The opinion of the court was delivered by: SNYDER
On December 7, 1973, after Non-Jury Trial, the three Defendants were found guilty (in a lengthy Opinion and Decree) of twenty-six counts of Mail Fraud, on an Indictment which originally contained sixty counts against ten defendants.
This Court pursuant to a Request for Specific Findings filed an Opinion which set forth the basis for the finding of guilt, as well as for the dismissal of numerous counts where the Court concluded, as a matter of law, that use of the mails had not been proven by the requisite degree of proof.
The substance of the scheme charged against the Defendants was that through certain home repair companies, homeowners were induced to enter into agreements for the repair and improvement of their residences. Upon the execution of contracts usually calling for installment financed payments, the Defendants would furnish coupon books to the homeowners showing the indebtedness payable to home repair companies or financing companies controlled by the Defendants. At the same time, it was charged, the Defendants would draft home improvement contracts on Associated Town "N" Country Builders (Associated) paper which would contain false information concerning the identity of the debtor and the type and cost of the improvements. The Defendants would then fraudulently affix thereto the signature of the homeowner who had contracted for the original improvement and Associated paper would be presented to Homemakers Loan and Consumer Discount Company (Homemakers), a subsidiary of General Electric Credit Corporation (G.E. Credit), for the purpose of inducing G.E. Credit to purchase these obligations and remit the proceeds to the Defendants. The mastermind of this scheme was alleged to be Gerald Schall. Michael Nikolich, an employee of G.E. Credit, was charged with manipulating the purchase of contracts, knowing them to be false, and then transmitting the proceeds to Gerald Schall. Theodore Torbich was alleged to be involved by going to the homeowners and doing unnecessary work on their furnaces, by intercepting coupon books evidencing the financing of the contracts through G.E. Credit (with whom the homeowners had no contact whatsoever), and by delivering a large portion of the proceeds of these loans to Schall from Homemakers by way of Associated.
Without attempting to summarize the thirty-four page Opinion filed at the conclusion of the trial, suffice it to say that the testimony received in the three weeks of trial substantiated beyond a reasonable doubt that the home improvement contracts which existed on the records of G.E. Credit were substantially larger than any contracts authorized by the homeowners and in not a single instance did the homeowners know anything about the fact that Associated was in any way connected with the transaction. G.E. Credit's books even showed some collections of monthly payments on accounts from homeowners (a lulling technique) who testified that they had never made any payments to G.E. Credit and that they were completely unaware of even the existence of such loans.
It was clear that Homemakers regularly processed their accounts and contracts (including the contracts of Associated) through a computer center in Canton, Ohio. The mailing counts of the Indictment were in pairs; that is, for each alleged fraudulent contract the odd numbered count represented the mailing of a contract from the office in Monroeville, where it was discounted, to G.E. Credit in Canton, Ohio, the processing center; and the second or even numbered counts represented the subsequent mailing from Canton, Ohio of a payment book directly to the homeowner in the Pittsburgh area.
The convicted Defendants have now filed Motions for Judgment of Acquittal and for a New Trial. In our opinion the Motions must be denied. We consider seriatim the grounds for a new trial raised by Defendants which we have attempted to distill from the thirty-three paragraphs of the Motion (Appendix to this Opinion) many of which are repetitious:
(1) The Opinion and Decree did not comply with Rule 23(c) of the Federal Rules of Criminal Procedure because the findings made are clearly erroneous and are not sufficiently set forth to indicate the guilt of the Defendants as to each count. (Paragraphs 1, 6, 7, 13, 19, 20 and 33 of the Motion).
(2) The Court erred in not suppressing in-court identification of some of the Defendants because of alleged improper out of court use of photographs. (Paragraph 2 of the Motion).
(3) The Court erred in not granting an Evidentiary Hearing in regard to an alleged inspection by the Court of the Jencks statements. (Paragraph 3 of the Motion).
