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Parties Involved:
Tommy Brown
Appellant
United States of America
Appellee

Document Text:

I 

PUBLISH 

FILED 

Unitm States Coprt <?r Ap;:cab Tent.i C1rcutt 

UNITED STATES COURT OF APPEALS 

SE? 0 3 1991 

ROBERT L. HOECKER 

Clerk 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, 

v. 

TOMMY BROWN, 

Defendant-Appellant. 

TENTH CIRCUIT 

90-1256 

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On Appeal From The 

United States District Co~rt 

For The District Of Colorado 

(U.S.D.C. No. 9:0-CR-36-4) 

Brian K. Holland of Holland, Seelen & Pagliuca, Denver, Colorado, 

for Defendant-Appellant. 

Stephen C. Peters, Assistant United States Attorney (Michael J. 

Norton, United States Attorney, with him on the brief), Denver, 

Colorado, for Plaintiff-Appellee. 

Before McKAY and SETH, Circuit Judges, and BROWN, District Judge*. 

SETH, Circuit Judge. 

*Honorable Wesley E. Brown, United States District Judge for the 

District of Kansas, sitting by designation. 

Appellate Case: 90-1256 Document: 01019294833 Date Filed: 09/03/1991 Page: 1 
This appeal involves various charges arising out of the 

representation of Gary and Marcee Levine by the law firm of 

Zimmerman & Schwartz. The grand jury returned a 50 count 

indictment charging the Levines, the law firm, certain members of 

the law firm, and other participants of conspiring to defraud the 

United States by concealing the financial transactions of the 

Levines. Appellant, who was an associate with the law firm, was 

named in 18 of the counts. In a joint trial with Steven 

Zimmerman, one of the senior partners of the law firm, appellant 

was convicted of four counts, conspiracy in violation of 18 u.s.c. 

§ 371, two counts of bankruptcy fraud in violation of 18 u.s.c. 

§§ 2 and 152, and mail fraud in violation of 18 u.s.c. §§ 2 and 

1341. On appeal, he challenges the sufficiency of the evidence as 

to each of those counts as well as various rulings by the trial 

court. For the reasons that follow, we reverse the trial court 

and remand for a new trial. 

STATEMENT OF FACTS 

Due to the complex nature of the transactions, we limit our 

discussion of the facts to those relevant to this appellant and 

incorporate by reference the statement of facts in United States 

v. Zimmerman, No. 90-1255. Viewing the evidence in the light most 

favorable to the government, the following events occurred in 

relation to this appeal. 

Gary and Marcee Levine operated a retail furniture store 

known as Levines Home Furnishings in Denver. The store's 

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( 

corporate name was Sofa Gallery, Inc. In 1985, they sought advice 

from David Schwartz, of Zimmerman & Schwartz, regarding payment of 

creditors and filing bankruptcy. 

Based upon the advice of Schwartz, the Levines hired Sales 

Results and its principal, Stanley Lansing, to conduct a 

liquidation sale. Lansing and Sales Results were to receive 10% 

of the gross retail revenues and the net proceeds were to be paid 

to the Levines' creditors. Cherry Creek National Bank and 

Westinghouse Credit Corporation, two of Sofa Gallery's principal 

creditors, agreed to the sale. They released their secured 

interests in the unsold inventory and financed the acquisition of 

over two million dollars additional inventory for the sale. 

During this time, the Levines and Lansing entered into an 

undisclosed kickback agreement whereby Lansing agreed to pay 

Marcee Levine one-third of his 10% commission. Upon the advice of 

Schwartz, Gary Levine received none of this money because of his 

impending bankruptcy. 

The liquidation sale was conducted from July through December 

1985. The sale resulted in a reported loss, with no proceeds paid 

to the creditors except for 0. Wesley Box and the Rocky Mountain 

News. During the course of the sale, however, Marcee Levine 

received an undisclosed kickback of approximately $100,000 from 

Sales Results. This payment along with $150,000 from preliquidation sale accounts receivable was deposited in the law firm 

trust account for the Levines' personal use. No evidence was 

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introduced that any of these financial transactions appeared in 

the law firm's ledger. 

In 1985, Schwartz delegated two tasks relevant to the Levine 

transactions to appellant. Schwartz requested that appellant 

draft a quitclaim deed granting Gary Levine's interest in the 

house to Marcee Levine and draw up the Articles of Incorporation 

for a business known as Action Sales Group, Inc. for Stephen 

Forsey. 

