Lustiger v. United States

• Decision Date: 04 March 1968
• Docket Number: No. 20967.,20967.
• Citation: 386 F.2d 132
• Parties: Marvin LUSTIGER, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

386 F.2d 132 (1967)

Marvin LUSTIGER, Appellant, v. UNITED STATES of America, Appellee.

No. 20967.

United States Court of Appeals Ninth Circuit.

November 16, 1967.

Certiorari Denied March 4, 1968.

Burton Marks, (argued), Beverly Hills, Cal., for appellant.

Edward E. Davis, U. S. Atty., JoAnn D. Diamos, Asst. U. S. Atty., (argued), Tucson, Ariz., for appellee.

Before CHAMBERS, HAMLEY and ELY, Circuit Judges.

Certiorari Denied March 4, 1968. See 88 S.Ct. 1042.

HAMLEY, Circuit Judge:

This is a mail fraud case involving the real estate activities of Marvin Lustiger in Mohave County, Arizona. The grand jury returned a nineteen-count indictment against Lustiger for violations of 18 U.S.C. § 1341 (1964), between September 7, 1960, and the filing of the indictment on October 25, 1963. Each count charged him with mailing a letter or printed matter to a named individual in furtherance of a scheme to defraud such person. The mailings occurred at various times between February 28, 1961 and April 7, 1963. Counts IX and X were thereafter dismissed. After a nonjury trial the district court convicted Lustiger on the remaining seventeen counts. Lustiger then took this appeal.

Appellant's primary contention is that the evidence adduced at the trial was insufficient to support the trial court's finding and conclusion that he engaged in a scheme to defraud or obtain money by means of false or fraudulent pretenses, representations or promises. It was stipulated prior to trial that appellant used the mail in connection with his land sales.

Since this is an appeal from a determination of guilt, we must view the evidence and all reasonable inferences therefrom in the light most favorable to the Government. Kaplan v. United States, 9 Cir., 329 F.2d 561.

Lustiger's real estate activities in Mohave County, Arizona, got under way on September 7, 1960, when he formed the Lake Mead Land and Water Company (company), an Arizona corporation. Lustiger and his family owned all of its stock and he, alone, was responsible for the policy-making and management of the company. The company thereafter acquired ownership or options to purchase approximately sixty-four sections of land in Mohave County, about sixty miles from Kingman, Arizona.

These sections consisted of the odd-numbered sections in a checkerboard pattern, the even-numbered sections being owned by the federal government. The company subdivided twenty of these sections, consisting of 9,844 acres, into 6,548 parcels. The company then offered to the public, for sale, all or part of eleven of these sections, consisting of 6,400 acres subdivided into 4,247 parcels. The company called this unincorporated subdivision "Lake Mead City."

In its sales operations, the company utilized the United States mails Lustiger organized Arizona Associated Advertising Agency to handle the advertising for the company. The company, through Lustiger, informed all customers that mail should be sent to the company at P.O. Box 13349, Phoenix, Arizona.

Actually, the company had only a part-time employee to receive and send mail from that address. This employee forwarded all mail received to Lustiger at Azusa, California. After receipt, Lustiger processed the mail through his National Land Company and returned it to Phoenix by bus. The part-time employee then placed the correspondence in the mail. All checks were cashed at a Phoenix bank.

Lustiger caused the company to advertise its property in newspapers and other publications throughout the country. Those who answered were sent an "Investor's Kit," consisting of a thirty-two page color brochure, a "Fact Sheet," and a land reservation form. If the reservation form was returned to the Phoenix Post Office box with a ten dollar refundable deposit, Lustiger caused the company to send the customer a vicinity map on which was marked his subdivision unit (section) and a plat map showing his individual parcel, together with a purchase contract for execution.¹

Land which cost Lustiger from $33.20 to $125 an acre was in this way sold in one and a quarter acre parcels for from $395 to $495. In the "Lake Mead City Building Area," the price was $695 for one and a quarter acres.

