U.S. v. Weisman

• Decision Date: 04 April 1980
• Docket Number: D,No. 642-3,642-3
• Citation: 624 F.2d 1118
• Parties: 5 Fed. R. Evid. Serv. 1338 UNITED STATES of America, Appellee, v. Eliot H. WEISMAN and Salvatore J. Cannatella, Defendants-Appellants. ockets 79-1315, 79-1318.
• Court: U.S. Court of Appeals — Second Circuit

Page 1118

624 F.2d 1118

5 Fed. R. Evid. Serv. 1338

UNITED STATES of America, Appellee, v. Eliot H. WEISMAN and Salvatore J. Cannatella, Defendants-Appellants.

No. 642-3, Dockets 79-1315, 79-1318.

United States Court of Appeals,

Second Circuit.

Argued Jan. 23, 1980.

Decided April 4, 1980.

Frank H. Wright, New York City (Grand & Ostrow, Norman S. Ostrow, Leslie A. Conason, New York City, of counsel), for defendant-appellant Weisman.

Douglas F. Eaton, New York City, for defendant-appellant Cannatella.

Nathaniel H. Akerman, Asst. U. S. Atty., New York City (Robert B. Fiske, Jr., U. S. Atty., S. D. N. Y., Scott G. Campbell, Howard W. Goldstein, Asst. U. S. Attys., New York City, of counsel), for appellee.

Before SMITH ^* and FEINBERG, Circuit Judges, and OWEN, District Judge. ^**

FEINBERG, Circuit Judge:

Eliot H. Weisman and Salvatore J. Cannatella appeal from judgments of conviction entered in the United States District

                Court for the Southern District of New York after an eight-week jury trial before Judge Robert W. Sweet.  Weisman, Cannatella and eight other co-defendants were indicted in June 1978 for alleged criminal offenses arising out of the creation, operation and bankruptcy of the Westchester Premier Theatre (the Theatre) in Tarrytown, New York.  Weisman was convicted of one count of operating the Theatre through a pattern of racketeering activity in violation of 18 U.S.C. §§ 1962(c) and 2, nine counts of fraud in the sale of securities in violation of 15 U.S.C. §§ 77q(a) and 77x and 18 U.S.C. § 2, nine counts of bankruptcy fraud in violation of 18 U.S.C. §§ 152 and 2, one count each of conspiracy to commit securities fraud and bankruptcy fraud in violation of 18 U.S.C. § 371, and one count of endeavoring to obstruct a grand jury investigation in violation of 18 U.S.C. §§ 1503 and 2.  Cannatella was convicted of the same counts of bankruptcy fraud and conspiracy to commit bankruptcy fraud.  1  In this appeal, Weisman and Cannatella raise numerous challenges to the conduct of the trial and the verdict, the most significant of which relate to Weisman's conviction under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq.  For reasons set forth below, we affirm the judgments of conviction
                

I. The Facts

Appellant Weisman does not argue that the evidence at trial was insufficient to convict him; while appellant Cannatella does make such a claim, it is without merit as will be seen below in Part III B of this opinion. The following is a brief summary of the charges in the government's indictment, which were subsequently shown to be justified by the evidence at trial and by guilty pleas of various defendants. The Theatre, from its inception until its collapse, was operated through a wide ranging pattern of fraud. This pattern emerged in 1973, when Weisman, along with his partners and eventual co-defendants Gregory J. DePalma and Richard Fusco, sought through a fraudulent public offering of common stock to raise over two million dollars for construction of the Theatre. Weisman and his co-defendants filed with the Securities and Exchange Commission a prospectus that contained false and misleading statements and that failed to disclose material facts, including DePalma's and Fusco's role in the project and their beneficial ownership of a large portion of the Theatre's stock. Also, to insure purchase of the necessary minimum number of shares at the public offering, Weisman, DePalma and Fusco, with the assistance of co-defendants Murad Nersesian, Leonard Horwitz and Laurence I. Goodman, made secret arrangements through which various individuals agreed to purchase stock in the Theatre in return for promises of eventual cash payoffs, transfers of portions of Weisman's interest in the Theatre, and other forms of inducement or remuneration.

Due to these efforts, the public offering of the Theatre's stock was successful. The newly constructed Theatre opened in March 1975, at which time Weisman and his confederates systematically began to skim and convert to their own use moneys received by the Theatre from ticket sales and various concessions. Portions of these funds were also used to repay the various secret debts incurred prior to the stock offering. During this period, the Theatre received a substantial amount in loans from Hugh Johnson & Company. These loans were arranged by the company's president, appellant Cannatella, who assumed a management role in the Theatre along with Weisman, DePalma and Fusco.

