Fabian v. United States

Decision Date28 March 1966
Docket NumberNo. 17889,17891.,17889
Citation358 F.2d 187
PartiesFrank J. FABIAN, Appellant, v. UNITED STATES of America, Appellee. Joseph E. FABIAN, Appellant, v. UNITED STATES of America, Appellee. Robert P. SZALAY, Appellant, v. UNITED STATES of America, Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

George O. Kanouff, Omaha, Neb., made argument for appellants and filed typewritten brief with Richard C. Sheridan, Omaha, Neb.

Jerry E. Williams, Asst. U. S. Atty., Des Moines, Iowa, made argument for appellee and filed brief with Philip T. Riley, former U. S. Atty.

Before MATTHES and GIBSON, Circuit Judges, and LARSON, District Judge.

LARSON, District Judge.

These are appeals from convictions by a jury on 16 Counts of mail fraud, 18 U.S.C. § 1341. Counts 2, 3, and 14 of the 19 Count indictment were not submitted to the jury. The scheme upon which the convictions are based was the sale of stereo sets on a chain referral system in the Des Moines, Iowa, area. Appellants now seek reversal of their convictions, based on these contentions:

1. The jury should have been released following a prejudicial statement made by a member of the panel from which they were selected;
2. The trial court erred in admitting testimony of oral statements made by Concordia salesmen;
3. The Government\'s evidence was cumulative, repetitious, and provoked jury passion and prejudice;
4. Instruction Number 12 was erroneous; and
5. The lower court erred in denying appellants\' motions for a directed verdict.

In the summer of 1962 appellant Frank Fabian, a 38 year old high school graduate, and his brother, appellant Joseph Fabian, a 27 year old college student, sold stereo sets for Concerto, Inc., in Omaha, Nebraska, on a part-time basis. Concerto used the referral system, described below, and the Fabians worked for commissions, usually receiving $50.00 per set. While vacationing in Omaha that summer appellant Robert Szalay, a 23 year old nephew of the Fabians, accompanied them on sales demonstrations. During that period the Fabians discussed the possibility of forming their own business and their nephew, if not an active participant, was present during some discussions. Although Szalay returned to his home in Dearborn, Michigan, at the end of the summer, communications were maintained. In the early fall of 1962 the Fabians definitely determined to set up a sales program in another city similar to that used by Concerto in Omaha, and Robert Szalay decided to join the venture, contributing some capital. Additional funds were advanced by Joseph Fabian and a brother not involved in this case.

Appellants then established Concordia, Inc., as a Nebraska corporation. Frank was president; Joseph, vice president; and Robert Szalay was secretary-treasurer. On October 1, 1962, the corporation was authorized to do business in the State of Iowa. A sales tax permit was secured on November 28, 1962, and appellants posted a cash bond of $500.00. Office space was obtained in Des Moines under a one year lease, commencing September 22, 1962, and bank accounts in the name of Concordia, Inc., were opened with a Des Moines bank. Membership in the Credit Bureau of Des Moines was established in October of 1962. Arrangements were made to obtain stereo sets from Muntz T. V. Inc. of Illinois at a cost to appellants ranging from $98.00 to $149.00, depending upon the model and finish. However, most of the 65 sets purchased from Muntz were in the wholesale price range of $98.00 to $103.00, plus freight. Appellants contacted several finance companies and Consumers Finance Corporation finally agreed to purchase the Concordia sales contracts.

The method of marketing the sets in Des Moines was, in essence, a carbon copy of the Concerto sales plan in Omaha. Each stereo purchaser would receive an "Owner's Dividend Certificate" which provided that $15.00 would be paid for the name of each prospective customer (subject to credit qualifications), who agreed to a sales demonstration, regardless of whether a sale resulted. In addition, the prospective customer would receive $5.00 merely for listening to the sales presentation, which was not contingent upon the purchase of a set. Customers were informed that they could earn a set by referring twenty-six names, which could be submitted over a two year period. Most purchasers understood that there was no limit to the number of names they were allowed to refer, so that all referrals over twenty-six would result in profit. The referral plan was represented as a substitute for expensive advertising and a means of introducing the product to the community. Also, customers were told that the sets would later be sold through a retail outlet which appellants, or Concordia, planned to establish. Most customers understood that the referral plan had operated in other cities, such as Omaha and Lincoln, and many had the impression that these operations were quite successful.

