U.S. v. Van Dyke

Decision Date13 September 1979
Docket NumberNo. 79-5020,79-5020
Citation605 F.2d 220
Parties4 Fed. R. Evid. Serv. 1160 UNITED STATES of America, Plaintiff-Appellee, v. Joseph VAN DYKE, III, Defendant-Appellant.
CourtU.S. Court of Appeals — Sixth Circuit

Richard J. Marco (Court appointed CJA), Cleveland, Ohio, for defendant-appellant.

James R. Williams, U. S. Atty., Ralph E. Cascarilla, Cleveland, Ohio, for plaintiff-appellee.

Before WEICK and MERRITT, Circuit Judges and PECK, Senior Circuit Judge.

WEICK, Circuit Judge.

Defendant-Appellant Van Dyke was indicted by the Federal Grand Jury in the Northern District of Ohio, Eastern Division for mail fraud in violation of 18 U.S.C. § 1341. The indictment contained 29 counts. During his trial by jury which lasted for nearly two months the Government dismissed two counts of the indictment for technical reasons and the jury found him guilty of three of the remaining 27 counts. He was sentenced pursuant to 18 U.S.C. § 4205(b)(2) to four years imprisonment on each count, to be served concurrently. In his appeal, he raises the following issues:

1. Violation of his constitutional right to a speedy trial.

2. Deprivation of his constitutional right to a fair trial by the manner and method in which his trial was conducted by the District Court.

3. The District Court erred in admitting the testimony of his agents who testified as to the false and fraudulent representations.

4. The District Court erred in denying his motion for a mistrial where certain jurors had read a newspaper advertisement of a former employee who had testified as a witness.

As we will point out, these contentions are without merit and we affirm.

I Facts

Appellant was the chief executive officer of Rings 'N Things, a company that wholesaled costume jewelry. Rings 'N Things was a subsidiary of Atlantic Southern Company, a holding company owned and controlled by Appellant. Appellant and his wife were on the Board of Directors of Rings 'N Things.

In addition to selling jewelry, Rings 'N Things principally was engaged in selling distributorships to investors. A distributorship was portrayed as an opportunity for individuals with a limited amount of cash to go into business for themselves and earn large profits for only part-time work. Distributors were to place displays of good quality jewelry in drug stores, newsstands, beauty parlors and other retail establishments on a consignment basis. The distributor's duties were to collect proceeds of sales from merchants who sold the jewelry and to keep the displays stocked with saleable jewelry bought from Rings 'N Things. For an investment of $4925.00 to $6495.00 an investor-distributor was promised 320 dozen pieces of jewelry of good quality, display stands, twenty "pre-sold" retail sales locations wherein merchants had already agreed to accept Rings 'N Things displays on a consignment basis, a unique and proven successful marketing strategy, distribution rights to a specific geographic area, placement of the displays in the twenty locations by a "fashion consultant" experienced in Rings 'N Things successful marketing strategy, and a guarantee that if the investor was dissatisfied after one year, the company would repurchase the distributorship for an amount substantially equal to the initial investment less the investor's gross sales. The investment in a Rings 'N Things distributorship was portrayed as risk free.

In fact, these representations or promises were in part or wholly false. Few of the investors received 320 dozen pieces of jewelry. Of those who did receive jewelry, most received a small shipment of several dozen pieces. In fairness, some of these partial shipments contained good quality jewelry as promised, but often in these partial shipments the jewelry was unpacked, disorganized, or broken. Many investors received no jewelry or display racks at all. Contrary to representations, Rings 'N Things' distributorship method of sales was not unique, but had been substantially acquired by Appellant while he was previously employed as a distributorship salesman of costume jewelry at Phase III, of Southfield, Michigan. Only a handful of distributors ever received the twenty pre-sold locations that were promised; many received none at all. Similarly, very few of the distributors received promised assistance and expertise from fashion consultants. Contrary to representations, distributors often did not receive the exclusive right to sell in a given geographic area. Selling territories often overlapped without the consent of the persons involved, and in one case at least more distributorships were sold in a small town than the population could possibly accommodate, which was with the Appellant's full knowledge. Although several distributors received their money back, as promised, after threatening publicity-generating lawsuits, the vast majority of distributors have not received their money back.

