U.S. v. Wilson

• Decision Date: 30 July 1986
• Docket Number: No. 85-1835,85-1835
• Citation: 798 F.2d 509
• Parties: 21 Fed. R. Evid. Serv. 202 UNITED STATES of America, Appellee, v. William H. WILSON, Jr., Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

Page 509

798 F.2d 509

21 Fed. R. Evid. Serv. 202

UNITED STATES of America, Appellee, v. William H. WILSON, Jr., Defendant, Appellant.

No. 85-1835.

United States Court of Appeals, First Circuit.

Argued May 6, 1986.

Decided July 30, 1986.

Robert W. Harrington with whom Clark W. Yudysky, Serino, Harrington & Vernaglia and John W. Doukas, Boston, Mass., were on brief, for appellant.

Robert S. Mueller, III, First Asst. U.S. Atty., San Francisco, Cal., with whom William F. Weld, U.S. Atty., Boston, Mass., was on brief, for appellee.

Before BREYER and TORRUELLA, Circuit Judges, and MALETZ, ^* Senior Judge.

TORRUELLA, Circuit Judge.

This appeal arises from a three count indictment charging appellant William H. Wilson, Jr. (Wilson) with the willful failure to declare income on his tax returns for the years 1978, 1979 and 1980. See 26 U.S.C. Sec. 7201. The jury returned a verdict of guilty on all three counts. The district judge imposed a six month sentence on each count to be served concurrently. Wilson was not fined.

After sentencing, Wilson filed a motion for stay of execution of sentence pending appeal, which was denied by the district court. Wilson then filed with this court three separate motions for bail and/or a stay pending appeal. These motions were denied by order of court, and the current appeal followed.

On appeal, Wilson's argument can be divided into two parts. First, he asserts that an incriminatory document written by him was protected by the attorney-client privilege, and therefore, was improperly admitted into evidence. Second, Wilson challenges a series of rulings by the district court premised on the court's finding that certain 1981 and 1982 events were irrelevant to the subject of trial, and therefore, could not be the subject of evidence, cross-examination or the instructions to the jury. For the reasons stated below, we reject appellant's arguments and affirm the judgment of the district court.

The evidence at trial showed that, during the indictment years of 1978, 1979 and 1980, appellant Wilson controlled the finances of New England Book Components, Inc. (NEBC), a printing company specializing in book components, dust jackets and paperback covers. NEBC had been founded in 1974 by Edmund Corvelli, James Middleton and Wilson as equal owners. Subsequently, James Moneghan, a printer, acquired a 10% interest.

The evidence showed that Wilson, in his 1978, 1979 and 1980 tax returns, failed to report substantial income taken by him from NEBC. This unreported income was divided into two categories: first, corporate funds paid to Wilson in complicity with the other owners; and second, corporate monies taken by Wilson without the other owners' consent, i.e., embezzled funds.

As to the first category, corporate funds paid to Wilson in complicity with the other owners, three methods were used. First, through a device known as the "personal ledger," the corporation would pay expenses of the four owners unrelated to the company business. Between 1978 and 1980, Wilson received $60,000 of such income, and did not report it. Second, Wilson, along with the other owners, would take a proportionate share of the cash sales of the business. Of this income, Wilson received $12,000 between 1978 and 1980, which was not reported. Third, the owners of NEBC formed a shell corporation, the Steven Green Paper Company (Company). Wilson would then write a check to the Company on a monthly basis, presumably as payment by NEBC on a fictitious purchase from the Company. The proceeds of the "sale" would then be distributed by the Company to its shareholders, Wilson, Corvelli, Middleton and Moneghan. Wilson received $8,000 of income from the Company in 1978, which he did not report. Thus, with the consent of his partners, Wilson received approximately $80,000 of unreported income from NEBC over the indictment years.

As to the monies that Wilson took without the consent of his partners, i.e., the embezzled funds, these constituted the bulk of the income not reported on the 1978, 1979 and 1980 returns. The evidence showed that NEBC owners Corvelli, Middleton and Moneghan had understood, in 1978, that the Steven Green Paper Company would no longer be used to divert income to any of the NEBC owners. However in 1980, Middleton discovered various checks made out to the Steven Green Paper Company as well as other bookkeeping discrepancies. Middleton then alerted Corvelli, and when they confronted Wilson, he admitted to having taken the monies. Financial records introduced at trial revealed the embezzled amount to be approximately $350,000 over the indictment years. Wilson reported none of the embezzled money as income.

