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United States v. Gelb

decided: August 1, 1989.

UNITED STATES OF AMERICA, APPELLEE,
v.
BERNARD GELB, DEFENDANT-APPELLANT



Appeal from judgment entered in the United States District Court for the Eastern District of New York (Van Sickle, J.) convicting defendant-appellant after jury trial of violation of Racketeer Influenced and Corrupt Organizations Act, and of mail fraud, bribery and making false corporate tax returns. Affirmed.

Lumbard, Newman and Miner, Circuit Judges.

Author: Miner

MINER, Circuit Judge

Defendant-appellant Bernard Gelb appeals from a judgment of conviction entered after a jury trial in the United States District Court for the Eastern District of New York (Van Sickle, J.).*fn* Having engaged in schemes to avoid paying postage on mass mailings, Gelb was found guilty of one count of violating the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) (1982); one count of mail fraud, 18 U.S.C. § 1341 (1982); fifty counts of bribery, 18 U.S.C. § 201(b)(1)(C) (1982 & Supp. V 1987); and three counts of willfully making and subscribing false corporate income tax returns, 26 U.S.C. § 7206(1) (1982).

Gelb claims, inter alia, that by conducting a trial during the Jewish holiday season, which, he asserts, made it impossible to include Jews in the venire from which his jury was selected, the district court deprived him of his sixth and fourteenth amendment rights to a jury representative of his community. He argues also that his mail fraud conviction was improper because dispatching mail without paying postage does not constitute mail fraud. Furthermore, he claims that paying Postal Service employees to ensure proper service is not bribery, and that there was insufficient evidence to support his bribery conviction in any event. Because the predicate offenses of mail fraud and bribery are said to be insupportable, Gelb argues that the RICO conviction cannot stand. Gelb contends also that evidence about "payoffs" to an institution other than the Postal Service, inadvertently introduced by a government witness, had a prejudicial effect upon the jury. Finally, Gelb claims that the district court committed reversible error during voir dire by not asking the jury venirepersons if they understood that testimony of a law enforcement official is not entitled to enhanced credibility simply by virtue of the official position of the witness.

It appears from the record that Jewish jurors are excused from duty only on Jewish holidays, not during the whole holiday season. As Gelb's trial was suspended for only the days necessary to observe the Jewish holidays, Gelb's sixth and fourteenth amendment rights were not harmed by the jury selection process. Contrary to Gelb's understanding of mail fraud, we hold that defrauding the Postal Service of postage does constitute mail fraud. Since the evidence supports Gelb's conviction for bribery as well as mail fraud, his conviction for violating RICO was proper. The "payoff" evidence inadvertently introduced by the government to which Gelb takes exception was not prejudicial. Finally, any error the district court may have committed during voir dire was harmless. Accordingly, we affirm.

BACKGROUND

EDP Medical Computer Systems, Inc. ("EDP") is a mass mailing and bill collection agency in Queens, New York that Bernard Gelb founded in 1969 and has managed ever since. While Gelb habitually held himself out to the public as EDP's sole shareholder, he actually held no shares in EDP, which had twenty-four shareholders, including Gelb's wife. In its own name and those of its affiliates and subsidiaries, EDP engaged in magazine subscription solicitations, collections for a number of New York City agencies, and data processing and billing for the Bronx-Lebanon Hospital. A common feature of EDP's activities was the dispatch of large amounts of mail; EDP's mail volume varied between 100,000 and 1,000,000 pieces per mailing. By all accounts, Gelb's business was successful. As a matter of fact, Gelb boasted that EDP had been the most successful of the collection agencies used by the New York City Environmental Control Board in 1985.

Generally, EDP used two types of first-class postage for its mailings -- permit mail and metered mail. With permit mail, the mailer is assigned a permit number, which is placed on envelopes by the mailer using either a preprinted envelope or a rubber stamp. When a stack of permit mail is brought to the post office, a sample piece is weighed, as is the entire stack. The weight of the stack is divided by the weight of the sample piece. This yields the number of pieces in the stack and the appropriate charge is then levied on the mailer. Thus, permit mail is paid for at the time of mailing.