On February 19, 1986, Schwartz asked appellant to attend a 

meeting at the Marriott to take notes. During this meeting, 

Schwartz proposed that the Levines use money from the Sofa 

Gallery's employee pension plan to capitalize Action Sales Group, 

Inc. At trial, appellant testified that he stated at the meeting 

that this would be an improper use of pension funds and refused to 

draft the documents. Forsey, however, testified that appellant 

did not object to the use of the funds. 

Thereafter, the Levines withdrew $425,000 from the pension 

plan and gave $300,000 to Forsey to fund Action Sales Group, Inc. 

The Levines put the other $125,000 in a secret trust account at 

the accounting firm of William c. Schlapman, P.C. This money was 

supplemented by corporate tax refunds and used for the Levines' 

personal use. In addition, the Levines and Schlapman entered into 

a plan to delay filing amended tax returns. 

On April 17, 1986, Schwartz drafted a letter to the Levines 

stating that "Tom Brown has been fully briefed on all aspects of 

all of our transactions and is fully cognizant of all the problem 

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areas in the event that there is any problem with either the new 

business or with the old negotiations." Supp. Vol. XXIII at 88-

89. 

On May 20, 1986, D. Bruce Coles, an attorney representing 

Colorado National Leasing, deposed Gary Levine. During his 

deposition, Gary Levine failed to disclose any of the trust 

accounts or interest in Action Sales Group, Inc. Although 

Schwartz attended the deposition with Gary Levine, the eviden9e 

showed that appellant met with Gary Levine prior to the deposition 

and met with Schwartz afterwards. Gary Levine subsequently filed 

for bankruptcy on September 26, 1986. 

Schwartz continued his representation of the Levines until 

1987 when he turned the Levine file over to appellant. On 

January 29, 1987, appellant met with Gary Levine to discuss his 

deposition concerning the bankruptcy proceedings. The following 

day, he attended the deposition with Gary Levine. Those present 

at the deposition were appellant, Gary Levine, Coles, and 

H. Christopher Clark, the bankruptcy trustee. They discussed the 

use of the employee pension plan funds to capitalize Action Sales 

Group, Inc.; however, Gary Levine denied any ownership or stock 

interest in Action Sales Group, Inc. He also failed to disclose 

either the law firm trust account or the Schlapman trust account. 

After the liquidation sale, the Levines put their financial 

records in a storage locker. During the bankruptcy proceedings, 

they allowed numerous inspections of the records contained in the 

storage locker. In 1986, Cherry Creek National Bank reviewed, 

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inspected and removed 20-25 boxes of documents. At his deposition 

in January 1987, Gary Levine agreed to turn over his storage 

locker key to the trustee. In March 1987, appellant wrote to the 

trustee and offered him the opportunity to inspect the records for 

the creditors. 

On April 14, 1987, a creditors' meeting was held where Coles 

expressed his dissatisfaction with discovery. In an attempt to 

obtain more information about the Levines' assets, Coles made/ 

several discovery requests. On May 19, 1987, the bankruptcy court 

issued an order for Marcee Levine to appear at a deposition on 

June 9, 1987, and produce copies of all financial bookkeeping or 

accounting records and related documents. 

During this time, Gary Levine told appellant that he did not 

want to pay rent on the storage locker and was going to destroy 

the remaining records. On May 23, 1987, appellant reviewed the 

records, determined that they were of no value to the bankruptcy 

proceedings and destroyed them at a landfill site. 

On May 27, 1987, appellant wrote a letter to Coles advising 

him that he had filed a motion with the court to vacate the order 

authorizing the examination and that the court would not be able 

to act before the June 9 deposition date. Thereafter, Marcee 

Levine was served with two subpoenas dated June 2 and June 15, 

1987. 

Without the court ruling on appellant's motion, Marcee Levine 

was deposed on June 18, 1987. Marcee Levine, through appellant, 

did not produce all of the documents requested by Coles, asserting 

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attorney-client privilege. Thereafter, appellant filed a motion 

for a protective order of the records until the court could make a 

determination of this issue. Coles did not oppose this motion 

because appellant subsequently agreed to supply Coles with the 

records he had requested. 

During the course of the bankruptcy proceedings, the 

bankruptcy trustee requested information concerning the Levines' 

1986 tax return. In response to these requests, appellant drafted 

a letter dated February 10, 1988 stating that: 

"The reason for the delay has been that the 

accountant wants a wealth of information and 

documents which the Levines have not entirely 

been able to locate. Many of their financial 

records were in the storage locker and seem to 

have disappeared into the hands of the 

numerous attorneys and banks who were 

interested in those documents." 

