United States v. Austin, No. 72-1016 to 72-1019.

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Citation462 F.2d 724
Docket NumberNo. 72-1016 to 72-1019.
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Wendell Warren AUSTIN, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. William E. BALES, Jr., Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Irving Wellesley BEEMAN, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Charles A. SAVIDGE, Defendant-Appellant.
Decision Date07 August 1972


Darrell L. Johnson, Los Angeles, Cal., for appellant Wendell Warren Austin.

Robert A. Coldsnow, Wichita, Kan., for appellant William E. Bales, Jr.

Clyde Wendelken, Wichita, Kan., for appellant Irving Wellesley Beeman.

Theodore H. Hill and Thomas H. Graber, Wichita, Kan., for appellant Charles A Savidge.

Edward H. Funston, Asst. U. S. Atty. (Robert J. Roth, U. S. Atty., on the brief), for the United States.

Before LEWIS, Chief Judge, DOYLE, Circuit Judge, and BRATTON, District Judge.

WILLIAM E. DOYLE, Circuit Judge.

The above named defendants were tried and convicted on charges of securities fraud, contrary to 15 U.S.C. § 77q and 18 U.S.C. § 2 (aiding and abetting), and mail fraud, contrary to 18 U.S.C. § 2314 (2), 18 U.S.C. §§ 1341, 1342 and 1343 and 18 U.S.C. § 2. The appellants were jointly charged with numerous other individuals in an indictment which contained a total of 50 counts. Each of the four defendants was convicted on count 5 of the indictment, a securities fraud charge, arising under § 17 of the Securities Act of 1933, 15 U.S.C. § 77q. In addition, appellant Austin was convicted on Count 8, mail fraud, 18 U.S.C. § 1343 and 18 U.S.C. § 2 (aiding and abetting). Appellant Savidge was convicted on Count 11 of violating 18 U.S.C. § 1341 (mail fraud) and 18 U.S.C. § 2 (aiding and abetting). Appellant Bales was in addition convicted under Count 6, 18 U.S.C. § 2314 (2) and 18 U.S.C. § 2; Count 9, (mail fraud) 18 U.S.C. § 1343 and 18 U.S.C. § 2 (aiding and abetting); Count 10, 18 U.S.C. § 1341 (mail fraud) and 18 U.S.C. § 2; and Count 11, 18 U.S.C. § 1341 and 18 U.S.C. § 2.

Most of the defendants filed motions for severance, which motions were denied. At the same time, the trial court, instead of proceeding on all of the counts contained in the indictment, severed out certain of the charges based on particular transactions and proceeded to trial on Counts 5, 6, 8, 9, 10 and 11 which arose from the so-called Horwitz dealings. The idea was that the defendants named in those counts of the indictment would be first tried and that separate trials would be held on other transactions. As it turned out, however, the only trial conducted was with respect to the mentioned counts, and the convictions on these counts are the only matters before us on appeal.

Prior to trial two of the defendants, Charles Krauthamer and Darel Martin, sought to enter pleas of nolo contendere which the court refused to accept, and subsequent to this refusal the defendant Krauthamer tendered a plea of guilty to one count of the indictment and the government offered to dismiss all other counts. This plea the trial court refused to accept. However, at a subsequent time before trial the court did allow the government to dismiss Counts 5, 6, 8, 9, 10 and 11 of the indictment as to the defendants Krauthamer and Edwin W. Prewitt.

As previously mentioned, there were numerous transactions, some of which were charged in the indictment and some of which were not. The bulk of these transactions was offered to show the existence of a plan, scheme or design to defraud and also for the purpose of showing the requisite criminal intent. The lead transaction was, of course, that in which one Gus Horwitz was named as the object of the scheme and artifice to defraud and which was set forth in Counts 5 through 11 (except 7). The definitive count of the indictment in the Horwitz transaction was Count 5 which alleged that from a time prior to November 5, 1965, continuing to March 24, 1966, the defendants devised a scheme to defraud Horwitz by means of false pretenses, representations and promises constituting a scheme and artifice to defraud. Particularly, it was alleged that:

1. Defendants would provide loan commitments to Horwitz guaranteeing a loan in the amount of $750,000.00 and at the same time obtain a fee of $14,500.00 from Horwitz.

2. Lincoln Mortgage Company, Inc. and Investment Corporation of America were to obtain this loan.

3. False financial statements were given.

4. The scheme was executed by use of the mentioned financial statement together with the letter of commitment of Lincoln Mortgage Company for which the advance fee was paid by Horwitz. The letter of commitment was alleged to be a security.

