The opinion of the court was delivered by: HAIGHT
I write this memorandum to amplify certain rulings made in preparation for and during the trial of this case, which resulted in conviction by the jury of certain of the defendants
on certain of the charges contained in the third superseding indictment.
The Scheme Alleged in the Indictment
A description of the alleged scheme lying at the heart of the indictment is necessary to an understanding of what follows.
The scheme alleged is a confidence game, known in the present vernacular of the street as the "pigeon drop" game. It is of ancient lineage. John Bacany, an NYPD frauds squad detective of over 20 years' experience, testified during pre-trial proceedings that the game was a familiar one when he joined the force, and had existed for many years before that. The frauds squad distributes a pamphlet intended to warn the populace of the game. A prototype of the game was described in a novel, "Trick Baby," found in the possession of defendant Blackmon. I think it likely that some version of the pigeon drop game was played on the streets of ancient Babylon, Sodom, and Gomorrah.
As played in the case at bar, which covered the period April through November 1985, the game victimized elderly women (or "lames," in modern parlance). The game begins when one of the players convinces the victim that they have, fortuitously and together, found on the street a portfolio (or "pack") containing cash and securities of great value. The victim, let us say, is walking past St. Bartholomew's Church on the way to do volunteer work at the Lighthouse for the Blind. (These details are not invented for dramatic effect; they are derived from. the evidence.) She is suddenly accosted by one of the con game players, who asks the victim if she dropped a leather portfolio seen lying on the street. The victim says "no." The player suggests that they open the portfolio, and does so. The victim gets a peek at what looks like bundles of cash in high denominations and negotiable securities. There is also a note making some sort of reference to the "P.L.O." or to "Iran." The player must set the hook by sustaining the prospective victim's interest, and generally exciting her desire for personal gain. If she disclaims any interest, or simply says "turn the portfolio over to the police" and departs, the game is lost and a new victim must be found. The first stage of the game is accomplished if, by fast and glib patter, the player persuades the victim that the player works for a distinguished banker or business executive, whose advice should be obtained about what to do with the "found" portfolio and its contents.
This brings the victim into telephone contact with the key con game player, the "talker." The victim never meets the talker, although she expects to, and may fruitlessly try to. Something always comes up to prevent a meeting en face. But what the talker says on the telephone to the victim is that he is an executive with a leading bank, or a business executive; that the cash and securities in the portfolio were destined for the P.L.O. terrorists or for Iran, in violation of humanitarian principles or legal embargo, as the case may be; that in the circumstances the owner of the valuables will never claim them, so that they may be regarded as found money; and that the total value is beyond the dreams of avarice (usually stated in the millions). The talker proposes a three-way split (victim, street player, and himself), and assures the victim that he will attend to any tax complications, in consultation with a high I.R.S. official of his acquaintance.
In the case at bar, the "talkers" pretending to be bankers or executives used the names "Mr. Goldberg" or "Mr. Goldstein." The equally fictitious I.R.S. official was "Mr. Carmichael."
If the victim remains on the hook, she is next persuaded to take out a bank safe deposit box, and then rent two adjoining rooms in a motel. In one of those rooms she meets with the street player, who produces large quantities of cash (apparently quite genuine) which is "counted down" to the victim, placed in felt money bags, and then purportedly lodged, with the "assistance" of the street player, in the victim's safe deposit box.
The amount of cash counted down to the victim always corresponded to the amount the victim had in her own independent bank or securities accounts: information the con game players obtained from the victim early on. It is those assets, of course, which were the objectives of the game. The function of the cash count down, said to represent an initial distribution of the victim's share of the "found" valuables, was to make the victim feel secure about entering into the final stage of the game. That sense of security was false. The "counted down" cash (which represented, in effect, the con game players' working capital) was always switched out of the bank bags, and cut-up paper substituted for it. The victims had been instructed by "Mr. Goldberg" or "Mr. Goldstein" not to spend any of the money supposedly in the safe deposit box for several months.
All this is preamble. The game succeeds when the victim is then persuaded to take money or securities out of her own account, convert them into foreign currency, and give the foreign currency to the street player (purportedly Mr. Goldberg's employee) for delivery to Mr. Goldberg. The pretexts given to the victims for this transfer of her assets varied. Typically "Mr. Goldberg" told the victim that, as an experienced banker or international businessman, he could produce a much higher rate of return on the victim's investments.
Writing in the calm of chambers, it seems amazing that such a scheme ever succeeded. But it did, repeatedly. One victim at trial, the widow of a corporate lawyer, closed out a Merrill Lynch, securities account in excess of $500,000, placed the proceeds in banks, then withdrew the funds, converted them into foreign currency and gave the entire amount to defendant Roland (the street player who pretended to be a nurse, "Mary Anderson," in the employ of "Mr. Goldberg"), for transmittal to Mr. Goldberg. The victim did all this on the telephoned instructions of a stranger she never met. While this was the largest amount testified to by a victim at trial, the pigeon drop game was played in the same way with all the victims described in the evidence.
Clearly, this ancient scam constitutes grand larceny under New York law. Defense counsel stated repeatedly that practitioners of the pigeon drop game are invariably prosecuted in the state courts. There seems no reason to doubt that this is so. None of the extensive research of Court or counsel on the "federal question" aspects of the indictment revealed prior federal prosecution of such a scheme. However, the case at bar, which began as a joint FBI/NYPD investigation (one of the victims had complained to the FBI), eventually took the form of an elaborate and complex federal indictment.
