USA v. Krimsky

• Decision Date: 16 June 2000
• Docket Number: No. 99-3742,99-3742
• Citation: 230 F.3d 855
• Parties: (6th Cir. 2000) United States of America, Plaintiff-Appellee, v. Leonard C. Krimsky, Defendant-Appellant. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 855

230 F.3d 855 (6th Cir. 2000)

United States of America, Plaintiff-Appellee, v. Leonard C. Krimsky, Defendant-Appellant.

No. 99-3742

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: June 16, 2000

Decided and Filed: October 24, 2000

Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 98-00259--Ann Aldrich, District Judge. [Copyrighted Material Omitted] Paul B. Ockene, Linda M. Betzer, ASSISTANT UNITED STATES ATTORNEY, Cleveland, Ohio, for Appellee.

Martin S. Pinales, John P. Feldmeier, Sirkin, Pinales, Mezibov & Schwartz, Cincinnati, Ohio, Nathan Lewin, Jody Manier Kris, David S. Cohen, MILLER, CASSIDY, LARROCA & LEWIN, Washington, D.C., for Appellant.

Before: MARTIN, Chief Judge; BATCHELDER and MOORE, Circuit Judges.

OPINION

BOYCE F. MARTIN, JR., Chief Judge.

Leonard Krimsky appeals his conviction and sentence for twelve counts of embezzlement from an employee benefit plan in violation of 18 U.S.C. § 664 and three counts of making false statements and concealing facts in documents required by the Employee Retirement Income Security Act (ERISA) in violation of 18 U.S.C. § 1027. For the following reasons we affirm the decision of the district court.

I.

During the 1980s, Leonard Krimsky owned and operated Worldwide Process Technologies in New Jersey, which manufactured specialized machinery for processing paper and plastics for industrial customers. In 1990, Worldwide Process Technologies purchased Kent Machine Company, a machine shop in Ohio that was experiencing financial difficulties. After the purchase, Kent Machine Company was renamed Kent Worldwide Machine Works (Kent).

Included in the purchase was Kent's employee pension benefit plan administered by the trust department of National City Bank. By 1992, the plan's assets exceeded $3,500,000.00. In 1993, after Kent began to experience financial difficulties, Krimsky approached National City Bank for financing. He requested that National City approve his request for a loan of twenty-five percent of the plan's assetsto Kent. The Bank rejected Krimsky's request as a prohibited transaction under ERISA. National City specifically told Krimsky that he needed an exemption from the Department of Labor before the bank could comply with his request for the loan.

In response to this rejection, Krimsky appointed himself as trustee of the plan and transferred the plan's assets to Huntington Trust Company with the understanding that after Kent applied for an administrative exemption from the Department of Labor, Huntington would grant the loan that National City had refused. The first loan was made in July 1993 for $850,000.00. Krimsky signed a promissory note for the loan that provided for periodic interest payments and a due date in 1995. Krimsky did not make the loan payments and extended the due date to 1998.

In June 1994, a Kent representative sought another loan from the plan. Huntington Trust Company requested additional documentation, which it never received. When Huntington refused the loan request, Krimsky, as trustee, transferred the plan's assets to a new custodian, Fifth Third Bank. In August 1995, Krimsky directed Fifth Third Bank to liquidate thirty percent of the plan's assets and transfer the cash to an account at Marine Midland Bank. Fifth Third resigned as custodian, citing concern that the account was not a conventional trust account, but did transfer $64,008.00 to the Marine Midland account. Later Fifth Third sent a $651,506.32 check to Marine Midland with a cover letter indicating that the money was in regard to the Kent pension plan. Krimsky's account with Marine Midland was not a defined benefit pension plan account and therefore was not qualified to receive the plan funds. Once it became aware of this, Marine Midland honored Fifth Third's request to stop payment on the check. Marine Midland had, however, already sent $60,000.00 of the $64,008.00 deposit to United Jersey Bank at Krimsky's request.

On August 22, Krimsky opened a new account with Dean Witter to which Fifth Third transferred the plan's remaining assets. It was from this account that Krimsky took the second loan of $2,195,000.00 of the plan's assets. This loan consisted of twelve installments between August 1995 and January 1996. Krimsky admitted that he knew that such a transaction was prohibited under ERISA but was told that it was permissible if approval was obtained and that approval could be obtained in some circumstances after the transaction had occurred.

