799 F.2d 1494 (11th Cir. 1986), 84-5677, United States v. Sawyer
|Citation:||799 F.2d 1494|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Steven SAWYER, Harvey M. Bloch, Allen C. Leavitt, Defendants-Appellants.|
|Case Date:||September 24, 1986|
|Court:||United States Courts of Appeals, Court of Appeals for the Eleventh Circuit|
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Nathan Z. Dershowitz, Dershowitz & Eiger, P.C., New York City, for sawyer.
Leon Kellner, U.S. Atty., Miami, Fla., Barry D. Goldman and Lucy L. Thomson, U.S. Dept. of Justice, Fraud Section, Crim. Div., Washington, D.C., for U.S.
Sheryl J. Lowenthal, Coral Gables, Fla. (Court-appointed), for Leavitt.
Irving P. Seidman, New York City, and Fred A. Schwartz, Entin, Schwartz, Barbakoff & Schwartz, North Miami Beach, Fla., for Bloch.
Appeal from the United States District Court for the Southern District of Florida.
Before FAY and KRAVITCH, Circuit Judges, and HENLEY, [*] Senior Circuit Judge.
This case arises out of a "boiler room" 1 operation at Stanford Management Corporation (SMC), a Hallandale, Florida based commodity pool operator and trading advisor. Appellants Steven J. Sawyer, a principal of SMC, and Alan C. Leavitt, an SMC
salesman, were convicted after a jury trial on eleven counts of mail and wire fraud, 18 U.S.C. Secs. 1341 and 1343 (1982); commodity fraud, 7 U.S.C. Secs. 6o(1) and 13(b) (1982); interstate transportation of a security taken by fraud, 18 U.S.C. Sec. 2314 (1982); and one count of conspiracy under 18 U.S.C. Sec. 371 (1982). Prior to trial, appellant Harvey M. Bloch, SMC's president, entered a conditional plea of guilty to one count of commodity fraud and one count of conspiracy. Appellants raise the following issues on appeal: (1) whether the evidence was sufficient to support the convictions of Sawyer and Leavitt; (2) whether the district court abused its discretion by denying Sawyer's and Leavitt's motions for severance; (3) whether the district court abused its discretion in certain evidentiary rulings; (4) whether the district court erred in refusing to grant judicial use immunity for a proposed witness of Sawyers'; (5) whether the government's opening statement constituted prosecutorial misconduct requiring reversal of Sawyer's conviction; (6) whether the district court erred in denying Bloch's motion to suppress evidence seized pursuant to the execution of a search warrant at SMC; and (7) whether Bloch's guilty plea was involuntary. Finding no error, we affirm.
On March 8, 1983, a grand jury in the Southern District of Florida returned an eighteen count indictment charging appellants and four codefendants 2 with devising and promoting a scheme to defraud members of the public who were induced to invest in commodity pools operated by SMC. The indictment specifically charged that the defendants falsely represented that SMC's commodity pools operated profitably and involved relatively low risk, when in fact, the great majority of the pools lost money; and that they intentionally concealed information regarding SMC's operating losses, large commissions and fees charged, and the actual value of investors' accounts. It was further charged that a false and misleading disclosure statement was distributed to SMC's investors. The evidence at the ensuing twenty-four day trial, which included the testimony of appellant Bloch, various SMC employees, SMC's lawyer and a parade of disgruntled SMC investors, provided the following background on SMC's troubled history and operations.
The SMC saga began in 1979 when Bloch, a former New York restauranteur, was invited to Florida to join a commodities business that his cousin, appellant Steven J. Sawyer was putting together. Early in 1980, Bloch became Sawyer's partner in a branch office of David H. Siegel & Company (DHS), a commodities pool operation. Bloch held the title of vice-president; David Siegel was the trader; William Zipkin and appellant Leavitt were in sales; and Sawyer was in charge of administration. Siegel and Michael King also owned SMC, which was not in use, thought it had a Futures Commission Merchant license. 3 This license, which DHS did not have, would allow SMC to solicit individual clients for individual commodities accounts, rather than just for pools. In June of 1980, Sawyer arranged for Bloch to purchase one hundred percent of SMC stock from Siegel and King. Bloch thus became SMC's sole record shareholder and its president. Bloch testified, however, that he and Sawyer were actually partners with Sawyer getting sixty percent of the profits and assets of SMC. There was no written document to this effect as Sawyer told Bloch he did not want to be a named owner of SMC because of personal problems, including the pendency of a million dollar lawsuit and other matters unrelated to the commodities business.
