Professional Documents
Culture Documents
14-10141, 14-10196
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TABLE OF CONTENTS
TABLES OF AUTHORITIES ........................................................................ vi-xiv
INTRODUCTION .................................................................................................. 1
QUESTIONS PRESENTED .................................................................................. 2
JURISDICTION ..................................................................................................... 3
STATEMENT OF THE CASE.............................................................................. 4
CUSTODY STATUS .............................................................................................. 6
STATEMENT OF FACTS..................................................................................... 6
A. Personal History of Steve Zinnel ..................................................... 6
B. Formation of System 3 ..................................................................... 7
C. The Luyung Property ....................................................................... 9
D. The Safeco Litigation..................................................................... 10
E. Done Deal ....................................................................................... 10
F. Family Law Litigation .................................................................... 11
G. The Bankruptcy.............................................................................. 12
H. Wilbert and His Attorney Become Informants and
Engage in Settlement Negotiations ............................................... 12
I. The Trial .......................................................................................... 14
J. Sentencing ....................................................................................... 16
K. Forfeiture ....................................................................................... 17
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J.
TABLE OF AUTHORITIES
Page(s)
Federal Cases
Ashe v. North Carolina
586 F.2d 334 (4th Cir. 1978) ............................................................................. 76
Boardman v. Estelle
957 F.2d 1523 (9th Cir.), cert. denied, 504 U.S. 904 (1992) ............................ 76
Durkin v. Benedor Corp. (In re G.I. Indus.)
204 F.3d 1276 (9th Cir. 2000) ........................................................................... 55
Gall v. United States
552 U.S. 38 (2007) .......................................................................... 46, 47, 73, 80
Green v. United States
365 U.S. 301 (1961) .......................................................................................... 76
Hughey v. United States
495 U.S. 411 (1990) .......................................................................................... 77
Keene Corp. v. United States
508 U.S. 200 (1993) .......................................................................................... 78
Nautilus Ins. Co. v. Reuter
537 F.3d 733 (7th Cir. 2008) ............................................................................. 57
Nelson v. United States
555 U.S. 350 (2009) .......................................................................................... 72
Rita v. United States
551 U.S. 338 (2007) .......................................................................................... 83
Stirone v. United States
361 U.S. 212 (1960) .......................................................................................... 27
United States v. Adamson
291 F.3d 606 (9th Cir. 2002) ................................................................. 25, 26, 27
United States v. Alghazouli
517 F.3d 1179 (9th Cir.), cert. denied, 555 U.S. 904 (2008) ............................ 33
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viii
ix
xi
xii
INTRODUCTION
This is a bankruptcy fraud case that went horribly wrong. The jury trial was
rife with prejudicial errors. The district judge, presiding in his first federal jury
trial, created a constructive amendment or prejudicial variance by enabling jurors
to convict appellant Steven Zinnel for bankruptcy fraud on uncharged conduct,
which also infected the predicate specified unlawful activity element for the
remaining offenses. The court admitted recordings of settlement negotiations
obtained by government-sponsored deceit in violation of Federal Rule of Evidence
408, allowed two lawyer-witnesses to testify on conclusions of law, and denied a
Rule 29 motion on money-laundering conspiracy that lacked sufficient evidence.
This appeal demonstrates a high probability that appellant Zinnel would not have
been convicted but for the district courts litany of errors.
Steve Zinnel, a fifty-year-old entrepreneur and job-creator with no criminal
past but a long history as a productive, decent human being and devoted father of
two (ZSER 21-41), was convicted by a jury for bankruptcy fraud and related
money laundering counts. After rejecting two five-year plea offers, which was
represented by the government as a reasonable and appropriate sentence, Zinnel
was convicted at trial and was sentenced to a miscalculated mid-range sentence of
17.67 years and a $500,000 maximum fine. (ER 156.)
At sentencing the court committed numerous reversible procedural errors
interests that were not charged, and by the district courts refusal to instruct the
jury on which properties were charged in Counts 1 and 2.
II.
settlement negotiations to prove the criminal liability and the invalidity of Zinnels
claim, based upon the courts pretrial determination of guilt, in violation of Federal
Rule of Evidence 408.
IV.
conclusions of law about the defendants guilt and debtors obligations under
bankruptcy law.
V.
Conspiracy.
VI.
(ER1 156.) Zinnel filed a timely notice of appeal on March 14, 2014. FRAP 4(b).
(ER 474.) This Court has jurisdiction over this appeal. 28 U.S.C. 1291; 18
U.S.C. 3742. Zinnels and co-defendant Eidsons appeals are consolidated.
STATEMENT OF THE CASE
Appellants Steven Zinnel and Derian Eidson were charged in a 19-count
superseding indictment (indictment) on December 7, 2011. (ER 179.) The
indictment in Count 1 alleged transfers and concealments of assets in
contemplation of bankruptcy, listing alleged pre-petition transfers and
concealments in paragraphs 4(a)-(n), and in Count 2 specifically listed six property
interests that were allegedly concealed from the bankruptcy trustee. (ER 181-184.)
The court denied appellants motion for bill of particulars (ER 205), mistakenly
believing that the magistrate judge had already denied the motion. (ER 13.)
Appellants objected to the jury instructions for Counts 1 and 2 and requested
specification of the property interests charged in the indictment, citing the risk that
without such clarification, the jury could convict on conduct not charged in the
indictment. The court denied this request. (ER 232, 975-977.)
Before trial, appellants moved to exclude evidence of settlement
negotiations between Zinnel and Tom Wilbert and their respective lawyers Eidson
and Frank Radoslovich, and to exclude an email from Zinnel to his ex-wife, as
1
violations of Federal Rule of Evidence 408. (Dkt. 79.) On May 24, 2012, the
court denied the motion. (ER 3-8.) Appellants reasserted this objection in limine
and at trial, unsuccessfully. (ER 16-17, 20, 806.)
Appellants objected to testimony from attorney Radoslovich on the grounds
that he was being asked to provide legal conclusions, that he was an undisclosed
expert, and that his testimony was irrelevant, which the court overruled. (ER 772782.) At the close of the evidence, appellants moved for a judgment of acquittal on
all counts pursuant to Federal Rule of Criminal Procedure 29, which was denied.
ER 39B-C, 989-990.)
On July 16, 2013, a jury convicted Zinnel of concealment or transfer of
property in anticipation of bankruptcy, 18 U.S.C. 152(7) (Count 1), concealing
property in his bankruptcy case, 18 U.S.C. 152(1) (Count 2), money laundering,
18 U.S.C. 1956(a)(1)(B)(i) (Counts 4-12), monetary transactions in criminallyderived property, 18 U.S.C. 1957 (Counts 15-17), and money laundering
conspiracy, 18 U.S.C. 1956(h) (Count 18). Codefendant Eidson was convicted
of Count 18, conspiracy, and Count 19, attempted money laundering, 18 U.S.C.
1956(a)(1)(B)(i). (ER 251-261.)
At Zinnels March 4, 2014 sentencing, the court cumulatively added 28
objected-to levels in enhancements. (ER 96-102.) The court imposed a 212-month
sentence (17.67 years), three years supervised release, the maximum $500,000
and taught them how to fish, drive a boat, and change the oil in a car. (ZSER 22,
29, 34.) He was an excellent CEO and leader, who worked with his employees to
help them improve, and his companies made a positive long-term impact on his
community. (ZSER 32.)
B.
Formation of System 3
This criminal case arose from the investigation of Zinnels personal Chapter
7 bankruptcy petition, filed on July 20, 2005 in the Eastern District of California.
(ER 1358.) In October 2001, Zinnel, his brother David, and electrician Wilbert
formed an electrical contracting company called System 3 by executing a business
formation agreement. (ER 635, 1337-1340.) Wilbert testified that Zinnel was a
silent partner in System 3 because he was having troubles with his wife and wanted
to keep his interest in the new company confidential. (ER 518.) However, under
the marital property judgment, Michelle Zinnel (Michelle) had no community
property interest in System 3. (ER 1588-1589, 1593-1594.) In December 2001
and early 2002, Corporate Control, Inc., one of the companies Zinnel started,
contributed capital to start System 3s operations. (ER 503-505, 1336.) Corporate
Control, Inc. was listed on Zinnels bankruptcy schedules. (ER 1393.) Zinnels
company also contributed vehicles, and assisted with corporate and financial
matters. (ER 538-539.)
System 3 was established as an S-corporation. As the sole shareholder,
Wilbert paid all the corporations income taxes on his personal return and received
K-1 distributions to reimburse him for taxes paid on the corporations pass-through
income. (ER 525-526.) In 2008 and 2009 alone, Wilbert took distributions
totaling $13.5 million from System 3. (ER 631-632, 1528, 1530.) Wilbert claimed
the distributions over eight years was mostly for taxes, (ER 632, 634), but
Wilbert used company funds to buy a new Porsche, to invest in the Wilberts
personal E*Trade account, and to buy increasingly luxurious homes. (ER 754,
757, 761-762.)
Between 2001 and 2004, System 3 was barely profitable. (ER 663, 668.) In
2005, the company made a net profit of $1.2 million and Wilberts salary was
$500,000, but no distributions or payments were made to Zinnel. (ER 665.) In
fact, there were no distributions to anyone besides Wilbert from System 3's
inception in 2001 through June 2006. (ER 639, 1437.) The December 2004
financial statement for System 3, six months before the Zinnel bankruptcy filing,
shows that a 46% interest in System 3 had a value of about $355,771 (46% of
$773,417). (ER 1605.) Later, in 2007 and 2008, the companys revenue and
profitability greatly increased from about $1 million in annual revenue to $100
million, (ER 640, 664-665, 669, 752.)
Wilbert represented himself to the world as the sole shareholder and officer
of System 3. (ER 534, 633, 750, 1549-1563.) For the tax years 2004 through
2009, Wilbert filed a Schedule K-1 with the IRS showing himself as the 100%
owner of System 3. (ER 652, 655-656, 1521-1530.) Zinnel was never issued any
System 3 stock certificates or K-1 statements as required by the business formation
agreement. (ER 633, 754.) Wilbert represented under penalty of perjury on
numerous license applications that he was the sole owner of System 3 since its
inception, even after the government directed Wilbert to amend his tax returns in
2009 to correct tax fraud for the years 2005 through 2008. Wilbert continued to
list himself on the amended K-1 as 100% owner of System 3. (ER 655-656, 1523,
1525, 1527, 1529.) Zinnel never worked at System 3, never hired or fired any
employees, and never bid on jobs for the company. (ER 666.)
