# Petition for Writ of Certiorari — Schwimmer v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1991
- **Citation:** 502 U.S. 810

## Text

90-1658 :

Bupreme Court, U.S
FILED
MAY 6 199)
IN THE | GRRGE OF RAE CUERK
SUPREME COURT OF THE UNITED STAPSS

OCTOBER TERM, 1990

MARTIN J. SCHWIMMER,

Petitioner,
-against-
UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF
CERTIORARI TO THE UNITED
STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

Alan M. Dershowitz

1525 Massachusetts Avenue
Cambridge, MA 02138

(617) 495-4617

Nathan Z. Dershowitz
Dershowitz & Eiger, P.C.
225 Broadway, Suite 2515
New York, NY 10007

(212) 513-7676

Victoria B. Eiger
Of Counsel

Ss 2) IEW

Whether it is proper for a
judicial decision to "dramatically
expand the scope of criminal
liability" under 18 U.S.C. §1954
by extending the statute's reach
to classes of persons not
mentioned in the statute and by
simultaneously narrowing its
express exception.
A. Whether a person may be

criminally liable under

18 U.S.C. §1954(1) --

which proscribes
receipt of certain
payments by "an

administrator, officer,

trustee, custodian,
counsel, agent, or
employee" of any

employee benefit plan

-~ if he "has the

Capacity to influence,
directly or indirectly,
the use of

benefit plan funds"
even though he does not
hold any of the
enumerated positions.
Whether the bona fide
compensation proviso of
18 U.S.C. §1954 applies
only where the person
who has received
payment has made full
disclosure to the plan
concerning his
comunmissions,
compensation, and
profit.

Whether the expansive
reading of §1954, if
appropriate at all,

must be applied

« ti-«

Il.

prospectively only.
Whether the Sixth Amendment's
right to counsel was violated
where, orice ¢6 trial, the
prosecutor obtained copies of
workpapers which were developed
for purposes of the defense and
which the prosecutor knew were
protected by the attorney-client
privilege so that he could assure
himself that there was nothing in
the defense which would surprise

him at trial.

- iii -

PARTIES TO THE PROCEEDINGS IN THE
COURT WHERE JUDGMENT IS SOUGHT

TO BE REVIEWED
The parties in the court below
were Martin Schwimmer, defendant-
appellant, and the United States of

America, appellee.

TABLE OF CONTENTS

QUESTIONS PRESENTED
FOR REVIEW... ccc ccc ccs cccccccscves i

PARTIES TO THE PROCEEDING
IN THE COURT WHERE JUDGMENT

IS SOUGHT TO BE REVIEWED.......... iii
TABLE OF CONTENTS... cccsccccccccecs Vv
TABLE OF AUTHORITIES......2eeceeees viii
OPINIONS BELOW... ..cccccccvccccvces xii
JURISDICTION OF THIS COURT......... X1v
CONSTITUTIONAL PROVISIONS

AND STATUTES INVOLVED............. XV
INTRODUCTION... cc cccccccccccccccvces 1
STATEMENT OF FACTS... cccccccscces 2
REASONS FOR GRANTING THE WRIT...... ig

I. THE COURT OF APPEALS

HAS DRASTICALLY AND
IMPROPERLY EXPANDED
THE SCOPE OF

18 U.S.C. §1954,
WHILE DRASTICALLY

AND IMPROPERLY
CONTRACTING THE
EXPRESS STATUTORY
EXEMPTION, AND,

IN SO DOING, HAS
VIOLATED PETITIONER'S
DUE PROCESS

RIGHTS... ccccccsccccsccce 13

A. THE COURT OF APPEALS
CONSTRUED §1954(1)
MUCH TOO BROADLY WHEN

IT READ THE STATUTE TO
REACH PERSONS WITH NO
EMPLOYMENT OR

FIDUCIARY RELATIONSHIP

TO AN EMPLOYEE

BENEPIT PLAN. .csccccccces 17

B. THE COURT OF APPEALS'
RULING THAT THE BONA

FIDE COMPENSATION

PROVISO OF §1954 IS

IN FACT A DISCLOSURE
PROVISION IS LIKEWISE
ERRONEOUS, AND COMPOUNDS
THE MISCHIEF THE EXPANSIVE
READING OF §1954's SCOPE
WILL CAUSE... cccccsccccces 26

C. EVEN IF THE COURT
OF APPEALS' READING OF
§1954 AND ITS PROVISO
ARE CORRECT, THAT
READING SHOULD

APPLY PROSPECTIVELY

II. THE DECISION OF THE COURT
OF APPEALS IGNORES
THE SUBSTANTIAL SIXTH
AMENDMENT, ATTORNEY-CLIENT
PRIVILEGE QUESTION THIS
CASE PRESENTS... .ccccccsece 33

CGE se & > 6 oon ORS 6 eee eee E ee «A 36
APPENDIX
Decision of the United States
Court of Appeals for the
Second Circuit
oe) ae > Pee: . SS Pe ee er A-1

Decision of the United States
Court of Appeals for the

- vi-

Second Circuit
RT BONN ek ovk cei e eek A-13

District Court's Memorandum
and Order
Ces: Bes SO) 6 0 6800s b hee we ee A-32

District Court's Memorandum
and Order
ee ee Peer ee ree A-43

District Court's Memorandum
and Order
(Be) ) eee a A~-52

Judgment of the

Court of Appeals

Affirming the Conviction

(ous Gals Bb 6 6 6.88 64 6-008 ee A-100

Order of the Court

of Appeals Denying Rehearing/
Rehearing en banc

pe NS A-102

- vii -

TABLE OF AUTHORITIES

CASES

Boule v. Columbia,
Ce Re Be. re 32

Caldwel]_v. United States,
205 F.2d 879
ee 35

Chambers v. Kaleidoscope, _
3 ver
Trust,
650 F. Supp. 359
Pcs I be oats Ses oweka es 19

Cc Vv ited States,

191 F.2d 749

(D.C. Che, 1931),

cert. denied,

PR Wes We CAOGR) 6 bdo cc iecccines 35

oxgo Vv ischemoe | eee 35
Hotfa v. United States,
Se A ri” See 35
Marks v. United States,
8S St! Bi) oy Se 32
Mc Vv. it tes,
we Uk 31
Rewis v. United States,
Se Wells ME PROPER Gi bv eeeocccuen 31

- viii -

Thornton v. Evans,
692 F.2d 1064
‘ek Ere 19

Vv er ,
433 F.2d 680
(2a Cir. 1970),

cert. denied,
~ S & we Be DS tree 20

United States v. Dorfman,

470 F.2d 246

(2a Cir. 1972),

cert. dismissal,

oe * Ae Et fT ee 21

United States v. Enmons,
SiG Ve. JSG CADTI) ccc ccccescves 31

United States v. Friedland,
660 F.2d 919
(3d Cir. 1981),
A ied,
SSO Vibe BES CABSS) oc ccccccvesssses 20

United States v. Harriss,
5 ae tee tl eee 31

United States v. Morrison,
602 F.2d 529

(3a Cir. 1979),
rev'd, 449 U.S. 361 (1981)........ 35

v. Palmeri,
630 F.2d 192
(3d Cir. 1980),

cer t : denied ’
SOW Walls WOT CROOR) 6 viccn ce cheascces 21

v. Posnjak,

457 F.2d 1110
te ee. 23

v. Provenzano,
615 F.2d 37 (2d Cir.),

cert. denied,
SO6 Dells BES CAGED cckccioccosvcce 21

United States v. Robilotto,
828 F.2d 940 (2d Cir. 1987),

cert. denied,
GBS Bela BOE (EBOB) cc cccccecccces 20

United States v. Romano,
684 F.2d 1057
(24 Cir.),
cert. denied,
COE Bata SOO (IGE) cc ccccccccnces 20

United States v. Russo,
442 F.2d 498
(2d Cir. 1971),

cert. denied,
404 U.S. 1023 (1972) cccccccccccscece r et
Vv. Ww q

785 F.2d 673

(9th Cir.),

cert. denied,

ee eee ee CSONE). ccc weer scewes 21

Uni Vv. ures,
736 F.2d 87
(3d Cir. 1984),

oe ETT e) er ee 21
Weatherford v. Bursey,
429 U.S. 545 (1977) .c.ccccvcscccce 35
STATUTES
18 U.S.C. BI9SE w cccccvcvscccseceoss passim
29 U.S.C. $1001 @t B@G...cccscccces 18
-

'

29 G.B. Ce. GELOZL—30. ccccccccvccccsc 29
29 U.G.Ce GLILILe ccccccccsssesceccces 29
29 U.S.C. $1002(21) (A) -cccccccccece 19
OTHER AUHORITIES

Department of Labor,

Legislative History of the

Wel‘ are and Pension Plan
Disclosure Act of 1958, As

j w 87-420

Of 1962... - ie es SS es ee we ee oe =e Ze Oe he he Ue Oe he Oe 27
108 Cong. Rec.

RFISIPRIESD CESS) ccoveccccccsvvesece 24
108 Cong. Rec.

1927-1935 (1962) .cccccccccvcvscecses 24
108 Cong. Rec. 1931

(1968) (EGR. GEVECE) coc ccccccccese 23
H.R. Rep. 998, 87th Cong.

2G SOBB. (1961) cccccccccccccsecves 24
S. Rep. 908, 87th Cong.

Ist SESS. (1961) .ccccccvccccccsess 24

- xi-

OPINIONS BELOW

During the trial, the district
court rendered two opinions’ which
addressed the scope of 18 U.S.C. §1954,
and its bona fide compensation proviso.
They are reported at 700 F.Supp. 104
(E.D.N.Y¥Y. 1988), and 706 F.Supp. 6
(E.D.N.Y¥. 1989), and are reproduced in
the appendix at A-32 and A-43,
respectively.

On appeal, the Court of Appeals
did not, initially, reach those issues.
It adressed only the issue of breach of
the attorney-client privilege, and
remanded the case to the district court
for further proceedings on that issue.
That decision is reported at 892 F.2d
237 (2d Cir. 1989), and is reproduced
in the appendix at A-13.

Following the remand, the
district court issued an opinion, which

is reported at 738 F.Supp. 654

- xii -

(E.D.N.Y. 1990), and reproduced at A-

52.

On January 23, 1991, the Court of
Appeals rendered its decision,
affirming the conviction. ss se

reported at 924 F.2d 443 (2d Cir.
1991), and reproduced in the appendix

at A-l.

- xiii -

JURISDICTION OF THE COURT

The judgment of the Court of
Appeals for the Second Circuit was
entered on January 23, 1991. (A-100)
The petition for rehearing was denied
by order entered on March 19, 1991. (A-
102) The Court has jurisdiction to
review the judgment of the Court of

Appeals pursuant to 28 U.S.C. §1254.

- xiv -

CONSTITUTIONAL PROVISIONS
AND STATUTES INVOLVED

The Fifth Amendment to the
Constitution provides, in pertinent
part:

nor shall any person
so * be deprived of life,
liberty, or property, without due

process of law °

The Sixth Amendment to the
Constitution provides, in pertinent
part:

In all criminal prosecutions, the

accused shall enjoy the right

to have the Assistance of

Counsel for his defence.

Section 1954 of Title 18 of the
United States Code provides:

Whoever being:

(1) an administrator, officer,
custodian, counsel, agent, or
employee of any employee welfare
benefit plan or employee pension
benefit plan; or

(2) an officer, counsel, agent,
or employee of an employer or an
employer any of whose employees
are covered by such plan; or

(3) an officer, counsel, agent,
or employee of an employee

— xXV —

organization any of whose members
are covered by such plan; or

(4) a person who, or an officer,
counsel, agent, or employee of an

organization which, provides
benefit plan services to such
plan

receives or agrees to receive or
solicits any fee, kickback, commission,
gift, loan, money, or thing of value
because of or with intent to be
influenced with respect to, any of his
actions, decisions, or other duties
relating to any question or matter
concerning such plan or any person who
directly or indirectly gives or offers,
or promises to give or offer any fee,
kickback, commission, gift, loan,
money, or thing of value prohibited by
this section, shall be fined not more
than $10,000 or imprisoned not more
than three years, or both: Provided,
That this section shall not prohibit
the payment to or acceptance by any
person of bona fide salary,
compensation, or other payments made
for goods or facilities actually
furnished or for services actually
performed in the regular course of his
duties as such person, administrator,
officer, trustee, custodian, counsel,
agent or employee of such plan,
employer, employee organization, or
organization providing benefit plan
services to such plan.

