Filed: Jan. 23, 1995
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 1-23-1995 USA v Zehrbach Precedential or Non-Precedential: Docket 93-7477 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "USA v Zehrbach" (1995). 1995 Decisions. Paper 20. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/20 This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for
Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 1-23-1995 USA v Zehrbach Precedential or Non-Precedential: Docket 93-7477 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "USA v Zehrbach" (1995). 1995 Decisions. Paper 20. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/20 This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for ..
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Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
1-23-1995
USA v Zehrbach
Precedential or Non-Precedential:
Docket 93-7477
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995
Recommended Citation
"USA v Zehrbach" (1995). 1995 Decisions. Paper 20.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/20
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 93-7477 and 93-7493
UNITED STATES OF AMERICA
v.
DARUS H. ZEHRBACH,
Appellant in No. 93-7477.
ALEX A. MERVIS,
Appellant in No. 93-7493.
Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Criminal Action No. 92-00218-01 and 02)
Argued October 28, 1993
Before: ROTH, LEWIS and GARTH
Circuit Judges
Reargued in banc October 17, 1994
Before: Sloviter, Chief Judge, Becker, Stapleton,
Mansmann, Greenberg, Hutchinson, Scirica, Cowen,
Nygaard, Alito, Lewis, Roth, McKee and Garth
Circuit Judges
(Opinion Filed January 23, 1995)
David M. Barasch
United States Attorney
Theodore B. Smith, III (Argued)
Assistant United States Attorney
Federal Building, 228 Walnut Street
P.O. Box 11754
Harrisburg, PA 17108
Attorneys for Appellee
James V. Wade, Esquire
Federal Public Defender
Daniel I. Siegel, Esquire (Argued)
Assistant Public Defender
100 Chestnut Street, Suite 306
Harrisburg, PA 17101
Attorneys for Appellant Zehrbach
Donald J. Goldberg, Esquire (Argued)
Creed C. Black, Jr., Esquire
Ballard, Spahr, Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attorneys for Appellant Mervis
OPINION OF THE COURT
ROTH, Circuit Judge:
Defendants Darus Zehrbach and Alex Mervis appeal from
jury verdicts convicting them each of two counts of bankruptcy
fraud and one count of conspiracy to commit bankruptcy fraud, in
violation of 18 U.S.C. § 152 (1988) and 18 U.S.C. § 371 (1988).
In their appeals, Zehrbach and Mervis asserted two grounds for
reversal. First, they argued that the district court erred in
instructing the jury that the government need not prove, as an
essential element of the crime, that they knew their actions to
be illegal. Second, they asserted that comments made by the
prosecutor in his closing argument, regarding two of the defense
witnesses, triggered a rule of per se reversal under United
States v. DiLoreto,
888 F.2d 996 (3d Cir. 1990). Their appeals
were first heard by a panel of this court. On the basis of the
panel decision, Zehrbach and Mervis petitioned for rehearing in
banc, which was granted as to both issues. For the reasons that
follow, we will overrule our ruling in DiLoreto, insofar as it
established a per se rule,1 and we will affirm the convictions.
I.
In the late summer or fall of 1989, appellant, Darus
Zehrbach, a West Virginia businessman doing business under the
name of Consolidated Assets Management Corporation ("CAMCORP"),
formulated a plan to purchase the assets of bankrupt aircraft
manufacturing companies. Zehrbach became particularly interested
in Taylorcraft Aviation Corporation ("Taylorcraft"), a company
located in Lock Haven, Pennsylvania, that was in the process of a
Chapter 7 liquidation proceeding.2 Zehrbach retained the
Pittsburgh investment banking firm, Drizos Investments, Inc., to
facilitate the acquisition by locating other investors and
securing financing.
1 In overruling the per se rule announced in DiLoreto, we do
not, based upon the facts presented in that case, in any way
overrule the result reached by the DiLoreto court in reversing
the convictions.
2
Largely because of a failed $458,000 bid to purchase
Taylorcraft at a prior bankruptcy auction, the Taylorcraft
bankruptcy proceeding had been converted from a Chapter 11
debtor-in-possession proceeding into a Chapter 7 liquidation.
Appellant, Alex A. Mervis, a stock broker and a
licensed pilot, had recently become an employee at Drizos
Investments. Because of his aviation background, he was assigned
to Zehrbach's project. Steven Drizos supervised Mervis's work on
this assignment. Robert Smith of Capital Resources Group, a firm
affiliated with Drizos Investments, was brought in to help with
financing. Eventually, Mervis located John Polychron, a North
Carolina investor, who agreed to become a limited partner in an
association in which Zehrbach was to be the general partner.
The bankruptcy trustee for Taylorcraft was Charles
Szybist, an attorney in Williamsport, Pennsylvania. Szybist
contacted a number of potential bidders in an attempt to generate
an offer that would be substantial enough to create a base for
aggressive bidding. In September 1989, Szybist received a bid of
$155,000 from Leander Research, Manufacturing and Distributing,
Inc. ("Leander"). Using this as his base, Szybist notified
creditors and other parties in interest of the offer, inviting
higher bids to be submitted by October 23, 1989. The notice
provided that Leander and all other higher, qualifying bidders
would be permitted to participate at a final private auction to
be held on October 30, 1989.
Three new parties, including Zehrbach through CAMCORP,
entered bids. T. Chester Baker made a bid of $156,000; Starman
Brothers Auctions bid $160,000; and CAMCORP bid $165,000.
CAMCORP's bid had been agreed upon at a joint meeting between
Zehrbach, Polychron, Drizos, Smith, and Mervis. Because the
names of the bidders were released, the Zehrbach group was in a
position to contact the other bidders. Zehrbach instructed
Mervis to negotiate a "buy-out" of their bidding positions.
Baker, for reasons unrelated to the case, lost interest in the
acquisition. The other parties remained serious. According to
Mervis, he did not hesitate to follow Zehrbach's instructions
because Zehrbach was a bankruptcy expert who "did this all of the
time."
Steven Starman, of Starman Brothers Auctions, testified
at trial that he would have bid up to "$200,000 plus" for
Taylorcraft. Appendix ("App.") at 189. On October 25, Starman
received a call from Mervis who asked what it would take to keep
Starman out of the bidding process. Starman agreed to withdraw
from the bidding for a payment of $40,000, with $10,000 to be
paid up-front and the remainder by January 1990. A draft
agreement was sent from Mervis's office at Drizos Investments to
Starman for his signature and return. The document
mischaracterized the nature of the payment as made "[i]n return
for services renderd [sic]." Starman also received a form of
notice that he was to sign, have notarized, and send to the
bankruptcy judge, informing the bankruptcy court of his
withdrawal from the bidding process. Upon receiving these
documents, Starman consulted his attorney, David Buelt, a
specialist in trusts and estates, who redrafted the agreement to
state that Starman Brothers Auctions was being paid to forgo its
right to bid at the October 30 sale of Taylorcraft's assets.
