Petition — Kramer v. United States

Supreme Court of the United States

October Term, 1975

ae

No... 2.5 = § 5 0) 1

i

Vv

EARL L. KRAMER,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

; =

—

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

Louis M. FiscHer

1115 Grant Street

Denver, Colorado 80203

Max A. Witson

Suite 100, 1860 Lincoln St.

Denver, Colorado 80203

Counsel for Petitioner

October, 1975

COCKLE PRINTING CO., 1822 ST. MARY'S AVE., OMAHA

INDEX

Pages

Opinion Below ....................... coals 2

Jurisdiction _.................... . 2

AER a OO RN Oe 2

Constitutional Provisions Involved se 3

Statement of the Case as me 3

Reasons for Granting the Writ

1. The decision below raises important ques-

tions concerning the administration of jus-

tice in conspiracy prosecutions. ......... 7

2. The decision below raises important ques-

tions concerning the conduct of U. S. attor-

neys and defendants’ rights to a fair trial... 13

REIS RSIS ese tne Oy Mee . 16

Appendix

Opinion and Judgment of Court of Appeals... A-1

Order Denying Petition for Rehearing ...........A-13

TABLE OF CITATIONS

Cases

Berger v. United States, 295 U. S. 78 (1935) ................ 13, 15

California v. Green, 399 U. S. 149 (1970) 9, 10,11, 12

Carbo v. United States, 314 F. 2d 320 (CA 9 1963),

cert. denied 377 U. S. 953 (1964) 0. 8

Dutton v. Evans, 400 U. S. 74 (1970) 7, 9, 10,11, 12

TABLE OF CITATIONS—Continued

Pages

Krulewitch v. United States, 336 U. S. 440 (1949)...7, A-11

Lutwak v. United States, 344 U. S. 604 (1953) 7

Mooney v. Holohan, 294 U. S. 103 (1935) 13

United States v. Ash, 413 U. 8S. 300 (1973) 0. 13

United States v. Bowen, 500 F. 2d 41 (CA 6 1974)

cert. denied 419 U. S. 1003 (1974) 16

United States v. Calvert, 498 F. 2d 409 (CA 6

I chciacisbisiakene “ 15

United States v. Grey, 422 F. 2d 1043 (CA 6 1970)... 15

United States v. Gullo, 502 F. 2d (CA 3 1974) WW. 15

United States v. Harrell, 436 F. 2d 606 (CA 5

TEED sccattaiecsiinetiseot , 15

United States v. Malizia, 503 F. 2d 578 (CA 2

1974), cert. denied 420 U. S. 912 (1975) 14

United States v. Morton, 483 F. 2d 573 (CA 8

1973) ......... . ” a 8

United States v. Nixon, 418 U. S. 683 (1974) .W... 10

United States v. Perry, 512 F. 2d 805 (CA 6

eames ataliesineeeniailaaiibaias 15

United States v. Santos, 385 F. 2d 43 (CA 7 1967)

cert. denied 390 U. S. 954 (1968) 8

United States v. Socony-Vacuum Oil Co., 310 U.S. — -

lil

TABLE OF CITATIONS—Continued

Pages

United States v. Spanos, 462 F. 2d 1012, 1014

(CA 9 1972) _ ............. 8

United States v. Vaught, 485 F. 2d 320 (CA 4

I iaeiikadiedih ticelileestetiteisaes ae 8

Wynn v. United States, 130 U. S. App. D. C. 60,

EE . 14

Constitutional Provisions

U. 8. Constitution, Amendment Voces 3

U. S. Constitution, Amendment VIO nce 3

Other Authorities

A.B.A. Standards for Criminal Justice Relating to the

Presseution Function 41.1 15

Prosecution Function §$5.6(b) ..... —

Davenport, The Confrontation Clause and the Co-

Conspirator Exception in Criminal Prosecutions:

A Functional Analysis, 85 Harv. L. Rev. 1378

| = wo ie ET sieinelieaiatiniiinel 8, 9, 12, A-11

2J Wigmore, Evidence 4 286 (3d ed. 1940) 200000... «14

A Re ae 2

I a cna hci ean man 3, A-2

Lt’ f a YY YS ee

ff 7 2 3

>

_<—— —--

In The

Supreme Court of the United States

October Term, 1975

EARL L. KRAMER,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

s¥.

—

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

>

The Petitioner, Earl L. Kramer, respectfully prays

that a writ of certiorari issue to review the judgment and

opinion of the United States Court of Appeals for the

Tenth Circuit entered in this proceeding on January 6,

1975.

°

OPINION BELOW

The opinion of the Court of Appeals, which has not

yet been reported, appears in the Appendix hereto. No

opinion was rendered by the District Court for the District

of Colorado.

ty.

Ww

JURISDICTION

The judgment of the Court of Appeals for the Tenth

Circuit was entered on January 6, 1975. A timely petition

for rehearing was denied on October 2, 1975, and this pe-

tition for writ of certiorari was filed within 30 days of

that date. This Court’s jurisdiction is invoked under 28

U.S.C. § 1254(1).

°

QUESTIONS PRESENTED

1. Is a defendant denied his right to confrontation

or his right to a fair trial when, in a conspiracy prosecu-

tion, an incriminating hearsay declaration of an alleged

co-conspirator is admitted into evidence and the declarant

is never asked whether he made such a statement, although

he testifies as a government witness?

2. Did the tactic of the prosecutor below, in introduc-

ing the hearsay declaration of an alleged co-conspirator

but failing to inquire of the declarant, who testified a8 a

government witness, whether he had made such a statement

3

constitute improper conduct on the part of the prosecution

so as to warrant reversal of petitioner’s conviction?

i.