C.
Before the divorce, Zinnel and his wife agreed to sell the Luyung property to
Tom Cologna for $161,718. (ER 497A, 1341.) In their April 8, 2002 property
division judgment, all of Zinnels businesses, their assets, and the Luyung property
were awarded to him. (ER 1588-1589, 1593-1594.) Zinnels ex-wife deeded her
interest in Luyung to Zinnel before the sale. (ER 954-955.) Cologna bought the
Luyung property on May 3, 2002. After payment of a secured creditor (Zinnels
grandmother), Zinnel received $4,742.69 from the sale. (ER 497A, 1341-1342.)
Two years later, Cologna sold the Luyung property for $169,804. (ER 498, 1345.)
The purchase funds came from Corporate Control Profit-Sharing Plan (PSP),
In May 2002, Safeco Insurance and two subsidiaries, General Insurance and
First National Insurance, sued five Zinnel companies for non-performance on
electrical installation contracts guaranteed by Safeco as surety. They also sued the
Zinnels for indemnity based on their personal guarantee. (ER 909A, 1621-1624.)
Zinnel fought the case for three years in pro se, until U.S. District Judge Shubb
granted Safeco a judgment against Zinnel in October 2004 for $1,192,000, ordered
Zinnel to indemnify his ex-wife and pay her attorneys fees of $9,870.43, and
dismissed with prejudice Safecos additional claims for $1,607,133. (ER 375-376,
386-387, 390, 392-393.) Zinnel appealed the judgment. (ER 909, 1623.) Zinnels
ex-wife listed her indemnification judgment as an asset of her own bankruptcy
estate several months before Zinnel filed his. (ZJN128, Exh. 13.)
E.
Done Deal
Attorney Eidson formed Done Deal, Inc. in July 2004. (ER 942, 1346.)
10
Eidson was the sole owner and officer. (ER 1346.) Eidson opened a checking
account and an E*Trade account for Done Deal, and later made Zinnel a signer on
both. (ER 946, 1351-1352.) Eidson advised Wilberts attorney that Zinnel had
assigned his interest in System 3 to Done Deal in July 2004. (ER 837.) After the
bankruptcy, Zinnel was a salaried employee of Done Deal. (ER 1419, 1533-1547.)
In 2004 through 2007, Zinnel consulted for System 3, reviewing monthly
financials, and Done Deal was paid at least $3,333 monthly for his services. (ER
669, 753, 1400.) From December 2006 through 2008, System 3 paid Done Deal
on invoices, some but not all of which Wilbert and his wife testified were fake.
(ER 568-571, 577, 583, 719-739, 753.) Eidson represented System 3 in two
lawsuits, fees for which were billed and paid through Done Deal. (ER 578-581,
724.) However, Julia Wilbert claimed that some legal services were false. (ER
728-729.) Zinnel sent an email dated June 11, 2008 itemizing distributions System
3 paid out, as well as payments for services. (ER 573-576, 1436-1438.) Wilbert
and his wife were largely discredited. They admitted gaining financial windfalls
by expensing payments to Done Deal, committed tax fraud, would lie for money,
and avoided prosecution by testifying. (ER 572, 696, 744-745, 750-751.)
F.
Zinnel and his ex-wife separated on December 4, 1999. (ER 918, 1587.) In
2001, Zinnel sent her one of many heated emails in their contentious divorce
11
negotiations, stating that his company was filing bankruptcy, which would limit his
income, and that her support would be severely restricted when he filed personal
bankruptcy. (ER 918A, 1334.) They litigated over spousal and child support for
years. Zinnel appealed a ruling on child support, and Eidson used Done Deal
funds to pay Zinnels $75,158 child support appeal bond. (ER 923-925.) The
government asserted that Zinnels motive for bankruptcy fraud was to avoid child
support. However, child support is not dischargeable in bankruptcy. (ER 494.)
G.
The Bankruptcy
On July 20, 2005, Zinnel filed his Chapter 7 bankruptcy petition. (ER
1358.) The pro se petition reported total assets of $842,620 and total claims of
$6,050,362.54. (ER 1360.) By the time of the bankruptcy filing, Zinnel had never
received a single payment or distribution from System 3. Zinnel worked as a
financial consultant for System 3. (ER 669.) In his bankruptcy, Zinnel listed debts
that included questionable and potential claims, secured debts, undischargeable
debts such as child support, double-counted debts, and some debts that were not
even incurred. (ER 494, 1371-1382.) All but one of the scheduled claims were
disputed, contingent or unliquidated. (ER 1371-1382.)
H.
12
1565.) Wilbert confirmed that this was not Zinnel and Eidson shaking [him]
down, but rather he wished to end the business relationship. (ER 675.) On May
22, 2008, Wilbert emailed Zinnel a proposed settlement agreement. (ER TRT 675676, 1425-1426, 1565.) Key provisions included that Wilbert has always been the
sole record ownerof System 3, that he did not acknowledge or admitthat
Sellers have or ever had a lawful interest in [System 3], typical contractual terms
such as a mutual release, a confidentiality clause, and a purchase price of
$3,944,799. (ER 1425-1430.)
After Wilbert initiated negotiations, the government selected Zinnel as a
target and informed Wilberts lawyer that Wilbert was not a target. (ER 657,
1548.) Wilbert and Radoslovich began working as government informants in
October 2008, planning to draw Zinnel into recorded settlement discussions. (ER
600, 648-650, 656.) Between June and November 2008, Zinnel did not contact
Wilbert urging resolution; instead Wilbert himself was pushing the issue. (ER
677.) In November 2008, Wilbert emailed Zinnel to arrange a secretly recorded
meeting. (ER 677-678.) Wilbert and Radoslovich met with FBI agents to discuss
how to talk to Zinnel, and later an agent instructed Wilbert to work in certain
topics in future recorded communications. (ER 680, 688-689, 1584.)
Wilbert met with Zinnel on December 3, 2008 at Starbucks, which was
recorded. (ER 594, 1444-1457.) Radoslovich had two face-to-face negotiation
13
meetings with Zinnels attorney Eidson, on February 17 and March 3, 2009. (ER
590-592, 595-597, 797-820, 1444-1520.) The government secretly recorded those
settlement meetings and sponsored lying by attorney Radoslovich, such as the
identity of the agent in the room who posed as an associate. (ER 791, 881, 1458.)
Both Wilbert and Radoslovich intended and attempted to negotiate a real
settlement. (ER 679-681, 790, 797, 839-840.) Wilbert and Radoslovich testified
over objection about correspondence and statements made during those
negotiations. (ER 585-599, 786-821.) The government argued that the settlement
recordings proved appellants guilt on all counts. (ER 1044-1045, 1048, 11141116, 1132-1135.) The government also argued that Zinnels 2001 email to his exwife during their divorce negotiations proved his long-term plan to file bankruptcy
to deny her child support. (ER 1048, 1135.) In 2011, when the bankruptcy was
reopened, Wilbert successfully argued to the trustee that Zinnel owned no interest
in System 3, and the trustee agreed to accept Wilberts payment of $350,000 as the
maximum value of any interest Zinnel owned. (ER 672-673.)
I.
The Trial
This was Judge Nunleys first federal jury trial. (ER 1147.) At trial, the
government introduced evidence that Zinnel concealed from the trustee certain
assets, including System 3 and the Luyung property, which were alleged in the
indictment, as well as assets that were not charged in Count 1 or Count 2; namely,
14
his personal bank account at Washington Mutual (WAMU) (ER 488-489, 890904, 908, 915, 1333), Corporate Control (ER 901-902), and Done Deal (ER 488B,
905-908.) The bankruptcy trustee testified that, if he had known Zinnel had access
to Done Deals bank account or if he knew Corporate Control had assets, he would
have investigated those interests. (ER 902, 908.) Both prosecutors argued that the
jury could convict Zinnel on Counts 1 and 2 based on concealing those uncharged
assets. (ER 1048, 1053-1054, 1116-1119.)
The jury instructions on Counts 1 and 2 failed to identify any assets, yet
referred to the alleged items of property and the above items of property as if
the assets were itemized above or the jury had received the indictment, which it
had not. (ER 1019-1021.) The jury instructions for all money laundering were
also fatally defective by failing to detail the predicate unlawful activity by
omitting the assets alleged in the indictment, failure to define proceeds as profits,
and stating that a simple transfer of cash is sufficient to establish money
laundering. (ER 1021-1027.)
The court allowed expert testimony by two lawyer-witnesses on issues of
law. Undisclosed expert Radoslovich opined, over objection, on several legal
issues, including Zinnels ownership interest in System 3, the illegality of Zinnels
nondisclosure of System 3 to the bankruptcy court and to Zinnels ex-wife, the
illegality of helping paper up Zinnels bankruptcy fraud, and the extortionate
15
Sentencing
The loss amount and number of victims were based solely sum of the
disputed and unverified claims (including new claims filed after the indictment),
and the number of claimants, lifted from the bankruptcy list of claims. The court
adopted the PSRs calculations of intended loss and number of victims, despite
16
Forfeiture
17
and (4) System 3, and ordered that the home and substitute assets be applied to the
money judgment. (ER 62-64, 152-155, 165-178.) In 2014, the court allowed
Wilbert to pay $2.8 million in lieu of forfeiture of 46% of System 3. (ER 65-68.)
SUMMARY OF ARGUMENT
I.
The evidence that Zinnel concealed three property interests not charged in
the indictment, the prosecutors argument that jurors could convict Zinnel of
bankruptcy fraud based on those uncharged concealments, and the inadequate jury
instructions enabled jurors to convict based on conduct not charged by the grand
jury. This constructive amendment or prejudicial variance requires reversal
because it is impossible to know whether the jury convicted Zinnel on the
uncharged conduct. Reversal is also required on the money-laundering counts,
which depended on the predicate offenses charged in Counts 1 and 2.
