U.S. v. Fallon

• Decision Date: 04 November 1985
• Docket Number: No. 85-1158,85-1158
• Citation: 776 F.2d 727
• Parties: 19 Fed. R. Evid. Serv. 632 UNITED STATES of America, Plaintiff-Appellee, v. James FALLON, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 727

776 F.2d 727

19 Fed. R. Evid. Serv. 632

UNITED STATES of America, Plaintiff-Appellee, v. James FALLON, Defendant-Appellant.

No. 85-1158.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 13, 1985.

Decided Nov. 4, 1985.

Jeffrey A. Kaufman, Gimbel, Gimbel & Reilly, Milwaukee, Wis., for defendant-appellant.

Nathan A. Fishbach, Asst. U.S. Atty., Office, Milwaukee, Wis., for plaintiff-appellee.

Before CUMMINGS, Chief Judge, and BAUER and FLAUM, Circuit Judges.

BAUER, Circuit Judge.

The defendant, James Fallon, was convicted below on nine counts of aiding and abetting mail fraud in violation of 18 U.S.C. Sec. 1341 and on one count of conspiracy to alter motor vehicle odometers in violation of 15 U.S.C. Sec. 1986. Fallon appeals his conviction on four of the nine mail fraud counts on the basis that the conduct alleged in those counts does not constitute a violation of the mail fraud statute. Fallon also attacks his conviction on all counts arguing that the jury was prejudiced by subsequently stricken testimony of a key witness who had a "performance deal" with the prosecutor. Fallon contends that despite the judge's instructions the jury must have considered the stricken testimony because the remaining evidence was insufficient to support his conviction. We affirm.

I.

Defendant Fallon was employed by Suburban Auto Brokers ("SAB"), an Illinois business organization. SAB was engaged in the business of buying used cars from automobile dealerships and then reselling those cars either to other dealerships or to the public.

SAB was also engaged in an on-going fraud. The government demonstrated at trial that, after purchase and before resale of a car, SAB often "rolled back" the car's odometer altering it to indicate a mileage reading substantially lower than the actual miles the car had been driven. To complete the fraud, SAB obtained a new vehicle title which, unlike the old title, did not indicate an odometer reading at the time of transfer. SAB could then enter whatever mileage it wished on the title before reselling the car.

SAB had to obtain new titles for its cars because the usual method of title assignment would reveal a car's true mileage when SAB resold the car. When SAB purchased a car from a dealer, the dealer usually assigned title by signing the vehicle title on the back and entering the odometer reading in the appropriate blank. SAB could not simply reassign a car with a rolled back odometer using this title since it showed the car's true pre-roll back mileage.

SAB obtained new titles without odometer entries by utilizing the Wisconsin Department of Transportation's auto titling process. A SAB employee would submit an application for new vehicle title along with the car's old transferred title to the Driver's License Exam Station in Elkhart, Wisconsin. The Exam Station would issue a new title with no odometer reading entry in the name of "Suburban Auto Brokers." The Exam Station then forwarded SAB's application and accompanying documents by United States mail to the Wisconsin Department of Transportation ("WDOT") in Madison, Wisconsin.

When SAB subsequently sold the vehicle, it simply entered whatever mileage it desired on the blank title. Although dealers can "sign over" title when selling a car to another dealer, consumers purchasing cars from dealers are required to apply for new titles. Thus, WDOT eventually received a record of all SAB purchases and resales.

SAB's procedure of routinely obtaining new vehicle titles in its own name was not necessarily suspicious. Evidence at trial indicated that this is a relatively common practice among auto brokers who sell cars to dealers. Auto brokers protect the identity of their sources so that purchasers cannot bypass the broker and go directly to the source.

SAB's plan was thus unlikely to attract special attention from WDOT. It could only be detected if WDOT matched the title from a SAB purchase to the title from a SAB sale, checked the information contained in both, and noticed the discrepancy between the odometer entries. Although WDOT checks every title application to make sure proper documents exist for each one, verification of the information contained in title documents is done only on a "spot check" basis.

The government presented evidence at trial of defendant Fallon's personal involvement in SAB's scheme. The government presented numerous vehicle titles, reassignment supplements, and odometer statements signed by Fallon which indicated that Fallon, on behalf of SAB, purchased many cars with high mileage readings and resold them with lower mileage readings. Several witnesses who were "drivers" for SAB testified that following Fallon's instructions they picked up several cars from dealers who had sold the cars to SAB, and later delivered the same cars to dealers who had purchased the cars from SAB. These witnesses testified that many of the cars had higher mileage readings on their odometers when purchased than when sold. Another government witness testified that he and Fallon had discussed altering odometer entries on vehicle titles by adding a decimal point before the last digit of the existing odometer entry and then adding a digit at the beginning of the odometer entry. For example, an entry showing that a car had 62000 miles at time of transfer could be modified by this method to show 36200.0 miles.

