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04/30/85 United States of America v. Mary Treadwell

April 30, 1985





Appeal from the United States District Court for the District of Columbia (D.C. Criminal Action No. 82-0045).


Tamm and Bork, Circuit Judges, and McGowan, Senior Circuit Judge. Opinion for the court filed by Circuit Judge Tamm.


In 1982, the grand jury for the District of Columbia indicted appellant Mary Treadwell, Robert E. Lee, Joan M. Booth, Charles W. Rinker, Jr., and Ronald S. Williams on one count of conspiracy, 18 U.S.C. § 371 (1982), sixteen counts of making false statements, 18 U.S.C. § 1001 (1982), seven counts of mail fraud, 18 U.S.C. § 1341 (1982), and one count of wire fraud, 18 U.S.C. § 1343 (1982). Appellant was also charged with three counts of income tax evasion, 26 U.S.C. § 7201 (1982). *fn1

On July 29, 1983, a jury found Treadwell guilty of one count of conspiracy and seven counts of making false statements and acquitted her of three counts of tax evasion, one count of wire fraud, and nine counts of making false statements. United States District Judge John G. Penn denied her subsequent motions for a judgment of acquittal and a new trial. 594 F. Supp. 831. The court sentenced Treadwell to three years' imprisonment and imposed a fine of $40,000.

Treadwell appeals, claiming, inter alia, that the trial court erred by: (1) denying her motion for acquittal on the conspiracy count because the evidence was insufficient; (2) delivering misleading and prejudicial jury instructions regarding the object of the conspiracy and the use of co-conspirator statements; and (3) denying her motion for a new trial because a document not in evidence was sent to the jury room. For the reasons given below, we affirm the conviction. I. BACKGROUND

A. The Government's Case

Appellant in the mid-1970s was the chief executive officer of P.I. Properties , a nonprofit real estate ownership and management firm. Co-conspirators Robert Lee and Joan Booth, Treadwell's sister, served on P.I.'s Board of Directors and were employed as project managers. Co-conspirator Ronald Williams, appellant's fiance, and later, husband, at one time was engaged by P.I. to perform accounting services. The government claimed that the conspirators used P.I. to acquire control of Clifton Terrace, a government-sponsored housing project, to misuse the project's assets for the enrichment of themselves and their other businesses, and to conceal these activities from government authorities.

Clifton Terrace is a low-income housing project in northwest Washington, D.C., presently owned by the United States Department of Housing and Urban Development ("HUD" or "the Department"). It has always suffered from a variety of problems typical of such projects -- high crime, low tenant morale, and rental receipts inadequate to cover project expenses. Trial Transcript (Tr.) 2053-56, 2074-76. Hoping to revitalize the project, the Department in the spring of 1974 agreed to sell Clifton Terrace to P.I. Properties. Tr. 1961-63, 2133-35. After passage of title, however, the property remained subject to a forty-year, HUD-held mortgage and a regulatory agreement providing the Department with a measure of control during the mortgage period. The agreement required the project to submit monthly financial reports and annual audited financial statements and prohibited it from taking certain actions, including the collateralization of rents and tenant security deposits, without Department approval. Gov. Exh. 624.

Treadwell did not supervise the daily operations of P.I. or Clifton Terrace but instead delegated those responsibilities to Robert Lee. He supervised an on-site staff consisting principally of Joan Booth and Zellene Laney, the bookkeeper. Treadwell exercised general supervisory authority and provided specific instructions regarding the project by holding regular meetings with Lee and Booth. Tr. 2403-04. Treadwell did not personally manage Clifton Terrace because, in addition to P.I., she was the chief executive officer of four other corporations: Youth Pride, Inc. ("Pride"), Pride Economic Enterprises , Pride Environmental Services , and T. Barry Associates ("T. Barry"), the last three for-profit organizations. *fn2

Treadwell's other businesses enjoyed substantial benefits as a result of P.I.'s acquisition of Clifton Terrace. *fn3 PEE benefitted the most conspicuously. In November 1974, P.I. began providing management services to the PEE-owned Buena Vista apartments, using the Clifton Terrace office staff, supplies, and facilities to do so. Clifton Terrace paid P.I. a monthly management fee of seven percent of gross income as compensation for its services. Buena Vista, however, paid no fee because PEE, its owner, was $200,000 in debt and could not afford it. Tr. 2432-35. Instead, PEE's directors, appellant among them, passed a resolution to compensate P.I. by a transfer of PEE stock. Tr. 2964-65. In effect, however, Clifton Terrace directly subsidized Buena Vista's management costs. *fn4

