Statements
protected by attorney-client privilege
Admission
of statements was harmless error nevertheless
By
David Ziemer
david.ziemer@wislawjournal.com
Jan.
29, 2007
|
What
the court held
Case:
U.S. v. Jung, No. 05-3718
Issue:
Are an attorney’s statements that his client admitted fraud
admissible?
Was
the admission of the statements harmless error?
Holding:
No. The attorney-client privilege protects the statements.
Yes.
The properly admitted evidence of guilt was overwhelming.
|
It
violated the attorney-client privilege to admit statements of
an attorney that his client had admitted guilt to the charge.
Nevertheless,
the Seventh Circuit held on Jan. 18 that the error was harmless,
where the evidence of guilt was overwhelming.
In
the 1990s, Edward T. Jung managed a hedge fund called Strategic
Income Fund, LLC (SIF), for Hollis Lamon, a securities broker
and promoter. Fred Isaf acted as SIF’s special counsel.
In
2003, Jung was charged in Illinois federal court with eight counts
of wire fraud and two counts of securities fraud.
During
the trial, the government introduced several statements made by
Jung’s former attorney, James Fox.
First,
Isaf testified that Fox had told him that “[Jung] had, if
I remember the words exactly, engaged in improper and illegal
trading.”
Second,
the government introduced a letter from Isaf to SIF’s investors
stating that “[Jung’s] lawyer informed me that [Jung]
had engaged in ‘improper and illegal trading activity’
which he had concealed from Lamon and Stern, all SIF Members,
and SIF’s accountant.”
Third,
Lamon testified that Fox had told him that “Mr. Jung, unbeknownst
to us, had another account. And he had taken, I believe was the
word, our money and used it for his own personal benefit and lost
it all trading.”
Finally,
Lamon also testified that “Mr. Fox gave us papers that he
said were written by Mr. Jung at the time that was, for lack of
a better word, Mr. Jung’s confession.”
The
jury found Jung guilty on all ten counts, and he was sentenced
to 109 months imprisonment, three years of supervised release,
a special assessment of $1,000, and $21 million in restitution.
Jung
appealed, but the Seventh Circuit affirmed in a decision by Judge
William J. Bauer.
Privilege
The
court concluded that the statements were distinguishable from
those in two other cases in which it had held that statements
of a defendant’s attorney were admissible pursuant to FRE
801(d)(2)(D), as statements of the defendant’s agent. U.S.
v. Harris, 914 F.2d 927 (7th Cir. 1990); U.S. v. Sanders, 979
F.2d 87 (7th Cir. 1992).
In
Harris, the defendant’s attorney visited with an eyewitness
prior to trial and showed him pictures of Harris’ brother
in an attempt to develop the theory was that Harris’ brother
had committed the crime and that he was a victim of mistaken identity.
However, after reviewing the pictures, the witness was confident
that it was Harris that he saw, rather than his brother.
At
trial, the witness testified about his conversation with Harris’
attorney, and the court admitted a statement attributed to Harris’
attorney acting in his investigative capacity.
The
court held that when Harris’ lawyer met with the witness,
he was “testing a theory on behalf of his client” and
not “relating confidential information about his client.”
Harris, 914 F.2d at 931.
In
Sanders, the defendant’s former attorney visited two co-conspirators,
who were in pretrial detention, and asked the co-conspirators
whether they had given statements to the police. The visit occurred
several months before Sanders was indicted.
At
trial, the government elicited the statements by the attorney
to show that Sanders must have been involved in the conspiracy.
Sanders, 979 F.2d at 90.
The
court concluded in the case at bar that Harris and Sanders were
distinguishable.
The
court reasoned, “Unlike the attorneys in Harris and Sanders,
Fox did not meet with Lamon and Isaf in an investigative capacity.
The statements attributed to Fox were uttered more than five years
before Jung’s criminal trial. This is not a case where an
attorney’s pre-trial tactical decisions backfired; Fox was
not attempting to develop a defense strategy by meeting with Lamon
and Isaf.”
The
government acknowledged, and the court agreed, that Fox’s
statements were made to notify victims about the situation on
behalf of the defendant as part of a strategy to be cooperative.
By
presenting the testimony, the court concluded that the government
“achieved the equivalent of having Jung’s former attorney
stand with the prosecutors and vouch for his indictment.”
The
court added, “From a policy perspective, defendants will
be chilled from sharing information with their attorneys, defense
attorneys will be deterred from vigorous advocacy, and the attorney-client
relationship will be impaired if statements like Fox’s regarding
Jung’s criminal liability are admissible.”
The
court thus held that it was error to admit the out-of-court statements
by Fox.
Harmless
Error
However,
the court held that admission of the error was harmless under
FRCP 52(a).
In
an affidavit Fox had signed, he acknowledged that he wrongfully
permitted securities to be deposited in his accounts, exposing
the investors to losses to satisfy his own trading losses and
expenses.
In
addition, in his bankruptcy proceeding, Jung agreed to the non-dischargeability
of the investors’ $21 million losses, pursuant to a provision
that debts owing to property obtained by fraud are non-dischargeable.
The
court concluded, “These statements defeat Jung’s arguments
that he did not intend to deceive the SIF’s investors and
that he reasonably believed the investors were on notice of cross-collateralization.”
In
addition, the government presented evidence that, although Jung’s
trading was never profitable, every year, he reported to investors
that the SIF fund had made profits.
Accordingly,
the court held that the admission of the statements by Fox was
harmless and, after briefly discussing the sentence and finding
it reasonable, affirmed.
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Case Analysis.
David
Ziemer can be reached by email.
