Appeal from a judgment of the United States District Court for the Southern District of New York (Pollack, J.) rendered after a jury trial convicting appellant of two counts of mail fraud, 18 U.S.C. § 1341. Affirmed .
Before Lumbard, Mansfield and Van Graafeiland, Circuit Judges.
Jack E. Bronston appeals from a judgment of the Southern District of New York entered after a jury trial before Judge Milton Pollack, convicting him of two counts of mail fraud, 18 U.S.C. § 1341,*fn1 based on the government's allegations that he fraudulently violated his fiduciary duty as an attorney by helping to further the efforts of Convenience and Safety Corporation ("C & S") and Saul Steinberg, chairman of C & S, to obtain a bus stop shelter franchise from the City of New York at the same time when the law firm in which he was a partner, Rosenman, Colin, Freund, Lewis & Cohen ("Rosenman Colin"), was representing a group of investors in BusTop Shelters, Inc. ("BusTop"), the then current holder of the franchise and a participant in the competition for its renewal. We affirm. The evidence was sufficient to allow the jury to convict Bronston of mail fraud based on his breach of his duty of loyalty to his firm's clients, his concealment from the clients of his promotion to their harm of the interests of Steinberg and C & S in obtaining the franchise, his specific intent thereby to defraud his firm's client of the very economic value his firm had been retained to protect, and his mailing of two letters in furtherance of the fraudulent scheme.
On May 8, 1975, BusTop obtained an interim franchise from the City of New York to build and maintain shelters at bus stops over a three-year period. In the spring of 1977, as the end of the interim franchise was drawing near, BusTop began seeking outside capital with which it could expand its business and improve its chances of persuading the City that a 20-year renewal of its franchise was in order. After extensive negotiations, two venture capital companies, Citicorp Venture Capital Limited (a subsidiary of Citicorp) and Fifty-Third Street Ventures, Inc. (collectively "the investors" or "the minority investors"), tentatively agreed to make a substantial investment in BusTop. On June 1, 1977, the investors contacted Samuel ("Sandy") Lindenbaum, a partner in the Rosenman Colin firm, and retained the firm to advise them in making the investment.
At approximately the same time Jack Bronston, who was then a partner in the Rosenman Colin firm and a state senator from Queens, learned that his friend and client, Saul Steinberg, was also interested in retaining Rosenman Colin to assist him in his efforts to obtain the bus stop shelter franchise. Acting on Steinberg's behalf, Bronston met with Lindenbaum on May 17, 1977, to tell him that Steinberg wanted to retain Rosenman Colin to represent him in his bus stop shelter endeavors, and that he wanted Lindenbaum to appear on his behalf before the Board of Estimate. Lindenbaum immediately declined to undertake the representation, however, because, although BusTop was not itself a client of Rosenman Colin (and the representation of the minority investors had not yet begun), Lindenbaum did not feel he could work against BusTop, in view of his personal friendships with BusTop's public relations consultant and attorney. Despite this reaction from Lindenbaum, Bronston went ahead on Steinberg's behalf and had a Rosenman Colin associate set up a Delaware corporate shell under the name of "Convenience and Safety Corporation," which would serve as Steinberg's vehicle in the bus stop shelter competition. C & S was incorporated on June 2, 1977.
On June 9, 1977, Bronston, by this time aware that Rosenman Colin had been retained as counsel by the BusTop investors, wrote a memorandum to his firm's new business committee, suggesting that the firm take on the representation of C & S
"which will serve as an investment vehicle for the erection of public bus shelters in New York City, Philadelphia, Chicago and Seattle. This may involve conflict with other clients of the office and should be discussed."
