U.S. v. Ranney
| Decision Date | 19 October 1983 |
| Docket Number | Nos. 82-1593,82-1594,s. 82-1593 |
| Citation | 719 F.2d 1183 |
| Parties | 14 Fed. R. Evid. Serv. 1007 UNITED STATES of America, Appellee, v. William RANNEY, Defendant, Appellant. UNITED STATES of America, Appellee, v. Dennis CIOFFI, Defendant, Appellant. |
| Court | U.S. Court of Appeals — First Circuit |
Paul A. Manoff, Boston, Mass., by appointment of the Court, with whom Levine & Manoff, Boston, Mass., was on brief, for William Ranney.
Ronald Kovner, Washington, D.C., by appointment of the Court, with whom Robert F. Muse, Washington, D.C., was on brief, for Dennis Cioffi.
Bruce A. Singal, Asst. U.S. Atty., Boston, Mass., with whom William F. Weld, U.S. Atty., Boston, Mass., was on brief, for appellee.
Before McGOWAN, * Senior Circuit Judge, BOWNES, Circuit Judge, and SKINNER, ** District Judge.
William Ranney and Dennis Cioffi appeal their criminal convictions in district court for mail and wire fraud and conspiracy to commit the same. See 18 U.S.C. Secs. 371, 1341, 1343 (1976). A federal grand jury in 1981 indicted Ranney and Cioffi as principals in a scheme to defraud investors who had purchased investment contracts for home heating oil from defendants' corporation. After an initial trial resulted in a hung jury, the government retried the defendants and obtained the convictions complained of in this appeal. Defendants raise numerous objections to their convictions, including assertions of collateral estoppel, improper admission of hypothetical questions, Brady violations, and prejudicial closing arguments by the prosecution. Because we find defendants' objections unpersuasive, we affirm.
In August 1979, Ranney and Cioffi joined with another principal, Stephen London, to form two Massachusetts corporations, Global Oil Corporation and World Petroleum Supply, Inc. 1 The two companies shared the same office over a bar owned by Ranney in downtown Boston. London and Cioffi served as successive presidents of Global, while Ranney occupied the post of president of World Petroleum Supply.
Between September 1979 and February 1980, Global sold 163 investment contracts for home heating oil to 130 investors throughout the country. The company received over one million dollars in revenues from these sales. Offers to buy were solicited through advertisements in major daily newspapers in large cities around the country with the notable exception of Boston. Global retained a staff of salesmen who were remunerated on a commission-only basis to respond to mail and telephone inquiries stimulated by the ads.
The contract offered by Global was in essence a futures contract. For a price of roughly $7,000, the investor purchased the right to buy 42,000 gallons of home heating oil at a fixed price on a given day. 2 The investor's purchase price for the oil was usually based on the bid price prevailing on the New York market on the day the contract was purchased. If the market price rose sufficiently between that day and the expiration date of the contract, the investor ostensibly stood to realize a profit represented by the difference between the contract price and the market price, less costs.
Advertising and sales materials developed by Ranney and Cioffi made a series of representations to potential buyers aimed at enticing them into making the investment. Global represented, for example, that it was an experienced company with a sophisticated research department working constantly with well-placed sources around the world to monitor developments affecting oil prices and to maximize investor profits. For every ten-cent increase in the price of a gallon of oil, the company maintained, the holder of a single contract would realize $4,200 in profit. 3 Potential customers were also told that the oil being offered actually belonged to Global and was ready for delivery to contract-holders upon demand from storage tanks in New York harbor. The contract fee paid by investors, according to the company, went partly to defray delivery, storage and insurance costs for this supply of oil. Customers were urged to act quickly, however, because the supply was limited and might not last until even the next business day.
These representations did not accord with underlying reality. Rather than being the large, sophisticated oil-trading firm that it painted itself to be, Global was a new, grossly undercapitalized enterprise with no experience in oil commodity markets whatsoever and no research department. In contrast to the company's profit projections, oil prices had to increase by eighteen to nineteen cents per gallon for the buyer even to break even on his investment, much less turn a profit. 4 Global Oil owned no oil, had no storage facilities, and never incurred any costs for delivering, storing or insuring such a supply. 5 The company's assertions that its supplies were limited and might be gone tomorrow, therefore, were disingenuous. Contrary to these assertions, Global had no "supply" at all and simply endeavored to sell as many contracts to as many investors as possible.
