U.S. v. Wellington, Nos. 83-1307

• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Writing for the Court: Before MERRILL, FARRIS and BEEZER; BEEZER
• Citation: 754 F.2d 1457
• Parties: 17 Fed. R. Evid. Serv. 961 UNITED STATES of America, Plaintiff-Appellee, v. Mark WELLINGTON, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Jerome C. UTZ, Defendant-Appellant.
• Docket Number: 83-1311,Nos. 83-1307
• Decision Date: 28 March 1985

Page 1457

754 F.2d 1457 17 Fed. R. Evid. Serv. 961 UNITED STATES of America, Plaintiff-Appellee,
v.
Mark WELLINGTON, Defendant-Appellant.
UNITED STATES of America, Plaintiff-Appellee,
v.
Jerome C. UTZ, Defendant-Appellant. Nos. 83-1307, 83-1311. United States Court of Appeals,
Ninth Circuit. Argued and Submitted Jan. 18, 1985.
Decided March 4, 1985.
As Amended March 28, 1985.

Page 1460

E. Leslie Hoffman, III, Washington, D.C., for U.S.

Christopher J. Cannon, San Francisco, Cal., for Wellington.

Jerome Utz, in pro. per.

Appeal from the United States District Court for the Northern District of California.

Before MERRILL, FARRIS and BEEZER, Circuit Judges.

BEEZER, Circuit Judge:

Along with two other defendants, Mark Wellington and Jerome Utz were indicted for eleven counts of mail fraud and violations of the Travel Act relating to a fraudulent land sales scheme. After a lengthy trial, a jury convicted Wellington and Utz on nine counts. We affirm.

I

Background

This case involves allegations of fraud arising out of a land sales operation in Placerville, California. The scheme was masterminded by David Pedley, who had four previous convictions on charges related to his involvement in fraudulent schemes. Following a stock fraud conviction in the mid-1970s, Pedley acted as an informer for several federal law enforcement agencies. Pedley was placed in the federal witness protection program. While in that program, he met Jerome Utz, who was a deputy attorney general for the state of California. Utz assisted Pedley and his son in obtaining a legal name change from "Pedley" to "Wellington." Utz also assisted David Wellington in obtaining clearance from federal authorities to engage in house construction. Wellington was joined by his son, Mark Wellington, and a friend, Michael Cano. Utz became a silent partner in the enterprise. The record reveals that David Wellington did not act as an informer for the state of California and that Utz's superiors were unaware of the assistance that Utz provided to the Wellingtons.

In 1976, Wellington and his associates recruited a sales force and began to solicit investors for their real estate development. They created Mission Vectors, Inc. ("Mission Vectors"), which owned an airplane that was used to fly potential investors

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from San Jose to Placerville. On arriving in Placerville, the potential investors were told that the proposed development would proceed in four stages. First, the investors would purchase lots from Pacific Park Properties ("PPP") for $10,000 each. Each lot would be free and clear of liens and encumbrances. Second, the developers would arrange construction loans in the investors' names. Third, Cano Construction Company ("CCC") would use the funds to construct houses on the lots. The investors were given a brochure which stated that CCC had been successfully producing houses since 1974. Fourth, Diamond Pacific Realty ("DPR") would market the completed homes. The investors were told that they would recover their down payments and receive any profits that were realized.

Several of those representations were false. All of the lots were subject to substantial liens, many of which were soon the subject of foreclosure proceedings. PPP did not even own some of the lots. In addition, CCC was created in 1976, rather than 1974. None of the principals had substantial experience in construction.

Several investors either discovered the misrepresentations or grew impatient with the lack of progress in the construction of their houses. To lull those investors into a sense of security, Wellington and his associates made further misrepresentations and promises and placed money into escrow accounts. The money in the escrow accounts was subsequently diverted to other accounts. PPP, CCC, and DPR declared bankruptcy in August 1978.

During the course of the development project, substantial amounts of money borrowed on behalf of the investors were diverted to other uses. These uses included renting a Mercedes for each of the principals, developing a potential television series about the federal witness protection program, and investing in private ventures.

After a lengthy investigation, a federal grand jury in the Eastern District of California indicted David Wellington, Mark Wellington, Jerome Utz, and Michael Cano on June 3, 1982. The indictment charged the defendants with nine counts of mail fraud and two counts of violating the Travel Act. See 18 U.S.C. Secs. 1341, 2314. Utz and Cano entered pleas of not guilty. Following his arrest in Mexico, Mark Wellington also pleaded not guilty. During the pendency of this case, David Wellington was imprisoned in Mexico awaiting trial on unrelated charges. David Wellington and Mark Wellington were also charged in a separate indictment with a scheme involving check kiting. The check kiting indictment was pending during the proceedings in this case.

