U.S. v. Siegel

• Decision Date: 24 August 1983
• Docket Number: 891,Nos. 929,D,s. 929
• Citation: 717 F.2d 9
• Parties: 14 Fed. R. Evid. Serv. 70 UNITED STATES of America, Appellee, v. Leonard S. SIEGEL and Martin B. Abrams, Defendants-Appellants. ockets 82-1366, 82-1369.
• Court: U.S. Court of Appeals — Second Circuit

Page 9

717 F.2d 9

14 Fed. R. Evid. Serv. 70

UNITED STATES of America, Appellee, v. Leonard S. SIEGEL and Martin B. Abrams, Defendants-Appellants.

Nos. 929, 891, Dockets 82-1366, 82-1369.

United States Court of Appeals, Second Circuit.

Argued Feb. 23, 1983.

Decided Aug. 24, 1983.

Walter P. Loughlin, Asst. U.S. Atty., S.D.N.Y., New York City (John S. Martin, Jr., U.S. Atty., S.D.N.Y., New York City, of counsel), for appellee.

Deborah A. Schwartz, New York City (Newman & Adler, Gustave Newman, New York City, of counsel), for defendant-appellant Siegel.

Michael Ross, New York City (LaRossa, Axenfeld & Mitchell, New York City, of counsel), for defendant-appellant Abrams.

Before PIERCE, WINTER and PRATT, Circuit Judges.

GEORGE C. PRATT, Circuit Judge:

Leonard S. Siegel and Martin B. Abrams appeal from judgments of conviction in the United States District Court for the Southern District of New York, Charles E. Stewart, Jr., Judge, entered after a jury trial. Both defendants were found guilty of fifteen counts of wire fraud, in violation of 18 U.S.C. Secs. 1343 and 2. Defendant Abrams was found guilty of endeavoring to obstruct federal investigators in violation of 18 U.S.C. Secs. 1510 and 2. Although both defendants were convicted of aiding in the preparation of a false corporate tax return in violation of 26 U.S.C. Sec. 7206(2), neither defendant appeals from that conviction.

We find sufficient evidence in the record to support the convictions under the wire fraud statute and affirm on those counts. Because we conclude, however, that Abrams' conduct did not violate 18 U.S.C. Sec. 1510, we reverse his conviction for obstruction of justice.

FACTS

Abrams and Siegel were tried with three co-defendants, Michael Gold, Frederick Pierce, and Irving Cotler, on a twenty count indictment. Counts one through fifteen charged all five defendants with use of interstate wires in furtherance of a fraudulent scheme to obtain money and to defraud Mego International, Inc. (Mego Int'l), its wholly owned operating subsidiary, Mego Corporation (Mego), and stockholders of Mego Int'l, in violation of 18 U.S.C. Secs. 1343 and 2. Count sixteen charged Abrams with endeavoring to obstruct federal investigators in violation of 18 U.S.C. Secs. 1510 and 2. Count seventeen charged all five defendants with other violations of 18 U.S.C. Secs. 1510 and 2. Count eighteen charged Siegel with endeavoring to obstruct the grand jury in violation of 18 U.S.C. Secs. 1503 and 2. Count nineteen charged Gold with subscribing to a false corporate income tax return in violation of 26 U.S.C. Sec. 7206(1). Count twenty charged Abrams, Siegel, and Gold with aiding in the preparation of a false corporate income tax return in violation of 26 U.S.C. Sec. 7206(2).

After a seven-week trial, the jury acquitted defendants Gold, Pierce, and Cotler of all charges. Abrams and Siegel were found guilty on counts one through fifteen and twenty. Abrams was also found guilty on count sixteen. Siegel was sentenced to concurrent three month terms of imprisonment on counts one through fifteen and a $5,000 fine on count twenty. Abrams received concurrent four-month prison terms on During the period covered by the indictment, Mego Int'l was a publicly held international manufacturer and distributor of toys and games. Mego was one of its wholly owned subsidiaries. Abrams was chairman of the board of Mego Int'l and its president until 1980. Siegel was secretary of Mego Int'l and executive vice president of Mego.

counts one through fifteen, twenty months' probation on counts sixteen and twenty, and a $5,000 fine on counts sixteen and twenty, for a total fine of $10,000. Both defendants are free on bail pending this appeal.

The fraudulent scheme underlying defendants' convictions involved unrecorded cash sales of Mego merchandise which had either been closed out and marked down for clearance or returned because of damage or defect. The evidence presented at trial showed that the scheme had been furthered in various ways. Abrams conducted some cash transactions himself. Siegel also dealt in cash transactions, supervising cash sales through a retail store of imported shirts worth over $30,000. Other cash transactions were conducted with the aid of William Stuckey, who was manager of Mego's Long Island warehouse and who became a principal witness for the government. At the direction of Abrams and Siegel, Stuckey sold Mego merchandise to various street peddlers and merchants for cash. The "off the books" sales together generated in excess of $100,000 in cash.