As used in this section, the term
(a) “any employee welfare benefit plan"
or “employee pension benefit plan"
means any employee welfare benefit plan
or employee pension benefit plan,
respectively, subject to any provision

- xvi -

of title I of the Employee Retirement
Income Security Act of 1974, and (b)
"employee organization" and
administrator" as defined respectively
in sections 3(4) and (3)(16) of the
Employee Retirement Income Security Act
of 1974.

- xvll -

INTRODUCTION

This case raises the fundamental
question whether it is proper for a
judicial decision to "dramatically
expand" the scope of criminal liability
under a federal criminal statute. If
there is any doubt that the Court of
Appeals' decision does dramacically
extend the scope of §1954, one need
only consult the prosecutor who
fashioned the charges and tried the
case. In an article he wrote which
appeared on the front page of the New
York Law Journal, he describes the
decision's broad ramifications,
bemoaning only the fact that’ the
decision's significance has yet to be
fully appreciated.

Petitioner submits that this
dramatic expansion of the statute is
unwarranted; it is inconsistent with

the statute's language and its

_

legislative history. In any i
even if the Court of Appeals'
interpretation of the statute is a
correct one, Petitioner submits that it
can apply only prospectively, because
he had no fair warning that the law
proscribed the conduct the Court of

Appeals has now ruled to be illegal.

STATEMENT OF FACTS

Petitioner Martin Schwimmer, Mario
Renda, and their firm, First United,
offered investment opportunities in the
form of jumbo CD's issued by various
banks and savings and loan institutions
to the employee benefit plans of Local
38 of the Sheetmetal Workers and of
Local 810 of the International
Brotherhood of Teamsters. These jumbo
CD's were attractive investments for
the plans; they carried negotiated

interest rates far higher than those

available on smaller CD's.

Petitioner received no
compensation whatsoever from Local 810
or its benefit plans, nor did he pay
off anyone from the union or the plans
in order to obtain the plans' business.
(A-20) Rather, he was compensated for
his work brokering these CD's through
commissions paid to First United by the
banks which issued the CD's. Renda and
Petitioner, as First United's
principals, shared the commissions,
which were placed in off-book accounts,
and, according to the government, not
reported as income.

The trustees and administrators of
the benefit plans knew that Petitioner
was not a good samaritan or a
volunteer; they assumed that he was
being compensated for his work, through
commissions or otherwise. They never
inquired as to the amount or basis for

his compensation, and Schwimmer did not

a

volunteer this information. At..@ii
times, the plans had full and accurate
Knowledge of the interest paid on their
CD investments.

In a straightforward application
of §1954, the indictment in this case
charged that Petitioner -- who was a
financial advisor to Local 38's benefit
plans and who was paid by those plans
for his services -- violated §1954 by
accepting commissions from banks in
connection with investments made by the
Local 38 benefit plans.

However, Petitioner was also
indicted, under 18 U.S.C. §1954, on the
novel and unprecedented claim that his
receipt of commissions from the banks

on Local 810's investments violated

that statute. To appear to come within
the statutory language the indictment

nevertheless recited that Petitioner

was "an investment advisor to, and an

agent and counsel of" the employee
benefit plans of Local 810.'

Not surprisingly, Petitioner's
relationship with Local 810's plans
became a critical issue at his trial.
Local 810's comptroller, Steven Gilman,
testified, without contradiction, that
Schwimmer was paid nothing by Local 810
or its employee benefit plans; Gilman
assumed that Schwimmer was receiving
compensation from other sources. (A-20)
Furthermore, Gilman made clear that,
although nearly half of Local 810's
investments and almost all of its cCD
investments were made through

Schwimmer, the investment decisions

were not made by Petitioner, but by

' Petitioner's indictment also

charged him with income tax evasion for
failure to report commissions,
conspiracy to defraud the United
States, and RICO conspiracy, based on
the predicate §1954 offenses.
Petitioner was convicted on these
charges, too.

Dennis Silverman, who was president of
Local 810 and the administrator of its
funds. Unlike Silverman, Petitioner
was not a fund fiduciary. He was
viewed as a stockbroker or other
independent provider of investment
opportunities.

Notwithstanding the absence of any
agency or fiduciary relationship to
Local 810's plans, even though the
statute's language is quite specific,
and over Petitioner's objection, the
trial court adopted the government's
view that Petitioner could nevertheless
be subject to §1954. The court charged
the jury that §1954 reaches all persons
“with the capacity to influence,
directly or indirectly, the use of
employee benefit funds," whether or not
they occupy any of the positions
enumerated in the statute. The court

instructed that, even if Petitioner was

not an agent or counsel to the local,
or its funds, he was subject to §1954
if his investment advice or
recommendations had a-— significant
influence on the funds' investment
decisions.

Responding to the jury's requests
for clarification during deliberations,
the court also instructed that §1954's
proviso exempting from the definition
of prohibited payments the acceptance
of “bona fide salary, compensation, or
cther payments made for .. . services
actually performed in the regular
course of his duties” applied only if
the person receiving such payments
disclosed to the plan details of his
compensation. (A-32)

On his appeal to the Court of
Appeals for the Second Circuit from his
conviction, Petitioner challenged the

district court's novel interpretation

,

of §1954, and the jury instructions
based on that interpretation. The
Court of Appeals affirmed. (A-1)

It held that §1954's “proscription
extends to ‘all persons who exercise
control, direct or indirect, authorized
Or unauthorized{,} over [a plan)'"
whether or not they hold one of the
enumerated positions. (A-9) Invoking
the broad, protective purposes of
§1954, the Court also approved the
lower court's ruling that a person
could fall within the statute's bona
fide compensation provision only if he
had made disclosure of the
compensation:

Because Section 1954 uses broad

language to protect plan

beneficiaries from dishonest or
unfaithful fiduciaries, it seems
clear that the statute was meant
to reach Schwimmer's intentional
failure to inform the trustees of

Local 810 that he was extracting a
commission from the placement of

their investments. (A-11)
The Second Cigrewitct’s
- 8-

extraordinarily expansive reading of
§1954 reflected in the court's first
holding, and the peculiarly narrow
reading of §1954's bona fide
compensation exemption to contain a
disclosure requirement, which is the
court's second holding, fly in the face
of explicit statutory language,
legislative history, case law, and
sound considerations of public policy.
The ruling necessarily affects all who
offer financial or other products to
pension plans. Ultimately it will also
affect the plans themselves, which, as
a result of the Court's ruling, will
Simply cease being offered the products
and services available to all others.
The Court of Appeals also rejected
Petitioner's claim on appeal that his
Sixth Amendment right to counsel and

the attorney-client privilege had been

violated by the prosecution. (A-7-8)

coaeniaa attanaaat etait ene |

Prior to trial, government prosecutors
had obtained from an accountant
retained by the defense team, certain
documents prepared by the accountant
for purposes of the sefense and
protected by the attorney-client
privilege. The documents were the
accountant's worksheets which, inter
alia, allocated the commissions
received by First United between Mario
Renda and Petitioner and which were
prepared by the accountant for purposes
of their joint defense.* Although the
government was on clear notice that the
worksheets were protected by the
attorney-client privilege, it obtained
the documents, as the prosecutor
acknowledged, so that he could assure
himself that they contained nothing

which might “bite him in the ass," that

e Renda ultimately pled guilty

before trial.

is, surprise him at trial and undermine
the government's case. Having acquired
the workpapers and having concluded
that they contained nothing which would
jeopardize the government's case, the
prosecution claimed that it made no
further use of them.

Following a remand by the Court of
Appeals for factfinding on the
government's use of the privileged
documents, the district court found
that there had been no impermissible
use of the documents. (A-52) It wholly
ignored Petitioner's claim that the
prosecutor's admitted acquisition and
use of the worksheets to reassure
himself that the defense would not
Surprise him at trial was itself an
impermissible use of the privileged
material.

The Court of Appeals, affirming,

refused to disturb the district court

ea

ruling. It too wholly ignored
Petitioner's claim that the
prosecutor's intentional invasion of
the defense camp to obtain documents
the prosecutor Knew were protected by
the attorney-client privilege -- and
his use of the documents to put his
mind at ease about the defense the
defendant would present -- violated

Petitioner's Sixth Amendment rights.

iG THE WRIT

I. THE COURT OF APPEALS’ HAS

DRASTICALLY AND IMPROPERLY

EXPANDED THE SCOPE OF

18 U.S.C. §1954, WHILE

DRASTICALLY AND IMPROPERLY

CONTRACTING THE EXPRESS

STATUTORY EXEMPTION, AND IN

SO DOING, HAS VIOLATED

PETITIONER'S DUE PROCESS

RIGHTS

Throughout these proceedings, the
prosecutor who fashioned Petitioner's
indictment and tried the case
downplayed the novelty of the
government's theory of Petitioner's
criminal liability under 18 U.S.C.
§1954, and ignored the ramifications of
that theory. But the prosecution has
always known what judicial acceptance
of his approach would mean.

As he wrote in an article about

this case which recently appeared on

the front page of the New York Law

Journal:

In a recent sleeper of a
decision whose repercussions
have yet to be felt, the U.S.

ne

Court of Appeals for the

Second Circuit dramatically

expanded the scope of

potential criminal liability

for investment advisors and

others who provide financial

services to employee benefit

plans, including most

notably, union pension funds.
Maffeo, '‘Schwimmer' Expands Liability
For Union Pension Fund Advisors,
N.¥.LJ., Apr. 11, 1991, at 1, col. 1.
If anything, the prosecutor continues
to understate the ramifications of the
Court of Appeals' decision.

As a result of that decision,
every bank, insurance company,
brokerage house, or investment firm (as
well as their officers or employees),
which has successfully solicited
investment business from any pension or
other employee benefit plan and which
has not disclosed the profit (or
salary, or commissions) it will make on

the plan's business has violated 18

U.S.C. §1954. If the bank, insurance

company, brokerage house, or investment

firm (or its officers or employees)
successfully solicits more than a
Single investment or solicits from more
than a single employee benefit plan,
the criminal RICO statutes will have
been violated as well. But there is
more. The decision of the Court of
Appeals is not limited by either its
logic or its terms to investment-
related services. Under the Court of
Appeals’ decision, any person or
business entity which supplies goods or
services of any sort to an employee
benefit plan at a profit or who is
compensated for his work, either by
Salary or by commission, has committed
a federal felony unless the amount of
his profit, salary, or commission is
disclosed to the plan.

As the prosecutor has now

acknowledged, the reading of §1954

ee

urged by him and endorsed by the Court
of Appeals "dramatically expanded the
scope of potential criminal liability"
under that statute. Petitioner submits
that this judicial expansion conflicts
with the clear and @xplicit language of
the statute, and criminalizes conduct
by persons the statute was never
intended to reach. The unjustified
expansion of liability throws’ into
question the propriety of the conduct
of scores of financial institutions
which have long dealt with employee
benefit plans precisely as the
Petitioner did. Ironically, rather
than protecting plan beneficiaries, the
court's decision must ultimately hurt
then, for those who have made
investment opportunities available to
employee benefit plans can no longer do

so without risking criminal sanctions.

