U.S. v. Brown, 90-1256

• Citation: 943 F.2d 1246
• Decision Date: 03 September 1991
• Docket Number: No. 90-1256,90-1256
• Parties: 33 Fed. R. Evid. Serv. 1286 UNITED STATES of America, Plaintiff-Appellee, v. Tommy BROWN, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1246

943 F.2d 1246

33 Fed. R. Evid. Serv. 1286

UNITED STATES of America, Plaintiff-Appellee, v. Tommy BROWN, Defendant-Appellant.

No. 90-1256.

United States Court of Appeals Tenth Circuit.

Sept. 3, 1991.

Brian K. Holland of Holland, Seelen & Pagliuca, Denver, Colo., 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 ^*.

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 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.

                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
                

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 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.

                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
                

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...