In April 1975, appellant and Lee created a new PEE division, the Special Police, in order to obtain a contract to provide security services for Clifton Terrace. *fn5 Fees paid to the Special Police from Clifton Terrace funds were a substantial source of revenue for the conspirators and their businesses. *fn6 Tr. 2661-76, 3262. In addition to their Clifton Terrace duties, the Special Police were regularly used to perform personal services for the conspirators *fn7 and to provide security services at Buena Vista and Kenesaw. *fn8 Tr. 2642, 2648, 2654, 3129-32, 3192, 3206. No other security personnel covered the needs of Clifton Terrace when the guards performed these additional tasks during their assigned shifts. Tr. 2654-55, 3133, 3195, 3200, 3209, 3211. In addition to the Special Police contract, PEE's landscaping division received a total of $18,617 in payments from Clifton Terrace, in some instances for work either wholly or partially unperformed. Tr. 2612-20.

Between June and December 1976, P.I. obtained three bank loans by improperly pledging Clifton Terrace tenant security deposits as collateral. Two of the loans were deposited in PES bank accounts and used to fund new business ventures. A portion of another loan was used to acquire property for Sticks and Stones, the for-profit housing rehabilitation company set up by Treadwell and Lee in 1976. Neither the loans nor the collateralization of the security deposits were reported to HUD on the project's monthly accounting reports ("the ABC's").9 Tr. 3354-95, 3455-73, 3943-56.

Booth and Lee routinely helped themselves to Clifton Terrace funds for a plethora of personal and non-project purposes. Heating oil for Buena Vista was paid for on several occasions with Clifton Terrace operating funds, while Clifton Terrace tenants were often without heat during the same periods. Tr. 2460, 2483-84, 2499, 2500-11, 3138, 3200-01. Project funds were used to pay Booth's legal fees in a child custody suit and for painting and carpeting the offices of the Kiosk Advertising Agency, another company owned by appellant. Significantly, neither Booth nor Lee had any ownership or other interest in Kiosk.10 In addition, Lee on several occasions misappropriated checks sent to Clifton Terrace by the company owning the project's coin-operated washers and dryers. Tr. 2601, 3003-05. Zellene Laney testified that after she brought the matter to Booth's attention, the latter telephoned appellant in Laney's presence to inform her of Lee's misconduct. Immediately thereafter, Booth told Laney that appellant was aware of Lee's activities and that she told her (Booth) that she (appellant) and Lee were going to start a new business with the money. Tr. 2601-03. Many of these improper expenditures were either misreported or not reported on the monthly ABC reports.

By the summer of 1976, the Department had become increasingly concerned about the financial health of the project. P.I. was behind in its mortgage payments and had provided HUD with neither a 1975 audited financial statement or the monthly ABC's required by the regulatory agreement. Tr. 3552-57, 3560-61, 3699-3700. Appellant responded to HUD's increased scrutiny by employing her fiance, Ronald Williams, an accountant, and two of his professional associates to review the project's books in preparation for an audit. Tr. 2470-71, 3418-24, 3430, 3435-38. Williams and his associates were not qualified to conduct such an audit under HUD rules, Tr. 3426-27, 3441-42, and appellant did not reveal her personal relationship with Williams to HUD. Tr. 3654-55, 3710-13. Although Williams never performed the audit and HUD later informed appellant that Williams would not be an acceptable auditor under its rules, three payments totaling $5,304 were made to Ronald Williams as compensation for his accounting services. Tr. 2581-89, 3778-81.

Despite repeated requests from HUD and repeated promises by appellant, no audit was forthcoming and the conspirators frequently resisted HUD's efforts to monitor the project's books. Tr. 3638-46, 3781-82. Laney testified that appellant and the co-conspirators in late 1976 and early 1977 destroyed and altered invoices and checks to conceal the various non-project disbursements in the event HUD conducted an audit. Tr. 2471-72, 2476, 2780-82.

Its patience exhausted, the Department finally conducted a partial audit in the spring of 1977.11 In response to HUD's findings, appellant and Laney prepared the overdue ABC's for the past year, determined which expenditures were to be reimbursed, and submitted the report and reimbursement checks to HUD that summer. At HUD's behest, Treadwell also removed Lee as general manager of Clifton Terrace and began to take a more active role in supervising the project's daily operations. Tr. 3736-37, 4824. After another year in which the financial and physical condition of the project continued to deteriorate, and during which appellant continued to promise and then fail to deliver the required audited financial statements, the Department in July 1978 foreclosed on the property. Tr. 3867-68, 3872-73.