Steven Starman did not question Buelt about the legality of the
agreement but merely expressed concerns about its enforceability.
The parties executed the amended agreement, and, once Starman had
received the initial $10,000 by wire transfer, he telephoned
Szybist to inform him that he would no longer be participating in
the bidding for Taylorcraft.
Leander Eckard, the president of Leander and the only
other potential bidder, testified at trial that he would have
been willing to bid up to approximately $250,000 for the purchase
of Taylorcraft. App. at 179. Sometime shortly after the October
23 close of bidding, Mervis had contacted Eckard to discuss how
much it would cost to purchase his bidding position. Although at
first Eckard was not interested, he began to reconsider his
position after he encountered difficulty in obtaining financing
for the potential acquisition. Eckard's initial request was for
a payment of $100,000, but Zehrbach instructed Mervis to
negotiate a lower figure. On October 26, Eckard and Mervis
agreed on a $50,000 fee with $30,000 payable immediately and the
remainder covered by a promissory note and security in one of the
Taylorcraft airplanes. Eckard had planned to fly from Seattle,
Washington, to visit the Taylorcraft plant the next day, October
27, the last business day before the auction on October 30. He
agreed to meet Mervis at the Pittsburgh airport to finalize the
bid buy-out.
To document the agreement with Eckard, Mervis contacted
Charles Vollmer, a Pittsburgh attorney. Vollmer had worked with
Drizos Investments in the past. Mervis and Vollmer met at 7:30
a.m. on October 27. Vollmer prepared three documents before
departing for a 10:00 a.m. appointment. These documents were (1)
a Letter of Intent for the limited partnership between Zehrbach
and Polychron, which had not yet been formally created; (2) a
letter to Polychron on Vollmer's firm letterhead with
instructions on making the $30,000 wire transfer to Eckard; and
(3) a bid buy-out agreement reflecting the terms of the
negotiations between Mervis and Eckard. Like the revised
agreement with Starman, the bid buy-out agreement stated that, in
exchange for the payment, Leander "agree[d] to sell to TAC
[Taylorcraft Acquisition Corporation, Zehrbach's group] all of
its rights . . . [with regard to its bid for Taylorcraft] and,
further, agree[d] not to participate either in its own right or
through third parties in the bidding process."
At the time he drafted the documents, Vollmer knew very
little about the transaction and had not conducted any legal
research on the issues. After drafting the bid buy-out
agreement, Vollmer expressed his uneasiness about the transaction
to Mervis, stating that he "hoped this thing [was] legal."
During the afternoon of October 27, after Vollmer was
able to consult two other attorneys and to do some legal
research, he faxed a letter to Mervis and Smith explaining:
Under the terms of the Agreement, Taylorcraft
Acquisition Corporation would buy out
Leander's "position" in the Bankruptcy Court.
Prior to this morning, I had thought that the
"position" that was being bought out, if
indeed there was one being bought out, was
that of a secured creditor. I simply
remarked to Alex that, "I hope this [is]
legal."
Mr. Vollmer then quoted, verbatim, the language of 18 U.S.C.
§ 152, the statute under which Zehrbach and Mervis were later
charged. Vollmer's letter concluded:
At this point, I must advise you that in
my opinion, there is a possibility that this
action violates these criminal provisions.
Unless this matter is somehow reworked so
that it is not a possible violation, such as
a possible joint venture with Leander, I
cannot recommend that you participate any
further. Please advise.
App. at 61-62.
In the interim, after meeting with Vollmer, Mervis had
gone to the airport to meet Eckard. Mervis gave Eckard the buy-
out agreement, which Zehrbach had signed, and a $30,000 certified
check. Mervis assured Eckard of the legality of the transaction,
stating that his attorney had approved it. Eckard had already
called Szybist to inform him that he would not be coming to view
the Taylorcraft plant or to place a bid.
Upon Mervis's return to his office that afternoon, he
was informed of the Vollmer letter which questioned the legality
of the bid buy-out scheme. Vollmer, Mervis, and Smith then held
a conference call with Zehrbach to inform him of Vollmer's
concerns. Zehrbach dismissed Vollmer's opinion, suggesting that
Vollmer did not know what he was talking about. After Drizos and
Smith requested a second legal opinion, Zehrbach contacted his
West Virginia attorney, James D. Crane, who had bankruptcy
experience. Crane affirmed the legality of the transaction, but
he characterized it as a joint venture that had merged bidding
interests. Crane was never informed that two bidders had been
paid to withdraw their bids.
After both Starman and Leander withdrew from the
bidding process just days before the auction was to occur,
Szybist called Mervis and spoke of his concern that the other
bidders "were having some difficulties." In response, Mervis
suggested not that there had been payments to withdraw, but
rather that "we had formed a joint venture and we had merged our
bidding interest." Szybist decided to postpone the auction from
October 30 to November 15 and to make it public rather than
private. At the auction, the Zehrbach-Polychron group was the
only bidder. Szybist accepted its bid of $165,000.
Shortly after the final sale, Szybist contacted the FBI
about the circumstances surrounding the withdrawal of the Starman
and Leander bids. After an FBI investigation, Mervis and
Zehrbach were indicted, tried, and convicted of one count of
conspiracy to commit bankruptcy fraud, in violation of 18 U.S.C.
§ 371,3 and of two counts of bankruptcy fraud, pertaining to
actions with regard to Starman and Eckard, in violation of 18
U.S.C. § 152.4 Specifically, Zehrbach and Mervis were charged
with conspiring to pay two bidders for the assets of Taylorcraft
to refrain from bidding in a bankruptcy auction, with actually
paying the bidders to refrain from bidding, and with purchasing
the assets as the sole bidders.
3
Section 371, conspiracy to commit offense or to defraud
United States, provides in part:
If two or more persons conspire either to commit
any offense against the United States, or to
defraud the United States, or any agency
thereof in any manner or for any purpose, and
one or more of such persons do any act to
effect the object of the conspiracy, each
shall be fined not more than $10,000 or
imprisoned not more than five years, or both.
4
Section 152, concealment of assets; false oaths and
claims; bribery, provides in part:
Whoever knowingly and fraudulently gives, offers,
receives or attempts to obtain any money or
property, remuneration, compensation, reward,
advantage or promise thereof, for acting or
forbearing to act in any case under title 11;
. . .
Shall be fined not more than $5,000 or imprisoned
not more than five years, or both.
Because the defendants did not substantively contest
the actions attributed to them, the sole issue at trial was that
of intent. Mervis and Zehrbach defended themselves on the basis
of their good faith belief that they had done nothing illegal.
