Upload
92589258
View
218
Download
0
Embed Size (px)
Citation preview
7/26/2019 Zinnel Appealate Brief March 2016
1/105
14-10141, 14-10196
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
vs.
STEVEN ZINNEL, and DERIAN
EIDSON,
Defendants-Appellants.
))))))))))))
C.A. Nos. 14-10141 and14-10196 (consolidated)D.C. No. 11-cr-00234 TLN
APPELLANT STEVEN ZINNELS OPENING BRIEF
SUZANNE A. LUBAN (SB#120629)Attorney At Law3758 Grand Ave. #4Oakland, CA 94610(650) 724-6345
Attorney for Defendant-Appellant,STEVEN K. ZINNEL
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 1 of 105
7/26/2019 Zinnel Appealate Brief March 2016
2/105
i
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 andEngage in Settlement Negotiations ............................................... 12
I. The Trial .......................................................................................... 14
J. Sentencing ....................................................................................... 16
K. Forfeiture ....................................................................................... 17
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 2 of 105
7/26/2019 Zinnel Appealate Brief March 2016
3/105
ii
SUMMARY OF ARGUMENT............................................................................ 18
ARGUMENT......................................................................................................... 19
I. THE COURT AND PROSECUTORS CREATED A CONSTRUCTIVEAMENDMENT OR PREJUDICIAL VARIANCE ON COUNTS 1AND 2 THAT TAINTED ALL COUNTS .............................................. 19
A. Standard of Review ........................................................................ 20
B. The Indictment, Trial Evidence and Jury Instructions ................... 20
C. The Jury Instructions and the Government's Arguments, Allowedthe Jury to Convict Zinnel Unconstitutionally on UnchargedConduct .......................................................................................... 25
D. Alternatively, Denial of a Bill of Particulars Was Prejudicial ....... 28
II. THE COURT PREJUDICIALLY ERRED IN INSTRUCTINGTHE JURY ............................................................................................ 28
A. Standard of Review ........................................................................ 28
B. The Jury Instructions on Bankruptcy Fraud Were FatallyFlawed ............................................................................................ 29
1. The Bankruptcy Fraud Instructions Were Inadequate BecauseThey Omitted the Property Allegedly Transferred or
Concealed ................................................................................... 29
2. The Instructions on Counts 1-2 Created Juror Confusion .......... 30
C. The Jury Instructions on Money-Laundering Were FatallyFlawed ............................................................................................ 31
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 3 of 105
7/26/2019 Zinnel Appealate Brief March 2016
4/105
iii
D. Joinder in Eidsons Jury Instructions Arguments .......................... 33
III. THE DISTRICT COURT IMPROPERLY REFUSED TOEXCLUDE EVIDENCE OF SETTLEMENT NEGOTIATIONSIN VIOLATION OF FEDERAL RULE OF EVIDENCE 408 ........... 34
A. The Error Was Prejudicial to Zinnel .............................................. 34
B. The District Court Also Abused its Discretion in AdmittingEvidence of Family Court Negotiations ........................................ 35
IV. THE DISTRICT COURT ERRED IN ADMITTING PREJUDICIALLEGAL CONCLUSIONS BY LEGAL EXPERTS ............................ 36
A. Standard of Review ........................................................................ 37
B. Objections to Radoslovichs Expert Testimony ............................. 37
C. Radoslovichs Legal Opinion Testimony ...................................... 38
D. Radoslovich Was Not Noticed As An Expert ................................ 39
E. Expert Testimony on Issues of Law is Inadmissible ...................... 40
F. Admitting Radoslovich's Legal Opinions Was Prejudicial ............ 40
G. Prejudicial Expert Testimony On Issues Of Law By BankruptcyExpert Gee Was Reversable Plain Error ........................................ 42
V. THERE WAS INSUFFICIENT EVIDENCE AS TO COUNT 18 ...... 45
A. Standard of Review ........................................................................ 45
B. There Was Insufficient Evidence of Interstate CommerceAnd Agreement With a Culpable Person For Count 18 ................ 45
VI. THE DISTRICT COURT COMMITTED NUMEROUSPROCEDURAL SENTENCING ERRORS ........................................ 46
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 4 of 105
7/26/2019 Zinnel Appealate Brief March 2016
5/105
iv
A. Standard of Review ........................................................................ 46
B. Intended Loss ................................................................................. 47
C. There Were Not 10 or More Victims ............................................. 53
D. Sophisticated Money Laundering .................................................. 56
1. The Court Improperly Based the Adjustment on BankruptcyFraud and 1957 Conduct ........................................................... 56
2. The Government Waived Any Unraised Arguments .................. 58
E. Aggravated Role ............................................................................. 59