II.
and because they referred to the alleged and the above items of property with
no items listed. The money laundering instructions gave inadequate guidance on
specified unlawful activity and the meaning of proceeds, and improperly
instructed that a simple transfer of cash could satisfy the financial transaction
element and jurisdictional requirement of 18 U.S.C. 1956.
III.
18
findings of guilt. The evidence was used to prove the invalidity of disputed claims
and to establish criminal liability, in violation of Federal Rule of Evidence 408.
This evidence was prejudicial because the government used it pervasively
throughout the trial and arguments, and it impacted every count of conviction.
IV.
from two lawyers, Radoslovich and Gee, on conclusions of law, including the
disclosure obligations of bankruptcy debtors, Zinnels commission of bankruptcy
fraud, and that paying Zinnel would constitute helping money-laundering.
Radoslovich was not a disclosed or qualified expert, and the improper testimony
invaded the province of the jury and denied Zinnels Sixth Amendment rights.
V.
bankruptcy fraud by hiding properties that were not charged in the indictment, and
19
the courts refusal to instruct the jury on which properties were charged in Counts
1 and 2, constructively amended the indictment, allowing the jury to convict Zinnel
for uncharged conduct, in violation of the Fifth Amendment.
A.
Standard of Review
This Court reviews this claim de novo because Zinnel objected to the jury
instructions for Counts 1 and 2, conveying the risk of conviction for unindicted
conduct if the charged property interests were not listed for the jury. United States
v. Ward, 747 F.3d 1184, 1189 (9th Cir. 2014). (ER 975-977, 983-985.)
B.
At the hearing, the district judge denied the motion because he mistakenly
believed the magistrate judge had already decided it. (ER 13.)
2
20
21
inaccurate because, while Count 1 had the phrase among others in the ways and
means section, 5 of Count 1 referred to the omitted interests listed in 4(a)-4(n),
without the qualifier among others. (ER 184.) In her arguments, the AUSA
failed entirely to address Count 2 (ER 976), which nowhere used the term among
others, and explicitly listed the property interests allegedly concealed. (ER 185.)
The Ninth Circuit has no model jury instruction for 18 U.S.C. 152(1) or
152(7). The court refused appellants requests to instruct the jury it was limited to
charged property interest as a basis for Counts 1 and 2. (ER 976-977.) The court
acknowledged the problem of leaving jurors without guidance on which property
interests they could consider, asking if the verdict forms and closing arguments
would specify which companies relate to which count. (ER 976.) The
prosecutor revealed that the verdict forms would not so specify, but assured the
court that closing argument would do so. Id. The judge was wrong to rely on the
prosecutors closing argument to protect Zinnel from this prejudicial variance.
The jury instructions allowed the jury to find Zinnel guilty of Counts 1 and 2
based on concealments not charged by the grand jury. As to Count 1, the jury was
instructed inter alia: You may find the defendant guilty if you find that all of the
above elements have been proven beyond a reasonable doubt as to at least one of
the alleged items of property for each defendant and you unanimously agree to that
item, without explaining what interests comprised the alleged items of property.
22
(ER 1019, emphasis added.) As to Count 2, the jury was instructed inter alia: The
law does not require that the government prove that each and every one of the
above items of property was concealed. You may find the defendant guilty if you
find that all of the above elements have been proven beyond a reasonable doubt as
to at least one of the above items of property for each defendant and you
unanimously agree to that item. (ER 1020-1021, emphasis added).
Neither the instructions nor the verdict form identified the above items,
and the jury was never read or given the indictment. The verdict forms did not
itemize property interests alleged in Count 1 or 2. (ER 251-252.) The jurors were
not limited, as the Constitution required, to the properties charged in the
indictment.
Jury Instructions and verdict forms in similar bankruptcy fraud cases in the
Eastern District of California have complied with the law by itemizing specific
misstatements or property concealments that were charged in the indictment,
directing jurors to agree unanimously on at least one misstatement or asset listed,
and check a box next to the asset(s) agreed on.3 However, the government and the
court declined to use that format here. (ER 977.)
In closing and rebuttal arguments, government counsel argued that Zinnel
E.g. United States v. Burke, CR 05-365-JAM; United States v. Klassy, CR 05503-MCE. The jury instructions and verdict forms in these cases specified the
charged interests. (ZJN009, 0013, 0017, 0021; Exh. 1-4.)
3
23
concealed the WAMU account, Corporate Control, and the entire company of and
Zinnels interest in Done Deal, and that concealment of any of those assets could
serve as the basis to find Zinnel guilty of Counts 1 and 2. (ER 1053-1054, 11161119.) For example, as to Count 1 the prosecutor argued: But does he have a
beneficial interest in Done Deal? Absolutely. And as you heard in the jury
instructions given by the judge, concealment of any one of these pieces of property
is sufficient for conviction. (ER 1048.)
On Count 2, the prosecutor argued that Zinnels WAMU account isn't here
on Schedule B, personal property, from his bankruptcy schedules, and that Zinnel
concealed an equitable interest in Done Deal. (ER 1053, 1333.) She then argued
jurors could convict based on any one of: 4Results, Luyung, Auto and Boat. An
ownership interest in System 3. Equitable control of Done Deal. And listed
personal bank account. Just as in Count 1, any one item of concealed property is
sufficient. (ER 1054.)
In rebuttal, the other prosecutor displayed the bankruptcy schedules and
argued: (1) Where is Done Deal? Done Deal is nowhere; (2) Zinnel's personal
account is not disclosed; and (3) in the 341 hearing,Zinnel says all the assets
of Corporate Control were sold in 2002 and went to First Bank. (ER 1116, 1119.)
The prosecutions arguments about uncharged assets were so memorable that the
judge recalled them at sentencing eight months later. (ER 1251.) Those arguments
24
made it likely that jurors convicted Zinnel based on the uncharged transfer or
concealment of the uncharged WAMU account, Corporate Control and/or Done
Deal, and it is impossible to ascertain that they did not.
C.
A person is entitled under the Fifth Amendment not to be held to answer for a
felony except on the basis of facts which satisfied a grand jury that he should be
charged. He is entitled to fair notice of what he is accused of, and not to be twice put
in jeopardy on the accusation. United States v. Tsinhnahijinnie, 112 F.3d 988, 992
(9th Cir. 1997); U.S. Const. Amend. V. In federal court a defendant may not be
convicted of an offense different from that specifically charged by the grand jury.
United States v. Stewart Clinical Laboratory, Inc., 652 F.2d 804, 807 (9th Cir.
1981). [T] he indictment's charges may not be broadened by amendment, either
literal or constructive, except by the grand jury itself. United States v. Adamson, 291
F.3d 606, 614 (9th Cir. 2002)(citing Stirone v. United States, 361 U.S. 212, 215-16
(1960)). An amendment to an indictment occurs when the essential elements of the
offense contained in the indictment are altered to broaden the possible bases for
conviction beyond what is contained in the indictment. United States v. Dennis,
237 F.3d 1295, 1299 (11th Cir.), cert. denied, 534 U.S. 821 (2001). Neither the
statutory citation nor the heading in an indictment is considered part of the indictment.
United States v. Pazsint, 703 F.2d 420, 423 (9th Cir. 1983).
25
Amending the indictment to charge a new crime through the jury instructions
constitutes per se reversible error. Stewart Clinical Laboratory, at 807. Just as in
Tsinhnahijinnie, the problem in this case is thus not that the government failed to
prove an element of the crime, but that it failed to comply with the requirements of the
Constitution. Id. Whether deemed constructive amendment or prejudicial variance,
the error here was unconstitutional and prejudicial because it enabled the jury to
convict Zinnel on Counts 1 and 2 based on uncharged concealment of three assets.
This error violated Zinnels constitutional rights to notice, freedom from double
jeopardy, and to be convicted only on charges found by the grand jury. The
indictment gave no notice that Zinnel was being charged in Counts 1 and 2 with
transferring or concealing the WAMU account, Done Deal and Corporate Control.
Given the governments exhortations to jurors to convict based on any of these
uncharged property interests, it is impossible to find that Zinnel was not convicted of
Counts 1 and 2 based on concealment of property not charged by the grand jury.
In Adamson, the indictment charged that the defendant falsely stated that
upgrades to servers had been made, whereas the trial evidence proved that he told
a different lie; [about] how upgrades had been made. Id., 291 F.3d at 616. The
trial court instructed the jury in Adamson that it must agree unanimously on at least
one falsehood, but did not specify the falsehoods charged in the indictment. Id. at
611. This Court held that this was a prejudicial variance, because the court instructed
26
the jury in such a way as to allow the defendant to be convicted on the basis of
conduct other than that with which he was charged. Id. at 616.
In Ward, this Court reversed on nearly identical facts. While the indictment
named two identity theft victims, the jury heard testimony evidence that Ward also
victimized others. The trial court instructed the jury that it could convict if the
defendant stole the identity of a real person, without specifying any names. This
Court reversed, reasoning that where the trial included evidence of both charged and
uncharged conduct that would satisfy an element of an offense, the jury instructions
did not limit the jury to the charged conduct, then the defendant's conviction could be
based on conduct not charged in the indictment. That possibility creates a constructive
amendment of the indictment, requiring reversal, because it destroy[s] the defendant's
substantial right to be tried only on charges presented in an indictment. Ward, 747
F.3d at 1186-1188, 1191 (quoting Stirone, 361 U.S. at 217). See also United States
v. Shipsey, 190 F.3d 1081, 1085 (9th Cir. 1999). This is exactly what occurred here.
Ward and Adamson compel reversal of Zinnels bankruptcy fraud
convictions. The variation between pleading and proof, the prosecutors arguments
encouraging jurors to convict Zinnel on Counts 1 and 2 based on concealing
uncharged assets, and the defective jury instructions affected Zinnels substantial
rights under the Fifth and Sixth Amendments. Stirone, 361 U.S. at 218-219. See
United States v. Lloyd, 807 F.3d 1128, 1164 (9th Cir. 2015).