On the motion of the defendants, venue was transferred to the Northern District of California. Judge Thelton Henderson presided over the first seven weeks of the trial. When Judge Henderson became ill, he was replaced by Senior Judge Ray McNichols, who presided over the final two weeks of the trial. On August 29, 1983, the jury convicted Wellington and Utz on nine of the eleven counts. Cano was acquitted on two counts, but the jury deadlocked on the remaining nine counts. The Government subsequently dismissed all charges against Cano. On December 6, 1983, Judge McNichols sentenced Wellington and Utz to three years imprisonment on each count, with the sentences running concurrently. Judge McNichols suspended all but six months of Utz's sentence and sentenced him to three years of probation.

II

The Indictment

The original indictment charged the defendants with a wide range of unlawful acts relating to the fraudulent land sales scheme. At trial, the defendants filed a motion to strike several unproven allegations as surplusage. After the Government admitted that various allegations were unproven, the district court struck those allegations. The original indictment was retyped with the deleted allegations omitted. The district court ultimately submitted the altered indictment to the jury. The defendants now contend that the

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Government's failure to prove the deleted allegations caused an amendment of the indictment in violation of their fifth amendment right to be indicted by a grand jury. ¹

Any person charged with a crime that is punishable by death or imprisonment in a penitentiary has a constitutional right to be indicted by a grand jury. U.S. Const. amend. V; see Ex parte Wilson, 114 U.S. 417, 427, 5 S.Ct. 935, 940, 29 L.Ed. 89 (1885); 1 C. Wright, Federal Practice and Procedure Sec. 121 (1982). In United States v. Pazsint, we summarized the law as follows:

After an indictment has been returned, its charges may not be broadened through amendment--whether it be by physical alteration, jury instruction, or bill of particulars--except by the grand jury. Simply correcting an obvious clerical error or eliminating surplusage from the text of the indictment may be harmless error, but amending the indictment to charge a new crime through the jury instructions constitutes per se reversible error.

703 F.2d 420, 423 (9th Cir.1983) (citations omitted). It is well settled that "a portion of the indictment that the evidence does not support may be withdrawn from the jury, and this is not an impermissible amendment, provided nothing is thereby added to the indictment, and that the remaining allegations charge an offense." 1 C. Wright, supra, Sec. 127, at 422; see United States v. Dawson, 516 F.2d 796, 801-02 (9th Cir.), cert. denied, 423 U.S. 855, 96 S.Ct. 104, 46 L.Ed.2d 80 (1975). The defendants claim that the altered indictment charged them with a different offense than the original indictment and that the alteration therefore constituted an amendment. The district court disagreed and denied the defendants' motions for a judgment of acquittal under Rule 29. ²

It is well settled that the government need not prove every allegation of fraudulent activity in an indictment. United States v. Gatewood, 733 F.2d 1390, 1394 (10th Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 200, 83 L.Ed.2d 132 (1984); United States v. Beecroft, 608 F.2d 753, 757 (9th Cir.1979). Even after the deletions, the indictment charged the defendants with numerous unlawful acts relating to the fraudulent land sales scheme. The altered indictment did not charge the defendants with a "new crime" or with additional unlawful acts. Instead, the altered indictment charged the defendants with perpetrating the same essential fraudulent scheme that was alleged in the original indictment. See Salinger v. United States, 272 U.S. 542, 549, 47 S.Ct. 173, 175, 71 L.Ed. 398 (1926); Dawson, 516 F.2d at 804. Accordingly, the district court's denial of the defendants' motions under Rule 29 was proper under the general rules governing the deletion of unproven allegations.

The defendants assert that our recent decision in United States v. Miller, 715 F.2d 1360 (9th Cir.1983), modified on denial of rehearing, 728 F.2d 1269 (9th Cir.), cert. granted, --- U.S. ----, 105 S.Ct. 78, 83 L.Ed.2d 26 (1984), requires a reversal in this case. We disagree. The defendant in

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Miller was charged with two unlawful acts, one of which the prosecution did not prove. The unproven allegation, a "false burglary," was at least as significant as the proven allegation, an inflated insurance claim. We noted that "there can be no dispute that Miller's conviction was predicated on a substantially narrower scheme than that pleaded in the indictment...." 715 F.2d at 1363. Accordingly, we reversed Miller's conviction. In this case, the defendants' convictions were not "predicated on a substantially narrower scheme than that pleaded in the indictment." While several specific allegations were deleted, the essential scheme alleged in the...