Petition — Bernstein v. United States
Supreme Court brief1976
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—BILF D
JUN 14 1976
IN THE MICHAEL RODAK, JR.,CLERK
Supreme Court of the United States
October Term, 1975
No. 79-1810
FLORENCE BEHAR,
Petitioner,
—
UNITED STATES OF AMERICA,
Respondent.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
SECOND CIRCUIT
HENRY J. BOITEL
Attorney for Petitioner
233 Broadway
New York, New York 10007
(212) RE 2-8104
es
‘TABLE OF CONTENTS
PAGE
I EN on oo odo s Code cons amber eeey we iii
Nf tati de caw ebeewedheiae beaneses 2
SEER SREP SPA ee a ny ote ene Ege 2
Questions Presented for Review ................5. 3
Constitutional Provisions and Statutes Involved .... 6
eee ss 7
A. Preliminary Statement ................. 7
B. The Federal Housing Administration ..... 9
C. Eastern Service Corporation ............. 12
eb ee ee CED “Scho i Wkeecccecess 13
Reasons for Granting the Writ .................. 14
I. Petitioner was unconstitutionally denied re-
presentation by counsel of her choice when
the District Court wrongfully held that her
attorney was possessed of an actual conflict
of interest and ordered her attorney to ter-
minate his representation of her, despite
her pleading protestations and her clear
waiver of the alleged conflict .......... —
is eC SE 5 VGN 6 kd acdc medbous 14
B. The Finding of Conflict of Interest
WE GS G-0Ssnsvke-sceuawencees 18
C. Petitioner Had a Right to Waive the
Alleged Conflict, and She Did So. .... 19
ii
PAGE
D. If Petitioner Did Not Understand the
Significance of a Waiver, the Court’s
Obligation was to Make It Clear to Her
and Not to Deprive her of the Freedom
ee SE -ni4taracceeeeeueeeekaues 21
E. The District Court Should Have Exer-
cised Other Available Options ....... 23
II. Petitioner was deprived of the effective
assistance of assigned counsel ...... rere 24
III. The indictment herein was fatally defective
since it failed to charge that petitioner had
knowledge of the falsity of statements con-
tained in the mortgage applications, and
since the false statement counts of the in-
dictment failed to particularize or even in-
dicate which of the numerous statements
were alleged to be false ................ 27
A. The Failure to Charge Knowledge of
DE cas0sideeseuean sues cali 28
B. The Absence of an Indication of What
Statements Were False ............ 29
IV. The District Court’s charge to the jury was
clearly erroneous and violative of due pro-
cess of law with respect to the standard of
liability as to the false statement counts of
See EEE +3 sek genusewedcendeeeoos 31
ED 6d pe neuekdeeuue bPeecklaedibetecou<. 33
CONTENTS OF APPENDIX
Appendix “A”:
Opinion of the United States Court of Appeals
for the Second Circuit, United States v. Bern-
ee Oe 6 65h 0 ne kn 00 akc eee lkna dca cs la
iii
PAGE
Dissenting Opinion of Cirevit Judge Ellsworth
We GE occ ccwesccsvesecucveccdues 47a
Appendix “B”:
Order of the Court of Appeals Denying Rehear-
ing and Amending Dissenting Opinion ........ 66a
Appendix “C”:
Order of the Court of Appeals Denying Rehear-
ing Im Bane .......cccrccccsecccvccceccvens 68a
TABLE OF AUTHORITIES
Cases:
Adams v. United States ex rel. McCann, 317 USS.
— SR Se ree rer rr rere 21
Bernstein et al. v. Travia, Docket No. 73-1591 (2d
ED es eee teeee: .beeessESeennQeetens 1
Faretta v. California, — U.S. — 95 S. Ct. 2525
ED, bc ch eeedesevedéucckeuseseendees 21-22, 23
Gideon Vv. Wainwright, 372 U.S. 335 (1968) ...... 18
Russell v. United States, 369 U.S. 749 (1962) ...... 30
Stirone v. United States, 361 U.S. 212 (1960) ...... 30
United States v. Berlin, 472 F.2d 1002 (2d Cir.,
ST cdc La deuedeenkeevevheedubeeaeeesenes 29
United States v. Bernstein et al., — F.2d — (2d Cir.,
PE GROG akc cnvesevecnccccess 2, passim, la
United States v. Ekelman & Associates, — F.2d —
(6th Cir., March 12, 1976) .............. 8, 31-2
United States v. Garcia, 517 F.2d 272 (5th Cir.,
SE oe ee ee Perr Cee ke tan een eee we 23
iv
United States v. Sheiner, 410 F.2d 387 (2d Cir. tage
SUEY 00640005 iNev edb e 5s bons Ghee 18
United States v. Wisneiwski, 478 F.2d 274 (2d Cir.,
SE a6. thay csusce cance uesenesd eee 18
United States Constitution
Fe rer rer 8, 6, 31
Sixth Amendment .... .......... es OP) 8, 6, 24, 31
United States Code
ee EE 6 Sen toneskbvevets sstauseeee 7
Se SEEK ED 00000 cr vescetosccenesesus scum 7
BD WA GORRD occ cccscvccccccccccces 4, 6, 7, 27, 30
SP Wah BREED co cclincccccccccceseuduccedeu 2
Federal Rules of Criminal Procedure:
MEP WOUPGES siccsccccnpeccccscocevectssdaawen 30
MOEN TD esses cvccdcescacesocenececensconcedail 24
Other Authorities:
Code of Professional Responsibility of the American
Bar Association .......... cc ccc cc ceeucccce 19
Standards Relating to the Defense Function (ABA
Approved Draft) §3.5 ...............000005. 19
IN THE
Supreme Court of the United States
October Term, 1975
No.
FLORENCE BEHAR,
Petitioner,
—
UNITED STATES OF AMERICA,
Respondent.
—_—————al — ae
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
SECOND CIRCUIT
Petitioner, Florence Behar, prays that a writ of cer-
tiorari i.sue to review a judgment of the United States
Court of Appeals for the Second Circuit, entered on
March 4, 1976, which affirmed a judgment of conviction
previously entered against her in the United States
District Court for the Eastern District of New York
(Appendix “A” hereto, infra, p. la).*
‘The appendices annexed to this petition are paginated “la”,
et seq.
Prior to the trial herein, several of the defendants, in-
cluding petitioner, petitioned the Court of Appeals for a writ
of mandamus directed to the trial judge, Bernstein et al. V.
Travia, Docket No. 73-1591. A four volume appendix was filed
[Footnote continued on following page]
2
Opinions Below
The Court of Appeals affirmed in a yet unreported
opinion, United States v. Bernstein, et al., —F.2d—
(March 4, 1976). The majority opinion is reproduced
in Appendix “A”, hereto, infra, at pp. la-47a. Circuit
Judge Van Graafeiland vigorously dissented, arguing for
2 complete reversal of petitioner’s conviction. His dis-
senting opinion is reproduced in Appendix “A”, at pp.
47a-65a. Thereafter, Judge Van Graafeiland amended
his opinion with respect to a matter not relevant: to this
petition (Appendix “B”, hereto, infra, pp. 66a-67a).
Jurisdiction
The jurisdiction of this Court is invoked under 28
U.S.C. § 1254(1).
The judgment of the Court of Appeals was filed on
March 4, 1976 (la), and the Court of Appeals denied
both rehearing and rehearing in bane on May 14, 1976
(Appendices “B” and “C” hereto, infra, at pp. 66a-69a).
This petition is filed within thirty days of the denial by
the Court of Appeals of the timely petition for rehearing.
|Foonote continued from prior page]
in connection with that petition. Volumes I and II were paginated
“A. 1”, et seq.; Volumes III and IV were paginated “B. 1”,
et seq. By order of the Court of Appeals, those four volumes con-
stituted part of the appellants’ appendix with respect to the
appeals from the various judgments of conviction.
Volumes V and VI were added to the appendix so as to
complete the documents necessary for the appeal, and they are
paginated “C. 1”, et seq. A complete set of Volumes I through
VI, inclusive, will be certified to this Court in connection with
the instant petition.
References herein to the trial transcript, which exceeded
25,000 pages, are preceded by “Tr.”.
3
Questions Presented for Review
This petition presents several questions of Constitu-
tional dimension. Certain of these questions have pro-
duced a conflict of opinion, both within the Second Circuit
(See: dissenting opinion of Judge Van Graafeiland, Ap-
pendix “A” hereto, infra, at pp. 47a-65a), and with a
recent opinion of the United States Court of Appeals for
the Sixth Circuit, United States v. Ekelman & Associates,
—F.2d— (March 12, 1976). Moreover, each of the ques-
tions presented appears to conflict with established pre-
cedents of this Court, and if the resolutions espoused
by the majority opinion prevail, they are likely to have
a profound effect upon criminal liability and upon the
administration of justice throughout the United States.
1. In an unprecedented decision, the Court of
Appeals ratified the District Court’s pre-trial order
which ousted petitioner’s retained counsel of choice
from the case, upon the alleged ground of conflict
of interest, despite petitioner’s pleas that her at-
torney be permitted to represent her. Was peti-
tioner deprived of the effective assistance of re-
tained counsel of her choice, in violation of the
_ Sixth Amendment, when the District Court or-
dered the attorney of her choice to terminate his
representation, and was the District Court in error
when:
A. It found that an actual conflict of
interest existed?
B. It refused to accept petitioner’s un-
equivocal waiver of the alleged conflict of in-
terest?
C. It deprived petitioner of the right to
waive the alleged conflict of interest upon the
ground that petitioner’s effort to exercise the
right was “not knowing and intelligent”? As-
4
suming, arguendo, that the factual predicate
for the Court’s opinion was correct, did not
the Court have the obligation to sufficiently
impress the significance of such a waiver upon
petitioner so that petitioner could make a
“knowing and intelligent” choice for herself,
rather than have it imposed upon her by the
Court?
D. It failed to take steps within its
power, including assignment of previously re-
tained counsel or a grant of a severance to
petitioner, rather than ousting petitioner’s
retained counsel of choice?
2. Was petitioner deprived of the effective
assistance of assigned counsel, who replaced peti-
tioner’s retained counsel of choice, since:
A. At the time of the assignment, both
the District Court and the prosecution, but
not the petitioner, knew that the assigned at-
torney was then representing a Federal Hous-
ing Administration employee who worked out
of the very Federal Housing Administration
office with which petitioner was alleged to
have had unlawful dealings?
B. The District Court permitted the as-
signed attorney to absent himself from critical
pre-trial and trial proceedings, and permitted
attorneys representing co-defendants at trial
to “pinch hit” for the assigned attorney, and
vice versa?
3. Was the indictment herein fatally defec-
tive since:
A. The false statement counts (18 U.S.C.
$1010) of the indictment failed to charge
5
that petitioner had knowledge of the falsity
of written statements of mortgage applicants
which petitioner forwarded to the Federal
Housing Administration? and
B. The false statement counts of the in-
dictment failed to particularize or even indi-
cate which of the numerous statements in
bulky FHA application packages were alleged
to be false?
4. As argued by Judge Van Graafeiland in
his dissenting opinion, was the District Court’s
charge to the jury erroneous with respect to the
standard of liability as to the false statement
counts of the indictment, since the Court’s charge:
A. Permitted the jury to conclude that
petitioner had an “affirmative duty” to exer-
cise “proper credit judgment” with respect to
statements made by mortgage applicants to
the FHA and “to insure that such statements
were true”?
B. Permitted the jury to reach this con-
clusion based upon Federal Housing Adminis-
tration instruction manuals, and_ similar
materials, rather than upon the provisions of
any statute or legislatively authorized regu-
lation?
C. Failed to define the concept of “proper
credit judgment”?
D. Failed to properly charge the jury
that if petitioner actually believed the state-
ments were true, she must be acquitted?
5. Was there a fatal variance between the
indictment and the proof, since the trial evidence
established the existence of multiple conspiracies,
and did the trial court err when it refused to
6
charge the jury on the issue of multiple conspi-
racies?*
6. Was the sheer length of this nine month
trial the result of an abuse of prosecutorial and
judicial discretion which deprived petitioner of
a fair trial?
7. In view of the above noted errors, must
petitioner’s conviction be reversed in all respects?
Constitutional Provisions and Statutes Involved
Fifth Amendment:
No person shall be held to answer for a capital, or
otherwise infamous crime, unless on a presentment or
indictment of a Grand Jury, except in cases arising in
the land or naval forces, or in the Militia, when in actual
service in time of War or public danger; nor shall any
person be subject for the same offence to be twice put in
jeopardy of life or limb; nor shall be compelled in any
criminal case to be a witness against himself, nor be
deprived of life, liberty, or property, without due process
of law; nor shall private property be taken for public
use, without just compensation.
Sixth Amendment:
In all criminal prosecutions, the accused shall enjoy
the right to a speedy and public trial, by an impartial
jury of the State and district wherein the crime shall have
been committed, which district shall have been previously
ascertained by law, and to be informed of the nature and
cause of the accusation; to be confronted with the wit-
*In view of the length of this petition and the importance of
the other questions presented, petitioner here sets forth ques-
tions 5, 6 and 7, although they are not discussed under the rea-
sons for granting the writ. In the event that the writ of cer-
tiorari is granted, petitioner respectfully requests leave of the
Court to thereafter argue those questions.
a
se ete, oneal ee ee
7
nesses against him; to have compulsory process for ob-
taining witnesses in his favor; and to have the Assistance
of Counsel for his defence.
18 United States Code § 1010:
£1010. Department of Housing and Urban Develop-
ment and Federal Housing Administration transactions
Whoever, for the purpose of obtaining any loan or
advance of credit from any person, partnership, associa-
tion, or corporation with the intent that such loan or
advance of credit shall be offered to or accepted by the
Department of Housing and Urban Development for in-
surance, or for the purpose of obtaining any extension or
renewal of any loan, advance of credit, or mortgage insured
by such Department, or the acceptance, release, or sub-
stitution of any security on such a loan, advance of credit,
or for the purpose of influencing in any way the action
of such Department, makes, passes, utters, or publishes
any statement, knowing the same to be false, or alters,
forges, or counterfeits any instrument, paper, or docu-
ment, or utters, publishes, or passes as true any instru-
ment, paper, or document, knowing it to have been altered,
forged, or counterfeited, or willfully overvalues any secur-
ity, asset, or income, shall be fined not more than $5,000
or imprisoned not more than two years, or both.
As amended May 25, 1967, Pub.L. 90-19, § 24(c), 81
Stat. 28.
Statement of the Case
A. Preliminary Statement.
On March 28, 1972, an indictment was filed in the
Eastern District of New York naming twenty-four de-
fendants and containing one hundred fifty counts (B. 11-
76), which charged violations of the Bribery (18 U.S.C
$201), False Statement (18 U.S.C. § 1010), and Con-
spiracy (18 U.S.C. § 371) statutes, all of which concerned
8
applications to the Federal Housing Administration for
home mortgage insurance.
On March 22, 1972, a superseding indictment was’
filed which, in substance, duplicated the original indict-
ment.
Following a year of repeated motions by the defend-
ants, predicated upon the sheer length of the prospective
trial upon prejudicial misjoinder of counts and defend-
ants, the District Court, on the eve of trial, directed the
prosecution to shorten the indictment by limiting the
number of counts. As a result, the case went to trial
upon a redacted indictment which contained sixty-five
counts, all of which were sequentially renumbered (C.
118-142). Nonetheless, the trial lasted nine months.
The redacted indictment [hereinafter, “The Indict-
ment”| charged that, from March 30, 1967 to March
29, 1972, the defendants had entered into a single con-
spiracy with regard to applications for mortgage insur-
ance which were submitted to the Federal Housing
Administration [hereinafter, “FHA”] through Eastern
Service Corporation [hereinafter, “Eastern”]. The in-
dictment alleged that false statements had been submitted
to the FHA and that officials of the FHA had been bribed
for the purpose of increasing “the value of real property”
and for the purpose of procuring, within the FHA, im-
proper processing, review and approval of applications.
The indictment named as defendants:
Eastern Service Corporation, a mortgage brokerage
firm located in Hempstead, New York, and classified as
an “Approved Lender” by the FHA;
Certain officers and employees of Eastern, including
petitioner ;
Employees of the Hempstead, New York, office of the
FHA;
EE
9
Dun & Bradstreet, Inc., a credit reporting agency
utilized by “astern for the purpose of securing credit
reports as to prospective mortgagors;
An employee of Dun & Bradstreet;
Ortrud Kapraki, a real estate broker who submitted
mortgage insurance applications to the FHA through
Eastern; and
Certain employees of Ortrud Kapraki.
Several defendants pled guilty, and others were severed
on the eve of trial, leaving nine defendants to stand trial.
Th trial proceedings commenced on October 1, 1973
(Tr. 1), and the jury returned its verdict, with respect to
petitioner, on June 25, 1974, almost nine months later
(Tr. 21930). Five defendants, including petitioner, were
convicted.’
B. The Federal Housing Administration.
The FHA is an agency of the United States govern-
ment which issues policies of mortgage insurance for the
purpose of encouraging lenders to finance mortgages in
situations where borrowers might otherwise not be able
‘Each of the convicted defendants appealed to the Court of
Appeals, and that Court affirmed the convictions of each of them
in the same opinion, which is reproduced in Appendix “A”,
hereto, infra, p. la et seq. We are advised that Eastern Service
Corp., Harry Bernstein, and Rose Bernstein are filing a joint
petition for a writ of certiorari with this Court, and that Melvin
Cardona is individually filing such a petition. Therefore, includ-
ing the instant petition, there will be three petitions filed. It
is respectfully requested that petitioner be given the benefit of
the questions and arguments presented in the related petitions.
