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United States v. Caine

decided: April 27, 1971.


Waterman, Moore and Feinberg, Circuit Judges.

Author: Feinberg

FEINBERG, Circuit Judge:

Monroe Caine, Kenneth Fino and David Ratke appeal from convictions of violating the federal mail and wire fraud statutes, 18 U.S.C. ยงยง 1341, 1343. Appellants were found guilty on 72 counts of an 85-count indictment after a 12-day jury trial in the United States District Court for the Southern District of New York before Walter R. Mansfield, J. Caine and Ratke were each sentenced to concurrent four-year prison terms and were fined $2,000 plus one-third of the costs of prosecution. Fino received concurrent one-year terms and a $1,000 fine, and was ordered to pay one-third of the prosecution costs.

The federal mail and wire fraud statutes provide, in relevant part, criminal sanctions against persons who, "having devised or intending to devise any scheme or artifice to defraud," use the mails or interstate telegraph facilities in furtherance of such a scheme. A short outline of the fraudulent scheme in the present case, as the jury was entitled to find it, is as follows. Defendants formed the Sperry Dynamics Corporation in 1964 in order to market the "Sperry Unitron," a device for increasing gasoline mileage in automobiles. The corporation embarked on a massive advertising campaign, replete with exorbitant and unjustified claims for its product. The advertisement stated, for example, that the Unitron was a "new invention by one of America's leading scientists (co-developer of synthetic tires and power brakes)," although the inventor was relatively unknown and apparently worked out of a "laboratory" in his garage. Similarly, the advertisement stated that laboratory tests had proved that the Unitron would enable the purchaser to get up to 33 to 37 miles per gallon, while both appellant-initiated and other tests showed that the Unitron provided no real improvement in fuel economy.

The advertisement contained errors of omission as well as those of commission. There was no mention that the Unitron was actually a can of engine detergent which needed to be replaced with every tankful of gas rather than a solid device which would not need replenishment. Nor did the advertisement indicate that the solid instrument shipped along with the fluid was merely a standard gasoline filter.

Finally, there was evidence of fraud in appellants' administration of the enterprise. Customers failed to receive their Unitron, even after their checks were deposited in Sperry's account, and they wrote up to nine complaint letters. Likewise, many claims for refunds were never satisfied.


Appellants' primary challenge to their convictions is that the court improperly permitted introduction of evidence that Sperry had failed to give refunds as promised in its advertisement. The issue arose early in the trial when the Government attempted to have a witness testify that, although he had returned the Unitron as instructed in the advertisement, he had never received a refund. Defense counsel objected and a lengthy colloquy ensued. Defense counsel argued that neither the indictment nor the bill of particulars charged the failure to pay refunds as a part of the fraudulent scheme. After discussion of various practical considerations, some of which will be mentioned below, the court ruled such evidence admissible under the following language of the indictment:

It was further a part of said scheme * * * that the said advertising, as the defendants well knew, would contain false, fraudulent and misleading statements * * * including among others * * *. [Emphasis added.]

Thereafter, many government witnesses testified that they had not received refunds.

Citing United States v. Pope, 189 F. Supp. 12, 25-26 (S.D.N.Y.1960), appellants contend in this court that the admission of the evidence respecting refunds requires reversal. In Pope, the defendant moved to strike the words "among other things" from an indictment, and the court granted the motion. It reasoned that the words constituted an impermissible delegation to the prosecution of authority to enlarge the charges contained in the indictment:

A specific charge made by the grand jury may itself fail for lack of proof and yet, if the prosecution may augment the charges under the all-inclusive "among other things," the defendants may finally be prosecuted and convicted on charges of falsity in the statements not considered by the grand jury or, if considered, may have been rejected by it.

Id. at 26. Appellants claim that the same rationale should govern here.

In reply, the Government distinguishes Pope. It points out that the indictment in that case charged the making of false statements in proxy solicitations and reports to the Securities and Exchange Commission, while the gist of the charge against these defendants is the devising of a scheme to defraud, made criminal when the mails or interstate wires were used to pursue it. Viewing the failure to make refunds as only one of the many ways in which the scheme was carried out, the Government contends that the specification in the indictment here of certain means of carrying out the scheme did not preclude proof of others under the "among ...

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