U.S. v. Sprayregen, 945

• Decision Date: 25 May 1978
• Docket Number: D,No. 945,945
• Citation: 577 F.2d 173
• Parties: UNITED STATES of America, Appellee, v. Gerald SPRAYREGEN, Defendant-Appellant. ocket 78-1066.
• Court: U.S. Court of Appeals — Second Circuit

Page 173

577 F.2d 173

UNITED STATES of America, Appellee, v. Gerald SPRAYREGEN, Defendant-Appellant.

No. 945, Docket 78-1066.

United States Court of Appeals, Second Circuit.

Argued May 17, 1978.

Decided May 25, 1978.

Jerry L. Siegel, Asst. U. S. Atty., New York City (Robert B. Fiske, Jr., U. S. Atty. for the Southern District of New York, Richard D. Weinberg, Asst. U. S. Atty., New York City, of counsel), for appellee.

Peter E. Fleming, Jr., New York City (Robert D. Piliero and Curtis, Mallet-Prevost, Colt & Mosle, New York City, of counsel), for defendant-appellant.

Before KAUFMAN, Chief Judge, and MULLIGAN and VAN GRAAFEILAND, Circuit Judges.

IRVING R. KAUFMAN, Chief Judge:

Gerald Sprayregen appeals from his conviction on all counts of an 11-count indictment, charging him with the preparation and dissemination of false financial statements relating to the John's Bargain Stores Corp., and with the subsequent concealment of this massive fraud. Specifically, appellant was convicted of submitting materially false financial reports to the SEC, to credit agencies, and to the First Pennsylvania Banking & Trust Co. so that he could receive a loan. Sprayregen now raises two issues on appeal. He contends that the prosecutor's repeated assertions during summation that he was lying contravene this court's holdings in United States v. White, 486 F.2d 204 (2d Cir. 1973) and United States v. Bivona, 487 F.2d 443 (2d Cir. 1973). He also argues that, in important particulars, the testimony of two material witnesses for the government differed, and that, to the extent the government disbelieved one of them, it knowingly countenanced the presentation of perjured testimony. Although we affirm, we do not mean thereby to indicate approval of the prosecutor's conduct.

I.

At trial, the government established its case against Sprayregen primarily through the testimony of two witnesses, Jose Umana, the comptroller of John's Bargain Stores, and Walter Spengler, the chain's Vice President of Operations subsequent to 1972. Their testimony, taken, as we must, in the light most favorable to the government, see United States v. Freeman, 498 F.2d 569 (2d Cir. 1974), established that, in 1969, a group of investors, including several sympathetic to the so-called Sprayregen interests acquired control of John's Bargain Stores. Immediately thereafter, this group, and the president of John's, one David Cohen, committed the corporation to an agreement whereby the stores agreed to purchase the appellant's brokerage firm, Sprayregen & Co., for a sum estimated at fifteen million dollars. Suppliers, apparently concerned over the exercise of this "put agreement" and its effect on the corporation's liquidity, commenced refusing credit to the John's Bargain Stores chain consisting of over 200 discount outlets. Throughout 1970, in fact, conditions worsened as store managers, forced to purchase inferior merchandise, found these goods were stagnating on the shelves.

Seeking to revitalize the chain, Sprayregen and Walter Spengler, then newly hired, decided to undertake a "mark down" program, reducing the price of merchandise in an effort to increase volume and generate cash. The amount of reductions was greater than expected, however, and the chain sustained a loss of approximately 1.8 million dollars. The instant criminal action derives from appellant's efforts, along with Spengler and Umana, to conceal this loss through a manipulation of the amount credited to John's Bargain Stores' inventory. When, moreover, it appeared that this fraud was about to be discovered appellant, in concert with Spengler and Umana, agreed to fabricate a story placing all blame for the fraud on Umana. This false tale was adhered to until Umana and, eventually Spengler, recounted a totally different version of the events concerning John's Bargain Stores, and pleaded guilty to charges relating to the fraud. The appellant, who testified in his own behalf, denied any knowledge of the actions taken at John's to conceal the chain's massive losses.

The case presented to the jury, accordingly, was one dependent on the jury's assessment of credibility. If the jurors credited the testimony of Umana and Spengler, or portions of their testimony, as their verdict indicates they must have, the government's case against the appellant was concededly compelling.

II.

It is in this context that Sprayregen's complaint regarding the propriety of the prosecutor's remarks during summation must be considered. ¹ In United States v. White, supra, and...