Imposing criminal penalties on the

Petitioner -- who faces a ten year
prison sentence and over six million
dollars in fines and forfeitures -- is
particularly inappropriate. Because
the statute Petitioner has been
convicted of violating gave no fair
notice that it meant what the Court of
Appeals now says it means, Petitioner's
conviction violates his right to due
process.
A. THE COURT OF APPEALS'
CONSTRUED §1954(1) MUCH TOO
BROADLY WHEN IT READ THE
STATUTE TO REACH PERSONS WITH
NO EMPLOYMENT OR FIDUCIARY
RELATIONSHIP TO AN EMPLOYEE
BENEFIT PLAN
This case involves Section 1954 of
Title 18, one of three criminal
offenses created by the Welfare and
Pension Plan Disclosure Amendment Act
of 1962, Pub. Law 87-420. That law was

enacted to strengthen the Welfare and

Pension Plan Disclosure Act of 1958,

Pub. Law 85-836, Congress' first effort

to eliminate certain perceived abuses
in the management and administration of
pension plans and other’ employee
benefit plans. Ultimately, Congress
found that the 1958 Act and its 1962
amendments were inadequate to protect
the beneficiaries of employee benefit
funds, and enacted the Employee

Retirement Income Security Act of 1974,

29 U.S.C. §§1001 et seq. ("ERISA").
ERISA contains complex and

comprehensive reporting and disclosure
requirements, and sets standards for
the conduct of persons who manage
employee benefit plans and plan funds.
The language of §1954 is inartful,
but it is not impenetrable. In
specific terms, it proscribes the
giving of anything of value to any
administrator, officer, trustee,

custodian, counsel, agent or employee

of any employee benefit plan (welfare

plan or pension plan), or to any
officer, counsel, agent or employee of
any employer or any union whose
employees or members are covered by
such a plan, because of such person's
actions, decisions or duties relating
to the plan. It also prohibits the
receipt of anything of value by those
same categories of persons with intent
to be influenced in his’ actions,
3

decisions or duties.

Until this case, all prosecutions

3 In addition, it prohibits

payment to or receipt of payment by a
person or entity which provides benefit

plan services to a plan, or any
officer, counsel, agent or employee of
such an entity. That provision,
§1954(4), is not at issue here.

Subsection (4) applies only to those
who provide benefit plan services to a
plan for a fee paid by the plan. See

Thornton v. Evans, 692 F.2d 1064, 1077
(7th Cir. 1982); Chambers. Vv.

Kaleidoscope, Inc., Profit Sharing Plan
and Trust, 650 F.Supp. 359, 376 (N.D.
Ga. 1986). See also 29 U.S.C. §1002
(21) (A). Further, the challenged
instructions to the jury were given in
connection with subsection (1), not
subsection (4).

under the statute had been confined to

persons who did occupy one or more of
the seven specified positions in an
employee benefit plan or one or more of
the specified union or employer
positions. A uniform body of case law
had developed which made clear that the
commands of the statute applied to any
person who occupied one or more of the
specified positions and who was in a
position to exercise influence over the
disposition of plan funds. See United
States v. Robilotto, 828 F.2d 940 (2d
Cir.), cert. denied, 484 U.S. 1011
(1988) (union's business agent); United
States v. Friedland, 660 F.2d 919 (3d
Cir. 1981) (general counsel to the
local); United States v. Romano, 684
F.2d 1057 (2d Cir.), cert. denied, 459
U.S. 1016 (1982) (security treasurer of

the union; executive administrator of

the plan); United States v. Berger, 433

- 20 -

—

F.2d 680 (2d Cir. 1970), cert. denied,
401 U.S. 962 (1971) (union president,

pension fund trustee); United States v.
Dorfman, 470 F.2d 246 (2d Cir. 1972),

cert. dismissed, 411 U.S. 923 (1973)
(special consultant to the _ fund);
United States v. Russo, 442 F.2d 498
(2d Cir. 1971), cert. denied, 404 U.S.
1023 (1972) (fund agent and counsel);
United States v. Schwartz, 785 F.2d 673
(9th Cir.), cert. denied, 107 S.Ct. 290
(1986) (plan trustees); United States
v. Soures, 736 F.2d 87 (3d Cir. 1984),
cert. denied, 469 U.S. 1161 (1985)
(union president); United States v.
Provenzano, 615 F.2d 37 (3d Cir.),
cert. denied, 446 U.S. 953 (1980) (fund
trustee); United States v. Palmeri, 630
F.2d 192 (3d Cir. 1980) (president and
secretary-treasurer of the local, fund
trustees, business representatives and

employees of the local).

- 21-

ae

The Court of Appeals for the
Second Circuit has now turned this body
of case law on its head by holding that
it is irrelevant whether a defendant
occupies one of the specified
positions, and that it is sufficient if
he is in a position to influence
investment decisions.

One problem with this construction
of the law is that the statute says no
such thing and no case before this one
has held or suggested that persons
outside the classes so meticulously set
forth in the statute are also subject
to its commands.

Section 1954(1) carefully
catalogues the persons to whom it
applies. It does not extend to persons
who have no employment relationship
with the plan and who are ~not
compensated by it, but who are employed

by other businesses which seek to do

business with employee benefit plans.*

Moreover, considerations of public
policy and fundamental fairness fully
support such a construction of the
statute. A person who falls within
one of the enumerated classes will know
or be in a position to ascertain it,
and will be able to regulate his
conduct accordingly. In contrast, a

person who comes to a plan with an

investment proposal will not
necessarily know whether his
recommendations are Significantly

* Under the maxim of statutory
construction, “expressio unis est
exclusio alteriums," where a statute
names the parties who come within its
provisions, other unnamed parties are
excluded. See, e.qg., Foxgord vv.
Hischemoeller, 820 F.2d 1030, 1035 (9th

Cir.), cert. denied, 108 S.Ct. 503
(1987). This principle has always had

special force in the construction of
penal statutes which must, in any
event, be narrowly construed to avoid
subjecting to prosecution activities
and individuals the legislature did not
mean to expose to liability. United

States v. Posniak, 457 F.2d 1110, 1118
(2d Cir. 1972).

influencing those who in fact are
charged with making investment
decisions.

Nothing in the legislative history
supports the Second Circuit's reading
of the statute.*® On the contrary, the
legislative history demonstrates that
§1954 was enacted to address certain
well defined and "flagrant abuses"
which survived the enactment of the
Welfare and Pension Plans Disclosure
Act of 1958. These flagrant abuses
involved bribery, kickbacks and related

conflict-of-interest payments involving

> The legislative history consists
of S. Rep. 908, 87th Cong. ist Sess.
(1961); H.R. Rep. 998, 87th Cong. 2d
Sess. (1961), reprinted in 1962 U.S.
Code Cong. & Admin. News 1532, Cong.
Rec. 1417, reported in 1962 U.S. Code
Cong. & Admin. News; Hearings before
the House Subcommittee on Labor of the
Committee on Education and Labor, 87th
Cong. ist Sess. (1961); Hearings before
the Senate Subcommittee on Labor of the
Committee on Labor and Public Welfasce,
87th Cong. list Sess. (1961); 108 Cong.
Rec. 1727-1743 #£=(House) (1962); 108
Cong. Rec. 1927-1935 (Senate) (1962).

plan trustees and administrators,
specifically, the use of relatives of
parties-in-interest as recipients of
purported salaries, fees or commissions
and bribes in the form of loans and
letters of credit. To the extent that
the statute's language is broad, it
reflects the conclusion that kickbacks
for the benefit of pension fund
administrators and fund fiduciaries
take myriad forms and the determination
-- subject to some controversy at the
time -- that the law should cover not
only union managed plans, but
management (employer) managed plans,
and jointly managed plans. See 108
Cong. Rec. 1931 (1962) (Sen. Javits).
Petitioner's conviction under a
reading of the statute which cannot be
squared with the statute's language,
legislative history, or underlying

purpose substantially undermines the

a e

Congressional policy to forbid certain
practices by persons with an employment
or fiduciary relationship to employee
benefit plans, and to leave others free
to act as they always have in their
dealings with employee benefit plans.
B. THE COURT OF APPEALS’ RULING
THAT THE BONA FIDE
COMPENSATION PROVISO OF §1954
IS IN FACT A_ DISCLOSURE
PROVISION Is LIKEWISE
ERRONEOUS, AND COMPOUNDS THE
MISCHIEF THE EXPANSIVE
READING OF §1954's SCOPE WILL
CAUSE
Construing §1954's bona fide
compensation proviso, an issue of first
impression, the Court of Appeals upheld
an instruction to the jury that
compensation cannot be bona fide, and
thus its receipt cannot be lawful,
unless its amount is disclosed to the
union and to its benefit plans. By
upholding this instruction, the panel

has converted §1954, a criminal statute

which prohibits the offer or acceptance

- 26 -

of certain proscribed payments to or by

certain persons, into a disclosure law,
the contours of which are unknown and
unknowable.°®

While purporting to further the
legislative purpose, the ruling ignores
the pertinent legislative history.
Nothing in §1954's legislative history
refers, either directly or indirectly,
to fair disclosure, full disclosure or
any duty to disclose whatsoever. See

Department of Labor, islative

History of the Welfare and Pension Plan

6 Petitioner submits that §1954's
bona fide compensation proviso does not
come into play at all in this case
because he is not among the persons
covered by §1954. Indeed, the
proviso's inapplicability further
confirms that §1954 was not intended to
reach any persons except those who hold
the positions enumerated in the
statute. The bona fide compensation
clause covers payments to persons for
services performed as ; ; ;
administrators, officer, trustee,
custodian, counsel, agent or employee,"
that is, in the covered capacities.
There were no such payments at issue
here in connection with Local 810.

- 27 -

Disclosure Act of 1958, as amended by
Public Law 87-420 of 1962. Section

1954 stands in stark contrast to §1027
of Title 18, one of the other two
criminal offenses created at the same
time §1954 became law. Section 1027
does concern disclosure obligations; it
makes it a felony to make false
statements or to conceal facts in
documents required to be published or
kept.

Reading §1954 as a disclosure
provision, as the Court of Appeals did,
does not merely create a legislative
design where none existed. It actually
threatens to wreak havoc on ERISA.
That carefully constructed statutory
scheme superseded the reporting and
disclosure requirements of the 1954 Act
and its 1962 amendments, and
established detailed and comprehensive

disclosure requirements, as well as

- 28 -

acter eeneneieenaeeint eel

civil and criminal sanctions for non-

compliance. See 29 U.S.C. §§1021-30,
1131.

Reading disclosure obligations
into §1954 is particularly
inappropriate in this case because
there is no dispute that Local 810 and
its plans knew that Petitioner was
being compensated by others for his
work. Thus, if anyone associated with
the plans and with fiduciary
responsibility for plan monies had
wanted to know details of Petitioner's
or First United's profits, they need
only have asked. To impose criminal
penalties on Petitioner because he
failed to disclose information that no
one in his position has ever revealed

and which no one ever asked him to

disclose is patently unjust.

The Second Cirewitc’s
extraordinarily broad reading of
= 29 -

"

§1954's reach to extend to persons who,
essentially, sell services or products
to an employee benefit plan, coupled
with the Court's peculiar reading of
§1954's bona fide compensation proviso
to require disclosure to the plan by
any such person of his compensation or
profit, will inevitably affect all
those who do business with employee
benefit plans. It will, Petitioner
submits, result in their simple refusal
to continue to do business’ with
employee benefit plans, to the ultimate
detriment of plan beneficiaries.
Because the ramifications of the Court
of Appeals' decision are so far-
reaching, review by this Court is

warranted.

- 30 -

Cc. EVEN IF THE COURT OF APPEALS'
READING OF §1954 AND ITS
PROVISO ARE CORRECT, THAT
READING SHOULD APPLY
PROSPECTIVELY ONLY

The Court of Appeals expansive
reading of §1954's scope, and narrow
reading of its exception, even if
correct, should be applied
prospectively only. Petitioner's
conviction under the Court's novel and
unanticipated reading of the law
violates the fundamental due process
principle that a criminal statute must
give fair warning of the conduct that

it makes a crime.’ See, e.q., United

States v. Harriss, 347 U.S. 612 (1954);

McBoyle v. United States, 283 U.S. 25

’ The doctrine of lenity requires
that any ambiguity concerning the ambit
of a criminal statute should be
resolved in favor of the defendant.
See United States v. Enmons, 410 U.S.
396, 411 (1973) (“({criminal statues}
must be strictly construed, and any
ambiguity must be resolved in favor of
lenity."); Rewis v. United States, 401
U.S. 808 (1971).

(1931).

As this Court has_- recognized,
deprivation of the right to fair
warning can not only arise from vague
statutory language, but from an
unforeseeable and retroactive judicial

expansion of narrow and _ precise

statutory language. © Vv.
Columbia, 378 U.S. 347 (1964). See

also Marks v. United States, 430 U.S.

