APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA Crim. Nos. 77-100-1 and 77-100-2
Before Rosenn, Hunter and Higginbotham, Circuit Judges.
Francis Harry Brown and Marvin Greenblatt appeal their convictions for using extortionate means to collect credit (Count 1); for conspiracy (Count 2); for mail fraud (Counts 5, 6, and 9); for conducting the affairs of an enterprise affecting interstate commerce through a pattern of racketeering activity (Count 13); and for conspiracy to commit that offense (Count 14). While appellants have raised several arguments, we find merit only in the contention that the government failed to prove mail fraud under Counts 5 and 6 of the indictment. Our disposition of those counts also requires reversal of the interrelated racketeering counts. We affirm as to remaining counts.
The charges against appellants arose from their management of the Chestnut Hill Lincoln-Mercury car dealership (Chestnut Hill) in Philadelphia between March 1972 and April 1975. During that time, Greenblatt was president of Chestnut Hill, and Brown was the dealership's general manager. Counts 1 and 2 of the indictment involved a charge that appellants extorted the repayment of a loan from Russell Wilmerton. Counts 3 through 12 charged Greenblatt and Brown with various acts of mail fraud. Counts 13 and 14 related to the operation of Chestnut Hill through a pattern of racketeering activity. Counts 15 and 16 charged appellant Brown only with criminal violations arising from the alleged misuse of an American Express credit card. Certain of the mail fraud counts 3, 4, 7, 8, 10, 11 and 12 were dismissed by the trial judge on defendants' motion for acquittal before the case went to the jury.*fn1 Counts 15 and 16 were severed before trial began and were dismissed with prejudice before this appeal was filed. The jury found both appellants guilty on the remaining counts 1, 2, 5, 6, 9, 13 and 14. Brown was sentenced to concurrent terms of three-years' imprisonment, and Greenblatt to concurrent terms of two-years' imprisonment.*fn2
We review the facts of the case as they appear from the evidence in the light most favorable to the government. See Glasser v. United States, 315 U.S. 60, 80, 62 S. Ct. 457, 86 L. Ed. 680 (1942).
Counts 1 and 2. Count 1 charged Brown and Greenblatt with using extortion to collect a debt in violation of 18 U.S.C. § 894.*fn3 Count 2 charged both defendants with conspiracy in relation to this substantive offense, Id. § 371. Russell Wilmerton arranged to borrow $9000 from Brown in November 1972. He had met Brown through a David Martin in connection with a previous loan. The money was given to Wilmerton in cash. No note was signed and no collateral was given. Each week Wilmerton was to pay $405 in interest, and the principal was to be repaid in thirty days. The loan was extended once, and interest payments were made until January 1973, when a receiver was appointed for Wilmerton's company. On January 29 and 30 several threats were leveled against Wilmerton because of his failure to repay the principal of the loan. One threat was personally delivered by Greenblatt.*fn4 As a result of the threats, Wilmerton agreed to repay the loan.
Count 5. Brown and Greenblatt were charged with mail fraud in relation to a scheme to obtain money from Herbert Bernstein by inducing him to invest in an illusory interest in the Chestnut Hill dealership. Count 5 dealt with a part of that scheme in which the two obtained the use of $6,000 in proceeds from a loan made to Bernstein by Allstate Finance Co. This transaction was in fact a "double fraud;" Count 6 charged that Allstate was defrauded as well.
The scheme began in late summer of 1974. At that time Brown convinced Bernstein to pay $20,000 towards the purchase of a portion of Brown's "interest" in Chestnut Hill. In early 1975, Bernstein gave Brown an additional $10,000 as a deposit on the purchase of Greenblatt's interest. In fact Brown never owned any interest in Chestnut Hill. Greenblatt did hold common stock, but could not sell or otherwise transfer the shares without first offering them to Ford Motor Company by the provisions of Ford's dealership-development program. Greenblatt did not give Ford the required notice and never transferred his shares.
The part of the scheme to defraud Bernstein charged in Count 5 was as follows. In early February 1975 Bernstein asked Brown to finance the purchase of a motorcycle. Brown suggested that instead of using the new motorcycle as collateral, Bernstein should use his 1974 Lincoln. The car's title was already encumbered, but the two planned to misrepresent to the finance company that the Lincoln was being purchased from Chestnut Hill. Bernstein would keep $4,500 of the $6,000 loan in order to buy the motorcycle and would lend the remaining portion to Brown. The loan was completed through Allstate Finance Company. Allstate's check was made payable to Chestnut Hill Lincoln-Mercury or Herbert Bernstein and was delivered on February 10, Bernstein endorsed the check, but Brown took the instrument into his possession and told Bernstein he would turn over the $4,500 when the check cleared.
Brown later refused to turn over the money to Bernstein and suggested that he consider the $6,000 as an additional investment in Chestnut Hill. Bernstein, at least by March 1, 1975, considered that the money would be treated as an investment. On March 6 Allstate mailed a coupon book to Bernstein for repayment of the loan. On April 8 Bernstein returned to Allstate two payment-due notices and Allstate's request to furnish title for the 1974 Lincoln. Accompanying the return was a letter explaining that he had not purchased the car and that Allstate should look to Chestnut Hill for recovery of the money. After Allstate contacted Brown and Greenblatt, the two telephoned Bernstein. Brown promised that Bernstein would receive his $4,500. As a result, Bernstein telephoned Allstate and indicated that the letter disclaiming the loan was the result of a misunderstanding and that he would make payments on the loan.
In response to the phone call, Mr. J. A. McGrath at Allstate wrote Bernstein a letter dated April 16, 1975. The letter thanked Bernstein for his call and indicated that new payment coupons would be forwarded.*fn5 The mailing of this letter formed the basis of the mail fraud charged in Count 5.
Because of the failure of Bernstein or Chestnut Hill to send the car's title to Allstate and because of the apparent demise of Chestnut Hill, Allstate on April 24, 1975 recovered the $6,000 from an auto repair company which had endorsed the check subsequent to Bernstein.
Count 6. Count 6 made reference to the same background facts supporting the mail fraud charged in Count 5. This count charged defendants with defrauding Allstate Finance Company in connection with the loan of $6,000 to Bernstein. The mailing charged in this count was Allstate's sending Bernstein the repayment-coupon book on March 6, 1975.
Count 9. The government charged in Count 9 that Brown and Greenblatt defrauded Ford Motor Credit Company, a Ford subsidiary which finances new and used cars for dealers. The fraud involved a false report of a "robbery" as a guise for the conversion of funds as to which Ford Credit had a security interest. The mailing which supported this count ...