U.S. v. Biesiadecki

• Citation: 933 F.2d 539
• Decision Date: 24 May 1991
• Docket Number: No. 90-1851,90-1851
• Parties: 33 Fed. R. Evid. Serv. 48 UNITED STATES of America, Plaintiff-Appellee, v. Jan BIESIADECKI, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 539

933 F.2d 539

33 Fed. R. Evid. Serv. 48

UNITED STATES of America, Plaintiff-Appellee, v. Jan BIESIADECKI, Defendant-Appellant.

No. 90-1851.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 24, 1990.

Decided May 24, 1991.

Michele E. Smith, Asst. U.S. Atty., David S. Rosenbloom, Barry R. Elden, Asst. U.S. Atty., Criminal Receiving, Appellate Div., Chicago, Ill., for U.S.

Patrick E. Deady, Lord, Bissell & Brook, Chicago, Ill., for Jan Biesiadecki.

Before CUMMINGS, WOOD, Jr., and RIPPLE, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

The government indicted sixteen former employees of the Chicago area offices of the First Commodity Corporation of Boston ("FCCB") for offenses arising from their participation in a massive scheme to fraudulently induce approximately 2,600 customers to invest in commodity futures contracts. Appellant Jan Biesiadecki was among those named in the original indictment. All of the defendants, except Biesiadecki, pleaded guilty prior to trial. The grand jury then returned a superseding indictment against Biesiadecki alone alleging that he fraudulently solicited over two million dollars from 111 customers. Biesiadecki pled not guilty and following a lengthy jury trial he was found guilty on all counts, including mail and wire fraud (18 U.S.C. Secs. 1341, 1343), racketeering (18 U.S.C. Sec. 1962(c)), and conspiracy to commit racketeering (18 U.S.C. Sec. 1962(d)).

In a separate verdict the jury found that $85,000 of Biesiadecki's commissions were subject to forfeiture under the racketeering statute. He was sentenced to three months imprisonment and five years probation. Probation was conditioned on the first six months being served in work release. Biesiadecki was also ordered to pay $25,000 in restitution and prohibited from engaging in the sale of commodities during his probation. Biesiadecki's appeal raises issues involving evidentiary rulings and the sufficiency of the evidence supporting his conviction. We affirm.

I. FACTS

Biesiadecki emigrated from Poland to the United States in 1977 and later became a naturalized citizen. He held a series of jobs, including janitor, machine operator, draftsman, mechanical engineer, and "consultant," until 1983. In May 1983, Biesiadecki applied for a position as an account executive with the Chicago office of FCCB and was hired for the firm's Oak Brook office. He worked at the Chicago office until the Oak Brook office opened in late 1983.

FCCB was a retail commodity brokerage firm headquartered in Boston and registered with the Commodity Futures Trading Commission ("CFTC") as a futures commission merchant. FCCB hired account executives (also referred to as brokers) paid on a commission basis, to solicit potential investors by telephone.

The primary investment vehicle of FCCB was called a long term forward ("LTF") account. The LTF account was a commodity futures margin account in which the investor purchased a certain number of units, paid a set commission initially and would be entitled to unlimited trading in that account for a specified period of time, usually three to six months. During Biesiadecki's tenure at FCCB, a typical account unit cost $12,900. The first $3,900 served as a fee to FCCB and the remaining $9,000 was equity for the margin account. FCCB also offered a more traditional commodities trading account in which the customer was charged a per-trade fee of $100.

The brokers were trained in a telephone sales technique referred to at FCCB as the "box close." Brokers employing this technique attempted to sell four components: the company, themselves, the product (commodities futures contracts), and the potential profits (called "money in, money out"). Several former employees of FCCB testified at trial that Biesiadecki was taught the "box close" sales technique and used it zealously.

In promoting the company, Biesiadecki and the other brokers were taught to stress the rapid growth of FCCB and its expansion from a $300,000 company to a $10,000,000 company. In reality, most of FCCB's customers were losing money. In selling themselves, the brokers said they worked long hours and constantly watched the market to protect their customers' investments. The brokers did work long hours, but their labors were focused on soliciting more customers rather than vigilantly scrutinizing market positions. Biesiadecki and the other brokers actually spent less than 45 minutes a day analyzing the markets. Brokers who spent more than that amount of time analyzing the markets were labelled "marketheads."

