United States v. Luxenberg

• Decision Date: 17 February 1967
• Docket Number: 16964.,No. 16080,16080
• Citation: 374 F.2d 241
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Leonard LUXENBERG, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. George ZIMMERMAN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

374 F.2d 241 (1967)

UNITED STATES of America, Plaintiff-Appellee, v. Leonard LUXENBERG, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. George ZIMMERMAN, Defendant-Appellant.

Nos. 16080, 16964.

United States Court of Appeals Sixth Circuit.

February 17, 1967.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Adrian B. Fink, Jr., Cleveland, Ohio, for appellant, Luxenberg. James J. Carroll, Cleveland, Ohio, for appellant, Zimmerman, George J. McMonagle, Cleveland, Ohio, on the brief.

Dominic J. Cimino, Asst. U. S. Atty., Cleveland, Ohio, for appellee, Merle M. McCurdy, U. S. Atty., Cleveland, Ohio, on the brief.

Before O'SULLIVAN and EDWARDS, Circuit Judges, and CECIL, Senior Circuit Judge.

CECIL, Senior Circuit Judge.

Leonard Luxenberg and George Zimmerman, the defendants-appellants, hereinafter referred to by name or as defendants, were convicted in the United States District Court for the Northern District of Ohio on the fourth and fifth counts of an indictment. One Mervin L. Gold was indicted in the first three counts of the same indictment, and was tried before a jury and found guilty on all three counts. All five counts involved a fraud on Cosmopolitan Small Business, Inc., hereinafter called Cosmopolitan, a licensee of the Small Business Administration, referred to herein as the Administration, an agency of the United States.

The defendants Luxenberg and Zimmerman was granted a severance and were tried separately from Gold. They waived a jury and were tried to the court on the fourth and fifth counts of the indictment. The fourth count of the indictment charged that the defendants conspired with Gold, with Feature Products of Indianapolis, with Feature Products of Cleveland, and with each other, to misapply and defraud Cosmopolitan of $28,000, which sum belonged to and was entrusted to the care of Cosmopolitan by the Administration, an agency of the United States, in violation of Sections 371¹ and 657², Title 18, U.S.C. The fifth count charged that the defendants aided and abetted³ Gold in the fraud and in the misapplication of the $28,000 fund, as alleged in the fourth count of the indictment.

The pertinent facts as alleged may be stated as follows: Luxenberg was the sole stockholder of two corporations, Feature Products of Indianapolis and Feature Products of Cleveland. Zimmerman was the secretary and attorney for both of these corporations. The Administration is an agency of the United States whose principal purpose is to license small business investment companies with authority to make loans and invest in small business concerns. Cosmopolitan, an Ohio corporation, applied to the Administration for a license. Gold was the undisclosed organizer and manager of Cosmopolitan and the applicant for this license. Upon request of Gold, Zimmerman did the legal work in incorporating Cosmopolitan and in making its application for the license. The name of Gold did not appear in any capacity in any of the documents submitted to the Administration. It was represented in these documents that Cosmopolitan had on deposit in its account at The Continental Bank of Cleveland the sum of $155,000. This was a false statement. Zimmerman requested the Administration to transmit to Cosmopolitan the license and matching funds of $150,000. The address of Zimmerman and Cosmopolitan was the same suite of the Engineers' Building in Cleveland. The Administration granted the license and issued a United States Treasurer's check to Cosmopolitan for $150,000. This is the only sum ever credited to the account of Cosmopolitan at the Continental Bank of Cleveland, which account was under the control of Gold.

After Gold obtained control of this money, he instructed Zimmerman to act as escrow agent in the handling of a $28,000 and a $32,000 loan to Feature Products of Indianapolis. Zimmerman had his associate, Eugene Stevens, prepare escrow papers for the execution of the loan. Gold delivered to Zimmerman Cosmopolitan's checks for $28,000 and $32,000 payable to Eugene Stevens. These checks were deposited at the Society National Bank in the escrow account of Zimmerman and Stevens. Among the escrow papers were the following:

1. A promissory note for $39,200, dated March 23, 1961, from Feature Products of Indianapolis to Cosmopolitan. This note bore the signature of Leonard Luxenberg as president.

2. A promissory note for $44,800, dated March 29, 1961, payable to Cosmopolitan by Feature Products of Indianapolis. This note also bore the signature of Leonard Luxenberg as president.

3. An unsigned and unexecuted resolution of Cosmopolitan's Board of Directors, dated March 23, 1961, authorizing the loan of $28,000 to Feature Products of Indianapolis.

