United States v. Brandom, 66-CR-2.

• Decision Date: 31 August 1967
• Docket Number: No. 66-CR-2.,66-CR-2.
• Citation: 273 F. Supp. 253
• Parties: UNITED STATES of America, Plaintiff, v. Smith F. BRANDOM, Jr., Kenneth Belling, Michael Gilboy, Donald R. Elbel, Roger Wolf, and Ronald Martin, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

273 F. Supp. 253

UNITED STATES of America, Plaintiff, v. Smith F. BRANDOM, Jr., Kenneth Belling, Michael Gilboy, Donald R. Elbel, Roger Wolf, and Ronald Martin, Defendants.

No. 66-CR-2.

United States District Court E. D. Wisconsin.

August 31, 1967.

James B. Brennan, U. S. Atty., Milwaukee, Wis., for plaintiff.

Charlton, Yanisch, Ritchay, Cain & Dieterich, Milwaukee, Wis., George F. Callaghan, Chicago, Ill., Frinzi, Catania & Neubecker, Milwaukee, Wis., Stanley Slagg, Edgerton, Wis., Maurice J. Walsh, Chicago, Ill., for defendants.

MEMORANDUM AND DECISION ON MOTIONS

MYRON L. GORDON, District Judge.

This memorandum will consider a number of motions submitted by the several defendants. Brandom, Belling and Gilboy have moved to dismiss counts 1 through 17 as well as count 18 insofar as it concerns them. Belling has moved to sever his trial from the other defendants and also to sever the trial of counts 1 through 17 from the trial of count 18 so far as it concerns him. Martin and Wolf have moved to dismiss counts 18 and 19 as to them.

There are other motions which have been made by the defendants and consented to by the government. Thus, the government has agreed that count 19 be severed from counts 1 through 18 for the purposes of trial. The government also agrees that the trial of Elbel on count 18 be severed from the trials of the other defendants. In addition, the United States has consented to sever the trial of Martin and Wolf on count 18 from the trials of the other defendants.

A 19 count indictment was filed against the defendants on January 11, 1966. The 19 counts are divisible into three major portions: (1) Brandom, Belling and Gilboy are charged with violation of 18 U.S.C. § 1341 (mail fraud); (2) all the defendants are charged with violating 18 U.S.C. § 371 (conspiracy to commit mail fraud); and (3) Wolf and Martin are charged with violation of 18 U.S.C. § 152 (concealment of assets in bankruptcy proceedings).

The charges originate from the operation of three corporations: Merchants Management Corporation, Market Mens Management Agency, Inc., and Market Mens Mutual Insurance Company. The first 17 counts charge that Brandom, Belling and Gilboy devised a scheme to defraud certain persons who were desirous of obtaining policies of insurance in an established and financially sound mutual insurance company, to-wit: Market Mens Mutual Insurance Company. To carry out this scheme, it is alleged that the defendants Brandom, Belling and Gilboy utilized the United States mails. The grand jury charged that the aforesaid three defendants used their positions of control in the three aforesaid corporations, and through such control were able to manipulate the corporate assets and thereby knowingly misrepresent Market Mens Mutual Insurance Company to be financially sound.

Several specific acts are attributed to the defendants in carrying out that scheme. Thus, it is charged that there was manipulation in the over-valuing of certain real property by approximately $50,000. It is also charged that the company surplus was overstated by approximately $232,000; this was allegedly accomplished by understating the reserve set aside for losses in a like amount. It is also charged that the same three men falsely represented the financial position of Market Mens Mutual Insurance Company to the Insurance Department of Wisconsin. It is claimed that this was done by entering into certain reinsurance contracts for the sole purpose of inflating the surplus of Market Mens Mutual Insurance Company and then cancelling such contracts after a financial status report was made to the commissioner of the Insurance Department of Wisconsin. In addition, it is charged that Brandom, Belling and Gilboy used the United States mails in furtherance of their scheme.

Count 18 charges that all six defendants conspired to violate the mail fraud statute by devising the aforesaid scheme to defraud and also with conspiring to use the mails in furtherance of such scheme. Several overt acts are enumerated, such acts being substantially the same as those set out in count 1.

Count 19 charges Wolf and Martin with fraudulently transferring and concealing property of Market Mens Management Agency in contemplation of bankruptcy proceedings. It is claimed that Wolf and Martin were stockholders at the time that the sum of $63,600 was withdrawn from the company's account at a bank in Elmwood Park, Illinois.

A number of the motions are overlapping and will be consolidated in this discussion when appropriate.

