United States v. Baren

• Decision Date: 10 July 1962
• Docket Number: Docket 26997.,No. 104,104
• Citation: 305 F.2d 527
• Parties: UNITED STATES of America, Appellee, v. Morris BAREN, Samuel C. Stein, Strick-Matador Corporation and Strick-Matador Corp. of Ohio, Appellants.
• Court: U.S. Court of Appeals — Second Circuit

305 F.2d 527 (1962)

UNITED STATES of America, Appellee, v. Morris BAREN, Samuel C. Stein, Strick-Matador Corporation and Strick-Matador Corp. of Ohio, Appellants.

No. 104, Docket 26997.

United States Court of Appeals Second Circuit.

Argued November 15, 1961.

Decided July 10, 1962.

Vernon C. Rossner, New York City (Edward H. Levine, New York City, on the brief), for appellants, Morris Baren, Strick-Matador Corp. and Strick-Matador Corp. of Ohio.

Jacob W. Friedman, New York City, for appellant, Samuel C. Stein.

Jerome C. Ditore, Asst. U. S. Atty. for Eastern District of New York (Joseph P. Hoey, U. S. Atty. for Eastern District of New York, Jerome F. Matadero, Asst. U. S. Atty. for Eastern District of New York, on the brief), for appellee.

Before SWAN, MOORE and SMITH, Circuit Judges.

LEONARD P. MOORE, Circuit Judge.

Appellants Morris Baren, Samuel C. Stein, Strick-Matador Corporation (S-M) and Strick-Matador Corp. of Ohio (S-M, Ohio) appeal from judgments of conviction of mail fraud and conspiracy (18 U.S.C.A. §§ 1341, 1342, 371). The individual defendants received concurrent sentences of eighteen months' imprisonment on each of nine mail fraud counts and one conspiracy count. S-M was fined on each of the ten counts and S-M, Ohio on two counts. Defendant Max Jedlicki pleaded guilty and received a suspended sentence. The trial court directed judgments of acquittal as to defendants John Baren and Irving Flux-gold. Defendant Marjay Sales Corp. did not appeal its conviction.

The Indictment

Count I alleges in substance that from on or about November 10, 1956 to January 3, 1958 defendants in the offer and sale of Strick-Matador knitting machines to nine named and various other persons "unlawfully devised, intended to devise, and employed devices, schemes and artifices to defraud and obtain money and property by means of false and fraudulent pretenses, representations and promises." Counts II through X repeat the allegations of Count I but name, respectively, each of the nine purchasers as the recipient of a postcard alleged to have been mailed as part of the fraudulent scheme. Count XI alleges an unlawful conspiracy.

The representations made in furtherance of the scheme and "well known to be false by the said defendants" were:

"(a) That Marjay Sales Corp., Marjay Corp. and Strick-Matador Corporation were wholesale distributors of hand-knit garments which they sold to department stores and specialty shops everywhere.

"(b) That Marjay Sales Corp., Marjay Corp. and Strick-Matador Corporation had a profitable market for hand-knit garments.

"(c) That up to $15.00 to $25.00 per week could be earned by the average lady working five to ten hours per week at home, making and selling knitted garments to the defendants, made on Strick-Matador knitting machines sold to them by the defendants.

"(d) That the cost of the Strick-Matador knitting machines could be paid by the purchasers through putting aside a part of the profit they derived each week from the sale of knitted garments to the defendants.

"(e) That the defendants would purchase for a period of three years, all garments knitted on the Strick-Matador knitting machine purchased from them, made and blocked to the pattern and specifications determined and furnished by the defendants.

"(f) That 99 out of 100 ladies learn the operation of the Strick-Matador knitting machine in only one lesson at the defendants\' school.

"(g) That the Marjay Sales Corp., Marjay Corp. and Strick-Matador Corporation buy hand-knitted garments made on Strick-Matador knitting machines from hundreds of ladies.

"(h) That knitting on the Strick-Matador knitting machine is fifty times faster than knitting by hand.

"(i) That a hand-knitted suit that sells for from $150.00 to $350.00 can be knitted on the Strick-Matador knitting machine in from ten to twelve hours by the average woman.

"(j) That the Strick-Matador knitting machine can be operated by a child, and that a person could learn to operate a Strick-Matador knitting machine in a matter of minutes.

"(k) That a knitted stole can be made on the Strick-Matador knitting machine in from three-quarters of an hour to one hour.

"(l) That the purchasers of the Strick-Matador knitting machines would have unlimited instructions at no charge."

