Bankr. L. Rep. P 73,034 United States of America v. Judith E. White and Richard L. White

879 F.2d 1509

• Court: Court of Appeals for the Seventh Circuit
• Decided: November 8, 1989
• Docket: 88-1925, 88-1926
• Status: Published

Opinions

POSNER, Circuit Judge.

Richard White and his wife Judith were convicted of bankruptcy fraud in violation of 18 U.S.C. § 152. Mr. White was fined $25,000 and given a short prison sentence, which the judge suspended; both Whites were ordered to provide community service for several months.

Richard White (“White”) was a principal of a corporation named White Petroleum, which owned gas stations in Indiana and Ohio. Mrs. White, a nurse, was not directly involved in her husband’s business activities. In 1983 White Petroleum declared bankruptcy, pulling the Whites down with it because they had made personal guarantees of several million dollars to the corporation’s creditors. White retained the Indianapolis law firm of Bamberger & Feible-man, which had represented the corporation in its bankruptcy proceeding, to represent him and his wife in their personal bankruptcies. A partner in Bamberger & Feibleman who worked on both the corporate and the personal bankruptcies, Mark Center, met with White in March 1984. At that meeting, according to White, a decision was made to list on the Whites’ asset statement a $10,000 loan that White had made to Twin Flags Trucking Company as a capital contribution having no present value rather than as a receivable, and in addition Center opined that certain life insurance policies owned by White were exempt property. Mrs. White was not present at this or any other meetings at which bankruptcy was discussed.

The personal bankruptcy petition was filed in December 1984, and in May of the following year the Whites were discharged from bankruptcy because the trustee concluded that there were no assets available for unsecured creditors. Two years later Mark Center was convicted of bankruptcy fraud in an unrelated matter and shortly afterward the government solicited him to help it obtain information on still another matter. Unable to assist the government with that matter Center volunteered that he had information that fraud had beén committed in the Whites’ bankruptcy. The government was interested and Center agreed to assist. To that end (though apparently not at the government’s direction), he went to the offices of Bamberger & Feibleman, with which he was no longer affiliated, and copied a number of documents from the Whites’ file. These he gave, through his counsel, to the government. Center later testified before the grand jury that was considering whether to indict the Whites, but he did not testify at their trial.

The charge against the Whites was that in their petition for bankruptcy they had willfully listed a phony third mortgage on their house and had willfully concealed several assets, including three life insurance policies, the $10,000 loan, and some stock in a local bank. The district judge denied the Whites’ request to examine the documents that the government had obtained from Mark Center, after the government assured the judge that it had not sought to place any of those documents in evidence and in addition submitted an affidavit stating that it had not received any privileged documents from Center. The government did not show the judge any of the documents it had received from Center.

The Whites argue first of all that there is no proof they read the bankruptcy petition before signing it. It is of course true that many people sign documents — even solemn documents reciting that the signer signed with knowledge of the contents and under penalty of penury (and the Whites’ bankruptcy petition contained such a recital, right above their signatures) — without reading them. This is a fact of life for a jury to consider in determining how likely it is that a defendant who signed a document knew what was in it. The cases rather confusingly say on the one hand that “proof of a signature alone ... is insufficient by itself to make knowledge of the contents ... attributable to the signor,” and on the other hand that “the signature ... is prima facie evidence that the signor knows the contents.” United States v. Harper, 458 F.2d 891, 894-95 (7th Cir.1971); see also United States v. Bass, 425 F.2d 161 (7th Cir.1970); United States v, Tolkow, 582 F.2d 853, 857 (2d Cir.1976). This makes it sound as if a jury both may not infer knowledge from the signature alone and may. But the confusion is semantic rather than substantive. There always is more evidence than the signature— evidence at the very least of the nature and length of the document — and the issue should be whether the total circumstances, including but not limited to the bare fact of the defendant’s signature, warrant a confident inference that the defendant knew what he was signing, see, e.g., United States v. Bessesen, 445 F.2d 463, 471 (7th Cir.1971), or, what has the same legal significance, deliberately refused to acquaint himself with the contents, fearing what he would discover if he did, see, e.g., United States v. Josefik, 753 F.2d 585, 589 (7th Cir.1985).

In the case of Mr. White, the circumstances enable the necessary inference of knowledge or reckless indifference to be drawn. He met with bankruptcy counsel to prepare both the corporate and the personal bankruptcy petitions. He knew he would have to meet with his creditors, to be examined under oath regarding the truth of the petition. See 11 U.S.C. §§ 341, 343. He was an experienced businessman who handled all the financial affairs of his household. It was not a case of a single oversight. There was sufficient evidence to establish beyond a reasonable doubt that White was aware of the contents of the petition.

