U.S. v. Nerlinger

Decision Date02 December 1988
Docket NumberD,Nos. 64,267,s. 64
Citation862 F.2d 967
Parties27 Fed. R. Evid. Serv. 271 UNITED STATES of America, Appellee, v. Gary NERLINGER and Robert Varipapa, Defendants-Appellants. ockets 88-1081, 88-1094.
CourtU.S. Court of Appeals — Second Circuit

David T. Grudberg, New York City (Mark F. Pomerantz, Fischetti Pomerantz & Russo, New York City, of counsel), for defendant-appellant Gary Nerlinger.

Helen Coady, The Legal Aid Society, Federal Defender Services Unit, New York City, for defendant-appellant Robert Varipapa.

Robert L. Plotz, Asst. U.S. Atty. for S.D. New York, New York City (Rudolph W. Giuliani, U.S. Atty. for S.D. New York, Linda Imes, Asst. U.S. Atty. for S.D. New York, New York City, of counsel), for appellee.

Before PIERCE and WINTER, Circuit Judges, and STEWART, District judge. *

WINTER, Circuit Judge:

Appellants Gary Nerlinger and Robert Varipapa appeal from their convictions on one count each of conspiracy to commit mail fraud in violation of 18 U.S.C. Sec. 371 (1982) and a total of sixteen counts, seven against Nerlinger and nine against Varipapa, of mail fraud in violation of 18 U.S.C. Sec. 1341 (1982). Nerlinger and Varipapa each moved for severance pursuant to Fed.R.Crim.P. 14. The district court denied these motions, and each appellant claims that the spillover effect from the joint trial prejudiced his respective defense. We disagree. In addition, Nerlinger claims that the admission against him of hearsay statements made by coconspirators after Nerlinger withdrew from the conspiracy was error. Although we agree that Nerlinger did withdraw from the conspiracy before the hearsay statements were made, the error was harmless. We therefore affirm both convictions.

BACKGROUND

The evidence presented by the government at the defendants' trial portrayed the following events. In early 1982, Tony DeAngelis became the head trader for the New York office of First Commodity Corporation of Boston, Inc. ("FCCB"), and as such, was authorized to execute orders for commodity-futures contracts on various exchanges.

A commodity-futures contract is an agreement either to purchase or to sell certain goods at a future date. Because estimates of future supply and demand for subject goods change over time, the value of commodity-futures contracts fluctuates. An investor may thus take advantage of such fluctuations by selling contracts before their date of execution on an exchange such as the Commodities Exchange in New York.

FCCB offered its customers two types of commodity-futures accounts pertinent to this appeal, both of which allowed discretionary trading by FCCB: (i) the round-turn account; and (ii) the long-term forward ("LTF") account. Under a round-turn account, an investor typically paid FCCB a commission of $100 per trade. An LTF account, by contrast, required a one-time, up-front commission of thirty-nine percent on a minimum investment of $10,000. The provisions governing LTF accounts limited investors to only one contract per $5,000 invested in the particular LTF account. Profits resulting from trading on the LTF account, however, were often reinvested in the account after the deduction of an additional thirty-nine percent fee. If such a reinvestment amounted to $5,000, the investor would be entitled to the inclusion of an additional contract in that LTF account. The acquisition of a contract through reinvestment was referred to as an "equity buy".

As the head trader for the New York office, DeAngelis was authorized to trade "in bulk"--permitted to place orders for a commodity at the exchange without those orders being assigned to an account of a particular FCCB customer. At the end of the day, he would then assign the trades to various customers' accounts. Soon after becoming FCCB's chief New York trader, DeAngelis, who had a gambling problem that caused him to need cash on a seemingly continual basis, chose to assign profitable trades to accounts that were close to earning $5,000 in profits. This enabled the salesmen on those accounts to cause an "equity buy" in the account and thereby earn an additional thirty-nine percent commission. Those salesmen in turn paid DeAngelis $50 for each "equity buy" he diverted to them.

In July 1982, DeAngelis and Stephen Donovan, a salesman in FCCB's New York office, developed a new scheme to generate cash. Donovan agreed to open an account at FCCB, and DeAngelis in turn guaranteed At the end of July 1982, Donovan opened an account in the name of his sister-in-law, Tina D'Erasmo. He did so in order to avoid FCCB's rule against a salesperson having an account at FCCB. DeAngelis's diversion of profitable trades to this account produced $29,000 in profits in the six months between August 1982 and January 1983. Subsequently, Donovan opened a second account, also in the name of a sister-in-law, Emily LaRose. This latter account produced profits of $27,000 between October 1982 and June 1983. The profits from both accounts were split between Donovan and DeAngelis.

the profitability of the account in exchange for one-half of the profits. This guarantee was based on DeAngelis's ability to assign profitable trades to that account. Necessarily, this diversion reduced the profits to FCCB's regular customers.