188 (1977). Petitioner submits that is
what has happened in his case. Thus,
even if the Court of Appeals'
construction is correct, its ruling

should apply prospectively only.

- 32 -

II. THE DECISION OF THE COURT OF

APPEALS IGNORES THE
SUBSTANTIAL SIXTH AMENDMENT,
ATTORNEY-CLIENT PRIVILEGE

QUESTION THIS CASE PRESENTS

The Court of Appeals' decision
obscures a critical point, and evades
entirely an important Constitutional
question warranting this Court's
attention. The uncontroverted evidence
established that, prior to Petitioner's
trial, the Assistant United States
Attorney in charge of the prosecution
sent two case agents to obtain certain
workpapers from an accountant who had
been retained by defense attorneys. At
the time, the government was on clear
notice that the workpapers were
prepared for the defense of the case,
and that they were protected by the
attorney-client privilege. In fact,
the AUSA had initially been frustrated
in his attempts to obtain these very

workpapers from the accountant when the

accountant invoked the attorney-client
privilege, and declined to produce
then.

The AUSA, however, refused to give
up. As he acknowledged, he wanted the
workpapers befcre trial so that he
could make sure that they contained
nothing which might “bite (him) in the
ass," that is, surprise him at trial
and threaten the government's case.
The case agent, who obtained the
accountant's workpapers at the AUSA's
request, reviewed them and turned them
over to the AUSA. He let the AUSA know
that the defense view of the facts, as
revealed in the workpapers, posed no
threat to the government's case. In
this way, the AUSA received the very
assurances that he sought.

This case squarely raises the

question whether the prosecutor's

admitted use of the privileged papers

to assure himself that there was no
risk that he would be surprised by the
defense was a proscribed use of the
privileged documents and one that
violated the defendant's Sixth
Amendment right to counsel. See
Weatherford v. Bursey, 429 U.S. 545
(1977); Hoffa v. United States, 385
U.S. 293 (1966); Glasser v. United
States, 315 U.S. 60 (1942). See also

Caldwel]_v. United States, 205 F.2d 879
(D.C. Cir. 1953); Coplon v. United

States, 191 F.2d 749 (D.C. Cir, 1951),
cert. denied, 342 U.S. 926 (1952).
This case presents an appropriate
opportunity for this Court to address
the question whether intentional
invasions of the defense camp by

overzealous prosecutors will -- or will

not be -- tolerated.

CONCLUSION

For the above stated reasons, the
petition for a writ of certiorari

should be granted.

Respectfully submitted,

Alan M. Dershowitz

1525 Massachusetts Avenue
Cambridge, MA 02138

(617) 495-4617

Nathan Z. Dershowitz
Dershowitz & Eiger, P.C.
225 Broadway, Suite 2515
New York, NY 10007
(212) 513-7676

Victoria B. Eiger
Of Counsel

May 2, 1991

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

—_>—

No. 464—August Term, 1990

(Submitted After Remand September 24, 1990
Decided January 23, 1991)

Docket No. 89-1106

>

UNITED STATES OF AMERICA,
Appellee,

—against—

MARTIN SCHWIMMER,
Defendant-Appellant.

Before:

MINER and ALTIMARI, Circuit Judges,
and GRAY, District Judge.*

7.

Following remand for hearing on issue of violation of
attorney-client privilege, appeal from judgment of
United States District Court for the Eastern District of
New York (McLaughlin, J.), convicting defendant-

* Hon. William P. Gray, United States District Judge for the Central
District of California, sitting by designation.

A-1

appellant, after jury trial, of racketeering conspiracy,
receiving illegal payments to influence the operations of
employee benefit plans, conspiracy to defraud the
United States and income tax evasion.

Affirmed.

a

NATHAN Z. DERSHOWITZ, New York, NY
(Victoria B. Eiger, Dershowitz & Eiger,
New York, NY, Alan M. Dershowitz,
Cambridge, MA, Daniel R. Williams, of
counsel) for Defendant-Appellant.

ANDREW J. MALONEY, United States Attor-
ney for the Eastern District of New
York, New York, NY (Louis M.
Fischer, Department of Justice, Wash-
ington, DC, of counsel) for Appellee.

>

MINER, Circuit Judge:

Defendant-appellant Martin Schwimmer appeals from
a judgment of conviction entered after a jury trial in the
United States District Court for the Eastern District of
New York (McLaughlin, J.). Schwimmer was convicted
of conspiring to conduct the affairs of an enterprise
through a pattern of racketeering activity, 18 U.S.C.
§ 1962(d) (1988), receipt of illegal payments to influence
the operations of employee benefit plans, 18 U.S.C.
§ 1954 (1988), conspiracy to defraud the United States,
18 U.S.C. § 371 (1988), and income tax evasion, 26
U.S.C. § 7201 (1988). The offenses all relate to the

A-2

receipt of commissions from a number of financial insti-
tutions for investing the funds of employee benefit plans
in Certificates of Deposit issued by the institutions.

Schwimmer argues that his sixth amendment right to
counsel was violated when the government intentionally
obtained from his accountant information protected by
the attorney-client privilege. He also contends that the
district court erred in instructing the jury that, whether
or not he was a formally-designated agent or counsel of
the employee plans allegedly victimized, he was subject
to the provisions of 18 U.S.C. § 1954 if his investment
advice significantly influenced the investment decisions
of the plans. Schwimmer argues further that the trial
court improperly instructed the jury that he was
required to disclose his commissions to an employee
benefit plan for which he acted in order to come within
the ‘‘bona fide compensation’’ exception provided in 18
U.S.C. § 1954.

In United States v. Schwimmer, 892 F.2d 237 (2d Cir.
1989) (‘‘Schwimmer I’’), we remanded for an eviden-
tiary hearing on the attorney-client privilege issue. After
that hearing, the district court found that no violation
of the privilege had occurred because no use or deriva-
tive use of privileged information was made by the gov-
ernment.

We hold that, on the basis of the additional evidence
adduced at the hearing, the district court correctly found
that no violation of the attorney-client privilege warrant-
ing a reversal of Schwimmer’s conviction had occurred.
Regarding the challenge to the jury instructions, we hold
that the district court did not misconstrue either the
scope of 18 U.S.C. § 1954 or the statute’s definition of

bs

‘*bona fide’’ compensation. Accordingly, we affirm the
judgment.

BACKGROUND

Familiarity with Schwimmer I, where we described in
detail the investigation and conviction of Schwimmer, is
presumed. Here, we recite only those facts relevant to
this appeal, as well as additional facts established at the
evidentiary hearing.

In Schwimmer I, we remanded Schwimmer’s case to
the district court for an evidentiary hearing because
there was insufficient evidence in the record to deter-
mine whether the government had obtained information
by invading the attorney-client privilege, and whether
any information that might have been obtained was used
to prepare the prosecution’s case. We directed the court
to determine whether the government’s case was in any
respect derived from a violation of the attorney-client
privilege and, if so, to determine what use was made of
the derivative information and whether that use affected
a substantial right of the appellant. Schwimmer I, 892
F.2d at 243-45.

On March 2 and 12, 1990, Judge McLaughlin con-
ducted evidentiary hearings on the attorney-client privi-
lege issue and found that no direct or indirect use of
privileged information by the government had occurred.

Judge McLaughlin focused on meetings between
Schwimmer’s accountant and government representatives
occurring on April 26, May 6, and August 18, 1988, and
on copies of the accountant’s workpapers that the
government had obtained. The accountant, Ralph Glick-
man, had been hired by Schwimmer and his co-defen-

A-4

i
:

dant, Mario Renda, to assist in the preparation of their
defense, and the workpapers described the allocation
between the two men of the commissions they received
for investing the funds of employee benefit plans.

Based on the testimony of government agents Frank
Devine and Eugene Brozen, the district court found that
the information derived from the meetings of April 26
and May 6 was not used to prepare for the prosecution
of Schwimmer. Rather, the meetings were conducted to
determine a reasonable forfeiture amount for co-
defendant Renda, who had pleaded guilty, and there
was little, if any, reference to Schwimmer. Regarding
the August 18 meeting, the district court heard uncon-
troverted testimony from Assistant United States Attor-
ney (‘‘AUSA’’) Bruce Maffeo that he had cautioned
Glickman at the outset of the meeting not to disclose
any information regarding conversations with Schwim-
mer, and that no inquiries into such confidential com-
munications between Glickman and Schwimmer were
made.

The court determined that there had been no deriva-
tive use of the information contained in the workpapers
examined and copied at Glickman’s office. Agent
Brozen, who had retrieved the papers, testified that he -
had told AUSA Maffeo that the workpapers contained
“nothing new’’ and that they never had discussed the
matter again. Agent Devine, who along with Brozen was
responsible for investigating the financial aspects of the
case, testified that he never was in possession of the
workpapers and never had discussed them with Brozen.
AUSA Maffeo testified that the first time he had looked
at the workpapers was the day of the hearing on

remand, and that, while preparing to prosecute Schwim-
mer, he had considered their acquisition a ‘‘non-event.’’

The district court also found that the workpapers had
not been used by the prosecution either to prepare for
cross-examination of witnesses or to gain an understand-
ing of the strengths and weaknesses of its case so that
evidence could be presented in the light most favorable
to the government. The cross-examination of defense
witnesses in the case was conducted entirely by AUSA
Alan Friedman. Both Maffeo and Brozen testified that
Friedman had neither seen the workpapers nor discussed
the workpapers with them. Similarly, the record con-
tained no evidence that the government used the papers
to structure its presentation of evidence. Rather, AUSA
Maffeo testified that the government was ready for trial
in March of 1988, well before the workpapers were
obtained.

Finally, Judge McLaughlin rejected Schwimmer’s con-
tention that the workpapers had provided new informa-
tion used by the government to alter the figures on its
spreadsheets. Judge McLaughlin found that, although
several figures were different, the substance of the
workpapers and of the government’s original spread-
sheets was the same. Alterations that had been made to
the government’s spreadsheets were predicated not upon
Glickman’s workpapers, but upon Glickman’s negotia-
tions with the government regarding the amount of
Renda’s forfeiture and upon the independent coopera-
tion of a business associate of Renda.

We think the district court’s rulings regarding the
attorney-client privilege and the jury instructions given
at the trial were correct.

A-6

ee aN

aan

le i es

DISCUSSION

A district court’s determination of whether the gov-
ernment improperly has used privileged information in a
criminal prosecution is an issue of fact that will not be
reversed unless the district court’s finding is clearly erro-
neous. United States v. Gallo, 863 F.2d 185, 190 (2d
Cir. 1988), cert. denied, 489 U.S. 1083 (1989). The gov-
ernment must demonstrate that the evidence it uses to

} prosecute an individual was derived from legitimate,

independent sources. Kastigar v. United States, 406 U.S.
441, 461-62 (1972). We believe that the district court’s
finding that no privileged information was used by the
government in its prosecution of Schwimmer was not
clearly erroneous because it is amply supported by the
evidence produced at the hearing.

Relying on United States v. McDaniel, 482 F.2d 305,

311 (8th Cir. 1973), Schwimmer argues that even the

indirect use of privileged information by the prosecution
is prohibited. However, we have expressly rejected the
McDaniel holding as being too restrictive. See United
States v. Rivieccio, No. 89-1581, slip op. at 7232 (2d
Cir. Nov. 2, 1990); United States v. Mariani, 851 F.2d
595, 600 (2d Cir. 1988), cert. denied, 109 S. Ct. 1654
(1989). In Mariani, we held that the mere ‘‘tangential[ ]
influence[ }] [that privileged information may have on]
the prosecutor’s thought processes in. . . preparing for
trial’? was not an unconstitutional use. 851 F.2d at 600.
Schwimmer contends that possession of the information
contained in the workpapers allowed the government to
confirm the information it had already acquired on its
own; however, this use would not require reversal
because confirmatory use is not prohibited under the cir-
cumstances of this case. See id. at 601. Here, the find-

A-/7

es

ings of the district court indicate that, at most, any
influence on the government’s case by information
obtained at the interviews or from the workpapers was
“‘wholly conjectural and insubstantial.’’ Jd. This does
not constitute an improper use. Rivieccio, No. 89-1581,
slip op. at 7233.

