U.S. v. Spiegel

• Decision Date: 18 October 1979
• Docket Number: No. 78-5110,78-5110
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Stanley SPIEGEL, Allen E. Perkins and Allan Holloway, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 961

604 F.2d 961

UNITED STATES of America, Plaintiff-Appellee, v. Stanley SPIEGEL, Allen E. Perkins and Allan Holloway Defendants-Appellants.

No. 78-5110.

United States Court of Appeals Fifth Circuit.

Oct. 18, 1979.

Edward T. M. Garland, Mark J. Kadish, Atlanta, Ga., for Spiegel.

J. Roger Thompson, Frank J. Petrella, Atlanta, Ga., for Perkins and Holloway.

William P. Gaffney, Asst. U.S. Atty., Dept. of Justice, Atlanta, Ga., for plaintiff-appellee.

Appeals from the United States District Court for the Northern District of Georgia.

Before GODBOLD, GEE and RUBIN, Circuit Judges.

GEE, Circuit Judge:

Appellants were indicted and tried on 30 counts ¹ of mail fraud under 18 U.S.C. § 1341, and one conspiracy count under 18 U.S.C. § 371. Following a trial lasting nine weeks, the jury found appellant Stanley Spiegel guilty of all 30 counts of mail fraud. Appellant Allan Holloway was found guilty of 25 counts of mail fraud; and appellant Allen Perkins was found guilty of one count of mail fraud and acquitted of all others. The jury acquitted all three of the conspiracy charges and acquitted two codefendants of all charges. Spiegel, Holloway, and Perkins appeal from their convictions. Appellant Spiegel's brief argues for reversal on 24 separate issues; the brief for Holloway and Perkins raises 15 issues. The transcript of proceedings in the trial court fills over 50 volumes. We granted additional time for oral argument and gave permission to file briefs more lengthy than usual.

It should be obvious that this is a complex case. Any summary of facts will be less revealing than an iceberg's proverbial tip. With that disclaimer, we now attempt to sketch the most important details while saving for our discussion of the more troubling issues a description of the events especially relevant to them.

Appellant Spiegel, a successful acquisition broker, bought the controlling interest in Coliseum Properties, Inc. (CPI) in October 1970 with notes totalling approximately $460,000. Spiegel and Holloway soon thereafter formed Leasing Corporation of America (LCA) as a CPI subsidiary. At about the same time, Spiegel and acquitted codefendant Joseph Lawson formed another CPI subsidiary, Auditing Services, Inc. (ASI). Holloway, through Holloway Enterprises, Inc. (HEI), contracted with CPI to sell franchises for both ASI and LCA.

LCA offered franchises to persons interested in entering the leasing business. Essentially, prospective dealers were told that LCA had access to 200 funding sources and could obtain financing for leases on almost any type of income-producing equipment, even on marginal lease applications. The sales pitch to prospective dealers furnished, amid other questionable information, the names and phone numbers of allegedly successful dealers. Franchise salesmen solicited a $2,500 down payment with a completed dealer application. Following approval of the application, the remainder of the $10,000 franchise fee became due. Dealers who paid in full received, by mail from Spiegel, a signed dealer agreement. A total of 34 LCA franchises were sold between December 1970 and December 1971; LCA received $365,000 in cash from those sales under its agreement with HEI that LCA and HEI would split the fees 60/40. Over 130 leases were submitted to LCA by dealers during 1971. Only four were placed successfully.

ASI offered computerized audits of utility expenses to businesses and industries. It sold franchises allowing solicitation of customer accounts in defined territories. Prospective dealers were told that utility rates from each dealer territory were programmed into the computer and that auditing by computer was the major advantage offered by ASI. Businesses for whom audits were done were to pay 50 percent of any refunds or utility savings to the dealer, who then was to share half his profits with ASI. To aid its franchise sales, ASI used photographs of computer facilities depicting an RCA computer and, later, tours of another facility. As with LCA sales, prospects were furnished the names and addresses of purportedly successful dealers. ASI received over $650,000 as its share of the fees from 62 franchise sales in 1971; HEI received over $225,000. Franchisees submitted many auditing contracts, but few recoveries resulted, although ASI had represented that the recovery rate would be very high.

Appellant Perkins was a paid "singer" for both LCA and ASI; I. e., he posed as a successful dealer and deceived prospective dealers by representing that he was receiving significant income from his "franchises." Spiegel and Holloway were aware of the use of "singers."