(4) The Court erred in not holding an Evidentiary Hearing concerning information which reached the Court of the alleged intention of one of the Defendants toward the end of the case to enter into plea bargaining. (Paragraph 4 of the Motion).
(5) The Court erred in permitting evidence of dealings with Homemakers Loan and Consumer Discount Company when the Indictment alleged General Electric Credit Corporation as being the party defrauded. (Paragraph 11 of the Motion).
(6) The Court erred in finding that the trial evidence justified that the mails were to be used as part of the scheme to defraud. (Paragraphs 5, 6, 7, 8, 10 and 15 of the Motion).
(7) The Court erred in permitting numerous counts to be tried when only one crime was involved, i.e., the prosecution split one scheme of mail fraud into sixty criminal acts. (Paragraphs 1, 9 and 17 of the Motion).
(9) The Court erred in interpreting the testimony of the various named witnesses and in the weight to be given to their testimony. (Paragraphs 23, 24, 25, 26, 27, 29, 30, 31 and 32 of the Motion).
(10) Finally, we also consider the Defendants' contentions that they are entitled to Judgments of Acquittal because the verdicts were against the weight and sufficiency of the evidence and that the interests of justice require a new trial.
I. SPECIFIC FINDINGS OF THE COURT IN COMPLIANCE WITH RULE 23(c) F.R.CR.P.
Defendants assert that the Court's Opinion and Decree did not comply with Federal Rule of Criminal Procedure 23(c) because the Findings and Conclusions were not sufficiently specific.
At the time of the filing of the original Opinion and Decree in this case, this Court had carefully reviewed the Opinion of the Third Circuit by Chief Judge Seitz in the case of United States v. Livingston, 459 F.2d 797 at page 798 (3rd Cir. 1972) in which the following appears:
"Findings of fact in non-jury criminal cases primarily aid the defendant in preserving questions for appeal and aid the appellate court in delineating the factual bases on which the trial court's decision rested. See 8 Moore's Federal Practice (Cipes, 2d ed.), Para. 23.05. Indeed, it has been suggested that findings under Rule 23(c) are a prerequisite to preserving for appeal issues concerning the significance or existence of a particular fact. See Wilson v. United States, 250 F.2d 312, 325 (9th Cir. 1957); Cesario v. United States, 200 F.2d 232, 233 (1st Cir. 1950). Findings of fact are essential to proper appellate review of a conviction resulting from a non-jury trial. This was an important consideration when the present text of Rule 23(c) was promulgated, altering pre-existing law and requiring the trial judge to make special findings, if requested. See Barron & Holtzoff, Federal Prac. & Proc., § 2124 (Rules ed.). Compare United States v. Weber, 437 F.2d 1218, 1221 (7th Cir. 1971) with Lofland v. United States, 357 F.2d 472, 477 (9th Cir. 1966). Rule 23(c) entitled the defendant to request and receive special findings. Howard v. United States, 423 F.2d 1102, 1104 (9th Cir. 1970)." (Emphasis added)
In particular, this Court approached the innocence or guilt of these Defendants with the mandate of our Circuit in mind as expressed in United States v. Dreer, 457 F.2d 31 (3rd Cir. 1972), where Circuit Judge Biggs in commenting upon mail fraud stated the following (at Page 33):
"This crime against the United States . . . [is] the use of its mails in carrying out the scheme to defraud, and it was, therefore, necessary for the government to allege in the indictment, and prove at the trial, that the defendant devised a scheme or artifice to defraud; used the mails; and either sent or received mail connected with the scheme." (Portion of a quote from United States v. Marrin, 159 F. 767, 774 (E.D. Pa. 1908), affirmed 167 F. 951 (3rd Cir. 1909).