10
to secure such mortgages due to relatively poor credit
standing or due to the nature of the neighborhoods in
which they wish to purchase homes. As an FHA expert
testified at trial, a person could be on welfare, he might
only have $200.00 to put down on a home, he might have
a poor risk rating in many recognized categories, and he
may be seeking to purchase a home in a ravaged area,
and yet he might qualify for FHA insurance (Tr. 2687).
The FHA maintains offices throughout the Country
for the processing of mortgage insurance applications.
One such office is located in Hempstead, New York, in the
same building as a number of FHA approved lending
institutions, including Eastern. The FHA staff includes
underwriters, processors, credit analysts, appraisers, re-
view appraisers, clerical personnel, supervisors and a
variety of others (Tr. 2220, et seqg.; 2498).
The first step in FHA processing involves approval
of the subject real property. Even before a home is
placed on the market, the seller or his real estate broker
can execute an FHA conditional commitment application
(Tr. 2222, et seg.). A copy of such an application is
reproduced at C. 1128. If the property complies with
rather amorphous FHA standards, the FHA issues a
conditional commitment with respect to the dollar amount
to which it will insure a mortgage on the property.
The principal condition of a conditional commitment
is that within six months after it is issued, a qualified
purchaser (mortgagor) must file with the FHA, through
a qualified lender, an application for a firm commitment.
A copy of the firm commitment form is reproduced at
C. 1129. That form is, in fact, an application for ap-
proval of the prospective mortgagor’s personal credit.
It requires information concerning his income, employ-
ment, outstanding obligations, ete. In conjunction with
the filing of the application for a conditional commitment,
TS
11
the FHA also requires that the mortgagor’s employer,
bank, and other persons with whom he has financial
relationships, execute forms concerning the nature of
those relationships. Examples of such forms are re-
produced at C. 1127, et seq.
Finally, it isan FHA requirement that a credit agency
render a factual data report with respect to the mort-
gagor. In the present case, the credit agency utilized
by Eastern was Dun & Bradstreet, Inc. The FHA, itself,
double checks the reliability of one out of every ten such
reports by sending it to another credit reporting agency
(Tr. 2560-7, 2993-4).
It is an FHA requirement that all applications for
mortgage insurance be submitted through an “Approved
Lender”. All of the above noted paperwork is submitted
by the mortgage applicant (frequently through a real
estate broker) to the Approved Lender, which then
passes it on in a package to the Federal Housing Ad-
ministration for approval. At the bottom of each ap-
plication for a conditional commitment and each applica-
tion for a firm commitment, there appears the following
statement, to be signed by a representative of the Ap-
proved Lender:
““MORTGAGEE’S CERTIFICATE:
“The undersigned mortgagee certifies that to
the best of its knowledge all statements made in
this application and the supporting documents are
true, correct and complete.
“Signature/Title of Mortgage Officer” :
At the FHA, the mortgage application package goes
to a credit analyst who determines whether the docu-
ments are in proper order and whether the credit and
other information comply with FHA standards. The
result of his analysis is set forth on a form entitled
12
“Report on Application”, a copy of which is reproduced
at C. 1135.
Once an FHA firm commitment issues, the ordinary
procedures leading to and including a title closing follow.
C. Eastern Service Corporation.
Until the events of this case, Eastern was one of the
foremost brokerage institutions in the Country. Approxi-
mately fourteen solicitors, employed by Eastern, visited
brokers in the Metropolitan New York Area, solicited
their business, and assisted them in compiling the in-
formation required for FHA applications. The co-
defendant, Melvin Cardona, was one such solicitor.
As the applications and supporting documents came
into Eastern, they would go to one or the other of fifteen
processing clerks. (Tr. 6060). The processing clerks
would maintain contact with the brokers for the purpose
of obtaining missing materials. When the processing
package was completed, it would be given to petitioner,
Florence Behar, who was the supervisor of the processing
section, and who would sign the above noted mortgagee’s
certificate as the designated signatory of Eastern. The
papers would then be delivered to the FHA (Tr. 10683).
It must be emphasized that petitioner was solely in-
volved with Eastern’s processing department. She had
nothing to do with the other departments and she was not
a stockholder of Eastern. She was simply an employee
whose function it was to coordinate the processing section
and to supervise the work of the employees of that sec-
tion. When she signed the various documents which were
submitted to the FHA, she did so solely in an organiza-
tional capacity. For that purpose she was given the purely
nominal title of “Assistant Vice President”. She had no
power to hire or fire or to refuse to do business with any
broker. (Tr. 11376-11390).
a
13
D. The False Statements.
Each of the numerous false statement counts of the
indictment were based upon mortgage applications which
originated with a Brooklyn real estate broker by the name
of Ortrud Kapraki. As is now known, Kapraki was a
person of sordid background. There is no evidence that
anyone at Eastern was aware of that fact at the times
relevant to this case. (Tr. 5491). Prior to trial, she en-
tered a plea of guilty and she thereafter testified as the
principal government witness.
According to Kapraki, while she was operating as a
real estate broker in Brooklyn, New York, she was ap-
proached by one of Eastern’s solicitors, the co-defendant
Cardona. She and Cardona thereafter allegedly embarked
upon a course of falsifying credit applications, employ-
ment verifications, and other supporting data for the
purpose of fraudulently securing FHA commitments.
Not content with Cardona’s alleged advise in this regard,
and without his knowledge, she even went to the extreme
of creating non-existent mortgagors, signing the names
of other persons on affidavits which she, herself, notarized,
etc.’ The applications were processed through Eastern.
During the course of the above noted misconduct,
Kapraki became familiar with various processing and
closing personnel at Eastern. It was customary for
brokers to give tips to such personnel, and Kapraki fol-
lowed the practice. Finding that petitioner Florence
Behar was in a position to expedite the processing of
applications, Kapraki allegedly began to tip her heavily.
Kapraki also tipped the processing clerks assigned to her
applications. (Tr. 3099-3101, 3113, 6060, 6075).
Tr. 3045, 3255-7, 3278-9, 3639 et seq., 3724-34, 3754, 3887,
4227, 4526, 4640-4, 4658-62.
14
Kapraki’s unequivocal trial testimony as a govern-
ment witness is that whatever money she paid to peti-
tioner Florence Behar was strictly in the nature of a
tip, and that she never requested or bribed petitioner to
do anything wrong. She paid the tip because she “appre-
ciated” the fact that petitioner “took very good care of
my cases” (Tr. 6060, 6075, 6080). She further unequivo-
cally testified that she and Cardona went through a
variety of maneuvers in an effort to keep the truth from
petitioner, and that she regularly lied to petitioner (Tr.
4629, et seq.; 6087-8). Moreover, in an effort to prevent
discovery when various of her “deals” went into defauit
after mortgages were granted, she secretly paid substan-
- tial sums of money to an employee in Eastern’s servicing
section for the purpose of suppressing the fact (Tr. 5694-
5700).
Reasons for Granting the Writ
L
Petitioner was unconstitutionally denied represen-
tation by counsel of her choice when the District Court
wrongfully held that her attorney was possessed of an
actual conflict of interest and ordered her attorney to
terminate his representation of her, despite her plead-
ing protestations and her clear waiver of the alleged
conflict.
A. The Basic Facts
This issue is discussed in the majority opinion of the
Court of Appeals, infra, at pp. 19a-2la. It is not dis-
cussed in the dissent.
Petitioner had been an employee of Eastern for four-
teen years prior to the indictment, and was earning
$200.00 per week with the same employer during the
15
pre-trial period. Her financial resources were meager,
and she was unable to afford the cost of her defense in a
protracted trial.‘
On or about October 18, 1971, petitioner was sub-
poenaed to appear before the grand jury which later
returned the indictment herein. The principals of the
Corporation, who received similar subpoenas retained an
attorney to represent them. The attorney suggested that
petitioner retain separate counsel and at her request he
referred her to Henry J. Boitel, Esq. As noted in the
opinon of the Court of Appeals it was agreed, with peti-
tioner’s full knowledge and consent, that her employer
would pay Mr. Boitel’s fees (19a).
At the outset, and periodically thereafter, Mr. Boitel
explained to petitioner the meaning of conflict of interest
and “that if [she had] any doubt whatsoever that my
sole loyalty in this case ran to you, if there were any
doubt in your mind whatsoever, that in fact you should
get another attorney”, and that “If you could not afford
to pay for an attorney that you could make application
to the Court and the Court would assign an attorney to
represent you without charge”. (C. 159-161). Never
once did Mr. Boitel denigrate to her the value or ability
of assigned counsel (C. 211).
About a year and four months after the filing of
the indictment, the District Court directed that those
attorneys representing multiple defendants appear in
Court with their clients so that the Court might inquire
into the question of conflict of interest. Since Mr. Boitel
represented only one client, he was not one of those sum-
moned to court. However, he appeared, revealed the fact
that a co-defendant was paying his fee, and inquired
‘if the Court would like to question my client as to her
feelings on the matter.” (C. 147-8; 247, 258-60).
*C. 161 177-8, 270-2.
16
Petitioner was sworn as a witness. Under questioning
by both counsel and the Court, she clearly and unequi-
vocally confirmed that the facts of Mr. Boitel’s represen-
tation of her were with her full knowledge and consent,
that from the outset of his representation of her and
periodically thereafter he had fully advised her with re-
gard to the issue of conflict of interest, and as to the fact
that if she could not afford to retain an attorney the
Court would assign an attorney to represent her without
charge. She affirmed her full and complete confidence in
the undivided loyalty of Mr. Boitel, despite various hypo-
theticals put to her by the Court (C. 157-178).
After a full explanation to her of possible adverse
consequences, petitioner continued to state, “I still want
Mr. Boitel.” The following then ensued:
“The Court: Therefore you will voluntarily
waive any question that may arise at any time
in-the future?
“(Petitioner]: That is right.
“The Court: With regard to conflict of inter-
est or as to prejudice that may occur to you and
you waive also the right to claim the effective as-
sistance of counsel.
“[Petitioner]: Yes, sir, I want Mr. Boitel.
“The Court: You are willing to make that
waiver.
“[Petitioner]: Yes, I am.
“The Court: That is what I want to know,
that that waiver is for now and in the future.
“| Petitioner] : Yes, sir.” (C, 170).”*
‘The entire transcript of the conflict of interest proceeding
is set forth at C. 148-277.
* During the proceedings of that day, petitioner implored
the Court repeatedly to permit her to continue with the services
of Mr. Boitel and that she felt no conflict, in fact, would occur.
(C. 167, 168, 169-70, 179, 180).
,
|
wr
onan eee
17
The Court, nevertheless, made a finding that a con-
flict of interest existed but stated that it would accept
petitioner’s waiver (C. 170, 186). The Court gave peti-
tioner’s counsel three days to secure a determination
from the Ethics Committee of the Association of the
Bar of the City of New York as to the propriety of pro-
ceeding in view of the Court’s finding. Early the follow-
ing morning, petitioner’s counsel forwarded the tran-
script of the prior day’s proceeding to the Ethics Com-
mittee. (C. 174-181, 188, 200-3, 249). However, that
same morning, petitioner’s counsel was summoned back
to court, and was told that he must leave the case and
that petitioner would receive other counsel (C. 199). In
short, the Court had reversed itself on the question of
whether it would accept petitioner’s waiver.
When Mr. Boitel advised the Court of his communi-
cations with the Ethics Committee, the Court’s reaction
was:
“Assuming the so-called Bar Association says
it wouldn’t be a conflict on your part to continue
to represent her, does that reverse my decision
as to my findings that I believe there is a conflict
and I won’t accept her waiver?” (C. 253).
Mr. Boitel proposed that the Court could remedy the
situation by assigning him under the Criminal Justice Act
or by paring down the one hundred fifty counts of the
indictment so as to bring the length of the trial to a
point where an average citizen would be able to afford
the services of counsel of his choice.°
The Court refused to consider assigning Mr. Boitel
unless Mr. Boitel returned to petitioner’s employer all
* Motions for a severance of defendants and/or a severance
of covnts, for the purpose of achieving this effect, had already
been denied by the Court during the course of pre-trie’ pro-
ceedings.
TE as
18
fees he had received for work already completed over
the course of the prior twenty-two months. It was made
clear to the Court that the fees which had already been
paid to Mr. Boitel represented compensation only for that
work which had already been performed and not any
work to be performed in the future (C. 214, 230-3). Since,
as noted by the Court, Mr. Boitel’s expenditure of time
and effort in the matter had been particularly substantial
(C. 231), the condition imposed by the Court upon Mr.
Boitel, a sole practitioner, was an impossible one.’ More-
over, the Court refused to entertain the request that the
trial be shortened by a severance of counts or of defend-
ants (C. 207-211).
B. The Finding of Conflict of Interest Was Error.
The right to counsel at trial is guaranteed by the
Sixth Amendment. Gideon v. Wainwright, 372 U.S. 335
(1963). It is clear that, “Defendants who retain coun-
sel also have a right of Constitutional dimension to rep-
resentation by counsel of their own choice... .” United
States v. Sheiner, 410 F.2d 337, 342 (2d Cir., 1969);
United States v. Wisniewski, 478 F.2d 274 (2d Cir.,
1973).
The opinion of the Court of Appeals notes that:
“ . . Neither [the District Judge] nor this
court in any manner questioned the integrity of
Mr. Boitel or his assurance that he would give
[petitioner] full and proper representation re-
gardless of who was paying him... .” (Infra, at
p. 20a).*
* The Court volunteered: “You have earned it, and I think you
have earned it ten times over” (C. 232).
® The Government made a similar concession in its brief in
the Court of Appeals at p. 147.
{Footnote continued on following page!
19
This case does not involve a situation where one at-
torney was scheduled to represent muitiple defendants at
a joint criminal trial or where the attorney had, at any
time, ever represented someone with a possibly adverse
interest.
Disciplinary Rule 5-107 of the Code of Professional
Responsibility of the American Bar Association makes
clear that, with the consent of his client, an attorney may
accept compensation from a third party, so long as the at-
torney does not permit the third party “to direct or
regulate his professional judgment in rendering such
iegal services.” See also: Ethical Considerations 5-21,
22 of the Code of Professional Responsibility, and Stand-
ards Relating to the Defense Function (A.B.A. Ap-
proved Draft), § 3.5, which are to the same effect. Peti-
tioner and her attorney complied with both the letter and
the spirit of the Code (full disclosure and independent
judgment) and of the Standards (explicit written under-
standing from the outset). The District Court was,
therefore, in error in finding that an actual conflict
of interest existed.
C. Petitioner Had a Right to Waive the Alleged Con-
flict, and She Did So.
The opinion of the Court of Appeals states that the
only issue was whether petitioner “knowingly and intel-
ligently” waived the potential conflict presented by the
fact that petitioner’s legal fees were being paid by her
employer. (20a). Two sentences in the opinion set forth
the factual basis for the Court of Appeals conclusion that
such a waiver was not made:
it is noteworthy that Mr. Boitel represented petitioner in
the Court of Appeals, and the Court’s opinion notes: “Mr. Boitel
has, it may be stated, ably represented her on appeal.” (19a;
see also, 47a).
20
“***The [trial] court’s interrogation of Mrs.
Behar established that she was not prepared to
have the court stand by and do nothing in the
event an actual prejudicial action on the part of
her lawyer arose. In other words, her waiver was
not without strings.***” (21a) [Bracketed ma-
terial added]
In fact, after closely questioning petitioner and speci-
fically advising her with respect to the potential conflict,
Judge Travia several times stated that she had made a
waiver and that he was willing to accept it (C. 173, 174,
182, 184, 186, 188). Inexplicably, the Court reversed its
position overnight ‘C. 193-215), and when petitioner con-
tinued to request that Mr. Boitel represent her and re-
peatedly consented to waive any conflict, the Court put to
her the following loaded question which could only be
answered affirmatively by any defendant in any criminal
case:
“The Court: But at a later date, if I see some-
one done in—for instance, I think you are not
being given the effective assistance—let’s use that
word—for some reason that might come to mind,
do you want me to sit back and do nothing or lean
over and tell you ‘You’re in trouble lady’?
“| Petitioner]: Yes.” (C. 222)
That question and answer constituted the sole sub-
stance from which the Court of Appeals wove its so-called
“string”, while ignoring the fact that petitioner imme-
diately thereafter persisted in acknowledging to the Dis-
trict Court that she was giving “an unequivocal, volun-
’ tray, knowing waiver.” (C. 224).
21
D. If Petitioner did not Understand the Significance
of a Waiver, the Court’s Obligation Was to Make
it Clear to Her and Not to Deprive Her of the
Freedom of Choice.
Assuming, arguendo, that there was any basis for as-
suming that petitioner’s waiver was not knowingly and
intelligently being made, then it was the obligation of the
Court to make the facts and the problem understood to
her. To deprive her of the right of counsel of her choice
did not implement the Constitutional guarantee; it de-
stroyed the guarantee as to her.
In Adams vy. United States ex rel. McCann, 317 US.
269 (1942), where it was held that a defendant has a
Constitutional right to represent himself, this Court
stated as follows:
‘What were contrived as protections for the ac-
cused should not be turned into fetters. ... To
deny an accused a choice of procedure in circum-
stances in which he, though a layman, is as capable
as any lawyer of making an intelligent choice, is to
impair the worth of great constitutional safeguards
by treating them as empty verbalisms.
