U.S. v. Slocum, 248

• Decision Date: 10 December 1982
• Docket Number: D,No. 248,248
• Citation: 695 F.2d 650
• Parties: 12 Fed. R. Evid. Serv. 77 UNITED STATES of America, Appellee, v. Robert W. SLOCUM, Defendant-Appellant. ocket 82-1161.
• Court: U.S. Court of Appeals — Second Circuit

Page 650

695 F.2d 650

12 Fed. R. Evid. Serv. 77

UNITED STATES of America, Appellee, v. Robert W. SLOCUM, Defendant-Appellant.

No. 248, Docket 82-1161.

United States Court of Appeals, Second Circuit.

Argued Sept. 3, 1982.

Decided Dec. 10, 1982.

Frederick H. Block, New York City, for defendant-appellant.

Samuel S. Linderman, Asst. U.S. Atty., New York City (John S. Martin, Jr., U.S. Atty. for the S.D. of N.Y., Walter P. Loughlin, Asst. U.S. Atty., New York City, on the brief), for appellee.

Before KEARSE, CARDAMONE and WINTER, Circuit Judges.

CARDAMONE, Circuit Judge:

It is often stated that if something is too good to be true, it probably isn't. Sadly, several hundred investors learned this lesson the hard way in the case before us. Operating on a well-known premise so tellingly phrased by P.T. Barnum, appellant conceived an elaborate Ponzi-like scheme and offered it to the public as a sure route to get rich quickly. Lured by promised profits of 100 percent in 90 days, "investors" eagerly bought securities in appellant's shell corporation. Only after being duped out of over three million dollars did the victims realize that this was not the road to riches they had imagined.

I

The facts at trial established that in 1975 appellant Robert W. Slocum, with the assistance of an attorney named Humberto Pacheco, formed International Trade Development of Costa Rica, S.A. (ITD) as a Costa Rican corporation. Slocum told Pacheco that ITD would engage in the business of importing Costa Rican wood crafts into the United States and that no outside financing of ITD would be used. Shortly after ITD's incorporation, however, Slocum began an extensive campaign of soliciting outside investments in ITD. As its president, he recruited an investment sales force, invited potential investors to presentations in Costa Rica and New York City extolling ITD's purported prospects, ran ITD advertisements in newspapers (e.g., a full page advertisement on July 4, 1976 in the New York Times Sunday Magazine Section) and opened showrooms for investors to visit in New York and Miami. Slocum and his salesmen encouraged investors to make their investments in cash and falsely told potential investors that they would double their investments in 90 days. ¹ Potential investors were also urged to act quickly because, they were told, the rate of return on their investments would soon decline from 100 to 50 percent. Numerous other fraudulent representations were made to investors, including that ITD had extensive orders for merchandise, had several factories in Costa Rica, and owned and was developing land in that Central American country. In fact, ITD never conducted any business other than that necessary to maintain a facade of legitimacy.

Worthless certificates designated "CRDs" were issued to ITD investors. Some were told that the initials "CRD" stood for Costa Rican Deposit; others were informed that "CRD" meant Costa Rican Development. The certificates, printed in a mixture of Spanish and English, contained blank spaces in which the name of the investor, the investment maturity date (90 days from the date of investment), the amount to be repaid (twice the amount invested) and the salesman's name were filled in at the time of purchase. The securities listed as ITD's treasurer one "Alfredo M. Cortina," a fictitious person. No attempt was made to register the certificates with the Securities and Exchange Commission (SEC).

When investors began pressing Slocum and his salesmen for return of their investments, they were variously and again falsely advised that Slocum was about to conclude an oil deal to generate new funds that he was going to Europe to obtain 40 million dollars so that they could be repaid, and that ITD's lucrative investments would soon pay off. In an attempt to generate operating funds Slocum sent Robert Angona, president of Costa Rican Imports of New York, ² and Frank Casey, one of Slocum's investment salesmen, to New York City to negotiate a fraudulent letter of credit. Angona and Casey presented the falsified letter of credit at Irving Trust Company in New York, but the bank refused to honor it. This attempt having failed, Slocum sent Edward Ekmalian, Angona's assistant, to Bogota, Columbia to negotiate the fake letter of credit there. This mission was also unsuccessful. Undaunted, Slocum, Angona and Ekmalian established an account for Costa Rican Imports of New York at Irving Trust and deposited into it two worthless checks drawn on ITD's account at City National Bank of Coral Gables, Florida. The checks were signed by Don Gordon, an ITD official, and Rita Slocum, appellant's wife. Angona and Ekmalian then withdrew the proceeds before the checks were dishonored by the drawee bank. This money was delivered to Slocum.

