717 F.2d 1238 (9th Cir. 1983), 81-1678, United States v. Mastelotto
|Docket Nº:||81-1678, 81-1679.|
|Citation:||717 F.2d 1238|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Jerry R. MASTELOTTO, and Willis B. Inglesby, Defendants-Appellants.|
|Case Date:||May 19, 1983|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Argued and Submitted Sept. 16, 1982.
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[Copyrighted Material Omitted]
Cedric Chou, Asst. U.S. Atty., Sandra Teters, Student Intern, San Francisco, Cal., for plaintiff-appellee.
Claudia Wilken, Wilken & Leverett, Berkeley, Cal., Craig S. Cook, Salt Lake City, Utah, for defendants-appellants.
Appeal from the United States District Court for the Northern District of California.
Before MERRILL, FLETCHER, and BOOCHEVER, Circuit Judges.
FLETCHER, Circuit Judge:
Mastelotto and Inglesby appeal their convictions on two counts of mail fraud in violation of 18 U.S.C. Sec. 1341 (1976) and eight counts of wire fraud in violation of 18 U.S.C. Sec. 1343 (1976). Each timely appealed. We have jurisdiction under 28 U.S.C. Sec. 1291 (1976).
Defendants contend that the indictment under which they were tried is duplicitous since each of its counts alleges the defendants' participation in two independent fraudulent schemes. They further assert that, even if the indictment itself is not duplicitous, the trial court's failure to give a "same single scheme" instruction prejudiced defendants' right to a unanimous jury verdict and to be tried only for that for which they were indicted. We conclude that while the indictment is not duplicitous as drawn, the failure to give proper instructions to the jury requires reversal.
This case involves allegations of numerous fraudulent transactions conducted over a ten-year period in Utah, Nevada, and California by and through three corporations engaged in the processing and sale of oil products. The evidence produced at trial related to two distinct sorts of fraudulent transactions. In the "mislabeling" transactions, oil products of the corporations were sold in containers bearing incorrect viscosity numbers or with brandnames indicating once-refined oil where the contents were in
fact re-refined oil. These misrepresentations allowed the oil to be sold at a price higher than it would bring if properly labeled, thereby increasing the profits of the corporations. In the "corporate sale" transactions, the purchaser of the assets of the corporations was not informed that the sales and cost figures of the corporations were based in part upon the sale of mislabeled oil products. These omissions induced the purchaser either to purchase more readily or to purchase at a higher price than it would otherwise have done and helped delay the discovery of the "mislabeling" transactions.
Defendants Jerry R. Mastelotto and Willis B. Inglesby were owners, directors, and officers of the companies involved in the fraudulent transactions. Bonus International Corporation (Bonus), the parent company, was located in Salt Lake City, Utah, and was engaged in the re-refining of oil products and the retail sale of re-refined oil. Inglesby was secretary, controller, and part owner of Bonus; Mastelotto was director, chief executive officer, and a 25% (and later 100%) owner of Bonus. Inglesby reported to Mastelotto.
Bonus had two refineries, one in Salt Lake City, Utah, and one in San Carlos, California. Until merging with Bonus in 1977, the latter was a subsidiary of Bonus doing business as Bayside Oil Company (Bayside).
Bonus also had two marketing arms for its petroleum products. The first, Consolidated Petrochemical Corporation (CPC), was located in Utah and was half-owned by Bonus. Mastelotto was a director and president of CPC, while Inglesby was controller, accounting supervisor, and, from September 1978 onward, an officer of CPC. The other, Lobo Oil Company (Lobo), was located in Nevada and became a wholly owned subsidiary of CPC in 1975. Mastelotto was a president and director of Lobo and Inglesby, the controller.
As early as 1970, Bonus and its subsidiaries sold motor oil to various corporations and governmental agencies in cans labeled with a viscosity rating (or "SAE" number) that did not match the actual viscosity of the oil in the cans. Changing the actual viscosity of the oil inside the can through the use of additives was more expensive than simply labeling the outside of the can to reflect the "SAE" number of oil that had been ordered.
