Opinion ID: 410420
Heading Depth: 1
Heading Rank: 5

Heading: George P. Fahr

Text: 66 A. George Fahr was found guilty on nine counts of mail fraud (Counts I, II, IV, V, IX, X, XI, XII, and XIV). The alleged offenses took place from April 30, 1979, up to September 10, 1979, just prior to the closing of FGS. Fahr contends that there was insufficient evidence to sustain any of these convictions. We cannot agree. 67 George Fahr came to FGS in February of 1979. He was recommended to Newham by Kaminski as very knowledgeable about commodities markets. Although at the time he was hired he was working as a cab driver, he had 18 years' experience in the investment industry. The scheme to defraud was, of course, well under way at this time. The question becomes whether and when Fahr became an active and knowing participant in the scheme. 68 In a statement to a postal inspector made after the closing of FGS, Fahr admitted that he learned of the dire financial condition of FGS in late March or early April, 1979. Indeed, almost everyone who worked for FGS at that time would have known as much. For in mid-March FGS's hedge account at National Commodities Exchange was closed out after FGS failed to meet a margin call. Newham was in Miami at the time, 25 and it was Fahr who dealt with Kaminski and Mount in an effort to assess the level of FGS's indebtedness to National. Fahr, after conferring with Kaminski and Mount, called Newham in Miami to tell him that FGS still owed $160,000 to National. Newham expressed surprise that they could owe that much money. 69 By April Fahr was training newly hired sales personnel at FGS. During this same period he was formally promoted to sales manager. He was also functioning as a salesman. He knew FGS was not covering its customers' investments either by obtaining futures contracts or by buying physicals. He nonetheless continued to make sales to customers. For instance, Paul DeLost testified that Fahr was his broker from March until the time FGS was closed. Fahr assured him that FGS covered investments by hedging in the futures market (Tr. XVIII, 213). In September, when Mr. DeLost visited the offices of FGS, he heard Fahr tell another customer over the phone that FGS was completely hedged and that FGS had millions of dollars behind it. 70 Newham also testified that after the hedge account was wiped out he and Fahr agreed that the only way to keep FGS operating was to go out and generate more sales. There was no change in the basic sales pitch that FGS would cover margin contracts by purchasing physicals or obtaining futures contracts. 71 In addition, Newham re-emphasized at this time that customers should be encouraged to keep their accounts fully leveraged. This was in the hope that prices would drop and FGS could close out the accounts of those unable to make their margin call. (This strategy was not new; see discussion in part V-A). This approach came easy for Fahr. His dealings with one John Page are a good example. Fahr began acting as his broker in April and continued to do so until FGS was closed. During this time the price of gold was on the rise, and consequently the equity in Page's account was growing. Page testified that it was his policy not to reinvest all of his equity, in order to protect himself if the market went down. Fahr assured him continually that he was being much too conservative (Tr. V, 218), and during the ensuing months he counseled him to make purchase after purchase from the equity in his account. In a legitimate business setting such pyramiding advice might have been proper. But here Fahr knew FGS was in no position to pay off Page's account. The equity purchases were encouraged only in order to keep Page in a vulnerable position. As it turned out, Page tried to liquidate his account in early September. He was stalled by Fahr, and the following Monday FGS was closed by federal authorities. 26 At this time the value of Page's account should have been in excess of $400,000. 72 Once again, this is not a full account of Fahr's activities at FGS. It is enough, however, to show that by early April 1979 he was an integral part of the fraudulent scheme. He was not a newcomer to the investment industry, he knew FGS was broke, and he knew customers were being misled. The jury's verdicts on the nine counts of mail fraud are amply supported by the record. 73 B. Fahr, like the other defendants, claims that it was error for the District Court to deny his motions for severance. As to the necessity of separate trials, Fahr makes the same arguments as those posited by defendant Payne. We reject those arguments for the reasons stated in part V-C, ante. 74 Fahr makes an additional argument concerning the denial of his severance motions which merits discussion. This argument involves the admission into evidence of testimony of a government witness concerning portions of a confession made by Fahr to a postal inspector. 75 A significant part of the statement was not admissible because it inculpated several of Fahr's co-defendants. Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968). 27 Fahr complains that the omitted portions were exculpatory as to him, and therefore that he was prejudiced by the District Court's refusal to grant him a separate trial in which the entire statement would have been admissible. 76 This argument emanates from the [general] principle that when a confession is introduced it is the defendant's right that all, and not just part of it, be produced. United States v. Wenzel, 311 F.2d 164, 168 (4th Cir. 1962). This rule, sometimes referred to as the rule of completeness, is well recognized in the law. Fed.R.Evid. 106; 1 Weinstein's Evidence p 106 (1981); 7 Wigmore, Evidence Sec. 2100 (Chadbourn rev. 1978). If the government insists on using the confession, severance is often required. 1 Weinstein's, supra, p 106, 106-10. The rule of completeness is not without its exceptions, nor is it to be woodenly applied. Where confessions by one defendant implicate other defendants, some courts have avoided problems raised by Bruton by admitting the statement in edited or redacted form with the references to co-defendants omitted. United States v. Hernandez, 608 F.2d 741, 748 (9th Cir. 1979); United States v. Cleveland, 590 F.2d 24 (1st Cir. 1978); United States v. Holleman, 575 F.2d 139 (7th Cir. 1978); United States v. Muro, 537 F.2d 1339 (5th Cir. 1976); United States v. Wingate, 520 F.2d 309 (2d Cir. 1975), cert. denied, 423 U.S. 1074, 96 S.Ct. 858, 47 L.Ed.2d 84 (1976). See also 1 Weinstein's Evidence p 105, 105-27 (1981); 7 Wigmore Sec. 2100(d) (Chadbourn rev. 1978). The rule of completeness is violated, and severance required, only where admission of the statement in its edited form distorts the meaning of the statement or excludes information substantially exculpatory of the declarant. See United States v. Kershner, 432 F.2d 1066, 1071 (5th Cir. 1970). 77 When redaction is employed as an alternative to severance to avoid the Bruton problem, an appellant is not relieved from showing prejudice to overturn on appeal the District Court's decision to continue with a joint trial. United States v. Cleveland, supra, 590 F.2d at 28; United States v. Smolar, 557 F.2d 13, 21 (1st Cir.), cert. denied, 434 U.S. 971, 98 S.Ct. 523, 54 L.Ed.2d 461 (1977). That showing has not been made here. Our reading of the omitted portion of Fahr's statement convinces us that, rather than being exculpatory, it actually corroborates the government's charge that Fahr was intimately involved with the operation of FGS and that he had total knowledge of what was going on. 28 There was no reversible error in the trial court's refusal to grant Fahr's severance motion. See United States v. Hernandez, supra, 608 F.2d at 749; United States v. Kershner, supra, 432 F.2d at 1071. 78 Fahr's last argument as to his severance motions concerns the alleged prejudice resulting from a reference made by Payne's counsel during closing argument about the defendants' failure to testify in their own behalf. This same argument was discussed and rejected in part III-C of this opinion, and we reject it here for the same reasons. 79 C. Fahr also makes arguments for reversal based on the alleged misconduct of the prosecutor and the presence of the alternate juror during jury deliberations. These arguments must fail for the reasons discussed in parts III-B and IV-B of this opinion. 80 D. There was ample evidence to sustain Fahr's convictions, and he received a fair trial. Accordingly, the District Court's judgments of guilty on counts I, II, IV, V, IX, X, XI, XII, and XIV are affirmed.