United States of America, Appellee-Cross-Appellant v. Harvey Myerson, Defendant-Appellant-Cross-Appellee

Citations: 18 F.3d 153; 1994 U.S. App. LEXIS 4155Docket: 368

Court: Court of Appeals for the Second Circuit; March 6, 1994; Federal Appellate Court

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Harvey Myerson, a New York attorney, appeals convictions from two trials where he was found guilty of multiple counts of mail fraud and travel fraud, as well as conspiracy to defraud the United States and making false statements on tax returns. Specifically, he was convicted of three counts of mail fraud for significantly overbilling clients and falsely claiming personal expenses as business costs, alongside two counts of travel fraud. In a separate trial, he was found guilty of conspiracy, false statements, and assisting in filing a false tax return related to his law partnership.

Myerson raises several claims on appeal, including errors regarding jury instructions, the exclusion of impeachment testimony, improper prosecutor comments during summation about his defense role, and inappropriate sentence enhancement under the Federal Sentencing Guidelines. Additionally, he challenges the admission of prior acts evidence related to his tax fraud conviction. The court affirms all convictions and finds no error in dismissing the two travel fraud counts on cross-appeal.

The billing fraud case against Myerson involved a fifteen-count indictment for defrauding six clients and his law firm by submitting inflated legal fees, notably billing Shearson Lehman Hutton, Inc. nearly $2 million for unperformed legal work. The fraud was uncovered by associates who discovered altered timesheets and corroborated by testimony from Myerson’s partners, who indicated he directed billing practices unrelated to actual services provided.

Clareman testified that, under Myerson's direction, he and Segall inflated attorney hours on Shearson bills, leading to an overcharge of $1,996,003, discovered during an internal audit. Shearson confronted Myerson and Clareman, but Myerson denied knowing about the overcharge, resulting in Shearson terminating M. K. Similarly, evidence indicated that ICN was overcharged for legal services not rendered, with Myerson billing for personal trips, including one to the Kentucky Derby. Myerson instructed partner Cooper to ensure ICN's bills reached at least $300,000 monthly. For Home, Myerson charged personal expenses, including a charter flight to his summer home, despite having no involvement in Home's cases. Myerson's defense at trial centered on the fraudulent actions of other M. K partners, who had either pleaded guilty or cooperated with the government. On appeal, Myerson acknowledged the jury had sufficient evidence for his conviction but claimed the district court made errors that prejudiced his defense. One key issue was the district court's refusal to instruct the jury to draw an adverse inference from the government's failure to immunize Cooper, who could have testified about billing practices at Myerson's direction. Cooper's involvement was critical to the fraud counts against Myerson.

The government presented statements from Cooper that implicated Myerson but did not call Cooper as a witness due to his pending guilty plea for defrauding the UFCW and his admission of obstructing justice by destroying subpoenaed records. Cooper's counsel informed the court that he would invoke his Fifth Amendment right against self-incrimination if called to testify, and that his testimony would not exculpate Myerson. Myerson expressed his intention to call Cooper as a witness despite knowing this, but did not challenge Cooper's invocation of privilege or pursue the court's offer to investigate a potential deal between Cooper and the government.

The district court denied Myerson's request to compel Cooper to testify and refused to instruct the jury to draw an adverse inference from the government's decision not to call Cooper as a witness. The court noted that Myerson strategically preferred not to have Cooper testify. The jury was instructed not to speculate on the reasons for Cooper's absence or draw inferences from it. On appeal, Myerson argued that the trial court erred by not allowing the jury to infer that the government's failure to call Cooper was unfavorable, citing established legal principles regarding witness availability and its implications for both parties.