Murray Cohen, a member of the committee, was the first to receive Bronston's memo, and immediately returned it to him with the notation: "We should not do anything further on this until Sandy (Lindenbaum), you and I talk about it. There is a definite conflict." At trial, Cohen testified that at a subsequent meeting with Bronston and Lindenbaum he told Bronston that the firm could not represent C & S because its interests were "inimical" to those of the investors in BusTop. The situation was described by Cohen:
"The investors were proposing to invest, over a period of time, $1,300,000 in BusTop and obviously were counting on BusTop obtaining a renewal of its franchise, and Convenience and Safety was going to be a competitor of BusTop for that franchise and, therefore, if we were successful on behalf of Convenience and Safety, we would have jeopardized the financial investment of the investors in BusTop."
Despite this clear response from Cohen rejecting his proposal that the firm accept the C & S representation, Bronston went back to Cohen on July 5, and proposed that he authorize the establishment of a client billing number for C & S "just in case at some time in the future something developed in which there was not a conflict." Cohen acceded to Bronston's request, but expressly instructed him that no work was to be performed on behalf of C & S without his prior approval. The memorandum written by Bronston to the firm's bookkeeper makes it clear that Bronston understood the very limited nature of Cohen's acquiescence:
"This new matter memorandum has been approved by Murray Cohen subject to the understanding that no further work will be performed on this matter without his explicit consent."
In August, 1977, representation of C & S's effort to acquire the New York City franchise was transferred to the law firm of Stein Rosen & Ohrenstein.*fn2
Thus, no later than June 9, 1977, the Rosenman Colin firm had made the decision to represent the BusTop investors rather than C & S in the competition for New York City's bus stop shelter franchise, and this decision had been authoritatively communicated to Jack Bronston. For the next two months Rosenman Colin attorneys labored on behalf of the minority investors in negotiating the exact terms of their participation in BusTop. The initial agreement memorializing this participation was signed in the Rosenman Colin offices on August 16, 1977. The agreement provided that the minority investors would make their investment in several stages. The first stage called for the investors to purchase $300,000 worth of secured BusTop notes, which would be converted into stock when and if certain conditions were met, the most important of which was BusTop's obtaining a renewal of the franchise. In later stages, additional investments totaling $1,050,055 would be made. At the time this initial agreement was signed, the parties expected that the Rosenman Colin firm would continue to represent the investors after the signing. Howard Schneider, the Rosenman Colin partner most deeply involved in the investors representation, described the arrangement at trial:
"the clear contemplation of the agreements and of the parties was that there would be a continuation of representation of the investors for the consummation of the transactions that were contemplated by the first financing agreement."
At no time relevant to the indictment in this case did the minority investors cancel the Rosenman Colin representation.
At the same time when these efforts were being made by Rosenman Colin lawyers on behalf of the BusTop investors, Bronston was secretly continuing his relationship with C & S. At the first meeting of C & S's board of directors, on June 17, 1977, Bronston was elected to a one-year term as the corporation's assistant secretary. On 15 separate occasions between August 25, 1977, and February 6, 1978, Bronston met with Steinberg and later filled out time tickets at his law firm indicating that the time spent was billable to C & S.*fn3 Bronston's time tickets reflected an additional half dozen meetings with other C & S officials during this same period, with the time recorded as billable to C & S.
Despite the fact that the legal representation of C & S's efforts to obtain the New York City franchise was formally transferred to Stein Rosen & Ohrenstein in August, 1977, Bronston continued thereafter to attend meetings at which C & S business in New York was discussed, and was kept informed about the progress of the C & S bid. Important internal documents dealing with the New York bid prepared by C & S or by lawyers for Stein Rosen were routinely sent to Bronston, occasionally by messenger. Finally, the billing records of David Simpson, the Stein Rosen partner principally responsible for the C & S account, indicated that on at least six occasions between December, 1977, and June, 1978, Bronston participated in conference calls or meetings which Simpson billed to C & S.