Evidence showed that LCA misrepresented the extent of its funding sources. Holloway prepared the LCA pitch book in Spiegel's presence, and Spiegel had ample opportunity to learn its contents. Spiegel confirmed, in a telephone call to a prospective dealer, that LCA could handle marginal paper and had 200 funding sources. Additionally, Spiegel sent backdated franchise agreements to "singers" Perkins and Jim Arnold knowing that no fees had been paid for their "franchises."

Spiegel and Holloway misrepresented the state of ASI's computer capability. Their computer expert told Spiegel in April 1971 that the rate structure of an entire utility company could not be programmed; analysis had to proceed one business at a time. When advised of this and when told such information would ruin the sales pitch, Spiegel indicated that ASI salesmen need not receive this information. Despite advice that franchise sales should stop, owing to a backlog at the computer, sales continued. Spiegel also misrepresented to a dealer that ASI had leased three-fourths of the time available on an RCA computer at an annual cost of $500,000.

From the foregoing and other facts proven at trial, we think it clear that the jury verdicts of fraud are supported by substantial evidence. We now proceed to consider the more serious points raised on appeal.

Eleven-Member Jury

Appellants contend that the trial court committed reversible error by excusing juror Suzanne Silver and continuing the trial with only eleven jurors. We disagree.

Two distinct provisions of the United States Constitution guarantee the right to a jury trial in criminal cases. ² The Supreme Court declared in 1930 that the Constitution required a jury of precisely twelve persons unless this right was waived by defendant. Patton v. United States, 281 U.S. 276, 50 S.Ct. 253, 74 L.Ed. 854 (1930). The Federal Rules of Criminal Procedure, enacted in the 1940's, codified Patton's requirement of twelve. ³ Our first inquiry thus must be whether Rule 23(b) has been followed here. ⁴

At a pretrial conference on June 3, 1974, attended by all counsel and appellant Spiegel, the question whether counsel and parties would be amenable to waiving the requirement of twelve jurors was first raised but not resolved. The jury was selected and sworn a week later, on June 10. After voir dire and before actual selection, all counsel for defendants stated, at side-bar, that their clients would waive the right to have twelve jurors. ⁵ Additionally, it was agreed at side-bar that two alternate jurors would be selected, despite the waiver, simply as a matter of preference. After a recess to discuss peremptory strikes and after the final selection, counsel for the government and for all defendants signed a written stipulation waiving the requirement of twelve jurors, and the trial judge announced in open court: "The court has received and approved the waiver of an alternate juror and the agreement to proceed with less than twelve in the event of necessity." There is nothing in the record to indicate conclusively that defense counsel conferred with their clients before signing the stipulation.

Soon after trial began, two jurors were excused, and the two alternates replaced them. Trial continued for approximately two more months. The government's case took seven weeks; defendants began theirs on August 5. Defendants wished to finish as soon as possible, since the jury was becoming restless and impatient. Defendant Spiegel was on the stand at the close of the day on Friday, August 9, his case complete except for cross-examination.

On Monday following the weekend recess, juror Silver did not report, owing to illness. Evidently the deputy clerk advised counsel of this new development before the judge entered the courtroom. On his arrival, the trial judge formally announced that juror Silver was ill, and he expressed uncertainty about when she would return. At that point, all defense counsel, in the presence of their clients, Requested that trial continue with the remaining eleven jurors; government counsel objected. The trial court then excused the juror and stated in defendants' presence that trial would proceed with eleven. Again, it is difficult to ascertain whether appellants were consulted by their attorneys before the latter made their request to proceed. Much later, in overruling motions for new trial, the trial court stated that defendants "either knew actually the substance of their rights (to a twelve-person jury), or committed the entire decision without regard thereto to their attorneys." Thus, he made no explicit finding that defendants knew exactly what was being waived on either June 10 or August 12. Unquestionably, none gave personal assent in court to trial by eleven jurors. ⁶

The real issue is whether Rule 23(b) allows counsel to waive a client's right to a jury of twelve in the absence of a finding that defendant either was consulted about the decision or personally and intelligently assented to fewer than twelve. ⁷

The language of Rule 23(b) departs substantially from that of Rule 23(a). The latter states:

Trial by jury. Cases required to be tried by jury shall be so tried unless the defendant waives a jury trial in writing with the approval of the court and the consent of the government.

Rule 23(b), on the other hand, refers not...