On November 24, 1981 a federal grand jury returned a 19 count indictment against Slocum and others for their role in the ITD fraud. Count one charged Slocum, his wife, and Henry Ming Wong, an ITD official, with conspiring to sell to the public unregistered securities and employing fraudulent means to effect such sales in violation of 15 U.S.C. Secs. 77e, 77q, 77x, 78j(b), 78ff and 17 C.F.R. Sec. 240.10b-5. Slocum alone was charged in count two with mail fraud in violation of 18 U.S.C. Secs. 2, 1341; in counts three through seven with the sale of unregistered securities in violation of 15 U.S.C. Secs. 77e, 77q, 77x and 18 U.S.C. Sec. 2; in counts eight through twelve with employing fraudulent means to effect the foregoing sales in violation of 15 U.S.C. Secs. 78j(b), 78ff, 17 C.F.R. 240.10b-5, and 18 U.S.C. Sec. 2; in counts thirteen and fourteen with interstate transportation of the proceeds of the foregoing sales in violation of 18 U.S.C. Secs. 2, 2314; and in count fifteen with the commission of wire fraud in violation of 18 U.S.C. Secs. 2, 1343. Count sixteen charged Slocum, his wife and Ming Wong with causing other persons to travel across state lines in furtherance of a scheme to defraud in violation of 18 U.S.C. Secs. 2, 2314. Count seventeen charged Slocum and his wife with conspiring to defraud several banks in violation of 18 U.S.C. Sec. 371. Lastly, counts eighteen and nineteen charged Slocum and his wife with bank fraud in violation of 18 U.S.C. Sec. 1014.

Following his trial in the United States District Court for the Southern District of New York before the Honorable Henry F. Werker and a jury, Slocum was convicted on counts two through nineteen. A mistrial was declared on count one after the jury was unable to agree. Judge Werker subsequently sentenced Slocum to an aggregate sentence of twelve years as follows: concurrent three-year terms on counts two through twelve, fifteen and seventeen; concurrent seven-year terms on counts thirteen, fourteen and sixteen to run consecutively to the three-year terms on counts two through twelve, fifteen and seventeen; and concurrent two-year terms on counts eighteen and nineteen to run consecutively to the three and seven-year terms.

II

Appellant raises several issues on appeal. First, he correctly contends, and the government concedes, that his convictions for bank fraud in violation of 18 U.S.C. Sec. 1014 must be reversed. Section 1014 provides in pertinent part:

Whoever knowingly makes any false statement or report, or willfully overvalues any ... property or security, for the purpose of influencing in any way the action of ... any bank the deposits of which are insured by the Federal Deposit Insurance Corporation ... upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan, or any change or extension of any of the same, by renewal, deferment of action or otherwise, or the acceptance, release, or substitution of security therefor, shall be fined not more than $5,000 or imprisoned not more than two years, or both.

18 U.S.C. Sec. 1014 (1976). The substantive bank fraud counts against Slocum were based entirely upon the two instances in which Slocum, through his agents Angona and Ekmalian, kited bad checks at Irving Trust. The debate has not been settled as to whether a "bad check" deposited in a federally insured bank is a "false statement" or constitutes "overvaluing" of property or security violative of 18 U.S.C. Sec. 1014. The Supreme Court recently held that such a check--even when deposited as part of a check-kiting scheme--does not constitute a false statement or an overvaluing of property or security within the meaning of Sec. 1014. See Williams v. United States, --- U.S. ----, 102 S.Ct. 3088, 3092-95, 73 L.Ed.2d 767 (1982); cf. United States v. Krown, 675 F.2d 46, 51 (2d Cir.1982) (merely depositing worthless checks in FDIC-insured bank does not violate Sec. 1014). ³ Consequently, Slocum's two year sentence for bank fraud must be vacated.

Appellant next argues that his conviction on count seventeen for conspiracy to defraud FDIC-insured banks in violation of 18 U.S.C. Sec. 371 must be reversed because the two instances of check-kiting, cited as overt acts in furtherance of the conspiracy, did not violate Sec. 1014. Overt acts, however, stand on a different footing. The fact that Slocum's check-kiting scheme did not violate Sec. 1014 does not mean that the kitings cannot be considered as overt acts in furtherance of the conspiracy to defraud an FDIC-insured bank. An overt act need not "be the substantive crime charged in the indictment as the object of the conspiracy"--nor need it even be a criminal act--in order to support a conspiracy conviction. Yates v. United States, 354 U.S. 298, 334, 77 S.Ct. 1064, 1084, 1 L.Ed.2d 1356 (1957). The reason for this is that the function of the overt act is simply to demonstrate the conspiracy's existence, i.e., to prove that it is at work. See id. Additionally, even were the check-kitings not deemed overt acts in furtherance of a conspiracy to defraud, evidence of a separate overt act to support a conviction under count seventeen is found in the...