U.S. v. James

• Decision Date: 18 December 1979
• Docket Number: 725,D,Nos. 710,s. 710
• Citation: 609 F.2d 36
• Parties: 5 Fed. R. Evid. Serv. 243 UNITED STATES of America, Appellee, v. Leonard JAMES and Otto Sebold, Appellants. ockets 78-1346, 78-1353.
• Court: U.S. Court of Appeals — Second Circuit

Page 36

609 F.2d 36

5 Fed. R. Evid. Serv. 243

UNITED STATES of America, Appellee, v. Leonard JAMES and Otto Sebold, Appellants.

Nos. 710, 725, Dockets 78-1346, 78-1353.

United States Court of Appeals, Second Circuit.

Argued March 5, 1979.

Decided Sept. 6, 1979.

Rehearing and Rehearing En Banc Denied Dec. 18, 1979.

John H. Doyle, III, New York City (Anderson, Russell, Kill & Olick, P. C., New York City, Randy Paar and Robert P. Reichman, New York City, of counsel), for appellant Leonard James.

Henry Putzel, III, New York City, for appellant Otto Sebold.

Rhea Kemble Neugarten, Asst. U. S. Atty., New York City (Robert B. Fiske, Jr., U. S. Atty. S. D. N. Y., Andrew N. Karlen, Special Asst. U. S. Atty., Richard D. Weinberg and Howard W. Goldstein, Asst. U. S. Attys., New York City, of counsel), for appellee.

Before FRIENDLY, SMITH and MANSFIELD, Circuit Judges.

J. JOSEPH SMITH, Circuit Judge:

This is an appeal by Leonard James and Otto Sebold from judgments of conviction entered after trial to a jury in the United States District Court for the Southern District of New York, Constance Baker Motley, Judge, on conspiracy and substantive counts involving the making of false statements in connection with bank loans and securities fraud. We find no reversible error and therefore affirm the judgments.

A three-count indictment was filed on January 27, 1978 against James and Sebold, together with Peter Crosby, William Rubin and C. W. Deaton. Count One alleged that all five individuals engaged in a conspiracy to make false statements to banks for the purpose of obtaining loans and extensions of credit and renewals thereof, and to commit mail fraud, wire fraud and securities fraud, in violation of 18 U.S.C. § 371. Count Two charged James, Sebold, Deaton and Rubin with substantive offenses involving the making of false statements, in violation of 18 U.S.C. § 1014. Count Three charged James, Crosby, Deaton and Rubin with substantive securities fraud violations, in violation of 15 U.S.C. § 77q.

Prior to trial, the district court granted the government's motion to sever Rubin's trial from that of the other defendants. He was tried in May, 1978 and convicted on Count One, but acquitted on Count Three. The government's motion to dismiss Count Two was granted when the jury was unable to reach a verdict. Rubin's conviction was affirmed on appeal. United States v. Rubin, 609 F.2d 51 (2d Cir. 1979). Deaton was not tried, because an earlier extradition order by which his presence in the United States had been obtained had not related to the events alleged in the indictment. The district court granted the government's application for an order Nolle prosequi in March, 1978.

The trial of James, Sebold and Crosby began on May 31, 1978 and continued until June 29, 1978. The jury found James and Sebold guilty on Counts One and Two, acquitted James on Count Three and acquitted Crosby on both counts in which he had been named. The district court sentenced James to 18 months in prison. Sebold received a suspended sentence of one year in prison and was placed on probation for three years.

Since there is no challenge to the sufficiency of the evidence, we shall merely summarize the events which gave rise to this indictment and trial. The proof at trial tended to demonstrate that James, Rubin and Deaton engaged in a scheme to obtain financing fraudulently from the Bankers Trust Company ("Bankers Trust") for their company, Tri-State Energy, Inc. ("Tri-State"). Through their efforts, and with the assistance of Sebold, who was a mining engineer, Tri-State obtained short-term loans totaling $475,000 from Bankers Trust. The scheme involved the use of false reports regarding Tri-State's chief asset (a coal mine), fraudulent sales contracts with Roland Werkstatten, GmbH, a German corporation for which Sebold was an agent, misrepresentations that stock of various companies which was pledged as collateral was unrestricted, and cash payments to two loan officers of Bankers Trust, Raymond Ludwig and John Keating. In addition, James, Rubin and Deaton painted a rosy, but false, picture of Tri-State's future in order to obtain extensions of some of the loans as they came due. All the outstanding loans eventually were consolidated into one note, payable on demand. The defendants continued to put off the day of reckoning by reassurances that Tri-State's business soon would improve. The scheme fell apart only when Bankers Trust received inquiries about Deaton and Tri-State from the Justice Department. The bank finally demanded full payment of the loans. When payment was not forthcoming, Bankers Trust commenced a lawsuit against Tri-State. Only about $2,500 was recovered.

