639 F.2d 896 (2nd Cir. 1981), 224, United States v. Reed

Docket Nº:224, 227 and 228, Dockets 80-1236, 80-1240 and 80-1264.
Citation:639 F.2d 896
Party Name:UNITED STATES of America, Appellee, v. Russell REED, James S. Doyle, and Thomas Francis Ryan, Appellants.
Case Date:January 27, 1981
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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639 F.2d 896 (2nd Cir. 1981)

UNITED STATES of America, Appellee,

v.

Russell REED, James S. Doyle, and Thomas Francis Ryan, Appellants.

Nos. 224, 227 and 228, Dockets 80-1236, 80-1240 and 80-1264.

United States Court of Appeals, Second Circuit

January 27, 1981

Argued Oct. 1, 1980.

As Amended April 10, 1981.

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[Copyrighted Material Omitted]

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John H. Gross, New York City (Randy Paar, Anderson Russell Kill & Olick, P. C., New York City, on the brief), for appellant Reed.

Robert Rosenthal, Mineola, N. Y., for appellant Doyle.

Frank W. Zito, Malverne, N. Y. (Henry J. Kruman, Maffucci, Kruman & Zito, Malverne, N. Y., on the brief), for appellant Ryan.

Carol B. Amon, Asst. U. S. Atty., Brooklyn, N. Y. (Edward R. Korman, U. S. Atty., for the E. D. N. Y., Vivian Shevitz, Asst. U.

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S. Atty., Brooklyn, N. Y., on the brief), for appellee.

Before LUMBARD, OAKES and NEWMAN, Circuit Judges.

OAKES, Circuit Judge:

Appellants were convicted after a jury trial in the United States District Court for the Eastern District of New York, George C. Pratt, Judge, on one count of securities fraud, three counts of mail fraud, and one count of conspiracy to commit securities and mail fraud. The case arises out of a scheme whereby appellant Reed was able to engage in more than $2 million worth of highly speculative trading through the brokerage house of Shearson Hayden Stone Inc. (Shearson) during an eight-week period without putting up any of his own cash. Reed ostensibly paid for the trades with twelve checks whose total face value exceeded $394,000, but all of which were drawn on accounts with wholly insufficient funds. The scheme was permitted to continue, despite SEC and Shearson in-house rules requiring payment within five days of any given purchase, through the cover-up activities of appellant Ryan, a registered representative at the Shearson branch office in Huntington, New York, and appellant Doyle, the operations manager of that branch. When Reed's account was ultimately sold out, Shearson took a substantial loss.

On appeal Reed, who jumped bail after the jury was drawn and was tried in absentia while a fugitive from justice, argues that he should be released from custody based on his allegation that after the verdict he was illegally abducted from the island of Bimini in the Bahamas and returned to Fort Lauderdale, Florida, where the FBI placed him under arrest. He also claims that the lower court should not have tried him in absentia, that it should have excluded evidence as to his contemporaneous participation in a similar scheme involving another brokerage house, and that it should not have submitted the mail fraud counts to the jury. Doyle and Ryan make certain evidentiary points which, together with Reed's contentions, we discuss below. None of the appellants challenges the sufficiency of the evidence.

FACTS

The facts need not be elaborated at length. Reed engaged in what is known as a "free-riding scheme" by opening three separate brokerage accounts at Shearson in the names of three corporations, on the first two of which he listed himself as corporate principal and on the third of which he used the assumed name Stephen Whitney. He established the three accounts in the names of the International Credilogical Corporation (ICC), the Universal Gym Equipment Corporation (UGE), and Whitney, Stonehill & Lawler (WS&L), on August 24, September 12, and September 26, 1978, respectively.

Ryan, a broker at Shearson, placed the orders on the accounts and Doyle, as operations manager, communicated payment information to the Shearson margin department. Doyle also had responsibility for ensuring that SEC and house regulations regarding timely payments for trades were followed. As checks on the ICC, UGE, or WS&L accounts came in, were deposited, and were returned as drawn on insufficient funds, Doyle would order the checks redeposited. Doyle later claimed that he had verified Reed's checks with several persons at the various banks, but the bank employees he named all turned out to be fictitious. Meanwhile, Reed was buying and selling on margin and purchasing highly speculative stocks and stock options.

