Kroll v. United States

• Decision Date: 11 February 1971
• Docket Number: No. 24583.,24583.
• Citation: 433 F.2d 1282
• Parties: Mark H. KROLL, William Cahn, William Criswell, Jack Chernau, John S. Hunt, Robert C. Brown and Fred H. Adler, Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

433 F.2d 1282 (1970)

Mark H. KROLL, William Cahn, William Criswell, Jack Chernau, John S. Hunt, Robert C. Brown and Fred H. Adler, Appellants, v. UNITED STATES of America, Appellee.

No. 24583.

United States Court of Appeals, Fifth Circuit.

November 2, 1970.

Rehearings Denied December 10 and December 28, 1970.

Rehearing Denied January 6, 1971.

Rehearing Denied February 11, 1971.

J. Edward Worton, Key West, Fla., for Robert C. Brown and Jack Chernau.

Eugene P. Spellman, Miami, Fla., for Fred H. Adler.

Carr & Warren, Hilton R. Carr, Jr., Herbert A. Warren, Jr., Miami, Fla., for William Cahn.

Harry W. Prebish, Miami, Fla., for William Criswell and John S. Hunt.

Walters, Moore & Costanzo, David W. Walters, Miami, Fla., for Mark H. Kroll; S. Harvey Ziegler, Miami, Fla., of counsel.

Michael J. Osman, Asst. U. S. Atty., Miami, Fla., for appellee.

Before PHILLIPS^*, BELL and SIMPSON, Circuit Judges.

SIMPSON, Circuit Judge:

The appellants, Mark H. Kroll, William Cahn, William Criswell, Jack Chernau, John S. Hunt, Robert C. Brown and Fred H. Adler, are here seeking relief from judgments of conviction entered after jury verdict of guilty¹ in the district court. They raise a myriad² of grounds upon which they claim that the convictions are defective. We affirm.

The indictment charged and the jury found that the defendants had engaged in a scheme to defraud investors in the offer and sale, through American Bonded Mortgage Company, Inc. (ABM), and affiliated companies, of notes secured by mortgages, promissory notes, evidences of indebtedness, investment contracts and mortgage insurance bonds during the period from about January 20, 1958 to about December 31, 1961.

The facts of this case are multi-faceted and extremely complicated. Because of the nature of the challenges raised here and discussed infra it is not necessary that we recount in detail the lengthy and involved scheme alleged. Succinctly stated, it was alleged that the defendants engaged in an intensive campaign whereby risky and virtually worthless mortgages were purchased from sources affiliated with ABM, a company established to deal in mortgages, were represented to be fully insured as to interest and principal by what in fact was a financially unsound ABM-affiliated insurance company, and were sold to the public by means of false and misleading advertisements and other false statements made to investors. In December, 1961, ABM was petitioned into bankruptcy along with its affiliated companies after allegedly defrauding investors of millions of dollars.

We proceed to discuss in some detail the points raised which we consider worthy of discussion.

I. SUFFICIENCY OF EVIDENCE TO SUSTAIN CONVICTION

Each of the defendants except Cahn asserts that there was insufficient evidence in the record to support his conviction, and that it was error for the court to deny the respective motions for judgments of acquittal. On a motion for judgment of acquittal the test is whether, in the view most favorable to the government, a reasonably-minded jury might accept the relevant evidence as adequate to support a conclusion of the defendants' guilt beyond a reasonable doubt. Glasser v. United States (1942) 315 U.S. 60, 62 S.Ct. 457, 86 L. Ed. 680; Mortensen v. United States (1944) 322 U.S. 369, 64 S.Ct. 1037, 88 L.Ed. 1331; Davis v. United States, 5 Cir. 1967, 385 F.2d 919; Lambert v. United States, 5 Cir. 1958, 261 F.2d 799; Vick v. United States, 5 Cir. 1954, 216 F.2d 228, 232. These jury verdicts, then, must be permitted to stand if there is substantial evidence to support them, taking the view most favorable to the government, without weighing conflicting evidence or testing the credibility of the witnesses, and allowing in favor of the verdicts all reasonable inferences from the evidence.