Myerson concedes that no extraordinary circumstances warranted the district court compelling the prosecution to grant immunity to Cooper, based on the precedent set in Blissett v. LeFevre, which establishes that such compulsion is limited to extraordinary situations. The district court correctly rejected Myerson's request to call Cooper simply to allow the jury to hear his invocation of the Fifth Amendment privilege, a point Myerson acknowledges. Myerson contends that the government, with its ability to grant use immunity, had the means to produce Cooper's testimony despite his assertion of privilege, thus he was entitled to a missing witness instruction. However, other circuits uniformly maintain that a witness asserting constitutional rights is deemed unavailable to both the government and the defense, negating the basis for such an instruction. Various cases, including United States v. St. Michael's Credit Union and United States v. Brutzman, support the view that the government's failure to immunize a witness does not, by itself, warrant a missing witness charge. Myerson references United States v. Salerno, arguing for its applicability, where a witness invoked the Fifth Amendment at trial after previously testifying under immunity before a grand jury. The court in Salerno determined that such witnesses were available to the government but unavailable to the defense, allowing for the admission of prior grand jury testimony under a hearsay exception.

The determination of whether to provide a missing witness instruction hinges on factors distinct from the admissibility of prior sworn testimony. In cases lacking prior sworn testimony, the prosecutor's decision not to grant immunity does not inherently suggest that the absent witness's testimony would have favored the defendant. To justify a missing witness instruction, two conditions must be met: the party must have exclusive control over the witness, and the circumstances must reasonably allow an inference that the absent witness would have given unfavorable testimony. The D.C. Circuit emphasizes that if there are valid reasons for not calling a witness, it does not support an inference of unfavorable testimony.

Furthermore, the unavailability of a witness with prior sworn testimony often warrants the admission of that testimony, a situation not applicable to missing witness instructions. Courts have ruled against a blanket requirement for a missing witness charge whenever a witness invokes the Fifth Amendment, as this could interfere with prosecutorial discretion regarding immunity. The absence of immunity does not automatically imply unfavorable testimony, and various factors influence a prosecutor's choice to grant immunity.

The document also cautions against establishing rigid rules for the missing witness charge, especially given the potential for "gamesmanship" in such requests. Courts have been reluctant to declare a witness unavailable if the defense shows no genuine interest in calling the witness, indicating that such tactics should not be supported. Consequently, absent evidence that the government failed to immunize an exculpatory witness, a district court does not err in denying a missing witness charge.

The district court determined that a missing witness charge was inappropriate in Myerson's case, concluding that the jury could not reasonably assume Cooper's absence indicated exoneration for Myerson. The court identified sufficient evidence suggesting Cooper's testimony would be detrimental to Myerson, including the counsel's representations and Cooper's refusal to testify. Myerson's claims regarding errors in jury instructions and his inability to argue inferences from Cooper's absence were rejected, as the court had discretion in its rulings and Myerson had raised questions to suggest an inference without directly stating it.

Additionally, Myerson contended that the district court erred by not allowing testimony to impeach statements made by co-conspirator Dan Cooper. During the trial, Myerson's partner, Arthur Ruegger, referenced Cooper’s claims about billing, while Myerson sought to introduce testimony from Douglas Stahl to counter Cooper's statements. The court indicated it would allow Stahl's testimony if a specific statement to impeach could be identified, but Myerson was unable to provide one. Myerson argued on appeal that the exclusion of this evidence was erroneous and that the government misled the court regarding its admissibility. The testimony was deemed generally admissible under Rule 806, as supported by precedent.

Cooper's testimony was limited to the ICN count, and Myerson's argument that the error affected the entire trial is rejected. The relevant statement by Cooper, concerning ICN billing exceeding $300,000, only impacts the ICN count, not the Shearson and Home counts, thus the focus remains solely on the ICN count. Concerning the district court's exclusion of Stahl's impeachment testimony, Myerson claims prosecutorial misconduct contributed to this error, asserting that while the error might be harmless alone, its combination with misconduct could lead to reversible error.

