Source: http://openjurist.org/381/f2d/824
Timestamp: 2015-07-07 21:57:50
Document Index: 611837935

Matched Legal Cases: ['§ 371', '§ 656', '§ 371', '§ 1001', '§ 1001', '§ 1001', '§ 5440', '§ 371', '§ 5440', '§ 5440', '§ 371', '§ 657', '§ 1006']

381 F2d 824 United States v. S Kahn B M | OpenJurist
381 F. 2d 824 - United States v. S Kahn B M	Home381 f2d 824 united states v. s kahn b m
381 F2d 824 United States v. S Kahn B M 381 F.2d 824
UNITED STATES of America, Plaintiff-Appellee,v.S. Lawrence KAHN, Arthur B. Sachs and M. Prial Curran, Defendants-Appellants.
Nos. 15665-15667.
Rehearing Denied September 12, 1967, en banc.
Richard E. Gorman, Anna R. Lavin, William T. Kirby, Don H. Reuben, Lawrence Gunnels, John E. Angle, of Kirkland, Ellis, Hodson, Chaffetz & Masters, Thomas W. Bloss, of Hubachek, Kelly, Miller, Rauch & Kirby, Chicago, Ill., for appellants, Arthur B. Sachs and M. Prial Curran.
Edward V. Hanrahan, U. S. Atty., Michael B. Nash, Asst. U. S. Atty., Chicago, Ill., for appellee, John Peter Lulinski, Richard G. Schultz, Lawrence Jay Weiner, Asst. U. S. Attys., of counsel.
We consider separate appeals by S. Lawrence Kahn, Arthur B. Sachs and M. Prial Curran from their convictions, following a jury trial in the district court, upon jury verdicts of guilty.
Kahn, and Sachs and Curran, attorneys for Kahn, were indicted with others as conspirators in a scheme to illegally use moneys of a number of federally insured banks and savings associations for their personal benefit. In addition to the conspiracy count, the defendants were charged in a number of other counts as principals or as aider-abettors in illegally misapplying funds deposited in federally insured institutions.1
Kahn and Sachs were each sentenced to serve five years on a number of separate counts of the indictment, the sentences to run concurrently. Curran was sentenced to two years on each of a number of counts, the sentences to run concurrently.
The sufficiency of the evidence is not challenged. Since we are not required to review the evidence for its sufficiency, only the essential nature of the Government's case need be shown.
The evidence put on by the Government, which the jury could have believed, tended to show that this was a case of untrustworthy men in trust; of loans without security, mortgages without property, checks without funds; of grossly unrealistic appraisals of real estate; of emptied banks acquired for their tills; of furtive manipulation and deceit. All this, in an accelerating necessity of acquisition, by taking from one bank as Peter to pay another as Paul, a pace in front of examiners, and a suspicion ahead of interested parties, to the ultimate benefit of defendants.
On appeal, defendants contend that the trial court committed error in many respects. Sachs and Curran urge that the indictment is fatally defective in its substantive counts as well as in its conspiracy count. They claim that the trial court gave a prejudicial credibility instruction and that they were prejudiced by the trial court's failure to give a "La Buy" instruction concerning lying witnesses. They further contend that the trial court should have granted a mistrial when a co-defendant, Thomas Joyce, pleaded guilty in the early stages of the trial as an aider and abettor. Finally, they assert that prejudicial error was committed by the trial court's refusal to grant them a severance from Kahn.
In Kahn's appeal, in addition to the above contentions respecting the defectiveness of the indictment, the joinder of defendants and the mistrial upon Joyce's plea of guilty, which he also urges, Kahn claims that there was an improper joinder of counts, that the trial court erred in not giving a certain instruction as his theory of defense, and that irrelevant and immaterial evidence was wrongly admitted at trial.
At the outset of our consideration, we note that we do not suffer the inability of the antique common law "to understand or accept a pleading that did not exclude every misinterpretation capable of occurring to intelligence fired with a desire to pervert." Paraiso v. United States, 207 U.S. 368, 372, 28 S. Ct. 127, 129, 52 L.Ed. 249 (1907). Indictments are read for their clear meaning, and convictions are not reversed because of minor deficiencies which did not prejudice the accused. Smith v. United States, 360 U.S. 1, 9, 79 S.Ct. 991, 3 L.Ed.2d 1041 (1959).