27
This Court must also reverse all of Zinnels money laundering convictions
(Counts 4-12, 15-18) because they were predicated on the defective bankruptcy
fraud convictions. (ER 190, 192-194, 196.) United States v. Garrido, 713 F.3d
985, 998-999 (9th Cir. 2013), cert. denied, __ U.S. __, 134 S.Ct. 1333 (2014)
(reversing 1957 convictions where the alleged criminally-derived property was
derived from defective fraud conviction); Shipsey, 190 F.3d at 1083, 1088
(reversing 1956 convictions predicated on reversed theft convictions).
D.
If this Court somehow finds that Count 1 or 2 was broad enough to include
the WAMU account, Done Deal and Corporate Control, then the district court
abused its discretion in denying the Bill of Particulars. Zinnel was surprised at trial
by the governments argument that jurors could convict him for concealing three
uncharged properties, having relied on the indictment and the governments trial
brief (which functioned as a Bill of Particulars). (ER 235-236.) See United States
v. Rodrigues, 678 F.3d 693, 702 (9th Cir.), cert. denied, 133 S. Ct. 359 (2012).
II.
Standard of Review
This Court reviews the language and formulation of jury instructions for
abuse of discretion. United States v. Christensen, 801 F.3d 971, 990 (9th Cir.
2015). Omitting an element of an offense is constitutional error that requires reversal,
28
unless the error was harmless beyond a reasonable doubt, i.e., if there is no
reasonable possibility that the error materially affected the jurys deliberations.
United States v. Pierre, 254 F.3d 872, 877 (9th Cir. 2001).
B.
A defendant can be found guilty of bankruptcy fraud only upon proof that he
knowingly transferred or concealed the property stated in the indictment. 18 U.S.C.
152(1) and 152(7). Of the seven circuits that have pattern instructions for
sections 152(1) or 152(7), six require a description of the property the indictment
alleged was transferred or concealed.4 The description of the property is critical to
allow preparation of a defense. E.g., 10th Cir. Pattern Crim. Jury Instr. 2.10 (Rev.
2011), cmt. (the property should be sufficiently identified in the instructions)
(quoting United States v. Arge, 418 F.2d 721, 724 (10th Cir. 1969)).
See First Cir. Pattern Crim. Jury Instr. 4.18.152(1) and 4.18.152(7); Third Cir.
Manual of Model Crim. Jury Instr. No. 6.18.152(1) (Rev. 2012); Seventh Cir. Pattern
Crim. Jury Instr. 18 U.S.C. 152(1) (Rev. 2013); Eighth Cir. Model Crim. Jury Instr.
No. 6.18.152A (Rev. 2014); Tenth Cir. Pattern Crim. Jury Instr. No. 2.10 (Rev. 2011);
Eleventh Cir. Pattern Jury Instr. (Crim.) No. 2 (Rev. 2010). (ZJN054-071; Exh. 8.)
4
29
In creating the bankruptcy fraud instructions given here (ER 221-226), the
government borrowed from United States v. Klassy, CR 05-503-MCE (E.D. Cal.).
However, the government omitted Klassys list of the property charged. (ZJN017018, Exh. 3.) The jury instructions in United States v. Burke, CR 05-365-JAM
(E.D. Cal.), also authored by the same U.S. Attorneys Office, also listed the
properties alleged in the indictment. (ZJN009; Exh. 1.) By omitting which items of
property the jury could consider, the jury instructions for Counts 1 and 2 were
inadequate to guide the jury. Reversal is warranted, as stated in Issue I, because it is
impossible to determine if this error materially affected the verdicts.
2.
In addition to omitting the property interests alleged in the indictment, the jury
instructions for Counts 1 and 2 were prejudicially confusing because each instruction
referred to property items as if they were identified elsewhere. The instructions made
reference to at least one of the alleged items of property for Count 1 (ER 1019),
and as to at least one of the above items of property as to Count 2. (ER 10201021.) These phrases were obviously borrowed from the jury instructions in Burke
and Klassy (ZJN009, 017, 021-022; Exh. 1, 3.) However, unlike in those cases,
Judge Nunley never identified the alleged items of property or the above items
of property. The jury never got the indictment, and the verdict forms did not
identify the interests. (ER 251-252.) The instructions created unresolvable jury
30
confusion. Jurors were left to glean the possible items of property from the
prosecutors arguments, which urged them to convict on uncharged conduct. (ER
1053-1054, 1116-1117, 1119.) It cannot be said that there is no reasonable
possibility that this error materially affected the verdict. Pierre, 254 F.3d at 877.
C.
All the money laundering convictions (Counts 4-12 and 15-18) were
unconstitutionally defective, because they rested on the specified unlawful
activity of bankruptcy fraud as described in the defective jury instructions for
Counts 1-2, and because money laundering convictions must fall where the
predicate conviction is reversed. Garrido, at 998-999; Shipsey, at 1083, 1088.
As to the 1957 counts, the jury was also not instructed that it must find the
property was in fact derived from specified unlawful activity, as required by Ninth
Circuit Model Criminal Jury Instruction 8.150. The indictment alleged that the
criminally derived property was money derived from a violation of 18 U.S.C.
152. (ER 190, 192-194, 196.) The jury was erroneously instructed that it must find
the property was, in fact, derived from bankruptcy fraud, without specifics. (ER
51.) The jury was left to select any conduct it felt was bankruptcy fraud.
This was a constitutional error requiring reversal, because it is impossible to
find the error harmless beyond a reasonable doubt. Pierre, 254 F.3d at 877. This
Court cannot determine whether the jury used (1) one of the uncharged property
31
interests (the WAMU account, Corporate Control, Done Deal or equitable control of
Done Deal) as the predicate unlawful activity to convict Zinnel on the 1956 counts,
and/or (2) used one of these same uncharged property interests or some other conduct,
unlawful or lawful, as the predicate unlawful activity for the section 1957 counts.
Second, the judge failed to instruct the jury that, as to both section 1956 and
1957 counts, proceeds means profits rather than gross proceeds. See United States
v. Santos, 553 U.S. 507, 514 (2008) (plurality); United States v. Bush, 626 F.3d
527, 536 (9th Cir. 2010) (applying Santos to 1957). In United States v. Van
Alstyne, 584 F.3d 803 (9th Cir. 2009), this Court held that absent a profits
instruction, Santos required reversal where the transactions charged as money
laundering were [t]ransactions that normally occur during the course of running
a[n illegal scheme]. Van Alstyne, 584 F.3d at 816 (quoting Santos, 553 U.S. at
517). Here, simple deposits of System 3 checks (Counts 4-12) and the payments
charged in Counts 15-17 were normally occurring transactions under Santos.
This error prejudiced Zinnel because System 3 repaid his 2001 investment
(ER 557, 564), and the jury was not instructed it could convict only if profits, as
distinguished from the initial investment, were concealed or spent. The refunded
investment should have been credited against some of the checks deposited as
charged Counts 4-9 under 1956 (requiring not guilty verdicts on some counts),
and again from the expenditures charged in the 1957 counts (Counts 15-17).
32
This error meets the plain error standard. The error was plain because this
instruction was clearly required by Santos, and the jury instructions failed to define
a key term in an element of the offense. The error affected his substantial rights
because the jury was allowed to convict Zinnel on Counts 4-9 and 15-17 based on
receipt and expenditures of $600,000 of initial investment rather than profits.
Unlike United States v. Alghazouli, 517 F.3d 1179, 1189-1190 (9th Cir.), cert.
denied, 555 U.S. 904 (2008), the jury was not instructed by alternate means, such
as by correctly defining proceeds and providing a list of the property
concealments in verdict forms of the indictment. The error seriously affects the
fairness, integrity, or public reputation of judicial proceedings, United States v.
Cannel, 517 F.3d 1172, 1175-77 (9th Cir.), cert. denied, 555 U.S. 854 (2008),
because the judge disregarded Supreme Court precedent, causing nine convictions.
D.
Finally, Zinnel joins all arguments in Eidsons Opening Brief in Case. No.
14-10196, that the money laundering instructions unconstitutionally instructed the
jury that the simple transfer of cash from one person to another may constitute a
money laundering offense. (ER 50.) This unconstitutional expansion of 1956
allowed the jury to convict Zinnel on Counts 4-12 and 18 without finding the
essential element of a financial transaction and the jurisdictional prerequisite of a
nexus to interstate commerce. In addition, this error requires reversal of Zinnels
33
1957 convictions (Counts 15-17), because the court instructed the jury on coconspirator liability for Counts 13-17, and that it could convict on 1957 based on
membership in the conspiracy charged in Count 18, at the time the offense
charged in Counts 4-12 and/or 19 was committed. (ER 53.) Since the jury found
Zinnel guilty of Count 18 and Eidson guilty of Count 19, they may have found
Zinnel guilty of Counts 15-17 based on the simple transfer of cash instruction.
These instructional errors require reversal of all Zinnels convictions.
III.
34
The Rule 408 errors also prejudiced Zinnel on the money laundering counts.
They rested on the predicate offenses of bankruptcy fraud, and the settlement
evidence was used to prove the specified unlawful activity element of money
laundering. In addition, the prosecutors argued that Zinnels and Eidsons efforts
to obtain $4 million proved conspiracy to launder proceeds of bankruptcy fraud.
(ER 1134.) The settlement evidence was the only evidence on Count 18.
The prosecutors arguments amplified the prejudice to Zinnel. In argument,
the AUSAs played 8 audio clips, and referenced the negotiations often, arguing
that they established Zinnels guilt on all counts. (ER 1048, 1127, 1114-1116,
1132-1135.) For example, AUSA Segal argued that Eidson lied about involvement
in Zinnels bankruptcy because she knows that the bankruptcy is red hot with
fraud. (ER 1133-1134.) The negotiations evidence was essential to the
prosecution case against Zinnel. Without it, no convictions were possible.
B.
The court erroneously admitted Zinnels 2001 email to his ex-wife, which
stated: that after Zinnel gets driven into bankruptcy by what both knew was an
inevitable lawsuit by Safeco, there will be no subjectivity to what my
compensation will be. Your support will almost go to zero and you will have to
go to work. As soon as the bank and the bonding company sue me for my
personal obligation, I will file personal bankruptcy as well. (ER 920, 1334.) As
35
part of the negotiations in their acrimonious divorce, Zinnel reminded his ex-wife
that he was being driven into bankruptcy (ER 921) and the resulting drop in
income would reduce her bargaining power. (ER 1585.) Thus, it falls squarely
within the parameters of Rule 408(a)(2). The purposes for which this evidence
was used also defied Rule 408. The government argued this evidence proved
criminal liability (i.e., guilt) because it showed he was planning to fake his
financial death as the prosecutor argued. (ER 1048, 1135.) See United States v.