Thus, the evidence at trial showed that, during the indictment years of 1978, 1979 and 1980, Wilson received, both with and without the consent of the other owners, approximately $430,000 in unreported income. This unreported income, noted the government's expert witness, led to an additional unpaid tax liability for Wilson of approximately $40,000 in 1978, $108,000 in 1979 and $92,000 in 1980.

I. ATTORNEY-CLIENT PRIVILEGE

Wilson's first argument on appeal is to challenge, on the ground of attorney-client privilege, the admission into evidence of a document written by Wilson and sent to attorney Karl Greenman. This document, known as the "Greenman Memo," contained an incriminating admission by Wilson that his unauthorized taking of monies from NEBC was "morally and ethically wrong," as well as a statement that the various income-enhancing schemes used by all the NEBC owners rendered him "no more or less guilty than the rest." Thus, through the Greenman Memo, Wilson not only admitted the embezzlement but also strongly implied that, as to the other NEBC schemes, all the partners (including himself) had done wrong.

In determining whether the district court's admission of the Greenman Memo constituted reversible error, we are called upon to decide the standard of review to be applied where evidence has been admitted by the trial court despite assertion of the attorney-client privilege. The government, relying on United States v. Sorrentino, 726 F.2d 876, 886 (1st Cir.1984), argues that a trial court's evidentiary rulings, including rulings on the existence of a privilege, can be overturned only upon finding an abuse of discretion. Appellant, by contrast, cites United States v. Petroziello, 548 F.2d 20, 23 (1st Cir.1977) for the proposition that preliminary "factual" determinations under Fed.R.Evid. 104(a), such as the existence of a privilege, are to be decided by the trial court under the standard of preponderance of the evidence, and then reviewed on appeal subject to a clearly erroneous standard. See, e.g., 1 J. Weinstein & M. Berger, Weinstein's Evidence p 104, at 104-29 to -31 (1985 ed.) (existence of attorney-client privilege is question of fact for the trial court); Steiner v. United States, 134 F.2d 931, 935 (5th Cir.), cert. denied, 319 U.S. 774, 63 S.Ct. 1439, 87 L.Ed. 1721 (1943) (same). Finally, while neither party has suggested the alternative, it might be possible that we engage in a de novo review and merely address the issue of whether the individual asserting the privilege, Wilson, has met his burden of showing the existence of the attorney-client privilege under United States v. United Shoe Machinery Corp., 89 F.Supp. 357, 358-359 (D.Mass.1950) (Wyzanski, J.).

Because we regard the existence of a privilege as a factual determination for the trial court under Rule 104(a), the district court's finding of no privilege can be overturned only if clearly erroneous. Applying this standard, we see no error in the court's conclusion that Wilson failed to meet his burden under United Shoe, supra.

In order to assert the attorney-client privilege, Wilson was required to make four showings: (1) that he was or sought to be a client of Greenman's; (2) that Greenman in connection with the Memo acted as a lawyer; (3) that the Memo relates to facts communicated for the purpose of securing a legal opinion, legal services or assistance in a legal proceeding; and (4) that the privilege has not been waived. United States v. United Shoe Machinery Corp., supra, at 358-359; Connelly v. Dun. & Bradstreet, Inc., 96 F.R.D. 339, 341 (D.Mass.1982). We address the above criteria in turn and emphasize that, if Wilson fails to meet his burden as to any one element, the privilege cannot be invoked.

First, as to whether Wilson was or sought to become Greenman's client, the facts ultimately do not support Wilson's claim that he met his burden below. Greenman testified that, in December 1980, he was approached by Corvelli, Middleton and Moneghan to represent NEBC in the buyout of Wilson's interest. Greenman further testified that, while he had represented Wilson on personal matters in the past, such representation would be commenced by a meeting where Wilson would effectively state "I need your legal services." No such meeting took place between Greenman and Wilson with respect to the buyout. Moreover, the only communication between them, the Memo itself, does not sufficiently convey an intent on Wilson's part to retain Greenman as his attorney. Finally, Greenman testified that all work previously done by him for Wilson was paid for on a project basis, and that no such payment was made by Wilson to Greenman in connection with the latter's role in the buyout. Thus, despite the fact that Greenman had represented Wilson in the past, and despite Greenman's statement that he never gave a thought to whom he was representing, the evidence of NEBC's specific retention of Greenman for purposes of the buyout, when combined with the total lack of evidence indicating an intent on Wilson's part to become a client of Greenman's for purposes of the buyout, leads us to conclude, as did the district court, that no attorney-client relationship existed at the time the Memo was sent.

Second, as to the requirement that Greenman act as a...