It is not necessary in a conspiracy indictment to allege with precision all the elements essential to the offense which is the object of a conspiracy; allegations clearly identifying the offense defendants conspired to commit are sufficient. Wong Tai v. United States, 273 U.S. 77, 81, 47 S.Ct. 300, 71 L.Ed. 545 (1927).
The test for the sufficiency of an indictment is "whether it contains the elements of the offense intended to be charged, `and sufficiently apprises the defendant of what he must be prepared to meet, and, in case any other proceedings are taken against him for a similar offense, whether the record shows with accuracy to what extent he may plead a formal acquittal or conviction.'" Hagner v. United States, 285 U.S. 427, 431, 52 S.Ct. 417, 419, 76 L.Ed. 861 (1932); United States v. Airdo, 7 Cir., 380 F.2d 103 (June 19, 1967).
The last two conditions of the test are not equivalent to the first, for the first establishes what must be proved, that combination of elements without which there is no crime alleged. Whether the elements are sufficiently alleged does not depend upon nice attention to technicality or formulistic recitals. "Upon a proceeding after verdict at least, no prejudice being shown, it is enough that the necessary facts appear in any form, or by their fair construction can be found within the terms of the indictment." Hagner v. United States, supra 285 U.S. at 433, 52 S.Ct. at 420. Cf. Rule 52(a), Federal Rules of Criminal Procedure, 18 U.S.C.A.
While Hagner may be distinguished by the fact that it was concerned with a post verdict attack upon an indictment, its reasoning is applicable to indictments attacked before verdict, as long as no prejudice to defendants is shown in the indictment.
It is, however, in an asserted incomplete allegation of elements that defendants attack the sufficiency of the indictment.
The defendants contend that the first count of the indictment, the conspiracy count, is fatally defective because it contains no allegation that any of the alleged conspirators was connected in any capacity with any of the institutions named in the count.
Count I, brought under § 371, 18 U.S. C.A., alleges a conspiracy to violate §§ 656, 657, 1001, 1005, and 1006, 18 U.S. C.A. Of these statutes, only § 371, which prohibits conspiracy to commit an offense or to defraud the United States, and § 1001, which relates to false and fraudulent statements, do not require that the alleged offender be "an officer, agent or employee of or connected in any capacity" with federally authorized or protected financial institutions. The substantive count of the indictment relating to § 1001, count XVIII, was dismissed. Defendants assert, therefore, that the § 1001 reference in count I cannot cure the failure of the count to allege the requisite capacity called for in the remaining four substantive statutes.
Count I, however, does allege that defendants controlled the management and operation of certain named financial institutions. In addition, it alleges certain overt acts in furtherance of the conspiracy; and some of the charged overt acts note certain official connections with the financial institutions named in the indictment.
"3. On or about November 1, 1962 at Chicago, Illinois, S. Lawrence Kahn presided at a meeting of the Executive Committee of the Chatham Bank of Chicago.
"10. On or about December 20, 1962 M. Prial Curran executed an escrow agreement as escrow agent for Chatham Bank of Chicago relating to the sale of permanent reserve shares of Equitable Savings and Loan Association.
"14. On or about February 19, 1963 at Chicago, Illinois Rudy Weinberg was elected Secretary-Treasurer and Arthur B. Sachs appointed General Counsel of Equitable Savings and Loan Association by the Board of Directors of Equitable Savings and Loan Association." [Emphasis added.]
Defendants, however, citing Pettibone v. United States, 148 U.S. 197, 13 S.Ct. 542, 37 L.Ed. 419 (1893); Brenner v. United States, 2 Cir., 287 Fed. 636 (1922); United States v. Devine's Milk Laboratories, Inc., D.Mass., 179 F.Supp. 799 (1960), assert that allegations of overt acts cannot cure an inadequacy in a conspiracy indictment.
In Pettibone, supra 148 U.S. at 203, 13 S.Ct. at 545, the Supreme Court said:
"* * * the conspiracy must be sufficiently charged, and cannot be aided by averments of acts done by one or more of the conspirators in furtherance of the object of the conspiracy."
The strictness of Pettibone was eroded, however, in Hyde v. United States, 225 U.S. 347, 32 S.Ct. 793, 56 L.Ed. 1114 (1912) where the Court interpreted § 5440 of the Revised Statutes, the present § 371 conspiracy statute, which in its critical language reads exactly as § 5440 did.2 It was stated that while at common law it was not necessary to aver or prove an overt act, § 5440 did require, as does § 371, some act to effect the conspiracy. Consequently, an overt act was required to be alleged along with conspiracy to constitute the offense under the federal statute.
