United States v. Steven Zinnel

FILED
NOT FOR PUBLICATION
FEB 09 2018
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 14-10141
Plaintiff-Appellee, D.C. No.
2:11-cr-00234-TLN-1
v.
STEVEN ZINNEL, MEMORANDUM*
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 14-10106
Plaintiff-Appellee, D.C. No.
2:11-cr-00234-TLN-2
v.
DERIAN EIDSON,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of California
Troy L. Nunley, District Judge, Presiding
Argued and Submitted November 16, 2017
San Francisco, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Before: W. FLETCHER and PAEZ, Circuit Judges, and WILKEN, District
Judge.**
Steven Zinnel appeals his conviction of concealment or transfer of property
in anticipation of bankruptcy, 18 U.S.C. § 152(7); concealment of property in
bankruptcy proceedings, 18 U.S.C. § 152(1); money laundering, 18 U.S.C.
§ 1956(a)(1)(B)(i); monetary transactions in criminally-derived property, 18
U.S.C. § 1957; and money laundering conspiracy, 18 U.S.C. § 1956(h). Derian
Eidson appeals her conviction of money laundering conspiracy, 18 U.S.C.
§ 1956(h); and attempted money laundering, 18 U.S.C. § 1956(a)(1)(B)(i). We
have jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a). We affirm the
convictions and reverse and remand the sentences for further proceedings
consistent with this opinion.
1. Constructive amendment or prejudicial variance
Constructive amendment “occurs when the charging terms of the indictment
are altered, either literally or in effect.” United States v. Von Stoll, 726 F.2d 584,
586 (9th Cir. 1984) (quoting United States v. Cusmano, 659 F.2d 714, 718 (6th Cir.
1981)). Variance “occurs when the charging terms of the indictment are left
unaltered, but the evidence offered at trial proves facts materially different from
**
The Honorable Claudia Wilken, United States District Judge for the
Northern District of California, sitting by designation.
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those alleged in the indictment.” Id. (same). Variance requires reversal only if it
affects the substantial rights of the parties. Id. at 587. We review this issue de
novo. United States v. Ward, 747 F.3d 1184, 1188–89 (9th Cir. 2014).
a. Zinnel’s bankruptcy fraud charges
There was no amendment or variance with respect to Count 1 or 2. Both
counts describe the fraudulent concealment of the Corporate Control and Done
Deal entities, and so the government properly included both companies in its
closing argument. Zinnel’s personal bank account, too, was encompassed by
Count 2. The indictment alleges that, “in the bankruptcy case captioned ‘In re
Steven Zinnel,’ Bankruptcy Case No. 05-28800-C7, . . . Zinnel falsely stated under
oath that he had no property that was not listed on his [bankruptcy] schedules.”
This was sufficient notice of the government’s theory at trial, which was that
Zinnel falsely omitted property from his bankruptcy schedules.
We additionally conclude that even if the personal bank account constituted
a variance, the variance was nonfatal because it did not affect Zinnel’s substantial
rights. See United States v. Tsinhnahijinnie, 112 F.3d 988, 991 (9th Cir. 1997).
Evidence of the bank account was provided during discovery and marked as a trial
exhibit, and Zinnel did not object when it was introduced at trial. Cf. Brulay v.
United States, 383 F.2d 345, 351 (9th Cir. 1967) (finding variance nonfatal where
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“at no time did the defendant claim surprise”). Moreover, Zinnel was indicted for
the act of concealing various items of property. Double jeopardy is not implicated
because “[t]he fact that several different items of property belonging to the estate
of a bankrupt were concealed does not multiply the number of offenses.” Edwards
v. United States, 265 F.2d 302, 306 (9th Cir. 1959).
b. Eidson’s money laundering charges
There was no amendment or variance with respect to Eidson. The
government properly charged Eidson under 18 U.S.C. §§ 1956(h)
and 1956(a)(1)(B)(i), which require that the defendant conducted or attempted to
conduct a “financial transaction which in fact involves the proceeds of specified
unlawful activity.” The trial record shows that the attempted transaction involved
actual proceeds of bankruptcy fraud in System 3’s bank account.