SUFFICIENCY OF THE EVIDENCE 

Appellant challenges the sufficiency of the evidence to 

sustain his conviction on all four counts. We address each of 

these counts in turn. In reviewing a sufficiency of the evidence 

claim, we "view the proof presented in the light most favorable to 

the government to ascertain if there is sufficient substantial 

proof, direct and circumstantial, together with reasonable 

inferences to be drawn therefrom, from which a jury might find a 

defendant guilty beyond a reasonable doubt." United States v. 

Sullivan, 919 F.2d 1403, 1431 (lOth Cir.). 

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• 

Count 1 

Count 1 charged appellant with conspiracy to defraud the 

United States under 18 u.s.c. § 371. Under this statute, the 

government was required to establish beyond a reasonable doubt 

that: (1) there was an agreement between two or more people, 

(2) to defraud the United States and (3) an overt act was 

committed by one of the conspirators in furtherance of that 

_/ 

agreement. See United States v. Schmick, 904 F.2d 936, 941 (5th 

Cir.). The defendant need not have knowledge of all the details 

or all the members of the conspiracy, United States v. Savaiano, 

843 F.2d 1280, 1294 (lOth Cir.), and the jury may presume that a 

defendant is a knowing participant in the conspiracy when he acts 

in furtherance of the objective of the conspiracy. United States 

v. Tranakos, 911 F.2d 1422, 1430 (lOth Cir.). '""The connection 

of the defendant to the conspiracy need only be slight, if there 

is sufficient evidence to establish that connection beyond a 

reasonable doubt."'" Id. (quoting Savaiano, 843 F.2d at 1294) 

(quoting United States v. Batimana, 623 F.2d 1366, 1368 (9th 

Cir.)). However, "'caution must be taken that the conviction not 

be obtained "by piling inference upon inference."'" United States 

v. Fox, 902 F.2d 1508, 1513 (lOth Cir.) (quoting United States v. 

Butler, 494 F.2d 1246, 1252 (lOth Cir.)) (quoting Direct Sales Co. 

v. United States, 319 U.S. 703, 711). 

Appellant claims that the evidence was insufficient to 

support his conviction because he was not a knowing participant in 

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i 

the conspiracy. Specifically, he claims that the government's 

case was built on inferences involving his role as attorney for 

the Levines. He argues that any task performed by him in relation 

to the bankruptcy proceedings could not constitute an overt act in 

furtherance of the conspiracy to defraud the United States without 

his knowing participation. 

We agree with appellant's argument that the government's case 

centers around his role as the Levines' attorney. While ther~ is 

little direct evidence of appellant's involvement, we must 

conclude that there was sufficient circumstantial evidence for a 

jury to have found beyond a reasonable doubt that appellant 

knowingly and actively participated in the conspiracy to defraud 

the United States. 

Viewing the evidence in the light most favorable to the 

government, a reasonable jury could infer that appellant was aware 

of the misuse of Sofa Gallery's employee pension plan funds, the 

Levines' interest in Action Sales Group, Inc., the misuse of the 

law firm trust account to hide the proceeds from the liquidation 

sale and the Schlapman trust account from the following evidence 

presented at trial. 

The evidence showed that appellant began working on the 

Levine bankruptcy case in 1985. His involvement in the Levine 

case gradually increased in 1986 when he attended a meeting at the 

Marriott with Schwartz, Forsey, and the Levines. During this 

meeting, it was suggested that Gary Levine use the Sofa Gallery's 

employee pension plan funds to capitalize Action Sales Group, Inc. 

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Although appellant denies that he acquiesced to the use of those 

funds in that manner, Forsey testified that appellant did not 

object. Further, Forsey's testimony was corroborated by the 

letter dated April 17, 1986, which stated that appellant had been 

fully briefed on all aspects of the Levine transactions. 

In addition to the letter drafted by Schwartz concerning 

appellant's knowledge of the Levine transactions, a reasonable 

jury could possibly infer that Schwartz "prepped" appellant O!l the 

Levine financial transactions when he turned the file over to him 

in 1987. Appellant's knowledge of Gary Levine's assets during the 

bankruptcy proceedings would be crucial to effective 

representation given the existing conspiracy to conceal a number 

of Gary Levine's assets. 

