U.S. v. Guadagna
| Decision Date | 06 July 1999 |
| Docket Number | Docket Nos. 98-1106,98-1146 |
| Parties | (2nd Cir. 1999) UNITED STATES OF AMERICA, Appellant, v. ROCCO F. GUADAGNA; MARVIN BARBER; LAUREL BENBOW; BRIAN BERARDINI; RICHARD BOOTH; CHEO BURROUGHS; BERNADETT "RENEE" CRAWFORD; LARRY DAYER; ANTHONY "TONY" GARAM; ANTHONY LOUIS GUADAGNA; ANTHONY "TONY" HACKETT; JAMES "JAMIE" HAYNES; DONALD IVEY; ROGER LEEPER; CARL LOMANTO; MELVINA MARKAJANI; THEODORE POWELL; SAMUEL RINGWOOD; CHARLES ROBBINS, SR.; STEVEN SACCO,"also known as Steven Roberts"; KYLE SALONE; KEVIN SANDERS; FRANCIS MICHAEL "MIKE" SAWICKI; JOHN SUPPA; JUDE WATKINS; LESLIE WILLIAMS; and EDWARD ZACCARIA, Defendants, THOMAS MULLEN, Defendant-Appellee, and JOSEPH MELI, Defendant-Appellant. August Term 1998 |
| Court | U.S. Court of Appeals — Second Circuit |
Appeal from judgment of the United States District Court for the Western District of New York, Skretny, J., granting defendant Mullen's motion for judgment of acquittal notwithstanding the jury verdict of guilty on counts 6 and 25 of the indictment.
Reversed in part and affirmed in part.
[Copyrighted Material Omitted] KEVIN W. SPITLER, Kenmore, NY, for Defendant-Appellant Joseph Meli.
ANTHONY M. BRUCE, Buffalo, NY, Assistant United States Attorney for the Western District of New York (Denise E. O'Donnell, United States Attorney for the Western District of New York, of Counsel), for Appellant United States of America.
PATRICK J. BROWN, Buffalo, NY (LoTempio & Brown, P.C., of Counsel), for Defendant-Appellee Thomas Mullin.
Before: FEINBERG, PARKER and POOLER, Circuit Judges.
The United States appeals from a judgment of the United States District Court for the Western District of New York, William M. Skretny, J., granting defendant Thomas Mullen's motion for judgment of acquittal, pursuant to Fed.R.Crim.P. 29(c), on two counts charging wire fraud. The district court found that, even when viewed in the light most favorable to the government, there was an absence of proof as to Mullen's intent to defraud for the acts charged in those two counts. For the reasons set forth below, we reverse as to one count and affirm as to the other.1
We view the evidence in the light most favorable to the government and draw all reasonable inferences in its favor. United States v. Nersesian, 824 F.2d 1294, 1302 (2d Cir. 1987). In light of this standard, a rational juror could have found the following from the evidence presented at trial:
The criminal case against Mullen grew out of the investigation into the activities of Rocco F. Guadagna, one of Mullen's co-defendants.2 Guadagna owned five corporations,3 collectively called "RFG Group" by the government, all of which engaged in sweepstakes telemarketing. Between January 1991 and March 1992, Mullen worked for RFG Group in a variety of management and sales positions.
Through its various corporations, RFG Group marketed an assortment of products -- water and air filters, vitamins, fire retardant spray, cosmetics, cleaning supplies and promotional items, such as pens and key chains -- using one basic scheme: sales people cold-called potential purchasers and told them that they had been selected for a special promotion by the product's "sponsor." If the sales person reached someone who was willing to listen, the sales person would then begin the pitch. The potential customer was told that he or she had been chosen to participate in an expensive promotion that entitled the customer to a valuable prize, to be determined at random. Before any product was even mentioned, the sales person described the various prizes, which included some combination of a new car, a Hawaiian vacation, art, a big screen TV, a substantial cash award and jewelry. The salesperson then explained that because the promotion was so expensive, the sponsor asked that the customer listen to a sales pitch for the sponsor's product.
