U.S. v. Gallagher

• Decision Date: 05 May 1978
• Docket Number: 77-1034 and 77-1278,Nos. 76-2665,s. 76-2665
• Citation: 576 F.2d 1028
• Parties: 3 Fed. R. Evid. Serv. 218 UNITED STATES of America, Plaintiff-Appellee, v. Anthony GALLAGHER, Defendant-Appellant. UNITED STATES of America, Appellee, v. John J. McCARTHY, Defendant-Appellant. UNITED STATES of America, Appellee, v. Allison FREDENBURGH, Defendant-Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 1028

576 F.2d 1028

3 Fed. R. Evid. Serv. 218

UNITED STATES of America, Plaintiff-Appellee, v. Anthony GALLAGHER, Defendant-Appellant.

UNITED STATES of America, Appellee, v. John J. McCARTHY, Defendant-Appellant.

UNITED STATES of America, Appellee, v. Allison FREDENBURGH, Defendant-Appellant.

Nos. 76-2665, 77-1034 and 77-1278.

United States Court of Appeals, Third Circuit.

Argued Oct. 3, 1977.

Decided May 5, 1978.

Frederic J. Gross, Takoma Park, Md., Charles M. Berk, Glenda Joyce Phinney, Law Student, for defendant-appellant, Anthony Gallagher.

Frederick P. Hafetz, Goldman & Hafetz, New York City, for defendant-appellant, John J. McCarthy.

Zazzali, Zazzali & Whipple, George L. Schneider, Newark, N. J., for defendant-appellant, Allison Fredenburgh.

Jonathan L. Goldstein, U. S. Atty., Katharine J. Sweeney, Asst. U. S. Atty., Newark, N. J., for appellee, U. S.

Before SEITZ, Chief Judge, and BIGGS and HUNTER, Circuit Judges.

OPINION OF THE COURT

BIGGS, Circuit Judge.

I. INTRODUCTION

The appellants were charged by a grand jury with conspiracy, 18 U.S.C. § 371, and with the substantive crimes of willful misapplication of bank funds, 18 U.S.C. § 656, and making false statements in connection with loans, 18 U.S.C. § 1014. ¹ At all times during the criminal activity charged in the indictment Anthony Gallagher was the president of Bar-Mar Warehouse, Inc. (Bar-Mar), located in Bayonne, New Jersey. John McCarthy was a vice-president of Bar- Mar. Allison Fredenburgh was the Branch Manager of the 45th Street branch of the Commercial Trust Company of New Jersey (Bank). The Bank's deposits were insured by the Federal Deposit Insurance Corporation.

The sixteen-count redacted indictment named all three defendants in the conspiracy count (Count I) and in the counts charging violations of § 1014 (Counts XII and XVI). The remaining counts, charging violations of § 656 (Counts II-XI, XIII, XV), named all three defendants, with the exception of Count XIV, which charged Fredenburgh alone with willful misapplication in connection with a loan made in the name of one Anthony Belis. A copy of the redacted indictment is attached to this opinion as an appendix.

The jury found Gallagher guilty of conspiracy (§ 371) and of the substantive crimes alleged, viz., twelve counts of § 656 violations, and two counts of § 1014 violations.

Fredenburgh was found guilty on all counts as alleged, viz., one count of conspiracy (§ 371), thirteen counts of § 656 violations, and two counts of § 1014 violations. McCarthy was found guilty of conspiracy (§ 371) and of one count of a § 656 violation, in connection with a loan made to one Deborah Dominach, but was acquitted on the remaining counts. The three defendants filed timely notices of appeal.

Because the facts elicited at trial are set forth in detail in subsequent portions of this opinion, we need only briefly summarize them here. The Government contends and the evidence shows that in 1973 Gallagher, McCarthy, and Josephine Johnson, an unindicted co-conspirator and Gallagher's mistress, and at one time an employee of Bar-Mar, collaborated with Fredenburgh to generate needed funds for Bar-Mar and/or for Gallagher which Gallagher was unable to obtain because of his and Bar-Mar's poor credit rating. To obtain money, Gallagher secured loans from the Bank in the names of third persons who were either asked by the conspirators to serve as nominal or sham borrowers and agreed to do so, or in whose names loans were granted without their express approval or knowledge.

II. FACTS. SUFFICIENCY OF THE EVIDENCE

The appellants insist there is insufficient evidence to convict them upon the charges alleged in the indictment. We, therefore, will go into detail to demonstrate what that evidence is.

