Petition — Freeman v. United States
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W Office-Supreme Court, U.S,
FILED
FEB 4 i993
ALEXANDER tL. STEVAS,
CLERK
82-1876
IN THE
Supreme Court of the Muited States
OCTOBER TERM, 1982
No.
GURN H. FREEMAN
Petitioner,
vs.
UNITED STATES OF AMERICA,
Respondent.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
D.L. DERTELLE
One N. LaSalle Street
Chicago, Illinois 60602
GERALD D. FREEMAN
4755 N. Washtenaw
Chicago, Illinois 60625
ORAL ARGUMENT REQUESTED
ISSUES PRESENTED FOR REVIEW
1. May evidence of clients’ representations, conclusions and impres-
sions regarding funding by Century be admitted against the accused on the
question of whether or not the accused actually represented to such
client(s) that Century would obtain financing for the clients’ business
endeavors when each client’s written offer of service expressly rejected
such funding by Century Consultants for the fees in question.
2. May specific intent under 18 U.S.C. § 1341 be found by: the lack of
future performance when the clients foreclosed such performance; an
“unalleged” unsound business concept when numerous nationally known
experts concur with Appellant’s concept as being the best method to
secure the most amount of venture capital for start-up companies and
when more clients succeeded as a result of Appellant’s services than
failed; and by various alleged misrepresentations either directly contra-
dicted by the alleged victims or not evidenced by the record.
3. The Court committed plain error when it arbitrarily included limited
offerings (that were to be funded by the clients) with secondary financing
to be secured by Century Consultants on a contingent fee; such theory was
contrary to all contracts, the alleged victims’ testimony, and the Govern-
ment’s own admission as to what constituted secondary financing and
who had to obtain funding for limited offerings and thereby held Appellant
responsible for funding limited offerings and implied seed capital was to be
paid for funding efforts as opposed to payment for credit extended on the
limited offering business plan as set forth in the contracts.
4. May the accused be found guilty of committing mail fraud where the
“scheme to defraud” as specifically pleaded in the Indictment is not
supported by a scintilla of evidence?
5. Whether or not the requirements of a Fair Trial are satisfied wherein
petitioner's guilt was premised upon extraneous matter not contained or
otherwise supported in the record such as fourteen ‘victim’ witnesses
allegedly testifying Appellant promised funding when in fact seven
“victim” witnesses either didn't testify or such persons had no knowledge
of Appellant: another witness was only introduced: still another witness
could not remember any discussions and the remaining five witnesses’
testimony was contrary to such finding—and the like.
6. May a conspiracy conviction rest upon a conclusion that sufficient
evidence existed when the evidence did not demonstrate: an agreement to
conspire: a divergence from legal to illegal conduct: proof of membership
by independent evidence or a single misrepresentation made by the
accused as alleged in the Indictment.
TABLE OF CONTENTS
TABLE OF AUTHORITIES. ............cceeeeseeeeeeees v
CONSTITUTIONAL PROVISIONS, STATUTES AND
OTHER LEGAL AUTHORITIES. ................006. vi
ENED wancsccccsccccsserevescvccccccccce l
REE Seco pecccvonccseccccscccccccescccces l
ISSUES PRESENTED FOR REVIEW ................ l
STATEMENT OF FACTS .....cccccccccccccccccccces 2
REASONS FOR GRANTING THE WRIT
I
The Court’s Opinion attempts to redefine what consti-
tutes a false and fraudulent promise or representation
made by defendant for the purpose of obtaining money or
property under 18 U.S.C. § 1341 by substituting no
evidence of Appellant’s alleged misrepresentations to
provide funding [Indictment para. 3 and 4 (f)] for evidence
of “alleged victims’” representations (not Appellant’s)
that their alleged purpose in hiring Century was to have
Century seek funding on their behalf; such construction of
the statute and indifference toward the lack of support for
the substantive charges in the Indictment conflicts with a
litany of case law both within and outside of the Sixth
INN HEMI, vce rccccccccsscccececcscce 5
II
The Court’s opinion attempts to redefine what consti-
tutes knowledge and intent under 18 U.S.C. § 1341 by
suggesting mere opinion, lack of future performance, an
“unalleged” unsound business concept; and various “‘al-
leged”’ misrepresentations not evidenced by the record
(testimony and exhibits) demonstrates “specific intent”
and somehow negates the history and time proven methods
which formulated Appellant’s (Century Consultants) be-
lief in his ability to assist clients in meeting their needs—
such Court opinion clearly conflicts with a litany of case
law both within and outside of the Sixth Court of
III
Para. 6 of the Indictment charges that clients were
informed they had to raise seed capital which would have
to be paid to Century Consultants to continue work on
arranging the majority of the financing; the Court’s opinion
alludes to para. 6 by arbitrarily holding that there was only
one type of business plan and that all funding beyond seed
capital was “secondary financing’? which was to be
obtained throagh Century Consultants’ sources. However,
the Court “omitted”’ the limited offering business pians,
which clearly were not any part of secondary financing
(contrary to Government’s admission) and disregarded the
proof that seed capital was not to be paid for anything other
than the credit that had been extended for the production
of the limited offering comprehensive business plan. .... .
IV
The scheme to defraud as depicted in the Indictment,
paragraphs 1-8, was not supported by a scintilla of
evidence; Appellant did not represent or otherwise promise
funding by Century as described therein, and such Court’s
affirmance of Appellant’s conviction for mail fraud is
unconstitutional under the Due Process Clause of the Fifth
Appellant was effectively denied his right to a fair trial
by the Court introducing extraneous matter not found in
the record. Amendment V, United States Constitution.
90666606668 800068 860.668 O68 OCROKREOBRBECEAD OW SO 66 ES OE C6 oe
There is a plain conflict between the Circuits wherein
the Court below did not attempt to demonstrate: the
existence of a conspiracy agreement; a divergence from
-iii-
Page
21
23
25
Page
legal to illegal conduct; proof of Appellant’s membership
in the alleged conspiracy by independent evidence; and a
single act specifically alleged as “part of the scheme and
artifice to defraud”’ as enumerated with paragraphs | thru
SE Ps EE i iecccassncecesectcteciccces 27
eI cas 55 6050 0k 4500s dueenss 6bn0sdsapneseds 30
APPENDIX A, OPINION OF COURT BELOW ....... A, 1-10
APPENDIX B, JUDGEMENT AND ORDERS
cco cekavees sn bekdbasbaues s¢0000% B, 1-3
APPENDIX C, (See Record of the Court Below)......... ci
APPENDIX D, STATUTES AND OTHER
Rs PRM REIN ws Sa bobs suviconenetocdccceee D, 1-4
APPENDIX E, GOVERNMENT ADMISSIONS....... E, 1
APPENDIX F, FINANCIAL AUTHORITIES......... F, 1-6
-iv-
TABLE OF AUTHORITIES
Page
Cases:
Calderon v. Atlas S.S. Co., 170 U.S. 272, 280, 18 S. Ct. 906
ETA PRCT Cal RNS A Ea 6
Epstein v. U.S., 174 F.2d 754 (6th Cir. 1949)............ 5
Harrison v. U.S., 200 F 662, 665 (6th Cir. 1912)......... 10
Ingram v. U.S., 360 U.S. 672, 680, 79 S. Ct. 1314, 1320
GEDGP) vnvccccccsccevccccrccerscccccccccccssccccescecs 13,
30
CID TE) cc ccccrvcccccccccscccveccencccvcscccccesesceens 20
Mutual Life Insurance Company v. Phinney, 178 U.S. 327,
By BP ee es FD CIS nn cn ccccccccccccccccccccccces 6,10
Sparrow v. U.S., 402 F.2d 826, 828-29 (10th Cir. 1968).. 14
Thompson v. Louisville, 362 U.S. 199, 80 S. Ct. 624 (1960) 25
U.S. v. Herr, 338 F.2d 607 (7th Cir. 1964)...........006. 7
U.S. v. Klein, 515 F.2d 751, 753 (3rd Cir. 1975) ......... 29,
30
U.S. v. Pearlstein, 576 F.2d 531,540 (Fn. 3) (3rd Cir. 1978) 9
U.S. v. Rabinowitz, 327 F.2d 62, 66, 81 (6th Cir. 1964) .. 5,7,
11,
17,
20
U.S. v. Regent Office Supply Co., 421 F.2d 1174, 1179 (2nd
ok Dar abe ckhics VGen ease cen eesecccceceecss 9
U.S. v. Shelton, 669 F.2d 446 (7th Cir. 1982)............. Il,
12.
14.
29
U.S. v. Swarthout, 420 F.2d 831 at 833 (6th Cir. 1970).... 21
U.S. v. Van Dyke, 605 F.2d 220, 225 (6th Cir. 1979)...... 6
U.S. v. Wieschenberg, 604 F.2d 326, 331 (Sth Cir. 1979)... as.
