U.S. v. Schnabel

• Decision Date: 11 July 1991
• Docket Number: No. 89-5609,89-5609
• Citation: 939 F.2d 197
• Parties: 34 Fed. R. Evid. Serv. 47 UNITED STATES of America, Plaintiff-Appellee, v. George SCHNABEL, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 197

939 F.2d 197

34 Fed. R. Evid. Serv. 47

UNITED STATES of America, Plaintiff-Appellee, v. George SCHNABEL, Defendant-Appellant.

No. 89-5609.

United States Court of Appeals Fourth Circuit.

Argued May 9, 1990.

Decided July 11, 1991.

Stanley James Reed, argued (Susan Berry Blomfield, on brief) Lerch, Early, Roseman & Frankel, Chartered, Bethesda, Md., for defendant-appellant.

Dale Preston Kelberman, Asst. U.S. Atty., argued (Breckinridge L. Willcox, U.S. Atty. and Jane F. Barrett, Asst. U.S. Atty., on brief), Baltimore, Md., for plaintiff-appellee.

Before WIDENER and MURNAGHAN, Circuit Judges, and SMITH, Senior Circuit Judge of the United States Court of Appeals for the Federal Circuit, sitting by designation.

OPINION

EDWARD S. SMITH, Senior Circuit Judge:

The appellant, George J. Schnabel II (Schnabel), was convicted of mail fraud in the United States District Court for the District of Maryland. On appeal, Schnabel asserts five instances of abuse of discretion by the trial court. We find no abuse of discretion by the trial court, and we affirm.

Facts

Schnabel was indicted on March 3, 1988 on three counts of mail fraud in violation of 18 U.S.C. Sec. 1341, ¹ and conspiracy to commit mail fraud in violation of 18 U.S.C. Sec. 371. ² The conspiracy charge was later dismissed on the Government's motion after Schnabel's alleged co-conspirators entered guilty pleas. After six days of trial before a jury, Schnabel was convicted of all three counts of mail fraud on March 14, 1989. Schnabel's conviction arises from events surrounding the collapse of First American Mortgage Company, Inc. (FAMCO). Specifically, Schnabel was convicted of inducing the Fairway Spring Company (Fairway Spring) to invest approximately $1.5 million in FAMCO, and subsequently using the mails to perpetrate fraud on Fairway Spring which led to the loss of its investment. Schnabel appeals his conviction.

FAMCO was engaged in originating mortgages and "selling" them to investors in the form of interest bearing notes secured by specific mortgages. Evidence showed that FAMCO suffered cash flow problems and engaged in fraudulent activities to alleviate its financial difficulties. Some of these fraudulent activities included diversion and commingling of investors' funds, sales of individual mortgages to multiple investors, and misrepresentation of security and insurance provisions supposedly backing FAMCO notes. For example, when a borrower paid off a loan, instead of remitting the principal to the investor who "owned" the loan, the funds were commingled with FAMCO's and used to make interest payments to other investors.

Schnabel first became involved with FAMCO as a financial planner with Financial Services Group (FSG) selling FAMCO loans to investors. The two companies later combined to form a joint venture, and Schnabel later became a vice-president of FAMCO. In September, 1983, while still employed by FSG, Schnabel first persuaded Fairway Spring to invest almost $500,000 of its funds in FAMCO notes under representation that the notes were secured by mortgages and insured. After Schnabel had moved from FSG to FAMCO, he continued to service the Fairway Spring account and persuaded Fairway Spring to invest an additional $1,055,000, bringing its total investment in FAMCO to approximately $1,555,000.

In September, 1984, Hennie Chase, FAMCO's treasurer, and Tim Hastings, manager of FAM Servicing (FAMCO's wholly owned servicing subsidiary), were called into a meeting with Jerry Gaultney, FAMCO's president, and Schnabel. Gaultney told Chase and Hastings that Fairway Spring had agreed to become an unsecured creditor of FAMCO, and to sell the mortgages which had been assigned to secure Fairway Spring's investment. Evidence shows that Fairway Spring had agreed to no such thing.

One consequence of this meeting was that confusion developed between Chase and Hastings as to who was responsible for Fairway Spring's interest payments. As a result, Fairway Spring received no interest payments from September, 1984 through February, 1985. When Fairway Spring called Schnabel to complain, he told them that he would take care of the problem immediately and reassured them of the safety of their investment. Schnabel then went to Hastings and directed him to remit payment to Fairway Spring for the amount of interest owed them for the four missing payments. Hastings sent Fairway Spring a check for $91,000 via Federal Express, and thereafter sent them their monthly interest payments by regular mail until FAMCO closed its doors in November, 1985.