™

CONSTITUTIONAL PROVISIONS INVOLVED

Constitution of the United States, Amendment V, pro-

vides in pertinent part:

‘*No person shall * * * be deprived of life, liberty,

_ or property without due process of law; * * *.”’

- Constitution of the United States, Amendment VI,

provides in pertinent part:

‘*In all criminal prosecutions, the accused shall enjoy

the right * * * to be confronted with the witnesses

against him; * * * .’’

ry

Vv

STATEMENT OF THE CASE

Petitioner was charged in a two-count indictment filed

in the District Court for the District of Colorado with

having conspired (18 U.S.C. § 371) to violate 18 U.S.C.

§ 1001 by knowingly making or causing to be made a false

representation in an application to the Small Business

Administration for the guarantee of a bank loan to a

potato company, and with having committed the substan-

tive offense of making such a false statement. The trial

court entered a judgment of acquittal as to the substantive

count at the close of the government’s case, and Petitioner

was convicted by the jury on the conspiracy count. Upon

direct appeal pursuant to 28 U.S.C. § 1291, the Court of

Appeals for the Tenth Circuit affirmed the judgment of

the District Court.

The Court of Appeals interpreted the ‘‘rambling and

prolix’’ indictment to charge Petitioner with conspiracy

to violate 18 U.S.C. § 1001 by the making of false repre-

sentations in an application to the SBA in either of two

material facts, (a) the financial condition of the potato

company, or (b) the intended purposes of the loan, i. e., that

petitioner was to receive a portion of the proceeds. Ap-

pendix, at p. A-2. Two unindicted co-conspirators were

also named in the indictment: Anthony Simeone, the

company owner, and Jack Biggs, an SBA loan officer.

Testimony at trial showed that in August, 1970, Sim-

eone and his accountant went to Kramer’s home to formu-

late an application for an SBA loan guarantee in the

amount of $180,000 to be loaned through Kramer’s bank.

There was evidence that Kramer suggested that certain

assets and liabilities carried on the company books should

be left out of the application because they did not directly

relate to the potato business. The accountant testified that

this was proper procedure, and he completed the actual

application. The government attempted to show at trial

that the removal of these assets and liabilities disguised

the true value of the company and resulted in more favor-

able consideration of the application by the SBA than

would have occurred had the application contained these

items.

The accountant was not charged in the indictment, nor

was he named co-conspirator. The Court of Appeals found

that there was no evidence to suggest that Biggs had any

knowledge or participation in the making of the applica-

or

tion, or that Petitioner had done anything with respect to

the making of the application other than to suggest the

legitimate procedure of leaving out certain items that did

not relate to the potato business. While Simeone attended

the August meeting and signed the application, he testified

that he had relied upon the accountant for what was con-

tained in the application. The Court of Appeals therefore

held that there was no evidence to support a finding that

two or more persons agreed to knowingly make or cause

to be made false statements in the application concerning

the financial condition of the company. Appendix, at pp.

A-8 - A-9.

However, the Court of Appeals took a different view

with respect to its alternative aspect of the conspiracy

count, i. e., the misrepresentation of the intended purposes

of the loan. There was evidence that after the proceeds of

the loan were disbursed, Simeone sent a $15,000 check to

Dant Slack, a potato dealer in Western Colorado and a

creditor of Simeone. Several days after receiving the

check, Slack obtained a $15,000 cashier’s check and sent

it by airplane to Simeone in Denver. Simeone cashed the

check and gave the $15,000 in one hundred dollar bills, to

Petitioner. The evidence showed that Petitioner deposited

$7,000 in cash in his personal account and also purchased

a $7,000 participation in the unsecured 10% of the SBA

loan. This latter transaction was also completed in cash.

The Court of Appeals held that these circumstances, cou-

pled with the fact that the SBA application stated that

the proceeds of the loan were for inventory capital and

the purchase and maintenance of machinery and equip-

ment (and made no mention of any participation by Pe-

titioner), were sufficient to demonstrate an agreement to

6

misrepresent the intended purposes of the loan and to

divert the proceeds. Appendix, at pp. A-9 and A-10.

The Court of Appeals was very troubled, however, by

a government tactic at trial. The prosecutor was not con-

tent to rest on the above facts.' Slack testified, over vig-

orous objection, that Simeone told him that ‘‘he Si-

meone) said he had to give (Petitioner) $15,000 to get the

loan.’’ (Record on Appeal, vol. II, pp. 150-151.) Simeone

was later called as a government witness, and though he

testified that Petitioner may have mentioned to him that

the loan might ‘‘cost something,’’ he was never asked

whether he had made the statement attributed to him by

Slack. (Record on Appeal, vol. III, pp. 248-249.) The

Court of Appeals recognized the danger of free applica-

tion of the co-conspirator hearsay rule, but it nonetheless

found that independent evidence of the conspiracy existed

so that the hearsay statement of Slack was properly ad-

mitted. Appendix, at pp. A-10, A-11. At the same time,

the court below stated that the tactic of the government

in failing to ask Simeone whether the hearsay statement

was true ‘‘betrays the truthfinding function of the prose-

cution, and we cannot condone it.’’ The court stil] af-

firmed, for it could find no legal or ethical rule to con-

demn the tactic, and it did not consider the hearsay state-

ment to be so prejudicial that it required reversal mere-

ly on that basis. Appendix, at p. A-12.

|. Both parties focused at trial and on appeal on the first prong

of the indictment as construed by the Court of Appeals. The

prosecutor told the trial court that the money conveyed through

Slack was not the crux of the charge, but rather the August

meeting was the essence of the indictment. Record on Appeal,

Vol. Ill, pp. 280-281.

