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United States v. Goldberg

decided: September 19, 1968.


Waterman and Feinberg, Circuit Judges and Zampano, District Judge.*fn*

Author: Zampano

ZAMPANO, District Judge:

On October 6, 1964, a grand jury returned a 32 count indictment charging 31 defendants with conspiracy to violate the anti-fraud provisions of the Securities Act of 1933, 15 U.S.C. § 77q(a), and the mail and wire fraud statutes, 18 U.S.C. §§ 1341, 1343; and with various substantive violations of those statutes. Seven of the defendants were put to trial in the instant case, including the appellants Goldberg, Scheftel, Tanenbaum and Teret. After a lengthy trial, the jury found all the appellants guilty of conspiracy; in addition, Goldberg, Tanenbaum and Teret were convicted on one or more of the remaining counts in which they were named. Various grounds are advanced on appeal for reversals of these convictions.


The appellants' first contention that the evidence was insufficient to support the verdicts is without merit. With respect to these four appellants, the evidence clearly established the existence of a defrauding scheme involving Goldberg, manager of the Biltmore Securities Corp. (Biltmore), and Scheftel, Tanenbaum and Teret, three of Biltmore's salesmen. In 1958 and 1959, Biltmore, an over-the-counter stock brokerage firm, "papered" prospective customers in several states with glowing printed reports and brochures, touting the virtually worthless stock of Lutah Uranium and Oil Company and its successor by merger, Shelton-Warren Oil Company. The names and addresses of these potential customers were recorded on "lead cards," over which Goldberg retained custody and control. Each day, as part of Biltmore's regular operations, Goldberg would distribute 10 to 15 of these cards to the Biltmore salesmen. They in turn would telephone the prospects listed on their "lead cards" and attempt to make an initial sale of Lutah or Shelton-Warren stock. If successful, the salesman would record and process the sale, and return the customer's card to Goldberg, who would recontact the customer and attempt to "load" him with additional stock. Each salesman received a commission on "opener" transactions ranging between 10 and 12 1/2% of the gross sales price; he received half of the regular commission on any subsequent "loads" made by Goldberg.

The government introduced ample evidence of the various manipulative selling techniques which the appellants employed in this "boiler room" operation. The indicia of fraud in these transactions included deceptive literature and flagrant, oral misrepresentations. Twenty-six customer-witnesses testified to their reliance on the appellants' false statements and misleading omissions. This evidence entitled the jury to find that the appellants employed fraudulent techniques "to sell a large volume of shares of one issuer by long-distance telephone * * * without disclosure to prospective purchasers of adverse financial information and [without] any reasonable basis for the optimistic statements and predictions made." Berko v. Securities and Exchange Comm., 297 F.2d 116, 117 (2 Cir. 1961). There was substantial evidence that each one of the appellants knowingly and actively participated in this fraudulent scheme to bilk the public by selling worthless stock. United States v. Bilotti, 380 F.2d 649 (2 Cir.), cert. denied, 389 U.S. 944, 88 S. Ct. 308, 19 L. Ed. 2d 300 (1967); United States v. Kelly, 349 F.2d 720 (2 Cir. 1965), cert. denied, 384 U.S. 947, 86 S. Ct. 1467, 16 L. Ed. 2d 544 (1966); United States v. Ross, 321 F.2d 61 (2 Cir.), cert. denied, 375 U.S. 894, 84 S. Ct. 170, 11 L. Ed. 2d 123 (1963).


Goldberg and Teret challenge their mail fraud convictions on the ground that the mailing of a stock certificate to a customer could not be "for the purpose of executing the scheme" -- an essential element of the crime charged -- but only "incidental and collateral thereto." They contend that, because they mailed stock certificates only at the customer's request and only after the purchase in question had been completed and paid for, such mailings were not "incident to an essential part" of the fraudulent transaction. Pereira v. United States, 347 U.S. 1, 8, 74 S. Ct. 358, 98 L. Ed. 435 (1954).

However, a failure upon request to deliver the stock sold would surely arouse a customer's suspicion and invite unwanted inquiry and perhaps rescission of the sale. Hence, the jury could reasonably infer that the delivery of the stock certificates was part of appellants' planned and deliberate use of the mails during the course of the scheme to lull their victims into a sense of security and to permit Biltmore to continue its relations with these customers. Bliss v. United States, 354 F.2d 456, 457 (8 Cir.), cert. denied, 384 U.S. 963, 86 S. Ct. 1592, 16 L. Ed. 2d 675 (1966). In any event, the point is immaterial in view of the concurrent sentences imposed on the substantive counts. Lawn v. United States, 355 U.S. 339, 359, 362, 78 S. Ct. 311, 2 L. Ed. 2d 321 (1958); United States v. Franzese, 392 F.2d 954, 958 (2 Cir. 1968).


Tanenbaum argues the trial court committed reversible error in two respects: (1) by admitting into evidence certain charts and summaries; and (2) by refusing to grant him a mistrial after it became apparent that his attorney was laboring under a conflict of interest.

The charts and summaries admitted into evidence were constructed exclusively from the testimony of the government's witnesses and from Biltmore's voluminous business records, which had been previously admitted into evidence. The court carefully charged the jury that these resumes were not themselves independent evidence, but only "visual representations of information or data as set forth in the testimony of a witness or in documents that are exhibits in evidence." The trial judge further pointed out that the charts and summaries were "no better than the books or the testimony upon which they are based, and it is for you to decide whether the charts, schedules or summaries correctly present the data set forth in the testimony and exhibits upon which they are based." We have examined the charts and summaries objected to and find no basis for the claim of prejudice; their admission was well within the trial judge's discretion. United States v. Ellenbogen, 365 F.2d 982, 988 (2 Cir. 1966), cert. denied, 386 U.S. 923, 87 S. Ct. 892, 17 L. Ed. 2d 795 (1967); Swallow v. United States, 307 F.2d 81, 84 (10 Cir. 1962), cert. denied, 371 U.S. 950, 83 S. Ct. 504, 9 L. Ed. 2d 499 (1963); United States v. Kelley, 105 F.2d 912, 918 (2 Cir. 1939). Nor was there error in submitting to the jury a chart prepared by the trial judge which specified the counts in which each defendant was named and summarized the witnesses and number of shares of stock to which each count related. United States v. Swan, 396 F.2d 883 (2 Cir. 1968); United States v. Bozza, 365 F.2d 206, 225 (2 Cir. 1966).

Tanenbaum's second point concerns the trial court's decision to appoint Tanenbaum's attorney as counsel for another salesman-defendant, Albert Lerch. We have recently expressed disapproval of this practice, Morgan v. United States, 396 F.2d 110 (2 Cir. 1968); but we find it resulted in no prejudice to Tanenbaum in the instant case.

Tanenbaum urges we find prejudice on the ground his attorney, while hampered by conflicting obligations to Tanenbaum and to Lerch, could not properly cross-examine a government witness, Erwin Saxl, in a manner best suited to advance Tanenbaum's defense. He claims his attorney was handicapped because certain aspects of Saxl's testimony which might exculpate Tanenbaum -- that ...

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