U.S. v. Levine, s. 91-1082

• Citation: 970 F.2d 681
• Decision Date: 02 July 1992
• Docket Number: 91-1096,Nos. 91-1082,s. 91-1082
• Parties: 36 Fed. R. Evid. Serv. 241 UNITED STATES of America, Plaintiff-Appellee, v. Marcee LEVINE and Gary Levine, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 681

970 F.2d 681

36 Fed. R. Evid. Serv. 241

UNITED STATES of America, Plaintiff-Appellee, v. Marcee LEVINE and Gary Levine, Defendants-Appellants.

Nos. 91-1082, 91-1096.

United States Court of Appeals Tenth Circuit.

July 2, 1992.

Stephen C. Peters, Asst. U.S. Atty. (Michael J. Norton, U.S. Atty., with him on the brief), Denver, Colo., for plaintiff-appellee.

Vicki Mandell-King, Asst. Federal Public Defender (Michael G. Katz, Federal Public Defender, with her on the briefs), Denver, Colo., for defendants-appellants.

Before McKAY and BRORBY, Circuit Judges, and VAN SICKLE, ^* District Judge.

BRORBY, Circuit Judge.

Gary and Marcee Levine, husband and wife, were tried jointly and convicted of numerous felony criminal charges. These charges stemmed from a multitude of acts committed by the Levines designed to defraud their creditors during the course of bankruptcy proceedings. Mr. Levine was convicted of eighteen counts and Mrs. Levine of seventeen. The Levines appeal asserting insufficiency of the evidence, evidentiary and sentencing errors. We affirm.

OVERVIEW

Mr. and Mrs. Levine owned and operated a furniture business which was in some financial difficulty because the Levines had overstated the inventory by approximately $1.1 million. This fact is important because the secured lenders believed far more collateral existed than actually did, and the income from the business would have been overstated.

The secured creditors finally demanded a physical inventory, which uncovered the inventory shortage and prompted the Levines to liquidate the business. The secured creditors agreed to additional loans to purchase inventory to "feed" a liquidation sale. The Levines hired a liquidator to conduct the sale and he was to receive ten per cent of the gross sales as compensation for his services. As one of the largest secured creditors was a bank, all sale proceeds were to be deposited therein so this creditor could monitor the progress of the liquidation. The liquidation sale commenced August 1, 1985, and terminated approximately five months later at the end of December when it was learned there was no money to pay creditors.

The Levines filed for Chapter 7 bankruptcy. Mr. Levine filed in September 1986. Mrs. Levine filed in February 1987. The Levines' debts were discharged in October 1987.

Thereafter diligent efforts of counsel for the creditors uncovered that the Levines, with the aid and assistance of their CPA, attorneys and various others, had hidden and transferred assets in order to defraud their creditors and had embezzled their employees' pension and profit plan assets. They accomplished this by many methods including transferring assets to associates and relatives, secretly diverting proceeds from accounts receivables, engaging in a hidden kickback scheme with the business liquidator, and maintaining secret undisclosed personal bank accounts. The Levines deposited much of the money hidden from the creditors into client trust accounts established by the Levines' attorneys and the Levines' CPA. These actions gave rise to the numerous criminal charges and convictions.

I The Bankruptcy Fraud Convictions

Mr. Levine was convicted of four counts of bankruptcy fraud and Mrs. Levine was convicted of two counts, in violation of 18 U.S.C. § 152. This statute provides that "[w]hoever knowingly and fraudulently conceals from a ... trustee ... or from creditors ... any property belonging to the estate of a debtor" shall be guilty of the crime.

The facts underlying and supporting these six criminal convictions clearly reveal the Levines wilfully and intentionally engaged in conduct designed to conceal the existence of many significant assets from both their creditors and the bankruptcy trustee. One individual testified the Levines transferred their vehicles to him in order to conceal their existence from creditors. The evidence further showed the Levines continued to use these vehicles as if they owned them.

The trial evidence also revealed the Levines' attorneys established a secret trust fund for their benefit. Mrs. Levine entered into a kickback scheme with the liquidator whereby the Levines received three per cent of the gross proceeds from the liquidation sale. These funds were channeled through the secret trust account to the Levines. Once the creditors learned of this secret account, the Levines' CPA established yet another secret trust account. Approximately $180,000 was channeled through this second secret account for the Levines' benefit.