Selling the "product" component of the "box" entailed creating a sense of urgency about investing. One strategy commonly employed at FCCB was to tell the customer that the price of silver was about to soar because of a particular world event. However, the world events were interchangeable as dictated by current affairs since it was irrelevant whether the particular world event actually had any impact on the silver market.

The fourth part of the "box"--the potential for sizable profits--was expressed by the brokers at FCCB through the concept of "money in, money out." In light of the results achieved for almost all FCCB customers, this concept would more appropriately have been labelled "money lost." During this portion of the sales pitch the broker would determine the possible amount of the customer's investment and then discuss the profit to be made if the price of the commodity increased by a certain amount. The broker would fail to mention that these windfall profits had never actually been realized by his customers.

Perhaps the most crucial element of the sales pitch was minimizing the risk. This was important because as part of the application process prior to investing, a prospective FCCB customer had to sign a risk disclosure statement which was required by Rule 1.55 of the CFTC. 17 C.F.R. Sec. 1.55 (1976). The statement apprised the customer of the extremely risky nature of commodity futures trading. In addition, FCCB's compliance department located in Boston called customers who had submitted applications in order to verify the customers' responses to the application questions and the telephone call would be tape recorded. In order to prevent potential customers from wavering in their decisions to invest, FCCB brokers would tell customers that the risk disclosure statement was a mere formality and they would emphasize their skill in handling accounts.

Biesiadecki was very adept at the "box close" technique and, in fact, became one of the top producers at FCCB. The experience of Raul Fuertes, one of the witnesses for the government, is illustrative of Biesiadecki's sales tactics. Fuertes was born in Peru and came to the United States in 1964. He worked as a headwaiter at a restaurant in Chicago. Fuertes was contemplating investing in real estate. He responded to a flyer mailed to him by FCCB and in early 1984 Biesiadecki began calling Fuertes two or three times a day attempting to persuade him to invest in commodities. Biesiadecki told Fuertes that "no investment will be better than commodity [sic]." He also told Fuertes that he was from Poland and had become very wealthy as a result of investment in commodities. On one occasion in the offices of FCCB, Biesiadecki showed Fuertes a computer printout which purported to represent the growth of one of his customer's accounts from $50,000 to $250,000 over a two-month period. Moreover, Biesiadecki told Fuertes that all of his customers were very pleased with him.

Fuertes finally succumbed to Biesiadecki's sales pitch and mortgaged his house in order to obtain $28,000 to invest in commodities. FCCB rules did not allow a customer to invest with borrowed funds. However, Biesiadecki circumvented this rule by instructing Fuertes not to send the loan proceeds directly to FCCB but instead to deposit the bank's check into his personal checking account and send two personal checks to FCCB. Biesiadecki also instructed Fuertes to lie about the source of the funds on his application form and during the compliance call, convincing Fuertes that he would not be able to "get into the business" if he gave the wrong answers.

After Fuertes invested with FCCB and began rapidly losing money he attempted to call Biesiadecki but his calls were not returned. By the time Fuertes closed his account at FCCB he had lost $20,000 of his $28,000 investment and had to sell his house to repay the loan. Not surprisingly, Fuertes testified that if he had known ninety percent of Biesiadecki's customers lost money he would not have invested. At trial, other customers of Biesiadecki testified to similar ill-fated investment experiences.

II. ANALYSIS

Biesiadecki raises the following challenges to his conviction: (1) the conviction was improperly based on Biesiadecki's failure to disclose prior customer losses to prospective investors; (2) the trial court erred in excluding testimony from customers who believed that they had not been defrauded by Biesiadecki; (3) the trial court erred in limiting cross-examination of former customers of Biesiadecki regarding their failure to complain about misrepresentations; and (4) the mailings charged in the indictment were not in furtherance of the scheme to defraud.

A. Failure to Disclose

The government elicited testimony from Biesiadecki's former customers concerning affirmative misrepresentations that his customers "are very pleased with him" and that he "always made money for his clients." Additionally, many former customers testified that Biesiadecki concealed the fact that most of his customers were losing money. Biesiadecki contends that in convicting him the jury could have improperly relied on his failure to disclose rather than relying exclusively on evidence of affirmative misrepresentations. Biesiadecki acknowledges in his reply brief that he does not attack his conviction based on insufficient evidence of affirmative misrepresentations, but he...