Davis, 596 F.3d 852, 859-861 (D.C. Cir. 2010).
All the settlement evidence prejudiced Zinnel. It featured prominently and
pervasively in evidence and arguments, and was used to establish guilt on all
counts. (ER 477, 916-917, 1048, 1135, 1334.) It was the sole evidence on Count
18. This Court must reverse on all counts, and should exclude at retrial all
statements made during negotiations, and all testimony about negotiations.
IV.
The court allowed the government to elicit, over objection, prejudicial legal
conclusions from undisclosed and unqualified expert Frank Radoslovich, System
3s attorney, on legal issues such as the illegality of Zinnels nondisclosure of an
interest in System 3 in bankruptcy and the need to reopen the bankruptcy to cure
the nondisclosure. (ER 783-785, 805-811, 819, 883.) Radoslovichs legal
conclusions reached all counts against Zinnel, invaded the province of the jury, and
36
denied appellants substantial rights to fair trial under the Sixth Amendment. In
admitting this testimony, the court abused its discretion and abdicated its duty to
ensure expert testimony is both reliable and relevant. Fed.R.Evid. 702. The
government elicited from disclosed bankruptcy expert Edmund Gee improper legal
conclusions concerning debtors disclosure obligations and penalties Zinnel
purportedly faced for nondisclosure. (ER 488A, 490-491, 496-497.)
A.
Standard of Review
This Court reviews for abuse of discretion the district courts evidentiary
rulings. United States v. Angwin, 271 F.3d 786, 798 (9th Cir. 2001), cert. denied,
535 U.S. 966 (2002). Evidentiary rulings are reversible if they more likely than
not affected the verdict. Id.; Fed.R.Evid. 103(a). Even if the individual errors do
not rise to the level of reversible error, their cumulative effect may be so
prejudicial that reversal is warranted. United States v. Wallace, 848 F.2d 1464,
1475-76 (9th Cir. 1988). Zinnel timely objected to Radoslovichs testimony. Plain
error applies to Gees testimony. Fed.R.Crim.P. 52(b).
B.
When the prosecutor asked Radoslovich if anyone else held any interest in
System 3, Zinnels counsel objected calls for a legal conclusion, which was
overruled. (ER 772-773.) Radoslovich testified the Zinnel brothers owned
interests in System 3. (ER 773-774.) The prosecutor then asked Radoslovich to
37
38
(3) the only right or honest resolution was to reopen the bankruptcy and
disclose Zinnels interest in System 3 (ER 805-806, 808, 811), and that that if
they were to reopen the bankruptcy, we might not all be here today (ER 840);
(4) absent disclosing Zinnels interest, payment by System 3 under the
buyout agreement would be criminal[ly] wrong, and would be helping an
individual paper up a transaction that was fraudulent (ER 805-806, 1469);
(5) Zinnel would have difficulty getting a court to enforce his interest in
System 3 due to his wrongful nondisclosure in the bankruptcy (ER 783-784);
(6) Zinnels wrongful concealment of assets from his ex-wife created a risk
that she would sue System 3 if the company paid Zinnel (ER 784);
(7) Wilbert and System 3 risked a potentially devastating civil law suit or
criminal charges if System 3 paid Zinnel according to a buyout agreement, because
Wilbert knew of Zinnels nondisclosures in bankruptcy (ER 784-785); and
(8) Eidsons statements to Radoslovich concerning what might happen if no
agreement were reached constituted an extortion-like threat. (ER 819, 883.)
D.
39
The erroneous admission of the legal opinions was prejudicial and more
likely than not affected the verdicts on all counts. Angwin, 271 F.3d at 798.
Radoslovich opined that Zinnel would have trouble getting a court to enforce his
interest due to his bankruptcy fraud (ER 774-775, 783-784), and that Zinnels
nondisclosure of System 3 was illegal and required him to come clean (ER 798,
805-806, 808, 811), and that payments from System 3 were the proceeds of illegal
conduct (ER 791, 811) each constituted opinions of Zinnels guilt on all charges.
40
41
42
Because there was no defense objection, the plain error standard applies.
Relief for plain error is available if there has been (1) error; (2) that was plain; (3)
that affected substantial rights; and (4) that seriously affected the fairness,
integrity, or public reputation of the judicial proceedings. United States v. Cannel,
517 F.3d 1172, 1175-77 (9th Cir. 2008).
Gees improper testimony satisfied the plain error standard. As argued
above, the prohibition on expert opinion concerning matters of law is wellestablished. The government contravened its own promise in its trial brief that Mr.
Gee will not be testifying as to any ultimate issue. (ER 240-242.) Gees legal
opinions listed above were all improper expert opinions on bankruptcy law and
ultimate issues of guilt, even though Gee omitted Zinnels name from his opinions.
Gee also impermissibly testified that the maximum penalty for bankruptcy
fraud is five years in prison, and that the reason for the warning on the bankruptcy
petition was to apprise the debtor that he must be truthful or face a significant
penalty. (ER 488A.) This testimony violated the prohibition on a jurys
consideration of punishment. United States v. Frank, 956 F.2d 872, 879-880 (9th
Cir.), cert. denied, 506 U.S. 932 (1992). This was plain error.
Gees legal opinions were highly prejudicial and more likely than not
affected the verdict, Angwin, 271 F.3d at 798, because they usurped the role of the
judge to establish the law, and of the jury to decide guilt by applying the law to the
43
facts. Moreover, the testimony about the maximum penalty falsely lulled jurors
into believing that Zinnel only faced five years if convicted, when in fact he faced
(and got nearly) twenty years in prison.
The errors affected Zinnels substantial rights, especially when considered
cumulatively with Radoslovichs improper legal opinions. Gee testified that
bankruptcy law required certain disclosures which the evidence arguably showed
that Zinnel did not make, and prohibited actions which the evidence arguably
showed that Zinnel did, which all went to the heart of the bankruptcy fraud
charges, and the predicate specified unlawful conduct element of the money
laundering charges. Gees testimony was prejudicial because it constituted stark
legal opinions that went directly to guilt on all charges, by a declared bankruptcy
law expert. Zipkin, 729 F.2d at 387. Because Zinnels own expert was precluded
from testifying to the contrary, the jury was highly likely to rely on Gees opinions.
Gees opinions were also wrong. Bankruptcy Trustee Reynolds testified that
Zinnels signing authority for Done Deal and use of a credit card for Done Deal
doesnt necessarily mean that he had to declare the credit card as an asset. (ER
910-911.) Regardless of Reynolds testimony, Gees testimony still was highly
prejudicial because the jury would likely accept the testimony of the bankruptcy
expert over that of a former trustee. Zipkin, 729 F.2d at 387. This testimony
seriously affected the fairness and integrity of the trial because the court abdicated
44
its duty to provide the law, and to prevent government experts from usurping the
roles of judge and jury, and because the jurys verdict was likely based on this
improper testimony. A new trial is required under United States v. Christian, 749
F.3d 806, 813 (9th Cir. 2014) because the improper expert testimony by both
lawyer-witnesses actually prejudiced Zinnel.
V.
Standard of Review
Zinnel joins the Standard of Review for sufficiency of the evidence in Eidsons
brief.
B.
45
The court disregarded the steps required by United States v. Carty, 520 F.3d
984, 992-994 (9th Cir.) (en banc), cert. denied, 553 U.S. 1061 (2008). The result
was a sentencing plagued by significant procedural errors. Gall v. United States,
552 U.S. 38, 51 (2007).
A.
Standard of Review
46
abuse of discretion. See e.g. United States v. Brown, 771 F.3d 1149, 1155 n.5 (9th
Cir. 2014); United States v. Staten, 466 F. 3d 708, 713 n.3 (9th Cir. 2006). De
novo review should apply here, given that application of the Guidelines to the facts
is a mixed question of fact and law.
This Court must first determine if the lower court committed a significant
procedural error, such as failing to calculate (or improperly calculating) the
Guidelines range, treating the Guidelines as mandatory, failing to consider the
3553(a) factors, selecting a sentence based on clearly erroneous facts, or failing to
adequately explain the chosen sentence. Gall, 552 U.S. at 51.
If so, then this Court must remand for resentencing pursuant to 18 U.S.C.
3742(f), without reaching whether the sentence as a whole is reasonable in light of
3553(a). United States v. Cantrell, 433 F.3d 1269, 1280 (9th Cir. 2006). If this
Court finds no procedural error, then it shall evaluate the sentence under section
3553(a) for substantive reasonableness under an abuse of discretion standard.
Gall, at 51; Carty, 520 F.3d at 993-994. This Court does not treat guideline
sentences as presumptively reasonable. Id.
B.
Intended Loss
The court found the intended loss was $3,615,758.30, based on the PSRs
so-called discharge figure, and added 18 levels. U.S.S.G. 2B1.1(b)(1)(J).
(1181-1182; PSR 21, ZSER 7). The PSR lifted this figure from the list of
47
unverified claims in the reopened bankruptcy. Neither the government, the trustee,
nor any court evaluated any claim listed in the PSR for truth or validity. The court
failed to require the government to carry its burden to prove any fact to support any
enhancement. United States v. Ameline, 409 F.3d 1073, 1085-86 (9th Cir. 2005)
(en banc). The proven loss was zero.
Zinnels factual objections to the PSR's calculations, Dkt. 300, triggered the
governments obligation to submit clear and convincing evidence to support the
18-level mega-enhancement for loss.5 Fed.R.Crim.P. 32(i)(3)(B). The government
chose instead to rely solely on Zinnel's bankruptcy schedules, and offered no
evidence at sentencing. The prosecutor announced that the loss calculation was
all academic [because] there was a trial herewe proved it beyond a reasonable
doubt, and called Zinnel's bankruptcy petition the gold standard of evidence.
(ER 1176, 1180-1181.) This was inaccurate, because every listed claim was
disputed, unliquidated, or contingent, several were not dischargeable or were
uncountable under U.S.S.G. 2B1.1, cmt. n.3(D), and according to the
governments expert, claims may be scheduled even if meritless. (ER 492-493).