The scope of the crime of Mail Fraud is an extremely broad one and the government ordinarily need prove only (1) the intention of devising a scheme to defraud, and (2) the use of the mails in its furtherance. Pereira v. United States, 347 U.S. 1, 74 S. Ct. 358, 98 L. Ed. 435 (1954); Kann v. United States, 323 U.S. 88, 65 S. Ct. 148, 89 L. Ed. 88 (1944). The scheme is one to defraud if it is reasonably calculated to deceive persons of ordinary prudence and comprehension. Silverman v. United States, 213 F.2d 405 (5th Cir. 1954), cert. denied 348 U.S. 828, 75 S. Ct. 46, 99 L. Ed. 653; Gusow v. United States, 347 F.2d 755 (10th Cir. 1965).
In this case there was a detailed analysis of the findings on which the Court was satisfied beyond a reasonable doubt that a scheme to defraud had been intentionally devised. The testimony of the victims was analyzed in detail showing that the homeowners' contracts were entirely different than the contracts finally transmitted through Associated Town "N" Country to Homemakers Loan and Consumer Discount, and subsequently discounted by Homemakers. The relationship between Associated Town "N" Country Builders, through Irwin Holtzman, and the Defendants Nikolich, Schall and Torbich, showed the use of Associated Town "N" Country as the "go between" in carrying out the scheme. The results of the scheme, in terms of money resulting from the fraud, were traced into either the hands of Gerald Schall directly or to companies operated by him. In total this amounted to $59,238.00 under the credible evidence. The original Opinion pointed out the identification made by each one of the homeowner-victims.
Particularly damaging to the Defendant's contentions was the testimony of Charles Celona, at one time employed by Gerald Schall. His testimony established the nature of the fraud by way of falsified home improvement contracts, the relationship of Torbich to the entire scheme, the transmittal of the money from Nikolich at Homemakers Loan and Consumer Discount to Associated Town "N" Country to Gerald Schall. Basically, he outlined the entire fraudulent scheme and the method of its operation. His testimony, in light of all of the other exhibits and the testimony of other witnesses, was entirely credible and persuasive.
Another former employee of Gerald Schall, John Fitchwell, identified Schall's association with various companies known as Peoples Service Gas Heating Company, Keystone Roofing and Remodeling Company, and the various other names used by Gerald Schall in his contacts with the victims. In particular, Mr. Fitchwell outlined the association between Schall and Nikolich and stated that Schall had indicated that he had "Nikolich in his back pocket".
Under the testimony of Irwin Holtzman, President and Owner of Associated Town "N" Country Builders, the results of the contracts, which were brokered in the name of Associated Town "N" Country, involved only a commission payment to Associated with all the rest of the proceeds delivered to Gerald Schall. Thus, the findings of the Court clearly showed the entire nature of the scheme to defraud, and further that the scheme was widespread as evidenced by the number of victims and the similarity of the operation and results of the scheme with respect to each of the victims.
The Court analyzed at great length the elements of the use of the mails and made specific findings with respect thereto on each count of the Indictment, as will be discussed more thoroughly in a subsequent point involving mailing. The law is clear that it is the use of the mails in connection with the scheme when the use of the mails follows in the ordinary course of business. While it is true that the Government's proof did not show that the Defendants mailed anything, there was certainly mailing caused to be done in carrying out the scheme. The Supreme Court of the United States covered this situation in its Opinion in Pereira v. United States, supra, where it stated:
"Where one does an act with knowledge that the use of the mails will follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not actually intended, then he 'causes' the mails to be used." (Emphasis added.)
II. ADMISSIBILITY OF IDENTIFICATION TESTIMONY
The Defendant, Gerald Schall, had filed a Motion to Suppress certain identification testimony as tainted by out of court photographic identifications. A hearing on the matter was held by Judge Joseph F. Weis, Jr. (at that time a Member of this Court but now a Member of the Third Circuit Court of Appeals). After hearing the testimony of the Postal Inspectors, who were extensively cross-examined, Judge Weis found that the methods employed by the Inspectors were not ...