“ .., when the administration of the criminal
law ... is hedged about as it is by the constitu-
tional safeguards for the protectio: of an accused,
to deny him in the exercise of his free choice the
right to dispense with some of those safeguards
*** is to imprison a man in his privileges and call
it the constitution.” (317 U.S. at 279-280).
In Faretta v. California, — U.S. —, 95 S. Ct. 2525,
at 2531 (1975), decided shortly after the argument of
this case, this Court specifically reasserted the above ~
quoted holding. Faretta, quoting from Adams, supra,
22
provides the key which both the District Court and the
Court of Appeals missed with respect to the Court’s
obligation to leave the choice to the defendant:
“Although a defendant need not himself have
the skill and experience of a lawyer in order
competently and intelligently to choose self-repre-
sentation, he should be made aware of the dangers
and disadvantages of self-representation, so that
the record will establish that ‘he knows what he is
doing and his choice is made with eyes open.’ ”
(95 S. Ct. at 2541).
The opinion in Faretta continues:
“Here, weeks before trial, Faretia clearly and
unequivocally declared to the trial judge that he
wanted to represent himself and did not want
counsel. The record affirmatively shows that
Faretta was literate, competent, and understand-
ing, and that he was voluntarily exercising his
informed will. The trial judge had warned Faretta
that he thought it was a mistake not to accept the
assistance of counsel, and that Faretta would be
required to follow all the ‘ground rules’ of trial
procedure. We need make no assessment of how
well or poorly Faretta had mastered the intricacies
of the hearsay rule and the California Code pro-
visions that govern challenges of potential jurors
on voir dire. For his technical legal knowledge,
as such, was not relevant to an assessment of his
knowing exercise of the right to defend himself.
“In forcing Faretta, under these circumstances,
to accept against his will a State-appointed public
defender, the California courts deprived him of
his constitutional right to conduct his own defense.
***” (95 S. Ct. at 2541).
23
In an excellent analysis, the United States Court of
Appeals for the Fifth Circuit, on August 7, 1975,
spevifically applied the Faretta rationale to the situation
of multiple defendants who wished to be represented by
the same attorney, United States v. Garcia, 517 F.2d
272 (5th Cir. 1975).
There appears to be no precedent for the ouster of
counsel under circumstances similar to those present in
this case. None of the authorities cited in the Court
of Appeals opinion (19a-21a) is on point. Each involves
multiple representation of defendants at trial. Not one
involves the propriety of the District Court ousting
counsel from the case. All make it incumbent upon the
District Court to fully advise the potentially prejudiced
defendant.
It is ironic that courts will find waivers of the right
to counsel and of the right to remain silent when the only
waraing given tc a defendant may be the hasty reading in
a monotone of the defendant’s rights from a dirty card
in the backroom of a station house by an unfriendly police-
man to a defendant who is handcuffed and who has just
been forcibly arrested. Here, petitioner had twenty-two
months of representation by Mr. Boitel to think about her
course, and she repeatedly pleaded with the trial judge
to permit her choice of counsel to stand. If justice and
the appearance of justice are to remain even handed, it
must be concluded that the District Court’s action was
violative of petitioner’s fundamental right to representa-
tion by counsel of her choice.
E. The District Court Should Have Exercised Other
Available Options.
In any event, the conflict of interest which the District
Court imagined existed could have been easily cured if
the District Court had granted counsel’s suggestion that
re a
24
he be assigned (thus eliminating the fee factor) or that
the outrageously cumulative counts of the indictment be
reduced so as to shorten the length of the prospective trial
(thus allowing petitioner to underwrite the costs of her
own defense). Rule 14 of the Federal Rules of Criminal
Procedure provides that, in order to avoid prejudice, the
District Court may grant a Severance of counts or of
defendants or may “provide whatever other relief justice
requires.” Since the average citizen would clearly have
been unable to afford the cost of his own defense at a
trial of so many cumulative counts of an indictment, in-
volving so many defendants, the Court’s powers under
Rule 14 should clearly have been exercised.
We urge, therefore, that any view of the facts of this
case must lead to the conclusion that petitioner was
denied the effective assistance of counsel of her choice
in violation of the Sixth Amendment of the United States
Constitution.
°
Il.
Petitioner was deprived of the effective assistance
of assigned counsel.
A few days after petitioner’s retained counsel was
ousted from the case, petitioner appeared in court alone,
pursuant to the Court’s direction (C. 267, et seg.). After
questioning her concerning her financial ability, and after
indicating that she would have to prove herself innocent
in order to avoid a conviction for which “You could go
to jail for more than a hundred years” (C. 274), and after
offering petitioner the opportunity to defend herself pro
se at the trial, the Court appointed an attorney to rep-
resent petitioner on a “strictly a temporary basis” (C.
275)."
*The Court’s conduct suggests that the whole conflict of
interest episode may well be viewed as an effort to club petitioner
into a plea of guilty.
EE LE TT
25
During that proceeding, government counsel stated
that “Mr. Rosenkranz [the assigned attorney, who was
not in court, and who had not yet met petitioner] is
now actively representing an individual ——”, but the
Court cut the prosecutor off stating, “I talked to him and
he doesn’t think it would present a conflict.” [Emphasis
added] The record does not show any revelation to
petitioner as to what the Court and the prosecutor were
talking about. However, the government has since con-
ceded in its brief in the Court of Appeals, at p. 152,
that the fact hidden from petitioner was that the as-
signed attorney was then representing an FHA employee,
who worked out of the Hempstead, New York office
(which was central to the instant indictment), and
who was then under indictment for receiving bribes
from a competitor of Eastern.”
Petitioner’s retained attorney was ousted from the
case just two months before the commencement of this
complex nine month trial. The first four days of trial
proceedings were devoted to motions for the severance of
counts and to anticipated procedural and evidentiary mat-
ters (Tr. 1-281). Assigned counsel for petitioner was
absent from these proceedings, with the Court’s consent,
since assigned counsel was then on trial in New Jersey.
The Court told petitioner not to be concerned since the
Court would act as her attorney for those proceedings
(Tr. 7, 112-18, 238, 252). In the 11idst of these proceed-
ings, petitioner suddenly addressed the Court:
“( Petitioner]: I don’t have an attorney. What-
ever is going on now I don’t have an attorney.
“The Court: I am your lawyer right now,
Mrs. Behar, don’t worry.” (Tr. 47).
“As the opinion of the Court of Appeals noted, within
another context, “Government proof on the bribery counts went
to the very heart of the FHA office involved, located, as it hap-
pened, in the same building with ESC [Eastern]” (5a).
26
This was so, notwithstanding the fact that the counts
which specifically concerned petitioner were the subject
of discussion and rulings by the Court. (Tr. 182-6, 247-
52). When assigned counsel made his first appearance,
a number of days later, he made the following pro forma
statement:
“(Assigned counsel]: * * * Your Honor I
would deem it sufficient if I were deemed to have
made the same motions that the others have, with
the same results.
“The Court: Okay.
“(Assigned counsel]: I think that would suf-
fice to protect the record.” (Tr. 285).
Once the actual trial commenced, the Court contin-
ually permitted attorneys to “fill in” for assigned counsel
when assigned counsel was absent on other business.
Thus, without protest from the Court, assigned counsel
was permitted to “pinch hit’ or vice versa, for the attor-
ney of an FHA appraiser who had, allegedly, been bribed ;
and the attorney of the Eastern solicitor Cardona, against
whom there was direct evidence of participation in the
creation of the false statements which petitioner is al-
leged to have negligently or recklessly passed on to the
FHA.” Similarly, the relative positions of the co-defend-
ants Dunn & Bradstreet and Prescott were analogous
to those of Eastern and petitioner. Nevertheless, the
attorneys for those defendants were permitted to regu-
larly substitute for each other."
It is respectfully submitted that if there were any
merit to the trial court’s order ousting counsel of peti-
' Tr. 5479, 5569, 7734, 7749, 8223, 9297, 9339, 9507, 9865,
9987, 11872, 12252, 12416, 15182 |not a complete list}.
‘Tr. 1665, 2775, 9127, 9981, 11171, 11429-30, 11682. 12438,
14228, 15360 [Not a complete list].
27
tioner’s choice, then, a fortiori, the same value sought
to be preserved was violated in the Court’s nonchalant
attitude with respect to petitioner’s representation by as-
signed counsel. Any view of this aspect of the matter
must confirm that petitioner was denied the effective as-
sistance of counsel.
The indictment herein was fatally defective since
it failed to charge that petitioner had knowledge of
the falsity of statements contained in the mortgage
applications, and since the false statement counts of
the indictment failed to particularize or even indicate
which of the numerous statements were alleged to be
false.
18 U.S.C. $1010 (quoted in full supra, p. 7),
declares it criminal if one: “. . . makes, passes, utters,
‘or publishes any statement, knowing the same to be
false. . .” [Emphasis added].
Count 25 of the redacted indictment, as quoted in
footnote 8 of the opinion of the Court of Appeals (infra,
at p. 15a) was typical of the numerous false statement
counts of the indictment. It charged as follows:
“On or about the 3rd day of April, 1969, with-
in the Eastern District of New York, the defend-
ants Rose Bernstein, also known as Rose Shoren-
stein, Harry Bernstein, Florence Behar, Ortrud
Kapraki, Melvin Cardona and Eastern Service
Corporation, for the purpose of influencing the
Federal Housing Administration of the Depart-
ment of Housing and Urban Development to in-
sure a loan and advance a credit by the defendant
Eastern Service Corporation, did knowingly make,
28
pass, utter and publish false statements in an ap-
plication for mortgage insurance on property lo-
cated at 416 52nd Street, Brooklyn, New York.
(Title 18, United States Code, Section 1010 and
Section 2).”
A. The Failure to Charge Knowledge of Falsity.
The opinion of the Court of Appeals, under the head-
ing “Sufficiency of the False Statement Counts” states
the issues raised on appeal with respect to the sufficiency
of the indictment:
“(The appellants] contend that the false state-
ment counts under 18 U.S.C. § 1010 under which
they were convicted fail sufficiently to charge a
crime. More specifically, appellants argue that
these counts fail to specify or identify the specific
statements alleged to be false and fail to allege the
essential element of knowledge that the statements
were false.” (15a) |Bracketed material and em-
phasis added]
Inexplicably, the opinion treats the first issue at length
but makes no further comment with respect to the second
issue. Ironically, however, in justifying the failure of the
indictment to specify which statements were false, the
opinion makes the very argument which we make with
respect to the omission of an allegation of knowledge
of falsity in those counts of the indictment:
“* * * Under 18 U.S.C. § 1010, however, the
critical element of the offense is the mental state
of knowingly making false statements. Since the
‘core of criminality’ is not the substance of the
false statements but rather that knowing false-
hoods were submitted to the FHA, appellants have
not been subjected to second guessing by the prose-
29
cutor or the trial jury on the particular and es-
sential subject matter of this offense, that is, the
existence of falsehoods in specific documents for
specific properties.” (18a) [Emphasis as in
original}.
As shown by Count 25, supra, the false statement
counts merely charge that the defendants, “did knowingly
make, pass, utter and publish false statements in an ap-
plication for mortgage insurance. . .”. There is no alle-
gation that the defendants knew that the statements were
knowingly made. To knowingly file a document which
happens to contain a false’ statement, is not a crime.
The crime occurs only when it is known that the docu-
ment contains false statements. In United States v.
Berlin, 472 F.2d 1002, 1007-8 (2d Cir., 1973), an opinion
issued eight months before the instant trial and in which
the trial prosecutor herein was also counsel, the Court
of Appeals reversed a conviction due to the iack of such
an allegation in the indictment.
Since the “core of [alleged] criminality” was missing
from the false statement counts or the indictment, those
counts were fatally defective and should have been dis-
missed, pursuant to the defense’s specific attack in this
regard prior to trial.
B. The Absence of an Indication of What Statements
were False.
As noted in the opinion of the Court of Appeals:
“!W Je can treat the assorted counts as identical
since their form is the same and they differ only as
to the date, the particular defendants named and
the property address to which the application re-
lates.” (15a).
The Court found no violation of either the Fifth or
Sixth Amendments to the United States Constitution nor
30
of Federal Rule of Criminal Procedure 7(c) (1), in the
absolute failure of the numerous false statement counts,
covering many properties, to specify what statements in
the mortgage application packages were false, or even
in what document they were contained. (16a). Instead,
the Court of Appeals opinion found:
“ * *~* The offense was fully and clearly
charged, since the indictment specified the time and
place of the transaction and the submission of a
particular false application in respect to a par-
ticular piece of property.” [Emphasis added].
The trouble with the Court of Appeals analysis is
that this case did not involve false applications. Indeed,
18 U.S.C. § 1010 prohibits the making of “any statement,
knowing the same to be false” [Emphasis added].
Since the indictment failed to specify the false state-
ments which were included in the hundreds of statements
that were part of any mortgage application package, the
prosecutors had carte blanche to pick and choose any
statements in the application packages, without reference
to what the grand jury had concluded were false state-
ments as to which petitioner may have engaged in cul-
pable conduct.
It is respectfully submitted that the false statement
counts herein were clearly in violation of the specificity
and particularity requirements enunciated by this Court
in Untied States v. Mills, 32 U.S. 138, 142 (1883); and
in Russell v. United States, 369 U.S. 749, 763 (1962).
This Court has held that an indictment must be a charge
found by the grand jury and such a charge may
not be amended or varied by the prosecutor. Stirone v.
United States, 361 U.S. 212 (1960). The absence of
some reasonable specification of the alleged false state-
31
ment provides the Court with no basis to determine
whether such an amendment or variation by the prose-
cutor has occurred. It cannot be said, therefore, that
the petitioner was brought to trial on charges returned
by the grand jury, as required by the Fifth Amendment,
or that the indictment adequately informed the petitioner
of the nature and cause of the accusation against her,
as required by the Sixth Amendment.
EV.
The District Court’s charge to the jury was clearly
erroneous and violative of due process of law with
respect tu the standard of liability as to the false state-
ment counts of the indictment.
This issue is the subject of Circuit Judge Van
Graafeiland’s eighteen page dissenting opinion (infra, at
pp. 47a-65a). We shall not impose upon the Court by
merely reiterating Judge Van Graafeiland’s devastating
analysis of the District Court’s imposition upon the
petitioner of standards not found in any statute or in
any legislatively authorized regulation. We, therefore,
incorporate his dissent by reference herein.
Eight days after the filing of the Court of Appeals
opinion herein, the Sixth Circuit issued its opinion in
United States v. Ekelman, — F.2d — (March 12, 1976;
No. 75-1123).
As with the Franklin Mortgage Corporation, in
Ekelman, the activities involved in the present case were
those of a “Nonsupervised Lender.” (Slip opinion, at p.
5). The heart of the Ekelman opinion clearly demon-
strates the validity of Judge Van Graafeiland’s dissent:
32
“As to the government’s contention that Frank-
lin recklessly failed to verify the information sub-
mitted to the VA and FHA, we agree with the
district court’s holding that in order for a repre-
sentation to be held reckless under the common law
the representation must appear to be an unqualified
assertion of fact based on the personal knowledge
of the party making the assertion when that party
has no basis in fact for making it. The certifica-
tion of truth ‘to the best of my knowledge and
belief’ is a qualified assertion of facts represented.
It does not represent that the party making the
assertion has personal knowledge of the facts and
is not the equivalent of an assertion such as: ‘I
certify that this veteran is indebted to others in the
amount of $5,000.00.’
“In certifying the truth of the information in
the application ‘to the best of its knowledge and
belief’ Franklin did no more than assert that it
had no knowledge of, nor intention to make, mis-
representations.” (Slip opinion, at pp. 7-8).
As shown by the testimony of Ortrud Kapraki, the
government witness who manufactured all of the false
statements involved in this case, petitioner had no actual
knowledge of the false statements (supra, p. 14). There
was no evidence in this case that petitioner’s func-
tion at Eastern Service Corp. was investigatory in na-
ture. By imposing an investigatory function and obli-
gation upon her, and by permitting the jury to conclude
that the failure to exercise such a function was a basis
upon which she could be held criminally liable, even in
the absence of actual knowledge, the District Court’s
charge deprived the petitioner of her due process right
33
to be held liable only upon standards specifically and
clearly promulgated at the time of such conduct.’
Conclusion
For all of the above reasons, the petition for a
writ of certiorari should be granted.
Respectfully submitted,
HENRY J. BOITEL
Attorney for Petitioner
233 Broadway
New York, New York 10007
(212) RE 2-8104
June, 1976
LJG
‘Judge Van Graafeiland persuasively argues that such
error requires the reversal of all counts as to which peti-
tioner was convicted (62a-65a). We fully agree. The majority
opinion does not dispute that aspect of Judge Van Graafeiland’s
dissent. Instead, it argues that no error was committed.
APPENDIX A
Opinion of the Court of Appeals
(March 4, 1976)
UNITED STATES COURT OF APPEALS
For tHE Seconp Circuit
2 -
No$-941, 942, 943, 945—September Term, 1974.
(Argued June 9, 1975 Decided March 4, 1976.)
Docket Nos. 74-2328-29, 74-2462-64
————__ e+
Unrrep States or AMERICA,
Appellee,
v.
Harry Bernstein, Rost Bernstein, Eastern Service
Corporation, Fiorence Benar and Metvin Carpona,
Appellants.
Before:
Fernserc, Oakes and Van GRAAFEILAND,
Circuit Judges.
—+-o-r
Appeal from judgments of conviction of conspiracy, 18
U.S.C. § 371, bribery, 18 U.S.C. § 201 and 18 U.S.C. § 2,
and false statement offenses, 18 U.S.C. § 1010 and 18 U.S.C.
