U.S. v. Netterville

• Decision Date: 09 June 1977
• Docket Number: No. 76-1670,76-1670
• Citation: 553 F.2d 903
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. William NETTERVILLE, Gerald L. Thatcher, Robert Douglas Watkins, and Donald Byrd Chambers, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 903

553 F.2d 903

UNITED STATES of America, Plaintiff-Appellee, v. William NETTERVILLE, Gerald L. Thatcher, Robert Douglas Watkins, and Donald Byrd Chambers, Defendants-Appellants.

No. 76-1670.

United States Court of Appeals Fifth Circuit.

June 9, 1977.

William N. Netterville, pro se.

James H. Martin, Dallas, Tex., for Chambers.

Emmett Colvin, Jr., Gary D. Jackson, Dallas, Tex., for Thatcher.

Melvyn Carson Bruder, Dallas, Tex., for Netterville.

Cecil Emerson, Dallas, Tex., for Watkins.

Michael P. Carnes, U. S. Atty., John W. Sweeney, Jr., Asst. U. S. Atty., Fort Worth, Tex., Judith A. Shepherd, Asst. U. S. Atty., Dallas, Tex., for plaintiff-appellee.

Appeals from the United States District Court for the Northern District of Texas.

Before COLEMAN, AINSWORTH and INGRAHAM, Circuit Judges.

AINSWORTH, Circuit Judge:

This criminal case involves a 13-count conspiracy indictment against several defendants charging violations of 18 U.S.C. § 1341, ¹ relative to use of the United States mails to defraud. The present appellants, Robert Douglas Watkins, Donald Byrd Chambers, Gerald Thatcher and William Netterville, and others, were charged in the indictment with use of the mails in the execution of a scheme to defraud and obtain money by means of false pretenses from persons induced to purchase oil products dealerships. The jury returned verdicts of guilty on at least some counts against each of the four appellants. Their appeal contends that the evidence at the trial was insufficient for the jury to find a conspiracy; that the evidence was insufficient to support convictions on various substantive counts; that they were denied their right to speedy trial; and other errors. We find these assertions to be without merit and affirm the judgment below.

Todd Van Note, Charlie Sheppart and Howard Eugene Mason incorporated Diversified Marketers, Inc., or DMI, on July 21, 1971. Defendant Watkins became vice president of DMI and defendant Chambers sales manager.

According to Van Note's testimony, the purpose of the company was to sell automotive filters through a network of consignment dealers. To acquire dealers DMI placed classified ads in newspapers. Interested potential dealers were to call a Dallas telephone number, at which they reached the DMI offices. Callers were told that they would be contacted by a salesman; the home office would then refer the names of the callers to salesmen in the field, who would contact the callers personally. The presentations made by the salesmen were based upon promotional materials including a sales manual compiled by Van Note and Chambers.

Several prospective dealers who were given the sales presentation appeared as witnesses at the trial. According to their testimony the salesmen represented that for about $3,000 paid in advance they would be granted a dealership, that inventory would arrive within three to six weeks, and that fifteen (sometimes more) retail locations would be arranged for them. Should a dealer become dissatisfied, DMI guaranteed to buy back any unsold inventory at a small discount. The sales manual contained a list of allegedly successful dealers whom the prospect could contact by telephone. Among the names listed was that of "Don Mason." The telephone number listed for "Mason" actually reached defendant Netterville, who played the part of the fictitious dealer and made what one witness described as "quite enthusiastic" false claims concerning the success of his "distributorship." Several witnesses testified that calls which they made to such numbers provided by salesmen were influential in their decisions to apply for dealerships.

Prospective dealers who were persuaded by the sales presentation would sign dealership agreements, and execute checks as advance payment. The signed agreements and checks would be sent, often by mail, to DMI in Dallas. Watkins would evaluate and "accept" the new dealer, execute a contract and repurchase agreement, and mail these and a welcoming letter back to the new dealer.

The money received from new dealers was supposed to be used to purchase and ship inventory and sales materials, and to establish retail locations for the new dealer, according to Van Note's testimony. Instead the money was used to pay the day-to-day operating expenses of DMI (and later of ICU). By February of 1972, however, DMI "reached a point where our overhead was ahead of our income," Van Note testified. When cash could not be raised through bank loans or through individual investors, it was decided, upon Chambers' suggestion, to form a new corporation which could provide cash. Accordingly, ICU Corporation was formed on February 11, 1972. Van Note, Watkins and Chambers were the incorporators. Chambers was president and Watkins was vice president. ICU was operated as a consignment dealership program similar to DMI except that the products involved were different oil additives, automotive waxes and polishes, and other products, instead of filters. Van Note testified that Chambers was "basically in charge of putting the packet together" for ICU's promotion and sales.

