United States v. Levinson

• Decision Date: 30 December 1968
• Docket Number: No. 18204-18207.,18204-18207.
• Citation: 405 F.2d 971
• Parties: The UNITED STATES of America, Plaintiff-Appellee, v. Benjamin LEVINSON, Franklin Mortgage Corporation, Edward P. Strang, Jr., Ross Howard, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

405 F.2d 971 (1968)

The UNITED STATES of America, Plaintiff-Appellee, v. Benjamin LEVINSON, Franklin Mortgage Corporation, Edward P. Strang, Jr., Ross Howard, Defendants-Appellants.

Nos. 18204-18207.

United States Court of Appeals Sixth Circuit.

December 30, 1968.

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Edward Bennett Williams, Washington, D. C., Patrick M. Wall, Washington, D. C., Donald E. Shely, Donald S. Young, Dykema, Wheat, Spencer, Goodnow & Trigg, Detroit, Mich., on brief, for appellant Strang.

William I. Liberson, Detroit, Mich., Cyril Abramson, Detroit, Mich., of counsel, for Ross Howard.

Joseph W. Louisell, Detroit, Mich., Ivan E. Barris, Detroit, Mich., on brief, Lawrence I. Levi, Orville J. Thill, Frank M. Wiseman, Detroit, Mich., Neil Howard Fink, Louisell & Barris, Detroit, Mich., of counsel, for Benjamin Levinson and Franklin Mortgage Corp.

Marvin R. Loewy, Sp. Atty., Department of Justice, Washington, D. C., Lawrence E. Gubow, U. S. Atty., Robert J. Grace, Asst. U. S. Atty., Detroit, Mich., on brief; Lafayette E. Broome, Mark M. Richard, Attys., Department of Justice, Washington, D. C., Russell M. Paquette, Chief Atty., Veterans Administration, Detroit, Mich., of counsel, for appellee.

Before PHILLIPS and PECK, Circuit Judges, and CECIL, Senior Circuit Judge.

CECIL, Senior Circuit Judge.

Edward P. Strang, Jr., Ross Howard, Franklin Mortgage Corporation and Benjamin Levinson, defendants-appellants herein, appeal from judgment of conviction in the United States District Court for the Eastern District of Michigan. The essence of the offense of which the appellants were convicted, as charged in the first count of the indictment, was a conspiracy to defraud the United States through the Veterans Administration, an agency of the United States, by preventing the Veterans Administration from having its loan guaranty program administered in accordance with the provisions of Section 1801 et seq., Title 38, U.S.C. and the rules and regulations promulgated thereunder. Although the indictment contained 33 counts, the trial judge severed counts 26 through 33 from the instant trial. The substantive offenses charged in counts 2 through 25 of the indictment stem from the alleged conspiracy in the first count.

In addition to the appellants herein, Richard David Mitchell, Richard E. Medinis, Thomas Whitford and Rem Realty Company, a Michigan corporation, were also indicted in the first count of the indictment. Robert Cerwin, an employee of Franklin Mortgage Corporation, was named as a co-conspirator but was not indicted. Rem Realty Company became defunct as a corporation and was dismissed before trial. Richard E. Medinis pleaded guilty and Thomas Whitford was dismissed at the close of the government's case. Richard David Mitchell was convicted but is now deceased.

Counts 2 to 5, 8 to 10 and 12 to 15 charged Levinson, Franklin, Strang, Mitchell, Medinis, Rem Realty and Howard with specific violations of Section 1001,¹ Title 18, U.S.C. Counts 6, 7, 16 and 17 charged Levinson, Franklin and Howard with specific violations of Section 1001. Count 11 charged Levinson, Franklin and Strang with a violation of Section 1001. Counts 18 and 19 charged Medinis, Mitchell, Rem Realty and Whitford with specific violations of Section 1001. Counts 20 to 25 charged Mitchell, Medinis and Rem Realty with violations of Section 1001. The severed counts of the indictment, Nos. 26 through 33, involve similar conspiracy and substantive offenses relative to the loan program of the Federal Housing Administration (FHA).

The case was tried before a jury and all of the defendants, except Whitford, Rem Realty and Medinis, were convicted on all of the counts of the indictment. The trial judge sentenced Franklin to pay a $10,000 fine, and sentenced Levinson, Strang and Howard each to pay a $10,000 fine and to 18 months' imprisonment upon their pleas "of not guilty and verdict(s) of guilty of the offense of conspiracy; false statements to obtain VA loans; aiding and abetting; in violation of Sections 371, 1001 and 2, Title 18, U.S.C., as charged in the indictment; * * *."