The record discloses the Levines formed another business entity, Action Sales Group, funded in part with monies embezzled from their employees' pension and profit sharing trust. Of the $487,000 embezzled from this trust, most found its way into the secret trust funds.

On appeal, the Levines do not deny taking these actions. They assert, however, they relied on their attorneys' advice, unaware that these actions were illegal. The Levines assert that determining what property belongs in the bankruptcy estate is often a complicated legal matter. They argue they were entitled to rely upon their attorneys' advice, which was that they no longer legally owned the property they were charged with concealing. To rephrase the Levines' argument, they contend the evidence is insufficient to establish they knowingly concealed these many assets as their attorneys had advised them they did not own that property.

Instruction 6 instructed the jury the acts had to be done "knowingly" and not because of mistake. Further, jury instruction 7 advised the jury that if a person acts strictly according to the attorney's advice "relying upon it and believing it to be correct, only intending his or her acts to be lawful," then that person cannot be convicted.

In reviewing the sufficiency of the evidence, this court must look at all the evidence, both direct and circumstantial, together with the reasonable inferences to be drawn therefrom in a light most favorable to the government to determine whether a reasonable jury could find the defendant guilty beyond a reasonable doubt. United States v. Ratchford, 942 F.2d 702, 703 (10th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1185, 117 L.Ed.2d 427 (1992).

An examination of Mr. Levine's testimony (Mrs. Levine did not testify) lends little support to their appellate argument. Mr. Levine testified his attorneys suggested "hiding" and "washing" funds in the attorneys' secret trust account so the creditors could be paid in full. Use of this terminology alone lends support to the jury's conclusion the Levines did not believe their attorneys' advice legal. Mr. Levine further testified the diverted monies were not used to pay creditors but instead were used to maintain a lavish life style. Mr. Levine testified that as his attorneys had prepared the transfer documents for various property, he assumed such action was lawful and proper. Mr. Levine's testimony continued to the effect that he honestly believed he did not own the property and his attorneys instructed him to deny ownership. It is simply incredible to assert that when Mr. Levine had the exclusive possession, use and control of property it was reasonable for him to believe he did not own the property.

The Levines' basic assumption is the jury is somehow bound to accept Mr. Levine's testimony as truthful. Such an assumption is unwarranted. The evidence established the Levines had ample reason to believe their attorneys' advice incorrect. The jury was entitled to make the choice and did. We conclude that more than ample evidence exists that would allow this or any other rational jury to conclude beyond a reasonable doubt the Levines knowingly and intentionally committed the criminal acts.

II Money Laundering

The jury convicted the Levines of six counts of money laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i). ¹ This statute prohibits a person from unlawfully conducting or attempting to conduct financial transactions with the proceeds of specified unlawful activity.

Four of the six counts involved income tax refund checks, three from the federal government and one from the State of Colorado, being deposited in the CPA's hidden trust account and subsequently being converted surreptitiously to the Levines' personal use. The Levines do not challenge the remaining two counts which involved the use of the monies embezzled from the employees' pension and profit sharing trust.

The Levines contend their conviction for money laundering cannot stand because the tax refund monies were not the proceeds of illegal activity but rather the proceeds from their legitimate furniture business. They now challenge the indictment. Alternatively, they assert the evidence is insufficient to sustain these convictions.

A. The Indictment:

The Levines contend the indictment failed to charge a crime as it failed to specify the disguised funds were from an unlawful source. In the trial court, Mrs. Levine challenged the indictment on similar grounds. See United States v. Levine, 750 F.Supp. 1433, 1442 (D.Colo.1990).

When we review an indictment which has been challenged on sufficiency grounds, we do so de novo; however, we must construe it liberally in favor of validity. United States v. Bullock, 914 F.2d 1413, 1414 (10th Cir.1990).

The indictment followed the statutory language and alleged the transactions in question involved a violation of 18 U.S.C. § 152, the bankruptcy fraud statute. Bankruptcy fraud is a specified unlawful activity for the purposes of the money laundering statute. See, e.g., United States v. Gleave, 786 F.Supp. 258 (W.D.N.Y.1992). Plainly the language of the indictment which followed the statutory language is sufficient. See Bullock, 914 F.2d at 1414. We hold the indictment sufficiently charges the Levines with using money from an illegal source--money diverted and concealed from the bankruptcy estate.

B. The Sufficiency of the Evidence:

To sustain a conviction under the...