Zehrbach's position, as stated by his counsel, was that Zehrbach
had made a mistake, just as the three attorneys involved in the
transaction, Buelt, Vollmer, and Szybist, had made a similar
mistake, and that Zehrbach could not have had fraudulent intent.
Mervis testified that he was working on a joint venture to merge
the bidding interests. Mervis also emphasized that Drizos and
Smith had supervised his involvement in the project. Mervis's
counsel argued that because Mervis was acting in good faith to
form a joint venture, he had no intention to deceive. The
government contended, on the other hand, that Zehrbach and Mervis
knowingly paid the other bidders to withdraw from the auction,
thereby keeping down the price paid for the Taylorcraft assets
and, as a consequence, cheating the creditors of Taylorcraft and
the bankruptcy trustee.
This question of good faith and knowledge of the law
became an issue in the formulation of the jury charge. The
district judge proposed first to list the essential elements of
the substantive offense and to follow that with a detailed
discussion of the requirements that the acts be performed
"knowingly" and "fraudulently." He would then, as Zehrbach and
Mervis requested, give an instruction on "good faith."
Although Zehrbach and Mervis fully concurred in the
scope and content of the good faith instruction,5 they challenged
a portion of the "knowingly" instruction, in which the court
stated that "[t]he government is not required to prove that a
defendant knew that his acts were unlawful." When the district
judge stated that he was going to leave this sentence in the
instructions, counsel for Mervis requested, "May I have argument
on that just to preserve my objection on the record?" App. at
608 (emphasis added). The district judge replied: "Sure. I
know you objected to that."
Id. Counsel for Zehrbach then
argued that the instruction had "the potential of confusing the
jury." Counsel suggested:
By telling the jurors that the government is
not required to prove that the defendant knew
his acts were unlawful, the jurors may
misconstrue that to mean that it is not
relevant that the defendant did not know that
his acts were unlawful.
Id. at 609. Counsel asked that the sentence be deleted "in the
interest of clarity" because of the potential for confusion and
"because the instructions clearly state[d] the burden of the
government and [did] not state that [proof of knowledge of
illegality] [was] one of the burdens of the government, because
it [hadn't] been suggested that this is one of the burdens of the
5
At a pre-charge conference, the district court asked each
party for their response to the court's rewrite of the good faith
instruction. Mervis' counsel said that it was "satisfactory,"
and Zehrbach's counsel found it to be "really much better than
[the] original good faith defense instruction." App. at 601-02.
government and because it [would] not be suggested that is one of
the burdens of the government . . .."
Id.
The following excerpt from the jury charge, which fills
twenty-six pages of trial transcript in its entirety, places the
remark in context. Topic headings have been inserted for the
ease of the reader. The instructions were as follows:
[1. The Elements]
In order to meet its burden of proof [on
the bankruptcy counts] as to either defendant
the government must establish beyond a
reasonable doubt each one of the following
elements: First, that the defendant gave or
offered any money, property, remuneration,
compensation, reward, advantage or promise of
any of those things to another in exchange
for that other person's acting or forbearing
to act; second, that the action or
forbearance, in exchange for which the money,
property, advantage or promise thereof was
given or offered, was in a case under Title
11 of the United States Code, the bankruptcy
law; third, that the defendant gave or
offered the money, property, advantage or
promise thereof knowingly; and fourth, that
the defendant did so fraudulently.
[2. "Knowingly"]
Now, in order to find a defendant guilty
of bankruptcy fraud, therefore you must find
beyond a reasonable doubt that the giving or
offering of money, property, remuneration,
compensation, reward, advantage or promise
thereof was done knowingly. An act is done
knowingly if it is done voluntarily and
intentionally and not because of mistake or
accident or other innocent reason. In other
words, an act is done knowingly if the
defendant is aware of the act and is not
committing the act through ignorance,
mistake, or accident. The government is not
required to prove that a defendant knew that
his acts were unlawful.
It is also necessary . . . that you find
beyond a reasonable doubt that the defendant
knew that his acts were in connection with a
bankruptcy proceeding. You may consider
evidence of a defendant's words, acts or
omissions along with all other evidence in
deciding whether a defendant acted knowingly.
[3. "Fraudulently"]
Also, . . . you must . . . find beyond a
reasonable doubt that the giving or offering
of money, property, remuneration,
compensation, reward, advantage or promise
thereof was done fraudulently. In a
bankruptcy case, an act is done fraudulently
if it is done with the intent to defraud the
creditors of the bankrupt entity or with the
intent to defraud the United States or the
trustee in bankruptcy concerning their right
and governmental function of regulating
bankruptcies and fairly distributing the
assets of the bankrupt entity.
Now, to act with fraudulent intent . . .
means to act knowingly and with the specific
intent to deceive, ordinarily for the purpose
[of] either causing some financial loss to
another or bringing about some financial gain
to one's self [sic].
Now, intent ordinarily may not be proved
directly because there is no way of fathoming
or scrutinizing the operations of the human
mind, but you may infer a defendant's intent
from the surrounding circumstances. You may
consider any statements made and done or
omitted by a defendant and all other facts
and circumstances in evidence which indicate
his state of mind.
To act with a fraudulent intent a person
must act knowingly and with the intention or
the purpose to deceive or to cheat, in this
case either to deceive or to cheat the
creditors of Taylorcraft Aviation Corporation
or the bankruptcy trustee.
[Passage distinguishing intent and motive
omitted.]
[4. "Good faith"]
Now, a defendant may contend that he did
not act with the specific intent to commit
the crimes with which he is charged since he
acted in good faith. A good faith is a
complete defense to charges of acting with
fraudulent intent because good faith is
simply inconsistent with the intent to
defraud. A person acts with fraudulent
intent and without good faith when he acts
with a purpose to deceive or to cheat, and so
as to deprive another person of a right or
property. While the term good faith has no
precise definition, it means, among other
things, an absence of an intention of taking
advantage of another.
The burden of proving that a defendant
did not act in good faith is on the
government. In determining whether a
defendant acted in good faith you should
consider all of the evidence in the case
bearing on that defendant's state of mind.
If the evidence leaves you with a
reasonable doubt as to whether a defendant
acted with the intent to defraud, or in good
faith, you must acquit him. On the other
hand, if you find that the government has
proven beyond a reasonable doubt all of the
other elements of the charged crimes and that
a defendant did not act in good faith, then
you should find that defendant guilty.
(Emphasis added).
At the conclusion of the reading of the jury charge,
defense counsel renewed their objections to the instruction that
the government was not required to prove that a defendant knew
his acts were illegal. App. at 726.
