U.S. v. Stern
| Decision Date | 12 March 1975 |
| Docket Number | No. 591,D,591 |
| Citation | 511 F.2d 1364 |
| Parties | 75-1 USTC P 9366 UNITED STATES of America, Appellant, v. Irving STERN, Appellee. ocket 74--2522. |
| Court | U.S. Court of Appeals — Second Circuit |
William I. Aronwald, Sp. Atty., U.S. Dept. of Justice (Paul J. Curran, U.S. Atty., S.D.N.Y., and John D. Gordan, III, Asst. U.S. Atty., New York City, on the brief), for appellant.
Raymond Bernhard Grunewald, New York City (Joseph Beeler, Miami Beach, Fla., on the brief), for appellee.
Before LUMBARD, FRIENDLY and GURFEIN, Circuit Judges.
The government appeals from an order of the Southern District of New York which suppressed, as attorney-client communications, portions of conversations between defendant-appellee Irving Stern and Walter Bodenstein, particularly the material portion of the tape recording of a May 18, 1973, conversation between the two men.
A review of the record of the suppression hearing persuades us that there was no basis for concluding that an attorney-client relationship existed between Bodenstein and Stern at the time of the conversations in question. Nor at argument was counsel able to state what legal advice Stern was seeking. We therefore conclude as a matter of law that the trial court erred in holding the conversation privileged.
The facts are not seriously disputed. The defendant-appellee, Irving Stern, is Vice President of the International Amalgamated Meat Cutters Union. He is under indictment, filed March 21, 1974, for violations of the Racketeer Influenced Corrupt Organizations Act (18 U.S.C. §§ 1962(c),(d)), the Taft-Hartley Act (29 U.S.C. §§ 186(a), (b)), and the Internal Revenue Code (26 U.S.C. §§ 7201, 7206(1)). Stern and his co-defendants are charged with conspiring to demand and accept, and demanding and accepting, payments from employers of members of his union. The indictment further charges the defendants with failing to report the payments so received to the Internal Revenue Service. 26 U.S.C. §§ 7201, 7206(1).
Walter Bodenstein is a New York attorney who operates C.P. Sales, Inc., a meat merchandising company for Iowa Beef Processors, ('IBP'), the largest meat packing company in the United States. Bodenstein and Stern were introduced eight to ten years ago by Moe Steinman, Bodenstein's father-in-law. Since then they have met occasionally in the course of business.
In June 1972 Bodenstein, who was under a tax investigation, informed Stern that Stern's name had been mentioned in the course of the investigation. Stern asked that he be kept informed of developments. Over the summer and fall of 1972 the two remained in contact, Bodenstein keeping Stern informed about the investigation. Upon learning that the investigation related to IBP, Stern asked Bodenstein to represent him. Bodenstein declined to do so.
At this time Stern expressed a fear that his 'stock speculations' might be disclosed as a result of the IBP investigation. Stern knew that Moe Steinman, Bodenstein's father-in-law, was a subject of an investigation into bribery of supermarket officials by IBP. Moe Steinman is named in Count 1 of the original indictment against Stern as the person through whom some of the alleged bribes were paid to Stern and his co-defendants. 1
In January, 1973 Stern was subpoenaed to appear before the New York County Grand Jury, but declined to testify. Thereafter, Stern again met with Bodenstein. He told Bodenstein that in his conference at the County District Attorney's Office there had been intimations of a connection between Steinman and himself, Stern. He again asked Bodenstein to represent him. Bodenstein again refused.
In March, 1973, Bodenstein and Steinman were indicted by a federal grand jury for filing false employers tax returns. Steinman, Currier Holman (an IBP official), and C.P. Sales, Inc., were also indicted federally and in the New York Supreme Court for other offenses.
On March 28, 1973, Stern received an IRS notification that his returns were being audited. In early April Stern spoke to Bodenstein about the audit. Bodenstein, unaware that Stern had already retained counsel and had so notified the IRS, recommended a lawyer.
In May Stern met with Bodenstein several times and discussed his fear of being unable to explain the source of $110,000 worth of bonds which he had posted as collateral for loans. Bodenstein was eager to make certain that the bonds were in no way related either to IBP or to his father-in-law, Steinman. Stern was similarly eager to steer clear of Steinman. Bodenstein taped the May 18, 1973 conversation, unbeknownst to Stern, to prove that neither he, IBP, nor Steinman was connected with the bonds. 2
The conversation itself is the most convincing evidence that it occurred not in an attorney-client context, but in the context of two men under investigation trying to protect themselves from any nuances of corruption that might spill over from one investigation to the other. The major subjects interwoven in their conversation were the investigation of the meat and supermarket industry, Stern's bonds, and expert tax counsel.
At the outset of the conversation Bodenstein repeatedly questioned Stern in an attempt to elicit statements that Steinman had never paid Stern anything on behalf of IBP. Stern answered simply 'Well, it's true.'
Stern then interrupted to ask about 'the George George thing' (George George, a supermarket official) and to say that 'Nicky is solid' (Nicholas Abondolo, later to be one of Stern's co-defendants). George George had received some publicity relative to his appearance before a grand jury. The indictment which was filed on March 21, 1974, against Stern and his co-defendants alleges, as an overt act on the conspiracy count, that George George paid Abondolo $2,000. The district court denied the motion to suppress this portion of the conversation as privileged, but granted the motion as to the rest of the conversation.
Thereafter, in this May 18 conversation, Bodenstein elicited considerable detail from Stern about the bonds and the lenders with whom the bonds had been put up as collateral. At the end of this exchange Stern reiterated that these transactions had 'absolutely nothing to do with IOWA (IBP)' and expressed the fear that 'they're going to try to link me up with Moe (Steinman). . . .'
Up to this point the conversation is characterized by a mutual fear that the investigation would reveal a tie-in between IBP and Stern.
Stern then questioned Bodenstein about names of expert tax counsel. Bodenstein's response was 'I'll tell you what we did when we checked.' Bodenstein proceeded to run through the names of several experts, among them Lou Bender, the tax lawyer whom Bodenstein and Steinman had retained. Finally, Bodenstein suggested 'Why don't you have your lawyer get in touch with Bender.' This exchange is consistent with a relationship of one man under investigation seeking advice and information from another who had been undergoing a similar investigation.
The balance of the conversation concerned Stern's fears of: (1) being linked to IBP ('The one thing I don't want to link is my situation with MOE and IOWA BEEF . . ..'); (2) losing his lawyer if he consulted an outsider ; (3) being unable to explain the source of the bonds . 3
In response to these expressions of Stern's fear, Bodenstein repeated his own belief that Stern was not involved with IBP, citing as support for this belief his knowledge of the grand jury testimony of 'everybody at IOWA BEEF,' including his own. Bodenstein further offered to speak to Lou Bender, his tax expert, about the best way for Stern (who would remain anonymous) or his attorney to consult with Bender without causing any 'conflict.' As Bodenstein put it, ...
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