Schwimmer also contends that the intentional intru-
sion into the attorney-client domain that occurred when
the government agents obtained the workpapers requires
an automatic reversal of his conviction. Although such
an intentional intrusion warrants careful scrutiny, this
Circuit never has gone so far as to adopt the per se rule
for which Schwimmer argues. United States v. Gartner,
$18 F.2d 633, 637 (2d Cir.), cert. denied, 423 U.S. 915
(1975). Rather, we have held that, unless ‘‘the conduct
of the Government has... been . . . manifestly and
avowedly corrupt,’’ Gartner, $18 F.2d at 637, a defen-
dant must show prejudice to his case resulting from the
intentional invasion of the attorney-client privilege.
United States v. Dien, 609 F.2d 1038, 1043 (2d Cir.
1979); see also United States v. Ginsberg, 758 F.2d 823,
833 (2d Cir. 1985).

Here, we find that the prosecution’s conduct was not
manifestly corrupt. Glickman was cautioned not to
reveal confidential communications during the course of
the interviews with government attorneys and investiga-
tors. Moreover, although the agents obviously obtained
the workpapers intentionally, Schwimmer suffered no
prejudice as a result. The hearing evidence demonstrated |
that no preview of defense strategy was derived from the
workpapers and that no other violative use of privileged
information had occurred.

A-8

Finally, we turn to the objections to the jury instruc-
tions noted in Schwimmer I but not addressed in that
opinion. Schwimmer was convicted of violating 18
U.S.C. § 1954, which prohibits the receipt of illegal pay-
ments to influence the operations of employee benefit
plans. The statute applies to, inter alia, ‘‘an administra-
tor, officer, trustee, custodian, counsel, agent, or
employee of any employee welfare benefit plan .. .’’
Id. § 1954(1). At the trial’s conclusion, the jury was
instructed that even if Schwimmer was not designated
formally as an agent or counsel to the employee benefit
plans, he was subject to section 1954 if his advice had a
significant influence on the plans’ investment decisions.
Schwimmer objected, maintaining that he was outside
the scope of the statute because he did not hold any of
the enumerated positions. A defendant need not for-
mally hold one of the enumerated positions to fall
within the statute’s coverage, however. Section 1954’s
“proscription extends to ‘all persons who exercise con-
trol, direct or indirect, authorized or unauthorized[,]
_ over [a plan],’’’ United States v. Robilotto, 828 F.2d
940, 946 (2d Cir. 1987) (quoting United States v.
Palmeri, 630 F.2d 192, 199 (3d Cir. 1980), cert. denied,
450 U.S. 967 (1981)), cert. denied, 484 U.S. 1011 (1988).

Here, the trial evidence amply demonstrates that
Schwimmer regularly gave financial advice to the
employee benefit plans and invested their funds, indica-
ting that he exercised, at a minimum, indirect control
over the plans’ investments. A trustee of Local 38’s ben-
efit plans testified that Schwimmer had been the finan-
cial advisor, with authority to make investment
decisions, for Local 38’s plans for about fifteen years.
The trial evidence also showed that, from 1981 to 1986,
Schwimmer had been the sole financial advisor to Local

A-9

a

~

810, investing more than $72 million on the fund’s
behalf.

Schwimmer’s contention that the court erred by
instructing the jury that evidence of actual control was
not necessary to bring a defendant within the reach of
the statute is also without foundation. We have held
that ‘‘section 1954 ... does not necessarily require
proof that the malefactor actually possessed the ability
to influence a welfare fund’s investment decisions,’’
Robilotto, 828 F.2d at 946, but rather, the statute ‘‘pro-
scribe[s] ‘acceptance of payment with the stated purpose
of exercising one’s influence. . . , regardless of capac-
ity to do so,’ ”’ id. (quoting United States v. Soures, 736
F.2d 87, 90 (3d Cir. 1984), cert. denied, 469 U.S. 1161
(1985)). Here, not only did Schwimnter represent that he
had the capacity to influence the employee benefit plans’
investment decisions, as two witnesses at trial attested,
but he actually advised the plans and made investments
on their behalf. Clearly, his conduct is proscribed by
section 1954.

Schwimmer also argues that the court’s instruction
with regard to Local 810, that compensation must be
disclosed in order to fall within section 1954’s ‘‘bona
fide’’ compensation: exception, was erroneous. In the
jury charge, the court defined ‘‘bona fide’’ to mean ‘‘in
good faith or without deceit or fraud.’’ Later, in
response to a jury request for clarification of the law
governing Schwimmer’s commissions on Local 810’s
investment activities, the court instructed that a fiduci-
ary must disclose the actual commission he is charging
in order to qualify for the bona fide compensation
exception.

A-10

18 U.S.C. § 1954, prohibiting the receipt of fees to
influence employee benefit plan operations, contains an
exception allowing bona fide compensation ‘‘for services
actually performed in the regular course of [the] duties’’
of those who exercise influence over the plan. ‘‘Bona
fide’’ literally means in good faith, exclusive of fraud or
deceit. It cannot be said that one who receives a com-
mission from a financial institution for placing employee
benefit plan funds, without disclosing to the plan the
actual commissions received, is acting in good faith.
Moreover, Schwimmer’s interpretation weakens the
force of the statute through which Congress intended to
regulate strictly the administration and operation of
employee benefit plans. See H.R. Rep. No. 998, 87th
Cong., 2d Sess., reprinted in 1962 U.S. Code Cong. &
Admin. News 1532, 1532-36. The evidence reveals that
the trustees of Local 810 did not know that Schwimmer
was receiving compensation from financial institutions
through First United, the vehicle used by Schwimmer
and his co-defendant to conduct their business. At trial,
Local 810’s comptroller testified that he assumed
Schwimmer was receiving tces from a source other than
the Local, but that he did not actually learn of
Schwimmer’s commissions until an investigation by
Local 810 was conducted. Because section 1954 uses
broad language to protect plan beneficiaries from dis-
honest or unfaithful fiduciaries, it seems clear that the
statute was meant to reach Schwimmer’s intentional fail-
ure to inform the trustees of Local 810 that he was
extracting a commission from the placement of their
investments. See United States v. Romano, 684 F.2d
1057, 1064 (2d Cir.), cert. denied, 459 U.S. 1016 (1982).

We have examined Schwimmer’s remaining conten-
tions and find them to be without merit.

CONCLUSION

The judgment of conviction is affirmed in all respects.

A-12

720—1-25-91 © USCA—80004 FY90
RECORD PRESS, INC., 157 Chambers &., N.Y. 10007 (212) 619-4949

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

ee

No. 1411—August Term, 1988
(Argued August 18, 1989 Decided December 27, 1989)
Docket No. 89-1106

>

UNITED STATES OF AMERICA,
Appellee,
—against—
MARTIN SCHWIMMER,

Defendant-Appellant.

Before:

MINER and ALTIMARI, Circuit Judges,
and GRAY, District Judge.*

>

Appeal from judgment entered in United States District
Court for the Eastern District of New York (McLaughlin,
J.) convicting defendant-appellant, after jury trial, of
racketeering conspiracy, receiving illegal payments to
influence the operations of employee benefit plans, con-

° Hon. William P. Gray, Ununed States District Judge for the Central
District of California, sitting by designation

spiracy to defraud the United States and income tax eva-

Remanded for hearing to determine whether attorney-
client privilege was violated by government’s use of docu-
ments and information furnished by accountant hired by
attorneys conducting joint defense.

-

NATHAN Z. DERSHOWITZ, Esq., New York,

New York (Victoria B. Eiger, Esq.,
Dershowitz & Eiger, New York, New
York, Robert S. Fink, Esq., Kostelanetz
Ritholz Tigue & Fink, New York, New
York, and Alan M. Dershowitz, Esq.,
Cambridge, Massachusetts, of counsel),
for Defendant-A ppellant.

LOUIS M. FISCHER, Esq., Brooklyn, New

York (Andrew J. Maloney, Esq., United!
States Attorney for the Eastern District of
New York, Bruce Maffeo, Esq., Alan
Friedman, Esq., United States Depart-
ment of Justice, Organized Crime Strike
Force, Brooklyn, New York, of counsel),
for Appellee.

>

MINER, Circuit Judge:

Defendant-appellant Martin Schwimmer appeals from a
judgment of conviction entered after a jury trial in the
United States District Court for the Eastern District of
New York (McLaughlin, J.). The offenses of conviction—

A-14

one count of conspiracy to conduct the affairs of an enter-
prise through a pattern of racketeering activity, 18 U.S.C.
§ 1962(d) (1982); seventy-six counts of receiving illegal
payments to influence the operations of employee benefit
plans, 18 U.S.C. § 1954; one count of conspiracy to
defraud the United States, 18 U.S.C. § 371; and six counts
of income tax evasion, 26 U.S.C. § 7201—all relate to the
receipt of commissions for investing the funds of
employee benefit plans in Certificates of Deposit issued by
various banks.’

Schwimmer argues that the trial court erred in instruct-
ing the jury that, whether or not he was a formally consti-
tuted agent or counsel of the employee plans allegedly
victimized, he was subject to the provisions of 18 U.S.C.
§ 1954 if his investment advice had a significant influence
on the investment decisions of the plans. The government
contends that the jury properly could find Schwimmer to
be an agent or counsel if it determined he had significant
influence on investment decisions, and that he clearly was
an agent of the plans he advised for an hourly fee.

Schwimmer argues also that the district court erred in
instructing the jury that he was required to disclose his
commissions in order to come within the ‘‘bona fide com-
pensation’’ exception provision of 18 U.S.C. § 1954. The
government responds that the exception, which allows
compensation for services actually rendered to an
employee benefit plan, requires disclosure of financial
activities involved in administering the plan, to the end

| Appellant was sentenced on February 14, 1989 to a term of impris-
onment of ten years, a term of probation of five years, fined $1.62 mil-
lion, ordered to forfeit the sum of $4.5 million, and pay a special
assessment of $4,050. See United States v. Schwimmer, 882 F.2d 22
(2d Cir. 1989) (requiring testimony before grand jury after conviction).

A-15

that beneficiaries might make proper judgments as to
whether the compensation is bona fide.

Finally, it is Schwimmer’s contention that he was enti-
tled to a hearing to determine whether his attorney-client,
sixth amendment and work product privileges were vio-
lated by the use of information, documents and grand jury
testimony furnished by an accountant hired to assist the
attorneys representing Schwimmer and a co-defendant in
the conduct of a joint defense. The government’s response
to this contention is that a hearing was unnecessary
because the trial court properly gleaned from the record
sufficient information to determine that there was no inva-
sion of the attorney-client privilege. We think that the rec-
ord is insufficient to support the perfunctory findings of
the district court with respect to the privilege issue, and we
remand for a hearing and detailed findings on that issue,
retaining jurisdiction of the appeal pending completion of
the proceedings hereby ordered in the district court.

BACKGROUND

In 1979 Mario Renda formed a corporation known as
First United Fund, Ltd. (‘‘First United’’) to engage in the
business of placing Certificate of Deposit (‘‘CD’’) invest-
ments in small banking institutions throughout the United
States. The banks and savings and loan associations to
which the investments were directed paid a broker’s com-
mission to First United. Renda was successful in finding
investors and soon hired a number of account executives
to contact financial institutions needing cash, offering
competitive interest rates and willing to pay for the ser-
vices of First United. Associated with Renda was Joseph
DeCarlo, who attended to the financial records of the
business and, until the advent of computerization at First

A-16

United, sent hand-typed bills for commissions. Early in
1981, Renda and DeCarlo met Schwimmer at a computer
store, fell into a conversation with him, and learned that
he too was in the business of placing funds for institu-
tional investors. Renda and Schwimmer joined forces
shortly thereafter.