Zehrbach and Mervis also objected during closing
argument to comments that the prosecutor made in regard to Drizos
and Smith, whom the defense had called as witnesses to support
Mervis's testimony that he believed he was creating a legal joint
venture to acquire Taylorcraft. In his closing argument, the
prosecutor suggested that neither Drizos nor Smith was "worthy of
belief," citing testimony which cast doubt on their credibility.
Specifically, the prosecutor pointed to Drizos's failure to
inform Polychron that an attorney had advised Drizos to refrain
from further action in connection with the buy-outs. He
similarly noted Drizos's failure to ensure that his employee
(Mervis) stop his involvement in potentially illegal activity.
The prosecutor also cited the inconsistencies between what Smith
had told the FBI and Smith's testimony in court. The prosecutor
then commented:
I suggest you shouldn't believe Drizos and
Smith because they're guilty of exactly the
same bankruptcy fraud that these two
defendants are guilty of. And don't you
assume that they are not going to get what's
coming to them either.
Both defense counsel immediately objected to this
statement. The district judge granted their motion to strike.
He cautioned the jury to "disregard the last statement of the
prosecutor with respect to what may or may not happen with
respect to these two gentlemen." Moreover, the judge
subsequently instructed the members of the jury to disregard
counsel's personal opinions and to make decisions based solely on
the evidence. He then reminded the jury not to consider any
evidence that he had instructed them to disregard in the course
of the proceedings.
Defense counsel later moved for a mistrial on the
ground that the second comment was irrelevant and was based upon
information outside the record. The district court denied the
motion, citing its curative instructions and questioning whether
the statement "could have resulted . . . in any serious prejudice
to either defendant." Similarly, in denying Zehrbach's motion
for a new trial, the district court held that the first sentence
of the statement was properly based on evidence of the witnesses'
own guilt that had been adduced at trial and that any improper
inference that might have been induced by the second sentence had
been cured by the court's instructions. United States v.
Zehrbach, No. 92-0218, mem. op. at 8-9 (M.D. Pa. Jul. 7, 1993).
Following the jury verdict, the district judge
sentenced Zehrbach to a term of imprisonment of 21 months,
followed by three years of supervised release, and sentenced
Mervis to 10 months of imprisonment, followed by two years of
supervised release. Zehrbach and Mervis base their appeal on the
two issues of the jury instructions and of the prosecutor's
remarks in closing argument.
The district court had subject matter jurisdiction
pursuant to 18 U.S.C. § 3231 (1988), and this court is vested
with appellate jurisdiction pursuant to 28 U.S.C. § 1291 (1988).
II. THE JURY CHARGE.
A.
Zehrbach and Mervis objected to the trial judge's
instruction that "the government is not required to prove that a
defendant knew that his acts were unlawful" on the grounds,
expressed by counsel, that it had "the potential of confusing the
jury." Defense counsel suggested that "[b]y telling the jurors
that the government is not required to prove that the defendant
knew his acts were unlawful, the jurors may misconstrue that to
mean that it is not relevant that the defendant did not know his
acts were unlawful." Although neither Zehrbach or Mervis's
attorney proposed any clarifying language, they asked that the
sentence be dropped "in the interest of clarity."
The extent of the grounds for defense counsels'
objection to the challenged instruction are not entirely clear
from the record. The objection could be construed as a challenge
to the trial court's inclusion of the instruction as a matter of
law. Alternatively, the objection could be read as a challenge
merely to the confusing nature of the instruction. The basis of
the objection determines the appropriate standard of review. We
will consider the issue first as a review of the legal propriety
of the instructions. In this light, if the objection is
construed as a challenge to the court's statement of the legal
standard, we exercise plenary review. United States v. McGill,
964 F.2d 222, 235 (3d Cir. 1992); Savarese v. Agriss,
883 F.2d
1194, 1202 (3d Cir. 1989). In connection with a review of the
legal sufficiency of the instructions, however, if we were to
determine that counsel had not objected at trial to the court's
statement of the legal standard, we would review the legal
propriety of the instructions on a "plain error" standard.6
Whether we exercise plenary review or apply the plain error
standard, however, we conclude that the court did not err in
stating the relevant legal principles.
Zehrbach and Mervis concede that the jury charge
correctly stated the government's burden of proof. The jury
instruction did not omit any of the four essential elements of
bankruptcy fraud. The trial judge properly instructed the jury
that the government was required to establish beyond a reasonable
doubt:
6
Where a party has not made a clear, specific objection to
the charge that he alleges is erroneous at trial, he waives the
issue on appeal "unless the error was so fundamental and highly
prejudicial as to constitute plain error." Bennis v. Gable,
823
F.2d 723, 727 (3d Cir. 1987) (internal quotation omitted); see
also United States v. Santos,
932 F.2d 244, 250-53 (3d Cir.)
(examining the court's failure to define the burden of proof
applicable to a duress defense for plain error where the party
objected to the court's failure to give the defendant's proposed
duress instruction), cert. denied
112 S. Ct. 592 (1991); United
States v. Castro,
776 F.2d 1118, 1128-30 (3d Cir. 1985), cert.
denied,
475 U.S. 1029 (1986).
First, that the defendant gave or offered any
money, property, remuneration, compensation,
reward, advantage or promise of any of those
things to another in exchange for that other
person's acting or forbearing to act; second,
that the action or forbearance, in exchange
for which the money, property, advantage or
promise thereof was given or offered, was in
a case under Title 11 of the United States
Code, the bankruptcy law; third, that the
defendant gave or offered the money,
property, advantage or promise thereof
knowingly; and fourth, that the defendant did
so fraudulently.
App. at 716.
Zehrbach and Mervis do not argue that the elements of
bankruptcy fraud were improperly set out. They contend, however,
that the challenged instruction, contained in the court's further
explanation of the element "knowingly," contradicted the court's
good faith instruction. As set out infra, the trial judge had
instructed the jury that good faith is a complete defense to
bankruptcy fraud and that the government must prove that a
defendant did not act in good faith. Zehrbach and Mervis made
the good faith charge relevant by their claim that they were
involved, not in an attempt to silence competing bidders, but
merely in a joint venture with Starman and Leander to acquire
Taylorcraft.
Our first consideration in reviewing defendants'
argument is whether a good faith defense was necessary in view of
the description of the elements of bankruptcy fraud which the
district court gave to the jury. If the jury found beyond a
reasonable doubt that, by paying competitors not to bid in the
auction, Zehrbach and Mervis acted with fraudulent intent to
deceive or to cheat the creditors of Taylorcraft Aviation
Corporation or the bankruptcy trustee, it would be inconsistent
with this conclusion for the jury also to find that Zehrbach and
Mervis had acted with good faith. When a jury has determined
that an accused has intended to cheat his victim, the possibility
that the accused also acted in good faith has been eliminated.
