U.S. v. Zimmerman, 90-1255
| Decision Date | 28 August 1991 |
| Docket Number | No. 90-1255,90-1255 |
| Parties | 33 Fed. R. Evid. Serv. 941 UNITED STATES of America, Plaintiff-Appellee, v. Steven ZIMMERMAN, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Steven Alan Reiss of Weil, Gotshal & Manges, New York City (Nancy S. Scherer of Weil, Gotshal & Manges, New York City, and Daniel J. Sears, Denver, Colo., with him on the brief), for defendant-appellant.
Stephen C. Peters, Asst. U.S. Atty. (Michael J. Norton, U.S. Atty., with him on the brief), Denver, Colo., for plaintiff-appellee.
Before McKAY and SETH, Circuit Judges, and BROWN, District Judge *.
Steven Zimmerman appeals his conviction for participating in a conspiracy to defraud between July 1, 1985 and April 1, 1988. Appellant was charged in two counts of a fifty count indictment involving twelve other alleged co-conspirators. Other co-conspirators charged included his law firm, his law partner, one of his law associates, and various law firm clients.
Zimmerman was charged with conspiring to defraud in violation of 18 U.S.C. § 371 (count 1), and using the United States mails in furtherance of the fraud in violation of 18 U.S.C. §§ 2 and 1341 (count 50). He was tried in a joint trial with co-defendant Tom Brown (No. 90-1256). The mail fraud charge was dismissed on the government's motion during the government's case in chief. The jury found appellant guilty on the conspiracy count.
Appellant raises four issues in his appeal. First, he challenges the sufficiency of the evidence supporting the conspiracy conviction. Second, he contends that the trial court erred by allowing the legal opinions of two bankruptcy judges into evidence. Third, Zimmerman argues that the trial court committed reversible error when it failed to answer jury questions during deliberations regarding whether appellant could be convicted for his failure to report a crime. Fourth, appellant contends that the district court erroneously calculated his offense level under the sentencing guidelines. For the reasons that follow we reverse the trial court and remand the case for a new trial.
Due to the complex and extensive nature of the conspiracy charged by the government, we limit our discussion of the facts to those particularly relevant to appellant. We consider the evidence as we must in the light most favorable to the government.
Appellant Steven Zimmerman and co-defendant David Schwartz were the two partners in the law firm of Zimmerman & Schwartz during the time charged in the conspiracy--July 1, 1985 to April 1, 1988. The firm employed between six to ten associate attorneys. One of those associates, co-defendant Tom Brown, was tried with appellant.
The conspiracy charged against appellant centers on his knowledge of the activities of Gary and Marcee Levine, law firm clients of his partner Schwartz, and who were involved in bankruptcy proceedings. The Levines owned and operated Levines Home Furnishings, a retail furniture store located in the Denver, Colorado area. The corporate name used by Levines Home Furnishings was Sofa Gallery, Inc. The conspiracy charge basically alleged that the law firm trust account was used to conceal funds of the debtors from the bankruptcy court and creditors in the bankruptcy proceedings.
The facts pertinent to the appeal are as follows. On or around July 1, 1985, the Levines and/or Sofa Gallery Inc., were referred to Zimmerman & Schwartz for advice regarding payment of creditors. Between 1975 and 1985, Sofa Gallery, Inc. under-estimated inventory values used to secure credit. This resulted in an approximately $1.5 million difference between money borrowed and actual assets.
Zimmerman and Schwartz met and determined that Schwartz would handle the Levines' representation. Zimmerman had taken two major cases and was planning an extended vacation outside the United States during August 1985. Schwartz accepted the Levines' case and advised them to hire Sales Results and its principal Stanley Lansing to conduct a liquidation sale. Sofa Gallery, Inc.'s two principal creditors, Cherry Creek National Bank and Westinghouse Credit Corporation (subsequently known as Chrysler First Leasing Corporation), agreed to the sale which was conducted between July and December 1985. Both creditors released their secured interests in the unsold inventory so the sale could proceed and financed the acquisition of over two million dollars in additional inventory for the sale.