REASONS FOR GRANTING THE WRIT

1. The decision below raises important questions

concerning the administration of justice in con-

spiracy prosecutions.

The tactics of the assistant U.S. attorney below, in

introducing the hearsay declaration of Simeone through

Slack, and then failing to inquire of Simeone whether he

had made such a statement, even though Simevne testi-

fied as a government witness, raise grave questions for

the administration of justice in the federal courts. If

such a tactic is allowed to go uncorrected, the scope of

evidentiary exceptions in conspiracy prosecutions will be

dangerously widened, and defendants’ rights to con-

frontation and to a fair trial will be seriously jeopardized.

This Court has previously restricted the admissibility

of hearsay declarations by a co-conspirator to those made

in the course of and in furtherance of the conspiracy.

Lutwak v. United States, 344 U.S. 604 (1953); Krule-

witch v. United States, 336 U.S. 440 (1949). Further-

more, this

‘limited scope of the hearsay exception in federal

conspiracy trials is a product, not of the Sixth

Amendment, but of the Court’s ‘disfavor’ of ‘at-

tempts to broaden the already pervasive and wide-

sweeping nets of conspiracy prosecutions.’ Grune-

wald v. United States, 353 U.S. 391, 404.’’ Dutton

v. Evans, 400 U.S. 74, 82 (1970).

The hazard of loose applications of the rules of evi-

dence, as warned against by Justice Jackson in Krule-

witch v. United States, supra, at 453, is not lessened by

the order of proof that often takes place in conspiracy

trials, where hearsay declarations, properly admitted only

upon an independent demonstration of the existence of

the agreement, often bootstrap the proof of the conspiracy

itself, for trial courts are permitted discretion as to the

order of proof.’

2. While the trial judge must make a preliminary determination

that there is substantial, independent evidence of the agreement,

at least enough to establish a prima facie case, United States v.

Vaught, 485 F. 2d 320, 323 (CA 4 1973); United States v. San-

tos, 385 F. 2d 43, 45 (CA 7 1967), cert. denied, 390 U. S. 954

(1968); United States v. Morton, 483 F. 2d 573, 576 (CA 8

1973]; United States v. Spanos, 462 F. 2d 1012, 1014 (CA 9

1972); Carbo v. United States, 314 F. 2d 718, 737 (CA 9 1963),

cert, denied 377 U.S. 953 (1964), the order of proof is left up

to the trial court. The dangers of the order of proof problem

have been pointed out by Justice Jackson in Krulewitch v.

United States, supra, at 453:

(A) conspiracy often is proved by evidence that is ad-

missible only upon assumption that conspiracy existed.”

See also Davenport, The Confrontation Clause and the Co-

Conspirator Exception in Criminal Prosecutions: A Functional

Analysis, 85 Harv. L. Rev. 1378, 1389 (1972) (hereinafter re-

ferred to as ‘Davenport’.

The dangers of this problem are present in this case. The

trial court admitted Slacks hearsay account of Simeone's al-

leged statement that he had to give fifteen thousand dollars

to Petitioner because the court felt that the agreement had been

proved by the August, 1970 meeting at Petitioner's home. (Rec-

ord on Appeal, vol. Il, pp. 147-148.) Yet the Court of Appeals

found that all Petitioner had done at the August meeting was

to suggest the entirely proper procedure that certain items

that did not directly reiate to the potato business be removed

from the SBA application. Appendix, at p. A-8. While the

Court of po did find sufficient evidence to establish a

conspiracy. it did so because of evidence that Petitioner had

told Simeone that the loan might ‘cost something,’ and be-

cause Petitioner was given fifteen thousand dollars by Simeone.

However, this testimony did not occur until Simeone himself had

(Continued on next page)

The tactics below raise more than mere problems of

the relaxation of the hearsay exception in conspiracy

trials. Rather, the purposes of the Confrontation Clause

would also appear to be threatened:

*‘The decisions of this Court make it clear that the

mission of the Confrontation Clause is to advance a

practical concern for the accuracy of the truth-deter-

mining process in criminal trials by assuring that

‘the trier of fact (has) a satisfactory basis for eval-

uating the truth of the prior statement.’ California

v. Green, 399 U.S., at 161.” Dutton v. Evans, supra,

at 89.

Indeed, the basis of our system of justice is the full

development of all relevant facts:

‘*We have elected to employ an adversary system of

criminal justice in which the parties contest all issues

(Continued from previous page)

testified, several witnesses after Slack had testified. Slack did

establish that Simeone had sent him a check for fifteen thousand

dollars and that he returned the fifteen thousand, via a cashier's

check, to Simeone. The only evidence to establish an agree-

ment at the time Slack testified was the August meeting. Under

these circumstances, it is difficult to see how anything but the

following occurred:

"There is a distinct possibility that the independent evidence

and the conditionally admitted hearsay will bootstrap each

other into legitimacy in the eyes of the jury, the hearsay

lending credence to otherwise insufficient independent evi-

dence, with the independent evidence then turning around

and legitimizing the use of the hearsay.'' Davenport, supra,

85 Harv. L. Rev., at 1389.

Here, of course, this problem was compounded because the

hearsay declaration was not even conditionally admitted. |+ was

simply allowed to sit in the minds of the jurors and poison any

possibility of an objective determination of whether the crime

charged was in fact proved.

