## Facts

- William Aramony served as chief executive officer of United Way of America (UWA); Thomas J. Merlo was UWA’s chief financial officer; Stephen J. Paulachak was associated with UWA-related entities.
- The defendants used their positions in a scheme that diverted UWA and related-entity funds for personal benefit, including personal travel, personal services, and personal purchases charged to UWA.
- Merlo also personally obtained proceeds from an annuity belonging to UWA and assisted in aspects of Aramony’s misuse of funds.
- During investigations triggered by media inquiry and internal review, Aramony communicated with UWA’s general counsel and outside counsel; he later claimed those communications were protected by attorney–client and common-interest privilege.
- After a jury trial in the Eastern District of Virginia, the defendants were convicted on multiple counts, including conspiracy to impede IRS functions, fraud offenses, transportation of fraudulently obtained property, monetary transactions in criminally derived property (18 U.S.C. § 1957), and tax offenses.
- The district court imposed prison terms and entered forfeiture and related sentencing orders tied in part to the § 1957 convictions.

## Issues

1. Whether communications involving UWA’s counsel were protected by Aramony’s individual attorney–client privilege or a common-interest privilege.
2. Whether evidence concerning Aramony’s personal lifestyle, expenditures, and relationships was inadmissible character evidence or unfairly prejudicial under Rules 404(b) and 403.
3. Whether the jury instructions on 18 U.S.C. § 1957 were erroneous for failing to require a finding that the monetary transaction was “in or affecting” interstate commerce.
4. Whether any instructional error on materiality for false-return offenses under I.R.C. § 7206 required reversal.
5. Whether sentences and forfeiture orders required reconsideration in light of any vacated convictions.

## Decision

- The court affirmed most convictions and evidentiary rulings.
- The court rejected Aramony’s attorney–client and common-interest privilege arguments and upheld admission of the challenged communications.
- The court upheld admission of lifestyle/relationship evidence as probative of motive, intent, and context, and not unfairly prejudicial.
- The court vacated certain § 1957 convictions for Aramony and Merlo because the jury instructions omitted the interstate-commerce element, and the error was not harmless.
- The court affirmed Paulachak’s convictions and sentence.
- The court vacated Aramony’s and Merlo’s sentences (and related forfeiture orders dependent on the § 1957 counts) and remanded for resentencing consistent with the surviving convictions.

## Legal Principles

- In the corporate setting, attorney–client privilege ordinarily belongs to the entity; an officer claiming an individual privilege must show an actual attorney–client relationship with counsel acting for the officer personally.
- Common-interest protection requires a shared legal interest tied to actual or potential litigation and a coordinated legal strategy; it does not arise from parallel interests alone.
- Evidence of personal conduct may be admitted to prove motive, intent, or the mechanics and context of a fraud scheme, subject to Rule 403 balancing.
- The “in or affecting interstate or foreign commerce” requirement in 18 U.S.C. § 1957 is an element that must be submitted to the jury; omission from instructions can require vacatur when not harmless.
- Instructional error on an element may be harmless where the jury’s necessary findings on other submitted elements effectively resolve the omitted point beyond a reasonable doubt.

## Conclusion

The Fourth Circuit largely sustained wide-ranging fraud and tax convictions arising from misuse of nonprofit funds, upheld admission of motive-and-context evidence and rejected claimed privileges over corporate-counsel communications, but vacated certain § 1957 convictions for failure to instruct on the interstate-commerce element and remanded for resentencing and related forfeiture reconsideration for Aramony and Merlo.


United States v. Aramony, 88 F.3d 1369 (4th Cir. 1996)