Because the trial judge had delivered detailed
instructions regarding the elements of bankruptcy fraud, and in
particular regarding the element of acting with fraudulent
intent, the good faith instruction became in fact superfluous.
The good faith instruction merely reiterated that the government
carried the burden of demonstrating that the defendants did act
with the requisite fraudulent intent.
Moreover, as Zehrbach and Mervis acknowledge, proof of
knowledge of illegality is not a burden of the government in a
bankruptcy fraud case. The statutory requirement that the
underlying acts be performed "knowingly" requires only that the
act be voluntary and intentional and not that a person knows that
he is breaking the law. See Cheek v. United States,
498 U.S.
192, 199 (1991) (stating that as a general rule, the government
is not required to prove the criminal defendant's knowledge of
the illegality of his actions); United States v. Brown,
862 F.2d
1033, 1038 n.5 (3d Cir. 1988).
The instant case differs from those cases involving
criminal offenses for which proof of knowledge of illegality is
an element of the government's prima facie case. In such cases,
mistake of law is a complete defense. For instance, the Supreme
Court recently held that the "willfulness" element of the anti-
structuring provision of the financial transaction reporting
requirements, contained at 31 U.S.C. §§ 5322(a) & 5324, requires
proof of knowledge of illegality. See Ratzlaf v. United States,
114 S. Ct. 655, 658 (1994). The Court based its holding upon a
strict reading of the statutory language of the two sections.
Section 5324 provides that it is illegal to "structure" financial
transactions "for the purpose of evading" a financial
institution's reporting requirements. Section 5322(a)
establishes that "a person willfully violating" the anti-
structuring provision (§ 5324) is subject to criminal penalties.
The Court found that failure to read knowledge of illegality into
a violation prosecuted under § 5322 would -- in light of § 5324's
purposefulness requirement -- treat "§ 5322(a)'s `willfulness'
requirement essentially as surplusage."
Id. at 659-60. In
concluding, the Court stated that it did not "dishonor the
venerable principle that ignorance of the law generally is no
defense to a criminal charge" and emphasized that its decision
was particular to the plain meaning of the statute then before
it.7
Id. at 663. See also Staples v. United States,
114 S. Ct.
7
Since Ratzlaf was decided, Congress has amended § 5324 so
that it contains its own criminal penalty provision, making
1793, 1804 (1994) (government required to prove defendant knew of
the features of his semiautomatic firearm which brought it within
the scope of the National Firearms Act, requiring registration of
fully automtic weapons); United States v. Curran,
20 F.3d 560,
568-69 (3d Cir. 1994) (applying the Ratzlaf willfulness standard
by analogy where the prosecution alleged a violation of the
disclosure obligations imposed under the Election Campaign Act);
United States v.
Gross, 961 F.2d at 1102 (noting that belief in
legality is a complete defense to the crime of making false
statements to the Securities and Exchange Commission where the
parties stipulated that the Government had the burden of showing
that the defendant acted with knowledge of the wrongfulness of
his actions).
We conclude, in light of the elements making up the
offense of bankruptcy fraud, particularly the element of intent
to defraud the creditors or the trustee of the bankruptcy estate,
that a defendant's good faith belief in the lawfulness of his
conduct is not a defense to bankruptcy fraud. In a case like the
present one, where the defendants have claimed they were
(..continued)
resort to § 5322(a) unnecessary. The amended provision does not
refer to a mental state but declares that "[w]hoever violates
this section shall be fined in accordance with title 18, United
States Code, imprisoned for not more than 5 years, or both."
1994 Riegle Community Development and Regulation Improvement Act,
Pub. L. No. 103-325, § 411, 108 Stat. 2253 (1994). Because the
provision no longer incorporates the willfulness requirement of
§ 5322(a), the only mental state that the Government must prove
in prosecutions for structuring is the purpose of having a
financial institution not file a required report.
attempting to set up a joint venture, a belief that acquisition
of Taylorcraft through a joint venture was proper would be
relevant for the jury to consider in determining if there was
intent to defraud. However, the element of "knowledge of
illegality" which is required in federal criminal tax offenses,
see
Cheek, 498 U.S. at 192, or in the violation of election
disclosure obligations, see
Curran, 20 F.3d at 569, is not a
required element of bankruptcy fraud. Therefore, proof by a
defendant of lack of knowledge of illegality cannot in and of
itself defeat a conviction for bankruptcy fraud.8
In challenging the legal sufficiency of the charge on
knowledge of illegality, Zehrbach and Mervis also argue that the
inclusion of the statement unconstitutionally shifted the burden
of proof or precluded the jury from considering proper
exculpatory information. They rely primarily on two cases,
United States v. Rhone,
864 F.2d 832 (D.C. Cir. 1989) and United
States v. Schilleci,
545 F.2d 519 (5th Cir. 1977), both of which
we find to be distinguishable.
8
For this reason, we do not find error in the district
court's ruling, if the court in fact did so rule, that defense
counsel could not argue that good faith is a defense if there is
a mistake as to the law, see App. at 607-08, so long as the
element of intent to defraud had to be proved by the government
beyond a reasonable doubt and so long as the jury could consider
the defendant's state of mind in making its determination on
intent to defraud. It is because we find that these latter two
requirements were met in this case that we do not find such a
ruling would have been erroneous.
In Rhone, the defendant appealed her conviction for
mail fraud and theft arising out of her continued receipt of
unemployment benefits after she had become employed full time.
As in the instant case, the government had the burden of
establishing specific intent to defraud, and the defendant's sole
defense was that she lacked the requisite intent, i.e., that she
didn't believe that her employment qualified as "full time"
employment. At the close of the case, the trial court gave a
standard jury instruction on specific intent to defraud but ended
the instruction with the following statement: "And I should
point out at this time that ignorance of the law is no excuse."
United States v.
Rhone, 864 F.2d at 834.
Suggesting that the quoted instruction eased the
government's burden of proving specific intent beyond a
reasonable doubt or at least "confused the jury on the very
central issue of intent," the D.C. Circuit found that the
statement created constitutional error requiring a new trial.
Id. at 836-37. The court concluded that
[t]he jury . . . could well have inferred
that the prosecution had met its burden of
proving specific intent beyond a reasonable
doubt simply on the basis that appellant was
presumed to know the law and that she
therefore knowingly committed fraud and
theft.
Id. at 837.