§ 2, in connection with applications for mortgage insur-
ance loans from the FHA, by a jury in the United States
District Court for the Eastern District of New York,
Anthony J. Travia, Judge, challenging judge’s failure to
recuse himself; sufficiency of indictment; disqualification
of counsel, joinder and denial of severance motions; suf-
ficiency of the evidence; existence of single conspiracy;
6631
2a
APPENDIX A—Opinion of the Court of Appeals
alleged prosecutorial mismanagement; instructions of and
interrogation by court; and multiplicity of counts.
Affirmed.
8 >
Frank @. Raicuie, Buffalo, N.Y. (Raichle, Ban-
ning, Weiss & Halpern, R. William Stephens,
of counsel), for Appellants Bernstein and
Eastern Service Corp.
Henry J. Borre., New York, N.Y., for Appel-
lant Behar.
Joun A. Kisex, New York, N.Y., for Appellant
Cardone.
Ronatp E. DePerris, Assistant United States
Attorney (David G. Trager, United States
Attorney for the Eastern District of New
York, Paul B. Bergman, Assistant United
States Attorney, of counsel; Gale A. Drexler,
on the brief), for Appellee.
or
Oakes, Circuit J udge :
This appeal is from convictions for “white collar” crimes
in connection with the obtaining of Federal Housing Ad-
ministration (FI[A) guarantees on mortgage loans. For
proof of the crimes involved, such a multiplicity of small
transactions was necessary to be shown that the trial in
the United States District Court for the Eastern District
of New York, Anthony J. Travia, Judge,* took over eight
months with a resultant 25,000-page transcript. The three
types of offenses of which appellants were found guilty
include conspiracy, 18 U.S.C. § 371, substantive bribery
offenses, 18 U.S.C. § 201 and 18 U.S.C. § 2, and substantive
® Now retired.
3a
APPENDIX A—Opinion of the Court of Appeals
false statement offenses in applications for mortgage in-
surance in violation of 18 U.S.C. § 1010 and 18 U.S.C. § 2.
All appellants were convicted of conspiracy, all appellants
except Melvin Cardona of bribery, and all appellants ex-
cept Rose Bernstein of fase statements.’ The appellants
1
The conspiracy count in the redacted indictment was Count 1; the
false statement counts submitted to the jury on which there were find-
ings of guilty were 2, 4, 5, 7, 9, 10, 12, 14, 16-18, 20, 21, 23, 25, 26,
27 and 31; the bribery counts on which there were findings of guilty
were 35-39, 41, 42, 44, 46, 48, 50, 51, 53, 55, 57, 59, 63 and 65. Eastern
Service Corp. (ESC) was acquitted on bribery Counts 29, 33 and 61,
Harry Bernstein was likewise, Rose Bernstein was acquitted on bribery
Counts 29, 33 and 62, and Florence Behar was acquitted on Count 33.
False statement Counts 2 and 20 were dismissed as to Harry and Rose
Bernstein ang Counts 25 and 50 as to Rose Bernstein.
The jury disagreed with respect to the defendants Dun & Bradstreet,
Inc. (conspiracy and ten false statement counts), Arthur Prescott (con-
spiracy and ten false statement counts) and Herbert Cronin (conspiracy
and 11 overvaluation counts). One false statement count had been dis-
missed on consent against the def ndants Dun & Bradstreet, Inc., and
Prescott at the end of the Government's case. The jury acquitted the
defendant Joseph Jankowitz (conspiracy and two bribery counts). The
jury was discharged by the court on July 5, 1974. Thereafter, by order
dated November 25, 1974, the court granted motions by the defendants
Dun & Bradstreet, Inc., and Prescott for a judgment of acquittal on
the conspiracy and ten false statement counts as to which there was
a hung jury.
On October 4, 1974, appellant Harry Bernstein was sentenced to a
term of imprisonment of five years on the conspiracy count, five years
on each of the 16 bribery counts, and two years on the false statement
count, the terms to run concurrently. He was also fined $10,000 on the
conspiracy count, $10,000 on each of 16 bribery counts, and $5,000 on
one false statement count, all fines to run consecutively (making a total
fine of $175,000). Appellant Rose Bernstein was sentenced to a term
of imprisonment of four years on each count to run concurrently, and
a fine of $10,000 on the conspiracy count and $10,000 on each of four
bribery counts to run consecutively (making a total fine of $50,000).
Appellant ESC was fined $10,000 on the conspiracy count, $5,000 on
each of the 18 false statement counts, and $20,000 on each of the 18
bribery counts, all fines to run consecutively (making a total fine of
$460,000). Appellant Behar was sentenced to a term of imprisonment
of two years on each count to run concurrently and a fine of $1,000
on each of three bribery and 18 falue statement counts to run consec-
utively (making a total fine of $21,000). Appellant Cardona wag sen.
tenced to a term of imprisonment of two years on each count te run
6633
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APPENDIX A—Opinion of the Court of Appeals
have launched a multiple attack on the convictions, their
claims ranging, inter alia, from disqualification of the trial
court and prosecutorial mismanagement to erroneous ad-
mission of evidence, insufficiency of evidence and erroneous
instructions to the jury. While we find some of their argu-
ments troublesome, we find none of them meritorious, and
affirm the convictions.
I. Statement of Facts. The FHA is a division of the
Department of Housing and Urban Development (HUD).
FHA has a loan guarantee program well known to the
publie whereby it grants mortgage insurance to a Jender-
mortgagee who is thereby insured against loss if the mort-
gagor is unable to pay off the loan. The mortgage insur-
ance in the instances here involved was obtained in a two-
step procedure. The first step was for the mortgagee to
apply to the FHA for an appraisal of the property; this
was made on a “Form 2800.” The scond was the mort-
gagee’s application for approval of the mortgagor’s credit;
this was made on a “Form 2900” and includes certain
necessary information and exhibits including a credit re-
port, verification of employment form, and the like. If an
appraisal of the property is up to sufficient value, the FHA
will issue a conditional commitment which it then makes
firm if the mortgagor’s credit is satisfactory and approved.
Kastern Service Corporation (ESC) was a lending insti-
tution wholly owned by appellant Harry Bernstein. It
would initially loan money to home buyers and _ subse-
quently sell the mortgage loans to permanent lenders, such
as savings banks, pension funds, and the Federal National
Mortgage Association, while being retained, however, to
concurrently and a fine of $1,000 on each of 17 false statement counts
to run consecutively (making a total fine of $17,000). Execution of sen-
tence was stayed, and the appellants have been free on bail pending
this appeal.
6634
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APPENDIX A—Opinion of the Court of Appeals
perform the administrative tasks involved in servicing the
mortgage.
ESC made its profit from two major sources—the orig-
ination and sale of loans and the servicing of loans. On
loan closings there was an origination or processing fee
of one “point,” #.e., one per cent of the mortgage amount.
In addition the corporation would charge a certain number
of “points” to the real estate broker or speculator who
sold the home and, after the loan closed, the mortgage
would be sold by ESC to a permanent lender at a discount
of a certain number of points. Thus the profit for ESC
was the difference between the points charged to the broker
or speculator and the points at which the loan was dis-
counted, plus the processing fee and any servicing fee, less
expenses.
The Government’s case, boiled down to the bare essen-
tials, was that the Bernsteins procured on behalf of ESC
favorable FHA appraisals by virtue of bribes to FHA staff
appraisers working out of the Hempstead, New York, re-
gional office. ESC also obtained approvals of individual
mortgagors’ credit by virtue of a number of false credit
statements submitted and certified or processed by Flor-
ence Behar, who was an assistant vice president of ESC
in charge of the processing section. A number of these
were solicited by Melvin Cardona, one of approximately
12 to 14 mortgage solicitors employed by ESC, who also
obtained false financial reports on the mortgagors’ behalf.
Government proof on the bribery counts went to the very
heart of the FHA office involved, located, as it happened,
in the same building with ESC. One FHA staff appraiser
receiving the bribes was Edward Goodwin, who performed
and reviewed appraisals in Brooklyn; he was assigned ap-
praisal applications from time to time by coconspirator
Rose Cohen and his appraisals were reviewed by defendant
6635
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APPENDIX A—Opinion of the Court of Appeals
Joseph Jankowitz, a senior FHA staff appraiser. Defen-
dant Herbert Cronin, the chief underwriter of the FHA
office, was responsible for overseeing all appraisals, and
had the “chief underwriter’s prerogative” (CUP) by which
an FHA appraisal might be increased in his discretion up
to a maximum of $500 on a particular property.
One of two principal real estate speculators active in
Brooklyn and involved in the case was Jet Warehouse, Inc.
(Jet), another wholly owned corporation of Harry Bern-
stein. Jet held second mortgages on a number of properties
which were later refinanced by way of FHA-insured mort-
gages. Jet also loaned money to various real estate specu-
lators to purchase properties, on which applications would
be submitted to the FHA. The other such speculator was
Ortrud Kapraki, who, along with Goodwin, was a chief
Government witness and who in 1968-70 had approximately
200 closings at ESC, amounting to about five per cent of
ESC’s business in FHA-insured mortgages.
ESC was an FHA “approved mortgage lender” and as
such, lending on an interim basis, it was able to make
considerable profits with very little risk and with a limited
use of capital. In the nature of economic life, once FHA
mortgage insurance has been procured only low down pay-
ments are required, a permanent lender is readily avail-
able to purchase the mortgage from the interim lender,
and if the mortgage goes into foreclosure the interim
lender knows that the FHA will pay virtually full value
on the outstanding loan so that there is no great risk of
foreclosure. The risk is, in fact, for all practical purposes
after assorted points are charged, close to zero. The Gov-
ernment proof adduced was also to the effect that at least
as to the second phase of the mortgage insurance process—
the mortgagor’s credit—the FHA is dependent upon the
approved mortgagee, and we may say apon the latter’s
6636
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APPENDIX A—Opinion of the Court of Appeals
integrity. This is so because only the mortgagee personally
interviews the mortgagor and it is the mortgagee which
has the obligation to obtain verification of employment and
income and to obtain other credit information regarding
a mortgagor’s employment and income.
It was after the inner city riots in 1966 and FHA inter-
vention to improve the inner cities that ESC and Jet
really went into what was a new market. Government
proof adduced was to the effect that after an initial ap-
proach by Harry and Rose Bernstein to Edward Goodwin,
the latter, with the approval of Chief Underwriter Cronin
but contrary to FHA policy, went to the Bernstein office,
supposedly to pick up some keys to properties. In reality
he was there approached with an arrangement whereby he
would obtain $50 per property on any Bernstein “2800”
form applications for appraisal. When Cronin asked Good-
win how he made out on the business of the “keys,” Good-
win replied that there was no problem. After that meeting
in March, 1967, Goodwin was “on the take” and he and
Bernstein arranved a plan whereby in. order to tell which
houses were Jet’s, Bernstein would identify them as “ORE,”
meaning “our real estate,’ not what the parties were to
mine out of the federal government. According to Good-
win’s testimony, Rose Bernstein encouraged him to accept
the $200 proffered by Harry Bernstein for the first four
top dollar appraisals. This was only the beginning, and
Government proof was that bribes were proffered by the
Bernsteins and taken by Goodwin on many occasions.
Providing an initial high appraisal was only part of the
bribed services rendered, however, because in several cases
when ESC submitted a request for a reevaluation Cronin
would return the files to Goodwin, ask him to take another
look at the value, saying in words to the effect of “Is that
all it’s worth? Take another look.” Goodwin would take
6637
8a
APPENDIX A—Opinion of the Court of Appeals
it to his desk, increase the value, and return the file to
Cronin’s office. Cronin would then exercise his prerogative,
the CUP, and increase the value an additional $500 more.
For four years, and through hundreds of these appraisals,
ESC and the Bernsteins would obtain high initial appraisal,
frequent upward reevaluation, and then the almost omni-
present CUP. On each of the bribery counts on which the
various appellants other than Cardona were convicted, the
Government proof established this with some elarity.? Evi-
dence indicated that Jet held second mortgages on nine and
owned three of the properties involved in the bribery
counts.
Bribery also occurred in reference to applications for
appraisals on a number of the so-called Kapraki proper-
ties. In the summer of 1968 the other real estate speculator,
Kapraki, began to submit an increased number of applica-
tions for appraisals to ESC, and appellant Behar told her
that she should have the right appraiser and introduced her
to the Bernsteins. Behar told her that it was important
to pay the appraisers at the going rate of $50 per property
and advised the Bernsteins that since Kapraki was a vol-
ume dealer she should have staff men, ?.c., fulltime FHA
appraisers like Goodwin, to handle her properties. Both
Harry Bernstein and Rose Bernstein informed Kapraki
that she would have to take care of the appraisers. There-
after Kapraki would tell Behar when she wantea the “right
appraiser,” and Behar cither alone or with Kapraki would
speak to the Bernsteins. The Bernstcins would arrange to
have either Jankowitz or Goodwin do the appraising, and
either Rose Bernstein or Behar would notify Kapraki that
Jankowitz or Goodwin would be appraising her properties
—---—-_ -—- _-
2 The properties referred to in the substantive counts may not have
been the only properties as to which Goodwin received payments from
ESC and Harry Bernstein. See note 3 infra.
6638
9a
APPENDIX A—Opinion of the Court of Appeals
on certain dates. Pursuant to their suggestions, Kapraki
would meet the appraiser each time and pay him $100 per
property. As for the method by which the “right” ap-
praisers were assigned, there was ample evidence to show
that ESC appraisal applications were delivered to Herbert
Cronin, who would give them to Goodwin or to Rose Cohen,
with a direction to assign them to Goodwin or Jankowitz.
There was evidence, indeed, that for at least two years
Rose Cohen, who testified for the Government, was receiv-
ing bribes from Rose Bernstein to assign cases to particu-
lar appraisers, especially Goodwin and Jankowitz. On four
of the bribery counts on which the appellants were con-
viected there was proof linking Rose Bernstein and Behar
to Goodwin appraisals for Kapraki that were “right” and
on three of those there was proof indicating Harry Bern-
stein’s involvement with Kapraki’s requests for the “right”
appraiser.
The false statement counts on which ESC, Behar, Car-
dona and Harry Bernstein were convicted all concern false
representations of employment or self-employment in ESC
applications for approval of mortgage credit, supported
either by an accountant’s false financial statements verify-
ing self-employment or by false verifications of employers.
(Government evidence established that Kapraki originally
had been solicited on behalf of ESC by way of appellant
Cardona, the commissioned mortgage salesman for ESC,
who explained the basie FITA application procedures to her.
It was in March, 1968, after a number of Kapraki’s pur-
chasers had been turned down by the FHA, that Cardona
and Behar offered to assist her. Kapraki indeed offered
to pay Behar $50 to $75 per case—an internal bribe—to
get FHA approvals. Kapraki, with Cardona’s assistance,
thus commenced to create false appearances of sufficient
income on FITA mortgage credit applications. After Car-
6639
10a
APPENDIX A—Opinion of the Court of Appeals
dona suggested various means of obtzining false verifica-
tions of nonexistent part-time jobs for Kapraki’s appli-
eants, Kapraki herself began to obtain these until she heard
in September-October of 1968S that she was getting a “repu-
tation” around town for such a service. Cardona then told
Kapraki that they could utilize an accountant in the Bronx,
Walter Blow, who would make false financial statements
as to self-employment for the use of the applicants. The
availability of Blow, in effect, had been announced by
Cardona’s sales manager at a sales meeting at ESC at
which Harry Bernstein was present. In March, 1969, when
Blow’s statements came to be questioned, Cardona recruited
another accountant, later a Government witness, to per-
form Blow’s service. Cardona also advised Kapraki re-
garding assorted other techniques to insure FHA approval,
such as submitting false affidavits to substantiate exag-
gerated down payments, forging lawyer’s signatures for
false escrow letters, and minimizing the number of depen-
dents, or altering the age of the mortgagor in the applica-
tion forms. Kapraki gave Cardona $95 for each set of
the aceountant’s false financial statements and $145 for
such a set plus false income tax returns, paying him usnu-
ally in cash but sometimes by check, with Cardona pocket-
ing some of the money for himself.
Appellant Behar, who took, as we said, a special interest
in Kapraki’s applications, no doubt beeause of their volume
and protitability to ESC, assigned an experienced proces-
sor, one Pat Buckley, whom Kapraki agreed to pay at the
rate of $50 per case, to handle them. lor Behar’s own aid
in expediting applications, Kapraki paid $50 or $75 per
property to begin with, then up to $200 per property, and
finally $250 by June, 1969. Usually Kapraki left the money
in cash in an envelope in Behar’s desk drawer, but in a
number of instances by way of checks payable to Cash,
6640
lla
APPENDIX A—Opinion of the Court of Appeals
or to Kapraki with her endorsement. These checks, with
Behar’s endorsements, were introduced in evidence. Behar’s
assistance in expediting applications went beyond a pas-
sive acceptance of their content. Behar told Kapraki to
have her mortgagors sign the applications in advance in
blank and, knowing that they were certifying to the truth
and completeness of information which was only later
typed in by Kapraki, Behar as the chief supervising process-
ing officer of ESC would nevertheless sign the mortgagee’s
certification to the FHA verifying the truth of the infor-
mation in the applications. Cardona and Behar also gave
Kapraki blank verification of employment forms, in viola-
tion of FHA requirements. When Behar called Kapraki
to tell her that Dun & Bradstreet, ESC’s credit report
service, was inquiring why so many of Kapraki’s mortgage
applicants worked at the “Boear” service station, Behar
asked, “They all work there, don’t they?” But she never
sent an employee of ESC ont to check with this supposed
employer. Cardona simply told Kapraki not to use the
same place all the time.