West v. U.S.. 68 F.2d 96 (10th Cir. 1933) ...........000ne 7
Page
Other Legal Authorities:
Amendment V, U.S. Constitution yi
25,
27
Corbin on Contracts, 1 Vol. Ed. (1980) § 25, p. 43; § 1252 at
MED keine vccccnecssacadecadsapccccncevesescss 7,10
Michigan Securities Regulations: Chapter 188, Uniform
Securities Act, Act 265 of 1964, Title 19—Trade and Com-
merce, Part IV § 19.776 (402), § § 10(A), p. 247 MLS.A. .. 13
Restatement, Contracts § 395 and § 274(1)(Fn.1)....... 10
Uniform Commercial Code § 2-202: “Final Written Ex-
PRESSION” . 22 ceccccccccccccccccccccccccccccccccceseees 6,7
Financial Authorities:
Alan J. Barton, Counsel for the National Venture Capital
I TLD nos cscdacpocdonssdecccsce cn 16
Business Week Supplement, “Venturing into Venture Capi-
Pees ise ncG bab en peeks edaabesacnees's 17
Ernest D. Chu, “Selecting the Right Venture Capitalist,” App.
DEC URb nbd shdehieesbSsubsdsorceabikeeceeosceses 19
Forbes Magazine, ““Venture Capital—Business Plan,” App.
| RISE Rg CR rE ar ne eae 16
Brian Haslett and Leonard E. Smollen, “Preparing a Business
eg 8 SS See re 17
Stanley M. Rubel, Guide to Venture Capital Sources:
Preface, App. F, (1—2 f.) 0... ccccccccccccccccccccvccees 18
“Private Financing Sources,” App. F, (5-6 f.).......... 16, 17,18
“United States Venture Capital Companies,” App. F, (4-5).
Small Business Administration, App. F. (1 f.) 8
David Silver, “How to Raise and Utilize Venture Capital,”
rE Aikawa iedvacdevssvstapadarevecdess dees 18,19
OPINION BELOW
The unpublished opinion of the United States Sixth Circuit Court of
Appeals is set forth in the Appendix as Appendix A.
JURISDICTION
The judgement sought to be reviewed was issued and entered on
October 1, 1982; petition for reixearing en banc was sought and it was
denied on November 24, 1982 and was reissued on December 9, 1982
and all of which are set forth in the Appendix as Appendix B. The
jurisdiction of the Court is invoked pursuant to 28 U.S.C. § 1254 (1).
ISSUES PRESENTED FOR REVIEW
1. May evidence of clients’ represen ations, conclusions and impres-
sions regarding funding by Century be a/Imitted against the accused on the
question of whether or not the accused actually represented to such
client(s) that Century would obtain financing for the clients’ business
endeavors when each client’s written offer of service expressly rejected
such funding by Century Consultants for the fees in question.
2. May specific intent under 18 U.S.C. § 1341 be found by: the lack of
future performance when the clients foreclosed such performance; an
“unalleged” unsound business concept when numerous nationally known
experts concur with Appellant’s concept as being the best method to
secure the most amount of venture capital for start-up companies and
when more clients succeeded as a result of Appellant’s services than
failed; and by various alleged misrepresentations either directly contra-
dicted by the alleged victims or not evidenced by the record.
3. The Court committed plain error when it arbitrarily included limited
offerings (that were to be funded by the clients) with secondary financing
to be secured by Century Consultants on a contingent fee; such theory was
contrary to all contracts, the alleged victims’ testimony, and the Govern-
ment’s own admission as to what constituted secondary financing and
who had to obtain funding for limited offerings and thereby held Appellant
responsible for funding limited offerings and implied seed capital was to be
paid for funding efforts as opposed to payment for credit extended on the
limited offering business plan as set forth in the contracts.
4. May the accused be found guilty of committing mail fraud where the
“scheme to defraud” as specifically pleaded in the Indictment is not
supported by a scintilla of evidence?
5. Whether or not the requirements of a Fair Trial are satisfied wherein
petitioner’s guilt was premised upon extraneous matter not contained or
otherwise supported in the record such as fourteen “victim” witnesses
allegedly testifying Appellant promised funding when in fact seven
“victim” witnesses either didn’t testify or such persons had no knowledge
of Appellant; another witness was only introduced; still another witness
could not remember any discussions and the remaining five witnesses”
testimony was contrary to such finding—and the like.
6. May a conspiracy conviction rest upon a conclusion that sufficient
evidence existed when the evidence did not demonstrate: an agreement to
conspire; a divergence from legal to illegal conduct; proof of membership
by independent evidence or a single misrepresentation made by the
accused as alleged in the Indictment.
PROCEEDINGS IN THE COURT BELOW
This criminal action was commenced on 7/8/80 by the United States of
America, in the United States District Court for the Western District of
Michigan, Southern Division, against petitioner, Gurn H. Freeman, Sr.
Petitioner was convicted of devising scheme or artifice to defraud by use
of U.S. mails; aiding and abetting. Counts /, 2, 3, and 4, 18 U.S.C. §
1341; 18 U.S.C. § 2 (a). Transportation in Interstate Commerce of
securities obtained by fraud; aiding and abetting. Count 7; 18 U.S.C.
§2314; 18 U.S.C. § 2 (a). Conspiracy to defraud the United States;
aiding and abetting. Count 8; 18 U.S.C. § 371; 18 U.S.C. § 2 (a).
Petitioner was acquitted of causing to be transmitted in interstate
commerce by means of a wire communication for the purpose of executing
the aforementioned scheme and artifice. Counts 5 and 6; 18 U.S.C. §
1343; 18 U.S.C. § 2 (a). |See, App. D, (2-3 d.), for full text of statutes. |
On 9/8/80, the District Court entered judgement finding the petitioner
guilty of 18 U.S.C. § 1341; 18 U.S.C. 2314; 18 U.S.C. 2 (a); and 18
U.S.C. § 371 and sentenced him to imprisonment for five years as to each
of Cc ints 1, 3 and 8, to run concurrently as to each of these Counts—as to
Counts 2, 4 and 7, is to be placed on probation for five years to run
concurrently upon release from confinement in a penal institution.
Petitioner was also fined $1,000 as to Count 3 and $10,000 as to Count 8.
Petitioner filed notice of appeal on 9/8/80. The United States Court of
Appeals for the Sixth Circuit entered judgement on 10/1/82, affirming all
Counts: 1, 2, 3, 4, 7 and 8.
STATEMENT OF FACTS
Appellant has been a full time professional business consultant since
1967. He established Century Consultants in 1971 and operated this
firm as a sole proprietorship until January 1974 when it was incorporated.
In February 1974 Appellant began his slow withdrawal from the firm
by setting forth the business concept for future management to follow
(i.e., Eckersberg Memorandum and Operations Manual) which was
based upon the successful operations of the sole proprietorship.
Century Consultants. by and through their Comprehensive Business
pe,
Plans, have “helped” many clients achieve their venture capital needs
via the “limited offering” capitalization by the client and his principals
(i.e., Brown, Fouts, Whitmer, Haas, Coville Engineering, and the like).
Century Consultants’ primarily produced business plans calling for
“limited offering’’ capitalization by the client which, in the initial stage
of capitalization, is the most common way to obtain equity capital.
Prior to the Indictment period Century only had one client whose
capitalization needs were greater than the amount called for in the
“limited offering” plan, thus Coville Engineering (the client) was
offered “secondary funding” efforts by Century via “private placement”
upon the successful conclusion of their “limited offering.” Coville
raised the limited offering and thereafter Appellant designed a “financial
proposal” for the ‘‘secondary funding” and subsequently sought out and
located Mr. Oberman (a source). After doing some additional investiga-
tion with respect to $10.5 million in mortgage financing to be secured by
land, buildings, and equipment, Oberman put together a group of
investors (Oberman included) willing and able to put up the intermediate
$1.5 million upon Coville finalizing a sales contract with the recipient of
the Coville product. (Delaware County, Pennsylvania originally was
interested in a solid waste plant.) Appellant performed as promised by
locating a source willing and able to finance; however, his fee was
contingent upon the final negotiations wi:ich never materialized and, it
should be noted, the project did not fail for lack of funding.
Like prior client Brown’s house raising construction company, Mr.