Schwimmer had been the investment adviser to four
employee benefit plans covering members of Local 38,
Sheetmetal Workers International Association (‘‘Local
38’’), since 1971. He was paid an hourly fee for his services
and agreed that any commissions earned on investment
transactions would be reported to Local 38 and used to
| offset his fees. The guidelines for investing furnished by
| the trustees of the plans required low risk investments, pri-
_ marily federally insured CDs. Schwimmer had complete
_ authority to place the assets of the plans, and his annual
reports to the trustees were general in nature, without any
breakdown of the investments by amount or location. In
1981 Schwimmer became the sole investment adviser to
two employee benefit plans covering members of Local
810, International Brotherhood of Teamsters (‘‘Local
810’’). Dennis Silverman, administrator of the plans and
president of Local 810, advised the union’s comptroller
that Schwimmer would give him instructions for wiring
money to various banks for deposit in CDs. Schwimmer
was not paid a fee for his services by Local 810 or the
plans, and did not advise them that he was compensated
through commissions paid by the banks.

Initially, Schwimmer made only short-term investments
through First United under an agreement with Renda call-
ing for an equal division of the commissions. Those invest-
ments were made on behalf of the Local 38 plans and some
individuals for whom Schwimmer acted. The commis-

sions, negotiated by Renda, were payable at the inception
of the deposit. DeCarlo sent the bills for the commissions
to the bank, and Schwimmer submitted invoices for his
share of the commissions to First United. Soon after he
became adviser to the Local 810 plans, Schwimmer
advised Renda that he was in a position to place large sums
of union funds in long-term investments. He advised
Renda that it would be necessary to make payments to
‘his people’’ in connection with this business, and the two
agreed that they would deduct 7/s of a point from the com-
mission for that purpose and continue to divide the bal-
ance of the commission equally. Schwimmer’s ‘‘people’’
presumably were union officials.

Toward the end of 1981, Schwimmer and Renda devel-
oped a system of off-the-book accounts for their long-
term investment commissions. This system entailed the
opening of separate bank accounts to receive deposits of
these commission payments and thereby by-pass the regu-
lar First United accounts. The separate accounts were non-
interest bearing, closed every six months, and not reflected
on the books of First United. The institutions paying com-
missions were directed to wire payment to the appropriate
off-book accounts, which were established at six banks
during the period 1981-1984. The accounts were not
reported to the Internal Revenue Service or First United’s
outside accountants. The long-term investments for the
benefit plans of Locals 38 and 810 were recorded for a
time in a notebook kept by DeCarlo. The bills for com-
missions on these investments, ordinarily computer-
generated, were typed separately and forwarded to the
appropriate institution at DeCarlo’s direction. In order to
forestall claims on the commissions by First United
account executives, Renda and DeCarlo told the execu-
tives that one point of the commission was being paid to

A-18

the unions. Similarly, Renda told some banking institu-
tions that the union would receive a ‘‘discount’’ on the
commissions.

When First United’s accountants performed an audit of
the company in 1983, Renda told them that $2,700,000 in
commissions was due the company on union benefit plan
transactions concluded in 1981 and 1982. Renda caused
those commissions to be paid into First United’s regular,
on-the-record account. No prior or subsequent commis-
sion payments on the union funds were so reported.
Schwimmer received his share of commissions from the
regular accounts in the form of ‘‘consulting fees.’’
Between December 1981 and December 1984, Schwimmer
and Renda placed $72,910,000 for the Local 810 benefit
plans and $22,985,487 for the Local 38 benefit plans in
long-term CDs issued by approximately twenty banks and
savings and loan associations. Commissions on these
deposits totalled $16,520,375, which Schwimmer and
Renda shared, subject only to the 7/s point deductions
needed to pay Schwimmer’s ‘‘people.’’ For more than two
years, beginning in January of 1982, Schwimmer cashed
First United checks on a regular basis at the Better Farm
Supermarket in Elmont, New York. In all, 210 checks
totalling over $1,900,000 were cashed during that period.
From December, 1981 through March of 1984, Schwim-
mer cashed First United checks totalling $1,212,725 at Nu
Service Tobacco. All the cashed checks represented shares
of commissions on long-term union benefit plan invest-
ments. Schwimmer cashed other checks signed by Renda
in order to make the 7/s point payments.

Although Schwimmer met annually with the trustees of
the Local 38 benefit plans, it was not until 1986 that he
reported for the first time that some of the CD investments

A-19

he had made were not insured. His previous annual report
had omitted any reference to the problems of Old Court
Savings and Loan Association, a failed institution holding
more than one-quarter of the investment funds of the
Local 38 benefit plans. In late 1986 the trustees of the
plans learned from their counsel that Old Court had failed
and that the funds were in jeopardy. Schwimmer then
reported that the investments in Old Court were not
insured by the federal government, contrary to the trust-
ees’ instructions. Pressed by the trustees for information
regarding his relationship with brokerage houses, Schwim-
mer ultimately signed a letter representing that he had not
received any commissions or compensation from any bro-
ker for placing CDs for any Local 38 benefit plan. At a
trustees’ meeting in December of 1986, he specifically rep-
resented that he did not conduct any Local 38 business
through First United Fund. Not only were the representa-
tions untrue, but Schwimmer also had failed to offset the
hourly fees for investment advice paid by Local 38 with
the commission compensation he received from First
United, as required by his agreement with the union.

Local 810 and its benefit plans had no agreement with
Schwimmer regarding payment for investment services.
ihe union’s comptroller, Gilman, assumed that Schwim-
mer was receiving commissions from some source but did
not think that it was his function to inquire. Even after it
was reported to the union that commissions had been
paid, the union was unaware of the amounts involved.
Gilman considered Schwimmer to be a broker who pro-
duced investment opportunities to be accepted or rejected
by the plans and sometimes called local banks to compare
their interest rates with those offered by Schwimmer. On
at least one occasion, a bank offered a CD interest rate
higher than that ultimately received by the Local 810 plans

A-20

|

;

:
4
j

because the commissions that were arranged reduced the
return to the plans.

When the government began its investigation into their
employee benefit plan investment activities, Schwimmer
and Renda each retained counsel. Schwimmer retained the
law firm of Kostelanetz Ritholz Tigue & Fink, and was
represented principally by Robert S. Fink of that firm.
Renda retained the law firm of Russo, Silverman and Vita-
liano and was represented principally by Ronald Russo
and Larry Silverman of that firm, which also represented
the interests of First United. Schwimmer, Renda and their
attorneys agreed to cooperate in all matters of mutual con-
cern related to the investigation and to the defense of any
charges that might be made against them. The attorneys
decided that it was necessary to hire an accountant to ana-
lyze the financial transactions in which their clients had
engaged as well as the tax consequences of those transac-
tions. Ralph Glickman, a certified public accountant, was
hired by attorney Silverman in June of 1984 to serve the
joint interests.

Although Silverman, attorney for Renda and First
United, worked most closely with Glickman, Schwim-
mer’s attorney, Fink, also met with the accountant from
time to time. Fink told his client to speak freely with
Glickman and that any conversations with the accountant
would be protected by the attorney-client privilege.
Schwimmer spoke to Glickman at some length on the
occasion of their first meeting, which took place at the
offices of First United in June of 1984. Present for all or
part of that meeting, besides Glickman and Schwimmer,
were Renda, Silverman, Ronald Russo of Silverman’s law
firm, Stewart Steinberg, another attorney for Renda, Ken-
neth Gould, a partner of Glickman, and Joseph DeCarlo.

A-21

Schwimmer spoke to Glickman on several occasions there-
after. He also furnished information to the accountant
through Fink and Silverman.

On July 2, 1987, and again on July 27, 1987, pursuant
to a subpoena, Glickman appeared before the grand jury
that ultimately returned an indictment charging Schwim-
mer and Renda in eighty-nine counts with racketeering
conspiracy, illegal pension and welfare fund payments,
kickbacks to union officers, embezzlement, obstruction of
justice and tak evasion. Glickman testified that he exam-
ined certain records after he was hired by Silverman but,
in response to a request to describe the records, responded
as follows: ‘‘I don’t believe I am permitted to specify
exactly what records I looked at or what I did for Mr.
Silverman.’’ He then testified that he provided commis-
sion income figures to David Cohen, Renda’s accountant,
for the preparation of Renda’s 1983 and 1984 personal
income tax returns. Glickman said that the figures were
acquired ‘‘[{f]rom the analysis that we made for Mr. Silver-
man’’ and were provided verbally to Mr. Cohen for inclu-
sion in the tax returns. Glickman derived the figures from
certain work papers, which he never showed to Cohen and
refused to discuss before the grand jury.

Glickman also testified before the grand jury that he
provided Cohen with certain information for preparation
of the 1984 tax returns of a corporation known as ‘‘First
United Air, Inc.’’ This corporation owned and leased out
an aircraft and received certain CD commission income,
and its stock was held in equal shares by Schwimmer and
Renda. When asked to identify the work papers used to
prepare the First United Air returns as well as the personal
returns, Glickman responded: ‘‘The work papers were
prepared. As to the details in the work papers, that I can-

A-22

~~. 4.

’ not discuss.’’ When asked specifically whether CD pur-
chases by Locals 38 and 810 were noted in those materials,
he declined to answer. In response to a question pertaining

| to his review of the records of an account opened in the
name of First United Fund, Ltd. and later changed to the
mame of First United Air in the Connecticut Bank and
Trust Co., the accountant replied: ‘‘I believe that I am not
permitted to discuss that because this was an analysis that
was prepared for the attorneys and under client-attorney
privilege I am not permitted to discuss that.’’ The Assis-
tant United States Attorney conducting the grand jury
proceeding responded: ‘‘We certainly respect that privi-
lege, sir.’’

On August 18, 1988, almost three months after Mario
Renda entered a plea of guilty to Counts One (racketeer-
ing) and Eighty-three (tax evasion) of the Indictment and
agreed to testify at the trial of his co-defendant, Glickman
met with the Assistant United States Attorney in charge of
the prosecution. According to the prosecutor, Glickman at
that time advised that he had arrived at the figures shown
on the 1983 and 1984 Renda personal returns and the 1984
First United Air returns by examination of bank state-
ments pertaining to the off-book accounts as well as the
records furnished by Joseph DeCarlo, all of which had
been available to the government previously. The prosecu-
tor then directed Glickman to turn over to the case agents
the ‘‘schedules’’ the accountant had prepared. He con-
tends that he never has seen the schedules but ‘‘was told by
the agents that they contain nothing more than a schedul-
ing of records previously acquired and examined by the
government during the grand jury investigation.”’

Schwimmer contends that the work papers, or sched-
ules, included privileged information not previously avail-

A-23

EO

able to the government. Although the work papers were
not offered in evidence,’ Schwimmer asserts that the gov-
ernment used the information contained therein to prepare
questions, decide who should be called as witnesses and
for trial preparation generally. In short, Schwimmer takes
the position that the work papers were of great assistance
to the government in assembling, organizing and proving
its case. Schwimmer points to two of these documents to
demonstrate that the government acquired information in
the form of figures and allocations not available from
bank records or records previously in the government’s
possession. One item, entitled ‘‘Analysis of Commis-
sions,’’ contains a breakdown of commissions for both
Schwimmer and Renda, and apparently includes the ‘‘bot-
tom line’’ figure furnished verbally by Glickman to Cohen
for the 1984 Renda personal returns. Also included in this
schedule were the names of the business entities that
cashed First United checks at Schwimmer’s behest. The
other item consists of two summary worksheets, sup-
ported by detailed worksheets, allocating commissions
between Schwimmer and Renda in 1983 and 1984.
Schwimmer contends that the information contained in
this item also was not available from the bank records or
any other materials previously available to the government
in any form. According to Schwimmer, the two items were
prepared by the accountant solely for purposes of the joint
defense.

The district court deferred until the close of the testi-
mony Schwimmer’s motion to dismiss the indictment for

2 The work papers in question were submitted to the trial court for in
camera inspection on the issue of attorney-client privilege. They were
not made a part of the original record but have since been turned over
to counsel for defendant, who has furnished them to us, without
objection, in the form of a supplemental appendix. -

A-24

violation of the attorney-client privilege or for a hearing to
determine whether there had been such a violation and, if
so, the extent thereof. Prior to instructing the jury, the
court ruled upon the motion as follows:

Having heard the testimony and evidence presented
during the trial, and having now inspected the grand
jury testimony and the documents which Glickman
gave to the government, I now determine that the
government has not violated the defendant’s
attorney-client privilege.