Appellant had developed a "sales pitch" and a brochure used in sales presentations. Appellant sold the first of the distributorships himself. Lester Kean, one of the first individuals to purchase a distributorship, testified that Appellant used stationery indicating that Rings 'N Things had offices in cities around the United States and that Appellant represented Rings 'N Things as a nationwide company that was very successful. At that time, of course, Rings 'N Things had no such offices, no such nationwide scope, and no such financial strength. Appellant trained salesmen for his organization and trained Richard Neiswonger, his national sales manager, to use his sales pitch. Neiswonger, who among other things was a former magician, trained other salesmen who were given a commission of $800.00 to $900.00 for each distributorship they sold. Salesmen were instructed to adhere to the sales presentation as supplemented by reading through the sales brochure with the potential investor.

An investor would read an advertisement in the business section of a local newspaper which advertisement would be entitled variously, "Local distributor can make monthly gross revenue of up to $3,456," "Local distributor has monthly revenues of $3,456," or "Local distributor has monthly gross revenue of $3,456 part time with a net profit of 35 percent ($1,206.60) for 7 to 10 hours work weekly. Assume business responsibilities within four to six weeks," whereas no such proven profit record existed. After reading the advertisement, an investor would call a toll free number and ask for Tom Buchanon, an assumed name. An appointment with a salesperson would be arranged. The salesperson displayed good quality merchandise at this meeting and worked through the sales brochure. The potential investor was given a "negative sell", i. e. the sales effort was directed at inducing the individual into offering to buy a distributorship. The individual was often asked to sign a document indicating that he would not disclose the information offered at the sales presentation. Few sales were closed immediately. In most instances the investor contacted the salesman several days later and agreed to buy a distributorship. After mailing a certified check and signed distributorship contract to Rings 'N Things in Cleveland, the person was notified by the company that his application for a distributorship was accepted pending final acceptance by the board of directors of the corporation, which included Appellant and his wife.

Although minor variations existed in the sales presentations described at trial by six salesmen, the testimony viewed in its entirety reveals that the sales presentations were strikingly similar in content. Several misrepresentations and falsehoods were stated to induce the sale. The company was portrayed as an established, well-financed and experienced company, whereas in fact the company was less than two years old and was poorly financed. Appellant himself had little personal knowledge of the costume jewelry business. The company was portrayed as seeking to appoint select persons as distributors. Investors were told that not everyone would qualify, whereas the evidence indicates that no application for a distributorship was rejected and no such discrimination in the selection of potential distributors took place. The marketing method employed by the company was portrayed as a proven success, whereas in fact this method was unproven by Appellant and no company experience, studies, or statistics existed to prove the claims of consistent success. Average daily sales were represented to be four sales per day for the company nationwide in early presentations, six to eight in later presentations, whereas actual sales appeared to be often one piece of jewelry per day or less for the distributors who received merchandise. At one salesman training session conducted by Neiswonger, assisted by Appellant, the salesmen were told that some distributors earned as high as $100,000.00 per year and that average sales per day for the company were six to eight sales, whereas no such profits or sales figures existed in fact.

To induce the sale of a distributorship, investors were given the names of fellow investors to call to discuss the success of their distributorships. Early in the life of Appellant's enterprise actual distributors were used who gave glowing generalities on the success of their distributorships for which praise they were paid by Appellant. When these references began giving bad recommendations or began refusing to answer calls, Appellant hired "singers" who were paid to falsely extoll the success of Appellant's distributorships.

In late 1975 Appellant was repeatedly warned by employees that his organization was incapable of handling the demands of outstanding distributorship contracts. Appellant nevertheless demanded that 200 new distributorships be sold in January, 1976, alone. In early 1976 little or no merchandise was bought to honor Appellant's company's contractual...

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