Eidson’s challenge to Count 19 is similarly misguided. Although the
indictment stated the wrong date for her meeting with Frank Radoslovich, this
typographical error did not prejudice Eidson. The correct date was apparent from
reading the rest of the indictment and the court informed the jury of the correct
date.
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2. Jury instructions
“In reviewing jury instructions, the relevant inquiry is whether the
instructions as a whole are misleading or inadequate to guide the jury’s
deliberation.” United States v. Lloyd, 807 F.3d 1128, 1164 (9th Cir. 2015)
(quoting United States v. Dixon, 201 F.3d 1223, 1230 (9th Cir. 2000)). We review
the formulation of jury instructions for abuse of discretion and their legal
sufficiency de novo. See United States v. Hofus, 598 F.3d 1171, 1174 (9th Cir.
2010).
a. Bankruptcy fraud
Zinnel argues that the district court erred in declining to include in the jury
instructions a description of the property charged. The parties have not cited, and
we are not aware of, any cases supporting this argument. The instructions were
adequate to guide the jury’s deliberation, especially considering that the
government’s closing argument advised the jury correctly of the property at issue.
The district court similarly did not err in denying Zinnel’s request to use a
special verdict form listing all of the property charged. See Bisno v. United States,
299 F.2d 711, 722–23 (9th Cir. 1961). The district court’s use of a general verdict
form here was sufficient because the court instructed the jury to return a guilty
5
verdict only if the jury could unanimously agree that the defendant “concealed at
least one of the items of property mentioned in the indictment.” Id.
b. Money laundering–“proceeds” and “profits”
Zinnel argues that the money laundering jury instructions should have
clarified that “proceeds” means “profits” rather than gross receipts, to reflect the
law established by United States v. Santos, 553 U.S. 507, 514 (2008). Because
Zinnel did not request this instruction in the district court, his argument on this
point is reviewed for plain error. United States v. Shields, 844 F.3d 819, 823 (9th
Cir. 2016).
A Santos instruction is required only when viewing proceeds as gross
receipts would present a “merger” problem creating a “radical increase in the
statutory maximum sentence . . . when nothing in the legislative history suggests
that Congress intended such an increase.” United States v. Van Alstyne, 584 F.3d
803, 814 (9th Cir. 2009) (quoting United States v. Kratt, 579 F.3d 558, 562 (6th
Cir. 2009)). Zinnel has not shown that a Santos instruction is warranted here. In
addition, such an instruction would have made no difference in this case because
partnership distributions are shares of profit.
6
c. Money laundering–“simple transfer of cash”
The district court did not err when it instructed the jury that “the simple
transfer of cash from one person to another may constitute a money-laundering
offense.” See United States v. Otis, 127 F.3d 829, 832–33 (9th Cir. 1997). It is
unlikely that the jury would have understood this instruction to omit the interstate
commerce element because it was immediately preceded by an instruction stating
the opposite. Read as a whole, the jury instruction was not erroneous. United
States v. Warren, 25 F.3d 890, 898 (9th Cir. 1994).
3. Admission of alleged settlement negotiations
A district court’s decision to admit evidence over Rule 408 objections is
reviewed for abuse of discretion. Cassino v. Reichhold Chems., Inc., 817 F.2d
1338, 1342 (9th Cir. 1987).
The district court properly admitted evidence of the talks between Zinnel
and Wilbert and between Eidson and Radoslovich because the discussions
themselves were part of the alleged money laundering. Rule 408 is “inapplicable
when the claim is based upon some wrong that was committed in the course of the
settlement discussions.” Uforma/Shelby Bus. Forms, Inc. v. NLRB, 111 F.3d 1284,
1293 (6th Cir. 1997) (quoting 23 Charles Alan Wright & Kenneth W. Graham,
Federal Practice and Procedure: Evidence § 5314 (1st ed. 1980)). The email
7
Zinnel sent to his ex-wife was also properly admitted because it was not an offer to
compromise under Rule 408.