Besides these misrepresentations, Global also used falsified references to bolster its credibility in the eyes of potential investors. Prospective buyers often asked for an independent source that could verify Global's past reputation and future prospects. Whenever this happened, salesmen were under orders from Ranney and Cioffi to refer most customers to World Petroleum Supply. Although World Petroleum occupied the same office as Global, customers were given a different address and telephone number and led to believe that the two companies were entirely independent entities. After making such a referral, the salesman would notify Global's receptionist to expect a call on World Petroleum's separate line. When the call came in, the receptionist would simply connect the customer with another Global salesman or officer, who would in turn provide a glowing report of Global's performance from the supposedly independent perspective of World Petroleum.
By the spring of 1980, defendants' scheme fell apart as investor losses mounted. Except for a few buyers who had complained earlier and received refunds, all of Global's customers lost their entire investments. In the meantime, Ranney, Cioffi and London had withdrawn over one-quarter million dollars from the two corporations for their own account, including payments for luxury apartments, home furnishings, loans to officers, and leases for one Rolls Royce and a Mercedes Benz.
Investor complaints led to a federal investigation. A federal grand jury was impanelled and in January 1981 returned a joint indictment against Ranney, Cioffi, London, and six salesmen on various counts of mail and wire fraud and conspiracy to commit the same. See 18 U.S.C. Secs. 371, 1341, 1343 (1976). There were in addition several counts under the anti-racketeering provisions of the Organized Crime Control Act of 1970, see id. Sec. 1962(a), and the dealer registration provisions of the Commodity Exchange Act, see 7 U.S.C. Secs. 6d, 6k(1), 13(b)-(c) (1976 & Supp. IV 1980).
All nine defendants were tried together in a trial that ended in July 1981. The jury acquitted the six salesmen of all charges against them, but was unable to reach a verdict with respect to Ranney, Cioffi and London. The government then narrowed its charges against these three principals to one count of conspiracy and nine counts of mail and wire fraud. Following a second trial that ended in June 1982, a new jury returned verdicts of guilty on all counts against the three defendants. These appeals by Ranney and Cioffi followed.
At the second trial, the district court overruled defense objections and permitted the prosecution to put on investor testimony as to the representations made to them by Global salesmen. Ranney and Cioffi contend that this testimony should have been excluded on grounds of collateral estoppel. They argue that because the jury in the first trial acquitted all six salesmen, it necessarily found that their statements did not form part of a scheme to defraud investors. In defendants' view, the government should not have been permitted to reintroduce these statements at the second trial in order to relitigate that same issue.
There is some doubt that the principle of collateral estoppel even applies to this case. 6 Whether it does or not, we find that the acquittal of the salesmen at the first trial did not foreclose the issue of whether their statements to customers formed part of a scheme to defraud investors. On the contrary, the acquittals suggest that the first jury credited the salesmen's testimony that they were merely following instructions from management and that a reasonable doubt therefore existed as to their intent to participate in the crimes alleged.
This likely basis for the jury's decision clearly left open the possibility that the salesmen's statements formed part of a fraudulent scheme organized and directed by management without the culpable awareness of its sales personnel. 7 That the jury did not decide this latter issue was made clear by its failure to reach a verdict with respect to the principal defendants. Collateral estoppel would therefore be inappropriate in this instance because the jury most likely grounded its verdict on an issue other than the one which defendants seek to foreclose. See Ashe v. Swenson, 397 U.S. 436, 444, 90 S.Ct. 1189, 1194, 25 L.Ed.2d 469 (1970).
In the course of receiving testimony from investors about the salesmen's representations, the district court permitted the prosecution over defense objections to pose a series of hypothetical questions to each investor. These questions typically followed an investor's testimony about what had influenced him to purchase a Global Oil contract. After invariably citing one or more of the representations made to him by a Global Oil salesman as the reason...
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