This Circuit requires strict compliance with Rule 32. United States v.
Pineda-Doval, 614 F.3d 1019, 1040 (9th Cir. 2010). [W]hen a defendant raises
The court found that due process required the clear and convincing evidence
standard of proof for facts supporting loss, citing United States v. Jordan, 256 F.3d
922, 926, 930 (9th Cir. 2001), but refused to apply this standard to all
enhancements as required by Jordan. (ER 94-96, 1160.)
5
48
objections to the PSR, the district court is obligated to resolve the factual dispute,
and the government bears the burden of proof.... The court may not simply rely on
the factual statements in the PSR, as the court did here. Ameline, 409 F.3d at
1085-86; Fed.R.Crim.P. 32(i)(3)(B).
While the court is afforded wide latitude to determine the amount of loss,
it still must make a reasonable estimate of the loss, given the available
information. Bussell, 504 F.3d at 960; U.S.S.G. 2B1.1, cmt. n.3(C). Where the
government offers no evidence, the loss finding must be vacated. See United
States v. Lake, 2014 U.S. LEXIS 10772 (5th Cir. 2014).
Judge Nunley found Zinnels offense conduct factually similar to Bussell,
504 F.3d 956. (ER 1182-1183.) Notably, Bussell received 36 months for
$3,057,927 intended loss, as compared with Zinnels 212-month sentence. Under
Bussell, a court must make a fact-based determination of the loss-calculation
method that best reflects the economic realities, and a fact-based estimate of the
loss, based on available information. The court here did neither. No evidence at
trial or sentencing established that any creditor was entitled to recover any claimed
amount. Zinnels conviction of bankruptcy fraud did not constitute a jury finding
of countable loss amount to any victims.
Not only did the government offer no evidence that any creditor was entitled
to recover the amount claimed, but the court disregarded contrary defense evidence
49
proving numerous claims were uncountable as intended loss. (ER 358-364, 11731187.) A sentencing judge may not ignore a defendants offer of proof to rebut a
loss calculation. U.S.S.C., Loss Primer (2B1.1)6 (2010) at 13. As defense
counsel argued, at trial Zinnel had no obligation or incentive to disprove the claim
details. The defense presented evidence at sentencing that refuted the validity of
certain claims and victims (ER 1170), and highlighted other uncountable claims.
(ER 1172.) The judges response was that the PSR listed the creditors on Zinnels
bankruptcy schedules and that 11 people filed claims. (ER 1187.)
The defense established that the PSRs discharge figure the court relied on
was overstated by at least $2,887,598.40 (ER 358-366, 1179, 1184-1185):
(1) Zinnel's scheduled assets of $842,620 (ER 1360) should have offset
intended loss, see U.S.S.G 2B1.1, cmt. n.3(E)(i);
(2) $1,807,133 claimed by Safeco, $1,607,133 dismissed with prejudice prebankruptcy (ER 393-394), and $200,000 secured (ER 495, 1369);
(3) $115,000 claimed by First Bank which was secured (ER 1368-1369) and
thus not dischargeable in bankruptcy, as the prosecutor conceded (ER 1180), thus
First Bank was not a victim;
(4) $47,132.09, the difference between $461,417.59, which the PSR
misstated as Gulf/Travelers claim, and $414,285.50, the actual amount owed (ER
Available at
http://www.ussc.gov/sites/default/files/pdf/training/primers/Primer_Loss.pdf
6
50
51
mentioning each defense objection, this Court is left guessing whether the district
court recognized, contemplated, and resolved the objections. Houston, 217 F.3d
at 1208-1209. Guessing is for contestants on television game shows, not for
judges applying the law. Id., 217 F.3d at 1209. Resentencing is necessary
because the court abandoned its Rule 32 obligations to consider defense evidence,
rule on each objection, and require the government to prove intended loss.
Moreover, the PSRs alternative loss calculation method failed to use the fair
market value of the undisclosed assets at the time of the concealment, July 2005.
United States v. Paley, 442 F.3d 1273, 1278 (11th Cir. 2006) (holding that using
appreciated value of undisclosed stock instead of initial investment was error).
After Zinnels indictment, in October 2011, the bankruptcy trustee determined that
$350,000 was the fair-market value of the estates interest, if any, in System 3.
The trustee was duty-bound to obtain the highest possible value for the estate, and
relied on an expert accountant who determined the net worth of System 3 as
$350,000. Therefore, any alternative loss calculation must use $350,000 as the
value of the undisclosed interest in System 3.
Finally, this Circuit adheres to the governing legal principle that whenever a
court estimates drug quantity, the court must err on the side of caution. United
States v. Scheele, 231 F.3d 492, 498-500 (9th Cir. 2000). The justification for this
rule is that a defendant's sentence depends in large part upon the amount of drugs
52
53
bankruptcy schedule. (ER 1187; ZSER 6,8,14, PSR 8, 22, 69.) The court
ignored Zinnels objections, evidence and offers of proof showing several
claimants suffered no countable loss as argued above, and did not require the
government to submit evidence, in violation of Rule 32(i)(3)(B).
Zinnel objected to the victim count and presented evidence and offers of
proof, as stated above, that: Fogcutter, MBNA, Stuart Allen, Arrow Financial, First
Bank and Michelle Zinnel were not victims under the Guidelines because they
suffered no actual countable loss, U.S.S.G. 2B1.1, cmt. n.1. Zinnel also
established that he contracted with Safeco in one indemnity agreement, so Safeco
and its subsidiaries should count as one victim. (ER 373 n.2.) Safeco, General
Insurance, and First National shared identical officers and corporate executives, as
well as litigation counsel. (ER 373A-373B.)
Zinnels objection triggered the governments obligation to prove that ten or
more identifiable persons suffered actual, countable monetary loss. United States
v. Showalter, 569 F.3d 1150, 1160 (9th Cir. 2009). Instead, the government asked
the court to rely on the PSRs list of unsubstantiated claimants. (ER 1186.) The
Guidelines [] do not allow a district court to estimate the number of victims under
2B1.1(b)(2). Showalter, at 1160. Neither may the court adopt disputed
conclusions in the PSR or rely on the bankruptcy trustees list of creditors where
the defense objects. Id. at 1161. In Showalter, the list of victims and claim
54
amounts the probation officer obtained from the trustee were deemed insufficient
to support the victim enhancement. Id. at 1159.
As in Showalter, the court here entirely relied on the PSRs repetition of the
trustees list of creditors, without evidence that any claimants suffered actual,
countable loss. (ER 1187-1188.) The Chapter 7 trustee had a fiduciary duty to
examine claims and object to them if appropriate, to maximize the legitimate
creditors recovery. 11 U.S.C. 704(5); Durkin v. Benedor Corp. (In re G.I.
Indus.), 204 F.3d 1276, 1280-1281 (9th Cir. 2000).
As Zinnel argued below (ER 358, 361), the number of victims was zero
because the government offered no evidence to verify any claim. At most, the
number of victims was three -- Safeco, Travelers and First Bank -- because the
government failed to refute defense evidence by providing any evidence to prove
other claims were dischargeable and properly countable as loss.
Perhaps forecasting remand, the prosecutor suggested he would offer proof
of collateral victims if its ever appropriate. (ER 1188.) However, the
government should not get a second bite at the apple on remand. This Court
departs from the general rule of remanding on an open record where there was a
failure of proof after a full inquiry into the factual question at issue. United States
v. Matthews, 278 F.3d 880, 886 (9th Cir. 2002) (en banc); United States v. Ponce,
51 F.3d 820, 829 (9th Cir. 1995) (remanding on closed record because the
55
Over objection, the court erroneously added two levels for sophisticated
money laundering. U.S.S.G. 2S1.1(b)(3) applies only if there was complex or
intricate offense conduct pertaining to the execution or concealment of the 18
U.S.C. 1956 offense. U.S.S.G. 2S1.1 cmt. n.5(A). The typical earmarks of
sophisticated laundering are fictitious entities, shell corporations, layering of
transactions, or offshore accounts. U.S.S.G. 2S1.1, cmt. n.5(A).
1.
56
available at
http://www.fincen.gov/statutes_regs/guidance/pdf/AdvisoryOnShells_FINAL.pdf
7
57
and a physical address. (ER 578-581, 669, 732, 742, 1409.) Further, the simple
deposit of checks payable to Done Deal into the Done Deal bank account was not
complex or intricate offense conduct. U.S.S.G. 2S1.1, cmt. n.5(A)(iii). (E.g.
ER 1401-1408.)
2.
58
Aggravated Role
59
1.
The key element for finding an aggravated role is the exercise of control
over culpable participants. Mares-Molina, 913 F.2d at 773. There was no
evidence that Zinnel directed any culpable person in the money-laundering
conduct. That Zinnel may have first proposed committing the offense is
insufficient. U.S.S.G. 3B1.1 cmt. n.4.
Garrison could not be counted because he was an innocent party and his
involvement predated the bankruptcy. While Julia Wilbert assisted in her
husbands tax fraud by expensing sums paid to Zinnel (ER 739, 741), she was
60
unaware that the Zinnel payments were proceeds of bankruptcy fraud. She
assumed Done Deal was one of Zinnels many companies. (ER 717.) The court
found that she testified she had no knowledge of why these payments were being
made. (ER 743.) There was no evidence she even knew of the bankruptcy.
Therefore, she was not a culpable participant in money laundering.
There was no evidence that Zinnel exerted any authority over Mrs. Wilbert.
Zinnel communicated with her only by email. (ER 712-714, 728, 749.) Zinnels
request for her to do him a big favor shows his lack of authority. (ER 721-722.)
The evidence suggested she was directed by or collaborated with her husband.
When asked why she went along with this system, Mrs. Wilbert replied: Because
I was asked to. (ER 718, 739.) Not because Zinnel asked her to.
Julia Wilbert admitted that she and her husband avoided paying taxes by
expensing these large sums. (ER 745.) Even after federal agents got involved, she
notarized false contract applications that benefitted the Wilberts. (ER 746-748.)
Zinnel obviously had no role in that conduct.
