United States v. Marchisio

• Decision Date: 09 April 1965
• Docket Number: Docket 28987.,No. 170,170
• Citation: 344 F.2d 653
• Parties: UNITED STATES of America, Appellee, v. Louis A. MARCHISIO, John H. Seiter and W. Ward Whipple, Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

344 F.2d 653 (1965)

UNITED STATES of America, Appellee, v. Louis A. MARCHISIO, John H. Seiter and W. Ward Whipple, Defendants-Appellants.

No. 170, Docket 28987.

United States Court of Appeals Second Circuit.

Argued December 3, 1964.

Decided April 9, 1965.

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Bernard W. Nussbaum, Asst. U. S. Atty., So. District of New York (Robert M. Morgenthau, U. S. Atty. for So. District of New York, Vincent L. Broderick and John S. Martin, Jr., Asst. U. S. Attys., on the brief), for appellees.

Joseph W. Burns, New York City (John P. Cuddahy and Austin, Burns, Appell & Smith, New York City, on the brief), for defendants-appellants.

Before FRIENDLY and SMITH, Circuit Judges, and BLUMENFELD, District Judge.^*

J. JOSEPH SMITH, Circuit Judge:

Louis A. Marchisio was convicted on trial before a jury in the United States District Court for the Southern District of New York, William B. Herlands, District Judge, of perjury and false statements in violation of 18 U.S.C. § 1621 and 18 U.S.C. § 1001 respectively and of conspiring to commit these acts in violation of 18 U.S.C. § 371. The appellants John H. Seiter and W. Ward Whipple were found guilty by the same jury of perjury and false statements and of conspiracy to commit perjury, all in violation of the above statutes. Marchisio received a sentence of one year and one day on each count with the sentences to run concurrently; imposition of sentence was suspended as to Seiter and Whipple, and they were placed on probation for two years concurrently on all counts. All three appeal. We find that the convictions for perjury, false statements and conspiracy were proper and that the trial court committed no error in the admission or exclusion of evidence, and we affirm the judgments.

The thirty-two count indictment filed by the Grand Jury on January 31, 1963 originally named six officers or employees of Washington Heights Federal Savings and Loan Association — Floyd Cramer, Frank Marsden, George O'Neill, Marchisio, Seiter and Whipple¹ — and George Martocci, a partner in the Colonial Mortgage Company, a mortgage brokerage firm that did a considerable amount of business with Washington Heights during the period in question. Cramer, the architect of the conspiracies and the one whose far-reaching ambitions caused the downfall of the others, died before trial. The indictment was severed as to Martocci, who served as the principal Government witness at the trial, and the remaining five were convicted. The appeals of Marsden and O'Neill have been dismissed on their own motions.

I. OUTLINE OF THE EVIDENCE

This case occupied some four months of trial time, involving eight thousand pages of testimony and hundreds of exhibits. The Government drew an elaborate picture detailing a multitude of unethical, if not illegal, transactions and dealings in the course of Washington Heights' business, culminating in the perjurious and false statements. We summarize the factual background.

Washington Heights, a financial institution engaged in the business of investing its depositors' savings principally in loans secured by mortgages on real estate, was founded by Cramer in 1941. It experienced immediate growth and came to be a leading institution in the greater New York City mortgage industry. In 1951, the two partners in Colonial, Martocci and James Houlihan, since deceased, discovered that one Fred Rellstab had an arrangement with Washington Heights whereby Rellstab acted as the exclusive mortgage broker for the bank in Westchester County. Recognizing the potential of an agency of that sort, Martocci and Houlihan approached Cramer and Whipple, president and vice-president and mortgage officer of Washington Heights respectively, in the hope of obtaining a similar exclusive agency for Colonial in the Bronx. Whipple informed them that Rellstab's good fortune was largely in consideration for Rellstab's agreeing to pay the salary of a public relations expert hired to publicize Cramer (who already had manifested ambitions of one day becoming President of the United States) and suggested that the brokerage arrangement requested by Colonial might be possible if Martocci and Houlihan were willing to do the same. The two agreed to Whipple's proposition, and beginning in August 1951, Colonial paid the public relations man $750 per month, receiving in return a three year exclusive agency with Washington Heights entitling Colonial to a 1% commission for all mortgage loans extended by the bank in the Bronx. The payments by Colonial continued for an eighteen month period and totaled about $12,000.

