Com. v. Levin

• Decision Date: 27 February 1981
• Parties: COMMONWEALTH v. Barry LEVIN (and nineteen companion cases 1 ).
• Court: Appeals Court of Massachusetts

Page 440

417 N.E.2d 440

11 Mass.App.Ct. 482

COMMONWEALTH v. Barry LEVIN (and nineteen companion cases ¹).

Appeals Court of Massachusetts, Norfolk.

Argued Nov. 6, 1980.

Decided Feb. 27, 1981.

John P. White, Jr., Boston (Michael H. Riley, Boston, with him), for Irwin Jacobson.

Ellen Y. Suni, Boston (Jack I. Zalkind, Boston, with her), for Robert Effenson.

Gerald Alch, Boston, for Barry Levin.

James D. St. Clair, Boston (Christina L. Harms, Boston, with him), for Earle Groper.

John P. Kivlan, Asst. Dist. Atty. (Charles J. Hely, Asst. Dist. Atty., with him), for Commonwealth.

Before ARMSTRONG, DREBEN and NOLAN, JJ.

NOLAN, Justice.

This case arises out of an insurance policy procured by the defendants in the face amount of $800,000 on the life of George Hamilton issued by Charter National Life Insurance Company (Charter), of St. Louis, Missouri. Irwin Jacobson was a physician, Robert Effenson, an insurance broker, Barry Levin, a practicing lawyer, and Earle Groper, a businessman and a non-practicing lawyer. Indictments charging each of them except Jacobson with forgery (G.L. c. 267, § 1), uttering (G.L. c. 267, § 5), fraudulently obtaining signatures by false pretenses (G.L. c. 266, § 31), larceny (G.L. c. 266, § 30), and attempted larceny (G.L. c. 274, § 6) were returned on July 6, 1978. Jacobson was indicted for all these offenses except uttering and attempted larceny. Additionally, on the same day, Jacobson was indicted for making false representations as an insurance medical examiner in connection with an insurance policy (G.L. c. 175, § 127) and Effenson for making false representations as an insurance broker (G.L. c. 175, § 127). They all were arraigned and pleaded not guilty on July 7, 1978. A joint trial to a sequestered jury commenced on January 22, 1979, and jury verdicts of guilty were returned on March 5, 1979, except as to the indictments for forgery and fraudulent obtaining of signatures against Groper and the indictment for attempted larceny against Effenson. On these latter three indictments, the jury returned verdicts of not guilty. All defendants have raised multiple issues on appeal. The convictions must be reversed for the reasons set forth in part 3, infra.

1. A Synopsis of the Facts. In this aper cu we recite only those facts which could be found by the jury on the basis of the evidence introduced as part of the Commonwealth's case, viewed in the light most favorable to the Commonwealth. The defendants Levin and Groper had been close friends from their school days and before 1973 had participated in at least three ventures in which they had together invested money in business corporations and become officers thereof. In 1973 they went into a venture with George Hamilton to form a corporation to engage in the retail furniture business. The company was located in Braintree and was called Hamilton's, Inc. Much of the original financing for the company consisted of cash payments evidenced by notes of the company. The original noteholders were Groper ($195,000), Levin ($83,000), three small business investment corporations (SBIC) ($150,000), and Hamilton ($66,000, $50,000 of which he obtained from a bank of which Groper was a director. Groper, Levin and one Birnbach, Groper's brother-in-law, guaranteed the note.). The Hamilton's, Inc., notes specified that the corporation would take out a life insurance policy on Hamilton with the corporation designated as beneficiary, subject to an assignment of the proceeds for the benefit of the noteholders. The company purchased such a policy from Boston Mutual Life Insurance Company on December 26, 1973, payable to Hamilton's, Inc., on Hamilton's death. The policy was for $1,000,000, twice the amount of the then outstanding notes. Hamilton had submitted to a physical examination for this policy. This policy does not figure in the indictments in this case, although the defendant Effenson was the broker.

The type of insurance taken out is known as key man insurance. It enables a company to insure the life of a person whose continued services are critical to the financial success of the company's business. Hamilton was the only one of the original investors who knew the furniture business. He had been a vice president of J. Homestock, another large furniture retailer. (Groper was president of a liquor wholesaler.) Hamilton was the creator of the concept underlying the store, of its characteristic and unique method of retailing. Hamilton became president; Groper, chairman of the board; Levin, treasurer.