In November 1995, a plan participant complained to the Department of Labor and produced a Form 5500 that showed the 1993 loan for $850,000.00. In April 1996, a Department of Labor investigator initiated an on-site investigation. The inspection resulted in a voluntary compliance letter dated May 8, 1996, stating that the Regional Director would not bring a lawsuit against Krimsky if he repaid the 1993 loan and had the plan independently audited. Krimsky responded by offering to repay the $850,000.00 loan in installments of $50,000.00 per month. During a subsequent meeting between Krimsky and the investigator, Krimsky disclosed the existence of the second loan and proposed a schedule for repayment for that loan as well.

The business subsequently failed. A forced foreclosure sale of the collateral securing the loans was held and resulted in a purchase price of $2.6 million. After various other obligations were satisfied, the sale produced $1,490,000.00 for the fund.

Krimsky was indicted in July 1998. He was charged with thirteen counts of theft from a pension fund in violation of 18 U.S.C. § 664, one for the 1993 loan and one count for each of the twelve installments of the 1995 loan. He was also charged with three counts of submitting false ERISA reporting forms to the IRS in violation of 18 U.S.C. § 1027. A jury convicted Krimsky on all but one of the counts. The district court determined Krimsky's offense level under the United States Sentencing Guidelines to be twenty-six and sentenced him to five years imprisonment, followed by a two-year period of supervised release. Krimsky began serving his sentence on July 15, 1999.

II.

Krimsky makes multiple challenges to the jury instructions. He alleges that the district court erred by: (1) inadequately defining intent in the 18 U.S.C. § 1027 jury instruction; (2)failing to provide a specific unanimity instruction; and (3)failing to properly instruct the jury on 18 U.S.C. § 664's specific intent requirement. Normally, we review the district court's jury instructions "to determine whether they fairly and adequately submitted the issues and applicable law to the jury." United States v. Williams, 952 F.2d 1504, 1512 (6th Cir. 1991). In this case, however, Krimsky did not object to the instructions at trial. We therefore review the jury instructions for plain error. See United States v. Hoglund, 178 F.3d 410, 412 (6th Cir. 1999). "Plain error is defined as an egregious error, one that directly leads to a miscarriage of justice." United States v. Busacca, 863 F.2d 433, 435 (6th Cir. 1988).

A.

Krimsky claims that the district court erred when giving the jury instruction for the alleged violation of 18 U.S.C. § 1027. The district court, in the jury instruction entitled "Elements of the Offenses," explained that the knowledge element of §1027 would be satisfied if:

Mr. Krimsky did so knowingly and wilfully [sic] and: (i) in the case of a false statement, with knowledge that the statement was false or with reckless disregard for its truth or falsity; or (ii) in the case of a concealment, cover up or failure to disclose, without a ground for believing that his action was lawful or with reckless disregard for its lawfulness.

In U.S. v. S & Vee Cartage Co., 704 F.2d 914 (6th Cir. 1983), we followed the Second Circuit in holding that "the term 'knowingly' in § 1027 requires only 'proof of a voluntary conscious failure to disclose without ground for believing that such non-disclosure is lawful, or with reckless disregard for whether or not it is lawful.'" Id. at 919 (quoting U.S. v. Tolkow, 532 F.2d 853, 858 (2d Cir. 1976)). Krimsky recognizes that, in the above-quoted jury instruction, the district court accurately stated the law in this circuit. Krimsky argues, however, that other jury instructions gave a different definition of the intent element, thereby creating a "real possibility" that the jury convicted Krimsky without finding that he possessed the criminal intent actually required.

In the instruction entitled "Knowing Action," the district court wrote that "[t]he third element refers to Mr. Krimsky acting 'knowingly and wilfully [sic].' With respect to this phrase, please refer to page 24 - 'Inferring Mental State.'" The "Inferring Mental State" instruction said, in part, "You may also consider the natural and probable results of any acts that the defendant knowingly did, and whether it is reasonable to conclude that the defendant intended those results." Krimsky claims that section lowered § 1027's required criminal intent element by equating "knowingly and willfully" with the standard of "knowledge" in civil litigation - that is, the natural and probable results of any acts. This, Krimsky argues, creates a possibility that he was convicted not because he knowingly and willfully filed false forms, as § 1027 requires, but rather because he failed to scrutinize them adequately, which would "naturally and probably" result in the filing of false forms. We disagree.

In the jury instruction defining the elements of the § 1027 offense, the district court articulated the correct intent standard for a finding that Krimsky acted "knowingly and willfully." Additionally, the district court correctly defined "knowingly and willfully" at page 23 of the instructions. If Krimsky had wished, he could have sought to have that definition incorporated by reference into the § 1027 offense instruction, but he failed to...