10

before a court of law. The need to develop all rele-

vant facts in the adversary system is both funda-

mental and comprehensive. The ends of criminal jus-

tice would be defeated if judgments were to be found-

ed on a partial or speculative presentation of the

facts. The very integrity of the judicial system and

public confidence in the system depend o» full disclos-

ure of all the facts, within the framework of the rules

of evidence.’’ United States v. Nixon, 418 U.S. 683,

709 (1974).

The two most recent interpretations of the Confron-

tation Clause by this Court are in Califormia v. Green, 399

U.S. 149 (1970); and Dutton v. Evans, supra. In both

eases this Court held that there was no violation of the

Confrontation Clause, but those cases did not present the

factual situation of the instant case.

California v. Green, supra, involved a statute which

permitted the introduction of previous testimony without

violation of the hearsay rule. This Court there stated

that the Confrontation Clause is not congruent with the

hearsay rule, 399 U.S., at 155-156, and it was held that

the previous testimony there in question, which had oc-

curred at a preliminary hearing, where the witness was

under oath and cross-examination took place, was suifi-

ciently reliable for constitutional purposes so as to allow

its admission into evidence when the witness, who was

present at trial, acknowledged that he had testified at

the preliminary hearing and was subject to cross-examina-

tion at the trial. Unlike that situation, however, the de-

clarant below was never asked whether he had made the

statement to Slack. Under these circumstances, the ad-

mission of the hearsay statement was virtually tanta-

mount to those cases in which the declarant is absent.

11

See, e.g., California v. Green, supra, at 161. Nor was

Simeone under oath or subject to cross-examination at

the time he allegedly made the statement to Slack. Final-

ly, unlike the situation in Green, the prosecution did not

make ‘‘every effort to introduce its evidence through the

live testimony of the witness” Simeone. 399 U.S., at 167.

In Dutton v. Evans, supra, also a state prosecution,

the hearsay statement of a non-appearing co-conspirator

was admitted at Evans’ trial. This Court held that the

hearsay statement was admitted under circumstances that

did not violate the Confrontation Clause because the state-

ment carried no express assertion of past fact, thus affect-

ing its weight, and its content was abundantly established by

other testimony at the trial, including that of another co-

participant, who testified under immunity on behalf of the

state. 400 U. S. at 89. The hearsay statement was thus,

in the opinion of the plurality, neither ‘‘crucial’’ nor

“devastating.” Id. at 87. Here, these indicia of reliabil-

ity are abundantly lacking, particularly since the alleged

declarant, Simeone, was present and testified as a govern-

meni witness. It was the government’s burden to produce

this evidence, id. at 102 n. 4 (Marshall, J., dissenting),

yet the prosecutor chose not to do so. Furthermore, the

evidence was both ‘‘crucial’’ and ‘‘devastating.’’ It was

the crucial piece of evidence to establish the offense,

namely the diversion of the loan proceeds. Had Simeone

been questioned about the statement, then he could have

been tested as to whether he in fact made it, what he

meant by it, and whether it was true. The jury could

then have evaluated these and other matters in light of

Simeone’s demeanor, and the truth-finding process would

have been markedly aided.

12

Both California v. Green, supra; and Dutton v. Ev-

ans, supra, were decisions under the Confrontation Clause.

This Court is free in this case to go beyond those de-

cisions, if it wishes, and impose higher standards in fed-

eral trials under its supervisory powers in order to insure

that trials are more fair and fully serve the truth-deter-

mining process.

It has been suggested that the reliability and pro-

bativeness of co-conspirator hearsay statements would be

increased if the present rule were to be modified. See

Davenport, supra, 85 Harv. L. Rev. at 1391-1407. In

order to guard against the situation in the instant case,

a declaration ostensibly against the declarant’s penal in-

terest or ostensibly an act of the conspiracy should be

inadmissible to the extent it implicates someone other

than the declarant in the criminal enterprise. Such a

statement is lacking in indicia of reliability, for it could

have been made to impress or brag, or could have been

deliberately false. Davenport, supra, at 1396-1397, 1400-

1401. The only way to insure the reliability of the state-

ment is to question the declarant—which could have been

very easily done here, since he was a government witness.

It is therefore submitted that in order to facilitate

the search for truth and to afford defendants in similar

situations their rights to confrontation and fundamental

fairness, this Court should adopt a standard requiring

that an available co-conspirator be the only source for

the introduction of hearsay statements. Otherwise, as

here, the prosecution will be permitted to broaden the

already dangerous hearsay exception in conspiracy cases,

and the truth-determining process will be undermined.

13

Because of the importance of this question to the admin-

istration of justice, and because of the likelihood of this

problem recurring in other cases, this Court should grant

the writ to review the judgment below.

2. The decision below raises important questions

concerning the conduct of U. S. attorneys and

defendants’ rights to a fair trial.

This Court long ago held that due process prohibits

the prosecution from taking any action that offends ‘‘fun-

damental conceptions of justice.’’ Mooney v. Holohan,

294 U. S. 103, 112 (1935). Accord, United States v. Ash,

413 U. S. 300, 320 (1973). This Court also many years

ago stated the ethical responsibilities of a federal prose-

eutor:

‘‘The United States Attorney is the representative

not of an ordinary party to a controversy, but of a

sovereignity whose obligation to govern impartially

is as compelling as its obligation to govern at all;

and whose interest, therefore, in a criminal prosecu-

tion is not that it shall win a case, but that justice

shall be done. As such, he is in a peculiar and very

definite sense the servant of the law, the twofold

aim of which is that guilt shall not escape or inno-

cence suffer. He may prosecute with earnestness and

vigor—indeed, he should do so. But, while he may

strike hard blows, he is not at liberty to strike foul

ones. It is as much his duty to refrain from im-

proper methods calculated to produce a wrongful

conviction as it is to use every legitimate means to

bring about a just one.’’ Berger v. United States,

295 U. 8S. 78, 88 (1935).

The conduct of the Assistant U. S. Attorney below

did not fulfill these requirements, and the effects of his

14

failure to ask Simeone, the declarant of the hearsay state-

ment admitted through Slack, about the statement de-

prived Petitioner of his right to a fair trial.