Sometime between the opening of the D'Erasmo account and the LaRose account, Gary Nerlinger, another FCCB salesman, became curious about DeAngelis's relationship with Donovan. Eventually, DeAngelis revealed to Nerlinger his agreement with Donovan and invited Nerlinger to participate in the same scheme. In August 1982, Nerlinger directed his then fiancee, later wife, and later yet his adversary in a bitter divorce, Linda Lempel, to fill out an account application at FCCB under her middle name, Ann. Nerlinger told Lempel to exaggerate on the application both the size of her income and the nature of her employment. In September 1982, Nerlinger opened the "Ann Lempel" account with a deposit of $5,000.

DeAngelis thereafter diverted profitable trades to the Lempel account. He also occasionally "busted" a profitable trade out of a legitimate customer's account and credited it to the Lempel account. Unlike the manipulation involving the discretionary assignment of trades, "busting" a trade out of an account involves taking a trade out of one account and placing it in another account. By September 23, 1982, after only two weeks of trading, Lempel had received a check for profits of $11,890 from FCCB. After Lempel deposited the check, Nerlinger split the proceeds with DeAngelis in cash. For the next several months DeAngelis continued to divert profitable trades to the Lempel account and received one-half of the profits.

In March 1983, Nerlinger decided to leave FCCB because of problems with his superiors unrelated to his activities with DeAngelis. In anticipation of his move, Nerlinger asked DeAngelis if the Lempel account could remain open after Nerlinger's departure from the firm. DeAngelis replied that that would not present any problems. At this time Nerlinger told his wife that they would be receiving some big checks from the FCCB account, but that they would not be doing it much longer. Subsequently, DeAngelis busted several trades into the Lempel account and, as a result, Nerlinger and Lempel received checks from FCCB in the amounts of $10,750 and $20,250 on March 11 and March 25, 1983 respectively. Nerlinger then closed the Lempel account. In all, the Lempel account had produced over $62,000 in profits in the less than seven months between September 1982 and March 1983. It was the only FCCB account serviced by Nerlinger that showed a profit during that period.

The closing of the Lempel account did not conclude DeAngelis's fraudulent operation at FCCB. In addition to the Lempel, D'Erasmo and LaRose accounts, the evidence showed that DeAngelis diverted winning trades into several other accounts in which he shared the profits. One of these was in the name of Joseph Giannone, a man DeAngelis had met at a card game, in an account under Giannone's name. As the salesman assigned to the Giannone account, appellant Robert Varipapa noticed its unusual profit record compared to other accounts (which showed no profit) and asked DeAngelis what was going on. Ultimately, DeAngelis explained how he could guarantee an account's profitability by manipulating the assignment of trades. He offered to include Varipapa in the scheme if Varipapa opened an account at FCCB under an assumed name. Varipapa thereupon opened an account with $10,000 under the name of his then girlfriend, later wife Immediately after the opening of the Tedeschi account, Tedeschi mentioned it to George Tackett, a business associate of her employer. Tedeschi explained that it was a "no-lose account and [that Tackett] should get involved in it." Tackett became interested and arranged a meeting with Varipapa. At that meeting Tackett told Varipapa that Tackett wanted to "open up an account exactly the way that [Tedeschi] had." Varipapa agreed but requested an initial account balance of $51,600. Varipapa wanted this amount because it reduced the difficulty of managing the "guaranteed-profit" account and would aid him in his bid to be salesman of the year. At a subsequent meeting attended by Varipapa, Tackett and Frank Lanziano (Tedeschi's employer), Varipapa explained how the account worked. He stated that "there was an inside man who was a trader, Tony DeAngelis, who manipulated the account in such a fashion as to guarantee that we would make money." In addition, the parties negotiated the terms of the guaranteed-profit account. Eventually "[they] agreed that 40 percent would be paid to Robert Varipapa who would in turn pay Tony DeAngelis and 60 percent would be paid to [Tackett and Lanziano]." On September 28, 1983, Tackett and Lanziano opened the account by depositing a certified check for $51,600 with FCCB.

Theresa Tedeschi. According to the agreement between...

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