Further, appellant met with Gary Levine to discuss his assets 

and go over "ground rules" for his deposition. Appellant also 

discussed Gary Levine's assets with Schlapman. A reasonable jury 

could infer that appellant was aware of Gary Levine's undisclosed 

assets from these discussions. 

While we have previously held that knowledge or mere 

association is insufficient to convict on a charge of conspiracy, 

Fox, 902 F.2d at 1514, we believe that appellant's actions 

constitute more than mere knowledge given the following events and 

the inferences which may be derived therefrom. 

During his first deposition, Gary Levine failed to disclose 

any information regarding his interest in Action Sales Group, 

Inc., the law firm trust account or the Schlapman trust account. 

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While appellant did not attend this deposition, he did meet with 

Gary Levine prior to the deposition to discuss "ground rules." 

Appellant represented Gary Levine at his second deposition 

which took place on January 30, 1987. Again, Gary Levine failed 

to disclose any of the trust accounts. While they discussed the 

embezzlement scheme of the employee pension plan to fund Action 

Sales Group, Inc., Gary Levine denied any ownership or stock 

interest in the company. From this evidence, a reasonable ju~ 

could infer that appellant discussed Gary Levine's assets with him 

and how to conceal them during the deposition. They could further 

conclude that appellant was aware of the conspiracy to conceal 

Gary Levine's assets and actively participated in the conspiracy 

by failing to reveal the undisclosed assets to the bankruptcy 

trustee. 

Lastly, the jury heard testimony concerning appellant's 

destruction of business records contained in the Levines' storage 

locker. A reasonable jury could conclude that appellant's 

destruction of records relating to the Levines' bankruptcy 

proceedings was probative of his involvement in the conspiracy and 

could infer from his actions that he actively participated in the 

conspiracy to defraud the United States. 

Given the evidence presented and the reasonable inferences 

therefrom, a jury could have found beyond a reasonable doubt that 

appellant was aware of all of the Levines' financial transactions; 

that he agreed to defraud the United States by concealing their 

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Appellate Case: 90-1256 Document: 01019294833 Date Filed: 09/03/1991 Page: 11 
financial transactions; and that he aided the conspiracy in its 

objectives in violation of 18 U.S.C. § 371. 

Count 44 

Count 44 charged appellant with "knowingly, fraudulently, and 

unlawfully" concealing the assets and property of Gary Levine from 

D. Bruce Coles during the bankruptcy proceedings of Gary Levine on 

January 30, 1987, in violation of 18 u.s.c. §§ 2 and 152. Th~ 

indictment specifically alleged that appellant failed to disclose 

Gary Levine's interest in Action Sales Group, Inc. and the 

proceeds derived therefrom, as well as the law firm and Schlapman 

trust accounts. 

Appellant claims that the evidence was insufficient because 

there was no direct evidence that appellant knew about the law 

firm trust account or the Schlapman trust account; therefore, he 

could not have counseled, aided and abetted Gary Levine during the 

deposition as to the concealment of those accounts. He further 

contends that Coles was fully aware of the employee pension plan 

scheme because it was discussed during Gary Levine's deposition on 

January 30, 1987. 

After carefully reviewing the evidence in the light most 

favorable to the government, we conclude that a jury could have 

found beyond a reasonable doubt that appellant committed 

bankruptcy fraud in violation of 18 u.s.c. § 152 for substantially 

the same reasons as discussed above. 

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•' 

From the evidence, a reasonable jury could infer that 

appellant was aware of all of the Levines' undisclosed assets; 

that appellant aided Gary Levine in the concealment of those 

assets; and that appellant failed to disclose the existence of 

those assets during the proceedings of January 30, 1987. We 

believe that the evidence presented was sufficient. 

Count 46 

Count 46 charged appellant with "knowingly and fraudulently" 

destroying, mutilating, and concealing the corporate accounting 

records of the Sofa Gallery and Gary and Marcee Levine after Gary 

Levine had filed bankruptcy in violation of 18 u.s.c. §§ 2 and 

152. 

Appellant claims that the evidence was insufficient to 

convict him of destroying the records because he complied with all 

of the discovery demands. Further, he claims that all of the 

records necessary to reconstruct the beginning inventory of the 

liquidation sale and the proceeds from that sale were contained in 

the government's document room and produced at trial. 

Although we agree with appellant that he was very 

accommodating in permitting the inspection of the records 

contained in the storage locker, the timing of the destruction in 

relation to the following events is suspect. 