Although the sales person never explicitly said that a purchase had to be made for the customer to be entered in the contest, the sales pitch was intentionally worded to imply that such a connection existed. And since the real purpose of the calls was to sell RFG Group products, not to notify anyone of a special promotion by a non-existent "sponsor," most of the call focused on strongly urging the customer to make a purchase. The pitch book used by the sales people contained many pages of rebuttal script, used to overcome customer objections to purchasing any product to win a prize. Only one paragraph in the pitch script, which covers 32 pages in the joint appendix, acknowledged that there was no requirement that a person purchase anything to have access to the "valuable prizes," and this portion of the script was apparently not read to the customer except in response to a customer who "elected" not to purchase a product but wanted the bonus.
Such extensive effort might not normally be necessary to sell cosmetics or cleaning products, as these products are relatively inexpensive and successfully sold by many retailers and wholesalers without recourse to sweepstakes promotions. However, RFG Group was at a competitive disadvantage, as its products were sold at an enormous mark-up from their wholesale cost. For example, RFG sold a six-month supply of vitamins for between $259 and $399, even though the vitamins cost RFG less than $12; RFG sold the Pure-N-Simple Water Filter for between $499 and $799, although it cost them only $56; and RFG sold a one-year supply of Valentina skin products for between $599 and $899, after purchasing that quantity for $81. Because the products were so expensive, RFG Group sales people had to lead customers to believe that the prizes for which they were eligible were worth at least the cost of the products purchased.4 The sales people suggested that the prizes were so valuable that the products were actually a bargain.
In fact, although the prize list did contain prizes that were worth more than the prices charged for the products, the valuable prizes were never randomly awarded to customers. Although customers were often led to believe that they had already won the most valuable of the listed prizes, in fact the only prizes randomly awarded were those worth little more than the products. The vacation prize was actually a certificate for lodging at a motel in Hawaii, worth about $45; the jewelry was a diamond pendant worth about $90 or a diamond and sapphire tennis bracelet worth about $40-50; and the art was a $47 lithograph or a ceramic dolphin statue. Cars, cash and big screen televisions were never randomly awarded,5 despite sales pitch promises to the contrary.6 And at least some of the employees of RFG Group became aware of this fact during the course of their employment -- Mullen admitted to an FBI agent in April 1994 that he thought the customers only received the cheapest prizes.
RFG Group perpetrated its fraud through a sales force primarily composed of "front sales representatives" or "fronters." Fronters were the sales people who cold-called potential first-time buyers using leads purchased by RFG Group from other sources. Fronters made between 100 and 200 calls per day, with between 15 and 30 of the calls resulting in sales presentations. About one out of every 15 to 20 sales presentations ended with a successful sale. Fronters usually sold between $499 and $799 of products per successful call.
After a customer agreed to a purchase, the fronter would complete a sales invoice and send it to the verification department. A "verifier" would then contact the customer, and in a taped conversation review the order and confirm that the customer had in fact agreed to the purchase. The purchase was then shipped with a "letter of guarantee" listing the bonus prizes that the sales person had described during the sales call. The prize for that customer was concealed by a foil seal. However, there was nothing random about the prize behind the foil. All first time purchasers received the same letter of guarantee and the same bonus prize.7 The real purpose of the letters of guarantee was to keep track of which company name had been used on a sale and how many times a customer had purchased.8 This information was valuable to RFG Group sales people in determining how much to try to sell to the customer the next time they called that person to "reload" them.
"Reload" or repeat sales constituted the real profit center for RFG Group. These sales were generated by a select group of elite sales people called "reloaders." The reloaders contacted past customers and attempted to sell them additional RFG Group products. A more specialized reload sales force, called "90-day salers," contacted reload customers 90 days after the last unsuccessful attempt to make a reload sale to them. All this effort went into reload sales because repeat sales were typically for far greater amounts than fronter initiated sales. Therefore, only the best salespeople were promoted to reload sales positions.9
As already indicated, Thomas Mullen worked for RFG Group for about 14 months -- from mid-January 1991 through mid-March 1992. At this time Mullen was in his mid-to-late 20s. However, he was not new to the industry and, by industry standards, he was not young. Prior to working at RFG Group, Mullen had worked for Vita Systems, another telemarketing company in Buffalo. Apparently, he was good at his job, because at some point in late 1990 he was recruited by RFG Group to work as a shift manager. Mullen's own brief to this court described his initial job at RFG as an entry level management position. And given the age of the people around him -- most employees were in their early 20s, with some as young as 16 or 17 and still enrolled in high school -- it is not surprising that someone relatively young would be found in a management position.
As a manager, Mullen had a variety of responsibilities. In addition to supervising 20-25...
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