One of the ESC people, Frank Fey, a vice president who
pleaded guilty and testified for the Government, was in-
quisitive as to Kapraki’s many delinquencies and the coin-
cidence of her use of the same accountant, Blow, to verify
so many self-employments. In late 1968, Fey told Behar,
“Mlorence, let’s stop the bullshit, you know as well as T
that these deals are phonies.” Behar continued to sign the
mortgagee’s certifieates and, despite intermittent questions,
even by the FILA, concerning potentially implausible infor-
mation in the Kapraki applications, Behar never checked
the validity of the representations beyond Kapraki’s word.
Key mentioned his concerns about fraud being involved
in Kapraki’s transactions to his bosses, Harry and Rose
Bernstein. Despite his urging them to stop processing
6641
12a
APPENDIX A—Opinion of the Court of Appeals
Kapraki’s applications both of them tcok the position that
it was better to do the business and let the FHA decide,
especially in view of the number of points ESC was charg-
ing Kapraki. The Government proof was in effect that at
least by the spring of 1969 Harry and Rose Bernstein
were content to have ESC process applications which their
supervisor, Behar, their salesman, Cardona, and their vice
president, Fey, knew were phony.
Il. Pretrial Motion to Disqualify. Appellants timely
moved with supporting affidavits to disqualify Judge Travia
because he had accepted guilty pleas under other indict-
ments and made certain comments in respect to other defen-
dants, some of whom were named as codefendants and
coconspirators of ESC, Harry Bernstein and Rose Bern-
stein.? They contend that under 28 U.S.C. § 144,‘ they pre-
sented a “sufficient affidavit” of Judge Travia’s “personal
3 The instant indictment was one of 13 returned by a grand jury against
ESC and the Bernsteins, containing a total of about 800 counts and
naming 50 defendants. These and several other FHA-related indict-
ments from the same grand jury were assigned to Judge Travia. Eleven
defendants involved in these prosecutions pleaded guilty prior to March
22, 1973; eight of these were codefendants and coconspirators of ESC
and the Bernsteins, and six were sentenced. It was on that date that
appellants ESC, Behar and the Bernsteins filed the affidavit supporting
the motion for recusal, citing excerpts from the sentencing proceedings
and from the guilty plea inquiries pursuant to Fed. R. Crim. P. 11.
4 28 U.S.C. § 144 provides:
Whenever a party to any proceeding in a district court makes
and files a timely and sufficient affidavit that the judge before
whom the matter is pending has a personal bias or prejudice either
against him or i favor of any adverse party, such judge shall
proceed no further therein, but another judge shall be assigned to
hear such proceeding.
The affidavit shall state the facts and the reasons for the belief
that bias or prejudice exists, and shall be filed not less than ten
days before the beginning of the term at which the proceeding
is to be heard, or good cause shall be shown for failure to file it
within such time. A party may file only one such affidavit in any
ease, It shall be accompanied by a certificate of counsel of record
stating that it is made in good faith.
6642
13a
APPENDIX A—Opinion of the Court of Appeals
bias or prejudice,” so as to have required his recusal. See
Berger v. United States, 255 U.S. 22 (1921). ‘the question
is whether the supporting affidavit is legally sufficient, i.e.,
alleges facts which support the charge of bias and preju-
dice, and whether such bias and prejudice stem from an
extrajudicial source. Wolfson v. Palmieri, 396 F.2d 121,
124 (2d Cir. 1968); Rosen v. Sugarman, 357 F.2d 794, 797-
98 (2d Cir. 1966).
The remarks of the judge which allegedly reveal preju-
dice were made in the course of Rule 11 questioning of
codefendants Goodwin, Kapraki, Cohen and Fey at the
time of taking their pleas and in the course of sentencing,
see note 3 supra. The questioning related to the nature of
the conspiracy and the role of various conspirators, includ-
ing the Bernsteins and ESC. The judge in those remarks
characterized the conspiracy as “this terrible scheme” and
“a great big scheme,” and stated, “I am sure this conspiracy
has cost society millions of dollars by way of payment of
taxes and otherwise, and the people who get involved in
these houses were dealt with very sharply. You cannot
close your eyes to these things.” °
—_————__—- _—__
5 Appellants take particular wmbrage at Judge Travia’s reference to
the “whole scheme” costing the Government “upwards of two or three
hundred million dollars, and who's paying for that?,” and answering
his own question, “Joe Blow, the guy on the street is paying for the
high living of many.” They now claim that the amount of money re-
ferred to was taken from an extrajudicial source, a press report, and
that there was no evidence that the Bernsteins cngayed in “high living.”
The affiiavit, however, waa hy no means so specific; it morely alleged
that the judge had formed an opinion derived from “some speculation
or information outside the record.” J/odqaon v. Liquor Saleamen’s Union
Local No. 2 of State of N.Y., 444 F.2d 1344, 1348-49 (24 Cir. 1971).
None of the statements relate to guilt or innocence of these appellants
and were simply responses to the explanations or pleas for clemency of
those pleading guilty or being sentenced. Moreover, the press reports
referred to on appeal were part of the papers attached to motions for
dismissal of the indictments on the ground of prejudicial pretrial
publicity.
6643
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APPENDIX A—Opinion of the Court of Appeals
Each of the comments made by tlhe judge was in the
course of a judicial proceeding in the context of discussions
with the defendants before him. None of them appears to
have arisen from an extrajudicial source or “resulted in
the formulation of an opinion on the merits not based upon
what the judge has learned by his participation in the
proceedings. .. .” United States v. Sclafani, 487 F.2d 245,
255 (2d Cir.) (reference at sentencing of codefendant to
remaining defendants as “people who have poisoned your
existence and placed you on the road of delinquency,” td.
at 252), cert. denied, 414 U.S. 1023 (1973). See United
States v. Grinnell Corp., 384 U.S. 563, 583 (1966). The
rule of law, without belaboring the point, is that what a
judge learns in his judicial capacity—-whether by way of
guilty pleas of codefendants or alleged coconspirators, or
by way of pretrial proceedings, or both-—is a proper basis
for judicial observations, and the use of such information
is not the kind of matter that results in disqualification.
Rules against “bias” and “partiality” ean never mean to
require tl total absence of preconception, predispositions
and other mental habits, as Judge Frank said so much
more felicitously in In re Linahan, Inc., 138 F.2d 650, 651-
52 (2d Cir. 1943). Of course such judicially aequired infor-
mation or those natural preconceptions may lead a judge
to feel a bias or prejudice that requires him to disqualify
himself—this was still, or at least until December 5, 1974,
when new 28 U.S.C. § 455 was enacted, however, a matter
for the individual judge subjectively to determine. Judge
Travia made no such determination here; a petition to this
court for a writ of mandamus on this issue was indeed
denied. The point is of no avail.®
|
6 Neither the judge’s conduct of the trial, see Part VIII infra, nor
anything we said in Winters v. Travia, 495 F.2d 839 (2d Cir. 1974),
is to the contrary.
6644
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APPENDIX A—Opinion of the Court of Appeals
III. Sufficiency of the Fulse Statement Counts. Harry
Bernstein, ESC, Behar and Cardona contend that the false
statement counts under 18 U.S.C. § 1010’ under which they
were convicted failed sufficiently to charge a crime. More
specifically, appellants argue that these counts fail to
specify or identify the specific statements alleged to be
false and fail to allege the essential element of knowledge
that the statements were false.
For all practical purposes we can treat the assorted
counts as identical since their form is the same and they
differ only as to the date, the particular defendants named
and the property address to which the application relates.
Taking Count 25 as an example (because it is the only
count in which four of these appellants were charged and
convicted), we set it out in the margin.’ We note that
7 18 U.S.C. $1010 provides:
Whoever, for the purpose of obtaining any loan or advance of
credit from any person, partnership, association, or corporation
with the intent that such loan or advance of credit shall be offered
to or accepted hy the Department of Housing and Urban Develop-
ment for insurance or for the purpose of obtaining any extension
or renewal of any loan, advance of credit, or mortgage insured
by such Department, or the acceptance, release, or substitution of
any security on such a loan, advance of credit, or for the purpose
of influencing in any way the action of such Department, makes,
passes, utters, or publishes any statement, knowing the same to he
false, or alters, forges, or counterfeits any instrument, paper, or
document, or utters, publishes, or passes ax truc any instrument,
paper, or document, knowing it to have been altered, forged, or
counterfeited, or willfully over values any security, asset, or in.
come, shall be fined not more than $5,000 or imprixoned not more
than two years, or both,
~ Count 25 of the redacted indictment (originally Count 20 of the
superseding indietment here, 72 Cr. 587) charged as follows:
On or about the 3rd day of April 1969, within the Eastern
District of New York, the defendants Rosx Branerrin, ulso known
as Rose Shorenstein, Harky Bernstein, Frorence Benar, Ortrup
KAPRAKI, MELVIN CARDONA and FASTERN Service Corporation, for
the purpose of influencing the Federal Housing Administration of
the Department of Housing and Urban Development to insure a
6645
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APPENDIX A—Opinion of the Court of Appeals
Count 25 identifies the particular false document involved,
that is, an application for mortgage insurance with respect
to a particular property. It may also be noted that the
Government provided a bill of particulars which specifically
identified the statements in the documents which the Gov-
ernment would seek to prove false at trial. A copy of the
“Form 2900” for each false statement count was submitted
to the jury with the statements alleged to be false circled
in red by the court.
We do not find any violation of either the Fifth or Sixth
Amendment to the United States Constitution or of Fed.
R. Crim. P. 7(c)(1). We have “consistently sustained in-
dietments which tracked the language of the statute and,
in addition, do little more than state time and place in
approximate terms.” United States v. Salazar, 485 F.2d
1272, 1277 (2d Cir. 1973), cert. denied, 415 U.S. 985 (1974) ;
United States v. Trotta, No. 75-1267 (2d Cir. Nov. 10, 1975),
slip op. 473, 477; United States v. Tramuntti, 513 F.2d 1087,
1113 (2d Cir.), cert. denied, 44 U.S.L.W. 3201 (U.S. Oct. 7,
1975). The indictments here in issue do just that.
The counts are particular in that they specify the prop-
erty involved which serves to fix and identify the particu-
lar false document. It is the submission of the false docu-
ment which constitutes the separate crime. Tripp v. United
States, 381 F.2d 320, 321 (9th Cir. 1967); Bins v. United
States, 331 F.2d 390, 393 (5th Cir.), cert. denied, 379 U.S.
880 (1964). See Cohen v. United States, 178 F.2d 588, 591
(6th Cir. 1949), cert. denied, 339 U.S. 920 (1950). While
some identification is required, United States v. Borland,
309 F. Supp. 280, 287-89 (D. Del. 1970); United States v.
loan and advance of credit by the defendant Eastern Service
CorPoraTIoNn, did knowingly make, pass, utter and publish false
statements in an application for mortgage insurance on property
located at 416 52nd Street, Brooklyn, New York. (Title 18, United
States Code, § 1010 and § 2).
6646
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APPENDIX A—Opinion of the Court of Appeals
Devine’s Milk Laboratories, Inc., 179 F. Supp. 799 (D.
Mass. 1960), it is not necessary that the indictment itself
go into evidentiary matters. The offense was fully and
clearly charged, since the indictment specified the time and
place of the transaction and the submission of a particular
false application in respect to a particular piece of prop-
erty. United States v. Alo, 439 F.2d 751, 756 (2d Cir.)
(indictment for obstructing justice by giving “false and
evasive answer:” before SKC sufficient although not speci-
fying the false and evasive answers), cert. denied, 404 U.S.
850 (1971). See also United States v. Weiss, 491 F.2d 460,
466 (2d Cir.), cert. denied, 419 U.S. 833 (1974) (indictment
for obstruction of justice by failing to produce documents
before grand jury sufficient though it fails to specify in
what way conduct was done corruptly).
It is, of course, for just this reason that bills of particu-
lars to be furnished pursuant to Fed. R. Crim. P. 7(f) may
be sought, United States v. Debrow, 346 U.S. 374, 376-78
(1953), and must be provided to make certain that there
is adequate notice under the Sixth Amendment. See United
States v. Alo, supra, 439 F.2d at 756 n.13. The indictment —
as amplified by the bill of particulars made clear to the
appellants what was the nature and cause of the Govern-
ment’s case and gave them ample opportunity to prepare
their defense. See United States v. Sperling, 506 F.2d
1323, 1344-45 (2d Cir. 1974), cert. denied, 420 U.S. 962
(1975).
Appellants also argue, however, that failure to specify
the particular false statements in each of the separate
counts allows no way of determining whether cach false
statement for which they were prosecuted was indeed the
false statement that was considered by the grand jury.
They rely on Russell v. United States, 369 U.S. 749 (1962),
and Stirone v. United States, 361 U.S. 212 (1960), neither
6647
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APPENDIX A-—Opinion of the Court of Appeals
of which, however, would require the indictments here to be
held defective for failing to specify each false statement.
Stirone held improper the admission of evidence of an
activity geographically different from that specifically
charged in the indictment, but no such departure in proof
from the specific allegations of the appellants’ acts oc-
curred here. Russell required that where the specific sub-
ject matter of a question refused answer by a defendant
was central to every prosecution under 2 U.S.C. § 192, be-
cause it constituted “the very core of criminality” to be
proved, the indictment must specify the particular subject
matter involved. Under 18 U.S.C. § 1010, however, the
critical element of the offense is the mental state of know-
ingly making false statements. Since the “core of crimi-
nality” is not the substance of the false statements but
rather that knowing falsehoods were submitted to the FHA,
appellants have not been subjected to second guessing by
the prosecutor or the trial jury on the particular and essen-
tial subject matter of this offense, that is, the existence of
falsehoods in specifie documents for specifie properties.*
9 As we said in United States v. Fortunato, 402 F.2d 79, 82 (2d Cir.
1968), cert. denied, 394 U.S. 933 (1969), “the omission of the means
by which the offense was committed does not render the indictment
insufficient.” Cf. Rosen v. United States, 161 U.S. 29, 34 (1896)
(defendant not entitled to know particular parts of document which
grand jury had found to be obscene); United States v. Ciramy, 510
F.2d 69, 73 (2d Cir. 1975) (manner of attempted evasion of income
taxes not essential to indictment). Moreover, as we have said, the
court’s charge on the question of false statements was perfectly proper
because the jury was instructed to limit itself to determining whether
there were false statements in any particular application concerning
employment and income therefrom and the mortgagee’s certificate;
for the jury’s consumption in the jury room the court circled in red
the partieular statements which were alleged to be false. As appellant
Behar explicitly concedes in her brief, “there was never any issue as to
the fact that the statements were false ... .” The only real issue was
asx to knowledge.
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APPENDIX A—Opinion of the Court of Appeals
IV. Disqualification of Appellant Behar’s Counsel.
Appellant Behar argues that she was unconstitutionally
denied representation by counsel of her choice when the
court found that an actual conflict of interest existed and
refused to accept a waiver of any potential conflict of
interest, ordering appellant’s attorney to terminate his
representation of her. It was the Bernsteins’ attorney,
Abraham Brodsky, who told Behar that he would get a
lawyer for her, and indeed he did refer her to Henry Boitel,
Esq. With her knowledge and consent Mr. Boitel’s fee was
being paid by the Bernsteins and ESC. Since Behar was
a co-defendant, however, there was every possibility of a
conflict of interest. A hearing was held, Mr. Boitel with-
drew, appellant waived any conflict of interest, and the
court found that the waiver was not knowing and intel-
ligent. The court then asked appellant Behar to retain new
counsel, and if she was unable to do so to return and the
court would appoint counsel for her. When she reappeared
and said she could not afford to retain counsel herself, the
court assigned Richard Rosenkrantz, Esq., as her attorney.
Mr. Boitel has, it may be stated, ably represented her on
appeal.
We have repeatedly held, as have other courts, that
representation free from conflicting interests is an essential
part of the Sixth Amendment right to the effective assis-
tance of counsel. See Glasser v. United States, 315 U.S. 60
(1942); United States v. DeBerry, 487 F.2d 448, 452 (2d
Cir. 1973); United States ex rel. Hart v. Davenport, 478
F.2d 208, 209-10 (3d Cir. 1973); United States v. Foster,
469 V2.1, 4-5 (1st Cir. 1972); Lollar v. United States, 376
F.2d 248 (D.C. Cir. 1967). Choice of counsel should not be
unnecessarily obstructed by the court, l/nited States v.
Sheiner, 410 F.2d 337, 342 (2d Cir.), cert. denied, 396 U.S.
825 (1969), but where there is a serious possibility that a
6649
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APPENDIX A—Opinion of the Court of Appeals
definite conflict of interest will arise, the necessities of
sound judicial administration require the court to take
command of the situation. United States v. Dardi, 330 F.2d
316, 335 (2d Cir.), cert. denied, 379 U.S. 845 (1964). The
standards of the American Bar Association have become
increasingly strict on this subject. See ABA Standards
Relating to the Prosecution Function and the Defense
Function § 3.5, at 211, 213 (Approved Draft 1971). See
also P. Wilson, Pattern Rules of Court and Code Provisions
38-39 (prepared for the Committee on Implementation of
Standards for the Administration of Criminal Justice of
the Section of Criminal Justice of the ABA, 1975).