1. The Court Incorrectly Based the Role Adjustment On theWrong Conduct ........................................................................... 60
2. Zinnel Exerted No Control Over Culpable Participants Relatingto Money Laundering Counts ..................................................... 60
F. The Sentence Subjected Zinnel to Unwarranted Disparity ............ 62
1. The 212-Month Sentence Resulted In Unwarranted DisparityWhen Compared to Similarly Situated Defendants ................... 63
2. The Average Sentences Imposed Nationwide Also Demonstratethe Huge Disparity Here ............................................................ 67
3. Comparing Sentences Imposed in Massive Fraud Cases .......... 68
G. The Court violated 18 U.S.C. 3553(a) and (c) ............................ 70
1. The Court Failed to Consider, and Failed to Explain Its Reasonsfor Rejecting, Defense Arguments Regarding Disparity and theFraud Guidelines ........................................................................ 70
2. The Court Failed to Explain Its Reason for the Sentence ........... 73
3. The Court Failed to Apply the Parsimony Principle .................. 74
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 5 of 105
7/26/2019 Zinnel Appealate Brief March 2016
6/105
v
H. The Fine Punished the Exercise of Fifth Amendment Rights ...... 74
I. The District Court Denied Zinnel Meaningful Allocution ............ 75
1. Factual Analysis ......................................................................... 75
2. Meaningful Allocution Is a Due Process Right .......................... 76
3. The Court Denied Meaningful Allocution By Pre-announcingthe Sentence Before Allocution ................................................. 76
J. Restitution Must Be Reversed ........................................................ 77
K. Erroneous Criminal Forfeitures ..................................................... 78
L. The 212-Month Prison Term and Maximum $500,000 Fine AreSubstantively Unreasonable ........................................................... 79
1. Standard of Review and Definition of Substantively
Unreasonable .............................................................................. 80
a. Lack of Meaningful Consideration of 3553(a) Factors ...... 82
b. The Sentence Is Substantively Unreasonable Because ZinnelReceived A Trial Tax of 3.5 Times More Prison Time ForExercising His Right to Trial ................................................ 83
c. Massive Disparity Creates Substantive Unreasonableness ... 85
A DIFFERENT JUDGE SHOULD BE ASSIGNED ON REMAND............... 86
CONCLUSION..................................................................................................... 88
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 6 of 105
7/26/2019 Zinnel Appealate Brief March 2016
7/105
vi
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 States361 U.S. 212 (1960) .......................................................................................... 27
UnitedStates 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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 7 of 105
7/26/2019 Zinnel Appealate Brief March 2016
8/105
vii
United States v. Ameline
409 F.3d 1073 (9th Cir. 2005) (en banc) ..................................................... 48, 49
United States v. Amezcua-Vasquez
567 F.3d 1050 (9th Cir. 2009) ..................................................................... 80, 81
United States v. Angwin
271 F.3d 786 (9th Cir. 2001), cert. denied,535 U.S. 966 (2002) ......... 37, 40, 43
United States v. Armstead
552 F.3d 769 (9th Cir. 2008) ....................................................................... 53, 77
United States v. Arthur
2006 U.S. Dist. LEXIS 79184 (E.D. Wis. 2006), affd, 582 F.3d
713 (2009) .......................................................................................................... 79
United States v. Attondo-Santos
385 F.3d 1199 (9th Cir. 2004) ........................................................................... 86
United States v. Berger
587 F.3d 1038 (9th Cir. 2009) ........................................................................... 46
United States v. Booker
543 U.S. 220 (2005) .......................................................................................... 63
United States v. Brennan
395 F.3d 59 (2d Cir. 2005) ................................................................................ 66
United States v. Brown
771 F.3d 1149 (9th Cir. 2014) ........................................................................... 47
United States v. Bush
626 F.3d 527 (9th Cir. 2010) (applying Santos to 1957) ................................ 32
United States v. Bussell
504 F.3d 956(9th Cir. 2007), cert. denied,555 U.S. 812 (2008) ..............passim
United States v. Cannel
517 F.3d 1172 (9th Cir. 2008) ..................................................................... 33, 43
United States v. Cantrell
433 F.3d 1269 (9th Cir. 2006) ........................................................................... 47
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 8 of 105
7/26/2019 Zinnel Appealate Brief March 2016
9/105
viii
United Statesv. Carty
520 F.3d 984 (9th Cir.) (en banc), cert. denied, 553 U.S. 1061
(2008) ..........................................................................................................passim
