and his right to fundamental fairness throughout
the criminal process. Specifically, appellant focuses on testimony stating that
he destroyed Sofa Gallery records; testimony that Judge Matheson found that he
violated the law; and testimony that he agreed to the proposal to fund Action
Sales Group, Inc. with the employee pension plan.
The trial court denied
appellant's motion to dismiss the case for grand jury abuse. United States v.
Law Firm of Zimmerman & Schwartz, P.C., 738 F.Supp. 407 (D.Colo.1990). It
found that appellant's challenge to the government's evidence "boil[ed] down to
a challenge to the weight and credibility of the evidence presented to the grand
jury." Id. at 411. The trial court rejected appellant's argument that
exculpatory evidence was excluded from the grand jury, citing to appellant's
narrative testimony before the grand jury and the admission of two extensive
letters outlining his defenses and theory. Id.
We review the trial court's
factual determinations under the deferential clearly erroneous standard.
United States v. Williams, 899 F.2d 898, 900 (10th Cir.1990). The trial
court's ruling will only be reversed if we find errors in the indictment which
prejudiced the defendant. Bank of Nova Scotia v. United States, 487 U.S.
250, 108 S.Ct. 2369, 101 L.Ed.2d 228 (1988). Such prejudice occurs if "there is
some significant infringement on the grand jury's ability to exercise
independent judgment." United States v. Pino, 708 F.2d 523, 530 (10th
Cir.1983).
We agree with the trial court
and find that the evidence presented by the government did not rise to the level
of prejudice warranting a dismissal of the indictment. Appellant was allowed to
present exculpatory material and was allowed to testify extensively on his own
behalf. While the government's witnesses may have provided testimony which was
somewhat unreliable, "the mere fact that evidence itself is unreliable is not
sufficient to require a dismissal of the indictment." Nova Scotia, 487
U.S. at 261, 108 S.Ct. at 2377. Any prejudice which might have resulted from the
government's evidence was harmless.
We have studied the remaining
arguments made by appellant but conclude that we need not comment on them in
view of our disposition of the case.
IT IS ORDERED that the judgment is REVERSED by
reason of the prejudicial errors and the case is REMANDED for a new trial.
C.A.10 (Colo.),1991.
U.S. v. Brown
943 F.2d 1246, 33 Fed. R.
Evid. Serv. 1286