U.S. v. Block, 83-8375

Citation755 F.2d 770
Decision Date19 March 1985
Docket NumberNo. 83-8375,83-8375
Parties17 Fed. R. Evid. Serv. 1025 UNITED STATES of America, Plaintiff-Appellee, v. Samuel Theodore BLOCK, Robert Edwards, Russell F. Gleason, Donald M. Beck, Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

Michael C. Ford, Atlanta, Ga., for Block.

Vernon S. Pitts, Jr., Atlanta, Ga., for Edwards.

Russell F. Gleason, pro se, and Steven Skelton, Bloomington, Ill., for Gleason.

Rhonda Brofman, Atlanta, Ga., for Beck.

Howard Weintraub, Asst. U.S. Atty., Atlanta, Ga., Sara Criscitelli, Appellate Section, Crim.Div., Washington, D.C., for plaintiff-appellee.

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

Before KRAVITCH and ANDERSON, Circuit Judges, and ATKINS *, District Judge.

R. LANIER ANDERSON, III, Circuit Judge:

Appellants were convicted of numerous counts of wire fraud, mail fraud, interstate transportation of a security which had been stolen, converted, or taken by fraud, and a single count of conspiracy. The convictions stemmed from an "advance fee" scheme that appellants and their co-conspirators operated in 1979 and 1980. Appellants argue that numerous alleged errors committed by the district court require a reversal of their convictions. We reject these contentions, and affirm.

I. FACTS

Appellants Gleason and Beck were listed as officers of a Georgia corporation, Offshore Investments, Limited ("OIL"), that was engaged in the practice of brokering loans. Appellant Edwards acted as general counsel for the corporation and also participated in the corporation's brokerage activities. Appellant Block was a California broker who referred prospective borrowers to OIL and described himself as OIL's west coast representative. Three other individuals, Mr. Almeda, Mr. Stafford, and Mr. McCaffery, were indicted as co-defendants but were not present at trial since the government could not secure their presence in the United States. 1

Almeda was the president of OIL. McCaffery and Stafford were affiliated with the London Irish Bank and also constituted an integral part of the scheme to defraud.

Brokers, including appellant Block, referred prospective borrowers who had been unsuccessful in obtaining financing from conventional sources to OIL. The borrowers then met with either Almeda, Gleason, or Beck at OIL's Georgia office. Generally, a representative of OIL stated that the corporation had been successful in securing collateral for large loans. The borrower presented a package relating to their proposed project. Almeda, Beck, Block, or Gleason then reviewed the proposals with the borrowers.

OIL representatives informed the borrower that he should apply for a loan significantly greater than the amount needed in order to ensure that a portion of the loan would be available for placement in a "sinking fund" where it would supposedly compound sufficient interest over the term of the loan to repay the entire principal. OIL did not purport to make loans. Instead, OIL's representatives stated that they would refer the borrower to a prime world bank that would provide collateral for the borrower's loans. The appellants represented the London Irish Bank to be such a bank. According to appellants, the collateral would take the form of "trust notes" which were similar to certificates of deposit. Armed with the "trust note" as collateral, the borrower would supposedly find conventional lenders ready, willing, and able to loan money for the contemplated project.

The appellants then informed prospective borrowers that they had to pay a fee to OIL to obtain this loan collateral. The fee was usually $25,000 to $35,000, although one borrower paid an advance fee of $120,000. The appellants told the borrowers that this fee did not go to OIL but instead was to be placed in an escrow account and would be paid to the bank when it issued the guarantee. The borrower was assured that the fee would be returned if he was unable to obtain a loan guarantee. OIL's reimbursement for its services was to come from a percentage of the funds advanced by the lender.

The terms of this agreement were set out in an ambiguously worded agreement called a "Mandate." The borrower also signed an "Agreement and Request for Loan Collateral." Upon receipt of the "Mandate," the "Loan Agreement," and the financial package, the London Irish Bank issued a guarantee called a "trust note."