Sometime during the liquidation sale, Lansing, who was conducting the sale, and the Levines entered into an undisclosed agreement, apparently approved by Schwartz, whereby Lansing agreed to pay Marcee Levine 1/3 of his 10% commission from the gross proceeds of the sale. On the advice of Schwartz, Gary Levine received none of this money because of his impending bankruptcy. Lansing paid Marcee Levine $100,614.51 during the course of the sale. This money was deposited in the Zimmerman & Schwartz law firm trust account. About $150,000 of preliquidation accounts receivable proceeds of Sofa Gallery, Inc. had previously been deposited in the trust account. The liquidation sale resulted in a reported net loss of $217,000.00 with only limited proceeds going to the creditors.
The testimony at trial established that in 1985 appellant had two or three contacts with the Levines' case after the initial discussion with Schwartz about whose clients the Levines would be. The first contact was a conversation in the hallway of the law firm in late July. Schwartz asked Zimmerman if the corporate preliquidation accounts receivable, referred to above, could be placed in the firm trust account when the secured creditors had not made a demand for the collateral or declared the note in default. Zimmerman responded that he thought it was appropriate but that Schwartz should research the question to be sure it was proper. Zimmerman testified that his approval of the use of the trust account in this manner was an "off-the-cuff opinion" which was why he suggested research be done. He stated that he did not see the notes held by the secured creditors and did not know who the secured creditors were.
In late October or early November 1985, Schwartz asked Zimmerman to call Al Jones at Colorado National Leasing and set up a meeting between Jones, Schwartz and Zimmerman regarding the continued use of forklifts leased by Colorado National Leasing to Sofa Gallery, Inc. The forklifts were needed for the liquidation sale. Zimmerman testified that at the meeting, Schwartz convinced Jones to intercede with the leasing company to allow the forklifts to remain at Sofa Gallery, Inc. even though back rent was due. Zimmerman stated that he was present at the meeting and that he listened to the discussion between Jones and Schwartz. Jones, on the other hand, testified that he did not recall Schwartz being present at the meeting.
The final possible contact in 1985 was on December 13. Zimmerman's client billing sheet refers to an entry billing 0.5 hours to the Levines for a "conference with client." Zimmerman testified that he did not recall this meeting and that he could not explain why this notation appeared on the billing statement. The evidence showed that on this day two checks in amounts of $8,000.00 and $7,614.91 payable to Marcee Levine were drawn against the law firm trust account. No connection was shown between the conference and the checks except the inference from the timing. Appellant did not sign the checks.
Appellant's 1986 contacts with the Levines were also limited. The government argues that appellant was indirectly linked to a February 19, 1986 meeting between Schwartz, co-defendant Brown, the Levines and Stephen Forsey. The meeting was to discuss the capitalization of a liquidation business known as Action Sales Group with Gary Levine and Forsey acting as one-half owners. The Levines agreed to capitalize the new company with approximately $300,000.00 in their employees' pension money.
Appellant was not present at this meeting. Evidence was introduced, however, showing that appellant wrote a check on the trust account for $2,692.38 on February 19 to Cherry Creek National Bank. Appellant testified that he was told by a bookkeeper or someone at the firm to write the check because Cherry Creek had made a demand for its collateral on the Sofa Gallery, Inc. note.
On March 5, 1986, Elizabeth Greenberg, representing Chrysler First (the successor to Westinghouse as a Levine creditor) wrote Schwartz and demanded an accounting of the Levine monies received at the law firm. Schwartz wrote back on March 12, 1986 declining to provide such an accounting. No evidence was introduced showing that Zimmerman knew of this letter.
Zimmerman did become involved with Chrysler First when it filed a suit against the law firm for civil damages based on criminal conversion. Chrysler First's complaint alleged that Sofa Gallery, Inc. monies were being used to pay attorney fees. Upon receipt of the claim, Zimmerman retained an attorney, Jay Horowitz, and contacted his insurance carrier regarding a possible claim. Zimmerman attended a meeting in early 1987 with Horowitz and Greenberg where the conversion lawsuit was discussed. Greenberg testified that she again asked for an accounting and Zimmerman refused. She stated that Zimmerman was angry and concerned that Chrysler would think there was something wrong with the way his law firm used the money. The lawsuit was ultimately abandoned when Chrysler First decided not to pursue the claim.
The remaining testimony concerning appellant's position in 1987 centers around his notice that a conspiracy relating to the firm's trust fund may have existed. In June or July of 1987, Robert Breindel, an associate lawyer at Zimmerman & Schwartz, testified that he overheard a conversation between Zimmerman, Schwartz and co-defendant Brown regarding the trust fund. Breindel stated that Brown...
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