The skimming operation forced the Theatre in December 1976 to file a petition under Chapter XI of the Bankruptcy Act. The Theatre was adjudged a "debtor in possession" and allowed to continue operations, but all expenditures, other than salaries and operating expenses, were subject to In May 1977, a federal grand jury began investigating the operations of the Theatre. At this time, Weisman and Horwitz attempted to persuade various prospective grand jury witnesses not to disclose the defendants' fraudulent transactions. These efforts to sidetrack the grand jury were unavailing, however, and a multiple count indictment was returned in June 1978.

prior approval by the bankruptcy court. Nonetheless, Weisman, DePalma and Fusco, now joined by Cannatella, continued secretly to skim the Theatre's receipts. Portions of the diverted revenues were unlawfully paid to various co-defendants, including Thomas Marson and Anthony Gaggi.

Trial commenced in October 1978 as to nine defendants; Marson's trial was severed for health reasons. In December 1978, Judge Sweet granted Gaggi's motion for acquittal, and in January 1979, declared a mistrial as to the remaining defendants when the jury was unable to reach a verdict. Subsequently, defendants Fusco, DePalma and Marson pled guilty to various charges. The new trial for defendants Weisman, Cannatella, Nersesian and Horwitz began in March 1979. As in the first trial, the bulk of the government's case consisted of testimony of several participants in the various schemes and numerous tape recordings obtained by the government through electronic surveillance and by a body recorder worn by government informant Norman Brodsky. In May 1979, the jury acquitted Nersesian but found Weisman, Horwitz and Cannatella guilty on all counts. Judge Sweet subsequently granted Horwitz's motion for a new trial, but denied similar motions by Weisman and Cannatella. On this appeal, we treat the major arguments raised by Weisman and Cannatella in separate sections. Our reviewing task is made easier by the various thorough opinions of the district judge, to which we refer below.

II. Weisman

A. The RICO Count.

Weisman directs his most pointed attack against his conviction for violating the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq., commonly known as RICO. For convenience, we have reproduced the relevant sections of RICO as Appendix A. The RICO count charged that Weisman, along with DePalma and Fusco, violated § 1962(c) by conducting the affairs of the Theatre through a "pattern of racketeering activity" that included the various predicate acts of securities fraud and bankruptcy fraud alleged elsewhere in the indictment. Weisman contends that his conviction on this count was invalid in three respects.

Weisman first argues that Judge Sweet's charge on the relationship between the various predicate acts of racketeering necessary to establish a violation of section 1962(c) was incorrect. That section prohibits the operation of any "enterprise" engaged in interstate or foreign commerce through a "pattern of racketeering activity." A "pattern of racketeering activity" is defined by section 1961(5) to require the commission of at least two "acts of racketeering" within a ten-year period, and section 1961(1)(D) specifies both fraud in the sale of securities and bankruptcy fraud as acts of racketeering. Weisman, however, unsuccessfully requested that the jury be charged that even if it found that he had committed two or more predicate acts of racketeering within a ten-year period, an unlawful "pattern of racketeering activity" would not be established unless the predicate acts were also found to be "related" to each other through a "common scheme, plan or motive so as to constitute a pattern of activity."

Weisman renews this claim on appeal, arguing that a requirement of "relatedness" between predicate acts is implicit in the meaning of the word "pattern" and should have been explained further, as he requested. Appellant further argues that such an interpretation is necessary in order to prevent the application of RICO to instances of sporadic and unrelated criminal activity that Congress clearly did not intend While these arguments are far from frivolous, we affirm Judge Sweet's refusal to give the requested charge, substantially for the reasons set forth in his ruling on appellant's challenge to the indictment before the first trial, which raised the same arguments. United States v. DePalma, 461 F.Supp. 778, 781-85 (S.D.N.Y.1978). As noted in Stofsky, supra, the statutory language does not expressly require that the predicate acts of racketeering be specifically "related" to each other and we find no affirmative evidence in the legislative history from which we should infer such a requirement. ³ Furthermore, the broad spectrum of predicate acts of racketeering enumerated in section 1961(1) belies any intent on the part of Congress to require that such predicate acts of racketeering must possess a unitary character. While we agree with appellant Weisman that RICO was not intended to apply to sporadic and unrelated criminal acts, see S.Rep.No.91-617, 91st Cong., 1st Sess., pp. 122, 158 (1970), we find that the statute was generally designed to avoid such an application. Most importantly, the predicate acts constituting a "pattern of racketeering activity" must all be done in the conduct of the affairs of an "enterprise." 18 U.S.C. §...