Opinion ID: 337639
Heading Depth: 1
Heading Rank: 2

Heading: the record contains sufficient evidence to support the jury's finding of guilt.

Text: 12 Despite the lengthy and detailed record in this case, which outlines the participation of the defendants in a scheme to defraud, the defense argues that there was insufficient evidence to establish the defendants' guilt beyond a reasonable doubt. This claim arises because much of the evidence, an estimated 80%, dealt with the MLC defendants and the loan transactions which were admitted to show their guilt. Since the MLC defendants were acquitted,the defendants argue they were prejudiced by this evidence. 5 13 However, the evidence would have been admissible against the defendants, regardless of the status of the MLC defendants, because the indictment charged an overall scheme or artifice to defraud. This case is analogous to a conspiracy trial in which the evidentiary rule is well-established that statements and acts of co-conspirators are relevant and admissible. 14 Justice Clark was confronted with this problem in United States v. Cohen, 516 F.2d 1358 (8th Cir. 1975). In Cohen, a mail fraud case, the facts were remarkably similar to the present situation. Justice Clark stated for the Eighth Circuit: 15 Once the appellant contrived this scheme to defraud and set it in motion, he was engaged in a continuous offense of causing the mails to be used in furtherance thereof, an offense which is not mitigated by his mere physical absence. In general, proof of a mail fraud scheme involving two or more persons is analogous to the nature of proof in a conspiracy, see United States v. Grow, 394 F.2d 182, 203 (4th Cir. 1968), and the same may be said of withdrawal from a mail fraud scheme. An individual participant in a fraud scheme will be held liable for the acts of his agents and co-schemers that are within the general scope of the scheme, see United States v. Cohen, 145 F.2d 82 (2d Cir. 1944), unless as in a conspiracy, he undertakes some affirmative act of withdrawal. See Glazerman v. United States, 421 F.2d 547 (10th Cir. 1970); Reisman v. United States, 409 F.2d 789 (9th Cir. 1969); Blue v. United States, 138 F.2d 351 (6th Cir. 1943). 516 F.2d at 1364. 16 But totally apart from the evidence concerning the MLC defendants 6 there is a wealth of evidence to support the jury's finding of guilt. In October 1971 Serlin sold Donald Oksas a Cardet franchise. He made numerous false and misleading statements. After Oksas discovered that the entire Cardet operation was a sham, Serlin induced Oksas to join the scheme. Serlin told Oksas that, for Cardet to succeed, prospects had to be convinced that Cardet was an established enterprise; that franchises were making a profit. Serlin told Oksas that he had to swing along to get along to make money. 17 Another witness (Stein) testified that Serlin induced him to act as a shill. As stated previously, his task was to casually arrive on the scene while a sales pitch was being made to a prospect. After being introduced and explaining his phony reason for interrupting the discussion, he would offhandedly remark how well his franchise was operating. He was engaged in this deceptive colloquy at Serlin's request. In fact he was not operating a successful franchise. 18 Defendant Phillips also engaged in making false representations on a massive scale. The defense seeks to legitimize these outright lies by claiming that the defendants had flamboyant style and that certain stories were told to establish rapport with the prospective buyers. They claim that the evidence was insufficient to demonstrate a criminal intent on the part of the defendants. Citing United States v. Scott, 263 F.2d 398 (5th Cir. 1959), and Telex, Inc. v. Schaeffer, 233 F.2d 259 (8th Cir. 1956), they point out that the statements using puffing, statements of unfulfilled promises, predictions about the future course of business, high pressure tactics, and erroneous conjectures do not necessarily amount to criminal intent to defraud. 19 But the evidence in this case shows much more than mere puffing. There was an obvious scheme built upon outright deception. Serlin was president and Phillips was vice-president of Cardet, which was the company central to the scheme. The positions occupied by the defendants and the magnitude of the misrepresentations alone may well have been sufficient proof of their involvement in a mail fraud violation. United States v. Cohen, 516 F.2d 1358, 1367 (8th Cir. 1975); United States v. Joyce, 499 F.2d 9 (7th Cir. 1974). Looking beyond the relationship of the defendant officers to the company, there is even more direct evidence of guilt. On appeal we cannot now overlook the very admissions of fraud in the statements made by Serlin:  . . . swing along (with the fraud) to get along to make money; or, by Phillips:  . . . give them a little and then you take it away. 20 In attempting to prove the defendants' guilt the government also presented substantial evidence of omissions of material fact which allegedly induced prospects to enter into MLC loan agreements. Serlin argues that omissions of fact do not constitute a violation of the mail fraud statute,18 U.S.C. 1341. In a general sense the mail fraud statute is a broad proscription of behavior for the purposes of protecting society. United States v. Owens, 231 F.2d 831, 832 (7th Cir. 1956). It was intended to prohibit conduct which fails to match the 'reflection of moral uprightness, of fundamental honesty, fair play and right dealing in the general and business life of members of society.'  