Plainly here there was a probability of conflicting and
inconsistent defenses based upon corporate and individual
liability, since as an employee of ESC Behar could well
take the stand and present a defense that her employers
were the guilty ones because she was only obeying the
orders of her superiors and following standard office pro-
cedure, On their part, they could assert the defense that
Behar had acted ultra vires and on her own. Indeed, these
were the ultimate defenses advanced by each. Since the
codefendants were underwriting Behar’s defense, this
readilv apparent conflict could be seen by the court to
indicate a significant probability of prejudice. The freedom
of the attorney, whether in cross-examination or assertion
of the defense of lack of authority, could have been in-
hibited and a full and uncompromised defense of his clients’
interests have been seriously impaired. While neither
Judge Travia nor this court in any manner questioned the
integrity of Mr. Boitel or his assurance that he would give
Behar full and proper representation regardless of who was
paying him, the court had a special duty to make certain
that any waiver was knowingly and intelligently made.”®
—_—_— -—
10 Judge Travia’s questioning showed great sensitivity to the need for
gauging the “knowing and intelligent” qualities of appellant Behar’s
6650
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APPENDIX A—Opinion of the Court of Appeals
See United States v. DeBerry, supra, 487 F.2d at 452-54.
But cf. United States v. Wisniewski, 478 F.2d 274, 285 (2d
Cir. 1973). A waiver in this regard is not quickly or lightly
to be found. See Glasser v. United States, supra, 315 U.S.
at 70-71. The court’s interrogation of Mrs. Behar estab-
lished that she was not prepared to have the court stand by
and do nothing in the event an actual prejudicial action on
the part of her lawyer arose. In other words, her waiver
was not without strings. The district court handled the
matter, we think, quite correctly, and Mr. Boitel withdrew
quite correctly. See United States v. DeBerry, supra;
United States v. Dardi, supra. We find nothing in the
record to indicate that Mr. Rosenkrantz did anything other
than what highly competent counsel would do, and nothing
to indicate prejudice to appellant from his short infrequent
absences. On this lengthy trial all counsel pinch-hit to a
limited extent for one another; daily copy of the proceed-
ings was available and the district court kept all counsel
well informed and left open the right to make any motion
as counsel wished.
V. Impermissible Joinder and Denial of Severance
Motions. Appellants Harry Berns‘ein, Rose Bernstein and
waiver, and it must have been statements cf hers such as the following
which gave him pause:
I am in a frightening position so far as as I am concerned.
I have never before been a defendant and this case has changed,
certainly, my life and my husband’s life . . . this is an involved
case. If an attorney is appointed and we have about two months
left—it is so comprehensive, there is so much to digest, I don’t
know if it can be done to my comfort.
I am willing to sign a waiver because I know the type—at least,
I feel I know the type Mr. Boitel is.
In addition, he ha» heen part of this case for sixteen months.
The new attorney, whoever he might be, is an unknown factor
to me. I know Mr. Boitel well and as I say, I am exceedingly
frightened.
6651
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APPENDIX A—Opinion of the Court of Appeals
ESC all contend that their convictions on the bribery counts
should be reversed on the grounds of both impermissible
joinder of offenses and of defendants and erroneous denial
of their severance motions. But it is well established that
under Fed. R. Crim. P. 8(b)"? joinder of multiple defen-
dants is proper if they are alleged to have participated
in the same series of acts which are part of a common
scheme or plan, or connected together. Here joinder of a
conspiracy count and the substantive counts arising out of
the conspiracy is proper since the charge of conspiracy
provides a common link and demonstrates the existence of
a common plan. C. Wright, Federal Practice and Procedure
(Criminal) 4144, at 322 (1974). See Schaffer v. United
States, 362 U.S. 511, 514 (1960); United States v. Miley,
513 F.2d 1191, 1209 (2d Cir. 1975); United States v.
Grancllo, 365 ¥'.2d 990, 993-95 (2d Cir. 1966), cert. denied,
386 U.S. 1019 (1967). Joinder here was clearly proper since
all the substantive counts were alleged as overt acts in the
conspiracy count.
On the question of severance, again the matter is one
for the trial court’s discretion. See Fed. R. Crim. P. 14;
United States v. Projansky, 465 F.2d 123, 138 (2d Cir.),
cert, denied, 409 U.S. 1006 (1972). see also United States
v. Miley, supra; United States v. Papadakis, 510 F.2d 287,
300 (2d Cir. 1975); United States v. Granello, supra, 365
F.2d at 944. Before trial the Government and the court
had been scrupulous in cutting down the indictment and
severing defendants therefrom. See note 3 supra. This
11 Fed. R. Crim. P. 8 provides:
(b) Joinder of Defendants. Two or more defendants may be
charged in the same indictment or information if they are alleged
to have participated in the same act or transaction or in the same
series of acts or transactions constituting an offense or offenses.
Such defendants may be charged in one or more counts together
or separately and all of the defendants need not be charged in
each count.
6652
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APPENDIX A—Opinion of the Court of Appeals
indictment originally named 21 individual and two corpo-
rate defendants and consisted of 211 counts. After assorted
pretrial procedures, pleas of guilty, nolo contendere and
assorted severances, the case went to trial with nine defen-
dants. Furthermore, as a result of a motion by the Gov-
ernment to sever various counts and upon direction by the
court to limit the number of counts, the number of counts
was reduced to 65. We believe in this regard that, subject
only to the legal questions whether there was here charged
and proved a single conspiracy and whether there was a
prejudicial variance from such a charge and the actual
proof, the basic underlying admonitions of United States v.
Sperling, supra, 506 F.2d at 1340-41, have been followed.
VI. Sufficiency of the Evidence. ESC contends that there
was insufficient evidence to establish an intent to benefit
it so as to support its conviction on the substantive counts
charging bribery on Jet properties and aiding and abetting
briberies on Kapraki properties. Appellant Rose Bern-
stein contends there was a failure of proof to support her
conviction of aiding and abetting Kapraki’s payment of
bribes to Goodwin. Appellant Behar contends that there
was insufficient evidence to establish the element of knowl-
edge required to support her conviction on the substantive
false statement counts. And appellant Cardona claims that
his convictions were based entirely on the testimony of
accomplices and asks us to reeonsider our prior holdings
in this regard,
Four substantive bribery counts, on each of which one
or more of the appellants were convicted, involved Kapraki
properties. In each case, Kapraki directly paid a $100
bribe to Goodwin. ESC contends that these bribes were
solely for the benefit of Mrs. Kapraki, and hence that ESC
could not have been found to have aided and abetted them.
While these payments did help to secure Goodwin’s ser-
6653
24a
APPENDIX A—Opinion of the Court of Appeals
vices to her, the ultimate intent of the parties was to
encourage Kapraki to process her applications through
ESC, which would then benefit therefrom in the “points”
it charged for each deal closed. Kapraki’s testimony estab-
lishes that both Rose and Harry Bernstein and Florence
Behar counseled Kapraki to bribe Goodwin on these prop-
erties, and our recital of the facts indicates that the testi-
mony from Kapraki, Goodwin, Cohen and Fey established
the method used by the Bernsteins to arrange for Goodwin
to be assigned to appraise these properties. By aiding and
abetting the bribery, ESC and the Bernsteins successfully
helped Kapraki to procure FHA approvals, and secured
and kept her as a profitable client.
ESC claims that appellant Harry Bernstein intended
only to benefit himself and not ESC in connection with the
14 counts involving his Jet properties, as to each of which
ESC and Bernstcin were convicted of bribing Goodwin.
Bernstein, however. was the president and sole stockholder
of ESC as well as ‘ue sole owner of Jet. Clearly he did
intend to benefit himself, but his bribery had the neat effect
of benefiting his interests in hoth capacities. ESC argues
that Bernstein had two completely separate businesses,
namely, operating ESC and speculating in real estate
through Jet, and that his bribes may be viewed only as
acts with the intent to further Jet’s and thus his own
profits. But evidence of the reality of an inextricably dual
intent could not have been ignored by the jury: that is the
intent to benefit ESC’s interests as well as Jet’s interests,
both of whose profits would inevitably inure to Bernstein’s
personal benefit. Here again ESC was the approved mort-
gagee used to process Jet’s applications, and if they were
approved by the FHA, ESC would stand to make a gross
profit on each property; it was in the interests of ESC
to obtain a favorable appraisal from Goodwin and to have
6654
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APPENDIX A—Opinion of the Court of Appeals
each deal closed. Furthermore, the greater the evaluation
of each property, the higher the mortgage amount might
become, and accordingly the more gross profit ESC would
stand to make in points charged. There was sufficient evi-
dence for the jury to find an intent by Bernstein to further
the interests of ESC, and thus to convict ESC on the Jet
bribery counts.
Our summary of the evidence established clearly that
Behar, who had the responsibility of signing the mort-
gagee’s certificate on behalf of ESC, acted in the very least
with a reckless disregard whether the statements made in
the Form 2900 credit reports were false. She gave Kapraki
blank verification of employment forms in violation of
FHA regulations; she accepted Kapraki’s statements that
a coincidentally large number of her applicants were em-
ployed at the Bocar gas station; she ignored the warning
of an experienced processor, Fey, who told her that she was
accepting phony applications. She was receiving money on
the side from Kapraki on each particular property; she
was concerned about getting the “right” man in the credit
section to examine and approve Kapraki’s applications,
and getting the “right” appraiser for her also; she never
sent anyone out to check on the truth of the representations
she was verifying, even when they were questioned by
FHA or Dun & Bradstrect credit examiners. See United
States vy. Levinson, 405 F.2d 971, 986 (6th Cir. 1968), cert.
denied, 395 T.S. 958 (1969). Although Behar may not have
had the authority to stop processing Kapraki’s applica-
tions, she did have authority to report irregularities. Her
failure to do so in the face of Kapraki’s delinquency rate
and heavy use of the same aecountant, Blow (whose finan-
cial statements were in March, 1968, declared permanently
unaceeptahle at ESC by Fey), together with the other
evidence outlined above, was sufficient to support Behar’s
conviction on the false statement counts.
6655
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APPENDIX A—Opinion of the Court of Appeals
Appellant Cardona seeks a ruling that a guilty verdict
may not rest upon the uncorroborated testimony of ac-
complices, in light of our decision in United States v.
Taylor, 464 F.2d 240 (2d Cir. 1972). In Taylor, however,
this court expressly limited itself to overruling United
States v. Feinberg, 140 F.2d 592 (2d Cir.), cert. denied, 322
U.S. 726 (1944), which had held that the quality of evidence
necessary to send a case to the jury in a criminal case was
the same as in civil cases. There was no discussion in
Taylor concerning the use of accomplice testimony, and,
indeed, this court has consistently held that conviction upon
such testimony is proper. See, e.g., United States v.
Messina, 481 F.2d 878, 881 (2d Cir. 1973), cert. denied,
414 U.S. 1145 (1974); United States v. Ferrara, 458 F.2d
868, 871 (2d Cir.), cert. denied, 408 U.S. 931 (1972). Ap-
pellant has presented no arguments as to why our prior
holdings should be overruled. The testimony of Kapraki
and accountant Abad was corroborated here by documen-
tary evidence, moreover, including specifically checks rep-
resenting some of Kapraki’s payments to Cardona for the
false financial statements concerning self-employment.
VII. Single Conspiracy and Varience. All appellants
argue vigorously that while the indictment charged only a
single conspiracy the proof at trial showed multiple con-
spiracies. All appellants except Cardona contend that the
court failed to charge the jury properly on the single con-
spiracy issue. Appellant Cardona claims that since he was
not involved in the bribery of FHA appraisers he is en-
titled to a new trial even if a single conspiracy is found.
Presumably all of these arguments would be all the more
vigorous in the light of our decision a short time ago in
United States v. Bertolotti, No. 75-1107 et seq. (2d Cir.
Nov. 10, 1975), slip op. 6409. There we reversed a convic-
tion obtained in a narcotics case on the basis of a single
6656
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APPENDIX A—Opinion of the Court of Appeals
conspiracy on the ground that the proof showed none such
but rather a series of smaller conspiracies with a resultant
material variance and a spillover effect involving the trans-
fer of guilt from members of one conspiracy to another.
But see United States v. Steinberg, No. 75-1150 (2d Cir.
Nov. 10, 1975), slip op. 6433, 6444. We think that the proof
here was such as to entitle the jury to find but a single
conspiracy. See United States v. Tramunti, supra, 513 F.2d
at 1105-07; United States v. Sperling, supra.
The conspiracy count charged was a single one, to de-
fraud the FHA by obtaining mortgage insurance on inner
city properties. The two objects charged, or the two steps
by which the principal object of the congpiracy were ob-
tained, were to bribe FHA officials in connection with their
appraisals and to submit to the FHA false statements
of the putative mortgagor’s credit, employment or income
in order to obtain approval of the mortgage insurance
applications. Appellants contend that the transactions sur-
rounding the Kapraki properties constituted a different
conspiracy from those concerning the Jet properties, and
that these conspiracies had unrelated purposes and no
connection between them. Here, however, it is not the case
that two groups, one organized by Kapraki for her benefit
and another by Harry Bernstein for his, existed indepen-
dently of each other with the coincidence that both of them
used the services of the same FIIA employee, Goodwin.
The pattern of conspiracy here thus « .es not resemble that
of the independent conspiracies in Kolteakos v. United
States, 328 U.S. 750 (1946), and appellants’ reliance on
Kotteakos is foreclosed by the substantial evidence of a
single conspiracy.
As our review of the facts reveals, it was Harry Bern-
stein as president of ESC and its principal officer who
was at the very center or top of the conspiracy. It was
6657
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APPENDIX A—Opinion of the Court of Appeals
Harry and Rose Bernstein who initiated the bribery rela-
tionship with Goodwin at the ESC office and who then
provided Goodwin’s services to their own client Kapraki.
They were able to obtain the assignment of appraisals to
Goodwin because of friendly relationships with Cronin and
Cohen in the FHA office, indeed, on Cohen’s part, a rela-
tionship founded in further bribery. The Bernsteins would
activate this use of Goodwin upon the requests of Behar,
who together with the Bernsteins informed Kapraki that
she could get the “right” appraiser, but that they would
have to be taken care of, th.‘ is, bribed for a high appraisal.
There was ample evidence to indicate that the bribery of
Goodwin and the induction of Kapraki into using his ser-
vices was done with the intent to benefit ESC in profits
from points charged Kapraki. ESC, it should be noted, as
Jet’s processor, benefited in the same way from Jet prop-
erty overevaluations. Although Rose Bernstein was neither
an officer nor an employee of ESC, she was intimately
involved in its affairs and operations, and, whether the
properties were Jet’s or Kapraki’s, she participated with
her husband in obtaining the unlawful services of Goodwin
to inflate values.
The desires of the Bernsteins to facilitate Kapraki’s FHA
approvals, for the benefit of MSC, extended to acquiese-
ing in the submission of false statements, which activity
was participated in most directly by ESC employees Behar
and Cardona. Harry Bernstein closed his eyes to any irreg-
ularities in the Kapraki applications despite two instances
of their integrity heing questioned by his vice president,
Fey. When Fey reported to both Bernsteins that he be-
lieved the Blow financial statements were frauds, they told
him that it was up te the FHA to realize this, and Rose
Bernstein reminded him of the number of points ESC was
charging Kapraki for its processing. Here, unlike Kot-
6658
29a
APPENDIX A—Opinion of the Court of Appeals
teakos, supra, not only were the Bernsteins and ESC the
central pivots of the sche ne to defraud the FHA, but their
activities and those of their coconspirators were linked
through the common means of using the same FHA officials
to achieve their common goal of benefiting ESC by defraud-
ing the FHA. It is immaterial that Kapraki entered the
scheme after it had started and that in connection with
her properties there were additional elements of false
statements which evolved. As the Court in Blumenthal
v. United States, 332 U.S. 539 (1947), indicated, “[C]on-
spiracies involving such elaborate arrangements generally
are not born full-grown. Rather they mature by successive
stages which are necessary to bring in the essential par-
ties.” Id, at 556.
Appellant Behar argues that even assuming the evidence
established a single conspiracy there was insufficient evi-
dence that her participation went beyond the applications
of Mrs. Kapraki. She argues that the so-called “single act
doctrine” is applicable to her. See United States v. Sperl-
ing, supra, 506 F.2d at 1342; United States v. Torres, 503
F.2d 1120, 1123 (2d Cir. 1974). But Behar was involved in
a number of acts. Indeed, she was convicted of 18 false
statement and three bribery counts. Her connection was,
moreover, near the center of the conspiracy as head of the
processing section of ESC. She played an active role in
bringing Kapraki into the bribery phase of the conspiracy,
making it clear to Kapraki that she should get the “right
appraiser.” The evidence is clear that she was aware of
the Bernsteins’ similar arrangements with respect to non-
Kapraki properties. Since she was thus aware that the
scheme was broader than her participation as an individual,
she is hound by the acts of her co-conspirators. See, e.a.,
United States v, Edwards, 366 F.2d 853, 867 (2d Cir. 1966),
cert, denied, 386 U.S. 908 (1967).
6659
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APPENDIX A—Opinion of the Court of Appeals
Appellant Cardona claims that since the Government
produced no evidence connecting him with the bribery-
overevaluation aspect but only with the false statement
phase of the conspiracy, he was substantially prejudiced
by the bribery evidence and is entitled to a new trial.
There was, however, ample evidence of a common goal by
all the conspirators to thwart the operation of the FHA
loan guaranty program in obtaining FHA insurance of
ESC processed mortgages.