Herbert’s clothing store, Mr. Jenkins’ tool and die shop, Mr. Clark’s
insurance business and Mr. Erbe’s cabinet manufacturing business,
these four “alleged victims’”’ businesses did not need a greater amount
of venture capital (equity) than any other client Century had “helped”
excepting Coville Engineering. Thus Century believed that they should
capitalize their businesses via a limited offering to be sold by the clients
themselves. Such belief was set forth in writing and Century further
stated their belief that “private placement” funding to financial institu-
tions (by Century) was not feasible because they would have to put up too
much money with such organizations to attempt a private placement at a
time when their position is not really strong enough. Each individual
received a written offer of services for his consideration (uninterrupted by
Century from 2 to 6 weeks). Each individual paid the retainer fee (ranging
from $500 to $5,000) in response to such offer to wit Century then was
authorized to produce a business plan wherein the capitalization was to be
designed so that a limited offering could be sold by the client. Century
performed pursuant to such offers as admitted by the Government. The
Government further admitted “most knew they had to raise their own
limited offering.” Although tnese clients may have come to Century
a,
Consultants seeking funding by Century Consultants, these clients never
bargained for funding by Century. No defendant made a single repre-
sentation with regard to Century funding these clients’ limited offerings
businesses.
Like the Coville Engineering project, Mr. Edelman’s photo lab
business, Mr. Morgan’s amusement park, and Mr. Webster’s shopping
center, these three “alleged victims’” businesses needed a greater
amount of venture capital (equity) than is feasible to raise via “limited
offering” only-type of business plans. Appellant made oral and written
representations that Century would seek “secondary funding” upon
completion of these clients’ “limited offering.” Originally only Edelman
would retain and authorize Century to produce the “limited offering”
type business plan and thereafter, upon successful completion of
limited offering capitalization by Edelman, Century was to design a
“financial proposal” (secondary funding business plan) at $50/hr. and
thereafter seek the secondary financing for Edelman upon a contingency
fee basis. Webster, on the other hand, chose to retain and authorize
Century to only produce a “‘limited offering” type business plan to be
capitalized by Webster. Webster would eventually pay Century in full
for such a business plan ($7,500), prior to even authorizing Century to
perform such future services (“secondary funding”) as contemplated in
the original offer. Morgan would never authorize Century to perform
the future service of “secondary funding;”’ he specifically retained and
authorized Century to only produce the business plan wherein limited
offering capital was to be obtained by the client. Where Coville raised their
limited offering to permit Appellant to begin the “‘secondary funding”
phase, Edelman didn’: sell the first dollar’s worth of his limited offering
because he elected not to proceed; Webster raised $25,000 in seed
capital and sold $40 to $45,000 of such stock but embezzled stock-
holders’ money; and Morgan refused a// offers for secondary funding.
Appellant’s future performance was foreclosed by the very parties the
Court claims to have been defrauded by such lack of funding efforts.
Appellant never performed such future “secondary funding”’ services
for reasons unrelated to Appellant’s intent or ability to perform.
Appellant’s stated intention to slowly withdraw from Century, as set
forth in the Eckersberg Memorandum, was evidenced by his actions
with regard to client work and the varying capacities under which he was
later employed. The bulk of the interviewing, client contact and actual
performance, the production of the business plan, was accomplished by
the five other consultants of Century.
After January 3, 1975, Powell replaced Appellant as an officer,
director, and employee of Century, Inc.; Appellant resigned from such
positions and became a sub-contractor for the firm so that Appellant
_4-
could spend more time to build a new business, American Business
Consultants, Inc., which he still owns and operates today. On 1/3/75,
Wagner and Powell were first introduced and up until 5/14/75, Wagner
continued to perform in the capacity to wit he was first hired (to develop
marketing plans) and Powell held a few free exploratory meetings (with
non-alleged victims) and contacted previous clients of Century to seek
repeat business, which was previously noted as a very important source
of income (i.e., letter and visit to Jenkins). On 5/14/75, Powell and
Wagner’s partnership purchased the assets and liabilities of Century
Consultants, Inc. to form Century Consultants Corp., and embarked on
a new theory for funding clients, however they chose to continue the
sub-contracting relationship (Century, Inc. began 1/3/75) with Appel-
lant until the fall of 1975. The severance of all ties between the parties at
that time was termed by Wagner a “complete business divorce.”
The conspiracy theory forwarded by Government briefs and the
Court rests upon the conclusions that a conspiracy existed between the
defendants, however, no facts were cited relating to how, when, or with
whom it began or continued. The sub-contracting relationship between
Appellant and Century, Inc. and Appellant and Century Corp. (Powell
and Wagner) evidences a different sort of relationship.
REASONS FOR GRANTING THE WRIT
I
The Court’s opinion attempts to redefine what constitutes a false and
fraudulent promise or representation made by defendant for the
purpose of obtaining money or property under 18 U.S.C. § 1341 by
substituting no evidence of Appellant’s alleged misrepresertations to
provide funding [Indictment para. 3 and 4 (f)| for evidence of “alleged
victims’” representations (not Appellant’s) that their alleged purpose in
hiring Century was to have Century seek funding on their behalf; such
construction of the statute and indifference toward the lack of support
for the substantive charges in the Indictrnent conflicts with a litany of
case law both within and outside of the Sixth Circuit Court of Appeals.
I
The Court argues that, notwithstanding the unrebutted facts that
clients received exactly what the parties had bargained for, “there is
sufficient evidence in the record of a scheme to defraud.”’ | App. A, (3-4
a.)] We do not argue that the indictment is deficient in pleading or that
Epstein v. U.S., 174 F.2d 754 (6th Cir. 1949) and U.S. v. Rabinowitz.
327 F.2d 62 (6th Cir. 1964) as cited by the Court | App. A, (4 a.)| are
somehow improper case law to establish a scheme to defraud via
knowing misrepresentations made by a defendant. It is, however, the
Court’s divergence from the Indictment |See App. C, (A-8, 9 c.):
ze
Specifically, para. 3 and 4 (f)] and the case law cited above, which
together require proof of misrepresentations made by defendant that
causes petitioner to question the Court’s finding of guilt based upon the
clients’ representations to Century and that such purpose for hiring
Century [clients’ primary goal: to have Century Consultants find
investors for their projects ... App. A, (4 a.)] was not fulfilled, therefore
such clients were defrauded.
It is here that the Court attempts to broaden the statute and case law
to encompass a new and apposite strain of mail fraud. The Court merely
discounts such intent of Appellant performing pursuant to such acknowl-
edged contracts [See, App. E, (1 e.)Government’s Second Reply Brief, p.
23] as inappropriate conduct which “did nothing to further the clients’
primary goal. [App. A, (4 a.)]
It is our contention that such “subjective” impressions and conclu-
sions of the clients in coming to Century Consultants was knowingly
bargained away |See, i.e. App. C: subjective impressions and conclu-
sions of Herbert at (Tr. 321c) and the Clarks at (Tr. 392c)]. The offers
of services to be rendered by Century was not silent with regard to
“clients’ primary goal; such goal was absolutely rejected as not
feasible. [i.e. App. C, (X-6c; X-113c; X-232c; X-251c; X-290c; X-
293c)]}. All clients knew or should have known that they were to raise
their own limited offerings as disclosed in the actual offers of service
{App. E, (1 e.); See, admission by the Government: “most clients
knew;” also see, App. D, (6 d.): U.C.C. § 2-202: “Final Written
Expression” The plain language used to describe the obligations of the
contracting parties was understood by the contracting parties and
therefore such agreement which offered an alternative means by which
clients could achieve funding could not be described as reasonably
calculated to deceive persons of ordinary prudence and comprehension
U.S. v.Van Dyke, 605 F.2d 220, 225 (6th Cir. 1979). Also, in Mutual
Life Insurance Company v. Phinney, 178 U.S. 327, 340, 20 S. Ci. 906
(1900) the United States Supreme Court decided, “If there was a full
and fair understanding between these two men in that matter . . . and each
relied upon that understanding . . . (no fraud) because it would be
unnecessary for the company to forfeit by legal proceedings what the
opposite party had voluntarily relinquished.”” Why should Appellant be
held accountable for that which the clients voluntarily relinquished?
When the clients failed in their endeavor to achieve their primary goal,
funding, through the agreed upon alternative means, the Court below
concluded that Appellant did nothing to further the “‘clients’ primary
goal.” In Calderon v. Atlas S.S. Co., 170 U.S. 272, 280, 18 S. Ct. 588
(1898), this Court held that where the language is clear and explicit, there
is no call for construction by the courts to find the presumed intention of
Le ws
the parties . . . such parties are presumed to know the force and effect of the
language in which they have chosen to embody their contracts. Appellant
defrauded no one by accepting money in exchange for the services which
were subsequently rendered pursuant to a written agreement to wit no
misrepresentations, no overreaching, and no duress was established in the
record as to those contracts. |See, App. D, (6 d.): U.C.C. § 2-202, supra]
The Court alleges an active misrepresentation in attempting to establish
“clients’ primary goal” as originating within Century Consultants,
however, the advertisement [App. C, (X-328c)] did not solicit a single
“alleged victim.”” Morgan testified as having coincidentally seen the ad at
the time he was introduced to Century, however, “that’s really all there
was to that.” [App. C, (Tr. 494c)]. All clients were referrals [| App. C,
(Tr. 102c; 117c; 298c; 366c; 470c; 494c; 645c)]. No other “alleged
victim” saw the ad which querried businessmen needing /imited offering
and/or possible private placement venture capital.