At the time appellant destroyed the records, Gary Levine's 

bankruptcy schedules had been filed and his case was pending; 

therefore, no records relating to his financial transactions 

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should have been destroyed. While the two subpoenas were not 

issued until after the records had been destroyed, appellant had 

received the May 19 order requesting that Marcee Levine produce 

records relating to her bankruptcy proceedings. He also knew that 

Coles was dissatisfied with discovery. Given this information, he 

should have given Coles or any other interested creditor the 

opportunity to review the records prior to destroying them. 

While appellant claims that the records destroyed were 

insignificant and that all of the records necessary to reconstruct 

the beginning inventory and results of the liquidation sale were 

produced at trial, without benefit of viewing those records, we 

cannot reach that same conclusion. 

Viewing the evidence in the light most favorable to the 

government and the reasonable inferences therefrom, the evidence 

presented established that the Levines stored records relating to 

their financial transactions in the storage locker; that Gary 

Levine had filed bankruptcy; and that appellant destroyed these 

records. A jury could have found beyond a reasonable doubt that 

appellant committed bankruptcy fraud in violation of 18 u.s.c. 

§ 152. 

Count 49 

Count 49 charged appellant with mail fraud under 18 u.s.c. 

§§ 2 and 134. The thrust of this count was that appellant falsely 

responded to a request by the bankruptcy trustee for information 

concerning the filing of the Levines' 1986 tax returns in a letter 

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sent through the United States mail. The government asserts that 

he responded falsely because the actual filing of the 1986 tax 

return would have revealed that the Levines received proceeds from 

Action Sales Group, Inc. 

In order to obtain a conviction under 18 u.s.c. § 134, the 

government was required to establish the existence of two 

elements: "(1) a scheme or artifice to defraud or obtain money or 

property by false pretenses, representations or promises; and/ 

(2) use of the United States mails for the purpose of executing 

the scheme." United States v. Cardall, 885 F.2d 656, 679 (lOth 

Cir.). 

Appellant claims that the evidence was insufficient to prove 

that he was involved in any scheme to conceal Gary Levine's assets 

or delay the filing of the Levines' taxes at the time he sent the 

letter to the bankruptcy trustee because all of the documents 

concerning Action Sales Group, Inc. had been disclosed and the 

bankruptcy trustee was aware of the employee pension plan scheme. 

While appellant correctly argues that the bankruptcy trustee 

was aware of the misuse of the employee pension plan funds, there 

is no evidence indicating that he was aware of Gary Levine's 

ownership interest in Action Sales Group, Inc. At his deposition, 

Gary Levine denied any ownership or stock interest in Action Sales 

Group, Inc. He also failed to disclose the proceeds he received 

from this venture in his bankruptcy schedules. Further evidence 

of this scheme is apparent from the fact that when the Levines 

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actually filed their tax return, they failed to report the 

proceeds from Action Sales Group, Inc. as income. 

Although appellant disclosed part of the Action Sales Group, 

Inc. agreement to Coles in July 1987, Coles did not receive a 

complete copy of the agreement until the fall of 1988, several 

months after the letter was sent to the bankruptcy trustee. In 

addition, a reasonable jury could possibly infer that appellant's 

letter to the bankruptcy trustee was not entirely accurate giyen 

appellant's destruction of some of the Levines' financial records. 

Therefore, at the time the letter was sent, a reasonable jury 

could conclude that the bankruptcy trustee was unaware of Gary 

Levine's interest in Action Sales Group, Inc. In an effort to 

conceal this information from the bankruptcy trustee and 

perpetuate the scheme to delay the filing of the Levines' 1986 tax 

return, appellant represented to him that not all of the records 

to complete the tax return were available. Based upon this 

evidence, a jury could have found beyond a reasonable doubt that 

appellant committed mail fraud in violation of 18 u.s.c. §§ 2 and 

1341. 

CO-CONSPIRATOR STATEMENTS 

Appellant challenges the admission of co-conspirator hearsay 

statements under Fed. R. Evid. 801(d)(2)(E). He argues that he 

was not a member of the conspiracy when those particular 

statements were made. He further claims that the trial court 

placed an imprimatur on the evidence. 

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The government began its presentation of the evidence in 

chronological order by establishing the underlying basis of the 

conspiracy. It presented evidence of the kickback agreement, the 

misuse of the law firm trust account to hide the proceeds received 

from the liquidation sale, the Schlapman trust account, the 

collection of Sofa Gallery's accounts receivable, and a plan to 

delay the filing of the Levines' corporate income tax return. 