As to the grand jury testimony, it dealt almost
exclusively with Glickman’s participation in the prep-
aration of Renda’s personal tax returns for 1983 and
four and the corporate tax return of First United for
84.

References to Mr. Schwimmer were negligible and
amounted to virtually nothing except to say that
Glickman had in fact met Schwimmer.

As to the documents, similarly, these documents
submitted by Glickman to the government were
merely schedules used to prepare First United’s tax
return or schedules setting forth the activities of the
several First United Fund bank accounts. Thus, I find
that has been no invasion of Schwimmer’s defense
camp by Glickman.

DISCUSSION

Narrowly defined, riddled with exceptions, and subject
to continuing criticism, the rule affording confidentiality
to communications between attorney and client endures as
the oldest rule of privilege known to the common law. See

generally, 2 Weinstein and Berger, Weinstein’s Evidence
€ $03(02]-503(d)(S)(01]; Fisch on New York Evidence
§ 517 (2d ed. 1977). Even in its debilitated form, however,
it provides essential support for the constitutional right to
the assistance of counsel. Without the attorney-client priv-
ilege, that right and many other rights belonging to those
accused of crime would in large part be rendered meaning-
less. Designed ‘‘to encourage full and frank communica-
tion between attorneys and their clients,’’ this rule of
confidentiality ‘‘recognizes that sound legal advice or
advocacy serves public ends and that such advice or advo-
cacy depends upon the lawyer being fully informed by the
client.’” Upjohn Co. v. United States, 449 U.S. 383, 389
(1981). It also recognizes that a lawyer’s ‘‘assistance can
only be safely and readily availed of when free from the
consequences or the apprehension of disclosure.’’ Hunt v.
Blackburn, 128 U.S. 464, 470 (1888); see also Trammel v.
United States, 445 U.S. 40, 51 (1980); Fisher v. United
States, 425 U.S. 391, 403 (1976).

The attorney-client privilege generally forbids an attor-
ney from disclosing confidential communications that
pass in the course of professional employment from client
to lawyer. See generally 81 Am. Jur.2d Witnesses § 172
(1976). The relationship of attorney and client, a commun-
ication by the client relating to the subject matter upon
which professional advice is sought, and the confidential-
ity of the expression for which the protection is claimed,
all must be established in order for the privilege to attach.
Re Grand Jury Subpoena Duces Tecum, 731 F.2d 1032 (2d
Cir. 1984). The privilege also is held to cover communica-
tions made to certain agents of an attorney, including
accountants hired to assist in the rendition of legal ser-
vices. United States v. Kovel, 296 F.2d 918 (2d Cir. 1961).
As to such agents, ‘‘(w]hat is vital to the privilege is that

A-26

the communication be made in confidence for the purpose
of obtaining /egal advice from the lawyer.’’ Id. at 922
(emphasis in original). Information provided to an
accountant by a client at the behest of his attorney for the
purposes of interpretation and analysis is privileged to the
extent that it is imparted in connection with the legal rep-
resentation. /d. See generally Annotation, Applicability of
Attorney-Client Privilege to Communications Made in -
Presence of or Solely to or by Third Person, 14 A.L.R. 4th
594, 635.

The joint defense privilege, more properly identified as
the ‘‘common interest rule,’’ see generally Capra, The
_ Attorney-Client Privilege In Common Representations, 20
Trial Lawyers Quarterly, Summer 1989, at 20, has been
described as ‘‘an extension of the attorney client privi-
lege,’’ Waller v. Financial Corp. of Am., 828 F.2d 579,
583 n.7 (9th Cir. 1987). It serves to protect the confiden-
tiality of communications passing from one party to the
attorney for another party where a joint defense effort or
strategy has been decided upon and undertaken by the par-
ties and their respective counsel. See United States v. Bay
State Ambulance and Hosp. Rental Serv., 874 F.2d 20, 28
(1st Cir. 1989). Only those communications made in the
course of an ongoing common enterprise and intended to
further the enterprise are protected. Eisenberg v. Gagnon,
766 F.2d 770, 787 (3d Cir.), cert. denied, 474 U.S. 946
(1985); Matter of Bevill, Bresler & Schulman Asset Man-
agement Corp., 805 F.2d 120 (3d Cir. 1986). ‘‘The need to
protect the free flow of information from client to attor-
ney logically exists whenever multiple clients share a com-
mon interest about a legal matter,’’ Capra, 20 Trial
Lawyers Quarterly, at 21 (citation omitted), and it is there-
fore unnecessary that there be actual litigation in progress
for the common interest rule of the attorney-client privi-

A-27

bi

lege to apply, United States v. Zolin, 809 F.2d 1411, 1417
(9th Cir. 1987), vacated in part on other grounds, 842 F.2d
1135 (9th Cir. 1988) (en banc). Neither is it necessary for
the attorney representing the communicating party to be
present when the communication is made to the other par-
ty’s attorney. Matter of Grand Jury Subpoena, 406 F.
Supp. 381 (S.D.N.Y. 1975); cf. Hunydee v. United States,
355 F.2d 183 (9th Cir. 1965).

As in all claims of privilege arising out of the attorney-
client relationship, a claim resting on the common interest
rule requires a showing that the communication in ques-,
tion was given in confidence and that the client reasonably
understood it to be so given. See United States v.
Keplinger, 776 F.2d 678, 701 (7th Cir. 1985), cert. denied,
476 U.S. 1183 (1986); Kevlik v. Goldstein, 724 F.2d 844,
849 (Ist Cir. 1984). The protection afforded by the privi-
lege extends to communications made in confidence to an
accountant assisting lawyers who are conducting a joint
defense on behalf of the communicating clients. See
United States v. Judson, 322 F.2d 460 (9th Cir. 1963). It
applies ‘‘regardless of the manner in which it is sought to
put the communications in evidence, whether by direct
examination, cross-examination, or indirectly as by bring-
ing out facts brought to knowledge solely by reason of a
confidential communication.’”’ 81 Am Jur.2d Witnesses
§ 194 (emphasis added). The burden of establishing the
attorney-client privilege, in all its elements, always rests
upon the person asserting it. Jn re Horowitz, 482 F.2d 72
(2d Cir.), cert. denied, 414 U.S. 867 (1973); von Bulow v.
von Bulow, 811 F.2d 136, 146 (2d Cir.), cert. denied, 481
U.S. 1015 (1987).

Schwimmer has carried the burden of establishing that
the information he furnished to Glickman, the accountant

A-28

hired by Renda’s attorney to serve the joint interests of
Renda and himself, was protected by the attorney-client
privilege. Schwimmer was directed by his attorney, Fink,
to speak freely with Glickman, who had been hired by
Silverman, Renda’s attorney, on behalf of both clients.
The attorneys had agreed to cooperate in all matters of
mutual concern relating to the investigation by the govern-
ment then in progress, and Fink represented to Schwim-
mer that any conversations with Glickman would be
privileged. The common interest rule clearly is applicable
here, since the information given by Schwimmer to Glick-
man was imparted in confidence for the ultimate purpose
of assisting attorneys who had agreed upon and under-
taken a joint strategy of representation, all of which was
well understood by Schwimmer. Indeed, the government is
willing to assume, for purpose of this appeal, ‘‘that appel-
lant has a valid claim to the joint or common defense priv-
ilege.”” The government contends, nevertheless, that it
obtained no information by invading that privilege. It is
not so clear that this is so.

In his testimony before the grand jury, Glickman
repeatedly invoked the attorney-client privilege when
questioned concerning the records he examined, the work
papers he prepared, and the analyses he formulated for the
attorneys providing the joint representation. The Assistant
United States Attorney conducting the grand jury pro-
ceedings at one point acknowledged that the privilege
properly had been claimed. Yet, the same Assistant United
States Attorney spoke with Glickman at some length at a
meeting following Renda’s guilty plea, presumably about
matters relating to the investigation, and at that time
directed the accountant to turn over to the case agents the
schedules he had prepared. Neither the testimony of the
accountant nor the schedules he delivered were offered in

A-29

evidence at Schwimmer’s trial. Schwimmer contends,
however, that information derived from these sources was
used by the government, in violation of the attorney-client
privilege, to prepare for trial. The indirect use of confiden-
tial information is what is challenged here. The govern-
ment asserts that the accountant furnished no information
not otherwise available to it. There is reason to question
that assertion.

Although the government argues that the work papers
furnished by the accountant consist only of schedules
attached to the First United Air tax returns and schedules
of checks written on several off-book First United Bank
accounts, all unprivileged information available to the
government, our review of the work papers reproduced in
the supplemental appendix suggests other possibilities.
Certain of these documents are not of the type ordinarily
submitted with corporate tax returns, and others appear to
contain information not ascertainable from bank records.
For example, a work paper entitled ‘‘Analysis of Commis-
sions,’’ containing listings for Renda, Schwimmer and
‘‘Genl’’ appears to contain the ‘‘bottom line’’ figure fur-
nished by Glickman to Cohen for Renda’s 1984 personal
tax return and related to the grand jury by the accountant.
Glickman nonetheless refused to describe to the grand jury
how that figure was arrived at, but the allocation is shown
on the worksheet. Listed in the same worksheet, under
Schwimmer’s name, is ‘‘Nu Tobacco,”’ one of the entities
regularly used by Schwimmer to cash First United checks,
with a corresponding dollar amount. Other worksheets
contain allocations of commissions between Schwimmer
and Renda, items not ordinarily part of corporate tax
returns or available from bank records.

A-30

ee

The district court found that, since the references to
Schwimmer in Glickman’s grand jury testimony were
‘‘negligible,’’ and since the documents delivered to the
government by the accountant were merely tax returns and
schedules relating to bank accounts, there was ‘‘no inva-
sion of Schwimmer’s defense camp by Glickman.’’ We
think that, based on the documer*ation available to it, the
district court should have conducted an evidentiary hear-
ing to determine whether the government’s case was in any
respect derived from a violation of the attorney-client
privilege in regard to confidential communications passing
from Schwimmer to Glickman. We remand to the district
court for such a hearing and, in the event of an affirmative
finding, a determination as to what use was made of the

_ derivative information and whether a substantial right of

the appellant was affected. The panel will retain jurisdic-
tion of the appeal pending completion of the hearing
hereby directed and the return of the district court’s find-
ings of fact and conclusions of law on the issue remanded.

CONCLUSION

The matter is remanded to the district court for further
proceedings consonant with the foregoing.

A-31

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

)
Additionally, even if the Work Papers
corroborated government evidence, the
record indicates that the government
did not choose to emphasize such
evidence. (Tr.156-157) The mere
corroboration of government evidence,
without more, is another "use" the

Second Circuit has found to be

"conjectural and insubstantial."
Mariani, 851 F.2d at 600-601.

Based on the overwhelming evidence
presented at the remand hearing, and
the Second Circuit's guidance in
Mariani, I conclude that the Work

Papers were not directly or indirectly

A - 84

used by the government in contravention

of any of Schwimmer's rights.

B. Legit;
of Proof

Schwimmer correctly states that,
under Kastigar, the government does not
satisfy its burden merely by
demonstrating non-use of tainted
evidence. (Def. Mem. at 39-40)
Assuming Kastigar applies, the
government must also prove that its
evidence was obtained from legitimate
independent sources. United States v.
Bianco, 534 F.2d 501, 509 (2d Cir.),
cert. denied, 429 U.S. 822, 97 S.Ct. 73
(1976); see United States v. Nemes, 555
F.2d 51, 55 (2d Cir. 1977).

The testimony on remand
demonstrates that, the government's
case was principally derived from the
field investigations of agents Brozen
and Devine. The foundation for these

investigations was the documentary

A - 85

evidence recovered from First United's
offices.

Included among the documentary
evidence were several canceled checks
drawn on the off book accounts. Agents
Brozen and Devine analyzed the checks
to determine who got the money. In
some instances the agents were able to
make this determination by merely
inspecting the checks. (Tr.11,45)
Inspection of certain checks, however,
did not reveal where the funds they
represented came to rest.