The appellants allege numerous grounds for reversal of the judgments. Although we agree that some of the rulings attacked constitute error, we conclude that none of the errors, whether considered separately or cumulatively, requires reversal, and we therefore affirm.

Sebold testified in June, 1976 before the first grand jury ¹ that investigated the events that led to his indictment. The attorney for the Strike Force on Organized Crime advised Sebold of his right to counsel and his right against self-incrimination. He further informed Sebold that the grand jury was "inquiring into possible violations of federal law on the part of Tri-State Energy and certain of its officers . . . ." Sebold was not an officer of Tri-State.

Sebold asserts that he was a target of the investigation at the time he testified. He contends that the failure to warn him that he was a target violated the rule established by this circuit in United States v. Jacobs, 531 F.2d 87 (2d Cir.) ("Jacobs I" ), Vacated and remanded, 429 U.S. 909, 97 S.Ct. 299, 50 L.Ed.2d 277, Original decision adhered to, 547 F.2d 772 (2d Cir. 1976) ("Jacobs II"), cert. granted, 431 U.S. 937, 97 S.Ct. 2647, 53 L.Ed.2d 254 (1977) Cert. dismissed as improvidently granted, 436 U.S. 31, 98 S.Ct. 1873, 56 L.Ed.2d 53 (1978). Sebold concedes, however, that his trial counsel failed to object when the testimony was offered at trial. ² Thus Sebold now is forced to argue that admission of the testimony was "plain error" that requires reversal despite the failure to object at trial.

We cannot agree. It is true that Rule 52(b), Fed.R.Crim.P., which simply restates the pre-existing law, United States v. Del Llano, 354 F.2d 844 (2d Cir. 1965), provides that "(P)lain error or defects Affecting substantial rights may be noticed although they were not brought to the attention of the court." (Emphasis added.) It is clear, however, that the defect of which Sebold complains affected no rights that he possessed. The Supreme Court held in United States v. Washington, 431 U.S. 181, 97 S.Ct. 1814, 52 L.Ed.2d 238 (1977), that failure to advise a witness before a grand jury that he was a "potential defendant" did not violate any constitutional right and thus did not require suppression of the witness' testimony. Our decision in Jacobs I and II to suppress such testimony was intended as "a one-time sanction to encourage uniformity of practice (Whatever the practice might be ) between the Strike Force and the United States Attorney . . . ." Jacobs II, supra, 547 F.2d at 773. (Emphasis added.) The establishment of such uniformity performed the "important function of the administration of criminal justice to let our citizens know that equal justice is available to all . . . ." Id., at 775. In addition, it might "bring the Strike Force and the United States Attorney to closer harmony, a boon for even-handed law enforcement which often will redound to the benefit of the prosecution rather than of the defense." Id., at 778. Thus Jacobs does not support the argument, rejected in any event by Washington, that the failure to give a "target warning" violated any right of a subsequently indicted defendant. We also find no reason again to exercise our supervisory powers to encourage uniformity. The Strike Force in the Southern District has been merged with the United States Attorney's Office since the events in question and the decision in Jacobs I. ³

Sebold also contends that his prosecution was barred by the five-year statute of limitations provided in 18 U.S.C. § 3282. The indictment, which was filed on January 27, 1978, alleged that the conspiracy lasted from June, 1972 through June, 1973, and that the events involved in Count Two, the substantive false statements charge, occurred from January 30, 1973 through March, 1973. As to this latter count, Sebold argues that the government proceeded on the theory that he was liable for the substantive crimes of his co-conspirators. Sebold does not dispute that the evidence established his participation in the conspiracy. He contends, however, that his withdrawal from the conspiracy before January 27, 1973 barred prosecution on either count. We disagree.

Withdrawal from a conspiracy requires "affirmative action . . . to disavow or defeat the purpose," Hyde v. United States, 225 U.S. 347, 369, 32 S.Ct. 793, 803, 56 L.Ed. 1114 (1912), of the conspiracy. The burden of proof of withdrawal rests on the defendant. United States v. Panebianco, 543 F.2d 447 (2d Cir. 1976), Cert. denied, 429 U.S. 1103, 97 S.Ct. 1129, 51 L.Ed.2d 553 (1977); United States v. Borelli, 336 F.2d 376 (2d Cir. 1964), Cert. denied, 379 U.S. 960, 85 S.Ct. 647, 13 L.Ed.2d 555 (1965). The record here is totally devoid of any affirmative act by Sebold to disassociate himself from the conspiracy. It is not even clear when Sebold claims to have withdrawn. His brief makes reference to testimony that he went to Tri-State's offices in early February, 1973 and found the doors padlocked. Such action by Sebold, even if it could be viewed as suggesting an intention to withdraw from the conspiracy, falls far short of the "communication of the abandonment in a manner reasonably calculated to reach co-conspirators," required by Borelli, supra, 336 F.2d at 388. ...