There was also evidence that, during the period when Bronston was secretly working in the interests of C & S against those of BusTop and his firm's clients, Lindenbaum was meeting with the clients (Venture Capital and Fifty-Third Street Ventures), was actively engaged in negotiating their agreement to invest in BusTop, was unaware of Bronston's activities on behalf of C & S, and was conferring with Bronston with respect to the clients' investment in BusTop. These conferences were billed by Lindenbaum to the clients. At the same time Bronston made out tickets to bill C & S for time spent in discussing with Steinberg Bronston's conversations with Lindenbaum. Billing records reveal that some of these Lindenbaum-Bronston meetings which were followed by Bronston-Steinberg conferences occurred at points of critical importance to the clients and to C & S in pursuing their competing and conflicting interests. For instance, on October 21, 1977, the day after the New York City Board of Estimate was to consider BusTop's application for the bus stop franchise, Lindenbaum and Bronston had a one-hour breakfast discussion which Lindenbaum billed to the BusTop investors as clients. Three hours later Bronston had a 21/2-hour meeting with Steinberg and others which he noted for billing to C & S. His firm's clients, the BusTop investors, were not informed of his activities on behalf of C & S in conflict with their interests.
The indictment against Bronston charged him with two counts of mail fraud, growing out of the sending of two letters allegedly intended to increase C & S's chances of wresting the New York bus stop shelter franchise from BusTop. The first count involved a letter sent by Stein Rosen on C & S's behalf to the members of the New York City Board of Estimate. The letter was prepared after Bronston had met with Steinberg and Samuel Stein of Stein Rosen on August 25, 1977. It was decided at that meeting that a letter should be sent to the Board publicly announcing C & S's interest in presenting to the City a plan for building and operating bus stop shelters, and introducing Stein Rosen as counsel for C & S. The letter was drafted by Stein Rosen lawyers, but before it was sent a copy of the draft was hand-delivered to Steinberg for review. Steinberg went over the letter with Bronston, and Bronston then telephoned Stein at Stein Rosen to let him know that he thought it was a good letter. Bronston then noted to bill C & S for five hours of services on August 25, specifically including his "review of letter with Saul Steinberg." He also noted an additional half hour spent on C & S business on August 26 for his telephone conference with "Sam Stein re letter." When the City subsequently responded to the August 26 letter, Bronston participated in a meeting with Steinberg and Stein to evaluate the response, and filled out a time ticket in the name of C & S for the time spent.
The second count grew out of a letter which Bronston himself drafted and sent on his official New York State Senate stationery to Richard Wells, Executive Assistant to New York City Comptroller Goldin, on October 28, 1977. In relevant part, the letter read as follows:
"I enclose some figures in connection with the existing franchise which I am sure you have, but which I would like to reiterate. Obviously, a renewal of the existing franchise would not appear to be in the public interest since it might be taken for a reward for non-performance."
The enclosure consisted of a one-page summary of the status of BusTop's performance under the interim franchise, emphasizing BusTop's failure to comply with the terms of the agreement. The final paragraph read as follows:
"Based upon the anticipated program of building approximately 4,000 shelters (including purchase from the City of the approximately 400 shelters built to date by BusTop Shelters, Inc.) and assuming payment to the City of between 14-16% of gross advertising revenues, the City would receive in excess of $2 million per annum at the conclusion of such construction program."
This letter was a retyped version of an October 27, 1977, memorandum from Henry Silverman, President of C & S, to Sidney Baron, C & S's public relations consultant, which had been changed in minor respects by Bronston to eliminate any reference to C & S, as the following pertinent portion of the C & S memorandum (with changed portions underlined) shows:
"Based upon our anticipated program of building approximately 4,000 shelters (including our purchase from the City of the approximately 400 shelters built to date by BusTop Shelters, Inc.) and assuming payment to the City of between 14-16% of gross advertising revenues, we believe that the City would receive from our operations in excess of $2 million per annum at the conclusion of our construction program."
The letter was typed on Bronston's official Senate stationery by his Rosenman Colin secretary and was mailed by her with the enclosure. Bronston then noted to ...