But there was insufficient evidence with regard to Mrs. White, and she must therefore be acquitted. There is no evidence that she was involved in her husband’s business affairs, knew anything about them, or took any interest in them. One of the government’s own witnesses testified that Mrs. White had signed documents (a mortgage and a personal guarantee) without, so far as this witness was aware, reading them. She attended none of the meetings at which her husband discussed the bankruptcy petition with the lawyers. It is true that one of the assets concealed was an insurance policy on her own life, but this suggests only that if she had read the petition she might have noticed an omission. It is true, too, that her signature appears not once but several times, on different documents attached to the petition — but not on the pages listing the petitioners’ assets. There is no evidence beyond the inference that can be drawn from her signatures that she did read the petition and accompanying schedules. In the circumstances — having regard for the nature of the bankruptcy-petition form, the circumstances in which she had previously signed documents involving her husband’s business, and the nature of her own occupation — the inference cannot be drawn with the confidence required in a criminal case.

That leaves us with a number of other issues raised by Mr. White, but only two have sufficient merit to require discussion. The first is whether the indictment was “duplicitous” in combining a number of fraudulent omissions from the bankruptcy petition in a single count. The argument that it was is that the jury may not have been unanimous with regard to any specific omissions — it is possible, for example, that three jurors may have been utterly convinced about one of the omissions, two others about another, the other seven about a third. That is a danger, but on the other side is the danger that if every omission is a separate count, a single fraudulent scheme could give rise to a staggering number of separate convictions. The statutory offense is bankruptcy fraud, and the grand jury is not obliged in our view to place every piece of the fraud in a separate count. No more is the petit jury required to agree on every detail, provided they are unanimous in believing beyond a reasonable doubt that the defendant committed the fraud. Cf. United States v. Markowski, 772 F.2d 358, 364 (7th Cir.1985); United States v. Balistrieri, 779 F.2d 1191, 1224 (7th Cir.1985).

The few cases on point support our conclusion, treating the fraudulent nondisclosure of several items of property in the petition for bankruptcy as a “single continuous concealment” constituting a single offense. Tugendhaft v. United States, 263 Fed. 562, 563 (5th Cir.1920); cf. United States v. Berardi, 675 F.2d 894, 898 (7th Cir.1982). “Surely, if an accused should conceal a dining room set, a china set, or one thousand silver dollars belonging to the estate of the bankrupt, his offense of failure to reveal or disclose would not be multiplied by the number of separate items concealed.” Edward v. United States, 265 F.2d 302, 306 (9th Cir.1959). And would the dining room set be a single item, or the number of separate pieces of furniture in the set? “[T]he duty to disclose ... is a single duty to reveal all.” United States v. Moss, 562 F.2d 155, 160 (2d Cir.1977). The fact that here a single form was involved supports this conclusion. Cf. United States v. Hawkins, 794 F.2d 589 (11th Cir.1986). Although we can find no cases on the point, we have no doubt that plural fraudulent omissions in a single federal income tax return are one offense rather than as many offenses as there are omissions; and we know that tax evasion committed over several years can be charged as a single continuous course of evasion, see United States v. Johnson, 319 U.S. 503, 513-15, 63 S.Ct. 1233, 1238-39, 87 L.Ed. 1546 (1942); United States v. Shorter, 809 F.2d 54, 56-58 (D.C.Cir.1987).

Moss draws what at first glance may seem an arbitrary distinction between nondisclosure in the initial petition and later. “When the concealment of assets belonging to the bankrupt occurs after a receiver or Trustee has been appointed, however, each separate act of concealment is a separate violation of the statute.” Id. But as the court explains, “in each such instance there is a separate act, taken at a discrete time, accompanied by the requisite intent.” Id.; see also United States v. Melton, 763 F.2d 401 (11th Cir.1985) (per curiam). “Any other rule,” the court in Moss continued, “would permit a defendant who has committed a first concealment to steal more on the theory that he would never become a sheep but always remain a lamb.” 562 F.2d at 160. The same, though, is true of the pre-filing concealment; if the defendant plans to omit one asset, he won’t incur additional criminal liability by omitting others. But there is a difference between the two cases. It is the distinction between an act of omission and an act of commission — a distinction perhaps too much derided. It is easier to determine whether someone hit X than whether someone failed to rescue X; and the difference is a clue to the law’s differential treatment of inflicting harm and failing to rescue from harm. It likewise is easier to imagine every separate act of concealment as a separate crime than to imagine every piece of information omitted from a form as a separate crime.' We need not explore the possible tension between Moss and the tax-evasion cases cited earlier.