Since an overt act is part of the offense, we see no reason why it may not be used to clarify the remainder of the count. This reading of the count as a whole is in accord with modern practice in reading indictments.3 Cf. Smith, supra; Hagner, supra; Rule 52(a), supra. Reading count I of the indictment as a whole, we hold that its allegations of control of management and operation, together with the factual allegations of overt acts, naming or at least intimating each of the defendants to have an official position with some of the financial institutions involved, satisfy the requirement that at least one of the conspirators be "connected in any capacity" with the institutions named in the count.
The defendants also challenge the sufficiency of the substantive counts of the indictment. Citing United States v. Quinn, 7 Cir., 365 F.2d 256 (1966); United States v. Britton, 107 U.S. 655, 2 S.Ct. 512, 27 L.Ed. 520 (1882); and United States v. Northway, 120 U.S. 327, 7 S.Ct. 580, 30 L.Ed. 664 (1887), they urge that the misapplication counts of the indictment fail to allege the essential elements of conversion. Since the indictment was tested by motions for bills of particulars, which were denied, the alleged defect in the indictment has not been cured by failure to act on defendants' part.
In Britton, supra at 666-667 of 107 U.S., 2 S.Ct. at 522, the Supreme Court stated:
"We think the willful misapplication made an offence by this statute means a misapplication for the use, benefit, or gain of the party charged, or of some company or person other than the association. Therefore, to constitute the offence of willful misapplication, there must be a conversion to his own use or the use of some one else of the moneys and funds of the association by the party charged. This essential element of the offence is not averred in the counts under consideration * * *."
In Quinn, supra at 260 of 365 F.2d, this court, merely repeating the language of the Supreme Court in Britton at 669 of 107 U.S., 2 S.Ct. 512, interpreted Britton to hold only that the averment "wilfully misapplied" was not sufficient in an indictment, but that there must be further averments that the willful misapplication was made and that it was unlawful. In Quinn, the requirement of a further averment beyond that of willful misapplication was satisfied by the averment that the defendant converted the moneys in question to his own personal use.
Contrary to defendants' contention, Quinn does not require the incantation of an allegation of conversion in an indictment under § 657 or § 1006, 18 U.S. C.A. in order for the indictment to withstand a test of its sufficiency. As stated, the only requirement recognized by Quinn is an averment showing an unlawful application which, if proved, would amount to a conversion. Such an averment is necessary in order to avoid charging and convicting an individual for no more than maladministration, mistake, or ineptitude. Cf. Britton, supra at 667-668 of 107 U.S., 2 S.Ct. at 512. Where it is clear that the allegedly defective count of the indictment cannot be read to charge mere maladministration, then the count is sufficient. Cf. Britton, id.
As applied to the instant case, therefore, the sufficiency of the counts of the indictment is to be tested, not by whether they literally allege conversion, but whether they allege unlawful application with the intent to defraud the association, to the use of some party other than the association.
Having carefully examined the counts of the indictment, we find that a number of them sufficiently charge an unlawful application to withstand the attack upon the sufficiency of the indictment. Cf. Ramirez v. United States, 9 Cir., 318 F. 2d 155 (1963).
Count III of the indictment charges Kahn, as vice-president and member of the Board of Directors of Chatham Bank of Chicago, and Sachs, as attorney of the Chatham Bank, with having fraudulently caused the disbursal of Chatham's check in the amount of $225,000, payable to Midwest Bank and Trust Company, which sum was represented to be the proceeds of a loan made to Sandy Building Corporation, secured by a mortgage on certain identified property, "well knowing that said property failed to provide sufficient security for the loan in that said property had fair market value substantially less than the disbursement * * *." The unlawful application of bank funds charged in this count is the knowing and purposive disbursal, without adequate security, of bank funds to a third party. The additional allegation in the count that such disbursal was made with the intent to defraud indicates that the disbursal, made knowing the inadequacy of the security, was not an act of maladministration, but one of criminal misapplication.