United States v. Christensen
801 F.3d 971 (9th Cir. 2015) ............................................................................. 28
United States v.Christian
749 F.3d 806 (9th Cir. 2014) ............................................................................. 45
United States v. Colon Ledee
772 F.3d 21 (1st Cir. 2014) ................................................................................ 66
United States v. Davis
596 F.3d 852 (D.C. Cir. 2010) ........................................................................... 36
United Statesv. Dennis
237 F.3d 1295 (11th Cir.), cert. denied,534 U.S. 821 (2001) .......................... 25
United States v. Edwards
595 F.3d 1004 (9th Cir. 2010) ..................................................................... 79, 80
United States v. Frank
956 F.2d 872 (9th Cir.), cert. denied,506 U.S. 932 (1992) .............................. 43
United Statesv. Garrido
713 F.3d 985 (9th Cir. 2013), cert. denied, __ U.S. __, 134 S.Ct.
1333 (2014) .................................................................................................. 28, 31
United States v. Gupta
904 F. Supp. 2d 349 (S.D.N.Y. 2012), affd,747 F.3d 111 (2d Cir.
2014), cert. denied,135 S.Ct. 1841 (2015) ....................................................... 62
United States v. Houston
217 F.3d 1204 (9th Cir. 2000) ..................................................................... 46, 52
United States v. Huckins53 F.3d 276 (9th Cir. 1995) ............................................................................... 86
United States v. Jordan
256 F.3d 922 (9th Cir. 2001) ............................................................................. 48
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 9 of 105
7/26/2019 Zinnel Appealate Brief March 2016
10/105
ix
United States v. Kimbrew
406 F.3d 1149 (9th Cir. 2005) ........................................................................... 46
United States v. Lake
2014 U.S. LEXIS 10772 (5th Cir. 2014) ........................................................... 49
United States v. Landeros-Lopez
615 F.3d 1260 (10th Cir. 2010) ................................................................... 76, 77
United States v. Lloyd
807 F.3d 1128 (9th Cir. 2015) ..................................................................... 27, 39
United States v. Luepke
495 F.3d 443 (7th Cir. 2007) ....................................................................... 76, 77
United States v. Mares-Molina913 F.2d 770 (9th Cir. 1990) ....................................................................... 59, 60
United States v. Matthews
278 F.3d 880 (9th Cir. 2002) (en banc) ................................................. 55, 58, 88
United States v.Messer
785 F.2d 832 (9th Cir. 1986) ............................................................................. 74
United States v. Messner
107 F.3d 1448 (10th Cir. 1997) ......................................................................... 40
United States v. Navarro-Flores
628 F.2d 1178 (9th Cir. 1980) ........................................................................... 46
United States v. Paley
442 F.3d 1273 (11th Cir. 2006) ......................................................................... 52
United States v. Panice
598 F.3d 426 (7th Cir. 2010) ................................................................. 68, 72, 73
United States v. Parris573 F. Supp. 2d 744 (E.D.N.Y. 2008) ................................................... 68, 69, 86
United States v. Paul
561 F.3d 970 (9th Cir. 2009) (per curiam) ........................................................ 88
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 10 of 105
7/26/2019 Zinnel Appealate Brief March 2016
11/105
x
United States v. Pazsint
703 F.2d 420 (9th Cir. 1983) ............................................................................. 25
United States v. Pierre
254 F.3d 872 (9th Cir. 2001) ....................................................................... 29, 31
United States v. Pineda-Doval
614 F.3d 1019 (9th Cir. 2010) ........................................................................... 48
United States v. Ponce
51 F.3d 820 (9th Cir. 1995) ............................................................................... 55
United States v. Quach
302 F.3d 1096 (9th Cir. 2002) ........................................................................... 87
United States v. Ressam679 F.3d 1069 (9th Cir. 2012) ..................................................................... 80, 82
United States v. Reyes-Oseguera
106 F.3d 1481 (9th Cir. 1997) ........................................................................... 88
United States v. Rodrigues
678 F.3d 693 (9th Cir.), cert. denied, 133 S. Ct. 359 (2012) ............................. 28
United States v. Rosbottom
763 F.3d 408 (5th Cir. 2014), cert. denied, __ U.S. __, 135 S.Ct.
985 (2015) .......................................................................................................... 67
United States v. Salgado
745 F.3d 1135 (11th Cir. 2014) ......................................................................... 60
United States v. Santos
553 U.S. 507 (2008) .................................................................................... 32, 33
United States v. Sarno
73 F3d 1470 (9th Cir. 1995), cert. denied, 518 U.S. 1020 (1996) .................... 77
United States v. Scheele
231 F.3d 492 (9th Cir. 2000) ....................................................................... 52, 53
United States v. Shipsey
190 F.3d 1081 (9th Cir. 1999) ............................................................... 27, 28, 31
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 11 of 105
7/26/2019 Zinnel Appealate Brief March 2016
12/105
xi
United States v. Showalter
569 F.3d 1150 (9th Cir. 2009) ..................................................................... 54, 55
United States v. Staten
466 F. 3d 708 (9th Cir. 2006) ............................................................................ 47
United States v. Stewart Clinical Laboratory, Inc.
