United States v. Groopman, 249.

• Decision Date: 27 February 1945
• Docket Number: No. 249.,249.
• Citation: 147 F.2d 782
• Parties: UNITED STATES v. GROOPMAN et al.
• Court: U.S. Court of Appeals — Second Circuit

147 F.2d 782 (1945)

UNITED STATES v. GROOPMAN et al.

No. 249.

Circuit Court of Appeals, Second Circuit.

February 27, 1945.

Samuel J. Siegel, of New York City (Samuel Mezansky, of New York City, on the brief), for defendants-appellants Henry Groopman and L. C. Heat Conditioning Corporation.

Louis Jay Brecher, of New York City (Freiman & Brecher and Maurice Freiman, all of New York City, on the brief), for defendant-appellant Fred Purcell.

Mario Pittoni, Asst. U. S. Atty., of Brooklyn, N. Y. (T. Vincent Quinn, U. S. Atty., and Vine H. Smith, Asst. U. S. Atty., both of Brooklyn, N. Y., on the brief), for plaintiff-appellee.

Before EVANS, CLARK, and FRANK, Circuit Judges.

CLARK, Circuit Judge.

After a lengthy trial, the three appellants herein, together with six other defendants, were convicted, under 18 U.S.C.A. § 88, of conspiring to make false statements to secure loans for the modernization of old houses under Title 1 of the Federal Housing Act and regulations issued under it, 12 U.S.C.A. § 1701 et seq., as specifically prohibited by 12 U.S.C.A. § 1731(a), as amended. Appellant Groopman, through his alter ego, appellant L. C. Heat Conditioning Corporation, of which he was president, was engaged in installing heating plants in houses, and had advertised for business in connection with federal insured modernization loans and had handled many such loans. Involved herein were six loans, as to all of which Groopman had prepared the papers, particularly those signed by the borrowers. The defendants who were convicted, but have not appealed, were John Meyers, president of John Meyers, Incorporated, a heating and plumbing supply company through whom five of the loans were made, and the five actual borrowers on the six loans. (One had obtained two loans in the names of two different corporations he controlled; another had used the name of his son.) The remaining defendant was appellant Purcell, a real estate broker who claims to have no connection with the transactions here involved, but to whom the evidence pointed, inter alia, as the owner, through controlled companies, of two of the properties for which loans were thus secured.

Title 1 of the National Housing Act, originally passed in 1934, sets up machinery for governmental insurance of loans on personal credit, not exceeding $2,500 each, where the proceeds are used in the modernization of old houses. Under the Act, the Federal Housing Administrator is authorized to insure against loss, banks and other eligible financial institutions which make loans in accordance with the prescribed regulations of the Administrator. 12 U.S.C.A. § 1703(a, b, g). The regulations here applicable called for various applications and statements from both borrower and his contractor tending to show financial responsibility to the extent of the loan on the part of the former, and completion of the work by the latter to the benefit of the premises thus improved and modernized. First required is a detailed "Credit Statement — Application," replete with warnings of the penalties for misrepresentation and quotation from the penalty section of the Act, wherein the applicant for the loan must give extensive details as to his personal and financial situation and as to the property upon which the improvement is to be made, including its purchase price, assessed value, incumbrances, and so on. One section contains a certification that the entire proceeds "will be expended on the above property as itemized below," followed by directions for accurate description of the improvements, and the estimated cost, together with the name and address of the "Contractor, Dealer, etc.," all with a particular "Warning" that "misrepresentation of use of proceeds other than described above constitutes violation of Federal law." Then after the work is completed the borrower signs a "Borrower's Completion Certificate," certifying that "all articles and materials have been furnished and installed and the work satisfactorily completed";¹ and the contractor signs a "Dealer/Contractor/Applicator Statement," certifying to the lending institution, in consideration of the latter's acceptance of the borrower's note, that "all articles and materials contracted for have been furnished and installed and the work fully completed" and that "the Completion or Installation Certificate was signed after the articles and materials contracted for had been furnished and installed and the work fully completed." The borrower also signs an authorization of payment to the dealer/contractor and a promissory note covering the principal, interest, and bank charges; and the lender thereupon files a "loan report" with the Administrator. Later if the loans are defaulted the lender files a claim voucher with the Administrator, upon which it secures reimbursement for its loss.

In the present case five of the loans were made by the Colonial Trust Company, Kingsboro Office, in Brooklyn, while the sixth was made directly by General Electric Contracts Corporation, a supply company. In each instance Groopman made out all the forms required initially from all of the borrowers; these specified as the dealer either his corporation or both Meyers' and his. Then after the borrower had signed and before completion of the work, he delivered the five Colonial applications to Meyers, who secured the loans from the Trust Company, paid the dealer the amount of its claims, and transmitted the proceeds to the borrower or his attorney. In the case of the sixth loan the lender made payment directly to Groopman's company, which made the disbursements. The fact that payments were made directly to the borrowers is important, since it shows that the work was not actually completed as certified in each instance to the lender by both borrower and dealer. The amounts thus paid over to the borrowers varied from less than one-fifth to over two-thirds of the proceeds of the loan, but for the six here involved amounted to nearly one-half of the total proceeds of $10,843. In addition the prosecution relied on Groopman's knowledge of the falsity of other details of various credit statements referring to the financial situation of the maker; and there was clearly sufficient evidence of this from the testimony of the witnesses themselves, as well as the surrounding circumstances, including even variations in the different statements.

There was thus adequate evidence to show a violation of § 1731(a). Appellant Groopman for himself and his company attacks not only the form of the indictment and the fact that he was charged under the conspiracy statute, but also the sufficiency of the evidence and the court's charge with reference to it. His defense here is that the lenders permitted the practice of making the loans before completion of the work and that the proceeds were actually applied in...