This is not the first time we have been presented with
a single conspiracy in the furtherance of which different
crimes were committed, or, indeed, in which one cocon-
spirator joined in one of the illegal objects of the con-
spiracy but not in others. Sce United States v. Levinson,
supra (VA home loan guaranty program). See also
United States v. Kelly, 349 F.2d 720, 755-56 (2d Cir. 1965),
cert. denied, 384 U.S. 947 (1966); United States v. Ben-
jamin, 328 F.2d 854, 864 (2d Cir.), cert. denied, 377 U.S.
953 (1964) (two aspects of single scheme—selling un-
registered securities and defrauding in sale of securities).
As we said in United States v. Borelli, 336 F.2d 376, 384-87
(2d Cir. 1964), cert. denied, 379 U.S. 960 (1965),
where the evidence is ambiguous as to the scope of
the agreement made by a particular defendant and the
issue has practical importance, the court must ap-
propriately focus the jury’s attention on that issue
rather than allow it to decide on an all or nothing basis
as to all defendants.
336 F.2d at 386 n. 4. This is exactly what the trial court
did in our case, just as it had omitted to do in Borelli,
Judge Travia charged the jury that it could find Cardona
to be a member of the conspiracy if the scope of his agree-
ment included one of the objects of conspiracy, provided
6660
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APPENDIX A—Opinion of the Court of Appeals
that the jury first found that the single conspiracy charged
did exist and that the scope of agreement made by at least
two of the conspirators included both objects of the con-
spiracy. See United States v. Levinson, supra, 405 F.2d at
989; United States v. Dardi, supra, 330 F.2d at 327; United
States v. Benjamin, supra, 328 F.2d at 864. Cf. United
States v. Papadakis, supra, 510 F.2d at 297; United States
v. Arroyo, 494 F.2d 1316, 1318-19 (2d Cir.), cert. denied,
419 U.S. 827 (1974). The jury was instructed repeatedly
by the court that there was no evidence in the case con-
necting Cardona with the bribery object of the conspiracy.
Here there was sufficient evidence to find a single continuing
conspiracy by coconspirators including the Bernsteins,
ESC, Behar and Kapraki, and to find that Cardona had
joined with Kapraki, Abad and Blow, in a portion of the
single conspiracy, the products of his frauds going un-
questioned, indeed, by Behar, ESC and the Bernsteins.
Here, as in Borelli, supra, what were required were ap-
propriate instructions as to the seope of the agreement
made by Cardona. These instructions were given here,
aid they were proper. As for any prejudice to Cardona,
there was overwhelming evidence of his participation in
the false statement frauds, making this hardly the case
“where a minor participant in one conspiracy was forced
to sit through weeks of damaging evidence” relating to
others. (/mited States v. Miley, supra, 513 F.2d at 1209.
Cardona points out that one month at trial concerned the
CUP prerogative of Cronin and one month the bribing of
Goodwin. Cronin, it should be noted, was not convicted,
and Cardona’s own participation in the false statement
scheme was so substantial that in a nine month trial we
cannot find any significant prejudice from bribery testi-
mony which the jury was instructed repeatedly did not
connect Cardona to the conspiracy.
6661
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APPENDIX A—Opinion of the Court of Appeals
The appellants Harry and Rose Bernstein, ESC and
Behar also argue that the trial court failed properly to
instruct the jury that it must find a single conspiracy and
not multiple conspiracies. However, the court explained
the essential elements of the crime of conspiracy, focused
the jury’s attention in compliance with Borelli on the im-
portance of determining whether each defendant became a
member of the conspiracy and the scope of his or her
agreement, and instructed the jury that it might find all,
none or some of the defendants guilty or not guilty on the
conspiracy count. The court instructed the jury that Count
1 “charges a single conspiracy having two objects or goals,
and the burden is upon the Government to prove that
charge as it’s made beyond a reasonable doubt.” In dis-
cussing membership in the conspiracy the court again
emphasized that the jury must find that the single con-
spiracy charged in the indictment existed,’* and in discuss-
ing the overt act element of the conspiracy the court re-
minded the jury that to convict it must find beyond a
reasonable doubt that the single conspiracy hoving two
objects as charged had been proved.
VIII. Prosecutorial Mismanagement. The claim is that
the appellants were deprived of a fair trial by the sheer
12 The court’s exact words were:
Now, in order to find that a particular defendant hds become a
member of the conspiracy, it is not necessary to find that the
defendant knew or was aware of both objects of the alleged
conspiracy if you find beyond a reasonable doubt that the scope
of the particular defendant's agreement included one of the objects
of the conspiracy provided that you first find that the single con-
spiracy charge in the indictment exists, and that the scope of the
agreement made by at least any two of the defendants included
both objects of the conspiracy.
The charge on conspiracy was adapted from suggested instructions
concerning multiple conspiracies in E. Devitt & C. Blackmer, Federal
Jury Practice and Instructions $$ 29.14, 29.15 (1970 ed.).
6662
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APPENDIX A—Opinion of the Court of Appeals
length of the trial allegedly caused by prosecutorial mis-
management. We have already stated, however, that the
Government and the court here anticipated what was said
in United States v. Sperling, supra, after the instant trial
had commenced, by severing a number of defendants, re-
ducing the number of counts, and making the case rela-
tively manageable. See note 3, supra. It is, of course, al-
ways true that there can be some spillover and prejudice
resulting when the conspiracy net is cast too wide, and
draws in too many participants and too many hearsay
statements, See Kotteakos v. United States, supra, 328
U.S. at 773. See also United States v. Dardi, supra, 330
F.2d at 329. The ultimate question is whether the number
of defendants and complexity of the case prevents the jury
from appraising the independent evidence against each
defendant and meting out individual justice under the law.
See Usited States v. Stromberg, 268 F.2d 256, 264-65 (2d
Cir.), cert. denied, 361 U.S. 863 (1959). Here it was, of
course, necessary to present both a good deal of back-
ground evidence to show the operations of the FHA and
the context in which these criminal activities took place,
and it was also necessary to introduce evidence as to a
substantial number of transactions in order to present the
true nature and scope of the criminal scheme. The bribery
issues, on the other hand, ultimately boiled down to ques-
tions of credibility of the witnesses; on the false statement
counts knowledge of falsity was the key issue, which was
in turn dependent to a great extent on the credibility of
the Government witnesses.
While it is not always necessarily wise to draw conclu-
sions after the fact, the jury in this case does seem to have
acted with extraordinary conscientiousness and sophistica-
tion. From time to time it asked for the relevant exhibits,
for parts of the charge to be read, and even specifically for
6663
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APPENDIX A—Opinion of the Court of Appeals
the charge regarding particular counts and particular de-
fendants, indicating that it focused on each count and each
defendant separately. The jury acquitted one defendant
and was not able to reach a unanimous verdict as to three
other defendants’? who were not central figures in the
scheme. Appellant ESC and appellants Harry Bernstein
and Rose Bernstein were each acquitted on three bribery
counts. Appellant Behar was acquitted on one bribery
count. Such a performance by the jury belies appellants’
claims that the length of the trial and the volume and com-
plexity of the evidence disabled its members from evaluat-
ing and applying the evidence to the individual defendants.
This kind of crime is, furthermore, extraordinarily diffi-
cult to prove. It must be proven in bits and pieces. If it
is broken down into too many charges, too isolated trans-
actions, too many fragments, the concept of the crime is
impossible to comprehend. We think that a conscientious
prosecution managed to delimit the issues, narrow the trial,
and yet satisfactorily demonstrate a pattern which consti-
tuted the overall crime. The claim of prosecutorial mis-
management is, in our view, utterly without merit.
IX. The District Court’s Interrogation of Mrs. Cardona.
Appellant Cardona argues that he was deprived of a fair
trial as a result of the court’s interrogation of Mrs. Car-
dona. Compare United States v. Nazarro, 472 F.2d 302, 304
(2d Cir. 1973), with United States v. Miley, supra, 513 F.2d
at 1205. See also United States v. Natale, No. 75-1276 (2d
Cir. Nov. 28, 1975), slip op. 793, 804-06. This interrogation
concerned events taking place after the FBI commenced
its investigation of this case. In August, 1971, Cardona
had met at his home with an agent of the FBI, one James
Sniegocki. Later that day Kapraki came to Cardona’s
house in response to the latter’s call and Mrs. Cardona
13 See note 1 supra.
6664
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APPENDIX A—Opinion of the Court of Appeals
began to relate, on direct examination, the substance of the
conversation between Kapraki and Cardona. We attach
extracts of this testimony in the margin.’* Cardona asserts
that the court’s subsequent intervention was a “vicious”
cross-examination, indicated disbelief in the witness’s testi-
mony and was an attempt to put words in her mouth.
14 Q. What, if anything else happened during that conversation’
A. My husband keep asking her to please to talk to the FBI
and to do it without her lawyer and they kept—
™he Court: To do it, what?
The Witness: Without her lawyer.
The Court: Whose lawyer?
Witness: Kapraki's lawyer.
Court: In other words, your husband was telling her what
to do without his lawyer?
Witness: Without her lawyer.
Court: Without her lawyer?
The Witness: According to the conversation that my husband
had with Agent Sniegocki.
The Court: He wanted Mrs. Kapraki to tell Agent Sniegocki
what your husband told Sniegocki, is that what you mean?
The Witness: My husband asked Ortrud Kapraki, in his own
words he said, “Please, Ortrud, if you have done something wrong,
it’s better that you talk to the FBI by yourself, because this
way you will feel better.”
The Court: Then you said something in accordance with—
The Witness: Because—
The Court: Did you say that?
The Witness: Yes.
The Court: Your husband said, “In accordance with my con-
versation [sic].
The Witness: You want me to repeat it?
The Court: Yes.
The Witness: Yes, you want me to repeat the conversation with
my husband, with Sniegocki—
The Court: I’m only interested right now in the conversation
between Mrs. Kapraki, your husband and you in your living room
or parlor, as you call it.
The Witness: All right. He—hke said to Ortrod Kapraki that
it was better for her—It was—It was better for her to confess
to the FBI without her lawyer.
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APPENDIX A—Opinion of the Court of Appeals
In our estimation, in these passages the court was not
indicating its belief in the defendant’s guilt or its disbelief
in the witness’s testimony, nor was it pushing Mrs. Car-
dona into altering that testimony. The testimony was un-
clear and it needed clarifying. At one point the court either
misunderstood or did not hear the witness clearly, surely
not an unforgivable sin in the course of a lengthy trial
with, so far as appears, a witness who might have been
diffeult to understand.’® The witness’s phrase “according
to the conversation that my husband had with agent Snie-
gocki” was also susceptible to assorted interpretations. The
court was trying to determine whether Cardona was telling
Mrs. Kapraki to tell the FBI what he had told the FBI
agent or whether Cardona had told Kapraki that she would
be better off if she confessed without a lawyer. When the
court said “no, no.” ** the judge was simply indicating that
he wanted the witness to testify as to the conversation with
Kapraki, not the conversation with Sniegocki. In the end
15 See note 14 supra regarding the context of the interrogation where
the court inquired as to whose lawyer Kapraki was told to speak to
the FBI without. Throughout the testimony of Mrs. Cardona, audi-
bility and comprehension evidently were made difficult by a soft voice,
rapid speech, a language harrier or a combination of these. She was
asked to speak up at least five times in the course of her testimony.
16 Following the colloquy cited, note 14 supra, the court went on to ask:
The Court: You said earlier something about, he told her some-
thing about the FBI, something in accordance with the way I
talked to him, what did you mean by that?
The Witness: According to what the Agent Sniegocki asked
to my husband.
The Court: No, no.
Mr. Klein: IT submit, your Honor, that is an answer.
The Witness: Yes, your Honor.
The Court: Say that again. .
The Witness: According to what Agent Snicgocki have asked
from my husband.
The Court: That is what your huaband told her?
The Witness: Yes.
The Court: You may proceed, Mr. Elein.
6666
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APPENDIX A—Opinion of. the Court of Appeals
even with the attempts at clarification the matter was so
muddled that Cardona’s counsel went over the entire con-
versation again. A federal district judge has, as we have
repeatedly said, a duty to attempt to clarify the witness’s
testimony and to get the jury to understand the evidence.
See United States v. Natale, supra. Judge Travia’s lim-
ited intervention can sustain no claim of prejudice by
Cardona.
X. The Charge on the False Statement Counts. Perhaps
appellants’ strongest argument is, especially if we judge by
the dissent, in respect to the charge on the false statement
counts. ESC, Harry Bernstein and Behar all contend that
the trial court’s charge on the element of “knowledge”
applicable to the false statement counts and the false
statement object of the conspiracy was erroneous. The
court alternatively charged “knowledge” in terms of “con-
scious avoidance” and “recklessness” and it is the “reck-
lessness” portion here attacked."
Following proper instructions that specific intent was
necessary and proof of mere negligence insufficient to
convict, the court charged that the element of knowledge
was satisfied by proof beyond a reasonable doubt that a
17 The conscious avoidance charge given was proper under United States
v. Brawer, 482 F.2d 117, 128-29 (2d Cir. 1973), cert. denied, 419 U.S.
1051 (1974), and United States v. Jacobs, 475 F.2d 270, 287-88 (2d
Cir.), cert. denied, 414 U.S. 821 (1973). However, there is no way
of knowing on which basis the jury decided the case so that if the
recklessness charge were erroneous the false statement counts and con-
spiracy count must fall.
We should add that use of the “reckless disregard” charge in this
case is not inconsistent with United States v. Bright, 517 F.2d 584
(24 Cir. 1975). Bright requires that a charge that knowledge of
falsity can be inferred from reckless disregard of the truth must
he “balanced” by a charge that actual belief in the truth of the
atatement negates knowledge of falsity. The record shows that Judge
Travia expressly gave thix “balanced” charge twice [C463, C511]. We
do not think that he had to do this again.
6667
38a | .
APPENDIX A—Opinion of the Court of Appeals
defendant recklessly stated as fact things of which he was
ignorant or acted with a reckless disregard of whether the
statements made were true. Despite appellants’ vigorous
protestations to the contrary we have no difficulty in find-
ing such a charge just as proper here as in the case of
Securities Act violations. See United States v. Benjamin,
supra, 328 F.2d at 862-63. See United States v. Squires,
440 F.2d 859, 863-64 (2d Cir. 1971) (in areas of fiduciary
responsibility under the securities laws “persons issuing
statements are under an affirmative duty to investigate, and
it is entirely appropriate to include ‘should have known’
within the definition of ‘know’ * ESC, Bernstein and
Behar knew that the FHA was relying on the Form 2900's
submitted, and the mortgagee’s certificate’s declaration
that the information was “true and complete to the best of
its knowledge and belief” carries this obligation at least.
The problem is that the court went on to attempt to
describe the duty of the parties, of ESC as an FHA-ap-
proved mortgage lender and of Bernstein and Behar as
key officers of such, with the evident purpose to give the
jury some standard for determining whether there was such
a reckless disregard of the facts as to amount to knowledge
of the falsity of the Form 2900’s. Judge Travia originally
said that the duty was “to insure” that the statements
made in the application were true, apparently borrowing
the phrase from our opinion in United States v. Andreadis,
366 F.2d 423, 430 (2d Cir. 1966) (an alternative ground in
holding that the Government proved knowledge of falsity
was that the defendant failed totally to discharge “affirma-
tive duty to insure” advertising claims were true), cert.
denied, 385 U.S. 1001 (1967). Conceiving, correctly we
think, that a “duty to insure” rather overstates the mort-
gagee’s responsibility—‘“‘reasonably to assure itself” would
be more aecurate—the judge below proceeded to clarify
6668
39a
APPENDIX A—Opinion of the Court of Appeals
the nature of the mortgagee’s duty, describing it as “a duty
to investigate and exercise proper credit judgment.” ™ It
is this portion of the charge to which the strongest objec-
tion is lodged as the “most aggravated” error, one com-
pounded by the court’s omission of any standard for
determining good or bad credit judgment.
But, and this is what appellants overlook and the dis-
sent misconceives, the charge did not indicate that it was
a crime not to exercise “proper credit judgment” and did
not equate failure to do so with reckless disregard of the
truth. Rather, the charge was that the crime consisted of
knowingly submitting an application containing a false
statement and that proof of mere negligent falsehood was
insufficient. The charge as we read it was that in deter-
mining whether there was reckless disregard f the state-
ments’ falsity such as to amount to knowledge, it was for
the jury to determine whether as mortgagee ESC had af-
firmative duties in connection with mortgagors’ loan guar-
anty applications. If such duties were found, the existence
of potential recklessness was still a question of fact. The
charge as such gave the defendants more than that to
which they were entitled.
We say this because an FHA mortgagee cannot even be
approved unless he is “responsible and able to service the
18 The court charged the jury:
[Y]ou may find that the FHA program places a duty on the
mortgagee (Eastern und Harry Bernstein) to investigate and exer-
cixe proper credit judgment with respect to statements contained
in applications for mortgage insurance submitted to the FHA.
The court then told the jury:
[I]}f you find that there is such an affirmative duty, then the
standard of recklexsncas, which I mentioned enrlier, is applicable
to the defendant HMastern Service Corporation, which is an approved
mortgagee.
Absent a finding of “such an affirmative duty” the jury was in effect
directed to acquit without reaching the question of recklessness.
6669
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APPENDIX A—Opinion of the Court of Appeals
mortgagee properly,” 12 U.S.C. §§ 1709(b) (1), 17151(d) (1).
