McHale v. United States

• Decision Date: 11 June 1968
• Docket Number: No. 20598-20600.,20598-20600.
• Parties: Joseph C. McHALE, Appellant, v. UNITED STATES of America, Appellee. Martin J. McHALE, Appellant, v. UNITED STATES of America, Appellee. Robert L. McHALE, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

130 US App. DC 163, 398 F.2d 757 (1968)

Joseph C. McHALE, Appellant, v. UNITED STATES of America, Appellee.

Martin J. McHALE, Appellant, v. UNITED STATES of America, Appellee.

Robert L. McHALE, Appellant, v. UNITED STATES of America, Appellee.

Nos. 20598-20600.

United States Court of Appeals District of Columbia Circuit.

Argued January 25, 1968.

Decided June 11, 1968.

Certiorari Denied December 9, 1968.

Mr. Carl L. Taylor, Washington, D. C. (appointed by this court), with whom Mr. Robert C. Maynard, Washington, D. C., was on the brief, for appellant in No. 20,598.

Mr. G. Nathan Calkins, Washington, D. C. (appointed by this court), for appellant in No. 20,599.

Mr. Francis C. Browne, Washington, D. C. (appointed by this court), for appellant in No. 20,600.

Mr. Lawrence P. Cohen, Atty. Department of Justice, of the bar of the Court of Appeals of New York, pro hac vice, by special leave of court, with whom Messrs. David G. Bress, U. S. Atty., and Frank Q. Nebeker, Asst. U. S. Atty., were on the brief, for appellee.

Before BAZELON, Chief Judge, and WRIGHT and TAMM, Circuit Judges.

Certiorari Denied December 9, 1968. See 89 S.Ct. 462.

BAZELON, Chief Judge:

Appellants, three brothers, were among several defendants tried jointly and convicted of mail fraud in connection with the operation of a debt consolidation business. The primary contentions of Robert and Joseph McHale are that the trial court should have granted their motions for severance. Joseph McHale also argues that the trial court improperly failed to instruct the jury on his theory of the case. Martin McHale, youngest of the brothers, contends that there was insufficient evidence to demonstrate his participation in the scheme and that the prosecution improperly relied on events subsequent to the last mailing named in the indictment.

I

The seven defendants in this case were all charged with participating in a scheme to defraud the customers of two debt consolidation companies. The Supreme Court has recognized that when several people are tried together there is a danger that adverse evidence against some of the defendants will improperly rub off on the co-defendants. In Blumenthal v. United States, 332 U.S. 539, 559-560, 68 S.Ct. 248, 257, 92 L.Ed. 154 (1947), the Court said "Perhaps even at best the safeguards provided by clear rulings on admissibility, limitations of the bearing of evidence as against particular individuals, and adequate instructions, are insufficient to ward off the danger entirely. It is therefore extremely important that those safeguards be made as impregnable as possible."

In United States v. Kelly, 349 F.2d 720 (1965), the Second Circuit held that in some cases an even stronger safeguard — severance — might be required. Kelly involved fraudulent stock transactions. The evidence against one of the defendants (Shuck) was far less extensive and far less incriminating than that against the other two. The court concluded that Shuck was inevitably prejudiced by the introduction of evidence against the co-defendants "which must have stamped them in the eyes of the jurors as unscrupulous swindlers of the first rank." 349 F.2d at 759.

To obtain severance under Kelly a defendant must at the very least prove that the evidence against his co-defendants is far more damaging than the evidence against him. It may well be that this is too rigid a requirement. It may well be that the dangers in these joint trials are so great that severance should be granted almost as a matter of course. But neither Kelly nor any other case goes that far. And careful consideration of the record convinces us that neither Robert nor Joseph McHale was entitled to severance under Kelly.

Joseph McHale contends also that the trial court improperly neglected to employ a safeguard recommended by the Supreme Court — adequate instructions. See Blumenthal, supra, 332 U.S. at 559, 68 S.Ct. 248. At trial Joseph submitted a written instruction stating at the outset that "Joseph McHale's defense is not that there was no scheme among any of the defendants. Rather, his defense is that the evidence shows he was not a party to any scheme, if there was one." The trial court gave no individual instruction for any defendant. Instead it advised the jury that: "The theory of the defense throughout is, first that there was no scheme to defraud; that if there was a scheme to defraud, the individual defendants had no knowledge of it and that each was acting in good faith in conducting his operations within the company." We cannot say that the difference between these two instructions is so great as to warrant reversal, particularly since appellant's instruction did not categorically accept the existence of a scheme, but hedged by using the phrase "if there was one."