652 F.2d 804 (9th Cir. 1981) ....................................................................... 25, 26
United States v. Stockwell
472 F.2d 1186 (9th Cir.), cert. denied, 411 U.S. 948 (1973) ............................ 83
United States v. Stoddard
150 F.3d 1140 (9th Cir. 1998), cert. denied, 525 U.S. 1168 (1999) ................. 78
United States v. Trujillo713 F.3d 1003 (9th Cir. 2013) ........................................................................... 63
United States v. Tsinhnahijinnie
112 F.3d 988 (9th Cir. 1997) ....................................................................... 25, 26
United States v. Van Alstyne
584 F.3d 803 (9th Cir. 2009) ............................................................................. 32
United States v. Wallace
848 F.2d 1464 (9th Cir. 1988) ........................................................................... 37
United States v. Ward
732 F.3d 175 (3d Cir. 2013),cert. denied,134 S.Ct. 2684 (2014) .................... 76
United States v. Ward
747 F.3d 1184 (9th Cir. 2014). (ER 975-977.) ............................................ 20, 27
United States v. Watt
910 F.2d 587 (9th Cir. 1990) ............................................................................. 74
United States v. Whitehead532 F. 3d 991 (9th Cir. 2008) ............................................................................ 82
United States v. Zipkin
729 F.2d 384 (6th Cir. 1984) ................................................................. 40, 42, 44
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 12 of 105
7/26/2019 Zinnel Appealate Brief March 2016
13/105
xii
United States Constitution
Amendment V ....................................................................................... 20, 25, 27, 74
Amendment VI ..................................................................................... 19, 27, 29, 37
Amendment XIV .................................................................................................... 76
Federal Statutes, Sentencing Guidelines and Rules
Title 11 United States Code
523(a)(15) ....................................................................................................... 51
704(5) .............................................................................................................. 55
Title 18 United States Code
152 .................................................................................................................. 31
152(1) .................................................................................................... 5, 22, 29 152(7) ................................................................................................................ 5
981(a)(2)(A) .................................................................................................... 78
1956 .........................................................................................................passim
1956(h) ........................................................................................................ 5, 57
1957 .........................................................................................................passim
3231 .................................................................................................................. 3
3553(a) .....................................................................................................passim
3553(c) ...................................................................................................... 70, 73
3582 ................................................................................................................ 63
3661 ................................................................................................................ 76
3663(a) ............................................................................................................ 77
3742 ............................................................................................................ 4, 47
Title 28 United States Code
1291 .................................................................................................................. 4
Sentencing Reform Act ........................................................................................... 86
United States Sentencing Guidelines 2B1.1 ........................................................................... 47, 48, 49, 50, 51, 53, 54
2S1.1 ............................................................................................. 56, 58, 59, 60
3B1.1 ................................................................................................... 59, 60, 62
3E1.1 ............................................................................................................... 84
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 13 of 105
7/26/2019 Zinnel Appealate Brief March 2016
14/105
xiii
Federal Rules of Criminal Procedure
Rule 16 ............................................................................................................... 39
Rule 32 ........................................................................... 46, 48, 49, 52, 54, 74, 76
Rule 52(b) .......................................................................................................... 37
Rule 408 ......................................................................................................passim
Federal Rules of Evidence
Rule 103(a) ........................................................................................................ 37
Rule 702 ....................................................................................................... 37, 40
Federal Rules of Appellate Procedure Rule 4(b) ...................................................... 4
Other Authorities
Guidance Memo., Dept. of the Treasury, Financial Crimes
Enforcement Network 1 (Nov. 9, 2006), available at
http://www.fincen.gov/statutes_regs/guidance/pdf/AdvisoryOnShel
ls_FINAL.pdf .................................................................................................... 57
NACDL, Comparative Fraud Table 2005-2009, available at
http://www.nacdl.org/criminaldefense.aspx?id=14143&terms=com
parative+fraud+table .......................................................................................... 64
U.S.S.C.,Loss Primer(2B1.1) (2010), Available athttp://www.ussc.gov/sites/default/files/pdf/training/primers/Primer
_Loss.pdf ........................................................................................................... 50
Letter to the U.S. Sentencing Commission from The Constitution
Project, Aug. 26, 2011, http://www.constitution
project.org/pdf/USSC2012.pdf .......................................................................... 86
Richard A. Oppel, Sentencing Shift Gives New Leverage to
Prosecutors,New York Times, Sept. 9, 2011, available at
http://www.nytimes.com/2011/09/26/us/tough-sentences-help-prosecutors-push-for-plea-bargains.html?_r=0 ................................................. 85
U.S.S.C. Quick Facts_Fraud(2014), available at
http://www.ussc.gov/sites/default/files/pdf/research-and-
publications/quick-
facts/Quick_Facts_Theft_Property_Destruction_Fraud_FY14.pdf .................. 82
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 14 of 105
7/26/2019 Zinnel Appealate Brief March 2016
15/105
"
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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 15 of 105
7/26/2019 Zinnel Appealate Brief March 2016
16/105
#
including miscalculating the Guidelines, relying on the PSRs unsupported loss
figures without requiring the government to produce any evidence, ignoring
defense evidence, chilling appellants allocution, and failing to explain reasons to
permit appellate review for imposing the shockingly-high sentence and maximum
fine on a first-time offender. Zinnel received 28 levels of objected-to
enhancements with each 2-level enhancement adding 42 months in prison.