The second noteworthy issue raised by White is the government’s refusal to allow his attorney to examine the documents that the government had obtained from Mark Center. Even if, as the government argues, none of the documents was introduced in evidence, some of them may, for all that appears, have provided leads to evidence that the government did use. The threshold question is, so what? If the government did obtain leads from the documents, did that violate any right of White’s? White suggests three possibilities. The first is that if any of the leads resulted from statements made by White to Center and reported in the documents, such use of the statements may have violated his Fifth Amendment right against compulsory self-incrimination. However, by failing to raise this issue other than by a passing reference in a footnote, White has waived it. See, e.g., Pearce v. Sullivan, 871 F.2d 61, 64 (7th Cir.1989); Bonds v. Coca-Cola Co., 806 F.2d 1324, 1328 (7th Cir.1986). Although the cases establishing this precept are civil cases, we have deemed it applicable to. criminal cases as well. See United States v. Williams, 877 F.2d 516, 518 (7th Cir.1989); United States v. Binder, 794 F.2d 1195, 1203 (7th Cir.1986); United States v. Mealy, 851 F.2d 890, 909 (7th Cir.1988) (dictum). Second, White argues that the use of documents obtained from his (former) attorney infringed his Sixth Amendment right to counsel. This argument has no merit, because Center was not representing White in the criminal matter and because that matter had not yet proceeded from the investigative to the accusatorial stage. See Moran v. Burbine, 475 U.S. 412, 432, 106 S.Ct. 1135, 1146, 89 L.Ed.2d 410 (1986). Third, White argues that the government may have violated the attorney-client privilege by making use (if it did make use) of information that he had given his attorney, Center, and that if so the government violated the due process clause of the Fifth Amendment as well. Surprisingly, the government does not argue that the privilege was unavailable to White because the disclosures he made to Center were fraudulent. See United States v. Zolin, — U.S. -, 109 S.Ct. 2619, 105 L.Ed.2d 469 (1989).

Given this waiver by the government, the third argument has potential merit, though no more. Although White could have prevented the admission of any testimony by Center that violated the attorney-client privilege — that is what an evidentiary privilege means — Center did not testify at White’s trial, and it is far from clear that the proper remedy for a violation of the attorney’s duty of confidentiality is exclusion from the client’s criminal trial of probative evidence obtained as an indirect consequence of that violation. Exclusionary remedies are strong medicine, normally reserved for constitutional violations and challenged even there, and when the attorney is not the defendant’s criminal defense attorney there is, as we have just seen, no Sixth Amendment issue. (And there is no constitutional right to counsel in civil cases on which to hang a constitutional attorney-client privilege.) If, however, the government, having the kind of hold over an attorney that it had over Center — for when it approached him he had been convicted but not yet sentenced — extracts from him client secrets that it then uses in a criminal trial of the client to the latter’s substantial prejudice, this might be the kind of serious governmental misconduct that would violate a criminal defendant’s rights under the due process clause of the Fifth Amendment. So at least a number of cases suggest. See United States v. Kleifgen, 557 F.2d 1293, 1297 (9th Cir.1977); United States ex rel. Shiflet v. Lane, 815 F.2d 457, 465-66 (7th Cir.1987); United States v. Fortna, 796 F.2d 724, 733 (5th Cir.1986); United States v. Rogers, 751 F.2d 1074 (9th Cir.1985). The fact that in this case no privileged documents were actually introduced in evidence (and this we have only on the government’s say-so) need not be crucial on the theory of these cases, if privileged documents or other privileged communications were used to obtain evidence that was placed in evidence — a matter on which the government’s affidavit is silent. All we know is that the government claims not to have introduced any privileged documents into evidence.

We do not want to decide a constitutional issue unless we have to, and we may not have to, since the government may have made no use of privileged documents in this case. We would also prefer to resolve the issue on a full record. To resolve the threshold factual questions the case must be remanded for appropriate proceedings in the district court to determine, first, whether the government procured or was otherwise complicit in a violation of the attorney-client privilege and, second, if so, whether the violation resulted in the introduction of evidence sufficiently material and adverse to White that the failure to exclude it denied him his basic procedural rights.

The district judge may if she wishes conduct an initial in camera examination of the documents that the government obtained from Mark Center and of the transcript of his grand jury testimony before deciding whether an evidentiary hearing (at which materials submitted to the grand jury could be disclosed to the defense pursuant to Fed.R.Crim.P. 6(e)(3)(C)(i) and (ii)) is necessary to resolve the issue. If she decides there was no error of constitutional magnitude, the conviction of White will stand, subject of course to his right to appeal from her determination. If she decides there was constitutional error, the government will be able to appeal and challenge the proposition that a violation of the attorney-client privilege by the government can in an egregious case violate not the Sixth Amendment right to counsel, which as we have emphasized is not in issue here, but the Fifth Amendment right to due process.

To summarize, the judgment against Judith White is reversed with directions to acquit her, and the case against Richard White is remanded for further proceedings consistent with this opinion.

Reversed in Part, and Remanded in Part.