A. As to Fredenburgh

The following persons were named in the sixteen counts of the indictment as borrowers who were involved in the scheme to defraud the Bank: Mari Esposito, Rose DeNicola, Victoria Squillante, Joan Ryan, Nicholas Palmisano, Deborah Dominach, Jane Marie Kellner, Gilbert Nonnenbacher, Melody Slivocka, Peter Daly, Anthony Belis, and Robert Brennan. Of these twelve, four persons, Victoria Squillante, Joan Ryan, Jane Marie Kellner, and Deborah Dominach, agreed to take out loans on Gallagher's behalf, but were assured that Gallagher would be responsible for repayment. Rose DeNicola and Mari Esposito also agreed to take out loans for Gallagher, who would assume the duty of repayment, and signed loan applications at Josephine Johnson's request thinking that they were credit references. Nicholas Palmisano, Melody Slivocka, Peter Daly and Robert Brennan never filled out loan applications or authorized anyone to borrow from the Bank in their names. Nonetheless loans were granted and checks issued in their names. These checks were allegedly initialled by Fredenburgh. Nonnenbacher and Belis initially met with Fredenburgh to take out loans and filled out loan applications. Nonnenbacher told Fredenburgh to hold the application in abeyance so that he could think about it further. Nonetheless a loan was granted in his name without his instructing Fredenburgh to do so. The money was not received by Nonnenbacher. The checks were initialled by Fredenburgh. Belis filled out a loan application in Fredenburgh's presence, but subsequently informed someone in the loan department of the Bank that he had changed his mind and did not need the loan. Nonetheless, the loan was granted but Belis never received the money. One of the three checks issued to him had on it initials the same as those of Fredenburgh. Toward the end of its case the Government called a handwriting expert who testified that he had compared signature endorsements on the backs of the loan checks with handwriting exemplars provided by the named borrowers. In his opinion the checks issued in the names of the following persons were falsely endorsed: Esposito, DeNicola, Squillante, Dominach, Nonnenbacher, Slivocka, Belis, Brennan, and Palmisano. Fredenburgh, as has been said, was a Branch Manager of the Bank. He knowingly violated consumer loan procedures at the Bank in that he approved loans and checks for applicants rejected by the main office without knowing The evidence clearly establishes that Fredenburgh accepted applications in person or from McCarthy and proceeded to process these applications. In fact, Fredenburgh approved the cashing of checks ranging from $300 to $7,500 in amount well knowing that some bore forged endorsements. In at least two instances, Fredenburgh took the money himself. See the DeNicola-and-Esposito-check incidents set out above. Fredenburgh saw that the proceeds of some loans got to Gallagher, as demonstrated by Kellner's testimony that he, Fredenburgh, instructed her to take $3500 in cash back to the "warehouse," i. e., Bar-Mar. The record does not show that McCarthy received any money, but it does demonstrate that he was a full participant in the scheme to defraud the Bank.

                them, and granted loans before the main office had acted.  He was permitted to make loans up to $10,000 over the rejection of the main office provided he knew the persons.  He frequently broke this rule.  Note his transactions with Mari Esposito, Victoria Squillante, Joan Ryan, Nicholas Palmisano, Jane Marie Kellner, and others.  Borrowers had loans granted in their names without having any contact with Fredenburgh or the Bank, or without even filling out loan applications.  We cite as example loans to Robert Brennan, Peter Daly and Melody Slivocka.  Those borrowers whom Gallagher sent to the Bank to take out loans with Fredenburgh were not questioned by Fredenburgh respecting their ability to repay, or the terms of the loans, even though they had no previous dealings with Fredenburgh or the Bank.  Such persons include Joan Ryan, and Jane Marie Kellner.  Many borrowers never received coupon books from the Bank.  These included Rose DeNicola, Mari Esposito, and others.  Fredenburgh processed two loans, those of Gilbert Nonnenbacher and Anthony Belis, without their authorization and knowledge.  Fredenburgh also rewrote the application of Joan Ryan.  2 Nonnenbacher's application was only partially filled out and he told Fredenburgh to hold it in abeyance so that he could think about it further.  In respect to Belis, after he filled out a loan application with Fredenburgh, he called the Bank and told someone (unspecified) in the loan department that he did not need the loan.  Nonetheless the loans were made and Fredenburgh initialled all three checks for Nonnenbacher and one of the Belis checks for cashing.  Vigorelli, a teller, testified that Fredenburgh had her cash checks of two named borrowers, Rose DeNicola and Mari Esposito, who were not even present.  Fredenburgh took the money.  Witnesses testified to Fredenburgh's frequent contacts in person or by telephone with Gallagher.  Josephine Johnson stated that Fredenburgh visited Bar-Mar twice a week throughout the year 1973 and came to see Gallagher and McCarthy.  Deborah Dominach testified that during the summer of 1973 she received as many as five calls a day from Fredenburgh requesting to speak to Gallagher.  Jeanne Murray testified that Fredenburgh was at Bar-Mar ten times during the year 1973 and telephoned very often.  Jane Kellner and Jeanne Murray said that when Fredenburgh came to Bar-Mar, he went directly into Gallagher's office.  Josephine Johnson testified that Gallagher told her he had selected the Bank because he had a connection there.  He stated that Fredenburgh was that connection.  Josephine Johnson also heard Gallagher tell McCarthy to bring the loan applications to the Bank and to be sure that Fredenburgh was there.  Mari Esposito testified that Josephine Johnson told her not to worry about repaying the loan because Gallagher was in with Fredenburgh at the Bank.  Fredenburgh rewrote Joan Ryan's application.  After Fredenburgh approved Jane Marie Kellner's check for cashing,

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