Reed did have accounts at each of the four banks upon which the checks were

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drawn, but the balances were minimal. For example, Reed deposited five checks in the UGE account drawn on the Canada Trust Company for $10,444, $15,000, $20,000, $39,094, and $20,611, when at the time his balance in that bank totaled only $24.58. And he drew checks in excess of $171,000 on his account at the Bank of America in Puerto Rico, when his total deposit there was only $100. As a result of Doyle's redepositing Reed's checks at Shearson despite this insufficiency of funds, Reed's brokerage accounts continued to show credit for substantial periods of time, giving him the opportunity to have the market move in his favor and to make additional purchases.

A phone call on October 30, 1978, from the vice president of the Bank of America in Puerto Rico finally alerted the Huntington branch manager to this scheme and Shearson's executives took action. For almost a week Reed staved off the inevitable selling out of his accounts with the confidence man's story that he was obtaining a line of credit at one bank or another. Even as the accounts were being sold out, with a loss to Shearson of approximately $379,000, Reed was bragging to Peter Kujawski, a Shearson vice president and lawyer who was investigating the matter, how smart he had been to do what he had done at Shearson, how dumb Shearson had been to let him get away with it, and how stupid Ryan and Doyle had been not to ask for some money "up front" for their participation in the scheme. Contemporaneously, and even after the events underlying the indictment in the present case, Reed was purchasing securities, again with insufficient fund checks, from another brokerage firm, Janney Montgomery Scott Inc. Evidence of this similar conduct was introduced at trial.

Reed did not appear in court on January 31, 1980, the date set for his trial, though he had been present on December 28, 1979, for the selection of the jury. No explanation for his absence was offered and Judge Pratt issued a bench warrant for his arrest. Although the Government was prepared to proceed, and codefendants Doyle and Ryan wanted to begin, Judge Pratt adjourned the trial until February 25, 1980. On that date, when Reed again failed to appear, the trial finally began. The judge, however, declared a mistrial on February 26, when one of the twelve jurors was injured. A new jury was selected and the trial began once more on February 29, 1980. All three defendants were convicted, Reed in absentia. 1

When Reed was finally arrested on March 25, 1980, and brought before the court, he moved to have his conviction set aside on the ground that the court had erred in trying him in absentia. He also moved to be released from custody and returned to Bimini in the Bahamas, alleging that he had been illegally abducted by agents of the United States government. Reed claimed that he had been living in Bimini, engaging in real estate transactions, when CIA agents enticed him by deceitful means upon a private airplane destined not for Nassau, as he had been told, but for Fort Lauderdale, Florida. According to Reed, the agents made him lie on the floor of the small plane for thirty minutes,

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holding a cocked gun to his head and threatening to blow his brains out. Reed further claimed that when he deplaned these men twisted his arm as they led him across the runway at Fort Lauderdale, where FBI agents were summoned to arrest him. Because of the nature of his arrest, Reed argued that the district court was without jurisdiction to impose sentence on him and should have ordered that he be returned to Bimini.

DISCUSSION

I. Reed's Arrest

Reed contends that his "abduction" from Bimini violated both his constitutional rights and international law, and requires us to exercise our supervisory power over the district courts. He bases his claim upon United States v. Toscanino, 500 F.2d 267 (2d Cir. 1974), which involved an Italian citizen who alleged that he had been kidnapped from Uruguay to Brazil where he was tortured and interrogated for seventeen days before being brought to the United States for trial in the Eastern District of New York. We held that this abusive conduct, if it had actually occurred, could not be tolerated without debasing the processes of justice, and that the defendant was entitled to an evidentiary hearing on his abduction claim if he offered some credible proof that the actions against him were taken by or at the direction of United States officials. In Toscanino we sought to resolve the conflict between the ninety-year-old teaching of Ker v. Illinois, 119 U.S. 436, 7 S.Ct. 225, 30 L.Ed. 421 (1886), as followed in Frisbie v. Collins, 342 U.S. 519, 72 S.Ct. 509, 96 L.Ed. 541 (1952), that the Government's power to prosecute a defendant is not impaired by the illegality of the method by which it acquires control over him, and the doctrine of Rochin v. California, 342 U.S. 165, 72 S.Ct. 205...

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