At about the time ICU was being formed DMI retained Jack Howard and Associates, a Dallas advertising firm, to assist in recruiting new dealers. Roy Stamps, who handled the account for Howard, testified that between January and August of 1972 DMI and ICU spent about $190,000 on advertising for new dealers. He testified that Chambers, Watkins and Van Note participated in preparing the ads, and that Van Note had final say. The ads were placed in newspapers "in almost every state in the Union," Stamps testified. A typical DMI newspaper ad which appears in the record said:

DISTRIBUTOR NEEDED. Be in business for yourself, full or part time, for twenty one year old auto products company. No direct selling. Service dealers only. Economy does not affect our business. Profit potential is extraordinary. Inventory secured with a guaranteed buy-back. Phone collect, Mr. Peters, area code 201-343-7771.

A similar ad for ICU described that company as sixty years old. Stamps testified that he felt these descriptions to be ethical even though the two companies were each less than one year old, because the products which they distributed bore trademarks or copyrights which were respectively 21 and 60 years old.

As early as December of 1971 DMI was experiencing "backlogging" difficulties in the shipment of promised merchandise to dealers, according to the testimony of one employee. By February of 1972 the two corporations were making agreements which they were unable to honor; merchandise was in some cases not shipped and the buy-back agreements were not honored. After "acceptance" new dealers began to be advised by letter that DMI had "filled its quota" of new dealers and that no additional dealers would be employed; the prepayments made by such dealers were in many cases not returned. Nevertheless, DMI and ICU continued to solicit new dealers Stamps testified that he was doing business amounting to $5,000 to $6,000 weekly with the DMI/ICU account and to enter into additional agreements with prospective dealers until August of 1972. The corporations continued to encourage and to attempt to mollify its dealers, often by letter, until as late as October, 1972. Some dealers received small amounts of their investment back, and others received nothing.

On April 11, 1974, a 13-count mail fraud and conspiracy indictment was returned naming Van Note, Oliver B. Kochs, and the present appellants. Trial was set for June 10, 1974, but the date was passed to allow the grand jury to return a superceding indictment. The new indictment (which differed from the original indictment only as to the number of counts under which certain defendants were charged) was handed down on June 26, 1974. The elements alleged as false or fraudulent in the indictment included the representation as to the ages of the companies, the agreement to repurchase, the guarantee of locations, the promise to deliver merchandise within three to six weeks, claimed profit expectancy of $90 per day (included in some ads but not all), and the use of Kochs and "Mason" as bogus established dealers or "singers." Counts 1 through 12 of the indictment named various defendants as actors in perpetrating the alleged fraud against specific prospective dealers, either by using the mails to send them contracts or by causing them to use the mails to send their prepayment checks to DMI or ICU. Count 13 alleged a conspiracy to conduct the fraudulent scheme by mail.

Trial was set for December 16, 1974, but was postponed when Kochs suffered a heart attack on December 14.

Van Note pleaded guilty to Count 1 of the indictment and, after sentencing, was dismissed from the cause on September 29, 1975.

Trial was set for December 1, 1975, but docket and witness complications caused its postponement until January 26, 1976. Kochs was severed from the cause due to his continuing heart ailment. He was too ill to appear at trial and died shortly afterward.

On February 6, 1976, the jury returned verdicts of guilty against each of the four remaining defendants. All were found guilty on Count 13, the conspiracy count. Watkins was convicted on 10 substantive counts alleging mail fraud. Chambers was found guilty on one of five substantive counts in which he was named. Netterville was found guilty on both substantive counts naming him, and Thatcher on five of seven. Watkins was sentenced to a total of eight years' imprisonment; Chambers received two concurrent five year terms; Thatcher received a total of seven years, and Netterville received three concurrent five year terms. All four appeal their convictions.

On appeal each of the appellants complains that he was denied a speedy trial. Each challenges the sufficiency of the evidence relating to the conspiracy count and to the substantive counts on which he was convicted. Thatcher and Netterville assert that an erroneous...