The government also presented the testimony of another SAB employee, Richard Huebner, an indicted co-conspirator who pled guilty prior to trial. On Fallon's motion the district court judge later struck Huebner's testimony on the ground that Huebner had made a "performance deal" with the government; as the district court phrased it, "it would be Huebner's performance at trial which would be the determining factor in whether he would be prosecuted." No. 84-CR-55, Mem.Op. at p. 7 (Dec. 7, 1984). Immediately after striking Huebner's testimony, the court instructed the jury to disregard the testimony. The court gave this instruction again when instructing the jury generally. Huebner was the only witness to testify that Fallon directed him to roll back odometers, saw him perform the work, and paid him for it.

Following the jury's verdict of guilty as to ten counts, Fallon moved for judgment of acquittal as to four mail fraud counts on the grounds that the mailings involved did not constitute mail fraud. Fallon also moved for a mistrial on the grounds that the jury must have improperly considered the excluded testimony of Richard Huebner because the remaining evidence was insufficient to convict Fallon of conspiracy to alter vehicle odometers or of aiding and abetting mail fraud. The trial court denied all post-conviction motions and entered the judgment and conviction order on January 18, 1985. Fallon was sentenced to fifteen months imprisonment for each mail fraud conviction, the sentences to run concurrently. For his conviction for conspiracy to alter vehicle odometers, Fallon was placed on probation for five years during which time he was ordered to refrain from engaging in the auto sales business. In addition, Fallon was ordered to make restitution totalling six thousand dollars. This appeal followed.

II.

To convict a defendant of mail fraud under Sec. 1341, the government must prove that the mailings were "for the purpose of executing the scheme." United States v. Maze, 414 U.S. 395, 400, 94 S.Ct. 645, 648, 38 L.Ed.2d 603 (1974); United States v. Bonansinga, 773 F.2d 166, 168 (7th Cir.1985); United States v. Wormick, 709 F.2d 454, 462 (7th Cir.1983). Fallon contends that the mailings of vehicle title application documents from the Driver's License Exam Station in Elkhart, Wisconsin to WDOT in Madison, Wisconsin were not "for the purpose of executing the scheme" because the mailings "were neither essential to nor in furtherance of the alleged odometer roll back scheme."

Fallon argues that the mailings were not "in furtherance of" the scheme because the Exam Station entered the relevant vehicle titling information in WDOT's computer when SAB applied for title. The Exam Station issued SAB its new blank title immediately and often waited days before mailing the underlying documents to WDOT. From this, Fallon concludes that the document mailings were unnecessary to obtain title. He argues they were instead made for "mere" record-keeping purposes.

Fallon argues that the mailings were not "essential to" the scheme because SAB was indifferent as to whether or not an individual mailing was even made. Fallon points out that when WDOT discovers that a document is missing it does not begin an investigative search; WDOT simply creates a "dummy" document containing as much information as is known of the missing document's contents. Fallon claims that SAB's scheme would thus be unaffected by the Exam Station occasionally failing to mail a set of titling documents. He concludes that the mailings were not "essential to" and thus not "for the purpose of" executing the scheme.

Finally, Fallon claims that the mailings actually increased the likelihood of SAB's scheme being detected and that under the relevant case law such mailings cannot constitute mail fraud. Specifically Fallon directs us to the Supreme Court's decision in United States v. Maze, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974), and our own decision in United States v. Galloway, 664 F.2d 161 (7th Cir.1981), cert. denied, 456 U.S. 1006, 102 S.Ct. 2296, 73 L.Ed.2d 1300 (1982).

This case is controlled by United States v. Galloway, 664 F.2d 161 (7th Cir.1981), cert. denied, 456 U.S. 1006, 102 S.Ct. 2296, 73 L.Ed.2d 1300 (1982). In Galloway, the defendant was an automobile wholesaler who, like Fallon, rolled back the odometers of used cars that he sold to dealers. Galloway, like Fallon, was convicted of mail fraud. The mailings triggering the mail fraud statute in Galloway were, as here, mailings to WDOT of vehicle title applications. In Galloway, however, the...