Although appellants make certain claims of prejudicial and erroneous rulings of the trial court, their appeal is based primarily upon the ground that the government's evidence did not establish beyond a reasonable doubt appellants' guilt of a scheme to defraud. It is upon this ground that their appeal must succeed or fail.

In every mail fraud case, there must be a scheme to defraud, representations known by defendants to be false and some person or persons must have been defrauded. Initially and for purposes of simplification all convicted defendants will be referred to, whether corporate or individual, as the defendants. In essence, the fraudulent scheme was the sale by defendants to certain members of the public of a mechanical knitting machine known as a Strick-Matador machine. This mechanical device had a row of 164 needles, each one of which would make a knitting stitch at a single stroke of the machine handle. Thus, when properly operated it could perform a knitting process with much greater rapidity than if each stitch were made by hand with ordinary knitting needles. At the outset a fundamental fact must be noted. There is no charge in the indictment that the machine was in any way defective or that it was incapable of performing a satisfactory knitting job. In fact the trial court said, "I agree that the machine is an effective machine, that it can produce work." The question, as the trial court saw it, was "whether it can produce it in accordance with the representations that were made or charged to have been made by Marjay, its officers and employees, * * *" The court believed that "even if one, two, three or four of these misrepresentations fall of their own weight, the jury may find that several of the others, which were important because in the jury's opinion people bought the machine on the basis of those representations, that might be enough."

Where sufficiency of the evidence is attacked as well as the importance (or lack thereof) of the misrepresentations relied upon by the government, there is no escape from a meticulous review of all of this over 4,200-page record and the scores of exhibits introduced.

The Organization of the New York Company

In 1955, Morris Baren, his father John Baren and Samuel C. Stein, the stockholders of S-M with offices in Buffalo, New York, became the American and Canadian distributors of a German-manufactured knitting machine. S-M granted a large number of distributorships and subdistributorships throughout this country. S-M, in addition, owned the "Knitting Center of Cleveland," operated by Stein. Baren, John Baren and Stein were also the stockholders of S-M, Ohio. Both S-M companies imported and sold the knitting machines, patterns and parts to the distributors. A Knitting Center in Detroit was operated by Baren's brother-in-law.

In December, 1956, defendant Max Jedlicki, having heard of the S-M business through mutual relatives (Jedlicki's nephew being Baren's brother-in-law), sought a New York City Distributorship. The general plan called for the sale of the machine to housewives who could make various knitted garments, and then sell the garments back to the distributors. The distributors were to make resales of the merchandise thus acquired to various outlets obtained by them.

As a result, a New York corporation, Marjay Sales Corporation (Marjay), was organized (Jedlicki's attorney and accountant handling the incorporation) and Jedlicki and S-M each became the owners of 50% of the stock. Originally Marjay's checks were to be signed by Jedlicki as President and either Stein or Baren. After July 10, 1957, Baren no longer was authorized to sign.

Marjay's business opened in the middle of April, 1957. Jedlicki and Stein drew salary checks of $150 a week; Baren did not receive a salary but came to New York sporadically and in the beginning period may have (according to Jedlicki; denied by Baren) hired some salesmen. S-M's and Baren's participation with Marjay consisted largely of supplying the printed material which was part of, and necessary for, the selling operation. This material is basic to the government's claim of a scheme to defraud. Fortunately, being in printed form, it obviates the resolution of conflicting testimony.

The Sales Procedure — or to the Government the Scheme to Defraud

Solicitation of potential purchasers of the machine in the New York area was made by newspaper advertisements and by mailing postcards supplied by S-M. The ad relied upon in Count I read:

"WOMEN — WOMEN EARN EXTRA MONEY AT HOME IN YOUR SPARE TIME EARN UP TO $1.50 HOUR KNITTING OR SEWING EXPERIENCE HELPFUL CALL TODAY!! RE 9-7977"

The postcards (Exhs. 4 and 8) were virtually identical and were mailed first from Marjay's Jamaica office and from New York after the office was moved there. Exhibit 4 read:

"Are you interested in making up to $15 to $25 per week independently? Do you have 5 to 10 hours per week to work right at home? Knitting experience helpful but not necessary. Guaranteed work. No selling involved. If you are interested in knowing more about this work at home, write your phone number below, put in an envelope and mail to:

MARJAY CORP 170-20 Hillside Ave Jamaica, N. Y Phone # RA 6-0716"

When responses were received from potential purchasers, the names were given to the various salesmen for personal visitation. To ensure both enthusiasm and uniformity in sales approach, a document referred to as the "Home Sales Pitch" was delivered to the salesmen. The sales pitch captioned with the address of S-M Buffalo is in conversational form and covered all steps to be taken from the initial "Knock, knock, knock" on the door, through the myriad of...