These cash sales were not recorded on Mego's books. Rather, Stuckey gave cash customers a Mego bill of lading and a handwritten receipt. He placed his copy of the receipt and the cash inside an envelope and stored it in either an office safe or a bank safe deposit box. At intervals, as the cash accumulated, Stuckey transferred the cash to Siegel at the company's New York City office. Although initially Siegel signed the copies of the receipts Stuckey had placed in the envelope and returned them to Stuckey, he discontinued the practice in late 1975 explaining to Stuckey that he should not sign the receipts because he was an attorney.

The indictment charged that defendants used the cash for bribery and self-enrichment. The government called several witnesses who, in addition to testifying to the unrecorded cash transactions, recounted their knowledge of the uses to which the money was put. Frank Voigt, vice president and later president of Mego until he resigned in 1974, testified that defendant Abrams' father, D. David Abrams, directed him to take cash from Stuckey and from a buyer, Israel Gewirtz, and to turn the money over to Siegel. Voigt stated that on one occasion Abrams' father told him to take $100 from the cash fund and to give it to a buyer during lunch. When he attempted to get this money from Siegel, Siegel told him "it's too late. * * * Marty [Abrams] just wiped me out. He took all the cash." Voigt also testified that Walter Mandel, Mego's sales manager, told him that he thought the cash proceeds were being used for payoffs to buyers, and that Mandel had made a payoff to someone at J.L. Hudson's.

Stanford Zeisel, controller and later treasurer of Mego from 1971 to mid-1975, testified that D. David Abrams told him also that he would be receiving cash from Stuckey and that Stuckey told him the cash came from the proceeds of the sale of damaged or returned goods. Zeisel stated that Mandel once had asked him for several hundred dollars in cash, and that when Zeisel refused to give it to him, either Martin Abrams or his father told him to give Mandel the money. Mandel told him that he was going to use the money to "take care of" someone at J.L. Hudson's. On cross-examination, however, Zeisel acknowledged that he did not know what was actually done with the money. Zeisel further testified that on one occasion, while Siegel was depositing some cash proceeds in the corporate safe deposit box, he gave Zeisel $50, saying, "Marty wants us to have a Christmas gift."

Stuckey also testified concerning the cash transactions and described his method of sending the cash to either Voigt, Zeisel, or Siegel by placing it in an envelope with two In support of the government's charge that proceeds from the cash sales were used in part to bribe union officials to secure labor peace, Stuckey described his involvement in a $30,000 payment to Irving Cotler, who had promised to arrange for labor peace with the union that represented Mego's warehouse employees, in return for being given Mego's trucking business. Stuckey testified that in November 1976 Abrams told him to call Israel Gewirtz, a long time Mego customer. On the same day, Cotler called Stuckey and gave him a telephone number to call after he met with Gewirtz.

copies of the handwritten customer receipt and a copy of the bill of lading. Stuckey testified that, although Siegel would no longer sign Stuckey's handwritten receipts after late 1975, Stuckey managed to retrieve some of those receipts when he delivered the cash to Siegel. The cash sales during this period were almost exclusively to Herbert Ristau, owner of Jo Ro Sales, and, while Stuckey testified that the receipts he had for the 1975-79 period did not represent all the cash transactions, nevertheless, the receipts presented at trial showed that Stuckey took in substantial amounts of cash in these transactions, for example, more than $40,000 during 1978 alone.

When Stuckey met Gewirtz at his office, he was taken to a nearby abandoned building and led through two locked doors and down a flight of stairs before being given the $30,000 that Gewirtz said Stuckey was "supposed to take care of for Marty Abrams". Stuckey gave the money to Cotler in a New Jersey hotel room and called Abrams to tell him that the payment had been made, saying that "the toys have been delivered". Cotler told Stuckey to forget the whole incident.

Stuckey also testified that in 1977, when Mego was afraid that it would not be able to get a shipment of containers off the docks because of a threatened strike, Frederick Pierce told him to take as much money as was necessary out of the cash sales fund and give it to Cotler "to do whatever he could do to get the goods to us". After the containers were delivered, Stuckey paid Cotler $800 out of the cash sales fund. On cross-examination, Stuckey stated that it was his belief that Pierce gave him these instructions knowing that Cotler might have to make an illegal payoff to get the goods off the pier.

Even though, as mentioned above, the cash sales were not recorded on Mego's books, Siegel and Abrams told Mego's auditors that there were no unrecorded assets. In addition, no information about the cash sales was divulged to Mego's stockholders. The jury was thus entitled to find that Siegel and Abrams, top executives in Mego, generated a secret fund of over $100,000 from cash sales of company...