We believe that the instruction in Rhone went far
beyond the instruction given in this case. That instruction
effectively told the jury that ignorance of the law is
irrelevant, suggesting -- incorrectly -- that the jury should not
even consider the defendant's lack of knowledge of the law
regarding her legal entitlement to unemployment benefits. In the
instant case, the court merely instructed the jury that the
government was not required to prove that the defendants knew
their actions to be illegal. This instruction correctly stated
the government's burden of proof in this case and in addition was
made pursuant to a charge in which the district court instructed
the jury no less that three times, once each in connection with
the defense of "good faith" and the elements of "knowingly" and
"fraudulently," that they "should consider all of the evidence in
the case bearing on that defendant's state of mind."
Schilleci involved the appeal of a conviction for
conspiring to intercept wire and oral communications, in
violation of 18 U.S.C. § 2511. This offense is a crime of
specific intent and has been held to require an intentional or
reckless disregard of legal obligations. See Malouche v. JH
Management Co., Inc.,
839 F.2d 1024, 1025 (4th Cir. 1988) (§2511
was intended "to denote at least a voluntary, intentional
violation of, and perhaps also a reckless disregard of, a known
legal duty", citing Citron v. Citron,
722 F.2d 14, 16 (2d Cir.
1983) cert. denied,
466 U.S. 973 (1984)). For this reason we do
not find that the Fifth Circuit's reasoning in Schilleci is
helpful to our consideration of an offense, like bankruptcy
fraud, where the government must prove intent to cheat or defraud
but where there is not a duty for the government to prove that
the defendant knew his acts were illegal.
Contrary to the arguments of Zehrbach and Mervis, we
find that the charge in the instant case fairly and adequately
submitted the issues to the jury for determination. The charge
accurately stated the government's burden of proof. It did not
preclude consideration of defendants' claim that they thought
they were putting together a joint venture and that they did not
know that what they were doing was illegal. Importantly, the
challenged instruction did not shift the government's burden of
proving fraudulent intent. At the same time, however, it did not
preclude the jury from considering exculpatory information which
Zehrbach and Mervis introduced in an effort to establish their
defense. Rather, the instruction merely explained that proof of
knowledge of illegality was not a burden of the government's case
in chief. We conclude that the court did not err as a matter of
law in setting forth the legal standards governing the jury's
consideration.
Moreover, since we have found that the legal standard
of the charge survived plenary review on the supposition that a
proper objection was made to the jury instructions, if we should
instead determine that defense counsel failed to object to the
legal propriety of the inclusion of the "the government is not
required to prove that a defendant knew that his acts were
unlawful" language in the jury instructions, clearly the giving
of this charge does not constitute plain error.9
B.
Whether or not defense counsel preserved an objection
to the legal sufficiency of the charge, counsel clearly objected
to the charge on the ground that it was potentially confusing to
the jury. In reviewing jury instructions, we review the trial
court's expression for abuse of discretion. Savarese v.
Agriss,
883 F.2d at 1194; United States v. Messerlian,
832 F.2d 778, 789
(3d Cir. 1987), cert. denied,
485 U.S. 988 (1988). We must
consider "whether, viewed in light of the evidence, the charge as
a whole fairly and adequately submits the issues in the case to
the jury." Bennis v.
Gable, 823 F.2d at 727. We must reverse if
"the instruction was capable of confusing and thereby misleading
the jury." Bennis v.
Gable, 823 F.2d at 727 (citing United
States v. Fischbach and Moore, Inc.,
750 F.2d 1183 (1984));
United States v. Goldblatt,
813 F.2d 619, 623 (3d Cir. 1987).
Examining the jury charge as a whole, we cannot agree
with Zehrbach and Mervis that the challenged instruction was
capable of confusing the jury, even in relation to the good faith
instruction. Notably, the good faith instruction came after the
9
This court has defined "plain error" as "those errors that
seriously affect the fairness, integrity or public reputation of
judicial proceedings." United States v.
Santos, 932 F.2d at 250
(internal quotation omitted). The doctrine is applied
"`sparingly' . . . and only where the error was sure to have had
an `unfair prejudicial impact on the jury's deliberations.'"
Id.
(citation omitted).
instructions on "knowingly" and "fraudulently," serving as a
general statement on the absence or existence of the required
intent. The court explained that good faith is an absolute
defense, that "all evidence bearing on [the] defendant's state of
mind" should be considered, and that the jury must acquit if they
had a reasonable doubt about the existence of intent or good
faith. Given this language, it is unlikely that the jury
mistakenly did not consider Mervis and Zehrbach's alleged belief
in the legality of their actions when the jury was deliberating
on the question of whether the government had proved fraudulent
intent beyond a reasonable doubt.
As a more general matter, the court continuously
reinforced the notions that the burden of proof in a criminal
case is always upon the government; that the defendants are
protected by a presumption of innocence; and that, unless they
are proven guilty beyond a reasonable doubt, the defendants must
be acquitted. The court repeated these principles at least six
times during the course of its final instructions to the jury.
In addition, the court instructed the jury to "consider the
charge as a whole," rather than "singl[ing] out any one
instruction." This reinforces our belief that the jury would not
have been misled by the single instruction that the government
need not prove knowledge of illegality.
Moreover, when defense counsel first challenged the
instruction, the court explained that it felt that the
instruction was necessary in order to clarify precisely what
"knowledge" is required of a defendant who acts "knowingly" in
the commission of bankruptcy fraud. That decision was clearly
committed to the discretion of the district court. Here,
Zehrbach and Mervis did not challenge the content of the good
faith instruction, nor did they propose the inclusion of a
sentence clarifying the relationship between their claimed
ignorance of the law and their good faith defense. They simply
challenged the inclusion of language which in fact correctly
commented on an element that the government did not need to
prove. Therefore, because we believe that the jury charge, taken
as a whole, was not misleading or confusing to the jury, we find
no abuse of discretion.
III. THE PROSECUTOR'S REMARKS.
A.
We turn next to Zehrbach and Mervis' argument that the
prosecutor prejudiced their right to a fair trial when he stated
in his closing argument:
I suggest you shouldn't believe Drizos and
Smith because they're guilty of exactly the
same bankruptcy fraud that these two
defendants are guilty of. And don't you
assume that they are not going to get what's
coming to them either.
Zehrbach and Mervis urge that these remarks comment on the
credibility of Drizos and Smith, based on facts not in the
record, and are therefore per se grounds for a new trial under
DiLoreto, 888 F.2d at 996. For the reasons stated below, we will
overrule the per se rule of DiLoreto. Rather than using the
DiLoreto per se rule, we will analyze this case on its own facts.
In making this analysis, because we must conclude that the
prosecutor's remarks were improper, we will go on to weigh the
remarks under a harmless error standard. See United States v.
Young,
470 U.S. 1, 11-12 (1985).
B.