Through two government witnesses, the trial court admitt~d 

the hearsay statements of the Levines and Schwartz which were 

allegedly made prior to appellant's involvement in the conspiracy. 

Appellant objected to their admissibility because it had not been 

established that he was a member of the conspiracy when the 

statements were made. The trial court overruled his objection but 

agreed to his request for a limiting instruction. The trial court 

gave the following limiting instruction: 

"THE COURT: Please be seated. Members 

of the jury, I am going to give you a limiting 

instruction at this time. I want to explain 

to you that we deal with evidence based upon 

what is known as the Federal Rules of 

Evidence. 

"And Rule 104(b) states that when the 

relevancy of evidence depends upon the 

fulfillment of a condition of fact, the Court 

shall admit it upon or subject to the 

introduction of evidence sufficient to support 

a finding of the fulfillment of the condition. 

"Now what that means in here in terms of 

the exhibits that are to be admitted in the 

government's case-in-chief is this: Each of 

the exhibits that will be offered and those 

which may be admitted by the Court are going 

to be admitted conditionally, and that 

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condition is that the government prove 

otherwise the existence of the conspiracy 

alleged. 

"So that as these exhibits are received 

into evidence during the course of the 

government's case-in-chief, bear in mind that 

until and unless the Court otherwise admits 

them unconditionally, they are not admitted to 

establish the existence of the conspiracy, 

rather the conspiracy will have to be 

established otherwise." 

Appellant did not object to this instruction. Thereafter, the 

_/ 

trial court expressed its concern that if the hearsay statements 

were subsequently admitted, this would convey to the jury that the 

trial court believed that the government had established the 

existence of a conspiracy. 

Although appellant had not requested a James hearing, the 

trial court held a hearing to determine the admissibility of the 

statements. It concluded that the evidence was sufficient to show 

that a conspiracy existed and that appellant was a member of that 

conspiracy. Appellant renewed his objection that the statements 

were inadmissible against him because he was not a member of the 

conspiracy when the statements were made. The trial court 

overruled appellant's objection, stating that "[o]nce a conspiracy 

is proven and once a person is hooked up to the conspiracy, even 

though it's at the tail end, the admission of co-conspirator 

statements at the front end are admissible against all the coconspirators." Supp. Vol. VII at 16. 

Rather than address the issue of the conditionally admitted 

statements, the trial court admitted them unconditionally, without 

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further instruction to the jury. Appellant did not object to the 

trial court's resolution of this issue. 

We first address appellant's claim that the trial court erred 

in admitting the hearsay statements of the co-conspirators which 

were made before it was established that he was a member of the 

conspiracy. In United States v. Mobile Materials, Inc., 881 F.2d 

866 (lOth Cir.), we said: 

"[A] trial court may admit statements of coconspirators under Fed. R. Evid. 80l(d)(2) 

after finding, by a preponderance of the 

evidence, that: 1) a conspiracy existed, 2) 

the declarant and the defendant against whom 

the declarations are offered were members of 

the conspiracy, and 3) the statements were 

made in the course of and in furtherance of 

the conspiracy." 

Id. at 869. In making this determination, the trial court may 

consider independent evidence as well as the hearsay statements 

themselves. Id. (citing Bourjaily v. United States, 483 u.s. 171, 

181). The determination of whether to admit such hearsay evidence 

is within the discretion of the trial court, Mobile Materials, 881 

F.2d at 869, and will not be reversed absent an abuse of 

discretion. United States v. Wolf, 839 F.2d 1387, 1393 (lOth 

Cir.). 

Such an abuse of discretion did not occur in this instance. 

In its case, the government presented the hearsay statements of 

the Levines and Schwartz primarily through the testimony of two 

government witnesses. The evidence, as a whole, established that 

a conspiracy existed; that the Levines, Schwartz and appellant 

were members of that conspiracy; and that the statements of the 

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Levines and Schwartz were made during the course and in 

furtherance of the conspiracy. 

Appellant contends that for these statements to be 

admissible, the government was required to prove that he was a 

member of the conspiracy at the time the statements were made. In 

support of his argument, he directs us to United States v. 