It can be inferred from the failure of the prosecutor

to ask Simeone about the statement that his response

would not have been favorable to the government’s case.

‘*(A) party’s failure to utilize a witness ‘peculiarly

within his power to produce * * * whose testimony

would elucidate the transaction’ permits an inferrence

that the testimony would have been unfavorable.’’

Wynn v. United States, 130 U. S. App. D. C. 60, 397

F’. 2d 621, 625 (1967).

The inference is based not upon mere non-production

or non-utilization of a witness, but rather upon ‘‘non-

production when it would be natural for (a party) to

produce the witness if the facts known by him had been

favorable.’’ 2 J. Wigmore, Evidence, § 286 (3d ed. 1940).

Accord, United States v. Malizia, 503 F. 2d 578, 581 (CA

2 1974); cert. denied, 420 U. S. 912 (1975).

The inference is applicable here, for Simeone was a

government witness. It is therefore fair to infer that

Simeone could not have substantiated the statement that

the money was for Petitioner in order to get the loan.

This means that the conduct of the prosecutor was more

than a ‘‘betray(al) (of) the truth finding function of the

prosecution.” Appendix, at p. A-12. Rather, it was a

successful attempt to introduce improper evidence—a vio-

lation of the A. B. A. Standards for Criminal Justice Re-

lating to the Prosecution Function §5.6(b). In analogous

circumstances, other Courts of Appeals have found viola-

15

tions of the standards of Berger v. United States, supra.

See United States v. Gullo, 502 F. 2d 759 (CA 3 1974),

where the government attorney improperly asked a wit-

ness whether he was aware that a co-defendant had

pleaded guilty. When objection was made, the prosecutor

promised to bring the co-defendant in as a witness. The

trial court then gave a sua sponte instruction to the jury

that the plea was not evidence of guilt of the other de-

fendants. The defense then reluctantly called the co-

defendant as a witness, and he repudiated, in an uncon-

vincing manner, his guilty plea. While the Court believed

the representation of the prosecutor that he did not know

the question was improper, the Court still found a viola-

tion of the Berger standard. /d. at 762-763. See also

United States v. Harrell, 436 F. 2d 606, 614-615 (CA 5

1970) (evidence of guilty plea by co-conspirator) ; United

States v. Calvert, 498 F. 2d 409 (CA 6 1974) (evidence

of prior criminal record of defendant when he did not

testify and did not put his character in issue); United

States v. Perry, 512 F. 2d 805, 806-807 (CA 6 1975) (at-

tempting to prove misconduct on other occasions when

not probative of particular offense and when defendant’s

character not in issue); United States v. Grey, 422 F. 2d

1043 (CA 6 1970) (injection of racial issue into bank

robbery case).

In all the above circumstances the courts found the

Berger standards to be violated. See also the commentary

to the A. B. A. Standards, the Prosecution Function, § 1.1,

at p. 44.

The hearsay statement involved here was crucial to

the outcome of the case. The other evidence was hardly

16

‘‘overwhelming;’’ rather, this was a close case, so the

admission of the statement cannot be considered harmless

error. Cf. United States v. Socony-Vacuum Oil Co., 310

U. S. 150, 239-240 (1940); United States v. Bowen, 500

F. 2d 41, 42 (CA 6 1974); cert. denied, 419 U. S. 1003

(1974). The jury was not given a cautionary instruction,

nor was the statement conditionally admitted. Under these

circumstances, it is clear that Petitioner was denied his

right to a fundamentally fair trial. In order to insure the

fairness of federal trials, this Court should grant the

writ to review the judgment below, else other courts will

be left with violations without remedies.

co)

CONCLUSION

For these reasons, a writ of certiorari should issue to

review the judgment and opinion of the Tenth Circuit.

Respectfully submitted,

Louis M. FiscHer

1115 Grant Street

Denver, Colorado 80203

Max A. Witson

Suite 100, 1860 Lincoln St.

Denver, Colorado 80203

Counsel for Petitioner

October, 1975

——-~--—-= -

——— Ge .—-

A-1

APPENDIX

Opinion and Judgment of Court of Appeals

United States Court of Appeals, Tenth Circuit

No. 741108

Filed January 6, 1975

United States of America,

Plaintiff-A ppellee,

vs.

Earl L. Kramer,

Defendant-A ppellant.

Appeal from the United States District Court

for the District of Colorado

(D.C. No. 73-CR-238)

John W. Madden III, Special Assistant United States

Attorney, Denver, Colorado (James L. Treece, United

States Attorney, on the brief), for Plaintiff-Appellee.

Lawrence M. Henry, Denver, Colorado, for Defendant-

Appellant.

Before Murran, Setu, and Barrett, Circuit Judges.

Murra, Circuit Judge.

A-2

Upon a trial to a jury appellant Kramer was convicted

and sentenced on a charge of conspiracy (18 U.S.C.