Prosecutorial misconduct does not always warrant the
granting of a mistrial. The Supreme Court has acknowledged that
given "the reality of the human fallibility of the participants,
there can be no such thing as an error-free, perfect trial, and
that the Constitution does not guarantee such a trial." United
States v. Hasting,
461 U.S. 499, 508-09 (1983). Thus, the
Supreme Court has held that an appellate court should not
exercise its "[s]upervisory power to reverse a conviction . . .
when the error to which it is addressed is harmless since, by
definition, the conviction would have been obtained
notwithstanding the asserted error."
Id. at 506.
The harmless error doctrine requires that the court
consider an error in light of the record as a whole, but the
standard of review in determining whether an error is harmless
depends on whether the error was constitutional or non-
constitutional. In this instance, the alleged error, attacking
the credibility of a witness with evidence not in the record, is
non-constitutional. We have held that non-constitutional error
is harmless when "it is highly probable that the error did not
contribute to the judgment." Government of Virgin Islands v.
Toto,
529 F.2d 278, 284 (3d Cir. 1976). "High probability"
requires that the court possess a "sure conviction that the error
did not prejudice" the defendant. United States v. Jannotti,
729
F.2d 213, 219-20 (3d Cir.), cert. denied,
469 U.S. 880 (1984).
Therefore, we will reverse if we conclude that the prosecutor's
remarks, taken in the context of the trial as a whole, prejudiced
the defendants.
In determining prejudice, we consider the scope of the
objectionable comments and their relationship to the entire
proceeding, the ameliorative effect of any curative instructions
given, and the strength of the evidence supporting the
defendant's conviction.10 As the Supreme Court has emphasized "a
criminal conviction is not to be lightly overturned on the basis
of a prosecutor's comments standing alone, for the statements or
conduct must be viewed in context." United States v.
Young, 470
U.S. at 11 (finding harmless error where the prosecutor had
stated his opinion that the defendant was guilty and urged the
jury to "do its job").
10
See United States v.
Gambino, 926 F.2d at 1355, 1365
(3d Cir.), cert. denied sub nom. Mannino v. United States,
501
U.S. 1206 (1991); United States v. DiPasquale,
740 F.2d 1282 (3d
Cir. 1984), cert. denied,
469 U.S. 1228 (1985); United States v.
Homer,
545 F.2d 864, 867-68 (3d Cir. 1976), cert. denied,
431
U.S. 954 (1977).
C.
The first sentence of the prosecutor's objectionable
remarks suggested that the jury should not believe Drizos and
Smith because they were also guilty of the crimes of which the
defendants were guilty. This statement was clearly improper to
the extent that it reflected the prosecutor's opinion concerning
the guilt of Mervis and Zehrbach. As the Supreme Court has held,
when a prosecutor expresses his personal opinion concerning the
guilt of the accused, he creates two risks:
such comments can convey the impression that
evidence not presented to the jury, but known
to the prosecutor, supports the charges
against the defendant and can thus jeopardize
the defendant's right to be tried solely on
the basis of the evidence presented to the
jury; and the prosecutor's opinion carries
with it the imprimatur of the Government and
may induce the jury to trust the Government's
judgment rather than its own view of the
evidence.
United States v.
Young, 470 U.S. at 18-19.
In addition, the statement was improper as an
expression of the prosecutor's personal belief regarding the
guilt of the two witnesses themselves.11 As the district court
11
Although counsel may state his views of what the evidence
shows and the inferences and conclusions that the evidence
supports, it is clearly improper to introduce information based
on personal belief or knowledge. Standard 3-5.8(b) of the
American Bar Association Standards for Criminal Justice provides:
It is unprofessional conduct for the prosecutor to
express his or her personal belief or opinion
as to the truth or falsity of any testimony
or evidence or the guilt of the defendant.
See also ABA Model Rules of Professional Conduct, Rule
3.4(e)(stating that a lawyer shall not "in trial . . . assert
held, however, "[i]t is not impermissible to argue the conclusion
that witnesses other than the accused are guilty of a crime when
evidence of such has been produced." United States v. Zehrbach,
No. 92-0218, mem. op. at 8. Evidence regarding Drizos and
Smith's decision making and supervision of the bid buy-out
scheme, including testimony by both witnesses as to their active
participation, supported the prosecutor's challenged remark,
prompting the district court to conclude that the remark was
"based on evidence adduced at trial."
Id. Nonetheless, to the
extent that the sentence was an expression of the prosecutor's
personal belief, it was inappropriate and is subject to review
for prejudicial effect, as is the second sentence of the
prosecutor's remarks.
The second sentence, which entreated the jury not to
assume that Drizos and Smith were "not going to get what's coming
to them," was improper and irrelevant, because it referred to
information outside of the record and sought to influence the
decision of the jury on an illegitimate basis. This Court has
long acknowledged a defendant's "right to have his guilt or
innocence determined by the evidence presented against him, not
by what has happened" -- or by what may happen -- "with regard to
a criminal prosecution against someone else." United States v.
(..continued)
personal knowledge of facts in issue except when testifying as a
witness, or state a personal opinion as to the justness of a
cause, the credibility of a witness, . . . or the guilt or
innocence of an accused").
Thomas,
998 F.2d 1202, 1207 (3d Cir. 1993) (quoting United States
v. Toner,
173 F.2d 140, 142 (3d Cir. 1949)).12
As the district court concluded in denying Zehrbach's
motion for a new trial, the prosecutor may have made the remark
"to keep the jury from reaching a verdict on an improper basis,
i.e. that all of the guilty parties had not been brought to
justice, and only the defendants then on trial had been singled
out for prosecution." United States v. Zehrbach, No. 92-0218,
mem. op. at 8-9. The court's conclusion was consistent with the
grounds that counsel for Zehrbach originally stated to support
his motion for a mistrial. Nonetheless, the remark effectively
encouraged the jury to reach a guilty verdict on irrelevant and
illegitimate grounds.
Furthermore, given that the prosecutor made the
statement in question immediately after telling the jury that the
witnesses should not be believed because they were themselves
guilty, the comment could also be construed as a comment on the
witnesses' credibility. Thus, Zehrbach and Mervis argued that
12
Likewise, standard 3-5.8(d) of the American Bar
Association Standards for Criminal Justice explains:
The prosecutor should refrain from argument which
would divert the jury from its duty to decide
the case on the evidence, by injecting issues
broader than the guilt or innocence of the
accused under the controlling law . . . .
Standard 3-5.9 further advises:
It is unprofessional conduct for the prosecutor
intentionally to refer to or argue on the
basis of facts outside the record.
this court's holding in United States v.
DiLoreto, 888 F.2d at
996, required reversal per se.
In DiLoreto, the defendants objected to the
prosecutor's comments in closing argument regarding the
credibility of the defendants' accomplices, who testified for the
Government after entering into plea agreements themselves. The
prosecutor stated: "We don't take liars. We don't put liars on
the stand. We don't do that."