The district court did not err in denying Eidson’s request to admit the entire
recording of her meeting with Radoslovich. The rule of completeness applies only
if the entire statement is required to correct a misleading impression created by the
excerpted statement. United States v. Vallejos, 742 F.3d 902, 905 (9th Cir. 2014);
Fed. R. Evid. 106. Eidson contends that the full recording was necessary to show
that she was merely trying to avoid litigation, but the portions played at trial
already showed this. The excerpted recordings were therefore neither misleading
nor taken out of context.
4. Testimony of lawyers
Because Zinnel objected at trial to Radoslovich’s testimony, this issue is
reviewed for abuse of discretion. United States v. Lloyd, 807 F.3d 1128, 1153–54
(9th Cir. 2015). Because he did not object to Gee’s testimony, we review for plain
error. Id. at 1152.
The district court did not err in admitting Radoslovich’s testimony about his
representation of System 3 with respect to the buyout agreement. Radoslovich
properly testified based on his perception of the events. See Fed. R. Evid. 701.
8
Nor did the district court err in allowing assistant United States trustee
Edmund Gee to provide background information about handling bankruptcy
petitions. Cf. United States v. Matsumaru, 244 F.3d 1092, 1101–02 (9th Cir. 2001)
(approving use of lay government witnesses to explain mechanics of visa
petitions). Zinnel could have called his own bankruptcy expert, but chose not to do
so.
Moreover, the district court gave an agreed-upon instruction advising the
jury to apply the law as laid out by the court. We presume the jurors followed this
instruction. See United States v. Olano, 507 U.S. 725, 740 (1993).
5. Sufficiency of the evidence
Eidson challenges her money laundering convictions for lack of sufficient
evidence. Zinnel joins her argument on the conspiracy count. We review a
challenge to the sufficiency of the evidence de novo. United States v. Bennett, 621
F.3d 1131, 1135 (9th Cir. 2010). First, we consider the evidence presented at trial
in the light most favorable to the prosecution; second, we determine whether the
evidence is adequate to allow “any rational trier of fact [to find] the essential
elements of the crime beyond a reasonable doubt.” United States v. Nevils, 598
F.3d 1158, 1164 (9th Cir. 2010) (en banc) (quoting Jackson v. Virginia, 443 U.S.
307, 319 (1979)).
9
Viewed in the light most favorable to the government, there is sufficient
evidence for a rational juror to conclude beyond a reasonable doubt that Zinnel and
Eidson committed their respective money laundering crimes.
The “financial transaction” element requires an effect on interstate or foreign
commerce, or use of a financial institution that is engaged in or affects interstate or
foreign commerce. United States v. Jenkins, 633 F.3d 788, 804 (9th Cir. 2011).
The government established at trial that System 3 paid distribution checks to
Zinnel, who cashed them in Done Deal’s bank account with Washington Mutual,
an FDIC-insured institution engaged in interstate commerce. A rational jury could
infer that the buyout payment would be carried out in the same way.
The financial transaction must involve “proceeds of a specified unlawful
activity.” The government established at trial that Wilbert initiated negotiations
with Zinnel to buy out his System 3 interest for roughly $4 million before the
government became involved. Wilbert had more than enough cash in the System 3
bank account to pay the required $4 million and had already paid Zinnel’s brother
$1.5 million for his share.
There was sufficient evidence that Eidson knew that the property involved in
the transaction constituted proceeds of unlawful activity. Eidson’s conversation
with Radoslovich demonstrated that Eidson knew Zinnel had concealed from the
10
bankruptcy court his interest in System 3, which was the basis for the $4 million
buyout. Eidson also participated in Zinnel’s bankruptcy proceedings and helped
him funnel money from System 3 through Done Deal and her client trust accounts.