The store opened in September, 1974. It lost money from its inception. In May, 1975, Groper lent the company $180,000 and Levin $40,000 and took back notes (the Series A notes) in those amounts from the company. By August the company had lost a million dollars or more. New money was required to keep the company breathing. At that time Groper put in an additional $200,000. Two new investors, Hannaford and Slater, put in $200,000 and $150,000 respectively. (Hannaford was associated with the corporation from which Hamilton's, Inc., leased its building; Slater was one of Groper's co-directors at the bank.) Levin put in an additional $15,000. Notes (Series B) were issued to cover the new financing.

The company's infelicitous financial start had caused Groper and Levin to become disenchanted with Hamilton and his performance as president. By the autumn of 1975 Groper had engaged Coopers, Lybrand to conduct a talent search for Hamilton's replacement.

At a meeting of the board of directors on December 22, 1975, Levin asked the members to approve the purchase of an additional policy on Hamilton's life in the amount of $800,000. One of the directors questioned the need for such a policy. Groper supported Levin, contending that the policy was required as part of the legal boilerplate of the Series B notes. Levin and Groper were the only lawyers on the board; they presumably knew that the insurance provision could be waived by the noteholders. (All the Series B holders were members of the board of directors, and all but Slater were present at the December 22 meeting.) The board voted approval of the additional insurance. After the December 22 meeting Effenson, an insurance agent and broker who was a longstanding friend of Levin, submitted an application for an additional $800,000 policy to Mutual Benefit Life Insurance Co. Such a policy would have resulted in total key man insurance outstanding on Hamilton's life and payable to the company in the amount of $1,800,000, well in excess of the outstanding notes.

Soon after the December meeting, relations between Hamilton and Groper and Levin deteriorated and became openly hostile. Hamilton told one employee after that meeting that he was "shocked" that Groper and Levin wanted more insurance on his, Hamilton's, life and that he would not go along with it, that he did not want an additional policy to go into effect. In January, Hamilton learned that Groper had offered the presidency to one Corrio. ² Hamilton on the one hand, and Groper and Levin on the other, actively sought to arrange for a sale of the company whereby one group could obtain control and oust the other. The animosity between the parties was evident to employees of the company. Loud shouting was overheard on one occasion, and one employee observed that Hamilton was not speaking to Groper or Levin in January and February except when necessary. Groper freely blamed the company's troubles on Hamilton in his negotiations with other companies, and in at least one conversation with a middle echelon employee, Groper made vulgar or disparaging remarks concerning Hamilton.

During this period Effenson was encountering difficulties in placing the $800,000 policy which had been applied for after the December 22 meeting. Mutual Benefit Life Insurance Company rejected the application in late January on the grounds that $1,000,000 of business insurance then in force should be sufficient for normal business needs.

In late February Effenson called on one Forti, who was a general agent for Charter National Life Insurance Company, a carrier specializing in high risk and substandard cases. Charter required two medical examinations. Forti told Effenson that Charter would accept a Mutual Benefit examination in fulfillment of its requirement of one examination but that Hamilton would have to submit to a second examination.

On March 2, 1976, Effenson delivered to Forti's secretary parts I and III of an application for insurance on Hamilton's life in the amount of $800,000. The application purported to bear Hamilton's signature in two places. The binder form had been torn from the bottom of part I. Effenson asked her for another binder receipt, which she typed in for him, indicating that the binder amount was to be $500. Effenson forwarded the binder to Levin. On March 5, Levin issued a corporate check for the $500 without going through an agreed upon procedure of discussing the bill first with the controller of the corporation a procedure which applied to all disbursements in excess of $200, a control measure in response to the severe liquidity problems of the corporation. (Substantially all large bills were, at that time, being put in a 30-day "tickler" file; at the end of thirty days most were then put in another 30-day "tickler" file.)

On March 12, in response to an inquiry from the home office of Charter National in St. Louis, Mo., Forti's secretary called Effenson to ask for the medical exam portion of the application (part II). Effenson said that he had had trouble arranging for Hamilton to see Dr. Jacobson (a friend of Effenson and a frequently used examiner in Charter National applications), that Hamilton was a busy man, and that he would arrange something soon. The secretary received the completed medical application form signed by Dr. Jacobson and purportedly by Hamilton on March 14 and forwarded it to Charter National.

The jury could properly...