U.S. v. Nathan
| Decision Date | 01 June 1987 |
| Docket Number | No. 86-5246,86-5246 |
| Citation | 816 F.2d 230 |
| Parties | 22 Fed. R. Evid. Serv. 1433 UNITED STATES of America, Plaintiff-Appellee, v. Donald Mark NATHAN, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Herbert S. Moncier (argued), Ann C. Short (Court-appointed), Knoxville, Tenn., for defendant-appellant.
John W. Gill, U.S. Atty., Nancy Palmer (argued), Knoxville, Tenn., for plaintiff-appellee.
Before MERRITT, WELLFORD and NORRIS, Circuit Judges.
Defendant, Donald Mark Nathan, appeals his conviction for interstate transportation of three securities taken by fraud in violation of 18 U.S.C. Sec. 2314. For the reasons that follow, we AFFIRM the conviction of defendant.
Nathan, who was a stockbroker with Prudential-Bache ("Pru Bache") in Knoxville, Tennessee, was indicted by the government for interstate transportation in 1984 of three checks allegedly "taken by fraud," which were drawn on the account of Pru Bache and payable to Robert L. Shirley. The theory of the prosecution was that Nathan, while with Pru Bache, removed $75,000 from Shirley's account and deposited the money in his own account for his personal use.
Charles West, a C.P.A., who managed the personal finances of Robert Shirley, used the defendant as a broker for Shirley's stock account. The account was a command account that could be drawn upon by request or by writing a check upon the account. Along with Shirley, West had access to the funds in the account.
West received two unrequested $25,000 checks drawn upon Pru Bache's bank account and payable to Shirley in February of 1984. When West questioned the defendant, he was told that the checks had been issued erroneously by Pru Bache when another broker had listed the wrong account number on a check request form. West returned the checks to the defendant for redeposit to correct the error.
West again questioned the defendant when he received the February statement for Shirley's account, showing two $25,000 debit entries and no corresponding credit entry showing the return of the funds. The defendant responded that the $50,000 had been used to purchase certificates of deposit for Shirley from a bank in Gatlinburg and that the certificates would be kept at Pru Bache for safekeeping. West later learned that no certificates had ever been purchased.
West did not recall ever receiving a third $25,000 Pru Bache check, but in mid-March, he had asked Nathan to transfer $25,000 from Shirley's account to Shirley's wife's account. When the transfer was not reflected on the March account statement, the defendant told West that it was a bookkeeping error. West later learned that no such transfer of funds was ever made by the defendant.
In May, 1984, the defendant left Pru Bache to work for another brokerage firm, Cralin and Company in Florida. At Nathan's request, the Shirley accounts were transferred with him. After the defendant went to Cralin, he telephoned West and told him that the balances for Shirley's account now reflected the return of the $75,000.
Shortly after this phone call from the defendant, West received a call from the manager of the Cralin branch where the defendant was employed. Following this conversation, West contacted Pru Bache concerning the missing $75,000. As a result of his discussions with Pru Bache, $75,000 plus interest was refunded to Shirley. The defendant sent a letter to West postmarked September 8, 1984, in which the defendant stated that he had covered the losses of another account with Shirley's money.
West testified that he had never given direct or indirect permission to the defendant to deposit checks payable to Shirley into Nathan's account, to use any of Shirley's money to pay off losses in someone else's brokerage account, or to loan any of Shirley's money to someone else. Shirley confirmed that he had not written and had not authorized anyone to write the endorsements "Robert Shirley" and "Don Nathan" which appear on the back of the three checks. He also stated that he had never authorized any loans from his account at Pru Bache. Shirley indicated that the missing $75,000 was first brought to his attention by West. He did not remember when West reported this, but believed it was after his accounts were transferred to Cralin and soon after West discovered the problem.
Carolyn Denny, a special FBI agent, conducted two interviews of the defendant in September 1984. She took notes of these interviews on FBI 302 forms. 1 The defendant voluntarily provided his own two page statement setting forth his version of the events regarding the three $25,000 Pru Bache checks. During the interviews, the defendant admitted that he had written both the "Robert Shirley" endorsement and the "Don Nathan" endorsement. He further admitted that he had deposited each of these checks into his personal checking account.