The further counts mentioned above were, as noted, all based on the Horwitz transaction and all of these incorporate the allegations of Count 5 and contain jurisdictional allegations regarding the use of the mails.

The principal witnesses in the case were Gus Horwitz and one Frank McCall who was an associate of Horwitz. The evidence showed that Horwitz and McCall were Illinois residents and were engaged in real estate developing in Illinois. It was in connection with the interest of Horwitz in the acquisition of the Fox Valley Country Club in Aurora, Illinois which brought Horwitz into contact with the defendants. McCall learned of the existence of the Lincoln Mortgage Company, Inc. of Wichita, Kansas, having been told that it was in the business of issuing commitments for loans. Thereupon McCall telephoned Lincoln Mortgage and talked to defendant Bales who was Vice-President of this Wichita, Kansas company. At the request of Bales, McCall submitted certain documents. On November 9, 1965, Darel Martin, the Treasurer of Lincoln Mortgage, advised that the proposed loan would be submitted to the loan committee for its approval.

The evidence disclosed that the following transpired:

1. Bales told McCall and Horwitz over the telephone that Lincoln Mortgage would grant the loan if they would come to Wichita and deposit a $15,000.00 initial fee.

2. On November 29, 1965, McCall and Horwitz received copies of a commitment letter signed by Martin purporting to grant a first mortgage loan in the amount of $750,000.00. This was not an outright commitment but a back-up commitment guaranteeing the making of the loan by others.

3. After receiving the commitment letter, McCall and Horwitz flew to Wichita for the purpose of assuring the funding of the commitment.

4. A check for $7,500.00 was presented to Bales and another check for $7,000.00 was given to Lincoln Mortgage Company soon after that in payment of the initial commitment fee. McCall paid the remaining $500.00.

5. On the occasion of this visit McCall and Horwitz were introduced by Bales to appellant Savidge, who said that his firm, Savidge and Associates, Inc. of Kansas City, Missouri would provide interim financing (emphasis supplied).

6. A funding agreement was worked out between Savidge and Horwitz, and the latter left Wichita believing that the interim financing would be processed by Savidge in a few days and the money would be available immediately thereafter. Another $22,500.00 in commitment fees was due and payable at the time of interim funding. The interim financing never materialized and hence this sum did not become due and payable.

7. On December 10 Savidge sent a letter to McCall and Horwitz saying that his company had given its verbal approval of the loan.

8. During the ensuing delay there were numerous telephone conversations in which appellant Savidge stated the money was set and only awaited completion of the paper work. Horwitz was required to renegotiate his option to purchase the country club.

9. Because of questions as to the financial backing of Lincoln Mortgage, Horwitz was furnished with a guarantee from another company, the Continental Leasing Corporation, together with a letter of reference from a Dallas bank in respect to Continental Leasing Corporation.

10. On December 22, 1965, Horwitz and McCall received a letter confirming the funding agreement with Savidge and Associates.

11. At the same time Horwitz and McCall received another letter from still another firm, Investment Corporation of America, signed by one Edwin W. Prewitt, President (Horwitz testified that he had never previously heard of either Prewitt or Investment Corporation of America).

12. On December 20, on the occasion of a McCall visit to Wichita, it was learned from appellant Bales that Lincoln Mortgage would not fund the commitment, but that Investment Corporation of America would. The necessary papers to effectuate this were executed and a copy of this undertaking of Investment Corporation was sent to the seller of the country club.

13. On December 23 Savidge and Associates sent a telegram to McCall advising that it would fund the commitment within 90 days on receipt of documentation from Investment Corporation of America. A week later McCall received a copy of a purported financial statement of Investment Corporation of America.

14. On December 27 Savidge and Associates sent another telegram to McCall again stating readiness to proceed with funding on receipt of complete information and documentation from Investment Corporation of America. Contemporaneously Savidge explained by telephone that he was waiting for Investment Corporation of America's financial statement and information as to its method of providing the long-term financing.

15. Thereafter additional balance sheets of Investment Corporation of America were sent to McCall and Horwitz together with an announcement of the acquisition by Investment Corporation of America of a new silver mine in Colorado.

16. On February 4, 1966, McCall received a letter from Prewitt of Investment Corporation of America apologizing for the delay.

17. On February 14 a telegram from Savidge and Associates...

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