Blachly v. United States, 380 F.2d 665, 671 (5th Cir. 1965), citing Gregory v. United States, 253 F.2d 104, 109 (5th Cir. 1958). Although the literal language of the statute (any scheme or artifice to defraud, or obtaining money or property by means of false or fraudulent pretenses) does not include omissions, at least one conviction, United States v. Bush, 522 F.2d 641 (7th Cir. 1975), has upheld the use of an omission to establish a violation of the mail fraud statute. In any event, this issue is not of primary concern in this case since there is ample evidence of actual misrepresentation to corroborate that the passive omissions were intended to defraud and further the scheme. 21 III. THE MAILINGS OUTLINED IN THE INDICTMENT WERE SUFFICIENT TO DEMONSTRATE A VIOLATION OF THE MAIL FRAUD STATUTE. 22 Various counts in the indictment named specific persons as receiving or mailing different items used in the scheme. However, the actual evidence at trial disclosed a variance between indictment and proof since other members of the addressee's household either received the mail or mailed a reply card. The defense argues that the conviction on these counts should be reversed on the ground of fatal variance between indictment and proof. 23 But the variances herein, usually amounting to a wife's opening the husband's mail or mailing his reply letter, are so insignificant that the result is a harmless inconsequential variance. To require a reversal, a variance between the indictment and the proof must affect the substantial rights of a defendant. As the Supreme Court observed in Berger v. United States, 295 U.S. 78, 82, 55 S.Ct. 629, 630, 79 L.Ed. 1314 (1932):The true inquiry, therefore, is not whether there has been a variance in proof, but whether there has been such a variance as to 'affect the substantial rights' of the accused. The general rule that allegations and proof must correspond is based upon the obvious requirements (1) that the accused shall be definitely informed as to the charges against him, so that he may be enabled to present his defense and not be taken by surprise by the evidence offered at the trial; and (2) that he may be protected against another prosecution for the same offense. 24 The mail fraud statute outlines three different uses of the mail in furtherance of a scheme to defraud which are prohibited: (1) the placing in any post office or authorized depository for mail matter, (2) the taking or receiving from any post office or authorized depository and (3) knowingly causing to be delivered by mail according to the direction thereon. The defendants were informed of the manner in which the mails were used to further the scheme to defraud and the basic description of the materials mailed. Their rights were not affected because a different member of the addressees' household actually received or opened the items sent through the mails. United States v. Atchinson, 524 F.2d 367 (7th Cir. 1975); United States v. Cobb, 397 F.2d 416 (7th Cir. 1968); United States v. Moser, 509 F.2d 1089 (7th Cir. 1975); Cromer v. United States, 78 U.S.App.D.C. 400, 142 F.2d 697 (1944). 25 Defendant Serlin cites Stirone v. United States, 361 U.S. 212, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960) in support of his argument that a fatal variance between proof and the charges in the indictment was established at trial. But in Stirone it was clear that the prosecution relied at trial on facts much different than those which were enumerated in the indictment. That is not the situation present in this case where the indictment sufficiently apprised the defendants of the mailings but mistakenly named the persons who actually received the mailings. 26 The defendants also contend that counts nine through fifteen do not allege mailings in furtherance of the scheme to defraud. They cite United States v. Maze, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974), and United States v. Staszcuk, 502 F.2d 875 (1974), for the proposition that use of the mails that is not a step toward receipt of the fruits of the scheme is not covered by (the mail fraud statute) . . . Staszcuk, 502 F.2d at 880. 27 These counts allege that the defendants caused to be delivered by mail to MLC various mail payment books, from which slips were removed and sent to MLC with each monthly payment. Because these mailings did not further the scheme, and because they principally dealt with defendants who were acquitted, the defense asserts that convictions on these counts were improper. 28 But our review of the record discloses that the government was justified in prosecuting these counts even after the dismissal of the MLC defendants. The mail payment books were essential in making the fraud possible. They gave the entire scheme a form of legitimacy or business propriety which inhibited the discovery of the real facts at an early stage. These mailings contributed substantially to the success of the entire scheme. 7 United States v. Chason, 451 F.2d 301, 303 (2d Cir. 1971); Adams v. United States, 312 F.2d 137, 140 (5th Cir. 1963). 29 The defendants' last technical attack on the indictment is that the counts alleging that the defendants caused to be mailed certain items were improper. Neither the case law nor the evidence presented supports the defendants on this point. The Supreme Court addressed this question in Pereira v. United States, 347 U.S. 1, 8-9, 74 S.Ct. 358, 363, 98 L.Ed. 435 (1954), stating: 30 Where one does an act with knowledge that the use of the mails will follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not actually intended, then he 'causes' the mails to be used. 31 The record shows use of business reply cards, which were pre-addressed and postage paid, and loan payment books. Thus it was reasonably foreseeable that the mails would be used in the ordinary course of business. 32