Notwithstanding the fact that no “alleged victim” was solicited by the
ad, the Court’s interpretation of the ad conflicts with the common law .. .
such ad, “Need Venture Capital?” etc. is not a specific offer to the
public looking for acceptance, rather it is merely an announcement that
Century Consultants has services available which seek to remedy such
problems. [See, Corbin on Contracts, 1 Vol. Ed. (1980) § 25, p. 43;
App. D, 3 d.)]
The case law with regard to misrepresentations made by accused which
were known to be false when made is quite extensive. [i.e., U.S. v.
Rabinowitz, 327 F.2d 62 (6th Cir. 1964); U.S. v. Herr, 338 F.2d 607
(7th Cir. 1964); West v. U.S., 68 F.2d 96 (10th Cir. 1933) and others | I
have no knowledge of any case law whereby representations made by
“alleged victims” not supported by money, property, or promise of
performance by accused led to a finding of a scheme to defraud within 18
U.S.C. § 1341.
The Court’s opinion attempts to redefine 18 U.S.C. § 1341 mail fraud
by insinuating that because ‘clients’ primary goal” was their stated
purpose for coming to Century, Appellant had somehow obligated himself
to seek such funding irrespective of the parties’ “final written expression”
and notwithstanding the facts that such “clients’ primary goal” was
specifically rejected by Appellant and was neither supported by consider-
ation or originated by and/or reinforced by Appellant. Such construction
of the statute and Indictment clearly conflicts with a litany of case law
within and outside of the Sixth Circuit Court of Anpeals.
REASONS FOR ae THE WRIT
The Court’s opinion attempts to redefine what constitutes knowledge
and intent under 18 U.S.C. § 1341 by suggesting mere opinion, lack of
ats
future performance, an “unalleged” unsound business concept; and
various “alleged” misrepresentations not evidenced by the record (testi-
mony and exhibits) demonstrates “specific intent” and somehow negates
the history and time proven methods which formulated Appellant’s
(Century Consultants) belief in his ability to assist clients in meeting their
needs—such Court opinion clearly conflicts with a litany of case law both
within and outside of the Sixth Circuit Court of Appeals.
II
The Court’s justification for finding “knowledge” and “specific intent”
rests upon inferences drawn from client’s lack of success and Appellant’s
omission to act upon “‘clients’ primary goal.” Petitioner wishes to review
such collateral theory of “specific intent” first upon the reasonableness of
the Court’s inferences in light of charges set forth in the Indictment, and
secondly, upon how the Court can reconcile Appellant’s “good faith
defense,” which is ordinarily a complete defense of fraud, in light of the
Court’s collateral theory.
“Expressed Opinion” Inferences Abound
Century did represent to seven clients via the retainer contracts
(Appellant authored four), that with the proper investment capital such
businesses could operate at a profit. None of the seven clients’ (pre-
“business divorce”) businesses were ever capitalized to the extent upon
which the representation had envisioned. Where the clients’ businesses
did open their doors to the public, the trial court precluded bonafide audits
of their operations to see if such businesses ever operated at a profit or
otherwise. [App. C, (Tr. 28-3 1c)] Also note the question of operating at a
profit was moot as to Edelman, Morgan and Webster as their business
endeavors were never open to the public.
The Court argues that the “expressed opinion” in each retainer letter
[i.e. App. C, (X-5Sc)]: “We believe that your basic program is sound and
that with the proper investment capital you could operate such a business
at a profit,” evidences a knowing misrepresentation from which the jury
could find Appellant had “no basis in fact for believing that the business to
be operated . . . would be profitable, and that Appellant’s expressed
opinion to that effect was therefore not actually entertained or at least not
honestly entertained.” [App. A, (4 a.)] The rate of failure in new
businesses (75-80%) is not particularly relevant to such clients, accord-
ing to expert witness Abel. (Tr. 1072c) Most businesses fail because of
poor management; and not because the business concept is not viable.
[See, SBA booklet: App. F, (1 f.)]
Petitioner believes such “expressed opinion” does not reach the heart
of the bargain nor does it pertain to the quality, adequacy or price of the
Comprehensive Business Plan; such representation amounts to nothing
more than mere opinion or “puffing”’ which is not cognizable under federal
mail fraud statute, 18 U.S.C. § 1341. U.S. v. Regent Office Supply Co.,
421 F.2d 1174, 1179 (2nd Cir. 1970) and U.S. v. Pearlstein, 576 F.2d
531,540 (Fn. 3) (3rd Cir. 1978). Such expressed opinion did not guarantee
success or deceive persons of ordinary prudence and comprehension. The
“alleged victims” must have believed that “with the proper investment
capital,” they could operate such businesses at a profit, otherwise, why
would such clients seek additional capital and/or ever go into business for
themselves. Neither the Indictment nor the clients claimed Appellant misled
by such “expressed opinion.”
Alleged Lack of Performance by Appellant
The Court also claims that “‘Freeman further misrepresented that
Century would provide the sources . ‘investors of his clients (Tr. at 123,
133, 162, 172).” [App. A, (5 a.)] Representations of Phase I] funding were
made to Edelman (Tr. at 123c; 133c; 162c; 172c); however, what
prevented Freeman from putting together the “financial proposal” that he
was going to use to seek financing for Mr. Edelman’s Phase II funding (Tr.
123c)? What prevented Appellant from carrying out his assurance to Mr.
Webb (Tr. 133c) that Appellant believed he could raise Edelman’s
“secondary financing” (Phase II) which was required to execute the Webb-
Edelman buy-out option agreement [App. C, (X-299, 300c]? Note
Edelman’s continued belief that Century would help raise funding is based
upon discussions and the contract (Tr. 162c). Also note the Court was not
reluctant to cite what reinforced the belief of the client even though such
question and answer was objected to and sustained at Tr. 162c (See,
Fair Trial Argument, para. 4, p.25 ). At Tr. 172c Conrad relates his
memory of the bargain when the “Best Evidence” of the agreement
remained unread in his hand, Government Exhibit I-11 (Tr. 171c).
Conrad did recall the condition precedent to Appellant’s undertaking
“major financial step” —Edelman must raise initial se+d capital |Conrad’s
memory was wrong on amount of seed capital . .. and omitted to state how
much capital was to be raised via Phase I “limited offering” —see Tr.
176—77c, testimony from document:Conrad stated, Edelman and princi-
pals must raise $250,000 limited offering, |App. C, (X-295c, para. 3c)|
and such “‘limited offering” capitalization was described by Century as
the “hardest part.” (Tr. at 172c) Whose conduct prevented such future
performance . . . if Edelman, then no misrepresentations.
Petitioner believes Edelman’s rights to such future performance
terminated upon his decision: “I elected not to carry on with that deal.”
[App. C, (Tr. 149-50c)]| The Court’s finding of misrepresentation rests
upon Appellant’s non-performance, however, such a conclusion of “fact”
is inconsistent with Appellant’s contractual rights under the agreement.
[See Corbin on Contracts, | Vol. Ed. p. 1010-1011 § 1252 “Discharge
of Duty by Non-performance of a Condition;” also see “Restatement,
Contracts § 395 and § 274(1), App. D,(4d.)] The fact Appellant raised
no funds for Edelman does not support a finding of misrepresentation or
that Appellant never intended to perform. In Harrison v. U.S., 200 F
662, 665 (6th Cir. 1912) that Court stated:
**... the scheme cannot be found in any mere expression of honest
opinion as to quality or as to future performance. There must be the
underlying intent to defraud.” [/d at 665]
Appellant performed all that he could pursuant to Edelman’s contract
by delivering up the Phase I Comprehensive Business Plan | App. C, (Tr.
at 162c)] How does one approach an “institutional investor” (source) to
secure secondary funding for an individual who has “elected not to carry
on with that deal?” Appellant’s representations to Edelman, though
unfulfilled, were not false when made within the context of the bargain
struck to wit Edelman breached. In light of Mutual Life Insurance Co. v.
Phinney, supra, at 639-40, Edelman’s actions would constitute an
abandonment and rescission of this contract with respect to both parties
and thus excuse Appellant as to any future performance as of time of
breach. The Court was mistaken with respect to Appellant’s duty to act
prior to the breach or thereafter.
Alleged Unsound Business Concept
The Court claims that this case “involves an unsound concept for
raising large sums of capital”... [App. A, (7 a.]) And such claim might
have some resemblance of truth if Appellant had told clients to go out and
try to raise upwards of $20 million via “limited offering;” | App. A, (6 a.)]
however, Morgan’s limited offering was for $200,000 not $20 million (Tr.