In assessing prosecutorial misconduct, especially during jury proceedings, the focus is on whether such conduct caused substantial prejudice to the defendant. Factors considered include the severity of the misconduct, remedial actions taken, and the likelihood of conviction without the improper statements. The alleged misconduct here involved the prosecution's misleading statement to the court regarding coconspirator statements, which resulted in the trial court excluding impeachment evidence. For an evidentiary error to be reversible, the evidence must be deemed material, meaning there is a reasonable probability that its admission would have changed the trial's outcome.

Although the prosecutor's actions might have been improper, the court applies a harmless error analysis due to the substantial evidence of Myerson's guilt regarding the ICN count. The government argues that the impeachment testimony was minimal and that overwhelming evidence, including testimonies from multiple witnesses, establishes Myerson's involvement in fraudulent activities related to ICN. This evidence significantly contrasts with the precedent set in United States v. Wali, where the court found the exclusion of critical exculpatory evidence to be non-harmless due to its centrality in implicating the defendant.

The court determined that the alleged error in testimony was harmless, noting that Stahl's contradictory testimony did not significantly impact the overall trial, which was supported by substantial evidence of Myerson's inflation of ICN's bills. The court ruled that the prosecutor's comments during summation, although potentially personal, did not prejudice Myerson or deny him a fair trial. The ruling emphasized that prosecutorial statements must be considered in the context of the entire argument, and that Myerson, who represented himself, did not demonstrate that the comments materially affected the trial's fairness. The court acknowledged that the government is allowed to respond to attacks on its integrity and found that Judge Korman's admonitions to both parties and the jury’s careful verdict indicated no substantial bias. 

Regarding sentencing, Myerson contended that the district court improperly applied enhancements for the same conduct, constituting double counting. The court added points for 'more than minimal planning' and for being an 'organizer or leader' of criminal activity with five or more participants, which Myerson argued should not both apply as they refer to the same conduct.

In United States v. Rappaport, the court held that enhancing a defendant's offense level for a leadership role involving more than five participants and substantial planning does not constitute impermissible double counting. Myerson's claims mirror those in Rappaport and are therefore rejected. Myerson was convicted of defrauding two clients, Shearson and the UFCW, under 18 U.S.C. § 2314 for fraudulent overbilling that induced travel by their representatives. The district court dismissed these travel fraud counts, ruling that the travel was not in furtherance of Myerson's fraud but rather for the clients' own legal business and was only tangentially related to the fraud. The government contended that the travel was integral to the fraudulent scheme, but the court affirmed the dismissal. 

The relevant statute requires two elements for conviction: (1) the defendant must have devised a scheme to defraud a victim of at least $5,000, and (2) the victim must have been induced to travel in interstate commerce due to this scheme. The statute emphasizes that the defendant must be a motivating force behind the victim's transportation. However, the government is not required to demonstrate that the defendant anticipated the victim's travel or had direct contact with them. The district court's conclusion that the travel was peripheral to the fraud and not undertaken to further Myerson's fraudulent actions must be assessed to determine if the dismissal was in error.

UFCW's associate general counsel, Robert Funk, made two trips from Washington, D.C. to New York in 1988 to meet with Myerson regarding a legal case. The first meeting led to UFCW hiring M. K for trial damages in South Dakota. During the second meeting, Funk and Myerson negotiated a reduced fee schedule due to UFCW's financial constraints. M. K later sent a bill containing allegedly fraudulent charges. The government argued that Funk's travel was part of a scheme to defraud under Section 2314, which necessitates that the victim be induced to travel. However, the court found no evidence that Myerson motivated Funk's travel, as Funk's intent was solely to negotiate lower fees. Consequently, the court dismissed the travel fraud count against Myerson.

Similarly, Shearson representatives traveled to Florida to monitor an ongoing case, but their travel was not induced by Myerson. Testimony indicated that such travel would have occurred regardless of Myerson's involvement. Therefore, the court also dismissed the Shearson travel fraud count under Section 2314.