Andrews, 585 F.2d 961 (lOth Cir.). In Andrews, we stated that "if 

it is more likely than not that a declarant and coconspirator/were 

members of a conspiracy when hearsay statements were made and the 

statements were in furtherance of a conspiracy, that hearsay is 

admissible." Id. at 965 (citing United States v. Petrozziello, 

548 F.2d 20 (1st Cir.)). This statement, as set out in Andrews, 

is not dispositive of the issue raised by appellant. Whether the 

defendant would have to be a member of the conspiracy at the time 

the statements were made for the co-conspirator statements to be 

admissible was not there an issue. Further, the Petrozziello case 

which Andrews relied on was clarified and substantially limited in 

United States v. Baines, 812 F.2d 41, 42 (1st Cir.). 

The prevailing view among the circuits is that previous 

statements made by co-conspirators are admissible against a 

defendant who subsequently joins the conspiracy. See 

United States v. Murphy, 852 F.2d 1 (1st Cir.); United States v. 

Badalamenti, 794 F.2d 821 (2d Cir.); United States v. Osgood, 794 

F.2d 1087 (5th Cir.); United States v. Balistrieri, 778 F.2d 1226 

(7th Cir.); United States v. Jackson, 757 F.2d 1486 (4th Cir.); 

United States v. Leroux, 738 F.2d 943 (8th Cir.); United States v. 

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Jannotti, 729 F.2d 213 (3d Cir.); United States v. Tombrello, 666 

F.2d 485 (11th Cir.); United States v. Anderson, 532 F.2d 1218 

(9th Cir.). We join in that holding. The fact that appellant may 

have joined the conspiracy after its inception does not make his 

co-conspirators' previous statements inadmissible. Therefore, the 

hearsay statements were properly admitted. 

We next address appellant's claim that the trial court placed 

an imprimatur on the evidence. Appellant argues that any 

reasonably attentive jury could have inferred from the trial 

court's subsequent admission of these co-conspirator statements 

that it believed that a conspiracy existed. Because he failed to 

object to the trial court's resolution of this issue, we review 

for plain error. United States v. Lonedog, 929 F.2d 568, 570 

(lOth Cir.). 

We cannot say that this constituted plain error. The hearsay 

statements admitted prior to the James hearing did not implicate 

appellant in any way. They were merely introduced as background 

information concerning the commencement and overall objectives of 

the conspiracy. 

Further, appellant does not dispute the fact that a 

conspiracy existed. He only disputes his involvement in it. Even 

if we accepted appellant's argument, the most that a reasonable 

jury could infer is that the trial court believed that a 

conspiracy existed. The trial court did not comment on 

appellant's involvement in the conspiracy or convey to the jury 

that it believed appellant was a member of the conspiracy. The 

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jury was still required to determine beyond a reasonable doubt 

that appellant was a knowing and active member of that conspiracy. 

Lastly, the trial court instructed the jury that "you should 

not assume from anything I may have said that I have any opinion 

concerning any of the issues in this case." Supp. Vol. XIV at 7-

8. A fundamental premise of our judicial system is that the jury 

can and will follow the instructions given by the trial court. 

Cardall, 885 F.2d at 668 (citing Parker v. Randolph, 442 U.S./62, 

73). Absent evidence to the contrary, we must conclude that the 

jury followed the instructions provided by the trial court. 

BANKRUPTCY OPINIONS 

During the government's case in chief, the trial court 

allowed the government to introduce the statements of two 

bankruptcy judges made in earlier proceedings involving the same 

bankruptcy. Both statements contained conclusions by the judges 

regarding the law firm's possible involvement in the same 

conspiracy here charged. No basis for the conclusions was 

offered. Appellant challenges their admission on the basis that 

they constituted hearsay and were so prejudicial as to constitute 

reversible error. 

The argument presented by appellant essentially duplicates 

that made by the defendant in the companion case, United States v. 

Zimmerman, No. 90-1255, slip op. at 15-20 (lOth Cir. Aug. 28, 

1991). The only difference is that this appellant was actually 

mentioned by name in one of the statements. For substantially the 

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_, 

same reasons as articulated in Zimmerman, we conclude that the 

trial court abused its discretion in admitting the statements and 

conclusions made by the two judges about the same issues as in the 

case being tried. Their admission constituted reversible error. 

The admission of the conclusions of the two bankruptcy judges 

as to the basic issue of the trial of appellants Zimmerman and 

Brown was exactly the same as having the judges appear as expert 

witnesses--experts who gave their opinions and conclusions as/to 

the matters the jury properly was to decide. We can see no 

difference in using the judges' statements and having them make 

the statements as witnesses at the trial. 

