U.S. v. Smith
| Decision Date | 31 October 1990 |
| Docket Number | 1388,D,Nos. 1387,s. 1387 |
| Parties | UNITED STATES of America, Appellee, v. Herbert Alwyn SMITH, and Joseph Shea Peeples, Defendants-Appellants. ockets 90-1090, 90-1091. |
| Court | U.S. Court of Appeals — Second Circuit |
Michael H. Sporn, New York City, for defendant-appellant Smith.
Martin G. Fogelson, New York City, for defendant-appellant Peeples.
James B. Comey, Asst. U.S. Atty., New York City (Otto G. Obermaier, U.S. Atty., S.D. New York, Joan McPhee, Asst. U.S. Atty., of counsel), for appellee.
Before KEARSE, WINTER and WALKER, Circuit Judges.
Appellants Herbert Smith and Joseph Peeples appeal from their January 30, 1990 convictions on one count of conspiracy to violate the Arms Export Control Act 22 U.S.C. Sec. 2751 et seq. and to commit wire fraud, and thirteen counts of wire fraud after an eight day jury trial presided over by Judge Keenan. They appeal on several grounds: 1) that the indictment used to originally charge them, which became defective under McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), could not be cured by mere redaction of non-McNally material, but required a new presentation to a grand jury; 2) that the evidence was insufficient to convict; 3) that the district court's jury instruction on the knowledge requirement for violation of the Arms Export Control Act was improper; 4) that the district court wrongly prevented an informant from testifying; 5) that the court erred in denying a severance; and 6) that the court's denial of defendants' Speedy Trial motion was error.
Because we find each of these contentions to be without merit, we affirm.
In late 1980 Angelo Spateri began to look for buyers for seven Agusta Bell AB 204 B helicopters. Defendant Smith contacted Spateri and offered to buy them for $5 million. Spateri told him that in order to complete the sale Smith would need to provide an end-use certificate (E.U.C.) which would state the destination and intended use of the helicopters. Smith originally told Spateri he was purchasing the helicopters for the Thailand Air Force, and Spateri received a confirming telex purportedly from that organization. However, upon checking the transmittal number in a directory, Spateri noted that the telex had been Spateri then wrote to the Office of Munitions Control (OMC) in the Department of State (State) inquiring whether a State license would be necessary to export the helicopters. State wrote back that because the helicopters could potentially be armed, they fell within Category VIII of the United States Munitions List and required a license for export. Spateri told Smith about this letter. On February 10, 1981, Spateri applied to the OMC for an export license, enclosing the material Smith had given him for an E.U.C. On March 30, 1981, State returned Spateri's application, but added that it could be resubmitted upon written confirmation of interest by the Ajman government. Spateri tried to inform Smith of this, but could not reach Smith until a week later, when Smith called Spateri and informed him that he already knew of the rejection, and that obtaining the necessary confirmation would be "no problem." Spateri never heard from Smith again.
sent from a textile company in Thailand. Smith then produced another "buyer"--the Ajman Bosco Refinery Company Ltd., located in Ajman, one of the United Arab Emirates--which Smith said needed the helicopters for its normal working operations. Smith provided a letter on Bosco letterhead to that effect which, together with two documents in Arabic, constituted his total E.U.C. documentation, although he said that he could provide a representation from the Government of Ajman if necessary. Smith closed the deal by giving Spateri a postdated check for $5 million.
In the meantime, Smith had been busy on another front. Starting in February 1981 he had been trying to sell these same helicopters to Joseph King, a Customs Service Special Agent posing as a broker seeking to buy helicopters for Iran. King first became interested in Smith when a supplier of Cobra gunship attack helicopters told him that some AB 204 B helicopters were available and referred him to defendant Peeples, as one who could get him in touch with the owner of the helicopters.
Peeples, acting as Smith's representative, told King when King first contacted him on March 5 and 6, 1981 that the helicopters had "gun mounts on them", and had export papers which were "bulletproof", including an E.U.C. ostensibly for delivery to a "friendly Arab country". He represented that the helicopters were owned by a Middle East oil company and could "immediately be armed." Peeples then put King in contact with Smith.