497c). Century’s “‘nebulous’ answers” to Morse [App. A, (3 a.)] were
really offers of service by Century suggesting just how Morgan, not
Morse, might resolve his secondary funding problems and still own parts
of an amusement park called “* Ameripark.” [See, Govt. Ex. G3 thru G5:
App. C, (X-254-59c)] Mr. Morgan wanted to know who he could contact
to raise his own secondary funding—which is why he termed Century's
offers to seek funding for him as “nebulous.” Morgan wanted such
answers but he did not want to pay for them or the business plan. Contrary
to the Court’s opinion, no “limited offering” capitalization plan called for
more than $250,000 to be raised by the client.
It should be noted that the business plans prepared by Century (limited
offerings) were the type of reports clients need to achieve funding
according to expert witness Abel |App. C, (Tr. 1075-76c)}:
“These reports, I think, would be helpful to the clients in taking
some of the steps along the way to get funding, so in that sense, I
think they would be helpful to obtain funding.” /d at 1075-76c
-10—
The number of “limited offering” only types of clients—Haas (App. C,
(Tr. 1107-O8c)], Whitmer |App. C, (Tr. 1085c)]}, Fouts | App. C, (Tr.
595-96c)}], Brown [App. C, (Tr. 1548c)], and others |Government
admitted eleven other businesses succeeded; App. C, (Tr. 1787c)]—that
succeeded in raising large sums of capital in single phase business plans
clearly negates the Court's theory. The client's failure to “presumably
know their own capabilities” for raising limited offering venture capital
does not evidence an unsound business concept. U.S. v. Rabinowitz, 327
F.2d 62 at 81 (6th Cir. 1964) (ie. Rabinowitz clients could not
appreciate their own desire to knit for money.)
Although “secondary financing” was not achieved for Edelman,
Morgan, or Webster due to their failure to raise “initial capitalization,”
such failure does not evidence an “unsound business concept.” Consider
the Coville Engineering project that successfully concluded a limited
offering and did not fail for want of “secondary financing” and Webster's
successors who built the Sleepyhollow Shopping Center on the site
Appellant selected with the ideas from Century’s business plan | App. C,
(Tr. 793-94c)]; such client projects demonstrate the soundness of raising
large sums of capital in two phases.
The judicial edict of the Sixth Circuit that such business planning
was unsound for raising large sums of money is contrary to common
knowledge within the financial community (See, Sound Business
Concept, p. 15-17 ) as well as Appellant’s experience as a business
consultant of 15-plus years.
Various Alleged Misrepresentations Not Evidenced by the Record
The Court’s argument that the instant case has a similar factual basis
with U.S. v. Shelton, 669 F.2d 446 (7th Cir. 1982) is not demonstrated
by the record.
The Court’s reliance upon the Webster testimony at Tr. 648 | App. A,
(5 a.)] does not evidence “that Freeman intentionally misrepresented to
them (clients) that Century had procured investors for several projects.
Webster's testimony was repetitiously verbose and vague as to the
conversation which took place:
“there was a construction firm, I can’t remember the name, but he
didn’t read off the name . . . / think it was, that they had helped and
financed . . . there was also a—oh, amusement park type thing . . .
it was American, or Americana, or something like that, and also a—
oh, right here in Grand Rapids there was a hotel or something they
were financing, some type of complex they were putting up ... He
did mention he knew some pilots personally that liked to finance this
type of thing, because they had a lot of extra income that they needed
financing ... " Id at 648-49 (Emphasis added)
Webster cites the same construction company brochures which were
-jj-—
shown to Erbe. |See, e.g. App. C, (Tr. at 96-7c). However with Erbe, the
Government attempted to clear the air on who “they” was:
Q: Forgive me, Mr. Erbe, is it your testimony that Mr. Freeman
said they had raised funding for the raising of the house project?
A. No. The company that was doing it. The company that was
raising these houses, the construction company or whatever it was.
Id at Tr. 97
The Government was not very interested in clearing up who they was
with Webster's testimony because certain portions of the testimony did
indicate who “they” might be (e.g. at Tr. 648c; “there was a hotel or
something they were financing, some type of complex they were putting
up’’); Century wasn’t in the business of financing “limited offerings” or
“putting up”(constructing) some type of complex or hotel.
The Court takes the Webster testimony (See, e.g. Tr. at 648c: “there
was also a—oh amusement park type thing like Cedar Point; it was
American, or Americana, or something like that’) and states that such
representation translates into a Freeman representation “that Century
had helped finance Americana Amusement Park, when in fact,
Americana’s promoter was one of Century's dissatisfied clients who
testified against Freeman at trial.” [App. A, (5 a.)] However, such
specific testimony does not even allude to financing by Century or
anyone else; secondly, Americana’s promoter did not testify at trial—
Mr. Willis E. Morgan d/b/a Ameripark, Inc. testified at trial; and
finally, petitioner believes that such piling of inference upon inference is
inconsistent with reasonable inferences which may be drawn from such
testimony. Whereas She/ton defendants did misrepresent actually fund-
ing other businesses, the testimony in the instant case indicates that
Century helped many clients, but the clients sought their own funding.
The Shelton case is dissimilar in other respects to the instant case as
well. Appellant and Century were independent consultants not part of
the “alleged victims’” businesses via management contracts; Shelton
defendants were principals who directly sought funding upon false data as
to the financial well-being of both past and present companies thus
defrauding investors, however, the “alleged victims,” in the instant case,
purchased services for their own independently run company—they did
not purchase stock and they were to seek their own funding; moreover, the
Appellant, although foreclosed from performance of funding clients’
businesses (Phase II) as an independent financial intermediary, he would
have only received 5% if successful and not 21.5%, which two of five
Shelton defendants exacted and divided into equal shares; and finally,
in the instant case, there is a distinct absence of actual misrepresentations—
impressions and conclusions by the alleged victims” (i.e. ‘clients’
primary goal”) are not misrepresentations made by Appellant.
-12.
Both the Government and the Court infer that Appellant had no
sources and, therefore, even if the acknowledged conditions precedent
were met, Appellant would not perform secondary funding because he
had “no” sources. |App. A, (6 a.)] Such argument results from piling
inference upon inference [See, Jngram v. U.S., 360 U.S. 672, 680, 79 S.
Ct. 1314(1959)]. The Court argues that Oberman’s testimony offered by
Appellant to rebut the charge that he had “no” sources somehow is
negated because “none of Century’s clients who testified ever had their
project presented to Mr. Oberman, and Mr. Oberman testified that
Freeman never presented a project to him as a possible investment after
the project (Coville Engineering) fell through.” |App. A, (5 a.)] How
can Appellant be expected to approach Mr. Oberman with Edelman’s
project, a man who quit before he got started (Tr. at 149-50c)? How can
Appellant be expected to approach Mr. Oberman with Webster's project,
Webster's embezzlement would have to be disclosed . .. Oberman or any
other source would not touch such a project | App. C, (Tr. 1668-70c)].
How could Appellant approach Mr. Oberman with any of the seven
clients’ “limited offering” capitalization projects considering both Mr.
Oberman and Appellant knew such action would violate S.E.C. and
Michigan Securities Regulations. |App. D, (4 d.)] Any such direct or
indirect solicitation of sources to Oberman by Appellant would have
defeated the limited offering exemptions to wit Appellant warned the
clients to seek legal advice in order to protect. | App. C, (%-295c)] Had
Appellant solicited Oberman for such purposes (“limited offering’’), he
would have been making a public offering of unregistered security as the
exemption from registration would have been defeated. Again, the
Court’s finding of fact is contrary to Appellant's justifiable omission to
act; never-the-less, the Court infers unlawful intent. Mr. Oberman’s
testimony clearly establishes a source ready and willing to review any
project Appellant may offer for his review. (Tr. 1225c)
The Court’s no sources theory is contrary to: (1) common law
contracts (i.e., Appellant was under no obligation to seek funding for such
“future” service upon breach of contract by the other party); (2)
security regulations in every state (i.e., since Appellant was not a
principal in any client’s business, had he presented such client's
“limited offering’ prospectus to Oberman, Appellant would be “in
effect” selling an unregistered security in violation of the “limited
offering” exemption from registration); and, (3) common knowledge as
to the availability of sources via books, magazines, newspapers, expert
witness testimony of Abel (Tr. 1075-76), Appellant's testimony (Tr.
1659-60c); as well as the testimony of two “alleged victims”: Clark
(Tr. at 407c), and Morgan (Tr. at 492—93c). The no sources allegations,
para. 4b-e, reflect a complete absence of knowledge with regard to the
ee
workings of the financial community.
This Court should further note that no client’s testimony even alludes
to the alleged misrepresentation described in para. 5, Count 1 [App. C,
(A-9, 10c)]; nevertheless, the Court below [| App. A, (6 a.)] enumerates
such allegation just as if the testimony exists:
“(S)hould they be accepted as clients, (Century) could tap
extensive sources for financing.” Jd at 6 a.