After Bloch's acquisition of SMC, it replaced DHS but kept the same offices and employees. SMC began actively doing business in July 1980. Reflecting his controlling interest, Sawyer was integrally involved in SMC's operations from routine matters of office administration to matters of financial management. The latter included setting up SMC's sales programs; hiring salesmen; setting commissions; reviewing salesmen's performances and scripts used in sales solicitations; keeping track of money coming in from investors; and, thereafter, determining which dissatisfied investors should receive a return of their management fees. Sawyer also disbursed corporate funds and used them as his own.
SMC employed about one hundred twenty salesmen who solicited investors and sold interests via Watts lines in two kinds of commodity contracts, long-term futures pools 4 and managed account pools, 5 through the use of "boiler-room" sales tactics, see supra n. 1. Salesmen attended daily motivational sales meetings held by Bloch. They were eligible to win prizes for sales performance such as silver dollars, Krugerrands, or leased Cadillacs. During the course of one of Bloch's meetings, which was taped and played at trial, Bloch was heard to say that customers would be led to the slaughterhouse, and that salesmen should avoid direct questions from customers and keep their answers in the "gray" area.
In December of 1980, Sawyer and Bloch learned that SMC had incurred huge losses as a result of David Siegel's unsuccessful trades. Siegel was fired and Michael King was hired as the trader. King would subsequently prove as unsuccessful a trader as Siegel. Initially, Bloch and Sawyer thought the SMC pools had suffered losses of $200,000; by February 1981, they discovered that the pools had lost over $954,000.00 in 1980. Sawyer and Bloch never informed their salesmen, their investors 6 or the Commodities Futures Trading Commission (CFTC) of the amount or nature of these losses.
In January 1981, Bloch directed that SMC's pools be consolidated into a smaller number of large pools. Investor's funds were transferred into these pools without their authorization or knowledge, and frequently, contrary to their instructions. 7 In spite of SMC's losses, in February of 1981, Sawyer gave Bloch a check payable to Bloch in the amount of $50,000.00, which they cashed and split sixty/forty--$30,000.00 for Sawyer, $20,000.00 for Bloch. In addition, numerous SMC checks
were written to Score Realty, a company from whose account Sawyer paid his personal bills. There were checks to Sawyer's wife, his mother-in-law, his children's live-in governess, his maid and a female friend, none of whom performed any services for SMC.
Numerous investor complaints began coming into SMC. Investors complained that they were in the wrong pools, not in pools at all when they thought they were in, or that they did not know the net asset value (NAV) of their account and could not get that information. In particular, a number of complaints came in with respect to salesman Philip Gold. Gold consistently told his customers that their accounts had made money when, in fact, they lost money, and frequently were not even in the market. Gold also told his customers that they had purchased managed accounts with a ten percent management fee, and not futures pools which were charged a commission of between thirty-five and forty percent. He also concealed the poor performance of the SMC pools. At one point, around August or September of 1981, Bloch tried to fire Gold for lying to customer Richard Lassig. Shortly thereafter, however, Sawyer intervened, telling Bloch that Gold knew what he was doing and that Gold was staying and would report to Sawyer. In the middle of the sales room, Sawyer remarked that Bloch did not know how to handle Gold, and that Gold should go directly to Sawyer with any problems. In February 1982, Bloch tried once again to fire Gold for lying to customer Joseph Olivio, who had made a tape recording of Gold's misrepresentations. Sawyer said he would handle the problem and reinstated Gold, advising him to come to him if there were any more problems. Gold remained at SMC under Sawyer's supervision and sold pool interests to sixty-one investors after Sawyer defeated Bloch's attempts to fire him.
Four salesmen, including appellant Leavitt were assigned by Sawyer and Bloch to handle investor complaints. One SMC salesman testified that it was his understanding that these complaint "specialists" were supposed to mislead investors. At times, Sawyer and Bloch also handled complaints. When Sawyer did take calls from investors, he frequently used the aliases Sloan and Stern, Bloch would use the aliases Boatwright and Lehrer. In addition, each also sold to investors, with Sawyer responsible for handling the accounts of SMC's largest investors, Carl and Mary Lou Schulte and her brother Michael Kneifl...
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