By 1975, Bonus and its subsidiaries also were selling re-refined oil, that is, oil which has been used once and has then been filtered in a re-refining process, in drums whose labels indicated that the contents were once-refined or "virgin" oil of such major brand companies as Mobil, Chevron, and Conoco. In addition, CPC sold re-refined oil, under the Bonus label, as virgin oil. Profit margins were greater when re-refined oil was sold as virgin oil rather than as the re-refined stock it actually was.
Late in 1977, the directors of Bonus decided to find a buyer for its re-refining assets. In October, 1978, Bonus sold its re-refining assets, as well as the assets of its two subsidiaries (CPC and Lobo), to Axel Johnson Company (Johnson). Prior to the sale, the officers of Bonus (including Mastelotto and Inglesby) did not inform Johnson of the "mislabeling" transactions or tell the buyer that the Bonus sales and cost figures were based on the sale of mislabeled oil. Moreover, the evidence adduced at trial showed that Bonus employees had hidden equipment and documents which would have revealed to the purchaser the fraudulent "mislabeling" transactions in which Bonus had been engaged.
On November 18, 1980, Mastelotto and Inglesby 1 were indicted by a grand jury on twelve counts of wire fraud in violation of 18 U.S.C. Sec. 1343 and 18 U.S.C. Sec. 2 and two counts of mail fraud in violation
of 18 U.S.C. Sec. 1341 and 18 U.S.C. Sec. 2. 2 The indictment comprises fifteen paragraphs: twelve describing the alleged fraudulent transactions; two setting forth, respectively, the twelve wire fraud and two mail fraud counts (the "count" paragraphs); and one incorporating the allegations of the twelve descriptive paragraphs into each of the fourteen counts contained in the two "count" paragraphs.
The third paragraph of the indictment charged that from 1969 until June 1979, the defendants
devised and intended to devise a scheme and artifice to defraud and for obtaining money and property by means of false and fraudulent pretenses, representations and promises as well as omissions to state material facts....
The next nine descriptive paragraphs each then explicated "a part of the scheme and artifice," including the mislabeling of oil products and the misrepresentation of the financial position and methods of operations of Bonus and its affiliates.
Following the twelve descriptive paragraphs were the two "count" paragraphs. Each of the twelve wire fraud counts charged defendants with transmitting or causing the transmission of a separate telephone call in 1978 "for the purpose of executing the aforesaid scheme and artifice to defraud." All but one of wire fraud counts alleged an interstate phone call from Bonus in Utah to Bayside in California. The two mail fraud counts similarly charged defendants with causing two letters to be delivered in 1977 and 1978 "for the purpose of executing the aforesaid scheme and artifice to defraud."
Defendants filed various pretrial motions, all denied except for portions of the motions for bills of particular. The case proceeded to trial on April 28, 1981. The defendants' principal defense was not that the fraudulent transactions did not occur or that defendants did not have knowledge of the transactions, but that the defendants lacked intent to defraud. Mastelotto and Inglesby blamed the fraud on their subordinates, who they claimed had disobeyed repeated orders to cease the fraudulent practices.
Defendants objected to the jury instructions in advance of trial and also as given on several grounds. They particularly objected to an instruction regarding the fraudulent scheme in that they did not think "it really points out to the jury the difference between a single scheme and multiple schemes and what their effect would be." 3 While the defendants had requested
the addition of "a paragraph clarifying or amplifying the overall scheme language," the court concluded that it "just couldn't do it."
On July 28, 1981, the jury returned verdicts of guilty for each defendant on eight counts of wire fraud and two counts of mail fraud. Both were sentenced on October 15, 1981. Mastelotto was sentenced to three years in custody. Inglesby received a $5,000 fine and was sentenced to two years in custody with all but six months suspended and one year of probation.
Mastelotto and Inglesby first challenge their convictions on the ground that the indictment was duplicitous. 4 They contend that the twelve descriptive paragraphs of the indictment, all of which were incorporated into each of the fourteen counts of the indictment, allege not merely one but two or more distinct schemes to defraud. They assert that each count charges two or more violations of sections 1341 and 1343, because each contains allegations of the use of the mails or telephone in furtherance of two or more schemes. They then conclude that since the indictment on its face sets forth in each count two or more crimes together as a single violation, the indictment must be dismissed as duplicitous. We disagree.
In reviewing an indictment for duplicity, our task is not to review the evidence presented at trial to determine whether it would support charging several crimes rather than just one, but rather solely to assess whether the...
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