U.S. v. Klinger, 94-50584

Citation128 F.3d 705
Decision Date18 November 1997
Docket NumberNo. 94-50584,94-50584
Parties97 Cal. Daily Op. Serv. 7493, 97 Daily Journal D.A.R. 12,064, 97 Daily Journal D.A.R. 14,091 UNITED STATES of America, Plaintiff-Appellee, v. Benjamin KLINGER, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Phillip Trevino, Los Angeles, CA, Mary Gibbons, Tappan, NY, for defendant-appellant.

Richard Drooyan and David F. Taylor, Asst. U.S. Atty., Los Angeles, CA, for plaintiff-appellee.

Appeal from the United States District Court for the Central District of California; Laughlin E. Waters, District Judge, Presiding. D.C. No. CR-93-00727-LEW.

Before: FLETCHER, CANBY and HAWKINS, Circuit Judges.

MICHAEL DALY HAWKINS, Circuit Judge:

This appeal requires us to apply to an instructional error the plain error standard of review recently clarified by the Supreme Court's decision in Johnson v. United States, --- U.S. ----, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997), and this court's en banc decision in United States v. Perez, 116 F.3d 840 (9th Cir.1997) (en banc). 1 Defendant Benjamin Klinger was convicted of twenty counts of making false statements to a bank in violation of 18 U.S.C. § 1014, three counts of money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i), five counts of unlawful monetary transactions in violation of 18 U.S.C. § 1957, and one count of mail fraud in violation of 18 U.S.C. § 1341. Klinger raises several challenges to his conviction. For the first time on appeal, he asserts that certain of the counts contained in the indictment were multiplicitous and contends others were duplicitous. He also challenges the district court's exclusion of a defense witness's testimony based on that witness's anticipated assertion of his Fifth Amendment privilege against self-incrimination. Finally, Klinger challenges the district court's instruction to the jury as to the definition of "knowingly," arguing that this general definitional instruction conflicted with the court's specific instructions as to the knowledge elements of 18 U.S.C. §§ 1956(a)(1)(A)(i) and 1957. Because Klinger failed to preserve his challenge to this instruction below, we apply the plain error standard of review recently clarified in Johnson.

We have jurisdiction over this direct criminal appeal pursuant to 28 U.S.C. § 1291.

FACTUAL AND PROCEDURAL BACKGROUND

Beginning in 1988, Benjamin Klinger was the president and majority partner of Best Fire Protection, a fire sprinkler installation As a result of these activities, Klinger was indicted on twenty counts of making false statements to a bank under 18 U.S.C. § 1014, three counts of money laundering under 18 U.S.C. § 1956(a)(1)(A)(i), five counts of unlawful monetary transactions under 18 U.S.C. § 1957, and three counts of mail fraud under 18 U.S.C. § 1341.

and maintenance company in the Los Angeles area. Between 1990 and 1992, Klinger applied for and obtained business and personal loans totalling approximately $1,000,000. In applying for these loans, Klinger submitted false federal tax returns and other false personal and financial information to various lenders. Following disbursement of the fraudulently obtained loan proceeds, Klinger deposited portions of the proceeds into Best Fire Protection's corporate bank accounts and into his personal bank accounts, while other portions of the loan proceeds were moved through Klinger's and his business partner's accounts at a brokerage house. Records of the brokerage house accounts were submitted to other lenders in an effort to deceive these lenders as to the value of Klinger's and his business partner's investments.

A central issue at Klinger's trial was whether Klinger had knowledge that false tax returns and false financial statements were submitted to various banks in connection with his loan applications. Klinger defended on the basis that his business partner and his accountants orchestrated the bank fraud scheme, and that he was unaware of the discrepancies between tax returns filed with the Internal Revenue Service and copies of tax returns submitted to the lenders. He testified that his former accountant, Shaul Sobel, handled financial and tax matters for Best Fire Protection.

As part of his defense, Klinger planned to call Sobel as a defense witness because Klinger alleged Sobel had prepared many of the financial documents at issue in the case. Although Sobel was not a defendant in the case and there was no indication that he was facing criminal charges based on his relationship with Klinger, he appeared at Klinger's trial, with counsel, pursuant to a subpoena from Klinger.

