Argued April 17, 2013
Appeals from the United States District Court for the Eastern District of Wisconsin. No. 11-cr-301—Rudolph T. Randa, Judge.
Before Easterbrook, Chief Judge, and Wood and Sykes, Circuit Judges.
Wood, Circuit Judge.
Norma Leonard-Allen and Walter Stern became entangled in the financial arrangements that underlie this case during the aftermath of a lawsuit in which Stern served as Leonard-Allen's attorney. The government charged that Stern hid some of Leonard-Allen's assets so that she would not have to declare them in her bankruptcy proceeding. It maintained that Stern knew of Leonard-Allen's bankruptcy when he opened certificates of deposit (CDs) with Leonard-Allen's money, and thus that his action amounted to money laundering in violation of 18 U.S.C. § 1956(h). Leonard-Allen, it said, committed perjury in violation of 18 U.S.C. § 1623 when she testified that Stern had not referred her to her bankruptcy lawyer, contrary to her representation on a client-intake form on which she had listed "Walter Stern" as the person who referred her to the bankruptcy lawyer. Both were convicted after a jury trial.
On appeal, Leonard-Allen argues that the client-intake form was subject to attorney-client privilege and should not have been admitted against either defendant. Stern argues that even if the form were not subject to attorney-client privilege, the statement in the form is inadmissible hearsay. He also argues that the court erred when it excluded as hearsay his testimony about why he purchased the CDs and when it excluded as irrelevant testimony from Leonard-Allen's daughters. We affirm Leonard-Allen's conviction because the client-intake form was not a communication made in furtherance of the legal representation and therefore was not subject to the attorney-client privilege. Because the trial court wrongly prevented Stern from testifying about his own conduct—testimony central to Stern's defense that he did not intend to conceal assets—we reverse Stern's conviction.
Stern met Leonard-Allen when he represented her in an employment discrimination suit. After the case settled, Stern and Leonard-Allen became romantically involved. They began living together in September 2006, months after Stern opened the first of two CD accounts underlying these charges. Leonard-Allen and her ex-husband had separated in June 2005 and had executed a Marital Settlement Agreement awarding Leonard-Allen $95, 000, to be paid in four installments. In July 2005, Leonard-Allen visited a bankruptcy attorney, Mary Losey. In response to a question on Losey's client-intake form asking "How did you select this office?, " she checked the box "Friend/Referral" and wrote in Walter Stern's name.
In September 2005, Leonard-Allen filed for bankruptcy, reporting $80, 000 in liabilities and only $30, 000 in assets. She did not disclose the $95, 000 marital settlement. Between June 2005 and January 2006, while her bankruptcy was pending, Leonard-Allen received four personal checks, issued from the divorce attorney's trust account, for a total of $95, 000. In January 2006, the bankruptcy court determined that Leonard-Allen had insufficient assets to pay her creditors and discharged her debt. A month later, Leonard-Allen used the proceeds of the first three divorce settlement checks to purchase a teller check; she promptly endorsed that check to Stern. In March 2006, Stern opened a CD account in his name with the proceeds of the check. In August 2006, Leonard-Allen used the proceeds of the fourth divorce settlement check to purchase another teller check, which she also endorsed to Stern. In January 2007, Stern used the proceeds of the second teller check and the first CD to open another CD account in his name. In January 2007, Leonard-Allen's ex-husband's attorney informed the bankruptcy trustee that Leonard-Allen failed to disclose the $95, 000 divorce settlement in the bankruptcy proceedings, and in October 2007, the bankruptcy judge revoked the discharge of Leonard-Allen's bankruptcy.
Criminal charges followed, and Leonard-Allen pleaded guilty to two counts of making a false declaration in a bankruptcy proceeding in violation of 18 U.S.C. § 152(3). After doing so, Leonard-Allen was subpoenaed to testify before a grand jury in the case against Stern. She told the grand jury that Stern had not referred her to Losey. The government subpoenaed records from Losey, including the client-intake form where Leonard-Allen had listed "Walter Stern" in the "Friend/Referral" box. Based on that evidence, the government charged Leonard-Allen with making a material false statement in a grand jury proceeding in violation of 18 U.S.C. § 1623. The court admitted the client-intake form as evidence of Leonard-Allen's perjury over Leonard-Allen's objection that it was subject to attorney-client privilege. She was convicted of the offense and sentenced to imprisonment for one year and a day.
Stern was charged with conspiring to commit money laundering in violation of 18 U.S.C. § 1956(h). His defense at trial was that he was unaware of Leonard-Allen's bankruptcy proceeding and therefore did not realize that he was hiding assets when he opened the CDs with Leonard-Allen's money. The court admitted the client-intake form as evidence that Stern likely knew of Leonard-Allen's bankruptcy; it overruled Stern's objection that Leonard-Allen's out-of-court statement on the client-intake form was inadmissible hearsay. See Fed.R.Evid. 801 & 802. It reasoned that the form was a business record, admissible under the business-records exception to the hearsay rule, see Fed.R.Evid. 803(6)(b). It also held that Leonard-Allen's statement was made in furtherance of a conspiracy between Stern and Leonard-Allen and was thus admissible under the co-conspirator exclusion found in Fed.R.Evid. 801(d)(2)(E).
During Stern's testimony, the court prohibited him from answering the following series of questions on the subject of his reason for purchasing the CDs for Leonard-Allen:
Q [Stern's lawyer]. Do you recall going to the bank on ...