US v. Law Firm of Zimmerman & Schwartz, PC, Cr. A. No. 90-CR-36.

• Decision Date: 23 May 1990
• Docket Number: Cr. A. No. 90-CR-36.
• Citation: 738 F. Supp. 407
• Parties: UNITED STATES of America v. The LAW FIRM OF ZIMMERMAN & SCHWARTZ, P.C., David Schwartz, Steven L. Zimmerman, Tommy Brown, the Sofa Gallery, Inc., d/b/a Levines' Home Furnishings Center, Marcee Levine, Gary Levine, Sales Results, Inc., a/k/a S.R., Inc., Stanley Lansing, William C. Schlapman, C.P.A., P.C., William Schlapman, and Shari Schlapman.
• Court: U.S. District Court — District of Colorado

738 F. Supp. 407

UNITED STATES of America v. The LAW FIRM OF ZIMMERMAN & SCHWARTZ, P.C., David Schwartz, Steven L. Zimmerman, Tommy Brown, the Sofa Gallery, Inc., d/b/a Levines' Home Furnishings Center, Marcee Levine, Gary Levine, Sales Results, Inc., a/k/a S.R., Inc., Stanley Lansing, William C. Schlapman, C.P.A., P.C., William Schlapman, and Shari Schlapman.

Cr. A. No. 90-CR-36.

United States District Court, D. Colorado.

May 23, 1990.

COPYRIGHT MATERIAL OMITTED

Stephen C. Peters, Asst. U.S. Atty., Denver, Colo., for the U.S.

Patrick J. Burke and John T. Baker, Bragg, Baker & Cederberg, P.C., Denver, Colo., for Law Firm of Zimmerman & Schwartz, P.C.

Lee D. Foreman, Denver, Colo., for David Schwartz.

Daniel J. Sears, Denver, Colo., for Steven Zimmerman.

Brian Holland, Denver, Colo., for Tommy Brown.

Leonard Chesler, Denver, Colo., for Marcee Levine.

Jeffrey Springer, Denver, Colo., for Gary Levine.

Robert A. Dill, Esq. Denver, Colo., for Stanley Lansing.

Michael Bender, Bender & Treece, Denver, Colo., for William C. Schlapman, C.P.A., P.C. and William C. Schlapman.

Thomas H. Coghill, Denver, Colo., for Shari Schlapman.

Robert T. Page, Denver, Colo.

MEMORANDUM OPINION AND ORDER

BABCOCK, District Judge.

On January 26, 1990, the twelve defendants in this case were indicted in the District of Colorado on fifty-three counts of criminal wrongdoing, including conspiracy, mail fraud, "pension kickback", "embezzlement from pension and profit sharing plans", and bankruptcy fraud. After denying defendants' motions to declare the case complex in an Order entered March 8, 1990, all of the defendants, with the exception of Steven L. Zimmerman (Zimmerman), Tommy Brown (Brown), and Shari Schlapman (Schlapman), filed waivers of speedy trial. Defendant Stanley Lansing entered a guilty plea, but has not been sentenced. Accordingly, the case was set on two "tracks". The track one defendants, Zimmerman, Brown, and Schlapman, begin a jury trial on June 4, 1990. The remaining defendants, the track two defendants, are scheduled for trial in November.

Pending before me are Zimmerman's Motion for Disclosure and to Dismiss filed with the Court under seal and Motion to Dismiss Count 1 of the indictment for failure to charge an offense or, in the alternative, alleging a multiple conspiracy and Brown's Motion to Dismiss for Grand Jury Abuse and Motion to Dismiss Count 1 of the indictment. Schlapman joins in Zimmerman's motion for disclosure of grand jury material and in his motion to dismiss Count 1. Hearing on the motions was held on May 18, 1990.

Zimmerman moves to dismiss the indictment on the grounds that his Fifth Amendment right to indictment and due process has been violated. Specifically, Zimmerman argues that 1) the prosecutor usurped the province of the grand jury to deliberate independently the charges contained in the proffered indictment by ignoring proffers of exculpatory evidence, by offering conclusory evidence of interested parties and by commenting on the assertion of the privilege against self-incrimination, and 2) the government improperly used civil process to develop information to further this criminal prosecution. Defendant Tommy Brown (Brown) also seeks to dismiss the Indictment because exculpatory pre-indictment statements from alleged co-conspirators were not presented to the grand jury for its consideration. I deny the motions.

I.

A.

An indictment valid on its face is not subject to challenge on the ground that the grand jury acted on inadequate or incompetent evidence, or even on information obtained in violation of a defendant's privilege against self-incrimination. United States v. Calandra, 414 U.S. 338, 345, 94 S.Ct. 613, 618, 38 L.Ed.2d 561 (1974); United States v. Beery, 678 F.2d 856, 858 (10th Cir.), cert. denied, 471 U.S. 1066, 105 S.Ct. 2142, 85 L.Ed.2d 499 (1982). An indictment can be dismissed only for prosecutorial misconduct that results in "some significant infringement on the grand jury's ability to exercise independent judgment." United States v. Pino, 708 F.2d 523, 530 (10th Cir.1983). "A district court may not dismiss an indictment for errors in grand jury proceedings unless such errors prejudiced the defendants." Bank of Nova Scotia v. United States, 487 U.S. 250, 108 S.Ct. 2369, 2373, 101 L.Ed.2d 228 (1988). In the Nova Scotia case, the Supreme Court articulated the applicable standard when dismissal is sought for nonconstitutional grand jury abuse.