The stereos were generally sold on an installment contract for $389.95, plus interest and carrying charges. These contracts were assigned to Consumer's Finance Corporation, which deducted a discount and paid the balance to Concordia. Purchasers were to make payments directly to the finance company, although some testified that they were not informed of this at the time they purchased the set, nor were they told about the interest and carrying charges added to the purchase price. With the addition of these charges, the total price of the set was approximately $485.00.

Initially appellants demonstrated the stereos, but they soon hired several salesmen, a number of whom were stereo purchasers who worked only part time. Among the salesmen was Don Knight, who had previously sold for Concerto in Omaha during the same interval that the Fabians were connected with that organization. Subsequent thereto, but before going to Des Moines, he took over a referral program involving Muntz stereos in Lincoln, Nebraska. That business was unable to honor the referrals and in mid-November, 1962, Knight came to Des Moines and was hired as a salesman for Concordia, receiving a commission of $60.00 a set, which was $10 more than the other salesmen received.

About the same time Muntz T. V. informed appellants that they would no longer sell stereos to Concordia. The Muntz sales manager indicated that this action was taken because the product was being sold in connection with a "gimmick" and because the price was exorbitant. He testified that the retail value of the stereos was $200.00. In addition, the Muntz representative informed the Fabians that a referral plan in Lincoln, with whom Muntz had been doing business, received adverse publicity which caused the company to become concerned about appellants' operation in Des Moines. The last set which Muntz sold to appellants was on November 20, 1962. Thereafter, Concordia obtained the same Muntz model from other sources, the majority at a wholesale cost higher than the Muntz price.

In December, 1962, Concordia began receiving complaints that appointments were not kept with the referrals. The office girl informed the callers that Concordia had attempted to contact them to reschedule some of these appointments since they had more than they could cope with, and that the salesmen were having difficulties in making all of the calls because of the severe weather. Complaints were also received concerning the $15.00 referral payments and customers were informed that there were so many to complete that it was impossible to adhere to the payment schedule. They were also told that the person with authority to sign checks was out of town. In addition to the complaints directed to Concordia, complaints were lodged with the Better Business Bureau. Shortly after appellants arrived in Des Moines, they had contacted the Bureau, leaving a phone number and address. After receiving a number of complaints, some beginning in the fall of 1962, a Bureau representative held a conference with the Fabians on January 16, 1963, and was promised complete cooperation in eliminating the problems. About a month later, on February 25, 1963, the business was abandoned, although no arrangements had been made concerning demonstration appointments and referral payments. Frank Fabian returned to Omaha; Joseph Fabian had already left in the latter part of January to resume his college work; Robert Szalay, after cleaning out the office, subsequently went back to Michigan.

Jury Prejudice

During selection of the jury a member of the panel made a statement to the effect that as a juror in another mail fraud case he suggested that defendant be found guilty so the jury could watch the World Series.1 Thereafter, counsel for both sides conferred with the trial judge in chambers and it was determined that appellants would be granted an additional peremptory challenge. When this juror was called, the trial judge excused him for cause. However, it is now suggested that the court should have dismissed the entire panel for cause or should have taken evidence to determine exactly what the prospective juror said and whether or not other members of the panel heard the statement.

"The right to challenge the panel or to challenge a particular juror may be waived, and in fact is waived by failure to seasonably object." Batsell v. United States, 217 F.2d 257 (8th Cir. 1954). In our opinion, that right was waived here. Appellants concede that no objection was made to the course followed by the trial judge. If dissatisfied with that procedure, the objection could have been noted. Appellants neither moved for a mistrial,2 nor did they present a motion to dismiss the panel. On voir dire, the panel might have been examined about the incident and, if appropriate, individual members might have been challenged for cause. None of these alternatives was chosen. Although there may have been prejudice here, appellants would have us reverse the convictions, and remand for a new trial on the assumption...

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