Similarly, there was sufficient evidence that Eidson knew the transaction
was “designed . . . to conceal or disguise the nature, the location, the source, the
ownership, or the control of the proceeds of specified unlawful activity.” 18
U.S.C. § 1956(a)(1)(B)(i). Eidson formed Done Deal, helped Zinnel funnel money
through Done Deal, and proposed to Radoslovich that the buyout be disguised as a
consulting payment to Done Deal.
The evidence of Eidson’s acts was also sufficient to show that Zinnel and
Eidson engaged in a conspiracy to launder money. They worked together to hide
assets before, during, and after Zinnel’s bankruptcy proceedings.
The government presented sufficient evidence to prove that Eidson took the
required substantial step towards commission of money laundering. See United
States v. Yossunthorn, 167 F.3d 1267, 1271 (9th Cir. 1999). Eidson sent
Radoslovich a letter establishing her representation and attended two meetings to
persuade Radoslovich to commit to the agreement. The parties had agreed on the
key terms of the deal, including price and method of payment. Had Wilbert and
11
Radoslovich been willing to structure the deal as Zinnel and Eidson proposed, then
the transaction would have been completed.
6. Sentencing
Both Zinnel and Eidson challenge their sentences. We first consider
whether the district court committed a “significant procedural error.” Gall v.
United States, 552 U.S. 38, 51 (2007). If the district court committed no
procedural error, then we consider “the substantive reasonableness of the sentence
imposed under an abuse-of-discretion standard.” Id.
a. Zinnel’s sentence
The district court did not err in calculating Zinnel’s Guidelines range when it
calculated the loss amount based on the amount of debt scheduled to be discharged.
See United States v. Bussell, 504 F.3d 956, 963 (9th Cir. 2007). Nor did the court
err when it calculated the number of victims based on the number of creditors who
filed claims in Zinnel’s bankruptcy case. The district court properly applied the
sophisticated money laundering enhancement based on Zinnel’s use of fictitious
entities and multiple layers of transactions. Additionally, the aggravated role
enhancement was appropriate because Zinnel managed and directed Eidson as well
as Tom and Julia Wilbert.
12
The district court did, however, commit procedural error in sentencing
Zinnel. Before allocution and counsel’s sentencing arguments, the district court
announced its “intent to sentence [Zinnel] to 212 months of imprisonment.”
During Zinnel’s allocution, in which he talked about his background, love for his
children, redeeming qualities, and the difficult circumstances of his divorce at the
time of the offense, the district court interrupted him, stating, “Mr. Zinnel, I’m
going to cut you off right here. Are you almost done? I’m going to give you three
more minutes to finish this up. Proceed.”
In response, Zinnel repeatedly pleaded for more time. At one point, Zinnel
protested, “I did want to address the Court today of why I didn’t plea . . . but if I’m
getting cut off to three minutes, I don’t know how I can possibly do this.” At
another point, Zinnel asked the court to “[p]lease bear with me just for a moment,
Your Honor. We’re talking 20 years of my life.” Here, the government cut in,
stating, “I think the safest thing under Rule 32 is to just let him go until his breath
runs out.” The court responded, “I’m not going to do that.” Although the court
allowed Zinnel to continue, it warned him that he would be cut off if he continued
to be “self-serving.”
Zinnel apologized and tried to focus on his redeeming qualities and the
justifications for some of his actions, only to be interrupted by the court once more
13
and told to “wrap it up.” Despite Zinnel’s subsequent attempts to take “full
responsibility” for his actions, express remorse, and illustrate his actions helping
others in jail, the district court remained unmoved, remarking that Zinnel’s
comments were “self-serving” and “really didn’t mitigate in [the court’s]
estimation.” After discussing several of the § 3553(a) factors, the district court
imposed 212 months, the sentence it originally announced.