Has the Court demonstrated proof beyond a reasonable doubt of
Appellant’s “specific intent” to defraud? Proof of intent is paramount in
a mail fraud case because the “good faith” of defendant is ordinarily a
complete defense. U.S. v. Foshe, 578 F.2d 629, 634 (Sth Cir. 1978)
History of Century Consultants (1971—Business Divorce): A
Sound Business Concept, Appellant’s Good Faith Defense
There is an abundance of evidence with regard to Appellant’s good
faith performance and intention to carry out the future promises and
representations made pursuant to the contract(s) and such actions
constitute a defense which the Appellant may assert in a prosecution
under the Mail Fraud Statute, 18 U.S.C. § 1341. Sparrow v. U.S., 402
F.2d 826, 828-29 (10th Cir. 1968).
Century Consultants has “helped” many clients achieve funding via
business planning. The program (financing and marketing concepts) for
developing client relations was based upon successful clients who
prospered far beyond the consulting fees charged. (U.S. v. Shelton,
supra-distinguished) When Appellant decided to slowly withdraw from
Century back in February 1974, he drew up a memorandum to guide
incoming management personnel . . . not only with regard to managing
the company, but he also outlined how to receive and retain “New
Business” (prospective clients). [See, “New Business:’’ App. C, (X-
348-49c)] Century Consultants was never in the business of just getting
retainers; Century’s previous clientele not only paid the retainer and
remaining balance for the production of the business plan, such clients
also became a “very important source of income” for subsequent work
[i.e., direct marketing, personnel search, negotiating contracts and the
like; [See, App. C, (X-347c), 2/4/74 Memo: para. A (3)]. According to
Government witness Wagner’s testimony, Century was primarily in the
business of producing business plans calling for limited offering
capitalization by the client (Tr. at 948c); the fact that such method was a
successful means of attracting equity capital (“venture capital’’)
supports the basis for such business practice.
All the while Appellant worked at Century, one strict rule was
adhered to according to Wagner (Tr. 950-5 1c) and such rule was also
set forth in the Eckersberg Memo:
**... this is a firm rule and no exceptions ... NO ONE in our firm
‘Hil
should ever, under any circumstances whatsoever, involve himseif in
the sale of securities (“limited offering”)... Always remember it is our
job to PLAN and it is the lawyer’s job to (ac)cept or reject the plan and
thereafter guide his client in any sale of securities.” Jd at X347-48c
Century Consultants’ doors would not have remained open long
enough for even the first “alleged victim” (5/31/74) to pass through if
such prior clients had been unsuccessful in raising their capital as
Century would not have received the remaining balance due on the
business plan or such subsequent work. The alleged “unsound business
concept” lacks substance where the client actively pursues funding as
agreed, instead of “electing not to pursue that deal.”
A Sound Business Concept
The Court contends that Century Consultants developed an unsound
business concept for raising large sums of money—but Appellant’s
established business practices are recognized and accepted by numerous
experts in the world of venture capital.
Clients came to Century seeking venture capital for their companies.
Such companies were either in the start-up stage or they were being
reorganized as new companies. Century Consultants held free explora-
tory meetings to gather information necessary to assess the viability of a
prospective client’s business. Contrary to the Indictment, para..7, the
Information Booklet (i.e. sample, X-260-75c) handed each client
before the close of such exploratory meeting completely disclosed, on
the first page, Century’s function and such, explicitly advised why the
information was needed:
“Information (is) to aid us in determining what should be done,
how it should be done and on what basis.” (Emphasis added)
The viability of a client’s project could not be assessed without first
obtaining considerable background information |App. F, (3 f.): i.e.,
“The financial intermediary might also be judged by . . . the thorough-
ness with which he reviews information about the client company.” /d
at 54]
After the information was analyzed, a written offer of services was
provided to the clients and their attorneys which spelled out what could
be done (i.e. design a comprehensive business plan); how it should be
done (i.e. offer outlined what subject matter would be addressed,
including a capitalization plan designed for the client to raise the capital;
and upon what basis (i.e. the retainer fee and a subsequent payment for
the extension of credit was set forth for the development of a Phase I,
comprehensive business plan, X-233c).
The retainer letter specifically advised the client to seek legal counsel
on the matter of how to transform the business plan into a limited
offering circular and thereafter how to sell same within the limited
I)
offering exemption. |i.e. App. C, (X-232-33c)] In Forbes magazine
(October 11, 1982), Mr. Thomas P. Murphy writes:
“This article is about the Business Plan . . . (an) absolutely
essential document you should assemble before launching a new
buiness . . . (i)t becomes a “Private-Placement Memorandum”
(“limited offering” circular) if you intend to expose your plan to
very many people in an effort to raise capital. If that is the purpose,
you should have it reviewed by a lawyer. He will keep you this side
of the SEC’s limitations on private offerings (limited offerings) and
make his presence known by pointing out risk factors...” [/d at
160, App. F, (6 f.)]
How sound is Appellant’s advice in rejecting funding by Century (i.e.
private placements to financial institutions) and opting for limited
offering funding by the client (i.e. to individuals the client knows). In
Source Guide for Borrowing Capital, edited by Stanley M. Rubel
(Library of Congress, Catalog Card No. 76-51983) (1977), p. 63 [App.
F, (5 f.)]: Mr. Rubel, in an article entitled “Private Financing Sources,”
States:
“There are a variety of sources for private financing. The greatest
amount of capital to start a business is raised from friends,
relatives, customers, suppliers, and individual investors. General
estimates indicate that most capital for new and emerging busi-
nesses is raised from these informed sources.” Jd at 63 (Emphasis
added)
And on the following page [App. F, 5 f.), supra at p. 64], Mr. Rubel
expands upon his reasons why limited offerings to individuals is the
preferred alternative for start-up companies because:
“There are few projects of this nature that are funded by the
organized venture capital industry.” Jd at 64
Thus, Mr. Rubel agrees with Appellant’s recommendation that clients
whose business were start-ups [See, Rubel’s definition—supra at 64,
App. F, (5-6 f.)] should seek limited offering capitalization by the
client versus private placement funding.
The financial structuring, set forth in the business plan(s), was
consistent with—the best practical method to obtain the most capital—
and stay within security exemptions as experts so advise. Alan J.
Barton, counsel for the National Venture Capital Association (green
book), supra at 79, |App. F, 3-4 f.)] states:
“Since registration, which requires the filing with and clearance by
the SEC of a lengthy disclosure document, is a relatively burden-
some and costly procedure, the exemptions provided by the 1933
Act are very significant to the venture entrepreneur, and he will
have to structure financing transactions to enable him to (use)
~16-
these exemptions.”
It should be noted, not only did Appellant structure the client's financial
pians within such exemptions but he warned the clients to have their
attorney explain the limited or private offering exemptions (X-295c).
The offer of service(s) took into consideration the perimeters respecting
the amount of money seed companies or start-up companies might
properly seek in their endeavor to secure venture capital and still provide
for managerial control, which every business plan so provides (i.e. Erbe's
offer of service, X-292c). In Business Week Supplement, September 13,
1982, entitled “Venturing into Venture Capitalism,” at p. 128-29 | App.
F, (6 f.)| the article suggests:
... “Entrepreneurs will come around with a detailed business plan . . .
Generally, seed companies can require up to $300,000, while
start-up financing begins at $500,000. Entrepreneurs are usually
reluctant to give up majority ownership.”/d at 128-29
This Court should note that Century's offer of services concerning all
clients’ business plans never involved more than $250,000 in Phase I
funding (i.e. seed capital and/or limited offering funding combined); as
can be seen, such was the amount that newer companies might generally
require for the initial stage according to such Business Week article,
supra at 129 (6 f.).
The Court states that comprehensive business plans did nothing to
further the “‘clients’ primary goal’’ but the experts disagree. Brian
Haslett and E. Smollen |App. F, (3 f.), supra at p. 22 | state:
“When raising equity capital, your business plan is a vital sales
tool . . . prospective backers will—or should— insist on reviewing
your proposal before considering any investment seriously. Some
will not even meet with an entrepreneur without first seeing his
business plan.” Jd at 22
The Court demonstrates a lack of appreciation for the “inherent utility”
of the business plan as a means for providing the clients with what they
desire—money. U.S. v. Rabinowitz, supra at p. 66. Appellant's
business practice was consistent with legal and practical considerations
with regard to raising venture capital for start-up companies.