4. An unsigned and unexecuted resolution of Cosmopolitan's Board of Directors, dated March 29, 1961, authorizing the loan of $32,000 to Feature Products of Indianapolis.

On March 27, 1961, Zimmerman's check for $28,000 was issued to Feature Products of Indianapolis. This check was charged to the escrow account of Zimmerman and Stevens at the Society National Bank. At the request of Gold the $32,000 was withdrawn from the escrow proceedings. The $28,000 check was credited to the account and credit of Feature Products of Indianapolis, in the Indiana National Bank of Indianapolis, on March 29, 1961. On March 29, 1961, Feature Products of Indianapolis issued its check for $27,000, drawn on the Indiana National Bank, payable to Feature Products of Cleveland. Zimmerman, as secretary of Feature Products of Cleveland, caused a certified resolution, dated March 29, 1961, to be filed with the National City Bank of Cleveland, authorizing the opening and maintenance of an account in the name of Feature Products of Cleveland, and permitting withdrawal of funds from the account by Len Luxenberg, president, and M. A. Singer, manager. Under date of April 4, 1961, Feature Products of Cleveland issued two checks totaling $26,000, payable to Mervin L. Gold and signed by Len Luxenberg. These two checks were deposited and credited to Gold's personal account at the Continental Bank at Cleveland. The remaining $2000 was never disbursed to either Gold or Cosmopolitan. The alleged loan of $28,000 to Feature Products of Indianapolis, for which Luxenberg, as president, executed a promissory note, was never paid to Cosmopolitan.

Both defendants assign as error the trial judge's denial of their motion to dismiss the indictment on the ground that it was based on their testimony before the grand jury in violation of their privilege against self-incrimination. The fifth amendment's privilege against self-incrimination in criminal cases⁴ is applicable in proceedings before a grand jury. United States v. Monia, 317 U.S. 424, 63 S.Ct. 409, 87 L.Ed. 376; Counselman v. Hitchcock, 142 U.S. 547, 12 S.Ct. 195, 35 L.Ed. 1110. The extent to which one must be advised of this right depends upon whether one is a defendant in custody of the authorities or whether one is merely a witness. One who is a defendant must be advised that he may refuse to answer incriminating questions and that anything he says may be used against him. A person testifying before a grand jury as a witness need not be so advised, but does retain the right to decline to give an incriminating answer. Stanley v. United States, 245 F.2d 427 (C.A.6); United States v. Benjamin, 120 F.2d 521 (C.A.2); Mulloney v. United States, 79 F.2d 566 (C.A.1), cert. den. 296 U.S. 658, 56 S.Ct. 383, 80 L.Ed. 468. This Court has held that a person who is virtually in the position of a defendant must be accorded the same rights as a defendant. Stanley v. United States, supra. Consequently a person against whom the prosecuting attorney is not seeking an indictment need not be advised of his right to refuse to answer incriminating questions. United States v. Parker, 244 F.2d 943 (C.A.7), cert. den. 355 U.S. 836, 78 S.Ct. 61, 2 L.Ed.2d 48. The fact that a person appeared in the capacity of a witness and testified before a grand jury without being so advised, does not furnish a basis for dismissing an indictment subsequently returned against such individual based, in part, upon his testimony. United States v. Scully, 225 F.2d 113 (C.A.2), cert. den. 350 U.S. 897, 76 S.Ct. 156, 100 L.Ed. 788. It is the duty and right of such witness to invoke the privilege against self-incrimination and refuse to answer questions.

The stipulated facts in this case demonstrates that this assignment of error is without merit. Zimmerman and Luxenberg testified before a grand jury investigating the business operations of Mervin Gold. Neither was advised of his right to refuse to answer incriminating questions. On the basis of this and other testimony, the grand jury returned indictment against both defendants. The crucial fact stipulated by the parties was that no "criminal proceedings were pending, or threatened against either of them; * * * nor * * * (was) the United States * * * then seeking an indictment against either of them."

By their own stipulations Zimmerman and Luxenberg testified as witnesses, not as defendants or persons in the position of defendants, before the grand jury. The fact that they made statements from which the grand jury could return an indictment, does not change the fact that their appearances before the grand jury were in the capacity of witnesses. While so testifying they had the right to invoke the privilege against self-incrimination, and their failure to do so, in view of the facts of this case, cannot be grounds to dismiss the indictment.

Both defendants claim that the trial judge committed reversible error in refusing to permit them to inspect the minutes of the grand jury which returned the indictment against them. The substance of their argument is that without these minutes the defense was hampered in presenting evidence to show that the defendants were virtually in the positions of defendants at the time they were subpoenaed before...