With metered mail, the mailer rents postage meters from the post office. A postage meter contains two internal registers, one ascending, which shows the total amount of postage imprinted by the meter since it first was put into circulation, and the other descending, which shows the amount of postage available on the meter at the moment of observation. Whenever the meter stamps out postage, the machine adds the amount of that postage to the ascending register and deducts it from the descending register. When the descending register runs down, the mailer brings the meter to the post office and purchases postage, the amount of which is added to the descending register and recorded on Postal Service Form 3610. Thus, metered mail is prepaid. Needless to say, access to the internal mechanisms of a meter, which is possible only by breaking a lead wire seal, is available only to authorized Postal Service employees. Most postage meters are manufactured by the Pitney-Bowes Corporation.

Gelb defrauded the Postal Service in two ways. From 1975 to 1978 he avoided the payment of postage by burying in sacks or hampers brought to the post office large quantities of permit mail beneath a few layers of metered mail. By such packing, Gelb created the impression that the entire sack or hamper already had been paid for, when, in fact, most of it had not.

Sometime in 1978 Gelb devised another scheme to avoid paying postage. After Gelb urged him to find "a way to save postage," EDP employee Arthur Sommer delivered to Gelb a stolen Pitney-Bowes postage meter. At Gelb's behest, Sommer broke the meter's seal and gained access to the inner mechanisms of the machine. He filed off the meter's unique serial number, which is engraved on a metal strip and is impressed onto a meter stamp anytime postage is dispensed from the machine, and glued onto it a metal strip fraudulently engraved with the serial number of one of Gelb's legally obtained meters. As a result, Gelb had in his possession a meter whose existence was not known to either the Pitney-Bowes Corporation or the Postal Service, and that produced meter stamps that appeared to have been printed by a legitimate machine. Gelb was able to manipulate at will the stolen machine's descending register. Thus, he had available unlimited amounts of postage for which he would not have to pay. Gelb used this stolen machine for nearly seven years.

Sommer stole a second Pitney-Bowes meter at Gelb's command and, as he did with the first machine, replaced its engraved serial number with a metal strip upon which was engraved the serial number of one of the meters legally registered to EDP. All told, Gelb had two stolen meters available to him, each of which could stamp out an impression identical to one created by a legal meter.

Between 1978 and 1985 EDP purchased only small amounts of postage for its six legal meters. Because the Postal Service requires that meter postage be bought or meters be inspected no less than once every six months and makes unannounced meter inspections, EDP ran enough mail through its legal machines to create the impression that these machines were used in accordance with Postal Service regulations. However, EDP used the two stolen meters to stamp postage for the bulk of its metered mail, often "a million [pieces] at a time."

EDP claimed as tax deductions postage stamped from the illicit meters. The discrepancy between the postage purchases recorded on Postal Service Forms 3610 and the amount claimed as business deductions on EDP's tax returns generally exceeded $145,000 a year. For example, in tax year 1980, Forms 3610 show that EDP purchased $70,020 in meter postage, but Gelb signed an EDP tax return listing deductions for postage in the sum of $265,906.

Testimony at trial revealed that Gelb, through associates, paid postal employees to ensure that his permit mail scheme went undetected. Two postal service employees who worked on the receiving platform of the Flushing Annex Post Office, Thomas Geraghty and John Krikorian, testified that they had received money from an EDP mailer named "Bernie," to whom Geraghty referred as the "Candy Man." Bernie told Krikorian at their first meeting that when EDP mail sacks were brought to the Flushing Annex Post Office, even without proper documentation, "[you] don't have to do nothing, just transfer it on to the trucks," and gave him $100 dollars. Bulk mail unaccompanied by documentation must be processed and the postage verified before being loaded onto delivery trucks. As a result of Bernie's instructions, whenever EDP's mail was brought to the Flushing Annex Post Office, Krikorian and Geraghty did not notify a supervisor or pass the mail on for further processing. Krikorian eventually lost his job for accepting money from Bernie.

Sometimes the money was paid by EDP truck drivers or assistants who had been seen with Bernie by post office employees. The money usually was delivered in an envelope addressed in Gelb's handwriting to a "Richard King," and always was packaged between two computer punch cards. Generally, money was received by the post office employees either once a week or once or twice a month, but never less than once a month. The ...


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