§ 371) to violate 18 U.S.C. § 1001' by knowingly making

or causing to be made false, ficticious and fraudulent

representations in an application to the Small Business

Administration for the guaranty of a bank loan to the

Simeone Brothers Potato Company, Ine. As we read the

rambling and prolix indictment, it alleges the making of

false representations in the application as to material

facts, to wit, (1) the financial condition of the Potato

Company and (2) the intended purposes of the loan. It

charges that these false representations caused the SBA

to consider more favorably the guaranty of 90% of a

$180,000 loan to the Potato Company by the First Nation-

al Bank otf Fleming, Colorado, of which Kramer was

president; that, as part of the conspiracy, Kramer would

receive $15,000 of the loan proceeds; and that his personal

interest in these proceeds would be concealed from the

SBA. Twenty-two overt acts are alleged in furtherance

of the conspiracy between Kramer and two unindicted co-

|. The statute in full reads: “Whoever, in any matter within the

jurisdiction of any department or agency of the United States

knowingly and willfully falsifies, conceals or covers up by any

trick, scheme, or device a material fact, or makes any false,

fictitious or fraudulent statements or representations, or makes

or uses any false writing or document knowing the same to con-

tain any false, fictitious or fraudulent statement or entry, shall

be fined not more than $10,000 or imprisoned not more than

five years, or both.’

——

A-3

conspirators, company owner Anthony Simeone and SBA

loan officer Jack L. Biggs.’

The Court’s instructions were not brought forward

on this record, and we shall proceed on the premise that

they correctly stated the law of the case. Suffice it to

say, for our purposes, that it was incumbent upon the

government to prove to the satisfaction of the jury beyond

a reasonable doubt that Kramer, Simeone, and Biggs

formed an agreement, however clandestine or informal,

to violate 18 U.S.C. § 1001 by the making of false repre-

sentations in an application to the SBA concerning a

material fact—i.e., either (1) the financial condition of

the Potato Company or (2) the intended purposes of the

loan;’ and that someone committed an overt act in further-

ance of this object. Kramer argues that the evidence was

insufficient as a matter of law to support the finding of

his guilt, especially in view of the erroneous admission

of hearsay evidence.

2. The second count of the indictment charged Kramer with the

substantive violation 18 U.S.C. 4 1001 by the same false rep-

resentations in the application pertaining to the Potato Com-

pany’'s financial condition. The court directed a verdict on this

count holding in effect that the evidence was insufficient to

take the case to the jury on the substantive offense but suffi-

cient on the conspiracy offense.

3. 18 U.S.C. § 1001 embraces in the disjunctive the separate

offenses conjunctively charged in the indictment as one offense

so that proof of a oy to make a false representation in

the application as to either the financial condition of the Potato

Company or the intended purposes of the loan will warrant a

conviction on this indictment. Turner v. United States, 396 U. S.

398, 420 (1970); United States v. Dinneen, 463 F. 2d 1036

(10th Cir, 1972); Troutman v. United States, 100 F. 2d 628

(10th Cir. 1938).

A-4

We are mindful that the government’s case has sur-

vived motions to dismiss and for directed verdict for the

insufficiency of the evidence by the rulings of an able

and experienced trial judge. In this posture, we should

not disturb the verdict unless convinced that the evidence,

considered in its most favorable light, is wholly insuffi-

cient to take the case to the jury. See United States v.

Kramer, No. 73-1925 (10th Cir. August 20, 1974).

This brings us to an analysis of the facts of record.

In essential outline, the proof was to the effect that the

Simeone brothers owned a number of closely knit incorpo-

rated businesses, one of which was a wholesale potato

company. Apparently, the Simeones interchanged assets

and liabilities between these corporate businesses as best

suited their personal and business convenience.

Faced with a financial crisis in early 1970, the Simeones

turned to their long-time friend and banker, Kramer.

On several occasions, Kramer and the Simeones discussed

the financial condition of the Company. Kramer indicated

that he knew someone at the SBA and might be able to

arrange an SBA loan guaranty. At some time during the

discussions and negotiations Kramer told Simeone that

the loan might ‘‘cost something.’’ As a result of these

discussions, Anthony Simeone and Walter Meisel, the

Company’s long-time accountant, traveled to Kramer’s

home with pertinent Company records in August, 1970.

There, the three of them discussed the Company’s financ-

ial affairs and roughed out an application for an SBA

guaranty on a $180,000 loan to be made by Kramer’s

bank. In the course of this three hour conference, they

discussed certain assets and liabilities on the Company

A-5

books which were not directly related to the wholesale

potato operation. Kramer suggested that if these assets

and liabilities were shown on the application, the Potato

Company would not have a ‘‘good chance to get the loan’’

and that they should ‘‘come out.’’ Meisel, who assumed

the responsibility for preparing the application, then pen-

cilled an abbreviated uotation of the assets and liabilities

that were to come out.

In the office preparation of the application and under

9(¢c), entitled ‘‘Surplus Analysis or Net Worth Reconcili-

ation,’’ in the column for ‘‘Withdrawals,’’ Meisel entered

the words ‘‘Net Assets’’ and the amount of $57,287 in

parentheses (apparently indicating deduction from total

net worth). On trial, he explained in some detail that

this sum of $57,287 was arrived at by deducting the liabil-

ities ‘‘left off’’ from the assets ‘‘left off,’’ as shown on

the business records of the Potato Company. These were

the items which were discussed at the conference and

which Kramer had suggested should come out. A list of

these items was received in evidence. It showed assets

of $182,299 and liabilities of $125,012, leaving a net of

$57,287. Among the listed assets was a $115,200 ‘‘invest-

ment’’ in a dog tract and a $9,600 ‘‘investment’’ in

Kramer’s bank. The assets and liabilities left off the

application submitted August 24, 1970, were also left off

the supplement submitted December 14, 1970.