Schnabel stayed in regular contact with Fairway Spring and repeatedly assured it of the safety of its investment. The combination of Schnabel's reassurances, and the regular interest checks, lulled Fairway Spring into a false sense of security about its investment until the day FAMCO folded and it found out that its investment was unsecured and the whole $1.5 million was lost.

Issues

On appeal, Schnabel alleges error by the trial court on four issues:

I. That the trial court abused its discretion by refusing defendant's request for supplemental voir dire.

II. That the trial court committed prejudicial error by admitting evidence of Schnabel's previous tax returns and the testimony of Schnabel's secretary concerning her family's investments with him.

III. That the trial court erred by failing to grant Schnabel's motion for acquittal based on variance between the evidence and the indictment.

IV. That the trial court's "willful blindness" instruction was not supported by the evidence.

Refusal of Voir Dire

During the court's initial voir dire, the jury was asked if any of them had served on a petit jury at the trial of a state or federal criminal case, and if so, whether such service had influenced them in any way. No jurors responded. Between the first and second day of trial, defense counsel discovered that the jurors had been on jury duty for four weeks prior to trial. This led him to believe that the jury had not accurately responded to the court's inquiry.

Schnabel filed a motion to obtain juror information, asking specifically whether any juror had served on a petit jury before the trial court during its current term, and if so, which attorneys had prosecuted those cases. During a chambers conference on the motion, the court stated that only one juror "falls into the category in question". Schnabel requested that the court conduct a limited voir dire of the juror concerning her prior jury experience. The court denied Schnabel's request, but instead offered to replace the juror with an alternate. Schnabel declined the offer, and trial continued with the juror still empaneled.

Schnabel asserts that the trial court's failure to conduct the requested voir dire was an abuse of discretion because it denied him information needed to make an informed decision on whether to strike the suspect juror. We disagree.

"A district court has wide discretion in the conduct of voir dire." ³ The purpose of voir dire is to obtain a fair and impartial jury. ⁴ Therefore, the question is whether the trial court's ruling impaired Schnabel's ability to obtain a fair and impartial jury, and if so, was the impairment significant enough to constitute an abuse of discretion.

In his brief to this Court, Schnabel admits that any doubt of the impartiality of the juror in question was based on speculation. The trial court was under no obligation to conduct supplementary voir dire based on mere conjecture. ⁵ Schnabel relies on three cases to support his contention that failure to conduct supplemental voir dire of a "questionable" juror constitutes abuse of discretion. ⁶ These three cases share a common fact pattern which makes them distinguishable from the case at bar. All three deal with jurors who are incapacitated due to physical illness. The issue dealt with in these cases pertains to a juror's physical ability to continue to hear the case, and has nothing to do with juror bias whatsoever.

Schnabel also admits to the impossibility of showing that he was prejudiced by the trial court's refusal to grant supplementary voir dire. Indeed, even if the trial court had granted his request and the juror had proved unsatisfactory to him, the proper remedy would have been to replace the juror, which the trial court offered to do. ⁷ Any prejudicial effect of the trial court's refusal to grant voir dire of the suspect juror was rendered harmless by its offer to replace her.

Schnabel's argument that he was "forced" to decide whether to replace the juror without "adequate information" is contradicted by the record. The first question posed by Schnabel's motion to obtain juror information was whether any juror had served on a petit jury trying a criminal case before the trial court during the current term. The record shows that the trial court answered this question at a meeting in chambers by categorizing one juror as "falling within the category in question". The second question posed by Schnabel's motion pertained to which attorneys prosecuted the cases referred to in the first question. This second question was directly asked and answered in the negative during the trial court's original voir dire. Therefore, Schnabel had all the information that he had requested, and was not prejudiced in any way by the trial court's offer to replace the suspect juror.

In sum, we hold that the trial court did not abuse its discretion by denying Schnabel's request for supplemental voir dire on a suspect juror and instead offering to replace the juror with an alternate.

Admission of Tax Returns and Secretary's Testimony

During its case-in-chief, the government introduced into evidence Schnabel's tax returns for the years 1984 and 1985, and testimony of his secretary (Ms. Minor) that Schnabel forgave a commission on the sale of FAMCO mortgages to her parents. Schnabel asserts that the trial court erred by improperly admitting this evidence over his...