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United States v. Thies

filed: January 23, 1978.



Aldisert and Weis, Circuit Judges and Christensen, District Judge.*fn*

Author: Weis


WEIS, Circuit Judge.

The issue in this appeal is not whether the defendants' reprehensible conduct was a criminal offense, but whether it was a federal crime. To establish jurisdiction, the government was required to establish that the sale of certain worthless bonds constituted interstate commerce. The proof, however, was lacking. We find an unexplained nine-year gap from the time the securities were converted in Arizona or California to their reappearance in the challenged sale is fatal to the prosecution and requires that we vacate the convictions.

Defendants Winthrop Drake Thies and Lewis Marcus were convicted of conspiracy and the substantive offense of selling Pinal County Development Association Industrial Revenue bonds in violation of 18 U.S.C. § 2315. The indictment charged that the securities were moving as, were a part of, and constituted interstate commerce and that the defendants knew the securities had been unlawfully converted. The jury accepted the government's proof and rendered guilty verdicts on the two counts submitted to it. The district court denied post trial motions, and sentenced both defendants to prison terms.

In 1964, the Pinal County Development Association issued coupon bearer bonds in the face amount of eighty-two and one-half million dollars to finance an industrial complex in Pinal County, Arizona, a project which died aborning. Although the bonds were printed, other preliminary steps to sale on the open market were not carried out. Sometime before 1967, a large quantity of the bonds were taken to California by one Haldiman. In 1967, the Superior Court of Arizona for the County of Pinal declared the bond indenture agreement null and void and ordered the return of all bonds for destruction. In all, more than forty-eight million dollars in face value of bonds were returned and destroyed. The remaining bonds, though authentic in appearance, were valueless and the Association was not able to account for them.

During 1974 and 1975, defendant Marcus deposited more than $100,000 face value of coupons from Pinal County Development Association bonds in a number of banks in several states. Accounts were opened in fictitious names with small initial deposits. After the coupons were deposited, large sums of cash were withdrawn and the accounts were closed. In late 1974 or early 1975, Marcus, using the name of Lewis Rubin, followed this procedure in a New York bank. At that time he was living at the Robert Treat Hotel in Newark, New Jersey.

Marcus was arrested in connection with these activities and confined to the Metropolitan Correction Center. There he confided in another inmate that he had negotiated the coupons and had access to substantial quantities of the bonds. Marcus' confidant advised the F.B.I. of defendant's admission, and at the Bureau's request maneuvered to have Marcus sell some of the bonds. As the first step, Marcus was introduced to F.B.I. undercover agent Louis Tosti as a person who was interested in buying Pinal bonds.

Marcus directed Tosti to his "outside" man, defendant Thies, a member of the New York Bar. At their first meeting on April 23, 1976, Thies told Tosti that Marcus had several million dollars of Pinal bonds but that the Association had gone out of business and that the S.E.C. had taken the bonds off the market. After some negotiation, Tosti agreed to buy one million dollars of the bonds for fifty thousand dollars. Because the bonds looked authentic, they could be used as collateral for fraudulent bank loans. Thus, although they were worthless to a legitimate investor, the bonds were not without value to those who would use them to perpetrate a criminal scheme.

After Marcus learned that a sale had been agreed upon, he sent several letters. One, addressed to a Steve Vento in New York City, stated that Marcus had directed his friend in New Jersey to give fifteen thousand of the fifty thousand dollars to Vento. A letter to Thies gave further instructions, and included an agreement that he and Marcus would divide twenty-five thousand dollars between them.

In preparation for the purchase, Tosti called Thies who said that he had over a "mil" in Pinal bonds and instructed the agent to take fifty thousand dollars in cash to a Newark bank. On several occasions afterwards, Marcus told Tosti that the transfer had to be delayed, in one instance because Thies was unavailable, and later because a messenger had not yet arrived at the Metropolitan Correction Center. Marcus said he wished to personally instruct the messenger where to deliver the bonds. On May 10, 1976, Tosti and Thies met at the Newark bank. Thies asked Tosti to sign a document which stated he had been told the bonds were not properly issued, were worthless and that he would not use them for illegal purposes. The agent signed the paper and exchanged $50,000 for the bonds. Thies then took the cash to the bank's safe deposit box area and was arrested. Five of the bonds had coupons due in April, 1976 still attached; the remainder had coupons due no earlier than April, 1977.

The defendants raise a number of contentions on appeal,*fn1 but we discuss only one - the failure of the prosecution to establish the statutory nexus with interstate commerce. In pertinent part, 18 U.S.C. § 2315 reads, "Whoever . . . sells . . . securities . . . with a value of $5,000 or more . . . moving as, or which are a part of, or which constitute interstate . . . commerce . . . knowing the same to have been stolen, unlawfully converted or taken . . . shall be fined. . . ." Defendants contend that the record in this case does not show that the interstate character of the transaction continued through the lengthy time period involved.

Congress has used the commerce clause as a basis for its exercise of criminal jurisdiction in a variety of circumstances. Such proscribed conduct as interstate car theft - the Dyer Act, 18 U.S.C. §§ 2311-2313; kidnapping, 18 U.S.C. § 1201; firearms possession, 18 U.S.C. § 922, 18 U.S.C. App. §§ 1201-1202; theft from interstate shipment, 18 U.S.C. § 659; and the one under scrutiny here, sale of unlawfully converted property and securities, come readily to mind. Jurisdictional language has differed in the various statutes, and consequently the decisional law includes both broad and narrow applications of the interstate nexus. The differences in statutory language in some measure represent congressional recognition that enforcement of the general criminal laws has traditionally been entrusted to the states. The degree to which the federal government should act in that sphere is dependent upon such factors as the nature of the offense, the difficulty of enforcement ...

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