Count IV of the indictment similarly charges Kahn and Sachs with fraudulently causing the disbursal of a Chatham check in the amount of $155,000, payable to Edward Ferrari, purportedly representing proceeds of a Chatham loan in that amount which Kahn and Sachs fraudulently caused to be granted to Ferrari, "well knowing that the proceeds of said loan would be used for the personal benefit and advantage of said defendants and further well knowing that said loan was granted on the basis of a false and fraudulent letter of commitment" from a certain savings and loan association, and knowing the letter of commitment was executed without authority.
Defendants attack the sufficiency of this count, notwithstanding its charge of conversion, on the ground that it only speculates concerning a use in the future. This ground of attack is mistaken. Willful misapplication is the crime charged. As we have said, a conversion need not be alleged as long as an unlawful application is shown by allegations. This was adequately done. Furthermore, the allegation of illegal disbursal to Ferrari, a third party, with knowledge that the proceeds of the loan would be used for their personal benefit in effect alleges a present conversion to a third party or to an agent of Kahn and Sachs.
The charges of count VII are adequate for the same reasons. Counts VIII and X, which were dismissed as to Kahn, also sufficiently charge a crime by Sachs.
Count XVI of the indictment charges Sachs and Curran with the misapplication of moneys belonging to and entrusted to the care and custody of Equitable Savings and Loan Association, of which Curran was a director and Sachs, attorney, in a fashion similar to the other counts. The count charges the illegal transfer of $625,070.27 to a certain named institution, which amount allegedly represented partial proceeds from a loan Sachs and Curran fraudulently caused to be made by Equitable, based upon inadequate security and a false appraisal report. Once again, the allegation of unlawful application is satisfied by showing a transfer to a third party, without adequate security and through means of false information, of funds of a federally insured savings and loan association.
From the foregoing considerations, we conclude that those counts of the indictment about which there is a contest on appeal adequately charge crimes, and we hold that the indictment was sufficient.
During the trial, the trial judge made an in camera inspection of FBI reports, which were based on FBI interviews with Sachs and Curran and which were not admitted into evidence at trial. Sachs and Curran contend that the trial judge's reading of the inadmissible material4 and his resultant belief that there was a discrepancy between the defendants' testimony at trial and the information given in the FBI reports caused him to give a prejudicial credibility instruction.
At the conference on instructions, the Government tendered a "La Buy" credibility instruction, which defendants accepted without objection. This instruction reads:
"In weighing the testimony of each witness the jury should consider his relationship to the Government, or to the defendant; the witness's interest, if any, in the outcome of the case; his manner of testifying; his candor, fairness and intelligence; and the extent to which he has been corroborated or contradicted, if at all, by other credible evidence.
"A defendant who wishes to testify is a competent witness, and his testimony should not be disbelieved merely because he is the defendant. However, in weighing his testimony, the jury should consider the fact that a defendant has a vital interest in the outcome of this trial."
The trial judge in his charge to the jury, however, without notice to the Government or defendants, gave a much longer instruction relating to credibility.5
Defendants urge that this longer instruction was given because the trial judge's reading of the FBI reports caused him to perceive discrepancies in testimony, to be suspicious of defendants' testimony, and therefore to overstress prejudicially the jury's duty to consider a witness's bias and interest in the outcome of the trial. It is contended, in effect, that by his insistent emphasis on credibility, the trial judge conveyed to the jury what almost amounted to a direction that the testimony of Sachs and Curran required more than ordinary scrutiny and that it could be rejected entirely.
Length alone is not a controlling factor in assessing prejudice. Cf. United States v. Birnbaum, 2 Cir., 373 F.2d 250, 257 (1967). Nonetheless, there are two questions which must be answered with respect to the credibility instruction given. The first determination to be made is whether it can be fairly said that the instruction singles out or unmistakably refers or draws attention to Sachs and Curran, or whether it was applicable to all witnesses who testified. It must then be determined whether the extended emphasis on credibility prejudiced them.
After examination of the challenged instruction, we cannot say that the jury was alerted that the credibility of Sachs and Curran, as distinguished from that of other witnesses, was to be given special examination. The instruction is directed to the credibility of all witnesses, is qualified to insure that it has application to all witnesses, and properly notes what can be taken into account in assessing credibility.
Other than what is claimed to be unwarranted emphasis, defendants do not argue that the instruction incorrectly states the law relating to credibility. It may indeed be that the FBI reports prompted the trial judge to give this instruction. However, to suggest that the origin of or motive for the unusually long instruction taints its substance is to assume that it is nothing more than its sources. Nothwithstanding the possible origination of the instruction, we look to and judge only its l