DiLoreto, 888 F.2d at 998.
Although the defendants characterized the comments as "improper
prosecutorial vouching depriving them of a fair trial," the
district court denied both their motions for mistrial and their
subsequent request for curative instruction. On appeal, this
court vacated and remanded, holding that "a prosecutor's remarks
regarding the defendant's guilt or a witness' credibility, if
based on information not adduced at trial, require reversal per
se."
Id. at 999.
The per se reversal standard announced in DiLoreto,
however, conflicts with Supreme Court case law requiring the
court to analyze prosecutorial comments case by case, in the
context of the entire trial, and to reverse only where the
defendant has suffered prejudice. United States v.
Young, 470
U.S. at 111-12. Therefore, we expressly overrule DiLoreto
insofar as it established a per se, rather than a case by case,
rule. We will, therefore, analyze the prosecutor's remark
pursuant to the harmless error doctrine. In light of that
analysis, we conclude that both comments, though truly improper
and unfortunate, do not constitute reversible error.
D.
Although it is true that irreparable harm may be
inflicted in a moment, the comments at issue were but two
sentences in a closing argument that filled forty pages of
transcript. Immediately after the objection, the court gave a
specific instruction to disregard the prosecutor's comment, an
instruction that the court repeated just a short time later at
the close of the prosecutor's argument. As a general matter, the
court told the jurors to disregard any personal opinion of
counsel and to base their decision solely on the evidence. And,
in its final instructions, the court cautioned the jury members
that the arguments of counsel are not evidence; that they must
not be persuaded by bias, prejudice, or sympathy; and that they
must not consider any evidence that they were earlier instructed
to disregard. We believe that this extensive cautioning by the
court was sufficient to cure the prosecutor's error.
Furthermore, the extensive evidence of Zehrbach and
Mervis's intent to defraud supports our conclusion that the
prosecutor's remarks would not have prejudiced the jury's
deliberations. The evidence clearly supports the government's
burden of proving that Zehrbach and Mervis knowingly and
fraudulently paid other bidders to refrain from bidding for
assets in a bankruptcy auction.
Zehrbach and Mervis acted in blatant disregard of
questions about the legality of their actions, and they
repeatedly mischaracterized the transaction. In response to
Polychron's inquiry as to whether the buy-outs were "kosher,"
Mervis promised to obtain an opinion letter from an attorney
approving the transaction. Mervis failed to produce such a
letter. Moreover, when Attorney Vollmer sent an unsolicited
letter quoting the relevant criminal statute and strongly
advising against further participation in the bid buy-out scheme,
Mervis and Zehrbach chose to disregard it. Zehrbach made some
effort to obtain another opinion, from Attorney Crane, to assuage
concerns. But Crane's positive opinion affirming the legality of
"the transaction" rested on a misrepresentation of the
transaction as a joint-venture rather than a bid buy-out. In
fact, in seeking Crane's legal opinion, no one had mentioned to
him the payments made to Starman and Eckard to refrain from
bidding. Mervis was similarly selective in his discussions with
the bankruptcy trustee and the FBI, referring to the transaction
as a "merger of interests" or a "joint-venture" and remaining
silent about the payments.
We find the evidence of knowledge and of deception to
be substantial. Under these circumstances and given the court's
curative instructions, we find that the remarks of the prosecutor
constitute harmless error.
IV.
For the foregoing reasons, we will affirm the judgments
of conviction of the district court.
United States v. Darus H. Zehrbach
United States v. Alex A. Mervis
Nos. 93-7477 and 93-7493
LEWIS, Circuit Judge, dissenting.
I join in Parts I and II of the majority opinion, and
in Part III insofar as it overrules the per se rule of DiLoreto.
However, I cannot join in Part III of the opinion to the extent
it concludes that the error here was harmless.
It is difficult for me to imagine a statement which
would carry a more powerful impact upon a jury, or which would be
more likely to deter it from acquitting, than to imply in no
uncertain terms that the defendants' two chief witnesses were
going to be indicted for their participation with the defendants
in the underlying criminal activity. That is exactly what
happened here. The prosecutor's statement was tantamount to
telling the jury that the defendants' two main witnesses were in
fact as guilty as the defendants were and would themselves be
brought to answer criminal charges, despite the fact that there
was no evidence to suggest that these individuals were going to
be indicted and despite the more compelling fact that they never
were indicted.
The majority acknowledges that "the remark effectively
encouraged the jury to reach a guilty verdict on irrelevant and
illegitimate grounds." Maj. Op. Typescript at 34. How, then,
can we be confident that "it is highly probable that the error
did not contribute to the judgment"? See Maj. Op. Typescript
at 31, citing Govt. of Virgin Islands v. Toto,
529 F.2d 278, 274
(3d Cir. 1976). "Highly probable" requires us to be virtually
certain, as that standard is only satisfied when we hold a "sure
conviction that the error did not prejudice" the defendant. See
Maj. Op. Typescript at 31, citing United States v. Jannotti,
729
F.2d 213, 219-20 (3d Cir.), cert. denied
469 U.S. 880 (1984).
The majority acknowledges this also, but then shifts its focus
from the impact of the remarks to the prosecutor's motive in
uttering them. I believe this diversion to be the fundamental
flaw in the majority's analysis. Since we must be convinced that
a criminal defendant was not prejudiced for harmless error to
apply, what difference does it make to that inquiry that the
prosecutor might have meant something else in uttering the
offending remarks? It is not what the prosecutor meant that
should control, but rather the effect of what he said upon the
defendants' right to be judged by an untainted jury. Our focus
should be to determine that it is almost certain that the error
did not contribute to the conviction. In my view, the majority
does not place sufficient emphasis upon this critical inquiry.
And it is precisely for this reason that I believe the
majority fails to perceive the violence which remarks such as
those at issue are capable of inflicting upon the unfettered
fact-finding and truth-seeking mission of the jury, preferring
instead to rely upon the court's cautionary instructions and the
quantum of evidence properly before the jury which pointed toward
guilt. As I stated in my original dissent, "I cannot imagine any
curative instruction that would be sufficient to purge the jury
of the powerful impact of such an improper, unfounded assertion
by the prosecutor." United States v. Zehrbach, Nos. 93-7477 and
93-7493 at 8 (Lewis, J. dissenting). I believe this is
particularly true in view of the fact that to a considerable
degree, the defendants' convictions rested upon the jury's
assessment of the credibility of Drizos and Smith. Moreover, I
am not persuaded that the jury could not have been influenced by
these improper remarks, to the prejudice of the defendants,
regardless of the weight of additional evidence demonstrating
their guilt.
For these reasons, I respectfully dissent.