As to Secondary Financing—Phase II Funding by Century
Noclient ever came to Century with a business that was a candidate for
a “private placement” in the initial stage. Thus where clients’ venture
capital needs were greater than what could reasonably be raised via
limited offering, Century developed a financing program in stages as the
experts agree “there are few projects of this nature (start-ups) that are
funded by the organized venture capital industry” at the initial stage.
|supra, at 64; App. F, (5 f.)] However, after successful completion of the
initial stage funding, secondary funding is viable via venture capital
me
companies even though such client companies may still be operating at a
loss, according to Mr. Rubel, supra (6 f.) at 65:
“Second-stage financing describes an investment in a company
that is producing . . . The company needs working capital and
expansion capital. Although it has clearly made progress, it is
probably still operating at a loss. Both venture capital companies
and SBIC’s tend to invest at this stage.” /d at 65
This Court should note Edelman and Webster’s offer of service(s) fully
incorporated such accepted financial principles and the Coville Engineering
project Appellant developed, proves the feasibility of financing in stages.
The Court claims “that Freeman could not have believed, or honestly
believed, that he would procure such sources of capital . . . because there
were none.” | App. A, (6 a.)] However, Appellant’s offer of proof to rebut
the charge, “no sources,”’ went far beyond the mere testimony of what the
Court below called a single “source” witness. [App. A, (6 a.)] Appellant
introduced the green book (Tr. at 1659c) Guide to Venture Capital
Sources, “4th Ed.” by Stanley M. Rubel (Library of Congress Catalog
Card No. 76-51894), (1977) as evidence of his knowledge on how to
approach and locate bonafide sources [See article and listing, “United
States Venture Capital Companies,” p. 171-332 supra, Appellant cited
three of 156 pages. |App. F, (4—5 f.) and (7-9 f.)
Moreover, the Guide to Venture Capital Sources has been “designed
_ to assist businessmen who are currently seeking venture capital for their
companies,” according to the book’s preface; the author goes on to state
in the preface, ‘*(t)he book will also be valuable to many professionals
who can assist early stage companies—investment bankers, commer-
cial bankers, consultants, lawyers, accountants, and others.” [App. F,
(1 f.)] The Court's theory that “(t)he case before us also involves an
unsound concept for raising large sums of capital” | App. A, (7 a.)] is
obviously not based upon the accepted practice and experience of the
financial community (i.e. green book) but rather upon the clients’
inability to perceive their desire and capabilities to succeed with an
agreed upon plan.
Mr. Silver's article, appearing under Chapter II, ““How to Raise and
Utilize Venture Capital,” ‘The Financial Intermediary,” at page 54 in
the green book [App. F, (2-3 f.)] mirrors Appellant’s Phase II—“future
performance” offer of services to Edelman and Webster |[See, App. C,
(X-296-97c and X-233c)]. As set forth therein [p. 54, 2-3 f.)}:
“Financial consultants will frequently analyze the need for funds,
prepare a private placement memorandum (“financial proposal”)
and make introduction to sources of money (“pre-negotiations”). . .
(a)ll three financial intermediaries (consultants included) charge a
fee at closing of approximately 5% for venture capital (same as
Appellant) . . . (c)onsultants and investment bankers normally charge
retainers for preparing the private placement memorandums plus
reimbursement of out-of-pocket expenses (same as Appellant).
The article goes on to state:
“To the entrepreneur who needs venture capital but doesn’t know
where to find it, the financial intermediary reduces his cost of search . ..
(t)he financial intermediary offers the client a personal relationship
and knowledge of the venture community that should save time and
facilitate much greater impact with venture sources . . . (a)nother
reason for using a financial intermediary is to prepare your company’s
business plan.” /d at 54 (12f)
Mr. Silver's credentials are impressive and include three years in the
credit department of Chase Manhattan Bank; A.B. and M.B.A. from
the University of Chicago, and the author of several books and
magazine articles concerning the entrepreneur. Appellant's business
concepts for raising large sums of capital are accepted and practiced in
the financial community. The business plans (i.e. X-31—101c) and
private placement memorandums (i.e., “financial proposals” like
Coville Engineering, X-352-400c) are necessary steps if one is to tap
the “many, many sources of funds for ventures such as any of these (i.e.
Herbert, Brown, and Webster's business plans reviewed by Abel),or any
other venture that you might imagine,” according to expert witness
Abel at Tr. 1075c. Appellant did demonstrate not only an appreciation
(need) for taking these steps, he also demonstrated a knowledge of
where to go (seek sources) once those steps have been taken. The
Court's denunciation that “clients were never given an opportunity to
examine potential financial sources because there was none” | App. A,
(6 a.)] exemplifies the lack of appreciation for taking such necessary
steps prior to contacting such sources. Clearly, Morgan’s desire to
know “exact financial sources Century would tap” for second and third
phases | App. C, (Tr. 498c)] prior to even contracting for such services
was an unreasonable request. |See, Ernest D. Chu statement, App. F,
(2 f.)] Neither Appellant nor any other financial intermediary could
have shown those clients “potential financial sources” prior to retaining
a consultant to prepare the “basic financial proposal” for the secondary
financing.
The right to freely negotiate and thereafter contract would be dealt a
serious, if not deadly, blow if U.S. v. Freeman, supra is not reversed.
The Court translates: representations of a ‘future performance” (Tr.
123; 133; 162; 172), unsuccessfully funded businesses (via “limited
offering”), and the lack of profitability of businesses (alleged victims)
that never opened to the public, into an unsound business concept for
raising large sums of capital.
$e
In light of the Court's decision, the contracts meant nothing. The
Court's opinion holds a seller of such services (business plan and/or
financial proposal) responsible for guaranteeing “limited offering”
capitalization despite the client's unwillingness to raise their own
limited offering as proscribed by law and acknowledged by the parties; it
also holds such person(s) responsible for guaranteeing profitability of
such businesses, notwithstanding the client's lack of effort, merely
because Century expressed an opinion that the client’s business
concepts were viable . .. who would have thought Colonel Sanders with
a social security check in one hand and a chicken recipe in the other
could build a profitable business or that a “Pet Rock” would be a
profitable and viable business concept.
The Court’s interpretation of the written and oral representations
offered and acknowledged by the contracting parties would have a
chilling effect upon the financial community's willingness to prepare
business plans, financial proposals for private placements, limited
offering prospectuses (prepared by attorneys), and numerous other
documents relative to their financial advice with respect to any type of
proposal for venture capital if failure of the client receiving such work
product could translate into a long protracted criminal proceeding
ending in a criminal conviction. Moreover, tens of thousands of civil
suits could also be filed by such clients seeking legal redress for fees and
damages as a result of such client’s failure to succeed with the work
product because of their own failure to appreciate their own capabilities
and willingness to succeed. U.S. v. Rabinowitz, supra at 81. Profes-
sional services of such aforementioned variety would indeed cease to
exist if such professionals had to risk such criminal, and possibly civil,
liability because the trier of fact (jury and/or Appeals Court) could not
appreciate the legal signiiicance of what was actually contracted for and
delivered and what is or is not a sound concept for raising large sums of
capital.
As previously noted, the Court's justification for finding “knowledge”
and “specific intent” in fact rests solely upon the failure of the client’s
ability to raise the “initial capitalization’’ which was described by
Century as the most difficult task before them. Appellant’s omission to
act upon a future performance was consistent with common law
contracts and evidenced no ill intent of Appellant. The Court’s theory of
“specific intent” to scheme to defraud does not amount to proof beyond
a reasonable doubt. /N RE Winship, 397 U.S. 358, 363-64, 397 S. Ct.
1068 (1970), it was held, inter alia:
“The requirement of proof beyond a reasonable doubt has (a) vital
role in our criminal procedure for cogent reasons . .. Moreover, use
of the reasonable doubt standard is indispensable to command
~20-
respect and confidence of the community in applications of the
criminal law. It is critical that the moral force of the criminal law
not be diluted by a standard of proof that leaves people in doubt
whether innocent men are being condemned.” /d at 364
In United States v. Swarthout, 420 F.2d 831 at 833 (6th Cir. 1970),
the Court concisely stated the principle which required the dismissal of
that prosecution at the end of the Government's case:
“Under our system of justice it is not enough that evidence in a
criminal case might support a finding of unethical conduct or of
some violation of law. It is essential that there be evidence from
which a jury could have found the defendant guilty beyond
reasonable doubt of the particular offense of the federal criminal law
with which the defendant has been charged.” (Emphasis added)
The Court’s collateral theory of “specific intent” does not evidence the
Indictment’s alleged misrepresentations which were to have been made
by Appellant.
REASONS FOR GRANTING THE WRIT
Il
Para. 6 of the Indictment charges that clients were informed they had to
raise seed capital which would have to be paid to Century Consultants to
continue work on arranging the majority of the financing; the Court's
opinion alludes to para. 6 by arbitrarily holding that there was only one
type of business plan and that all funding beyond seed capital was
“secondary financing” which was to be obtained through Century
Consultants’ sources. However, the Court “omitted” the limited offering
business plans, which clearly were not any part of secondary financing
(contrary to Government’s admission) and disregarded the proof that
seed capital was not to be paid for anything other than the “credit” that had
been extended for production of the limited offering comprehensive business
plan. 11
The Court Committed Plain Error
The evidence in the light most favorable to the Government proves
the Court’s theory to be false.