The defendant was the Pru Bache account executive also responsible for the account of Tom Perry, who maintained his stock and commodities account and also a separate commodities account in the defendant's name. The commodities account (the "Nathan/Perry" account) was claimed by Nathan to be a nominee account; he contended that Perry directed the trading in the account and received all the benefit of the account. The defendant admitted that the nominee account was set up to circumvent Stock Exchange and SEC regulations concerning trades by a single individual. The funds in the account in Perry's name had been provided by Ken Graham. Perry managed the investments in the account in exchange for 10% of any profits.
In early February 1984, the Perry commodities account and the "Nathan/Perry" commodities account lost approximately $25,000 due to the failure to close out positions. Perry was trading in his commodities accounts more than the margin requirements permitted. (Perry thought he had a system to "beat" the market.) Nathan told Perry that payment of the losses had to be made very quickly due to margin payment deadlines. Perry replied that Graham was a millionaire and would supply the money but that he was out of town for a few days. Since Graham was unavailable, he and Perry attempted unsuccessfully to make trades to gain back Perry's losses.
Nathan claimed that within an hour of informing Perry of the losses, he received a phone call from West requesting that $25,000 be withdrawn from Shirley's money market account. Nathan could not be sure but believed that he hand carried the first check, dated February 15, 1984, to West who then returned it to him. Nathan claimed that based on casual remarks by West and Perry, he assumed that this $25,000 check was to be used to cover the losses in the Perry accounts as an informal loan from Shirley to Perry. There was no evidence that West ever specifically told the defendant that the money was to be used for Perry.
Nathan deposited the first $25,000 check into his personal checking account. He then purchased a cashier's check payable to Pru Bache which he used to pay the losses from Perry's commodities trading, since Pru Bache would not accept personal or third party checks.
A few days later, Nathan recalls that West again called Pru Bache and requested a second $25,000 withdrawal from Shirley's account. This telephone request was received by another broker who passed West's message on to the defendant. He then processed the check request form for the $25,000. Nathan mailed the check to West, who subsequently returned it in an envelope with other documents. Although West gave no specific instructions, Nathan claimed that he assumed that West intended this check to also be used to cover losses from the Perry account. Regarding the $25,000 transfer from Shirley's account to his wife's account, Nathan again stated that he assumed that West intended the funds to cover Perry's trading losses.
Nathan deposited the third $25,000 check into his personal checking account and used a portion of the proceeds to purchase a $15,000 cashier's check payable to Ken Graham. This cashier's check was to cover Graham's withdrawal request.
Nathan denied that he had used any of the $75,000 from Shirley's account for his own personal benefit. Instead, he claimed that it was not until mid-April, 1984, that he realized his misinterpretation of West's intentions regarding Shirley's $75,000. The defendant admitted that he did not discuss this "misunderstanding" with West until many months later when he wrote him a letter concerning the transaction.
Pru Bache's Knoxville, Tennessee branch office manager, Kosofsky, testified that in late February 1984, he had the defendant write a memo for the file explaining the trading in the Perry commodities account and the "Nathan/Perry" commodities account:
During the weeks of 1/31/84 thru 2/10/84, I executed commodity trades in accounts 87118 ["Nathan/Perry" Account] and 01536 [Perry Account]. The trades for 01536 were all done following my solicitation of the client. The trades in 87118 are, of course, in my own account....
Perry denied that he had ever authorized the defendant to open a nominee account on his behalf in Nathan's name and stated that he had never seen the statements for either the securities or commodities "Nathan/Perry" account or for the Don and Pat Nathan stock account. Perry did not discuss the problems in his Pru Bache accounts with Kosofsky. Nathan's motion for a bill of particulars was granted on a limited basis. Later, defendant unsuccessfully submitted a motion questioning the sufficiency of the government's bill of particulars.
Prior to his indictment, defendant unsuccessfully requested pretrial diversion and was informed that the United States Attorney's Office for the Eastern District of Tennessee did not recognize pretrial diversion. Defendant then filed a Petition for Review of Denial of Pretrial...
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