New England Enterprises, Inc. v. United States, 7079-7082.

• Decision Date: 13 January 1969
• Docket Number: No. 7079-7082.,7079-7082.
• Citation: 400 F.2d 58
• Parties: NEW ENGLAND ENTERPRISES, INC., et al., Defendants, Appellants, v. UNITED STATES of America, Appellee. Kenneth R. BAUER, Defendant, Appellant, v. UNITED STATES of America, Appellee. Robert L. MARQUIS, Defendant, Appellant, v. UNITED STATES of America, Appellee. Eugene L. MICHAUD, Defendant, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — First Circuit

400 F.2d 58 (1968)

NEW ENGLAND ENTERPRISES, INC., et al., Defendants, Appellants, v. UNITED STATES of America, Appellee.

Kenneth R. BAUER, Defendant, Appellant, v. UNITED STATES of America, Appellee.

Robert L. MARQUIS, Defendant, Appellant, v. UNITED STATES of America, Appellee.

Eugene L. MICHAUD, Defendant, Appellant, v. UNITED STATES of America, Appellee.

Nos. 7079-7082.

United States Court of Appeals First Circuit.

August 20, 1968.

Certiorari Denied January 13, 1969.

COPYRIGHT MATERIAL OMITTED

Stanley M. Brown, Manchester, N. H., with whom Charles A. DeGrandpre and McLane, Carleton Graf, Greene & Brown, Manchester, N. H., were on brief, for appellants.

John Wall, Special Asst. U. S. Atty., with whom Louis M. Janelle, U. S. Atty., and William H. Barry, Jr., Asst. U. S. Atty., were on brief, for appellee.

Before ALDRICH, Chief Judge, McENTEE and COFFIN, Circuit Judges.

Certiorari Denied January 13, 1969. See 89 S.Ct. 654.

COFFIN, Circuit Judge.

Appellants are a New Hampshire corporation, New England Enterprises, Inc. (New England), two of its officers and three of its sales managers. Together with defendant Interstate Engineering Corporation (Interstate), not a party to this appeal, they were convicted under the federal Mail Fraud Act, 18 U.S.C. § 1341. They claim error in the trial below in the following respects: that the district court failed to apprise the defendants of the nature of the case against them; that the jury impaneling practice followed by the court was contrary to Fed.R.Crim.P. 24(b); and that various errors were committed by the court in the conduct of this seventeen day trial.

The indictment charged defendants, among other things, with devising and intending to devise a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations, and promises from some seventy-seven married couples and three individuals. The nature of the scheme was stated to be defendants' inducement, through misrepresentations and omissions to state material facts, of the signing of installment sales contracts for the purchase of Compact vacuum cleaners, manufactured by Interstate and sold through New England, a local distributor, and its various salesmen. In particular, appellants were charged with carrying out a promotional scheme in which prospective buyers were told that they could acquire a vacuum cleaner, listed at and said to be worth $269, for only $19.90 plus the submission of names of other prospective buyers to advance New England's advertising campaign which would assuredly yield enough bonuses to cover or exceed the list price of the cleaner. Other allegations of deception, including failure to state the effect of the endless chain aspect of appellants' referral program,¹ a charged misrepresentation as to the manufacture of the machine's motor, the suggested illegality of certain Cadillac, television and green stamp contests, and the establishment of an inflated sales price were stricken from the indictment and withdrawn from the jury's consideration.

The working of the scheme was illustrated by the following evidence elicited from a series of government witnesses who had been appellants' customers. Prospective customers would receive through the mail a card signed by a friend or relative who was already a Compact purchaser. The card, while not identifying New England by name or in any other way, invited the recipients to win a Cadillac or color television set and informed them they would be called by telephone for an appointment. In the subsequent telephone call a New England operator or salesman would provide no more detailed information, except to say that the product he or she had was new and revolutionary and that it could only be promoted through personal home visits. Appointments were arranged for a time when both husband and wife were expected to be in. The salesman would enter empty-handed and begin his "Front Talk" as prepared by New England. His purpose at this stage was to arouse the interest and curiosity of his hosts by explaining that he was working to establish a brand name for a new product yet to be shown in the area; that the product was manufactured by Interstate, a California corporation which at one time manufactured airplanes and parts but, because of the war's end and the loss of government contracts, decided to enter a new field; that Interstate, after study and analysis, developed a unique product in an area shared by 119 other companies but which had nevertheless caused housewives much dissatisfaction; that Interstate, in order to establish a brand name, needed to advertise; that conventional media advertising resulted in a money drain without appreciable market gain; that Interstate now found that the most effective way to advertise was by "word of mouth"; and that if the salesman's listeners would agree to tell others of this product he would show them how to make some of the advertising money Interstate had previously wasted.