The borrower then took the trust note to a lender to obtain a loan. At this point, the "chicken and egg" game began. None of the borrowers were able to obtain loans with the trust notes. Lenders expressed a variety of reasons for their refusal to make the loans. Some explained that the trust note was not a guarantee, but was a promise to provide a guarantee if the borrower obtained a loan commitment. The promise, however, was an empty one for a borrower would have no need for a guarantee after a loan commitment was obtained. Other lenders explained that the London Irish Bank refused to confirm the guarantee over the phone or that the London Irish Bank's reputation was poor.

Some victims then went to England to meet with bank personnel, McCaffery, Stafford, and, on occasion, Gleason. They gave a variety of responses to the borrowers' inability to obtain a loan: some borrowers were assured that a loan would be forthcoming; McCaffery refused to meet with other borrowers or disclaimed responsibility for their inability to obtain a loan.

Other borrowers returned to OIL. OIL followed a policy of not taking phone calls from the disgruntled borrowers. On the occasions when a borrower did contact an OIL representative, they insisted that the guarantees were viable and generally maintained that OIL had performed its obligations by supplying the guarantees. OIL refused to refund any of the advance fees.

At trial, the government proved through various bank and wire transfer records that the advance fees were never put in an escrow account but were instead diverted to appellants for their personal use.

Each appellant testified in his own defense. The basic thrust of the defense case was that the appellants made no knowing misrepresentations, did not participate in a conspiracy, and did not knowingly defraud the would-be borrowers. Appellants generally suggested that they were themselves "defrauded" in that they thought they were involved in legitimate business transactions. Appellants further suggested that Almeda, McCaffery, and Stafford were exclusively responsible. Alternatively, appellants maintained that the scheme was in fact a viable, legitimate financing arrangement.

II. THE INTERSTATE TRANSPORTATION COUNTS

Appellants argue that the evidence was insufficient to convict them of the interstate transportation counts. These counts charged appellants with the interstate transportation of securities, knowing the same to have been stolen, converted, or taken by fraud under 18 U.S.C. Sec. 2314. These counts involve substantially identical facts.

In each count, the appellants induced clients of OIL to travel into Georgia for the purpose of delivering a check to OIL for the client's advance fee. The appellants accepted the checks and either deposited them in OIL's account or forwarded them to co-defendant McCaffery at the London Irish Bank. In each instance, the funds were not placed in an escrow account but were distributed among the defendants instead.

18 U.S.C. Sec. 2314 provides, in pertinent part:

Whoever transports in interstate or foreign commerce any goods, wares, merchandise, securities or money, of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud ... [s]hall be fined not more than $10,000 or imprisoned not more than ten years, or both.

18 U.S.C. Sec. 2314. Appellants first note that the first paragraph of Sec. 2314, unlike the second paragraph, does not employ the language "transports or causes to be transported." From this, appellants argue that they have been indicted for a "new offense" since the indictment charged them with causing the interstate transportation of securities obtained by fraud.

This argument has, however, been firmly rejected by the Supreme Court. In Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435 (1954), the Court held that "[t]o constitute a violation of these provisions, it is not necessary to show that petitioners actually ... transported anything themselves; it is sufficient if they caused it to be done."

Appellants next argue that the transportation in interstate commerce had ceased before the checks were converted or taken by fraud. In particular, appellants note that the victims crossed state lines with the checks in their own possession. Appellants contend that any fraud or conversion of the checks was purely of an intrastate character.

In McElroy v. United States, 455 U.S. 642, 102 S.Ct. 1332, 71 L.Ed.2d 522 (1982), the Supreme Court held that under a related subsection of Sec. 2314, an offender can be properly convicted of the interstate transportation of forged securities even if the forgery occurred after the security's movement across state lines. According to the Court, "Congress intended to proscribe the transportation of a forged security at any and all times during the course of its movement in interstate commerce, and ..., the stream of interstate commerce may continue after a state border has been crossed." Id. at 653-54, 102 S.Ct. at 1339. Thus, the Court concluded that the trial judge properly instructed the jury that the transportation of a forged security within the boundaries of a state violates Sec. 2314 if the jury found the movement to be a "continuation of the movement that began out of state." Id. at 654, 102 S.Ct. at 1339.

Appellants attempt to distinguish McElroy by noting that it interpreted a different paragraph of Sec. 2314. The operative language--"whoever transports in interstate or foreign commerce any [securities of a...

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