Com. v. Kiley

• Decision Date: 30 September 1977
• Parties: COMMONWEALTH v. Charles J. KILEY, Jr. Supreme Judicial Court of Massachusetts, Suffolk
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 837

367 N.E.2d 837

373 Mass. 454

COMMONWEALTH v. Charles J. KILEY, Jr.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued May 6, 1977.

Decided Sept. 30, 1977.

John P. White, Jr., Boston, for defendant.

Wade M. Welch, Sp. Asst. Atty. Gen., Boston (Donald P. Zerendow, Asst. Atty. Gen., with him), for the Commonwealth.

Before HENNESSEY, C. J., and QUIRICO, BRAUCHER, KAPLAN and LIACOS, JJ.

HENNESSEY, Chief Justice.

After a trial before a Superior Court judge without jury, the defendant was found guilty on twelve indictments, and on all of the ninety-three counts contained therein, charging violations of G.L. c. 266, § 53A. All charges concerned twelve loans from the Brighton Five Cents Savings Bank (Brighton Five) to Merlin R. Fisher, Jr. (Fisher), six loans to Cirt Research, Inc. (Cirt), of which Fisher was president, and six loans to Octal Realty Inc. (Octal), of which Fisher was president. All loans were alleged to have occurred from on or about October 10, 1969, to on or about July 16, 1971. During all this time the defendant was president of the Brighton Five.

The violations charged were three indictments for wilful misapplication of bank funds in connection with the loans to Fisher, Cirt, and Octal; three indictments for knowingly receiving and accepting fictitious, valueless, inadequate and irresponsible obligations from Fisher, Cirt, and Octal; three indictments for loaning the funds and credits of the Brighton Five to Fisher, Cirt and Octal when the defendant knew each to have insufficient assets; and three indictments for knowingly making and causing to be made false entries on the bank's books, reports, and statements in connection with the loans to Fisher, Cirt, and Octal. ¹

The defendant was found guilty on all indictments and counts and received a sentence of five years to the Massachusetts Correctional Institution at Concord on each count of the indictments, the sentences to be served concurrently. His appeal is here under G.L. c. 278, §§ 33A-33G. We conclude that there was no error.

1. Trial of the action consumed more than four weeks, and generated hundreds of transcribed pages of testimony. Most of the testimony concerned the details of the twenty-four loans which were the subject matter of the indictments.

The defendant argues that the evidence did not warrant findings of guilty on the ninety-three counts, and that it was error for the judge to deny the defendant's motions addressed to the insufficiency of the evidence. We disagree. The evidence was sufficient as to all indictments and all counts. As to this issue, we consider only the evidence heard by the judge up to the time the Commonwealth rested its case in chief. See Commonwealth v. Kelley, --- Mass. ---, --- ^a, 346 N.E.2d 368 (1976).

In 1968, the defendant worked in Binghamton, New York. Fisher, whom the defendant had known since 1956 and with whom he had a social relationship, worked in a position subordinate to the defendant. In the fall of 1968, the defendant's brother Edward became president of the Brighton Five, his father having been president previously. In 1968, Fisher's salary was approximately $12,000 a year.

In the summer or fall of 1968, the defendant advised Fisher of the availability for purchase with no money down of accounts receivable and suggested formation of a corporation. Fisher then formed Cirt Research, Inc. These accounts receivable were "bad debts" of the Brighton Bank and Trust Company. Fisher testified that the defendant arranged for Cirt to purchase such accounts receivable, but that Fisher had never collected more than $15,000 on them and had ceased collecting about June, 1969. Fisher testified that an attorney, Mr. Henry M. Quinlan, had done some collecting thereafter, but Fisher did not know how much was collected. Fisher said that the defendant claimed to him to have collected $100,000 but Fisher knew nothing further about it and had no records to show it. Nothing in Cirt's records authorized the defendant to do anything.

In late July, 1968, the defendant became aware through his brother Edward of the availability for purchase of the Riviera Beach Motel in South Yarmouth. The defendant asked Fisher if he wanted to buy the motel, and advised him that the Brighton Five would finance 100% Of the purchase price plus additional money for renovation and working capital. The motel was closed in the winter. It was purchased by three trusts on August 30, 1968: the 22 Wightman Drive Realty Trust, Merlin R. Fisher, Jr., trustee; the 112 Gilmore Avenue Realty Trust, one John E. McEnaney, trustee; and the 77 Schubert St. Realty Trust, one James J. McKeown, trustee. Fisher put no money of his own into any of these trusts. He claimed that he and his wife owned the trusts or, alternatively, that Octal owned the trusts, but he had no evidence or records to show it. The purchase price for the motel was approximately $1,000,000. The funds were obtained from three mortgages of approximately $400,000 each from the Brighton Five. The mortgage financing had been arranged by the defendant. During 1969, the motel income was insufficient to meet expenses including mortgage debt. Fisher testified that additional funds were bank wired "from Boston" to the account of Octal in Binghamton, New York, so that mortgage payments could be made. During this period, Fisher was sending the defendant progress reports on the motel and discussed his bank balances with the defendant. During the summer of 1969, Fisher delivered to the defendant checks signed by him and drawn on a general account of the motel with the amount and payee left blank.

Fisher testified that in September or October, 1968, the defendant advised him to form a corporation to "hold" the Riviera Beach Motel. Octal Realty Inc. was formed about that time.

The corporate records of Cirt and Octal indicate that 900 shares of both Cirt and Octal stock were issued to Fisher and 100 shares of stock in each corporation to James J. McKeown. The president and treasurer of both Cirt and Octal was Fisher. His wife, Edna M. Fisher, was the only other officer of either corporation. Both corporations opened an account in the First City National Bank of Binghamton, New York. Merlin and Edna Fisher were the authorized signatures for both of these accounts. Fisher testified that there was no capital investment made in either corporation, that neither Cirt nor Octal had a corporate office, that the only corporate records of either corporation other than the initial formation papers and minutes were the checkbooks of Cirt and Octal which he maintained, and that, except for a savings account in the name of Octal at the Brighton Five, neither Cirt nor Octal had any other bank account. Fisher also testified that the defendant acted as his adviser as to the business of both corporations. Fisher testified that he had no knowledge as to the whereabouts of the stock certificates issued by either corporation. On cross-examination, Fisher agreed that for practical purposes he was Octal and Cirt.

On March 10, 1969, the defendant became president of the Brighton Five. In June of that year Fisher moved to Cape Cod to manage the Riviera Beach Motel. Title to the Cape Cod house was in Fisher's wife's name. Aside from the 900 shares of Cirt and the 900 shares of Octal, he had no stockholdings.

The twenty-four loans detailed in the indictments were shown on bank records to be secured by collateral in form of stocks and bonds, posted by the borrowers. The evidence showed that Fisher, Cirt, and Octal did not own the collateral. The defendant personally handled all the transactions for the bank. By these loans hundreds of thousands of dollars of the bank's money were obtained. This was diverted, not to the "borrowers," but to the defendant. There was evidence that the defendant diverted some of the money to pay for renovations to the Riviera Beach Motel, as well as the mortgage payments owed to Brighton Five on the motel. There was also evidence that the defendant used some of the money to buy securities on the stock market for Fisher, as authorized by Fisher. There was evidence from which the judge could infer that Fisher never became the owner of any of the stock allegedly purchased. There was evidence that the bank's board of investment knew nothing about these loans.

From this and other evidence the judge could infer that the defendant, as alleged in some of the indictments, in the language of G.L. c. 266, § 53A, "wilfully misapplie(d)" the funds of the bank. The evidence...