The prejudicial inquiry must focus on whether any violations had an effect on the grand jury's decision to indict. If violations did substantially influence this decision, or if there is grave doubt that the decision to indict was free from such substantial influence, the violations cannot be deemed harmless.

Nova Scotia, supra 108 S.Ct. at 2378, quoting United States v. Mechanik, 475 U.S. 66, 78, 106 S.Ct. 938, 945, 89 L.Ed.2d 50 (1986) (O'Connor, J., concurring).

1. Exculpatory Evidence.

In order to render a decision free from bias, the grand jury must be both independent and informed. United States v. Williams, 899 F.2d 898, 903 (10th Cir. 1990). "To be independent and informed, the grand jury must be able to obtain all relevant evidence, since only then can its judgment truly be informed." Id. at 903, quoting United States v. Flomenhoft, 714 F.2d 708, 711 (7th Cir.1983), cert. denied, 465 U.S. 1068, 104 S.Ct. 1420, 79 L.Ed.2d 745 (1984). Accordingly, a prosecutor has the duty to present substantial exculpatory evidence to the grand jury. Id. at 900-901. Although a prosecutor is not required to "ferret out" and disclose every bit of potentially exculpatory evidence to the grand jury, substantial exculpatory evidence discovered during the course of an investigation must be revealed. Id.

Having reviewed the documents presented, I conclude that the government did not withhold exculpatory evidence from the grand jury. The government honored its obligation to present exculpatory evidence when it 1) tendered to the grand jury two detailed letters written by Zimmerman's attorney and corresponding exhibits explaining why the evidence did not support an indictment against Zimmerman, 2) allowed a character witness for Zimmerman to testify a second time, and 3) marked Zimmerman's proposed instructions as a grand jury exhibit and allowed the grand jury to consider them as the law of the case.

Brown's argument that certain witnesses gave misleading and untruthful statements to the grand jury regarding his involvement in the alleged scheme to defraud creditors boils down to a challenge to the weight and credibility of the evidence presented to the grand jury. The evidence presented on the motion demonstrates that the government presented to the grand jury Brown's requested exculpatory evidence. The government allowed Brown to testify narratively before the grand jury prior to cross-examination and to introduce prepared written statements and other exhibits for the grand jury's consideration. Moreover, Brown and every other defendant who gave a statement, exculpatory or otherwise, to the United States Attorney had their statements transcribed and submitted to the grand jury upon request.

Further, the Supreme Court has held that "the mere fact that evidence itself is unreliable is not sufficient to require a dismissal of the indictment." Nova Scotia, 108 S.Ct. at 2377. Here defendants have not shown that the government knowingly introduced false or misleading evidence or that the government caused the witnesses to give false or misleading testimony. Id. Issues of weight and credibility of the evidence are properly for the petit jury.

2. Conclusory Evidence of Interested Parties and Comments on the Assertion of Fifth Amendment Privilege.

Zimmerman contends that the government encroached upon the province of the grand jury when it called upon Special Agent Jerry Burford as a "summary witness," witnesses D. Bruce Coles (Coles) (an attorney who formerly represented a secured creditor, Colorado National Leasing, Inc., now special counsel for the trustee handling the Levine bankruptcy matters), and Elizabeth J. Greenberg (Greenberg) (a Sherman and Howard attorney, formerly an associate of the prosecutor's, who represented Westinghouse, another secured creditor) to "impart their conclusions of criminal wrongdoing and their evaluation of the credibility of witnesses." Similarly, Brown contends that Burford and Coles made misleading and untruthful summaries to the grand jury regarding his involvement in the case. I disagree with defendants' contentions.

First, summary testimony is permitted to aid a grand jury investigation. See Bank of Nova Scotia v. United States, 108 S.Ct. at 2377. Here, after thirty-two witnesses had testified before the grand jury over a sixteen month period, and only after defendants' exculpatory evidence and legal theories were presented, was Special Agent Burford called to give summary testimony. Under these circumstances I conclude that the testimony was appropriate and nonprejudicial to defendants. See Id.

Second, Coles and Greenberg properly testified as experts in commercial law, as witnesses who had represented creditors of the Levines, and as witnesses who had dealt with the Law Firm of Zimmerman & Schwartz in an attempt to collect debts owed to their clients. Coles also testified as a witness who had served as special counsel to the trustee in bankruptcy. See United States v. Anderson, 778 F.2d 602, 605 (10th Cir.1985) (law professor's expert testimony on general concepts of trust law held proper). As such, Coles had extensive knowledge of the matters investigated by the grand jury. Moreover, Coles' opinion testimony regarding Marcee Levine's statements was presented to the grand jury as exculpatory evidence at the written request of Marcee Levine's attorney.

Finally, defendants' claim that several witnesses were improperly allowed to testify that certain statements were "false" or that certain...