Meisel testified that the $57,287 was intended to be a

reconciliation of the assets and liabilities shown on the

application with the assets and liabilities shown on the

Potato Company records. He was careful, however, to

A-6

say that he did not undertake to give an audited opinion

or to verify the value or authenticity of the listed items.

There was some proof to the effect that the $115,200

dog track item was worthless and that the $9,600 ‘‘invest-

ment’’ in Kramer’s bank was in fact a Simeone debt to

the bank rather then an asset. The government suggests

that if the true value of these assets had been used, the

enplication would have shown a withdrawal of net liabili-

ties rather than one of net assets; that the effect of the

withdrawal was to exclude from the application actual

liabilities by balancing them against fictitious assets.

While the application was pending, Kramer highly

recommended the Potato Company’s application to the

processing SBA officer. There was testimony that the

application was considered ‘‘marginal’’ and that if there

had been any change in the iisted assets and liabilities,

it would probably have been declined. After approval of

the loan and authorization of disbursement on December

23, 1970, the loan funds were disbursed by Kramer’s bank

to the Potato Company’s account in two installment: —

$125,000 on December 23 and $55,000 on December 28.

Meanwhile, on December 22, a $15,000 check was drawn

on the Potato Company payable to Dant Slack, a potato

dealer in Monte Vista, Colorado, and a creditor of the

Simeones. After receiving this check in Monte Vista

from Simeone, Slack cashed it on December 24, and the

4. But see 15 U.S.C. 636(a}(I) to the effect that all SBA loans

are only marginally bankable: ‘'No financial assistance shalt be

extended . . . unless . . . not otherwise available on reasonable

terms.”

A-7

check cleared the Potato Company account when the only

funds available in the account were the SBA loan pro-

ceeds. On December 28, Slack purchased a $15,000 cash-

ier’s check and on the same date sent it by airplane to

Simeone in Denver. Simeone and Kramer went to the

airport, picked up the check, and Simeone cashed it the

same day, receiving $15,000 in $100 bills, all of which

Simeone gave to Kramer. On December 29, Kramer de-

posited $7,000 in currency in his personal savings account

at a Sterling, Colorado, bank; and on December 30, he

purchased a $7,000 participation in the unguaranteed 10%

of the SBA loan in a cash transaction using all $100 bills.

Cross examination developed the fact that Simeone had

been a participator with Kramer in the unguaranteed por-

tion of two other loans; that Simeone had ‘‘given Mr.

Kramer a lot of money over the years and that he [Kram-

er] put it where he thought best’’; and that he expected

a return of the money from Kramer.

From all the evidence, Kramer argues that the govern-

ment failed to make a case. He maintains that his only

participation in the preparation of the application was to

discuss certain unrelated items (assets and liabilities) and

to recommend that they be left out of the application;

that this recommendation had the purpose and effect of

causing the application to speak the truth and was in

nowise false. He points to the fact that the application

was made by the experienced C. P. A. Meisel who testified

tuat it accurately represents the financial records of the

Potato Company. He challenges the record for evidence

to justify the inference that he agreed with anyone to

make false representations as to any material fact in the

application.

A-8

The $57,287 entry seems to be the heart of the govern-

ment’s contention that the application falsely represented

the financial condition of the Potato Company. After all

the discussion about it, we remain uncertain of the sig-

nificance of this entry in the context of the application.

As we read and understand the entry, it was carried

neither as an asset nor as a liability. Meisel testified

on cross-examination that it was a reconciliation of the

application with the company records and that he put it

under ‘‘Surplus Analysis or Net Worth Reconciliation—

Withdrawals’’ because he ‘‘found no better place to put

it.”’ Moreover, he agreed that this treatment of the assets

and liabilities was a ‘‘legitimate procedure’’ and that it

accurately reflected the financial records of the Potato

Company. It may well be that the financial records them-

selves were in part ficticious and that the entry was

therefore deceptive. But even so, there is nothing in this

record from which it can be inferred that Kramer sug-

gested the entry or that he had anything whatsoever to

do with it other than to suggest the admittedly legitimate

procedure of leaving out certain items because they did

not relate to the potato business.*

Meisel, who made the entry and vouches for its appro-

priateness, was neither charged with the offense nor

named as a co-conspirator in this indictment. Though

loan officer Biggs was named as a co-conspirator, there

is no probative evidence of his knowledge or participation

5. Apparently, it was the court's appraisal of this evidence that

prompted it to direct a verdict of acquittal on the substantive

charge that Kramer himself made or caused to be made false

representations in the application concerning the financial con-

dition of the Potato Company.

* —_ oe ene

A-9

in the making of the application. A Mr. Bailey of the

SBA actually processed the application for the guaranty.

He testified that he interviewed Kramer by telephone and

the Simeones in person at both their place of business

and at the SBA offices; and that the Simeones were at

his desk in connection with the loan application ‘‘many

times.’’ He also testified that Simeone was in the office

of co-conspirator Biggs, Bailey’s supervisor, several

times, and we may validly assume that Simeone’s visits

with Biggs were in connection with the application. But

there is nothing to indicate, or from which it can be in-

ferred, that the visits were in any way sinister or con-

spiratorial. Certainly, there is nothing from which it

can be inferred that Biggs formed or participated in an

agreement of any kind. Simeone, who was produced as a

government witness, testified without contradiction that

he attended the conference and signed the application but

he ‘‘never paid much attention to the books’’ and relied

upon his accountant Meisel. In this posture of the case,

we are unable to discern wherein on this record two or

more persons agreed to knowingly make or cause to be

made false statements in the application concerning the

financial condition of the Potato Company.