The salesman would then go to his car and return with a Compact cleaner which he would demonstrate. Either during or after the demonstration he would ask his prospects how they would like to own the cleaner for $19.90 — always asserting, however, that it was not for sale. In time he would offer it for $19.90, which offer, he said, was good only that evening. If his hosts expressed an interest he would tell them about the bonus program for referrals — $25. for each referral sale made — and would illustrate with the following example from the "Closing" of New England's sales manual:

"Now let\'s say you send us to see 50 people * * * at least 50% will Qualify/that\'s 25 times $25 is $625 * * * could you use that kind of money * * *"

The customers would be required to sign a conditional sales contract, represented as a "bond of friendship" and said to be necessary to motivate them to send out referral cards since "people are basically lazy". Some purchasers testified that they never understood they were signing a contract and explained that, even if they tried to read it before signing, the salesman engaged them in conversation making concentration difficult or impossible. Others testified that, though they realized they were signing a sales contract and even questioned the salesman about the possibility that he might not sell to enough referrals to cover the cost of their Compact through bonus repayments, the salesman answered that their only concern was to produce names and addresses and to "leave the rest to me".

In essence it was this program, explained with some slight variation by the different government witnesses, which the government was ultimately permitted to argue to the jury as the scheme to defraud. As the government's evidence further disclosed, New England's experience was that twelve per cent of the referrals, not fifty per cent, resulted in sales. Hence, purchasers generally received few, if any, bonus repayments. In fact, in order to receive ten such repayments, the number necessary to reduce the cost of the Compact to $19.90, each purchaser would have had to submit between 80 and 85 cards.

I. NOTICE OF PROSECUTION'S THEORY

We turn first to a consideration of appellants' claim that prior to the instruction of the jury they were never made aware of the charge and nature of the evidence against them and hence were deprived of an opportunity to prepare an adequate defense. It is important in connection with this argument that we make perfectly clear what is at issue and what is not. We are concerned only with the sufficiency of disclosure of the theory of the case upon which appellants were ultimately convicted. Accordingly, we ask: can it be determined from the pleadings, statements and orders of the court, and the nature of the appellants' defense, whether appellants were in fact so plainly uninformed? It is wholly irrelevant whether or not appellants were adequately apprised of the government's alternative theories, all of which were ultimately withdrawn from the jury's consideration. There is no prejudice in a court's trimming an indictment charging several acts of fraud where the court during the course of the trial determines that certain allegations will not lie as a matter of law and either announces its decision to counsel prior to the introduction of evidence bearing on them or, to the extent such evidence is placed before the jury, effectively strikes it by appropriate instruction.

The indictment was returned on April 4, 1966. A Bill of Particulars, requested by Interstate, was filed by the government the following November 14, and a further Bill, requested by all defendants, was denied on March 15, 1967. The judge who presided at the trial of this case was so assigned on April 25, 1967 and on May 19 and May 22 issued pre-trial memoranda explaining his view of what the government alleged to be defendants' scheme to defraud. Both memoranda were withdrawn by letter of June 13, 1967. Two days later appellants moved for a second Bill of Particulars, which Bill was submitted June 19 and filed June 20, 1967. Trial began on June 19 and ended July 21.

Appellants first contend that they were unable to glean from the indictment itself or the government's first Bill of Particulars the nature of the scheme to defraud charged against them. We find those two documents more instructive than appellants are willing to concede. First, two paragraphs of the indictment directly charge misrepresentation of ultimate cost. Paragraph 14 states that it was a part of the fraudulent scheme to "mislead * * * prospective purchasers into believing that, because of the operation of the referral plan, they would obtain the Compact vacuum cleaner for only $19.90, and that any other costs would be recouped through bonus-commission payments of $25.00 each by merely sending * * * letters to their best friends, and further, that the purchasers would likely receive additional income."...