Moreover, although the 18 U.S.C. 3553(a) sentencing factors are the bedrock of
federal sentencing, the judge myopically failed to consider a single factor other
than the Guidelines. In a DOJ press release issued within hours of sentencing, the
government bragged that Zinnel's sentence was the longest for bankruptcy fraud in
the history of the Eastern District of California. (ZJN175; Exh 16.) Many
similarly situated defendants have received three to six years in prison.
The court compared Zinnels conduct to that of Letantia Bussell, but ignored
the disparity between Bussells 36-month sentence for sophisticated bankruptcy
fraud and Zinnels 212-month term. Zinnels sentence and maximum fine are far
above the norm for similar offenders, and are draconian and unprecedented.
QUESTIONS PRESENTED
I. An unconstitutional constructive amendment or prejudicial variance
was caused by the confluence of the governments introduction of evidence and
arguments that Zinnel committed bankruptcy fraud by hiding three property
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 16 of 105
7/26/2019 Zinnel Appealate Brief March 2016
17/105
$
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. The jury instructions on all counts were unconstitutionally inadequate,
incorrect and/or prejudicially confusing.
III. The district court erred by admitting prejudicial evidence of
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. The district court erred by allowing two lawyer-witnesses to testify on
conclusions of law about the defendants guilt and debtors obligations under
bankruptcy law.
V. There was insufficient evidence as to Count 18, Money Laundering
Conspiracy.
VI. The sentence is procedurally erroneous on numerous grounds
including incorrect Guidelines calculations, and subjected Zinnel to unwarranted
disparity, and is substantively unreasonable.
JURISDICTION
The district court had jurisdiction over this criminal trial under 18 U.S.C.
3231. The court entered final judgment as to Steven Zinnel on March 4, 2014.
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 17 of 105
7/26/2019 Zinnel Appealate Brief March 2016
18/105
%
(ER1156.) 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
1ER refers to Joint Excerpts of Record. ZSER refers to Zinnels SealedExcerpts. ZJN refers to Zinnels Exhibits to Motion for Judicial Notice.
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 18 of 105
7/26/2019 Zinnel Appealate Brief March 2016
19/105
&
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 772-
782.) 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 criminally-
derived 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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 19 of 105
7/26/2019 Zinnel Appealate Brief March 2016
20/105
'
fine, and $2,513,319 in Restitution (ER 116-117, 156-161.)
The parties waived a jury as to forfeiture. (ER 1042.) Over defense
objection (Dkt. 245), the court ordered forfeited: the Luyung vacant lot, Zinnels
home, Done Deal, and System 3, and ordered a personal money judgment for
$1,297,158.20. (ER 62-64, 165-173, 176-178.) The court denied Zinnels motion
to stay forfeiture pending appeal. (ER 4-5.) On April 2, 2014, Ms. Eidson was
sentenced to 121 months in prison. (ER 146.)
CUSTODY STATUS
Zinnel was remanded at conviction and has been incarcerated since July 16,
2013. He is currently at FCI Terminal Island in San Pedro, California. His
projected release date is December 5, 2028.
STATEMENT OF FACTS
A. Personal History of Steve Zinnel
Appellant Steven Zinnel started as a journeyman electrician. (ER 87-88,
448.) He worked 60 hours a week, went to college at night, and earned a
bachelors degree in management and a masters degree in business administration.