In a separate trial, Myerson was convicted on multiple counts, including conspiracy to defraud the U.S. and filing false tax returns. Evidence revealed that between 1980 and 1986, Myerson charged clients over $1 million for services not rendered and funneled payments through his brother-in-law, Joseph Rahn, who posed as local counsel despite not being an attorney. Rahn received $408,500 for these fictitious services and was instructed by Myerson to file a false tax return to conceal income from Myerson's ex-wife, with Myerson promising to reimburse him for taxes paid.

Myerson failed to report illicit income on his personal tax returns for the years 1980, 1982, 1983, and 1986, leading to three tax charges based on transactions with Rahn, which he did not dispute. Myerson argued he lacked the intent to cheat on his taxes due to being "irrational" from excessive alimony demands. In response, the government introduced evidence of prior bad acts to demonstrate Myerson's state of mind and intent, including testimony from attorney Thomas Wyatt, who received substantial checks from Myerson's firm for nonexistent legal services and returned the funds to Myerson to conceal them from his ex-wife's legal scrutiny. Additionally, yacht salesman Richard Kammerer received payments for purported legal fees, also tied to Myerson's financial dealings. The district court deemed this evidence compelling and relevant under Federal Rule of Evidence 404(b), which allows for the admission of evidence of prior bad acts for purposes other than establishing bad character, provided it is not overly prejudicial compared to its probative value. The court concluded that Myerson's defense was weak and found the government's evidence to be highly relevant and appropriately admitted, affirming that the district court acted within its discretion. The appellate court supported the lower court's findings, stating that any ruling admitting such evidence can only be overturned for clear abuse of discretion, which was not present in this case.

The evidence against Myerson for money laundering and tax fraud was deemed strong enough to render any potential errors in the admission of 404(b) evidence harmless, leading to the affirmation of his conviction on tax fraud counts. The district court's judgment was upheld for all counts, with the court noting the dismissal of both travel fraud counts due to insufficient evidence, which the government cross-appealed. Myerson received a sixty-month sentence for mail fraud, with two concurrent ten-month sentences, and three concurrent thirty-three month sentences for tax fraud, all serving concurrently with a three-year supervised release. The superseding indictment included charges under the RICO Act and obstruction of justice, but only six mail fraud counts, three travel fraud counts, and one obstruction count were submitted to the jury after several counts were dismissed or stipulated away during the trial. Myerson was acquitted of several charges, including mail fraud related to his law firm and certain clients, as well as travel fraud and obstruction of justice. Testimony issues arose regarding potential witness Cooper, whose credibility was questioned due to document destruction, and the prosecution's inconsistent statements about evidence related to Cooper's claims against Myerson raised concerns about ethical conduct. Testimonies from Segall and Giordano indicated that Myerson manipulated client billing practices, including inflating hours and altering work descriptions, further supporting the fraud allegations against him.

Evidence was presented regarding Myerson's personal expenses charged to ICN that had no business relevance. The significance of this evidence was diminished by the uncertainty among the parties and the district court about whether such testimony had been admitted. Myerson contended that the prosecution unfairly criticized his performance as his own counsel, labeling him as overly dramatic and manipulative in his questioning. He specifically objected to the prosecutor's comments on his courtroom gestures, which were used to support a witness's testimony about Myerson advocating for inflated bills. The district court rejected Myerson's objection, asserting that the jury would rely on their own observations of the gestures made during cross-examination. The government argued that Myerson had selectively highlighted minor instances of prosecutorial response to his inappropriate conduct. Notably, after the government's composed opening statement, Myerson's pro se defense opening included personal attacks on the prosecutor, suggesting that the prosecution was motivated by a desire for attention and was biased against him for being a prominent Jewish lawyer. The district court admonished Myerson for the inappropriateness of his opening statement and anticipated that his closing arguments would likely be even more inappropriate. The court emphasized that the evidence concerning transactions of $750,000 was relevant to establishing state of mind, which is a critical issue in the case, and rejected Myerson's attempt to exclude this evidence.