Gradsky v. United States

Decision Date28 February 1967
Docket NumberNo. 23783.,23783.
Citation373 F.2d 706
PartiesHarold GRADSKY, Appellant, v. UNITED STATES of America, Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Herbert Brownell, W. Thomas Margetts, III, Lord, Day & Lord, New York City, James Lee Rankin, Jr., New York City, of counsel, for appellant.

Lloyd G. Bates, Jr., Asst. U. S. Atty., Miami, Fla., Mahlon M. Frankhauser, Sp. Asst. Atty., Washington, D. C., William A. Meadows, Jr., U. S. Atty., Miami, Fla., David B. Bliss, Sp. Counsel, P. Dennis Belman, Atty., Div. of Trading and Markets, S. E. C., Washington, D. C., of counsel, for appellee.

Before TUTTLE, Chief Judge, and BELL and GOLDBERG, Circuit Judges.

TUTTLE, Chief Judge:

This is an appeal from judgment of conviction and sentence of appellant Gradsky on three counts of an indictment charging him and others with numerous counts of mail fraud,1 fraud in the sale of securities,2 and conspiracy to violate the two statutes.3

Because of the disposition we make of the case, we deal with only three assignments of error: (1) insufficiency of the evidence to warrant submission of the cases to the jury; (2) refusal of the trial court to grant motion for mistrial after the prosecuting officer allegedly "vouched" for the credibility of two co-conspirator-witnesses for the government; and (3) the denial by the trial court of a motion for severance.

We conclude that if the jury was entitled to credit the testimony of the two co-conspirators, Zane and Gilmore, as they would be under proper circumstances, the evidence against Gradsky was sufficient to permit a finding by the jury that he was guilty beyond a reasonable doubt.

The factual background necessary for an understanding of this court's decision can be briefly stated: The indictment covered the period from June 1, 1957, to May 15, 1961. On June 1, 1957, Harold Gradsky owned four corporations in Miami, Florida — Federal Finance, Inc., an automobile finance company; Insured Rentals, Inc., a car leasing company, and two small loan companies, All-State Loan Company and Modern Loan Company. At about this time, he began to solicit investments from the public in Federal Finance, Inc., by occasionally advertising in the papers that Federal could pay 15% interest on its notes. Gradsky told investors Federal could pay this high rate of interest because it earned 36% on its investment in finance paper and that small loan receivable accounts or automobile paper would be assigned as security for loans made by the public investors.

Witnesses testified to having made loans based on these representations. While there was evidence that there was some business conducted by the several companies, the proof warranted submission to the jury of the question whether Gradsky had devised a scheme to defraud in that neither the true nature of, nor the noticeable lack of success of the businesses was truly represented to the public.

The jury could believe that prior to, and in, March, 1959, the companies were unsuccessful and were in a failing condition. At that time there was $134,000 owed to members of the public who had made loans to Federal, based on the representations made by Gradsky. The jury could believe that at this time there was practically no security available for the holders of the $134,000 in notes.

In January, 1959, co-conspirator Leon Gradsky,4 a brother of Harold's, suggested to self-confessed co-conspirators Zane and Gilmore that they organize a company to engage in an operation similar to Federal. They organized Inter-City Acceptance Corporation and commenced doing business in Sarasota, Florida. In the first month, it obtained $90,000 of public investments following advertisements that it would pay 12-15% interest. It was represented that the loans would be secured by finance paper valued at 125% of the amount of the loan. It soon became apparent that there was no source of such paper and Leon suggested that Inter-City acquire Harold's companies. Contracts were executed whereby Inter-City acquired the four companies from Harold Gradsky on March 14 and 18, ostensibly for $11,000, plus an agreement to pay him $400 per week as a consultant for 90 days. There was a subsequent payment to Harold of $4500 for certain interests in his Tampa operation, and $500 was paid to an employe, McKee, for his interest in the company. The jury could find that all of these sums came out of the "investments" made by the public in Inter-City.

Zane and Gilmore both testified that the four parties, Harold and Leon Gradsky, Zane and Gilmore, were in fact to continue as partners; that the $16,000 (this apparently included the payment to McKee) purchase price was split four ways; that they all shared equally in the weekly compensation of $1400 and that they would all divide up the proceeds from "investments" after making required payments (presumably to keep the investors satisfied).

The two mailings that were the basis of the substantive counts of mail fraud on which appellant Gradsky was convicted occurred after March 14, at which time he was daily assisting in his task as consultant or adviser to the Inter-City corporation and at a time when he was still drawing compensation which the jury could believe was part of the money invested by the gullible investors. At this time also, the jury could believe testimony that Inter-City bought face-value of $100,000 worth of "loans" from another finance company for $5,000, but purported to pay $20,000 for them and that the $15,000 was divided between the four "partners." The jury could also believe that this money in which, according to the testimony of Zane and Gilmore, Gradsky shared, was from the "investments" made by the public in Inter-City on the representations that their loans would be secured. It is undisputed that this paper, bought for 5% of its face, was used on the basis of 125% of the face to give appearance to the collateralizing of loans. Thus a $1,000 loan would have $1250 face amount of paper as security. This $1250 was worth on the average 5% of its face, or $62.50. In point of fact, the testimony would warrant the jury's finding that practically no collections were made on the paper.

Further, although the evidence disclosed that there was some automobile paper that belonged to Federal Finance when it was transferred to Inter-City on March 14 by appellant Gradsky, the jury could believe that it was practically worthless.

Zane and Gilmore admitted they diverted over $100,000 of Inter-City funds to their own individual purposes at a time after May, 1959, the date they said they had terminated their connection with the Gradskys. At this time, they turned their attention to a new venture. They practically gave Harold Gradsky's four companies to Muir and one Bennett, since deceased, who contrived to operate under the new name of Franklin Acceptance Corporation until they closed their doors to their defrauded investors in March 1961. The jury could find that Zane and Gilmore helped keep the Inter-City and Federal Finance successor afloat for two years, hoping (erroneously, it seems) that the statute of limitations would protect them from any criminal charges if they were able to do so.

There is no real question but that from March 14, 1959, the operation was shot full of fraud. Without going any more fully into the details of appellant Gradsky's activities, we conclude that the jury could find that he was a party to a scheme to defraud in furtherance of which he participated in causing the mailings described in counts 14 and 15 to be made. We also conclude that the testimony of Zane and Gilmore supports the government's charge that a conspiracy to commit the...

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