Before Klinger's attorney could call Sobel to testify, however, the government attorney objected, stating that he expected Sobel to assert his Fifth Amendment privilege against self-incrimination, and contending that it would be improper for the defense to call Sobel solely to have him assert his Fifth Amendment privilege in front of the jury. The government contended, and the district court agreed, that "the mere assertion of the Fifth Amendment privilege by a witness has no evidentiary value whatsoever." The government attorney suggested to the district court that the proper way to determine whether Sobel would in fact assert his Fifth Amendment privilege would be to "put [Sobel] on the stand outside the presence of the jury," and to exclude his testimony if he asserted his Fifth Amendment privilege during the hearing.

In response, Klinger's attorney argued that Klinger had testified that he was unable to obtain certain financial records necessary to his defense because he had given those records to Sobel. The defense contended that its purpose in calling Sobel to testify was "to present evidence that [Klinger] does not have those books and records and try to present evidence as to ... the last place [Klinger] knew they were" and to show Klinger's efforts to subpoena the financial records from Sobel. The district court asked, "Sobel's not going to testify to anything, is he?" Klinger's attorney responded, "I believe he will acknowledge that he did receive that subpoena duces tecum." Klinger's attorney told the district court, however, that Sobel would invoke his Fifth Amendment privilege if asked what financial records he possessed.

Concluding that such testimony would be "non evidence," the district court stated that "if what the witness is or is not going to testify to is not going to have some evidentiary value, and it doesn't prove or disprove one way or the other, then that testimony can't come in." The court also noted that "a person can't be called for the purpose of asserting the Fifth Amendment." Without holding an evidentiary hearing as to whether Sobel would invoke his Fifth Amendment privilege, the district court excluded Sobel as a witness.

At the close of evidence, the jury was instructed as to the offenses charged. With [T]he defendant knew that the property involved in the financial transaction represented the proceeds of some unlawful activity.

respect to the money laundering counts under 18 U.S.C. § 1956(a)(1)(A)(i), the district court instructioned the jury that, to convict, the government must prove beyond a reasonable doubt that:

(emphasis added).

Immediately after reading the elements of 18 U.S.C. § 1956(a)(1)(A)(i), the district court gave the following general definition of "knowingly":

An act is done knowingly if the defendant is aware of the act and does not act through ignorance, mistake or accident. The government is not required to prove that the defendant knew his acts or omissions were unlawful.

(emphasis added).

A few sentences later, the district court further defined the knowledge element of 18 U.S.C. § 1956(a)(1)(A)(i) as follows:

The term, quote, "knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity," unquote, means that the person knew the property involved in the transaction represented the proceeds from some form, though not necessarily which form, of activity that constitutes a felony under state or federal law. A violation of Title 18 United States Code Section 1014 is a felony under federal law.

After defining other terms contained in 18 U.S.C. § 1956(a)(1)(A)(i), the district court instructed the jury on the elements of an unlawful monetary transaction under 18 U.S.C. § 1957, instructing that, to convict, the government must prove that:

[T]he defendant knowingly engaged or attempted to engage in a monetary transaction involving criminally derived property.

(emphasis added).

The district court also offered a further instruction on § 1957's knowledge element, stating:

"[c]riminally derived property" ..., means any property constituting or derived from the proceeds of any criminal offense.

...

The government is not required to prove that the defendant knew the offense from which the criminally derived property was specified unlawful activity [sic].

On March 3, 1994, the jury returned a guilty verdict on all remaining counts (two mail fraud counts having been earlier dismissed on government motion). The district court sentenced Klinger to 120 months' imprisonment, to be followed by five years of supervised release.

ANALYSIS
1. The Form of the Indictment

For the first time on appeal, Klinger contends that the indictment was duplicitous and multiplicitous: duplicitous because two of the money laundering counts alleged that Klinger manipulated illegally obtained loan proceeds for the purpose of deceiving two banks, but the counts did not require jury unanimity as to which bank, and multiplicitous because it charged him with separate counts under 18 U.S.C. § 1014 for each false financial document he submitted in connection with various loan applications.

Rule 12(b)(2) of the Federal Rules of Criminal Procedure requires a defendant...

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