I do not criticize the choice of federal over state prosecution. It is no more my position to do so than that of defense counsel. The United States Attorney's Office has discretion, at least initially, to determine if a crime is federal in nature, and to prosecute it accordingly. But the form the third superseding indictment took raised questions which permeate the record, some of which are further dealt with in this memorandum.
The indictment on which the case was sent to trial charged defendants with conspiring to violate, or with substantive violations of, what would appear to be every federal statute of even arguable relevance to this scheme.
Count 1 charged all defendants with violating 18 U.S.C. § 371 by entering into a single conspiracy to commit the following federal crimes:
(a) Possession of counterfeit or forged securities of an organization, in violation of 18 U.S.C. § 511(a).
(b) Wire fraud, in violation of 18 U.S.C. § 1343.
(c) Possession of five or more identification documents, in violation of 18 U.S.C. § 1028(a)(3).
(d) Possession of fifteen or more access devices, in violation of 18 U.S.C. § 1029(a)(3).
(e) Securities fraud, in violation of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78ff, and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5.
As to those of its aspects charging one or another of the fraudulent schemes, the indictment referred to six defrauded victims, and to three attempted victims as to whom, for one reason or another, the game did not work.
Substantive counts 2 through 5 charged all defendants with entering into a single scheme to commit wire fraud, in violation of § 1343. The four counts in furtherance of the alleged scheme each alleged a particular instance of interstate wire communication.
Counts 6 through 20 charged all defendants with entering into a single scheme to commit bank fraud, in violation of 18 U.S.C. § 1344. The 15 counts in furtherance of the alleged scheme each alleged a particular, fraudulently procured withdrawal by a victim of her funds from a federally insured bank. For some undisclosed reason, this particular scheme was not included as an objective of the single § 371 conspiracy alleged in Count 1.
Counts 21 through 29 charged all defendants with securities fraud. Each of the nine counts charged two or more defendants with defrauding a particular victim, or attempting to do so.
Count 30 charged all defendants with possession of counterfeit or forged securities, in violation of § 511(a).
Count 31 charged Jones and Blackmon only with possession of unauthorized, access devices, in violation of § 1029 (a)(3).
Count 32 charged Jones and Blackmon only with possession of identification documents, in violation of § 1028(a) (3).
Count 33 charged Blackmon only with making a false statement in his application for appointment of counsel under the Criminal Justice Act, in violation of 18 U.S.C. § 1001.
Count 34 charged Jones only with violation of this Court's bail order restricting his travel, in violation of 18 U.S.C. § 401.
Count 35 charged Jones and Blackmon only with possession of cocaine. This charge resulted from a search under warrant of a Bronx apartment Jones and Blackmon used. I granted defendants' pre-trial motion to sever this count.
Defendants' counsel contended from the outset that all the Government's proof would and could show was a series of individual, unrelated con games, albeit with some occasional overlapping of players. They challenged the existence of the single conspiracy and single schemes alleged in the indictment.
In the event of conviction on such a prosecutorial theory, the questions for the appellate courts are whether the evidence permitted a reasonable jury, properly instructed, to find the existence of the single conspiracy or scheme alleged in the indictment; and, as to a particular defendant, his or her participation in it.
The appellate inquiry is retrospective, the defendant by definition having been convicted. In the trial court, these questions arise prospectively, at the end of the Government's case and within the context of Rule 29, F.R.Crim.P.
In the case at bar, when defendants made their Rule 29 motions the Government conceded that there was no evidence linking all defendants in a single conspiracy to violate 18 U.S.C. § 1028(a)(3) (possession of identification documents), or § 1029(a)(3) (possession of access devices). The only evidence of these illicit activities related to Jones and Blackmon. Accordingly these objectives of the single conspiracy alleged in Count 1 were stricken from that count, although they remained as substantive charges against Jones and Blackmon.
As to violations of 18 U.S.C. § 511(a) (possession of counterfeit or forged securities) and 15 U.S.C. § 78j(b) (securities fraud), I concluded that in the circumstances revealed by the evidence they were not legally viable objectives of any conspiracy or scheme. alleged in the indictment. Accordingly these two objectives were stricken from the conspiracy count, and counts 21 through 29 (the substantive securities fraud counts) were dismissed. As to the conspiracy count, this left wire fraud as the sole surviving objective for the jury to consider.
I also held that, contrary to defendants' assertions, the allegation of a scheme to violate 18 U.S.C. § 1344 (bank fraud) was legally viable.
I also held that a reasonable jury, properly instructed, would be entitled to find the existence of a single conspiracy to commit wire fraud, as well as single schemes to commit wire and bank fraud; and that each defendant was a participant in such conspiracy and schemes. The case was submitted to the jury accordingly, under instructions which dealt inter alia with single versus multiple conspiracies and schemes.
My reasons for these rulings are, to some extent, stated on the record. That statement is sufficient in respect of the alleged violations of § 511(a). I write further on the issues of bank fraud and securities fraud.
The bank fraud statute is new. Congress added it to Title 18's anti-fraud arsenal by Pub.L. 98-473, Title II, § 1108(a), Oct. 12, 1984, 98 Stat. 2147. At least insofar as the research of Court and counsel reveal, the statute has not yet been judicially construed.
The statute reads in pertinent part:
"(a) Whoever knowingly executes, or attempts to execute, a ...