There was no evidence that Zinnel controlled or directed Eidson in
connection with money laundering which benefitted her equally. Eidson was an
independent business-owner and an experienced lawyer. Her personal strength is
evident in the recordings used at trial. (ER 1444-1520 and audio.)
Tom Wilbert cannot be criminally responsible in Count 18, because he
61
United States v. Gupta, 904 F. Supp. 2d 349, 350-351 (S.D.N.Y. 2012), affd, 747
F.3d 111 (2d Cir. 2014), cert. denied, 135 S.Ct. 1841 (2015).
8
62
18 U.S.C. 3553(a)(6).
1.
63
Other Fraud cases submitted to the district court (ER 424-430), as well as similar
cases on the IRS website and collected by the National Association of Criminal
Defense Attorneys.9 (ZJN077-122; Exh. 9-12.) In these cases, downward
variances from the draconian fraud guidelines are the rule, not the exception.
Many bankruptcy fraud defendants who went to trial, with similar loss
amounts, similar conduct, and identical or higher criminal histories, received
sentences that were significantly lower than Zinnels.10 Zinnel has not been able to
find a similar bankruptcy fraud case where the defendant got a higher sentence.
The following are several examples of similarly situated defendants:
Letantia Bussell, whose offense conduct and economic realities Judge
Nunley found similar to Zinnels, was sentenced after trial to 36 months for
causing $2.93 million in actual losses, with intended losses of $3,057,927. To
avoid tax liability, the Bussells set up corporations to conceal their ownership and
control over assets, then filed for bankruptcy. One of the new corporations served
as the employer for Dr. Bussell. They also opened an off-shore account to receive
and conceal funds from John Bussells pension plan. Bussell, 504 F.3d at 958-962.
Michael Wayne Harding was sentenced six days after Zinnels sentencing, in
64
65
process server with a golf club, and then Vandevort called 911 to falsely report a
home invasion. He opened bank accounts in the name of his nursing business,
diverted its revenue to these accounts, and used straw persons as bank signatories
and officers of his business entities, to hide his assets. The money laundering
convictions stemmed from Vandevorts use of undisclosed income from his
nursing business to pay personal expenses and use of proceeds from refinancing
his home to buy land in a relatives name. (ZJN149-151, 180; Exh.14, 16.)
Dr. Colon Ledee and his attorney-sister were sentenced to 72 months and 36
months respectively, for concealing the pre-petition transfer of property to his
secretly-owned corporation, then making several property transfers using relatives,
layered transactions, and forged checks. The intended loss was $1.4 million.
United States v. Colon Ledee, 772 F.3d 21, 25-26, 39 (1st Cir. 2014).
Robert Brennan, who caused much higher losses than Zinnel, was convicted
by a jury in the Southern District of New York of concealing from the bankruptcy
trustee $4 million in bearer bonds, $500,000 in casino chips, and $18 million in
proceeds from investing those concealed assets through an off-shore trust. United
States v. Brennan, 395 F.3d 59, 62-63 (2d Cir. 2005) (as amended). With intended
loss of $22 million, almost ten times the intended loss imputed to Zinnel, Brennan
was sentenced to 110 months, slightly over half of Zinnels sentence. Id.
Harold Rosbottom received 120 months for his bankruptcy fraud and money
66
The 212-month sentence imposed on Zinnel was ten times the median
sentences imposed on defendants convicted of bankruptcy fraud and money
laundering nationwide. According to the Judicial Business of the U.S. Courts
Annual Reports, in fiscal 2011-2014, the median prison sentences imposed for
bankruptcy fraud were 25 months (2011), 21 months (2012), 24 months (2013),
and 18 months (2014). (ER 416, 419, ZJN024, 0031, Exh. 5-6.) The median
prison sentences for money laundering were similar. In fiscal 2011, 2012, 2013 and
2014, the median sentences were 64.5 months (2011), 46 months (2012), 37.5
months (2013), and 41 months (2014). (ER 417, 420, ZJN027, 034; Exh. 5-6).
67
68
Name
Amount of Loss
Sentence
Hotte
$67 million
108 months
Formisano
$9.8 million
78 months
Smirlock
$12.6 million
48 months
Adelson
$50-100 million
42 months
Betts
$1.3 million
366 days
Chavrat
$1.1 million
6 months
Tursi
$1.1 million
41 months
Scuteri
$2.5 million
21 months
Kearney
$1.3 million
51 months
Rutkoske
$12 million
108 months
69
Cushing
$24 million
97 months
The defendants listed above caused far more harm than did Zinnel even
accepting the governments position. The disparities between Zinnels sentence
and the moderate sentences imposed on Bussell, Burke, Quan, Vandevort, and the
others discussed above and cited in the charts provided to the district court were
unwarranted, in violation of 18 U.S.C. 3553(a)(6).
G.
After calculating the Guidelines range and allowing the parties to argue,
district courts must consider the section 3553(a) factors and decide if they support
the sentence suggested by counsel. Carty, 520 F.3d at 992-993. [W]hen a party
raises a specific, non-frivolous argument tethered to a relevant 3553(a) factor . . .
[,] the judge should normally explain why he accepts or rejects the party's
position. Id. The court here utterly failed to do so.
The judge nearly skipped over two of the Carty steps, of hearing arguments
and considering 3553(a) factors, agreeing with the AUSA that: we're doing the
appropriate Carty two-step of correctly calculating the guidelines and then doing
70
sentencing.11 The court then announced the 212-month sentence, and asked if
judgment and sentence should not proceed at this time? (ER 109-110.)
Next, when defense counsel stated her intention to address disparity, the
court showed its disregard for this factor, repeating: Other than that, is there any
reason why judgment and sentence should not proceed at this time? Id. Earlier,
the court had inaccurately summarized Zinnels disparity objections as based on
the disparity between the sentences recommended for Eidson and Zinnel. (ER
107.) Zinnels actual disparity argument was unrelated to Eidsons sentence. The
courts erroneous synopsis ignored 15 pages of analysis and a raft of supporting
exhibits. (ER 433-448 and Dkt. 307-1.)
Defense counsel demonstrated disparity by pointing to numerous similarlysituated bankruptcy fraud defendants who got sentences much lower than 212
months, that Zinnels sentence was far higher than sentences nationwide in
bankruptcy fraud cases involving worse criminality and higher losses. She also
argued that the increasingly punitive amendments to the fraud table were
unsupported by reliable data, and thus the sentence was substantively
unreasonable. (ER 1224-1228.) Numerous support letters spoke of a generous,
loyal friend, father, brother and son, contradicting the judges perception of Zinnel.
The actual Carty steps are: (1) properly calculate the guideline range, (2) allow the
parties to argue for the appropriate sentence, and (3) consider the 3553(a) sentencing
factors to decide if those factors support the sentence suggested by the parties. Only
then may the court decide the sentence. Carty, 520 F.3d at 991.
11
71
(ZSER 21-41.) The court did not address any of Zinnels oral or written
arguments, or any of the mitigation argued.
Just before finally re-announcing the 212-month sentence, the court noted a
few positive qualities in Zinnel, then announced a tirade of negative attributes:
selfishness, narcissism, lying and blaming others. (ER 113-116.) Even if these
criticisms were justified, they were not markedly different or worse than the greed
and selfishness that underlies every fraud case, and certainly did not justify a
sentence four to six times that imposed on many similarly situated defendants.
The judge then imposed the identical sentence he pre-announced before any
mitigation arguments or allocution, evincing no recognition of defense counsels
3553(a) arguments. In particular, the judge did not utter a word about disparity,
other than his earlier mischaracterization of Zinnels disparity argument. Despite
extensive briefing and oral argument addressing disparity, the judge ignored the
directive of 3553(a)(6). As in Panice, the court did not give adequate
consideration to the disparities between [Zinnels] sentence and those given to
other white collar criminals with similar or more culpability. Id., 598 F.3d at 443.
Further, the court here ignored the Supreme Courts repeated admonition
that a district court must not presume a Guideline-range sentence reasonable. See
Nelson v. United States, 555 U.S. 350, 352 (2009). The court disregarded the
Supreme Courts clear instruction to treat the Guidelines as only one factor as
72
73
Statement of Reasons, the court added a rote and pitifully inadequate explanation
for the massive sentence: Due to the nature, circumstances, and seriousness of the
offense. (ZSER 43.) Similarly, the court also gave no explanation for imposing
the maximum fine (in a $20,000-$500,000 range), and violated Rule 32(i)(3)(B) by
not resolving Zinnels objections and ignoring evidence that he was broke. (ER
370-371, 1197, 1200.)
Zinnel got the highest-ever bankruptcy fraud sentence in the Eastern District
of California. (ZJN175; Exh.16.) The lack of an explanation sufficient[] to permit
meaningful appellate review compels remand. Carty, 520 F.3d at 992.
3.
74
because Zinnel refused to provide information, although the government seized his
assets and had evidence he was without any funds. The court imposed the
maximum fine for no stated reason other than Zinnels silence. Thus, Zinnel was
punished for exercising a constitutional right, and the fine must be vacated.
I.
Factual Analysis
75
to speak only to the extent that your statements mitigated any possible sentence
you might receive. (ER 1247.) Zinnel spoke briefly, then stopped. (ER 1249.)
2.
In this Circuit, denial of the right of allocution violates due process under the
Fourteenth Amendment and Rule 32(i)(4) of the Federal Rules of Criminal
Procedure. Boardman v. Estelle, 957 F.2d 1523, 1526 (9th Cir.), cert. denied, 504
U.S. 904 (1992); Ashe v. North Carolina, 586 F.2d 334, 336 (4th Cir. 1978). The
most persuasive counsel may not be able to speak for a defendant as the defendant
might, with halting eloquence, speak for himself. Green v. United States, 365
U.S. 301, 304, (1961) (plurality). The judge was wrong to limit the content of
Zinnels allocution, because he had the right to speak on any subject of his
choosing prior to the imposition of sentence. United States v. Ward, 732 F.3d
175, 181-82 (3d Cir. 2013), cert. denied, 134 S.Ct. 2684 (2014); 18 U.S.C. 3661.
3.
Allocution must be meaningful, not an empty formality after the judge has
stated the chosen sentence. United States v. Luepke, 495 F.3d 443, 450 (7th Cir.