We think, however, the evidence is entirely sufficient

to support a finding that Kramer and Simeone conspired

to misrepresent the purposes for which the loan proceeds

were to be used; that Kramer was to receive $15,000 of

the proceeds; and that it would be concealed from the

SBA. The application explicitly stated that $160,000 of

the loan proceeds were to be used for ‘‘ Working Capital—

Inventory’’ and the remaining $20,000 for ‘‘ Acquisition

A-10

and/or Repair of Machinery and Equipment.’’ There was

direct evidence that Kramer first suggested the idea of an

SBA loan guaranty and that it might ‘‘cost something’’;

and that he participated and counseled in the preparation

of the application. As president of the lending bank and

based on his participation, it is fairly inferrable that

Kramer knew that the application did not contemplate

that he should receive any part of the loan proceeds, and

there is direct evidence that he did receive $15,000 of

these proceeds. The surreptitious manner in which Kram-

er and Simeone consummated the transaction certainly

lends credence to the government’s contention that it was

part of an agreement to misrepresent the intended pur-

poses of the loan and to divert the proceeds from the

purposes for which the loan was made and to conceal that

fact from the SBA.

But the government was not content to rest its case on

the inferences to be drawn from these facts. Slack of

Monte Vista, an innocent party to the $15,000 transaction,

was called to testify over hearsay objection that Simeone

had told him that ‘‘he [Simeone] had to give Mr. Kramer

$15,000 to get the loan.’’ Simeone was later called as a

government witness, but he was not questioned by either

the prosecution or the defense concerning his alleged out-

of-court declaration.

Slack’s testimony was, of course, pure hearsay. Kramer

strenuously contends that it was calculated to poison the

minds of the jury and that it was reversibly erroneous,

especially in view of the failure of the prosecution to

question Simeone as to his own alleged declaration. As

A-11

hearsay, it would be clearly inadmissible in most any

trial other than a conspiracy case. This tactic is remin-

iscent of Mr. Justice Jackson’s caustic observations on

hearsay evidence in conspiracy trials in his concurrence

in Krulewttch v. United States, 336 U. S. 440, 445, 453

(1949). He characterized the crime of conspiracy as an

‘‘elastic, sprawling and pervasive offense .... so vague

that it almost defies definition’’ and warned especially

against the ‘‘hazard from loose application of rules of

evidence”’ in a prosecution for this crime. We subscribe

to Mr. Justice Jackson’s insistence on a narrow applica-

tion of the exception to the hearsay rule in cases of this

kind.

We are nonetheless constrained to conclude that the

exception was applied within proper bounds in our case.

It is settled as an exception to the hearsay rule that state-

ments by a co-conspirator made in furtherance of a con-

spiracy which has been established by competent evidence

are admissible against an alleged conspirator, and the or-

der of proof is a matter within the discretion of the trial

court. As we have seen, the existence of a conspiracy

and Kramer’s complicity are shown by direct evidence

quite apart from the hearsay testimony. The jury cer-

tainly could have inferred from the oral and documentary

6. See generally McCormick, Evidence 645 (1972); Davenport, The

Confrontation Clause and the Co-conspirator Exception in Crim-

inal Prosecutions: A Functional Analysis, 85 Harv. L. Rev. 1378,

1385 (1972), and cases cited therein.

A-12

evidence that the payment of loan proceeds was to be

made and was in fact made to Kramer in return for his

assistance in obtaining the loan. And this evidence was

produced at trial before the admission of the hearsay evi-

dence bearing on the same issue. Under these circum-

stances, Slack’s hearsay testimony comes within the nar-

row bounds of the exception to the hearsay rule.

The failure of the government to inquire of Simeone

concerning the truth of the hearsay statement can be jus-

tified only in terms of trial strategy, a matter within the

competence of counsel and not revealed on this record.

Such a tactic betrays the truth-finding function of the

prosecution, and we cannot condone it. But we know of

no legal or ethical rule to condemn it. And we cannot say

that it was so prejudicial as to require reversal on that

ground alone.

We conclude that the evidence was sufficient to justify

the inference that Kramer and Simeone conspired to vio-

late 18 U.S. C. § 1001 by falsely representing in the SBA

application the purposes for which the loan guaranty was

to be made. The hearsay evidence which was admitted

to support the prosecution’s case comes within the narrow

exception for co-conspirator’s declarations. In these cir-

cumstances, we cannot say that the trial court was clearly

wrong in submitting the case to the jury, and we will not

disturb the verdict.

The judgment is affirmed.

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Order Denying Petition for Rehearing

SEPTEMBER TERM—OCTOBER 2, 1975

Before The Honorable Alfred P. Murrah, Senior Judge,

The Honorable Oliver Seth and The Honorable

James E. Barrett, Circuit Judges

No. 74-1108

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

Vv

Rh

EARL L. KRAMER,

Defendant-A ppellant.

This matter comes on for consideration of the appel-

lee’s motion to supplement the record and request that

the Court amend its opinion, as well as the appellant’s

petition for rehearing.

Upon consideration whereof, it is ordered that the

appellee’s motion and request are denied. It is also

oruered that the petition for rehearing is denied.

HOWARD K. PHILLIPS, Clerk

By: /s/ Robert L. Hoecker

Chief Deputy Clerk

SEAL

By /s/ Mary A. Sherman, Deputy Clerk