In these instances, agents Brozen
and Devine attempted to allocate the
checks' proceeds between Schwimmer and
Renda by examining the "back end" of
each transaction. &. web e 45-46)
First, the agents examined the checks
to determine where they were
negotiated. Next, agents Brozen and

Devine interviewed the principal of the

A - 86

= ee

business which cashed the check to
determine who received the check's
proceeds. The principal of Nu-Service,
All-County Tobacco and Crown Confection
was Bill Brooks. (Tr.14-15, 46-47)
Allen Gouz was the principal of various
entities operating under the Gouz name.
(Tr.12-14)

Thus, the record indicates that
the case against Schwimmer was derived
from evidence uncovered by agents
Brozen and Devine. (Tr.147-148, 156-
157) All this evidence was obtained
before the government acquired the Work
Papers; and it was this evidence alone
that led Mr. Maffeo to answer "ready
for trial" in March 1988. (Tr.156-157)
Accordingly, I conclude that’ the
government has provided more than ample
proof that its evidence against
Schwimmer was secured from legitimate

independent sources.

A =- $7

EE

M in Fried

When agent Brozen retrieved the

Work Papers from Mr. Glickman's office
he was accompanied by agent Marvin
Friedman. Agent Friedman did not
testify at the remand hearing.
Schwimmer contends that the absence of
testimony from agent Friedman
“precludes an affirmative finding that
the government met its heavy burden of
proof." (Def. Mem. at 40) This
contention proves too much.

To satisfy its burden of proof
under Kastigar, the government need not
provide testimony from every person in
any way associated with the Schwimmer

investigation. United States v.

Romano, 583 F.2d 1, 8 (lst Cir. 1978);
see Bianco, 534 F.2d at 509-10. On the
other hand, the government may not rely
on mere conclusory denials. See United

States v. Nemes, 555 F.2d 51, 54-55 (2d

A - 88

i eeaeeeenatanaat nil

Cir. 1977).
In this regard, I am persuaded by
the reasoning of the First Circuit in
Vv ano:

{mjuch obviously depends on
all the facts and
circumstances of a particular
case. Here we think it was
not necessary, nor would it
have been particularly
meaningful to require that
every individual in = any
manner affiliate with the
investigation provide an
affidavit denying contact
with the testimony.
Affidavits from principal
investigators were provided
and there was much additional
evidence -- and nothing to
the contrary -- establishing
lack of taint. 583 F.2d at
8.

As in Romano, I conclude that it was
not necessary for the government to
provide testimony from agent Friedman
to establish non-use of the Work
Papers.

The principal agents involved in
the financial investigation, agents

Brozen and Devine, testimony that they

A =- &9

did not use the Work Papers in any way.

Mr. Maffeo testified that he did not

use the Work Papers or recall any

discussion of the Work Papers with

agent Friedman. (Tr.139, 157) My

conclusion that the government's case
was derived from legitimate independent
sources of proof is not affected by
gossamer speculation concerning
possible use of the Work Papers by
agent Marvin Friedman.

W n mation Contained in

the Glickman Work Papers

Finally, Schwimmer makes much of
the fact that the Work Papers contained
some figures different from those
contained in the government's

spreadsheets. (Def. Mem. at 23-38)?

3Schwimmer maintains that’ the
different figures in the Work Papers
were "new information." (Def. Mem. at
14-15) According to Schwimmer, the
mere fact that the Government obtained
such information “is dispositive on
this hearing since the prosecutor
failed to establish procedures (i.e.,

A =- 90

a

Schwimmer also contends that
alterations appearing in the government
spreadsheets establish that the
government “used” the Work Papers
(Id.).

I have laboriously scrutinized the
government spreadsheets, the Work
Papers and the items discussed in

Schwimmer's post-hearing submissions.

"Chinese Walls") to prevent use of this
information..." (Def. Mem. at 14-15)
This argument overstates the law in
this Circuit and is without merit. The
case cited by defendant,

v. Schwimmer, 882 F.2d 22, 26 (2d Cir.
1989), is an earlier proceeding in this
very case. In Schwimmer, the Second
Circuit stated that, if there is a
retrial, “without deciding the issue,
it would appear prudent for the
government to establish a so-called
"Chinese Wall® .. .* zd, Because
there has been no retrial, Schwimmer
obviously does not yet require erection
of Chinese Walls in this case. It is
also noteworthy that even in the event
of a retrial, the Second Circuit
recommended, rather than required, that
the prosecution take steps to separate
its prosecutor from persons exposed to
tainted evidence. Id. For the above
reasons, I reject Schwimmer's "Chinese
Wall” argument.

A- 91

Schwimmer's contention that the Work
Papers contain figures different from
those in the government spreadsheets is
correct. The government does not,
however, claim that all the figures are
identical.* (T:.90)

Of the hundreds of entries in the
government spreadsheets, Schwimmer
focuses on a relatively few figures
that differ from figures in the Work
Papers. According to Schwimmer, these
differences establish that the
government obtained “additional
information” from the Work Papers.
(Def. Mem. at 24) I disagree.

After examining the Work Papers,

agent Brozen concluded that they

* Apparently, before the Second
Circuit the government claimed that it
possessed “everything” that was in the
Work Papers. (Tr.95-97) The government
abandoned this claim at the remand
hearing by admitting that the Work
Papers contained some figures different
from the government spreadsheets.

A=- 92

contained “nothing we didn't know
already .. ." Despite the difference
of some figures, agent Brozen obviously
concluded that the substance of the
Work Papers was the same as the
information reflected in the government
spreadsheets. Agent Brozen did not
report to Mr. Maffeo that the Work
Papers contained information he "hadn't
seen in precisely that form..."
(Tr.114) Because Mr. Maffeo believed
that the Work Papers contained no new
information, he did not adjust
preparation of Schwimmer's prosecution
after the Work Papers were obtained.
(Tr.157) Therefore, I am satisfied
that the Work Papers did not provide
new substantive information that was
used by the government.

I have also examined the
alterations of the government

spreadsheets referred to by Schwimmer.

A - 93 -

Most of these alterations serve only to
reduce income allocated to Renda. It
is not surprising that Renda's
allocations are reduced, as agents
Brozen and Devine testified that
Glickman negotiated for such
reductions. Reductions in the income
allocated to Mr. Renda do not, however,
indicate that the government “used” the
Work Papers.

Two $500,000 transactions
conducted with the Republic National
Bank were initially charged to Renda
and subsequently allocated to
Schwimmer. (Tr.88) This re-allocation
was made as a result of Joseph
DeCarlo's cooperation. (Tr.50, 51, 111)

Of the hundreds of items allocated
to Schwimmer in the government
spreadsheets, only one other item was
ever charged to Mario Renda. (Gov. Exh.

F4-B,check No. 522) It is beyond

A - 94

question that Schwimmer's fate was
sealed whether or not this single item
was charged to Schwimmer. Moreover, as
discussed above, the testimony
indicates that not even this item was
charged to Schwimmer through use of the
Work Papers.

Thus, a thorough review of the
government spreadsheets, the Work
Papers and the arguments of Schwimmer's
counsel does not affect my conclusion
that the government did not use the
Work Papers.

IV. TESTIMONY OF MR. MAFFEO

Lastly, Schwimmer contends that
this Court improperly called Mr. Maffeo
as a witness after the parties rested.
(Tr.19) This is an untimely, last-
ditch technical argument that smells of
the lamp.

First of all, Schwimmer's

contention that the parties rested

A- 95

before Mr. Maffeo was called is not
supported by the record. Throughout
the remand hearing Schwimmer's own
counsel suggested that he might call
Mr. Maffeo as a witness. (Tr.75, 81)
After Assistant United States Attorney
Alan Friedman indicated that he would
not call Mr. Maffeo as a witness, he
rested. (Tr.118-123) At this
juncture, the Court indicated that it
might find testimony from Mr. Maffeo
helpful. (Tr.125) With unseemly
haste, counsel for Schwimmer’ then
rested immediately. (Tr.126)

Clearly, this Court has’ the
authority to call witnesses to
supplement the record. Fed. R. Evid.
614. That a trial court lacks this
power “never will be conceded so long
as the bench retains a true conception
of its constitutional function and a

due sense of self-respect." 9 Wigmore,

A - 96

san ea cereererienearereeeneill

Evidence §2484 at 282. (Chadbourn rev.
1981). I reject the notion that
counsel can enervate this Court's
ancient power to call a witness by
interjecting his intention to rest
after the Court has expressed its
interest in a witnesses' testimony.
The argument, though perhaps ingenious,
is not ingenuous.

Further, Schwimmer's objection, if
that is what it was, was certainly not
calculated to apprise the Court of his
concern. After Mr. Maffeo took the
stand, Schwimmer's counsel stated that:

I thought your Honor was

calling (Mr. Maffeo]} as your

witness, as opposed to Mr.

Friedman calling hin. If
your Honor prefers it that

way, that's okay. I want to

put on the record I'm
confused as to how this is
proceeding. (Fes 131)
(emphasis added).
Schwimmer's counsel did not object to
Mr. Maffeo's testimony at any point

during the hearing.

A- 97

Fed. R. Evid. 614(c) provides that
"(ojbjections to the calling of
witnesses by the court .. . may be
made at the time..." This rule is
intended to ensure that objections are
timely made, thereby enabling the Court
to taken any necessary corrective
measures. 3 Weinstein's Evidence,
9614([04]); see Fed. R. Evid. 614
advisory committee's note. Clearly,
counsel cannot remain silent during a
hearing, effectively waiting in ambush,
and only afterwards spring its
objections on this Court. Because
Schwimmer did not object to Mr.
Maffeo's testimony during the remand
hearing, I reject Schwimmer's belated
objections as untimely.

CONCLUSION

For the reasons discussed above, I

conclude that the government has met

its burden of proving that its case was

A- 98

ve

derived from legitimate independent
sources of proof rather than from the
direct of indirect use of privileged
information. I also conclude that Mr.
Maffeo properly testified at the remand
hearing.

SO ORDERED.

Dated: Brooklyn, New York
May 31, 1990

JOSEPH M. MCLAUGHLIN,
U.S.D.J.

The Clerk shall make copies of
this Order and shall serve them upon
the parties.

A= 99

UNITED STATES COURT OF APPEALS
FOR THE
SECOND CIRCUIT

At a stated Term of the United
States Court of Appeals for the Second
Circuit, held at the United States
Courthouse in the City of New York, on
the 23rd day of January, one thousand
nine hundred and ninety-one.

Present: HON. ROGER J. MINER
HON. FRANK X. ALTIMARI
Circuit Judges,
HON. WILLIAM P. GRAY,
District Judge,

UNITED STATES OF AMERICA
Appellee,
Docket No.
89-1106
-~against-
MARTIN SCHWIMMER,

Defendant-Appellant.

Appeal from the United States
District Court for the Eastern District
of New York.

This cause came on to be
considered on the transcript of record
from the United States District Court
for the Eastern District of New York
without oral argument.

ON CONSIDERATION WHEREOF, it is
now hereby ordered, adjudged and
decreed that the judgment of said
District Court be and it hereby is
affirmed in accordance with the opinion
of this court.

|

Elaine B. Goldsmith, Clerk
By:

Edward J. Guardaro,
Deputy Clerk

- 101 -

UNITED STATES COURT OF APPEALS
FOR THE
SECOND CIRCUIT

UNITED STATES COURT
OF APPEALS

FILED

MAR 19 1991

ELAINE B.
GOLDSMITH, CLERK
SECOND CIRCUIT

At a stated term of the United
States Court of Appeals for the Second
Circuit, held at the United States
Courthouse, in the City of New York, on
the 19th day of MARCH, one thousand
nine hundred and NINETY-ONE

UNITED STATES OF AMERICA,

APPELLEE,
DOCKET NUMBER
V. 89-1106
MARTIN SCHWIMMER,
DEFENDANT-
APPELLANT
A petition for rehearing

containing a suggestion that the action
be reheard in banc having been filed
herein by Appellant SCHWIMMER

Upon consideration by the panel
that heard the appeal, it is

Ordered that said- petition for
rehearing is DENIED.

It is further noted that the
suggestion for rehearing in banc has

- 102.-

been transmitted to the judges of the
court in regular active service and to
any other judge that heard the appeal
and that no such judge has requested
that a vote be taken thereon.

ELAINE B. GOLDSMITH
Clerk

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_2027%3A1. Public record. Not legal advice.