B. The Defense

It was conceded by both sides that both Booth and Lee misappropriated project funds on numerous occasions. Appellant claimed, however, that because she was not involved in the daily management of the project, she was completely unaware of the wrongdoing of her subordinates. Once she learned of their misdeeds in the spring of 1977, she took steps to rectify the damage done by reimbursing the project and firing Lee. She emphasized that there was no direct evidence that she had ever agreed to or authorized their misuse of Clifton Terrace assets. She also proffered evidence that the management fees paid to P.I., the monies received by PEE Special Police, and the compensation she received as an officer from these sources were entirely reasonable and proper. She also emphasized a number of apparent inconsistencies and errors in the testimony of Zellene Laney, the project's former bookkeeper and the government's principal witness. II. SUFFICIENCY OF THE EVIDENCE

Appellant contends that because the government failed to sustain its burden of proof, the trial court erred in denying her motion for acquittal on the conspiracy count. In support of her claim, she argues that the government offered no proof that she agreed to a conspiracy to defraud the United States by misappropriating, misapplying, diverting, and stealing project assets. She argues that, even if the government had successfully established her participation in concealment of the misappropriations from HUD, involvement in the cover-up of an already executed crime would not, standing alone, necessarily show participation in the main purpose of the conspiracy. See Grunewald v. United States, 353 U.S. 391, 404-05, 1 L. Ed. 2d 931, 77 S. Ct. 963 (1957). We reject these arguments and sustain the trial court's determination that the evidence of Treadwell's complicity in the main conspiracy was sufficient to support the jury's verdict.

In ruling on a motion for a judgment of acquittal, "the trial court must view the evidence in the light most favorable to the Government giving full play to the right of the jury to determine credibility, weigh the evidence and draw justifiable inferences of fact." United States v. Davis, 183 U.S. App. D.C. 162, 562 F.2d 681, 683 (D.C. Cir. 1977); accord, Glasser v. United States, 315 U.S. 60, 80, 86 L. Ed. 680, 62 S. Ct. 457 (1942). Upon review, the appellate court must apply the same standard. See Crawford v. United States, 126 U.S. App. D.C. 156, 375 F.2d 332, 334 (D.C. Cir. 1967). Thus, the trial court may take the case from the jury "only when there is no evidence upon which a reasonable mind might fairly conclude guilt beyond a reasonable doubt." Davis, 562 F.2d at 683.

This case is troubling because the government's evidence against Treadwell was almost entirely circumstantial, and the majority of her actions were susceptible to logical and innocent explanations. In determining whether the government has met its burden of proof, however, no legal distinction may be drawn between direct and circumstantial evidence, id. at 684,12 since it is "the traditional province of the jury to assess the significance of circumstantial evidence, and to determine whether it eliminates all reasonable doubt." United States v. Staten, 189 U.S. App. D.C. 100, 581 F.2d 878, 883 (D.C. Cir. 1978). See also Glasser, 315 U.S. at 80 ("Participation in a criminal conspiracy need not be proved by direct evidence, a common purpose and plan may be inferred from a 'development and a collocation of circumstances.'" (citation omitted)). Similarly, the government, when using circumstantial evidence, need not negate all possible inferences of innocence that may flow therefrom. Holland v. United States, 348 U.S. 121, 139-40, 99 L. Ed. 150, 75 S. Ct. 127 (1954); United States v. Lewis, 200 U.S. App. D.C. 76, 626 F.2d 940, 951 (D.C. Cir. 1980).

To establish a criminal conspiracy under section 371, the government must prove beyond a reasonable doubt that: (1) two or more persons formed an agreement either to commit an offense against or defraud the United States; (2) the defendant knowingly participated in the conspiracy with the intent to commit at least one of the offenses charged or to defraud the United States; and (3) at least one overt act was committed in furtherance of the common scheme. See United States v. Andreen, 628 F.2d 1236, 1248 (9th Cir. 1980); Pinkerton v. United States, 145 F.2d 252, 254 (5th Cir. 1945).