I

MOTION TO DISMISS COUNTS 1 THROUGH 17

18 U.S.C. § 1341 provides in part as follows:

"Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises * * * for the purpose of executing such scheme or artifice or attempting so to do, places in any post office * * * any matter or thing whatever to be sent or delivered by the Post Office Department, or takes or receives therefrom, any such matter or thing * * * shall be fined not more than $1,000 or imprisoned not more than five years, or both."

In support of their motion to dismiss the mail fraud charge, the defendants contend that the government has failed properly to allege venue, in violation of the Sixth Amendment of the Constitution, which affords an accused the right to trial in the district wherein the crime was committed. Bratton v. United States, 73 F.2d 795, 798 (10th Cir. 1934).

In my opinion, the defendants err in their contention that venue is not alleged in the first 17 counts. In count 1, paragraph 2, of the indictment, as well as in counts 2 through 17, there is language to the effect that on certain dates "the defendants * * * for the purpose of executing the aforesaid scheme and artifice to defraud and attempting to do so, did knowingly and wilfully place and cause to be placed in an authorized depository for mail matter a letter to be sent and delivered by the United States Post Office Department to * * *." Each time this or a similar allegation appears, the words "at Milwaukee in the State and Eastern District of Wisconsin" also appear. I believe that the indictment is sufficient regarding venue. United States v. Hoffa, 205 F. Supp. 710, 722 (S.D.Fla.1962).

The defendants also attack the indictment on the ground that it fails to state a cause of action. There are two general criteria to be observed in determining the adequacy of an indictment. One is whether it contains the elements of the offense intended to be charged, thus apprising the defendant of what he must be prepared to meet; the second standard requires that in the event of subsequent proceedings against him, the record will show with accuracy the existence of a former acquittal or conviction. Williamson v. United States, 310 F.2d 192, 196-197 (9th Cir. 1962).

With reference to a charge of mail fraud, it is essential that an indictment allege a scheme to defraud and the use of the mails in furtherance of such scheme. United States v. Shipp, 359 F. 2d 185, 188 (6th Cir.), cert. denied, 385 U.S. 903, 87 S.Ct. 213, 17 L.Ed.2d 134 (1966); Strauss v. United States, 347 F.2d 691, 692 (7th Cir. 1965); Milam v. United States, 322 F.2d 104, 108 (5th Cir. 1963).

The defendants contend that the indictment fails to allege a scheme to defraud and also that no false pretenses have been asserted by the government. It is argued that portions of the indictment which purport to describe the alleged scheme are in fact statements of acts which were beneficial to Market Mens Mutual Insurance Company and its policyholders. In addition, the defendants assert that there are no allegations to support the charge that the policyholders were fraudulently induced to purchase policies of insurance by means of misrepresentations.

The law requires that allegations of a scheme to defraud be more than merely conclusory; some particulars must be set out. In United States v. Mercer, 133 F.Supp. 288, 289 (N.D.Cal. 1955), the court states:

"Cases considering indictments based upon the mail fraud statute have firmly established the rule that such an indictment is bad if it fails to charge any particulars of the scheme to defraud * * * The rule has been stated most often in cases where the indictment there considered was upheld as stating sufficient particulars of the scheme to defraud; but all recognize that some description of the fraudulent scheme is a necessity."

In Fabian v. United States, 358 F.2d 187, 193 (8th Cir.), cert. denied, 385 U.S. 821, 87 S.Ct. 46, 17 L.Ed.2d 58 (1966), the court defined a scheme as one which "involves some connotation of planning and pattern * * *." In another mail fraud case, Holmes v. United States, 134 F.2d 125, 134 (8th Cir.), cert. denied, 319 U.S. 776, 63 S.Ct. 1434, 87 L.Ed. 1722 (1943), the court stated:

"Acts innocent in themselves may yet in combination constitute a fraud or attempts to commit fraud. One attempting to commit a fraud may well seek to give the act an appearance of legality and innocence. * * * It is not essential that the matter mailed be in itself criminal or objectionable, or that it disclose a fraudulent purpose."

See also United States v. Buckner, 108 F.2d 921, 926 (2nd Cir.), cert. denied, 309 U.S. 669, 60 S.Ct. 613, 84 L.Ed. 1016 (1940).

From the standards set forth in the foregoing citations, I conclude that the alleged scheme to defraud has been set forth in the indictment of the case at bar in more than terms of conclusion. Count 1 initially charges the gist of the scheme: to obtain money through false pretenses; it then goes on to describe the nature of such false pretenses as being the misrepresentation of the company as one which was financially sound and able to afford insurance coverage when it was known that the financial condition of the company was in fact not sound. The indictment also charges that Brandom, Belling and Gilboy, having first...