(ER 1237, ZSER 11, PSR 52.) He became an entrepreneur, starting several viable
electrical contracting businesses. (ZSER 5,7, PSR 5, 21.) Zinnel provided a
warm and happy home life for his two children during his custody time, including
during the acrimonious post-separation years. He took his kids on camping trips,
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 20 of 105
7/26/2019 Zinnel Appealate Brief March 2016
21/105
(
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,
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 21 of 105
7/26/2019 Zinnel Appealate Brief March 2016
22/105
)
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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 22 of 105
7/26/2019 Zinnel Appealate Brief March 2016
23/105
*
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. The Luyung Property
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),
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 23 of 105
7/26/2019 Zinnel Appealate Brief March 2016
24/105
"+
Zinnels ERISA-approved retirement plan (a different entity than Corporate
Control, Inc.). (ER 903-904, 913-914, 1242.) The PSP was listed on Zinnels
schedules, and exempt from the bankruptcy. (ER 903-904, 912-914, 1363.)
Cologna told an IRS agent in June 2011 that he viewed the Luyung property as an
investment. (ER 498A.) At trial prosecutors argued these transactions were
designed to hide Luyung from the bankruptcy. (ER 1118.)
D. The Safeco Litigation
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 inpro 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.)
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 24 of 105
7/26/2019 Zinnel Appealate Brief March 2016
25/105
""
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. Family Law Litigation
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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 25 of 105
7/26/2019 Zinnel Appealate Brief March 2016
26/105
"#
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
$6,050,362.54. (ER 1360.) By the time of the bankruptcy filing, Zinnel had never
received a single payment or distribution from System 3. Zinnel worked as a
financial consultant for System 3. (ER 669.) In his bankruptcy, Zinnel listed debts
that included questionable and potential claims, secured debts, undischargeable
debts such as child support, double-counted debts, and some debts that were not
even incurred. (ER 494, 1371-1382.) All but one of the scheduled claims were
disputed, contingent or unliquidated. (ER 1371-1382.)
H. Wilbert and His Attorney Become Informants andEngage in Settlement Negotiations
In May 2008, Wilbert initiated negotiations to terminate his business
relationship with the other owners of System 3. (ER 671, 674-676, 840, 1564-
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 26 of 105
7/26/2019 Zinnel Appealate Brief March 2016
27/105
"$
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 675-
676, 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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 27 of 105
7/26/2019 Zinnel Appealate Brief March 2016
28/105
"%
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, 1114-
1116, 1132-1135.) The government also argued that Zinnels 2001 email to his ex-
wife 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,
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 28 of 105
7/26/2019 Zinnel Appealate Brief March 2016
29/105
"&
his personal bank account at Washington Mutual (WAMU) (ER 488-489, 890-
904, 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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 29 of 105
7/26/2019 Zinnel Appealate Brief March 2016
30/105
"'
nature of statements by Eidson. (ER 783-785, 805-811, 819, 883.) Radoslovich
was not disclosed as an expert, and admitted he was not knowledgeable in criminal
or bankruptcy law. (ER 792, 832.) Disclosed bankruptcy expert Edmund Gee
opined on which assets debtors must disclose, and the meaning and purpose of the
notice of the five-year maximum for false statements on a bankruptcy petition,
which Gee opined was a significant penalty. (ER 488A, 490-491, 496-497.)
The government was allowed, over objection, to introduce a large body of
evidence of the Zinnel/Wilbert settlement negotiations, including letters, emails,
testimony, and audio excerpts of meetings that were played for the jury repeatedly.
(ER 585-599, 784-792, 839-840, 879-881.) In all, the prosecution offered 20
settlement-related documents into evidence and played selected audio clips from
recorded settlement meetings 27 times. The prosecutors argued that this evidence
proved that Zinnels claim for payment by System 3 was invalid, the bankruptcy
was fraudulent, and their efforts to negotiate payment were illegal. (E.g., ER
1065-1068, 1133-1134.)
J. 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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 30 of 105
7/26/2019 Zinnel Appealate Brief March 2016
31/105
"(
defense objections and contrary evidence. (ER 96, 98-99.)
The intended loss figure included Safecos bogus claim for $1,607,133,
which a federal judge dismissed before the bankruptcy because these amounts were
not incurred as losses. (ER 375-376, 392-393.) The intended loss figure also
improperly included a secured claim by First Bank for $115,000 which, as the
government conceded, could not be counted since no loss resulted. (ER 99.)
Zinnel extensively objected and provided evidence and offers of proof that
most claims were not compensable under the bankruptcy laws, were uncountable
under the Guidelines, and that other enhancements were erroneous. See Dkt. 300.