Treadwell argues that the government failed to prove the second element of the crime because she never authorized or agreed to any misappropriation of Clifton Terrace funds. Rather, she claimed throughout the trial that she was the innocent victim of the illegal misappropriations by Booth and Lee, that she never took funds directly from Clifton Terrace for personal use, and that when she learned of her subordinates' wrongdoing, she took steps to rectify the defalcations. Any efforts to conceal the misdeeds from HUD resulted from her desire to avoid the risk of foreclosure by remedying the problems personally, not for the purpose of furthering the main conspiracy.

The government's case, however, described a scheme whose contours were far broader than one involving simple theft from the Clifton Terrace till. Instead, the government sought to prove Treadwell's participation in a scheme that encompassed not only the brazen malefactions of Booth and Lee, but also a general pattern of self-dealing, conflicts of interest, and shoddy management practices through which the conspirators illegally enriched both themselves and their other businesses at the expense of Clifton Terrace. P.I. and the other Pride-affiliated companies entered into a series of questionable and self-dealing transactions detrimental to the interests of Clifton Terrace and its tenants. The Special Police contract, P.I.'s management of the Buena Vista and Kenesaw apartments, and the landscaping and gardening services paid for in full but only partially performed were prominent examples.

Appellant argues, however, that these transactions were not necessarily harmful to Clifton Terrace. She points out, for instance, that the PEE Special Police received less compensation than did the company that had formerly provided security services. Her argument misses the point. The situation created by these conflicts of interest in itself proved adverse to Clifton Terrace and its tenants. In every such transaction, there was an incentive to favor the interests of Treadwell's other companies over those of Clifton Terrace's tenants, and the evidence showed a consistent pattern in which that risk materialized. Zellene Laney testified, for example, that certain project expenses, including P.I.'s management fee and the Special Police security fee, were always paid even though expenses like fuel and electric bills were not. Tr. 2514-16. Clifton Terrace operating funds were used to decorate the offices of the Kiosk Advertising Agency and to purchase property for use by other Pride companies. Tenant security deposits were collateralized against loans P.I. obtained for the benefit of appellant's other businesses in violation of the HUD regulatory agreement. The salary Treadwell received from P.I., a $1,000 "bonus" Jamaican Christmas vacation received from the Special Police account, and other payments depended directly on the flow of Clifton Terrace funds. Former Special Police and Clifton Terrace employees testified that security personnel were routinely diverted from their duties at Clifton Terrace and used to perform personal services for the conspirators and security services for Buena Vista and Kenesaw. Similarly, payments were made to Ronald Williams, Treadwell's fiance, ostensibly for his work as an "independent" auditor auditing the Clifton Terrace accounts, even though no audit was ever completed by him,13 and neither he nor his firm were qualified, under applicable HUD regulations, to perform the work. In short, in every transaction there was a potential for improper favoritism, and as the government's case demonstrated, too often that potential was realized.

Treadwell claimed she knew nothing about any of the improper expenditures made by Booth and Lee. The jury knew, however, that appellant had a close personal relationship with her sister, Joan Booth, and was closely associated with Lee in this as well as other businesses. It heard testimony that she held regular meetings with Lee and Booth in order to supervise their management of the project. It knew from her own testimony that she had extensive experience as a government-grant entrepreneur and that she therefore was accustomed to obtaining government money to finance various "self-help" enterprises, managing those enterprises, and accounting to the government for how that money was spent. Combining these factors with the sheer magnitude of the abuses at Clifton Terrace, many involving other businesses that she controlled, would fully support a reasonable inference that Treadwell knew of and condoned her subordinates' malfeasance.

Finally, the government presented testimonial and documentary evidence that Treadwell attempted to conceal the extent of the wrongdoing from HUD by temporizing in the face of HUD's demands for audited financial statements and by destroying and altering invoices and reconciling checks so that the expenditures would appear to be proper Clifton Terrace disbursements. Treadwell claimed, however, that her efforts were directed solely toward rectifying the damage done by her subordinates and that the testimony of Zellene Laney that Treadwell altered and destroyed documents was "thoroughly impeached" on cross-examination. As we have stated, however, the government need not negate every inference of innocence that may flow from a given set of events. More important, it is the province of the jury to assess the credibility of witnesses, and the jury thus was entitled to believe Laney or disbelieve Treadwell as it deemed fit.

Based on the voluminous evidence presented and viewed in a light most favorable to the government, we find that the trial judge properly denied Treadwell's motion for acquittal on ...

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