A mortgagor must under the regulations establish in an
approved standard application form, 24 C.F.R. § 203.11,
that the mortgage payments are within his means, 24
C.F.R. §§ 203.33, 203.34, 221.1. That form specifically re-
quires a certificate by the mortgagee that “all information
in the application is true and complete to the best of its
knowledge and belief.” Under the analogous civil case law
the mortgagee, knowing that the federal insurer is “rely-
ing on its professional judgment in a business relation-
ship” has an affirmative duty “to use due care in provid-
ing information and advice” to the federal mortgage guar-
antor, First National Bank, Henrietta v. Small Business
Administration, 429 F.2d 280, 287 (5th Cir. 1970); Mt.
Vernon Cooperative Bank v. Gleason, 367 F.2d 289, 293
(Ist Cir. 1966) (Veterans Administration). The entire
scheme of FHA mortgage guaranties presupposes an
honest mortgagee performing the initial credit investigation
with due diligence and making the initial judgment to
lend in good faith after due consideration of the facts
found. The trial court in our view could have charged
that ESC had commensurate duties as a matter of law,
that Harry Bernstein as principal corporate officer did
also, and that Florence Behar as officer in charge of pro-
cessing mortgage loans and signing the mortgagee’s neces-
sary certification of the application as “true and complete
to the best of its knowledge and belief” did likewise. It
is our view that delimiting those duties by defining them
as duties “to investigate” and to use “good credit judg-
ment” was a fair description of the responsibilities in-
herent in the relationship between the defendants and the
FITA, as we have above described it.
Thus, to reiterate, the phrase “proper credit judgment”
was used simply in the context of defining the affirmative
6670
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APPENDIX A—Opinion of the Court of Appeals
duties the FHA mortgagee has. In leaving to the jury the
question whether any duties existed, duties which we think
it is plain the mortgagee had as a matter of law, the ap-
pellants were obtaining the benefit of a charge more favor-
able than that to which they were entitled. Appellants
rely on United States v. Guterma, 281 F.2d 742, 751-52 (2d
Cir.), cert. denied, 364 U.S. 871 (1960), for the proposition
that if the matter of duty was going to be charged at all
it should have been charged as a matter of law.’® In per-
mitting the jury to determine the existence of the duties
here, however, the court always clearly stated the crime
to consist of recklessly stating facts of which the mort-
gagee was ignorant or acting with a reckless disregard of
whether the facts stated were true. We do not see, there-
fore, how the appellants’ substantial rights were in any
way affected by the charge on exercising “proper credit
judgment.” If the jury decided that there were duties (to
investigate and to use proper credit judgment), the ap-
pellants were no worse off than if the court had initially
charged them that there were such duties as a matter of
19 In United States v. Guterma, 281 F.2d 742, 751-52 (2d Cir.),
cert. denied, 364 U.S. 871 (1960), the court held that it was improper
for the court to leave to the jury a task “properly his own,” in that |
case interpretation of the term “net book value” in an SEC instruction,
as applied to a pledge of securities. Here, of course, appellants below
had argued that the matter of duty on their part should not he charged
at all. Once the court decided to leave the question of duty to the
jury instead of charging it affirmatively as a matter of law, appellants’
immediate reaction was as follows:
The Court: (continuing) Or whether I would leave the question
to the jury as a matter of fact to find. And I had come to the
conclusion, unless the Government wishes to argue additionally,
that I’m going to leave it to the jury as a question of fact.
Mr. Obermayer [for Dun & Bradstreet]: Fine. My application
this morning—
The Court: Does the Government wish to argue on that point
before—
[The balance of this colloquy is in dissent note 5.]
6671
42a
APPENDIX A—Opinion of the Court of Appeals
law, as we think it could have. If the jury decided that
tuere were no such affirmative duties, then the appellants
were, of course, much better off—they would have been
entitled to acquittal according to the judge’s instructions.
They have in any event net been prejudiced.
XI. The Trial Court’s Intentional Omission to Marshal
the Evidence, While appellants complain of the length and
prolixity of the trial, they also complain of the court’s fail-
ure in the charge to summarize the evidence. This is a
matter, surely, within the trial court’s discretion. United
States v. Kahaner, 317 F.2d 459, 479 n.12 (2d Cir.), cert.
denied, 375 U.S. 835 (1963); United States v. Gillilan, 288
F.2d 796, 798-99 (2d Cir.), cert. denied, 368 U.S. 821 (1961).
That discretion was not abused. Exhaustive summations
lasted 14 days. Kapraki and Goodwin had been on the stand
19 and 16 days respectively so that the jury could well
weigh their credibility or lack of it. The court pointed out
the principal differences in the evidence as to the appropri-
ate defendants—e.g., Rose Bernstein’s lack of connection
with the false statements and Cardona’s lack of connection
with the briberies. Cf. United States v. Aloi, supra, 511
F.2d at 598-99. It also stressed the importance of individual
determinations as to each defendant on each count, a matter
scrupulously observed by the jury if we are to judge from
its inquiries and verdicts. See note 1 and Part VIII supra.
While the evidence here was complicated, or at least ex-
tensive, the issues were not. On the bribery counts, as we
have observed, the issue was essentially one of credibility
and on the false statement counts knowledge of the falsity.
By circling in red the statements on the Form 2900 credit
applications which were claimed to be false (and for all
practical purposes adinitted to he) the court accomplished
aloft more than words in a charge could have done to direct
the jury’s attention to the critical faets. Here as in United
6672
43a
APPENDIX A—Opinion of the Court of Appeals
States v. Hyde, 448 F.2d 815, 842 (5th Cir. 1971), cert.
denied, 404 U.S. 1058 (1972), a detailed review of the fac-
tual transactions “carried risks of omission, over-enumera-
tion, over-simplification of some facts compounded by
over-complication of other facts.” Here, as in United States
v. Cohen, 145 F.2d 82, 92 (2d Cir.) (L. Hand, J.), cert.
denied, 323 U.S. 799 (1944), “If the judge had once em-
barked upon a consideration of the transactions in detail,
he would have committed himself to a discussion of them
all; otherwise he would surely have laid himself open to
the charge of undue emphasis.” Judge Hand’s words in
Cohen are equally applicable here:
[I]n this country not only has the exercise of the power
[to marshal the evidence] never been obligatory, but
the power itself has heen somewhat suspect. It is
strange to hear an accused complaining of such a
failure; we may be assured that, if the power had been
used, the complaints would have heen louder, and al-
most certainly better grounded.
145 F.2d at 93.
XII. Other Points. Appellants make three complaints
about the charge on aiding and abetting the briberies. The
first is that the court grouped the assorted defendants as-
sociated with ESC together, as it did assorted other defen-
dants (the FHA defendants, the credit reporting defen-
dants). We think this made sense, however, and note also
that the jury was in conclusion instructed that individual
verdicts as to particular defendants on each count were
called for. The second objection is that the court charged
that if the jury found a payment by Kapraki was made
appellants’ conviction must follow; this is entirely out of
context, however, because the court gave a correct charge
regarding the aiding and abetting of Kapraki; only in
6673
44a
APPENDIX A—Opinion of the Court of Appeals
setting out the elements of the complicated lesser offense
of giving a gratuity did the court say “you should deter-
mine with respect to each defendant whether or not the
payment of money was made corruptly [elsewhere de-
fined],” and “If you are convinced beyond a reasonable
doubt that the payment was so made, then you must con-
vict the defendant or defendants on that count.” We view
this as perfectly proper. The court, contrary to appellants’
third argument, did charge what acts could he considered
acts of aiding and abetting.”
Appellant Behar separately complains of prejudice by
virtue of that portion of the charge that conditioned a find-
ing of the guilt of Cardona or Harry Bernstein as aiders
and abettors of the false statements upon a finding of guilt
as to the principal (Behar, ESC). Put it is the law that
a person cannot be found guilty of aiding and abetting
unless a principal whom he has aided and abetted com-
mitted the criminal act. See Shuttlesworth v. City of Birm-
ingham, 373 U.S. 262 (1963); United Siates v. Hoffa, 349
F.2d 20, 40 (6th Cir. 1965), aff'd, 385 U.S. 293 (1966). But
cf. United States v. Bryan, 483 F.2d 88, 93-94 (3d Cir. 1973)
(not necessary that principal be tried and convicted or
even identified) ; United States v. Provenzano, 334 F.2d 678,
691 (3d Cir.), cert. denied, 379 U.S. 947 (1964). Surely
Behar and ESC were the principals in the false statement
phase of the case. While the proof of Cardona’s guilt was
overwhelming, perhaps, there was no prejudice to Behar;
it is not without significance that on one such count Behar
was named and convicted while Cardona was not even
20 The court stated that appellants were charged
with aiding and abetting and counselling the payment of bribes
to Edward Goodwin and the defendant Joseph Jankowitz and the
Government claima this was done by counselling payment of moniex
to these men and by arranging to have them assigned to Mrs.
Kapraki's cases. |
6674
45a
APPENDIX A—Opinion of the Court of Appeals
named. We have previously commented on the jury’s ability
to view the evidence with a discriminating eye.
Finally, and this is a point on which my brothers and
I disagree, appellants Harry Bernstein and ESC argue
that certain of the bribery counts were multiplicitous (ap-
pellants use erroneously the term “duplicitous”). On four
different occasions Bernstein paid Goodwin a lump sum
for several property appraisals at $50 per appraisal, thus,
for example, paying him $350 on October 6, 1967, for seven
property appraisals. The problem is that while only one
payment of money was made on this occasion, appellants
were charged in five counts (and ‘incidentally Bernstein
fined $10,000 for each count and ESC $20,000 for each,
note 1 supra). In totality four lump sum payments resulted
in convictions on 11 counts. The question—one as to which
there are no cases directly in point—is whether each lump
sum payment constituted one crime or several, a single
transaction or many. Appellants argue, and the writer
agrees, that under 18 U.S.C. § 201(b) it is the corrupt gift
which is the essential criminal act on the part of the donor,
though it be with the intent to induce several criminal acts
(and might be punished severally under 18 U.S.C. § 201(c)
ym the part of the donee).”" See generally Ladner v. United
21 The indictments here were for violations of 18 U.8.C. § 201(b). That
section makes it a crime whenever a person
direetly or indireci!;, corruptly gives, offers or promises anything
of value to any public official or person who has been selected
to be a public official, or offers or promises any public official or
any person who has been selevied to be a public official to give
anything of value to any other person or entity, with intent—
(1) to influence any official act; or
(2) to influence such public official or person who has been
selected to be a public official to commit or aid in committing or
collude in, or allow, any fraud, or make opportunity for tho
commission of any fraud, on the United States; or
6675
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APPENDIX A—Opinion of the Court of Appeals
States, 358 U.S. 169, 178 (1958) ; Bell v. United States, 349
U.S. 81, 84 (1955) (Frankfurter, J.).
My colleagues take the entirely rational and different
view and it is therefore the opinion of the court that sep-
arate offenses may arise out of the same transaction where
each of the alleged offenses requires proof of some fact
or element not required to establish the other. See Albrecht
v. United States, 273 U.S. 1, 11 (1927); United States v.
Tarrant, 460 F.2d 701, 704 (5th Cir. 1972); Moeller v.
United States, 378 F.2d 14, 15 (5th Gir. 1967); Newman
v. United States, 212 F.2d 450, 452 (6th Cir. 1954); United
States v. Michelson, 165 F.2d 732 (2d Cir.), af’’d, 335 U.S.
469 (1948).
It was not, in the majority’s view, simply the payment
of the money which constituted an offense under § 201; it
was also the offering or promising to pay. The proof estab-
lished that Harry Bernstein promised to pay $50 for each
“top dollar” appraisal which Goodwin made. The Govern-
ment offered separate proof with regard to each property
to establish that it had been over-valued and that, as a
result, a fraud had been committed upon the United States.
(3) to induce such public official or such person who has been
selected to be a public official to do or omit to do any act in
violation of his lawful duty ... .
It is also a crime for the recipient of the bribe who
being a public official or person selected to be a public official,
directly or indirectly, corruptly asks, demands, exacts, solicits,
seeks, accepts, receives, or agrees to receive anything of value for
himself or for any other person or entity, in return for
(1) being influenced in his performance of any official act; or
(2) bemg influenced to commit or aid in committing, or to
collude in, or allow, any fraud, or make opportunity for the
commission of any fraud, on the United States; or
(3) being induced to do or omit to do any act in violation of
his official duty... .
18 U.B.C. §$ 201(e).
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APPENDIX A—Opinion of the Court of Appeals
That payments were thereafter made in installments which
sometimes exceeded $50 did not require the number of
statutory violations. The “official act” which had been im-
properly influenced under § 201 was the appraisal of each
property on which a commitment was made for FHA mort-
gage insurance.
We have in short reviewed the extensive record and, with
extremely careful and thorough argumentation by counsel,
considered the numerous legal points arising out of this
necessarily very lengthy trial. We are persuaded that the
matter was handled with the greatest of care by the trial
judge, with high competence by both Government and
defense counsel, and with painstaking consideration of
individual defendants and counts by the jury, under in-
structions that were, if anything, favorable to the accused.
Several of the legal points were troublesome; indeed, we
are not unanimous on all of them. The sentences were stiff.
But these were serious crimes.
The judgment is affirmed.
Oo
Van GraaFEILann, Circuit Judge (dissenting) :
“Proper credit judgment” is a wonderfully impressive
phrase, a portentous, business-like phrase, one that rolls
readily off the tongue of bankers and financiers in their
board rooms and at their clubs. But, what does it mean?
The statute under which defendants were convicted con-
tains no reference to it. The district judge never instructed
the jurors as to its meaning. We have no idea how these
twelve untutored laymen defined it. Last, but not least, my
brothers in the majority fail to enlighten us with their
interpretation. And yet, this phrase, undefined, ‘unex-
plained and uninterpreted to this date, forms the very core
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48a
APPENDIX A—Opinion of the Court of Appeals
of the Covernment’s case on the false statement counts as
it was presented to the jury by the district judge.
The majority finds this to be merely “troublesome”. I
find it the culmination of a series of errors in the district
court’s charge which fairly cry for reversal. I, therefore,
respectfully dissent.
Conviction of the defendants under 18 U.S.C. § 1010
required proof of three elements: the making of a false
statement in the FHA application, knowing it to be false
for the purpose of influencing the FHA to issue mortgage
insurance. United States v. Leach, 427 F.2d 1107 (lst
Cir.), cert. denied, 400 U.S. 829 (1970). The Government
did not contend that appellants Harry Bernstein, Florence
Behar and Eastern had actual knowledge of the falsity of
any of the statements at issue herein. However, the judge
instructed the jury that it was unnecessary for the Govern-
ment to prove to a certainty that these defendants knew a
statement was false. He charged that, although knowledge
could not be established by proof of mere negligence, it
might be found if a defendant was aware of the high prob-
ability that a statement was false, unless that defendant
actually believed that the statement was not false. He
charged further on the theory of conscious avoidance.
If the District Judge had stopped at that point, I would
have no fault to find. United States v. Bright, 517 F.2d
584 (2d Cir. 1975); United States v. Egenberg, 441 F.2d
441, 444 (2d Cir.), cert. denied, 404 U.S. 994 (1971) ; United
States v. Abrams, 427 F.2d 86 (2d Cir.), cert. denied, 400
U.S. 832 (1970); United States v. Sarantos, 455 F.2d 877
2d Cir. 1972). However, the Judge continued on into
what I conelude was error. He charged that it was a ques-
tion of fact for the jury to determine if the FHA placed an
affirmative duty on certain of the defendants.' He charged
—
1 Now, it is a question of fact for you as jurors to determine
from the evidence you have heard in this case—and you have
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APPENDIX A—Opinion of the Court of Appeals
that, if there was a duty to investigate, proof of “reckless-
ness” would satisfy the requirement of knowledge under
the statute.? He then instructed the jury to determine as
a question of fact whether the defendarts Harry Bernstein,
Florence Behar and Eastern had the duty to exercise
“proper credit judgment” with respect to statements made
in the mortgage insurance applications and to “insure”
that such statements were true.°
heard testimony from HUD representatives and from others, the
exhibits that you will find were introduced and received in evi-
dence, the papers from which I just read now, which the Court
took judicial notice of, and the mortgagee’s handbook and the
FHA manual, and whatever other evidence there was, if any, in
the case, is for you to determine if the FHA, of the Housing and
Urban Development, places an affirmative duty on certain of the
defendants in this case.
You may in making such a determination consider the regula-
tions that have been read to you during the course of the trial,
the testimony of the witnesses concerning them, the instructions
concerning the applications necessary to be filcd, and the papers
necessary to make up the complete application. You recall they
referred to that as a package, if I recall correctly. [R. 21386).
2 Finally, in the contest [sic] of this case there is a third way
of satisfying the requirement of knowledge. Where a person who
makes, passes, utters or publishes a false statement is under an
affirmative duty to investigate the element of knowledge is satisfied
by proof beyond a reasonable doubt that a defendant recklessly
stated as facts things of which he was ignorant, or acted with a
reckless disregard of whatever statements made were true. (R.
21425].
3 Now, in the light of the National Housing Act, part of which I
read, and about which you heard testimony from Mr. Hipps, I
believe, and possibly Mr. Sanders, the Federal regulations which
were set forth in the eligibility requiremens for approval of
mortgagees who submit applications to the FHA and which set
forth eligibility requirements for mortgagors, the the instructions
contained in the mortgagee’s handbook, the requirement that a
mortgagee certify that all information in an application is true
and complete to the best of its knowledge and belief, and the
underlying policy of reliance by the FHA on the mortgagee to
submit complete and truthful information, yon may find that the
FHA program places a duty on the mortgagee to investigate and
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