The government introduced evidence tending to prove that the defendants developed a highly-organized sales campaign replete with half-truths, misrepresentations, and other deceptive techniques in order to interest investors in purchasing mortgages. The salesmen were furnished with complete sales kits extolling the financial soundness of the program offered. The sickly financial condition of ABM was not disclosed to investors. Salesmen were instructed to tell prospective investors that the mortgages were on "preferred, selected, single-family Florida homes", when in truth many of the mortgages encumbered much less desirable properties. It was represented that the mortgages were insured by a policy which was authorized by the Florida Insurance Commissioner, when the Commissioner had not so approved the policy. Investors were told that investments in mortgages were 100% safe because the mortgages were insured, when in fact the ABM-affiliated insurance company was inadequately financed to insure fully the risks presented. Relevant matters withheld from investors included: ABM's lack of mortgages in inventory, the poor quality and near worthlessness of mortgages assigned, the fact that mortgages were often on vacant land and hence uninsurable or illegally insured under Florida law, the fact that mortgages were junior to other liens of millions of dollars, and finally the fact that the insurance bonds were of little protection and were issued by an insurance firm affiliated with ABM. Evidence indicated that investors' funds were used to make interest payments to other investors because defaults on mortgages had reduced ABM's cash supply. Evidence also tended to show that the defendants had improperly diverted company funds for their own personal use, and for the purpose of financing other projects of interest to the defendants.

Defendants contend that they relied in good faith on the advice of counsel in operating this business. Significantly, however, the counsel upon whose advice they claim they relied was not called as a witness. In fact evidence was introduced by the government that house counsel had admonished the defendants that delivery of mortgages before houses were completed on the properties might be fraudulent, and that Florida law did not allow insurance of vacant lot mortgages. Outside counsel had also advised that apparent misrepresentations might be violations of the anti-fraud provisions of the securities laws. Letters from Aetna and Kemper insurance executives, who issued fidelity bonds to ABM, indicate their concern over misrepresentations made in ABM's advertising. Nevertheless the operation continued.

Although the numerous defendants were involved at different times and to differing degrees in the perpetration of this scheme, there was plentiful evidence at trial from which a jury could reasonably find beyond a reasonable doubt that all participated knowingly in the unlawful acts for which they were indicted. The defendants were free to introduce evidence of good faith reliance upon counsel as tending to prove they lacked criminal intent, but the jury was not bound to accept this evidence. The record contained other competent evidence from which the jury could find that the defendants in fact acted with the requisite intent to defraud.

II. PRE-INDICTMENT DELAY

The indictment which was returned on February 15, 1966, alleged that the conspiracy terminated on December 31, 1961. The appellants contend that they were deprived of a fair and speedy trial by virtue of a delay of over four years measured from the date of termination of the scheme to the date of the return of the indictment.

The applicable statute of limitations in this case is five years. It is well-settled in this Circuit that the Sixth Amendment right to a speedy trial and the rights granted by F.R.Crim.P. 48(b) do not accrue to a defendant until after a prosecution is instituted. United States v. Grayson, 5 Cir. 1969, 416 F.2d 1073, 1076-1077, cert. denied 396 U.S. 1059, 90 S.Ct. 754, 24 L.Ed.2d 753 (1970); Harlow v. United States, 5 Cir. 1962, 301 F.2d 361, cert. denied 371 U.S. 814, 83 S.Ct. 25, 9 L.Ed.2d 56 (1962). Any delay between commission of the crime and indictment is controlled by the applicable statute of limitations. United States v. Grayson, supra; Bruce v. United States, 5 Cir. 1965, 351 F.2d 318, cert. denied 384 U.S. 921, 86 S.Ct. 1370, 16 L.Ed.2d 441 (1966). The defendants urge that we adopt the reasoning of United States v. Parrott, 248 F. Supp. 196 (D.D.C.1965), wherein an indictment was dismissed in part because the court found that the defendants had been unduly prejudiced by unexcused pre-indictment delay. Even if Parrott was the applicable law of this Circuit — which it is not — the case would not be applicable to the situation at hand, for the defendants have not sufficiently demonstrated any prejudice stemming from the lapse of time prior to indictment.

III. GRAND JURY ARRAY

The defendants allege that the grand jury selection process in the Southern District of Florida is discriminatory and does not represent a fair cross-section of the community. This contention was specifically rejected in Stassi v. United States, 5 Cir. 1968, 401 F.2d 259.

IV. CAHN'S MOTION FOR CONTINUANCE

Defendant Cahn argues that the trial court abused its discretion in denying his motion for a continuance so that counsel might have additional time to prepare for trial. After the indictment was filed Cahn was initially represented by an attorney who filed various pretrial motions and participated in pretrial proceedings. Four weeks prior to trial, this attorney was allowed to withdraw from the case with respect to representation of Cahn. Cahn took sixteen days thereafter to retain new trial counsel. Twelve days prior to trial new counsel made an oral motion for continuance. The court denied it immediately.

Apart from calling attention to the shortness of time for preparation, Cahn has not demonstrated that trial counsel was prevented from properly defending him or that he was otherwise prejudiced by being required to go to trial. In fact, the record shows that trial counsel...