The judge failed to resolve most of Zinnels objections, and failed to explain
his decisions to impose 212 months, two years over the PSRs recommended
mega-sentence, and the maximum fine. He gave no consideration to Zinnels
disparity and mitigation arguments under 3553(a). (ER 1173-1207.) The court
pre-announced the sentence, and then repeatedly interrupted Zinnels allocution
and set arbitrary time and content limits. (ER 1207, 1210, 1240-1249.) The court
imposed the highest bankruptcy fraud sentence ever in the district, 212 months, the
maximum fine of $500,000, and inflated restitution. (ER 158, ZJN175; Exh.16.)
K. Forfeiture
The court granted the governments motion for forfeiture of a $1,297,158.20
money judgment plus: (1) the Luyung Property, (2) Zinnel's home, (3) Done Deal,
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 31 of 105
7/26/2019 Zinnel Appealate Brief March 2016
32/105
")
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. The bankruptcy fraud instructions were fatally flawed as argued in Issue I,
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. The court erred in allowing secretly recorded evidence of settlement
negotiations between parties and their attorneys, based on improper pretrial
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 32 of 105
7/26/2019 Zinnel Appealate Brief March 2016
33/105
"*
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. The court erroneously admitted prejudicial, inadmissible expert testimony
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. There was insufficient evidence of the financial transaction and
agreement with another culpable person elements as to Count 18.
VI. The court committed numerous reversible procedural sentencing errors. The
sentence was procedurally and substantively unreasonable, and subjected Zinnel to
unwarranted disparate treatment.
ARGUMENT
I. THE COURT AND PROSECUTORS CREATED A CONSTRUCTIVE
AMENDMENT OR PREJUDICIAL VARIANCE ONCOUNTS 1 AND 2 THAT TAINTED ALL COUNTS
The governments evidence and arguments that Zinnel committed
bankruptcy fraud by hiding properties that were not charged in the indictment, and
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 33 of 105
7/26/2019 Zinnel Appealate Brief March 2016
34/105
#+
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 novobecause 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. The Indictment, Trial Evidence and Jury Instructions
Count 1 in 4(a)-4(n) listed specific actions as ways and means of
concealing specified property to defeat the bankruptcy laws, and then alleged in 5
that Zinnel excluded from his bankruptcy interests in assets transferred or
concealed as alleged in 4(a)-4(n) above. (ER 181-184.) Count 2 alleged
fraudulent concealment of Zinnels interests in System 3, 4Results, Auto and Boat
Store, and Luyung, payments Zinnel was receiving from [System 3] through
Done Deal, and Zinnels interest inDone Deals bank account. (ER 185.)
The defense moved unsuccessfully for a bill of particulars.2 (ER 205-207.)
The government argued the indictment was sufficiently detailed. (ER 210-212.)
Before trial, the governments trial brief clarified Count 1 by identifying the
#At the hearing, the district judge denied the motion because he mistakenlybelieved the magistrate judge had already decided it. (ER 13.)
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 34 of 105
7/26/2019 Zinnel Appealate Brief March 2016
35/105
#"
specific property it contended Zinnel transferred pre-petition as follows: System 3,
4Results, Auto and Boat Store, Derian Eidson Client Trust Account, Zinnels use
of Done Deals bank account to pay expenses, and the Luyung Property. (ER 235-
236.) Neither the indictment nor the governments trial brief mentioned Zinnels
WAMU account, or alleged that Zinnel transferred or concealed Corporate
Control, Done Deal, or Zinnels interest in Done Deal. (ER 182.)
Neither Count 1 or 2 alleged that Zinnel concealed his personal WAMU
account, Corporate Control, the entire company of Done Deal, other assets of Done
Deal besides its bank account, or Zinnels interest in Done Deal. (ER 184-186.)
At trial, prosecutors presented evidence that Zinnel concealed and omitted
from his bankruptcy schedules: his WAMU account (ER 488-489, 890-904, 915,
915, 1333); Corporate Control, Inc. (ER 901-902); and Done Deal (ER 488B, 905-
908.) Orally and in writing, appellants requested jury instructions that would list
the assets charged specifically in Counts 1 and 2, to protect against conviction on
unindicted conduct. (ER 976-977, 232.) Zinnels lawyer argued:
theres been so much mentioned about bank accounts and companiesand these are not alleged in the indictment. it prevents jury confusion
because some people might be up there saying let's vote on North
Valley, let's vote on that WAMU check. And that's a problem for usbecause we can't defend something when he's not indicted for it, yet hecould be found guilty of it on a different entity or interest. (ER 976.).