QUESTIONS PRESENTED TO THE COURT BY THE JURY 

On the third day of deliberations, the jury sent a note to 

the trial court containing three questions. The questions were 

direct, well written and clearly described the jury's problem. 

The jury's inquiry stated: 

"If a person observes an act that is 

obviously, to him or her, a crime, (1) does 

the observer have a legal responsibility to 

report the crime; (2) does the observer have a 

legal responsibility to intervene to stop it; 

(3) does failure to report or otherwise 

intervene make the observer a participant or 

in any way responsible?" 

A conference was held to determine what the trial court's response 

should be. After some discussion, the trial court indicated that 

the jury's questions went to the "heart of the conspiracy concept" 

and that the jury instructions as a whole adequately addressed the 

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• 

questions posed. Supp. Vol. XVI. Appellant stated that in the 

absence of his tendered instruction on mere knowledge and 

association, rejected by the trial court, the trial court should 

refer the jury to instruction No. 5 with respect to defining the 

act of conspiracy and intent, and instruction No. 6 with respect 

to specific intent. The trial court rejected such a specific 

instruction stating that by referring them to the instructions as 

a whole, the jury would necessarily be referred to instructions 

Nos. 5 and 6. 

Appellant challenges the trial court's instructions to the 

jury claiming that his tendered instructions would have remedied 

the jury's confusion. We have reviewed appellant's proposed 

instructions and find that they were similar to those given by the 

trial court. Further, we find that they did not specifically 

answer the jury's questions regarding appellant's duty to report a 

crime. 

Although we find appellant's argument unpersuasive, some 

additional instruction was required. Because appellant has not 

raised the issue of an additional instruction before this court, 

we raise our own motion and review for plain error. See 

United States v. Kline, 922 F.2d 610, 613 (lOth Cir.). 

We addressed this issue in Zimmerman, No. 90-1255, slip op. 

at 20-24, and for essentially the same reasons expressed therein, 

we conclude that the jury may have been confused and convicted 

appellant on an improper basis. It was plain error not to resolve 

or attempt to resolve the jury's confusion. 

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) ' 

GRAND JURY ABUSE 

Appellant challenges the government's presentation of 

evidence to the grand jury. He claims that the government 

presented misleading and untruthful statements to the grand jury 

regarding his involvement with the other co-conspirators which 

interfered with the grand jury's independence and his right to 

fundamental fairness throughout the criminal process. 

Specifically, appellant focuses on testimony stating that he 

destroyed Sofa Gallery records; testimony that Judge Matheson 

found that he violated the law; and testimony that he agreed to 

the proposal to fund Action Sales Group, Inc. with the employee 

pension plan. 

The trial court denied appellant's motion to dismiss the case 

for grand jury abuse. United States v. Law Firm of Zimmerman & 

Schwartz, P.C., 738 F. Supp. 407 (D. Colo.). It found that 

appellant's challenge to the government's evidence "boil[ed] down 

to a challenge to the weight and credibility of the evidence 

presented to the grand jury." Id. at 411. The trial court 

rejected appellant's argument that exculpatory evidence was 

excluded from the grand jury, citing to appellant's narrative 

testimony before the grand jury and the admission of two extensive 

letters outlining his defenses and theory. Id. 

We review the trial court's factual determinations under the 

deferential clearly erroneous standard. United States v. 

Williams, 899 F.2d 898, 900 (lOth Cir.). The trial court's ruling 

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will only be reversed if we find errors in the indictment which 

prejudiced the defendant. Bank of Nova Scotia v. United States, 

487 u.s. 250. Such prejudice occurs if "there is some significant 

infringement on the grand jury's ability to exercise independent 

judgment." United States v. Pino, 708 F.2d 523, 530 (lOth Cir.). 

We agree with the trial court and find that the evidence 

presented by the government did not rise to the level of prejudice 

warranting a dismissal of the indictment. Appellant was allowed 

to present exculpatory material and was allowed to testify 

extensively on his own behalf. While the government's witnesses 

may have provided testimony which was somewhat unreliable, "the 

mere fact that evidence itself is unreliable is not sufficient to 

require a dismissal of the indictment." Nova Scotia, 487 U.S. at 

261. Any prejudice which might have resulted from the 

government's evidence was harmless. 

We have studied the remaining arguments made by appellant but 

conclude that we need not comment on them in view of our 

disposition of the case. 

IT IS ORDERED that the judgment is REVERSED by reason of the 

prejudicial errors and the case is REMANDED for a new trial. 

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