The district court’s actions unduly limited Zinnel’s right to allocution, which
is an “essential element of a criminal defense” guaranteed by due process.
Boardman v. Estelle, 957 F.2d 1523, 1526 (9th Cir. 1992). Zinnel’s allocution was
relevant to mitigation, focused on his personal qualities, and did not stray into
“irrelevant philosophical discussions.” United States v. Mack, 200 F.3d 653, 657
(9th Cir. 2000). The court’s constant interruptions deterred Zinnel’s allocution.
See United States v. Sarno, 73 F.3d 1470, 1503 (9th Cir. 1995). Because the
14
district court had discretion to impose a shorter sentence, the error was not
harmless and resentencing is appropriate.1 Id. at 1503–04.
Zinnel further challenges the district court’s orders of restitution and
criminal forfeiture. Because the district court did not abuse its discretion, we
affirm both orders.
b. Eidson’s sentence
The district court did not abuse its discretion in calculating the loss amount
attributable to Eidson as $4 million, the amount Wilbert offered Zinnel in exchange
for his interest in System 3. Nor did the district court err in imposing both the
sophisticated money laundering and abuse of position enhancements. The two
enhancements serve “separate and distinct purposes.” United States v. Gallegos,
1
Accordingly, we need not reach Zinnel’s challenge to the substantive
reasonableness of his sentence. We note, however, that Zinnel’s 212-month
sentence is the longest sentence ever imposed for bankruptcy fraud in the Eastern
District of California. The district court is not required to compare Zinnel’s
sentence “to the sentence of every criminal defendant who has ever been sentenced
before,” United States v. Treadwell, 593 F.3d 990, 1012 (9th Cir. 2010), but the
disparity here warranted a more detailed discussion of the court’s reasoning. The
record as a whole should “reflect[] rational and meaningful consideration of the
factors enumerated in 18 U.S.C. § 3553(a).” United States v. Ressam, 679 F.3d
1069, 1089 (9th Cir. 2012) (en banc) (quoting United States v. Tomko, 562 F.3d
558, 568 (3d Cir. 2009) (en banc)). The district court’s actions limiting Zinnel’s
allocution, paired with its incomplete discussion of § 3553(a), suggest that it may
not have considered all of the facts relevant to the sentencing factors. The court
should also have explained why Zinnel’s sentence was “sufficient, but not greater
than necessary” to accomplish the sentencing goals. Id. at 1088.
15
613 F.3d 1211, 1216 (9th Cir. 2010). The sophisticated money laundering
enhancement punishes complex and intricate schemes, and the abuse of position
enhancement punishes misuse of a trusted position.
With respect to Eidson, the district court again addressed some, but not all,
of the sentencing factors before imposing a sentence of 121 months. As with
Zinnel, the court did not explain why the sentence was “sufficient, but not greater
than necessary” to accomplish § 3553(a)’s sentencing goals. Ressam, 679 F.3d at
1088. Instead, the court stated that it did not think there was “any significant
difference between a sentence of, what, 108 months, nine years, versus a sentence
of 121 months, which is a year and a month more than that sentence.” To the
contrary, even a minimal amount of additional time in prison is significant to the
defendant and can constitute prejudice. Cf. Glover v. United States, 531 U.S. 198,
203 (2001). The court’s statements indicate that it did not impose the minimum
sentence necessary. Accordingly, resentencing is warranted.
Lastly, Zinnel and Eidson both contend the case should be assigned to a
different judge on remand. Reassignment is not warranted, however, because there
are no “unusual circumstances” indicating that the judge would have difficulty in
reconsidering his previously expressed views. United States v. Quach, 302 F.3d
1096, 1103 (9th Cir. 2002).
16
We have considered the remainder of the parties’ arguments and find them
to be without merit.
AFFIRMED IN PART, REVERSED IN PART, and REMANDED for
resentencing consistent with this disposition.
17