II

Martin McHale, who was only 22 at the time of the last mailing named in the indictment, contends that there was insufficient evidence that he knowingly participated in a scheme to defraud. The record demonstrates that, while the evidence against Martin was hardly overwhelming,¹ it was sufficient to send the case to the jury.

Martin's second contention is that the Government improperly presented evidence concerning events which took place after the dates mentioned in the indictment. The Government responds that these "subsequent acts of fraud were manifestations of the same continuing scheme to defraud, and were illuminating on the prior intent. * * *" One difficulty with this view is that the subsequent events took place when Martin had assumed a managerial position.² Hence they are not necessarily relevant to show his intent or knowledge at an earlier stage when he held less responsible positions.

Secondly, even if the subsequent acts have some relevance the question remains whether they were presented in such detail that Martin was in fact being tried for crimes not named in the indictment. The record indicates that most of the evidence against Martin concerned events subsequent to the mailing of the last count letter. This is clearly reflected in the transcript version of the Government's summation to the jury. Over three of the five pages of the summation deal with subsequent events.

McCormick makes plain that in determining the admissibility of other crimes evidence the trial court must employ a "balancing" process. McCORMICK, EVIDENCE 332 (1964). Here the balance must take into account that the evidence of misconduct prior to the last count letter was not great, that the evidence of subsequent misconduct was not completely relevant, and that the volume of the latter evidence far exceeded that of the former. Under these circumstances, we believe it was reversible error for the court to permit such extensive testimony on events subsequent to the last count letter.

Nos. 20,598 and 20,600 are affirmed. No. 20,599 is reversed.

TAMM, Circuit Judge (dissenting):

I dissent from only that section of the majority opinion which reverses the conviction of Martin McHale, id est, case number 20,599 in this court. The reversal is predicated upon the conclusion that the Government improperly presented evidence concerning events which took place after the dates named in the six count indictment charging eight persons with use of the mails in a scheme to defraud. The indictment, returned on June 8, 1965, enumerated use of the mails in furtherance of the scheme to defraud on September 23, 1961 (count one), April 6, 1962 (count two), June 20, 1962 (count three), July 30, 1962 (count four), January 31, 1963 (count five), and February 4, 1963 (count six). Martin McHale was found guilty of the charges contained in counts three, four, five and six of the indictment.

Martin McHale entered the employment of the involved debt consolidating firms in November, 1961 and served in various positions until, as manager at the Baltimore office, his employment terminated in May, 1963. Very briefly summarized, the Government's evidence established that as branch manager of the Baltimore office Martin McHale continued the established policy of deducting, despite contrary representations to the customers, the entire "installation charge" from the first payments made by customers, and before any remittances were submitted to creditors (Tr. 303-04); he instructed the manager of the Wilmington office to follow the same practice. (Tr. 1115-18.) The evidence established Martin McHale's knowledge that creditors of customers were not being promptly paid, and that customer payments were frequently being used for purposes other than the decreasing of the bills owed their creditors by the paying customers; and that in April 1963 he wrote a letter to an inquiring customer, falsely representing that certain creditors, about whom the customer inquired, had been paid, when in fact the customer's "account card" disclosed that those creditors had not been paid. (Tr. 1642-45.) The record disclosed that Martin McHale failed to refund monies owing to customers upon the termination or cancellation of the customers' accounts (Tr. 1650-51, 1700, 1760-61), and that he on occasion transferred amounts owing to customers on a refundable basis to the "refund sheet" account which account was used to pay operating expenses of the company. (Tr. 305-13, 320-23, 338, 452, 1471-73, 1478-80.)

The evidence at trial convincingly established a scheme to defraud wherein the company, contrary to its representations, fraudulently converted to its own use funds belonging to depositors and misrepresented the method and time of deduction of its own charges, as well as the nature of the services it would, or did, perform for its fee. The use of the mails in furtherance of the scheme was clearly established by the evidence. Martin...