As a result of its favored status, Colonial's income and profits multiplied, but Washington Heights', or rather Cramer's, continued beneficence naturally carried its price — Martocci and Houlihan were at Cramer and company's beck and call. From 1952 to 1954 Colonial was requested a number of times to perform various collection services for the bank and Cramer by accepting payment of monies actually owing to Washington Heights and by holding these sums in Colonial's name for Cramer's future use. For example, in September of 1952 Washington Heights purchased five mortgage loans from a broker named Saul Gaynes at prices which gave the bank discounts aggregating $27,628.79, but the bank never received the benefits of the discounts. Instead, Washington Heights made it appear that Gaynes received par value and instructed Gaynes to pay the entire discount sum to Houlihan of Colonial. Houlihan, asked personally by Cramer to act as conduit for this money, accepted payment from an intermediary source and pursuant to Cramer's instructions, a few weeks later, made some initial disbursements from this fund ($500 to a political campaign and $500 to the Student Volunteer Movement, a charity actively promoted by Cramer). Other collections made by Colonial were received in the form of 1% fees on mortgage loans granted by the bank to service veterans; for the 1% charge Colonial representatives attended closings at which mortgage loans to builders were being changed, or "recast," to mortgage loans to veterans who had purchased homes from the builders.² During this two year period, Martocci maintained a yellow tally sheet of the funds thus retained and of disbursements made at the direction of Cramer, Seiter, Marsden and O'Neill.

This arrangement provided the basis for the very large transactions of 1954 and 1955. In March and April 1954, Marchisio requested Martocci to purchase two delinquent mortgage loans from Washington Heights on the understanding that Colonial would be reimbursed for any loss suffered, and in July a similar request was made with respect to a construction loan on a project that was about to be foreclosed (the "Saxon Heights" project).³ Cramer was apparently concerned, in this case, with avoiding showing a loss on loans which might indicate to the supervisory personnel of the Federal Home Loan Bank Board that the bank had exercised poor judgment in extending the particular loans.

Colonial, instead of Washington Heights, sustained losses on these mortgages of approximately $113,000. As a means of repayment, Cramer and Marsden originated a scheme whereby Washington Heights would actually receive as an origination fee with respect to certain mortgage loans an amount which was less than that which Colonial offered to the bank and which Colonial and the Washington Heights' mortgage officer decided was due the bank. For example, if a loan was offered at a bonus of 6%, Washington Heights would accept it at a 4% bonus and allow Colonial to retain the other 2% (2 "points"). Over the two year period during which this arrangement functioned, Colonial collected in excess of $230,000, far more than was necessary to reimburse it for its losses; the remaining balance was used, at Washington Heights' direction, to help finance Cramer's unsuccessful congressional campaign (almost $80,000) and to purchase additional delinquent mortgages from Washington Heights. In late 1955, the running account, recorded regularly on yellow sheets by both O'Neill and Martocci, was about in balance, and in this posture Marsden terminated the point retention agreement.

Colonial's designation as nominal holder of funds belonging to Washington Heights posed several accounting problems, especially that of showing on its books that this money was merely being retained. From 1952 to 1954, the various sums received were recorded as credits in an account labeled as the "Recast Loan Account," and all disbursements on behalf of and at the direction of Washington Heights were recorded therein. In late 1954, a new account entitled "Accommodation Account" appeared for the first time; all amounts received thereafter were either relegated to this new account or to the "Recast Loan Account," and, when in 1955 the repayment arrangement was discontinued, both of these accounts ceased to be active.

In 1956, an Internal Revenue Agent was assigned to examine Colonial's books and records, and the presence of the two accounts, neither of which was reported as income, understandably aroused his curiosity. An internal revenue investigation was commenced immediately to determine the source and use of these funds — thus began the series of investigations, inquiries and eventually the Grand Jury hearings which culminated in the prosecution of the defendants for perjury, false statements and conspiracy.

Shortly after the internal revenue investigation started, Martocci reminded Marsden that Washington Heights had in its files letters from Colonial which showed the origination fees which Colonial offered Washington Heights when it applied for mortgage loans. In the subsequent months, several discussions concerning these letters transpired between Marchisio, O'Neill, Marsden, Seiter and John Hannigan, the bank's closing attorney and Marchisio's subordinate, and it was decided that the letters would be removed.

Prior to the...