On March 9, 1981 Smith told King that he had an export license and "in theory" the helicopters were "supposed to go to Ajman", but that he had approval from the Arabs for transshipment. The next day he told King that the refinery end use for the helicopters was merely "camouflage", and that "if you can't beat them legally, you beat them another way, don't you?" He then asked for $6.25 million--twenty five percent of the purchase price--up front to pay for "shipping costs." King expressed doubts about the availability of the helicopters, saying that he had heard that there was a Customs Service lien on the helicopters due to irregularities in their shipment to the United States. Smith denied that there was such a lien, and told King to have his clients deposit their payment into a bank account to be released as soon as the helicopters were loaded onto a ship. Smith also told King again that the helicopters had an export license from the State Department, reading from State's letter to Spateri returning his application, but changing the ending to read "Currently no restrictions for Ajman apply."
Later in the day Smith admitted that there was a Customs lien, but promised to pay it. He also said that an export license would be available the next day. He told King to tell his client, Iran, that the helicopters were "the difference between them winning and losing a war." On March 13 Smith altered his story: the Customs lien would be paid once he had proof that King's client would buy the helicopters, and the export license would issue when the lien was paid. Smith added that he and Peeples wanted King's client to put up a bank guarantee releasing payment when the export license came through.
In the beginning of April, Smith and Peeples moved to close the deal. Smith told King on April 7 that the lien had been lifted, on April 8 that "we have our license now", and on April 9 telexed him requesting an irrevocable purchase order that same day. Peeples also called King on April 9 to report that Smith had received the export license. King telexed Smith confirming his agreement to buy the seven helicopters, subject to Smith getting an export license and a verifiable E.U.C. On April 13 Smith purported to accept King's offer, telexing But he refused to ship the helicopters until King paid him, which he insisted on being done outside of the United States. On April 14, 1981, King telexed Smith in response that he had heard that State had returned Spateri's application for an export license without action. Smith did not respond.
Peeples continued to push the sale, purporting to be speaking for Smith. In an April 16 telex Peeples offered to travel to New York to meet with King. The next day Peeples telexed that Smith had a provisional export license, and that he and Smith would personally see the head of the OMC to clear up any misunderstandings. On April 22 Peeples told King to call him in Switzerland. When King called, Peeples told him that Smith was planning to straighten things out with the OMC in the next few weeks, but would do so immediately if King provided him with a bank guarantee. When King offered to put the funds in escrow with his own attorney, Peeples said such an arrangement had to include "some penalty ... in favor" of Smith. By the next day, however, Peeples told King that Smith said "escrow will not do", and that Smith was getting a bank guarantee from another buyer, Libya. Peeples urged King to provide a bank guarantee first, and then Smith would transfer his ownership documents to King. On April 24 Peeples sent a final telex to King, urging him to supply a bank guarantee or a letter of credit to secure the sale.
On May 7, 1981 King telexed Smith, asking that he or Peeples call. On July 28, King sent another telex requesting contact. Smith responded to this, saying that he would not take an escrow and demanding a bank guarantee equal to half the total purchase price. That was the last King heard from Smith. In 1982 King contacted Peeples in Europe in an attempt to locate both defendants in order to arrest them. In 1985 Smith and Peeples were indicted, and in 1986 they were arrested.
Count one of the indictment as originally filed charged Smith and Peeples with participating in a conspiracy with three alleged objectives: (1) to make false statements to the OMC in connection with an export license application, in violation of 22 U.S.C. Sec. 2778(c); (2) to export the helicopters without a valid license issued by the OMC, in violation of 22 U.S.C. Sec. 2778(b)(2); and (3) to commit wire fraud, in violation of 18 U.S.C. Sec. 1343. The scheme underlying the wire fraud objective of the conspiracy, as well as the thirteen substantive wire fraud counts, had two components: 1) obtaining money from prospective purchasers of the helicopters by falsely representing that an export license had been issued for them and 2) defrauding the United States of its right to control the export of defense articles and munitions.
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