2007) (the substantial purpose of allocution is not served simply because, at some
point before the close of a sentencing proceeding, a defendant is invited to speak).
The judge denied meaningful allocution by definitively announcing the
sentence before inviting Zinnel to speak. United States v. Landeros-Lopez, 615
76
F.3d 1260, 1266-1268 (10th Cir. 2010); Luepke, 495 F.3d at 448-450. As occurred
here, [b]elatedly inviting the defendant to speak after announcing his sentence
does not satisfy this standard, even if the sentence has yet to be formally imposed.
Luepke, at 450; Landeros-Lopez, at 1266. Although Zinnel was not entirely
silenced, his allocution was chilled by the courts interruptions, limits, and
threats to cut him off (ER 1240 1244, 1247), which deprived him of meaningful
allocution. United States v. Sarno, 73 F3d 1470, 1503-1504 (9th Cir. 1995), cert.
denied, 518 U.S. 1020 (1996). Resentencing is required.
J.
For the reasons argued in the Victims section above, this Court must
reverse the erroneous order of restitution as to any persons who do not meet the
requirements of 18 U.S.C. 3663(a). Restitution under 3663(a) is limited to
actual monetary loss that was (1) properly included in the loss calculation,
Armstead, 552 F.2d at 780-781, and (2) caused by conduct underlying an offense
of conviction. Hughey v. United States, 495 U.S. 411, 416 (1990).
Zinnels ex-wife submitted three successive versions of her claim for
restitution, asserting increasing amounts ($242,671, $644,511 and $1,039,739)
(ZSER 49-58), demanding assets awarded to Zinnel in the divorce, lost wages,
future child support, and health insurance, and none of which could be counted as
77
actual loss. She was awarded restitution of $305,058.12 (ER 142, 144.) Part of the
award included the indemnification for attorneys fees that Mrs. Zinnel had
forfeited in her own bankruptcy, and uncountable interest and child support.
Consequential expenses, such as child support and attorneys fees spent to clarify
support orders, cannot be included as restitution. United States v. Stoddard, 150
F.3d 1140, 1147 (9th Cir. 1998), cert. denied, 525 U.S. 1168 (1999).
K.
The Luyung and Old Eureka properties lacked a sufficient nexus to any
offense of conviction. Neither was forfeitable as proceeds of bankruptcy fraud,
because they were already Zinnels and thus were not obtained as a result of
bankruptcy fraud. 18 U.S.C. 981(a)(2)(A). The money laundering statute
amended in 2009 uses obtained or retained while the forfeiture statute enacted in
2000 uses only the term obtained. Compare 18 U.S.C. 981(a)(2)(A);
1956(c)(9) (2009). See Keene Corp. v. United States, 508 U.S. 200, 208 (1993).
Moreover, the verdicts on Counts 1-2 did not identify Luyung or Old Eureka.
The Old Eureka property was also erroneously forfeited because the
$235,000 cashiers check, not the Old Eureka property, was the corpus of money
laundering Count 16. (ER 291.) The entire property is not forfeitable simply
Although the restitution order was stipulated, by its terms the stipulation did not
waive any objections to guideline calculations or findings, such as that Michelle
Zinnel is a victim or that any amounts she claims constitute loss under the
Guidelines. (ER 123, 141.)
12
78
because laundered funds paid down the mortgage. United States v. Arthur, 2006
U.S. Dist. LEXIS 79184 at *18 (E.D. Wis. 2006), affd, 582 F.3d 713 (2009).
Moreover, the $1,297,158 forfeiture money judgment resulted in double recovery.
L.
79
sound like what an appellate court should be laying down as a rule to the
district courts. But can we do any better by attempting to spell out what
constitutes unreasonable in the abstract? I think the Court, in Gall,
wants us to try.
Edwards, at 1022 (Bea, J., dissenting).
If substantive review of sentences actually exists, other than in theory, it
must be undertaken at least occasionally. This is an appropriate case for such
review, because it raises so starkly the problems with the out-of-control fraud loss
Guideline, the piling-on of enhancements, disparity, and the trial tax.
1.
80
shirked that overarching statutory charge, Carty, at 991, in imposing a nearly 18year sentence on Zinnel, a 50-year old first-time non-violent offender and devoted
father of two, for fraud crimes that caused at most limited harm. Zinnels sentence
was substantively unreasonable because: (a) the record does not show any rational
and meaningful consideration of the 3553(a) factors; (b) Zinnel was subjected
to a massive trial tax; and (c) his sentence far exceeded the sentences imposed in
many similar cases.
Zinnels sentence was simply unconscionably high. Zinnels 30 levels of
enhancements are a 400% increase from the base offense level of six for
bankruptcy fraud. In Amezcua, this court found that a 200% increase from the base
offense level (for illegal re-entry elevated by a stale aggravated felony) was
substantively unreasonable on the facts of the case, even though it was correct
under the Guidelines. Amezcua, 567 F.3d at 1055. Judge Nunleys rote addition of
30 levels of enhancements produced the longest sentence for bankruptcy fraud in
the Eastern District of California and possibly in the United States for similar
offense conduct and loss. This Court should find that Zinnels 212-month term
and maximum fine of $500,000 is substantively unreasonable based on the facts of
this case.
The sentence at issue is not the product of defendant-specific section 3553(a)
factors for which the district court was in a superior position to find the relevant
81
facts and to judge their import. United States v. Whitehead, 532 F. 3d 991, 993
(9th Cir. 2008). Here, as explained above, the court did not consider a single
required section 3553(a) factor.
The Sentencing Commission reported that the average length of sentence for
fraud offenders in 2014 was 24 months. U.S.S.C. Quick Facts, Fraud (2014). A
sentence that is 900% over the 22-month national average for bankruptcy fraud and
488% higher than the 36 months Letantia Bussell received, when Judge Nunley
found that her case was factually similar to Zinnels, cannot be justified.
(a)
82
83
that the complex bankruptcy fraud of Letantia Bussell was factually similar to
Zinnels case. (ER 1182-1183.) However, after a jury trial, intended loss of $3
million and actual losses of almost $2.4 million, Bussell received a prison sentence
of 36 months. Bussell, 504 F.3d at 958-962.
The Sentencing Guidelines already have a built-in mechanism to inject a
modicum of leniency for pleading guilty rather than going to trial; i.e. the 2 or 3
point reduction for acceptance of responsibility. U.S.S.G. 3E1.1. However,
rather than simply deny that reduction as an appropriate consequence of going to
trial, the prosecutor and the court together wielded a sledgehammer.
This case is a prime example of the epidemic of extracting guilty pleas from
federal defendants fearing high sentences if they go to trial, by heavily penalizing
those who dare to put the government to its burden at trial. We now have an
incredible concentration of power in the hands of prosecutors said Richard E.
Myers II, a former Assistant U.S. Attorney.13 In plea negotiations and in court,
federal prosecutors effectively dictate the sentence through the Trial Tax.
In Zinnels case, the prosecutor knew every pertinent fact before making the
five-year offers (and one-year offer to Eidson). Neither Zinnel or Eidson testified
at trial. Yet, after Zinnel exercised his right to trial, the prosecutor initially argued
84
for offense level 41 and a range of 324-405 months (27.5 to 33 years) (ER 294),
instead of Offense Level 26 as the plea offers stated. At sentencing, the prosecutor
argued for offense level 38, a trial tax of 15 levels, and cynically sought 20 years
(ER 1229, 1231) four times the five-year sentence offered before trial. The court
readily imposed an unconstitutional Trial Tax of 3.5 times more prison time after
Zinnels rejection of the plea offers.
The 212-month sentence was so much higher than the penalty the AUSA
earlier believed was appropriate, that this case cries out for a finding that this
sentence was substantively unreasonable due to the unconscionable Trial Tax.
c.
85
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Letter to the USSC from The Constitution Project, Aug. 26, 2011,
http://www.constitution project.org/pdf/USSC2012.pdf.
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is reassigned. United States v. Paul, 561 F.3d 970, 975 (9th Cir. 2009) (per
curiam). For all these reasons, unusual circumstances exist for remand to a new
judge.
Resentencing must be on a closed record. This court departs from the
general rule of remanding on an open record where, inter alia, there was a failure
of proof after a full inquiry into the factual question at issue. Matthews, 278 F.3d
at 886.; United States v. Reyes-Oseguera, 106 F.3d 1481, 1484 (9th Cir. 1997).
Here, the Government had eight months to collect and present evidence on
sentencing enhancements. The government filed several sentencing briefs (see
Dkt. Nos. 299, 304, 306), and had a full opportunity and incentive to present any
evidence it wished. Failing to meet its burden after a full inquiry into the factual
question at issue, Matthews, 278 F.3d at 886, the government should not get a
second chance.
CONCLUSION
For the foregoing reasons, Zinnels convictions should be reversed for retrial
or dismissal as appropriate. At a minimum, Zinnels sentence must be vacated and
the case remanded for resentencing on a closed record, to a different judge.
Dated: February 29, 2016
Respectfully submitted,
/S/ Suzanne A. Luban
SUZANNE A. LUBAN
Counsel for Appellant Steven Zinnel
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2.
3.
Respectfully submitted,
/S/ Suzanne A. Luban
SUZANNE A. LUBAN
Attorney for Steven Zinnel
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 104 of 105
Respectfully submitted,
/S/ Suzanne A. Luban
SUZANNE A. LUBAN
Attorney for Steven Zinnel
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 105 of 105
CERTIFICATE OF SERVICE
(When all Case Participants are Registered for the
Appellate CM/ECF System)
C.A. Nos. 14-10196 and 14-10141 (consolidated)
I hereby certify that on March 1, 2016, I electronically filed the foregoing
APPELLANT STEVEN ZINNELS OPENING BRIEF and APPELLANTS
EXCERPTS OF RECORD (7 VOLUMES) with the Clerk of the Court for the
United States Court of Appeals for the Ninth Circuit by using the appellate
CM/ECF system.
I certify that all participants in the case are registered CM/ECF users and
that service will be accomplished by the appellate CM/ECR system.
March 1, 2016
Respectfully submitted,
/S/ Suzanne A. Luban
SUZANNE A. LUBAN
Attorney for Appellant Steven Zinnel