In opposition, the prosecutor pointed to the phrase among others in Count
1, implying that it included unstated property interests. (ER 976.) This was
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 35 of 105
7/26/2019 Zinnel Appealate Brief March 2016
36/105
##
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 propertyfor each defendant and you unanimously agree to that
item, without explaining what interests comprised the alleged items of property.
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 36 of 105
7/26/2019 Zinnel Appealate Brief March 2016
37/105
#$
(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 propertywas 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 propertyfor 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 05-503-MCE. The jury instructions and verdict forms in these cases specified the
charged interests. (ZJN009, 0013, 0017, 0021; Exh. 1-4.)
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 37 of 105
7/26/2019 Zinnel Appealate Brief March 2016
38/105
#%
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, 1116-
1119.) 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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 38 of 105
7/26/2019 Zinnel Appealate Brief March 2016
39/105
#&
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. The Jury Instructions and the Governments Arguments, Allowed
the Jury to Convict Zinnel Unconstitutionally on Uncharged Conduct
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. UnitedStates 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 Statesv. Dennis,
237 F.3d 1295, 1299 (11thCir.), 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).
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 39 of 105
7/26/2019 Zinnel Appealate Brief March 2016
40/105
#'
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 notconvicted of
Counts 1 and 2 based on concealment of property not charged by the grand jury.
InAdamson, 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 inAdamson 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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 40 of 105
7/26/2019 Zinnel Appealate Brief March 2016
41/105
#(
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 notcharged 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 (quotingStirone, 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.
WardandAdamsoncompel 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).
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 41 of 105
7/26/2019 Zinnel Appealate Brief March 2016
42/105
#)
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 Statesv. 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. Alternatively, Denial of a Bill of Particulars Was Prejudicial
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. THE COURT PREJUDICIALLY ERRED IN INSTRUCTING THE JURY
A. 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,
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 42 of 105
7/26/2019 Zinnel Appealate Brief March 2016
43/105
#*
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. The Jury Instructions on Bankruptcy Fraud Were Fatally Flawed
This claim incorporates Issue I above. The jury instructions on Bankruptcy
Fraud (ER 1015-1021) violated Zinnels Fifth and Sixth Amendment rights to be tried
only on charges in the indictment and to notice of the charges against him, and were
also prejudicially confusing. Zinnel timely objected. (ER 232, 975-977, 983-984.)
1. The Bankruptcy Fraud Instructions Were Inadequate BecauseThey Omitted the Property Allegedly Transferred or Concealed
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)).
%SeeFirst 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. PatternCrim. 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.)
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 43 of 105
7/26/2019 Zinnel Appealate Brief March 2016
44/105
$+
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 omittedKlassyslistof the property charged. (ZJN017-
018, 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. The Instructions on Counts 1-2 Created Juror Confusion
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 ifthey 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 1020-
1021.) These phrases were obviously borrowed from the jury instructions inBurke
andKlassy(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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 44 of 105
7/26/2019 Zinnel Appealate Brief March 2016
45/105
$"
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. The Jury Instructions on Money-Laundering Were Fatally Flawed
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 fromspecifiedunlawful 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 anyconduct 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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 45 of 105
7/26/2019 Zinnel Appealate Brief March 2016
46/105
$#
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. SeeUnited 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 (quotingSantos, 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).
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 46 of 105
7/26/2019 Zinnel Appealate Brief March 2016
47/105
$$
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. Joinder in Eidsons Jury Instructions Arguments:
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
Case: 14-10141, 03/01/2016, ID: 9885174, DktEntry: 27, Page 47 of 105
7/26/2019 Zinnel Appealate Brief March 2016
48/105
$%
1957 convictions (Counts 15-17), because the court instructed the jury on co-
conspirator 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. THE DISTRICT COURT IMPROPERLY REFUSED TOEXCLUDE EVIDENCE OF SETTLEMENT NEGOTIATIONSIN VIOLATION OF FEDERAL RULE OF EVIDENCE 408
Zinnel joins all arguments raised in Eidsons Opening Brief regarding
erroneous admission of settlement negotiation evidence under Federal Rule of
Criminal Procedure 408.
A. The Error Was Prejudicial to Zinnel
The pervasive evidence and arguments concerning settlement negotiations
were especially prejudicial to Zinnel. In addition to prejudice discussed in Eidsons
brief, the evidence of settlement talks was especially damning to Zinnel. For
example, Wilbert testified: I told Steve Zinnel that he had lied to the bankruptcy
about ownership. (ER 591.) Wilbert and Radoslovich asserted throughout the
recordings and testimony that Zinnel committed bankruptcy fraud and that any
pay-out by System 3 would be criminal[ly]