As part of the company's policy to provide its customers with a "gilt-edge" to their investment, the company, through Lustiger, maintained both an exchange policy and a refund policy. Under the exchange policy, customers who had purchased lots in the ten units within which the company had not installed roads, staked lots, or provided parcel identification markers, could trade for property in the "improved" building area. The trade cost the customer nothing, provided he built within five years of the exchange; otherwise, the customer only received credit for his equity in the unimproved unit against the higher purchase price for a lot in the building area. Under the refund policy, if for any reason a customer changed his mind or was not completely satisfied within thirty days, his money was returned without question.²

The advertising brochure which Lustiger had the company distribute, entitled "Join Us for Pleasure and Profit at Lake Mead City," contained numerous statements describing the asserted advantages of Lake Mead City. In addition, the brochure contained many photographs purporting to depict scenes in the area. Sales generated by this extensive advertising program continued until May, 1962. At that time the advertising campaign was discontinued as the result of litigation over the company's title to the land. By March 10, 1962, three thousand lots had been sold.

Paragraphs 7 through 11 of Count I of the indictment, made applicable to all counts, charge that Lustiger's advertising materials contained misleading, deceptive, false and fraudulent pretenses, representations and promises concerning the property. These paragraphs further charge that these alleged misleading, deceptive, false and fraudulent pretenses were part of a scheme by Lustiger to defraud land purchasers.

The alleged verbal and photographic statements of this kind pertained to such matters as investment potential, status as a "planned community," desirability of location, favorable deed restrictions, character as a "resort area," quality as compared to other Arizona land, proximity to Lake Mead National Recreation Area, proximity to water sports, presence of a "Joshua tree forest," access, proximity to Kingman, Arizona, availability of power and telephone facilities, adequacy of domestic water supply, surveys and platting, existence of houses in the Lake Mead City development, care taken in choosing lots for individual purchasers, prospective price increases because of rapidly increasing values, and scarcity of remaining lots.

In addition to statements of the kind described above, the indictment charges that Lustiger failed to disclose the following material facts: all units of the development were located in odd-numbered sections, widely scattered in five different townships; the alternate even numbered sections, owned by the federal government, were used for grazing; many units had rocky hills and unbridged natural drainage washes; only a few units had convenient access; the nearest available power and telephone lines were many miles away; most units did not have street signs, lot corner markers or lot identification markers; and some units were many miles from a domestic water supply.

On this appeal Lustiger argues that some of the asserted statements and concealments listed above did not involve material facts. As to the remainder, Lustiger contends the evidence failed to establish that the representation of a material fact was false, or that a material fact had been fraudulently concealed. Further, he contends that all the statements constituted only "seller's puffing," and were not sufficient to establish a scheme to defraud land purchasers.

Lustiger did not request the trial court to find the facts specially, as he might have done under Rule 23(c), Federal Rules of Criminal Procedure, and no special findings were entered. It follows that we must assume that the trial court found in favor of the Government with respect to each and every alleged statement or concealment relied upon by the Government.

This being the case, Lustiger cannot obtain reversal on the ground that some of the representations or concealments of material fact relied upon by the Government were not proved to be false, misleading or deceptive. As long as a sufficient number of the statements were shown to be knowingly false, deceptive or misleading to permit the trial court to infer that defendant intentionally engaged in a scheme to defraud, the conviction must be affirmed. Ballard v. United States, 9 Cir., 138 F.2d 540, 545.

One of the categories of alleged misleading, deceptive and false statements contained in Lustiger's advertising materials relates to the availability of water, both for recreational and domestic uses. The color brochure contains numerous photographs, most of which depict water scenes on or around Lake Mead. The lake is said to be only five miles from Lake Mead City. Other photographs show small lakes and ponds, purportedly located within the boundaries of Lake Mead City. One body of water is colorfully described as the "Favorite swimming hole." Another picture shows a large metal water tank lying horizontally alongside a windmill, with the printed declaration: "IMPORTANT! Plenty of Water." A vicinity map "Depicting Lake Mead City Area," distributed by Lustiger, shows two wells, three springs and a water pipe line.

Lustiger does not deny that these representations were made, nor does he question the materiality of the facts presented. He argues, however, that the court's presumptive finding that the representations were misleading, deceptive and false was not supported by the requisite degree of proof.

Our examination of Lustiger's advertising materials reveals that the statements, photographs and maps,...