The Veterans Administration's home loan program is based upon Section 1801 et seq., Title 38, U.S.C., and the regulations promulgated thereunder. The statutory plans provide for the issuance by the VA of guaranties on mortgage loans made to veterans. To participate in this program a veteran must have been discharged under other than dishonorable conditions and have served a minimum of ninety days' service. Section 1810(b) states that no loan may be guaranteed unless

"(1) the proceeds of such loan will be used to pay for the property purchased, constructed, or improved;

"(2) the contemplated terms of payment required in any mortgage to be given in part payment of the purchase price or the construction cost bear a proper relation to the veteran\'s present and anticipated income and expenses;

"(3) the veteran is a satisfactory credit risk;

"(4) the nature and condition of the property is such as to be suitable for dwelling purposes;

"(5) the price paid or to be paid by the veteran for such property, or for the cost of construction, repairs, or alterations, does not exceed the reasonable value thereof as determined by the Administrator; and

"(6) if the loan is for repair, alteration or improvement of property, such repair, alteration, or improvement substantially protects or improves the basic livability or utility of such property."

Loans may be guaranteed on either the "automatic basis" or the "prior approval basis." Section 1802(d) provides for the issuance of automatic guaranties on loans made by "supervised lenders." A "supervised lender" is generally any financial institution, insurance or mortgage and loan company that is subject to "examination and supervision" of an agency of the federal or a state government. Wayne National Life Insurance Company qualified as a "supervised lender" because it was an insurance company subject to the supervision of the Michigan Insurance Commissioner. It is the responsibility of the supervised lender to determine whether the loan meets the requirements of the statute and regulations. Section 1032, Veterans Administration Regulations.

Unlike supervised lenders, whose loans are automatically guaranteed by the VA, "non-supervised lenders" must seek guaranties on the "prior approval basis." A "non-supervised lender" is one that is not subject to the supervision of a federal or state agency. Franklin Mortgage Corporation was a non-supervised lender. Under the "prior approval basis" of obtaining guaranties, the VA, not the lender, makes the final determination as to whether or not the loan comports with all statutory and regulatory requirements. The VA would make this determination on the basis of the pertinent information required to be submitted to it by the lender. If the loan is held to qualify, the VA so notifies the lender who then closes the loan and submits the loan to the VA who issues its guaranty.

The benefits of obtaining guaranties on the automatic basis are twofold. It relieves the VA of the necessity of making a detailed and lengthy study of the loan application to see if it qualifies for a guaranty. This responsibility is assumed by the supervised lender who certifies that "the loan conforms otherwise with the applicable provisions of 38 U.S.C., Chapter 37, and of the regulations concerning guaranty of insurance of loans to veterans." Because the VA does not make the determination of eligibility, the guaranties are issued much sooner than if the application had been submitted on a prior approval basis.

Appellants Strang and Howard contend that the conspiracy count of the indictment, Count one, is defective and insufficient and should have been quashed. Both of these appellants made pre-trial motions to this effect which were denied by the trial judge. The decisions of the Supreme Court make it clear that a valid indictment must fulfill two distinct functions. First, an indictment must inform the accused of the nature of the charges against him, with such specificity and particularity that the accused is enabled to undertake and prepare an adequate defense. Second, an indictment must be so framed that it should be evident to what extent a plea of double jeopardy is available to the accused in the event of future charges involving similar offenses. United States v. Debrow, 346 U.S. 374, 74 S.Ct. 113, 98 L.Ed. 92; Hagner v. United States, 285 U.S. 427, 52 S.Ct. 417, 76 L.Ed. 861; Russell v. United States, 369 U.S. 749, 82 S.Ct. 1038, 8 L.Ed.2d 240.

Although an indictment is subject to careful examination to assure conformity with the strict requirements mentioned above, not all lapses from precision and correctness require that an indictment be quashed. Non-prejudicial errors and defects do not invalidate indictments which otherwise fulfill the two prime requisites of informing the accused of the nature of the charge and defining the scope of a future plea of double jeopardy. Smith v. United States, 360 U.S. 1, 79 S.Ct. 991, 3 L.Ed.2d 1041; Williams v. United States, 341 U.S. 97, 71 S.Ct. 576, 95 L.Ed. 774. The essence of this principle is found in Rule 52(a) of the Federal Rules of Criminal Procedure which states that "Any error, defect, irregularity or variance which does not affect substantial rights shall be disregarded."

Rule 7(c) of the F.R.Crim.P. provides that "The indictment * * * shall be a plain, concise and definite written statement of the essential facts constituting the offense charged." In addition to stating the specific statutory violation alleged, the indictment must indicate the manner in which the alleged violation occurred and the essential factual allegations in support thereof. An indictment which does not mislead the accused as to the nature of the offense charged, enables him to prepare an adequate defense and is specific enough to prevent future prosecutions for the same...