The evidence, the contracts and alleged victims’ own testimony,
provides unrebutted proof that three distinctly different types of
business plans existed among the seven alleged victims that Appellant
met or dealt with prior to the “business divorce”:
A. A “limited offering” plan which specifically rejected “private
placement” funding to be obtained by Century Consultants and
specifically told the client that he must obtain his own “limited
offering” financing. No “seed capital” plan was discussed or
involved in this limited offering business plan. Four of the seven
=. ype
clients only contracted for this type of business plan: Herbert,
Erbe, Morgan, and the Clarks (X-5—8c; X-289-92c; X-401-04c;
111-14c),;
B. Aplan that called for nothing but “seed capital”: this plan was
provided to Jenkins for $500 (X-105-09c); this seed capital plan
was to be followed by a “‘limited offering,” however, Jenkins, after
raising the $15,000 as set forth in the plan. . . never came back to
Century Consultants because he went to a consultant he knew in
Lansing (Tr. 487c); and,
C. Aplan that called for two phases of financing: Phase I involved
a “seed capital” plan and a “limited offering” plan; Phase II
involved a “private placement” for which Century Consultants
agreed to develop a “second business plan,” referred to in the
contract as the “basic financial proposal,” for additional fees of
$50/hr. and thereafter to work as a finder on a contingent fee of
5% to locate “institutional” sources of funding. The only client to
contract under this single agreement encompassing both phases
was Edelman (X-293-98c). After paying his retainer and receiving
his business plan, Edelman decided against proceeding—his testi-
mony was... “I elected not to carry on with that deal.” (Tr. 149-
50; 155c)
Webster was offered the same type of contract as Edelman, but
Webster refused the Phase II finders’ fee work by Century when
the bargain was struck (i.e. No authorization until 6/9/75; X-227-
28c) and only contracted for Phase I work. (X-230-34c) After
paying his fees for the Phase I—limited offering business plan on
5/29/75 (X-229; 244c)— Webster entered into a separate contract
on 6/9/75 for the Phase II finders’ fee work wherein Century would
seek funding upon a contingency fee basis. (X-227-28c) Webster
only obtained $60 to $65,000 of his Phase I seed capital and limited
offering and admitted to embezzling his shareholders’ money and
thus, Phase II work was foreclosed by Webster himself.
Only Edelman and Webster’s “Phase II”’ portions of their contracts
called for Century Consultants to seek funding through Century
Consultants’ sources; seed capital was never to be paid to Century for
work to “obtain” any financing; Jenkins and Webster were the only
clients to raise any seed capital—Jenkins kept all $15,000 for his own
operating expenses (Tr. 476c); Webster raised $25,000 seed capital
(Tr. 652c) and paid $7500 of it to Century for the “credit” extended to
him [See, 2nd paragraph under: With Respect to our Fees . . . Phase I:
(X-233c)] for the production of his Phase I “limited offering’’ business
plan. Edelman’s contract called for him to raise $25,000 in seed capital
and pay the $8000 balance he owed on his comprehensive limited
»
offering plan (X-296c) but Edelman never raised any seed capital. Seed
capital was not paid to work on the majority of any client's financing as
paragraph 6 charges—it was to be paid to Century because Century
extended credit for development of the “comprehensive business plan”
under Phase I (X-233c).
The Court’s opinion states . . . “Should the client manage to raise the
seed capital, Century would then offer further services for obtaining the
second larger phase of capital on a contingent fee basis.”’ This finding
constitutes “plain error’’—limited offerings were not part of the
“second, larger phase of capital” to be secured by Appellant upon a
contingent fee . . . no contract or testimony supports the Court’s
inference (i.e. limited offering funding by Century Consultants).
Clearly, the fees tendered by five of the seven clients (Herbert, Erbe,
Morgan, Clark and Jenkins) were paid for nothing more than seed
capital and/or limited offerings type business plans; clearly, Webster
tendered the fees in question (i.e. $7500, Count 7) for nothing more
than a seed capital/limited offering type business plan (no fees were
tendered for his secondary funding contract (X-227-28c); and finally,
Edelman’s fees, as the contract clearly states, were paid for the
production of his seed capital/limited offering type business plan and he
foreclosed any future performance by his own decision.
The Court committed “plain error” when it “omitted” limited
offering funding by the client and arbitrarily held Appellant responsible
for “‘all’’ clients’ funding beyond the seed capital |contrary to Govern-
ment admission; See, App. E, (2 e.)|
REASONS FOR GRANTING THE WRIT
IV
The scheme to defraud as depicted in the Indictment, paragraphs |—
8, was not supported by a scintilla of evidence; Appellant did not
represent or otherwise promise funding by Century as described
therein, and such Court’s affirmance of Appellant’s conviction for mail
fraud is unconstitutional under the Due Process Clause of the Fifth
Amendment.
IV
The arguments set forth under Sections I, II, and III of the brief
demonstrate a lack of evidence regarding Appellant’s intent and the
various misrepresentations alleged as part of the scheme and artifice to
defraud as depicted in paragraphs | thru 6, Count | of the Indictment.
Such arguments demonstrate the deficiency of: the ‘clients’ primary
goal” as Appellant's representations to fund clients; proof of Appellant's
intent based upon lack of future performance when such non-performance
was justifiable (Tr. 123c; 133c; 162c; 172c); a variety of unalleged acts
=,
(Indictment) argued upon facts not contained in the record (i.e. ad,
expressed opinion, unsound business concept, etc.); various alleged
misrepresentations not contained in the record (i.e. Tr. 648c, no sources,
if accepted as client—funding by Century); and the Indictment’s single
business plan theory whereby all funding beyond seed capital was to be
raised by Century upon receipt of client’s seed capital monies notwith-
standing the fact that three different offers of services were contracted for
by the clients wherein limited offering funding was the client’s responsibil-
ity and seed capital monies were to be paid Century for credit extended for
designing limited offering type business plans.
Appellant further contends that the record is also void of any such
representation with respect to paragraph 7, Count 1; the only evidence
in the record with respect to how such information would be used—
appears on the face of the document |i.e. App. C, (X-260c); also See,
Sound Business Concept, p.15 : experts agree with Appellant's need
and use of such information. |
With regard to paragraph 8, Count | | App. C, (A-18c)], Appellant
further states that such alleged non-performance of promised acts
(funding by Century) as contemplated within the alleged “scheme to
defraud”’ should be adjudicated upon the individual contracts and
corresponding oral representations made thereto with respect to each
client. No client claimed Appellant did not act pursuant to the oral
representations and contract—only the Government and the Court
claim these individuals were due a performance not bargained or paid for
by the clients. To infer that any of the seven clients were due
“secondary funding” by Century is “plain error” even in a light most
favorable to the verdict.
There simply is no testimony by the “alleged victims” to support the
alleged misrepresentations that were specifically pleaded as “part of the
scheme and artifice to defraud” (para. 1-8, Count 1). The Court's
unpublished opinion is premised upon facts immaterial to Appellant’s
specific intent and non-existent as to Appellant’s alleged acts. The
‘clients’ primary goal” is and always was the subjective impressions,
conclusions, and desire of the clients. Petitioner believes that ‘‘clients’
primary goal,” if pleaded in an Indictment to demonstrate the existence
of a scheme to defraud, would give cause to quash such Indictment (i.e.
no mens rea of accused).
The scheme to defraud as alleged in the Indictment is not supported
by a scintilla of evidence. The “scheme to defraud” as portrayed in the
alleged misrepresentations as enumerated in the Indictment was never
demonstrated by any evidence . . . instead the Court below attempted to
demonstrate fraud via the clients’ failure to achieve their primary goal,
however such “facts’’ presented were either immaterial (i.e. subject
~24-
impressions, conclusions, and their desire) or such “facts” were
unsubstantiated by the record. |See, Appellant Denied Fair Trial
Argument, p. 25-27 | It is undeniably the duty of the Supreme Court to
insure that individuals are not convicted upon Indictments where the
evidence is totally devoid of one or more elements of the crime (i.e.
mens rea and actus rea). The leading case in this area is Thompson v.
Louisville, 362 U.S. 199, 80 S. Ct. 624 (1960), therein the Court
stated: ‘The ultimate question presented to us is whether the charges
against petitioners were so totally devoid of evidentiary support as to
render his conviction unconstitutional under the Due Process Clause of
the Fourteenth Amendment.” /d at 654. Petitioner contends that the
“no evidence rule” of 7hompson, supra, setting the standard for
Supreme Court review of State convictions is equally applicable to
review on certiorari to the Circuit Court of Appeals. The “no evidence
rule”’ is applicable to the Indictment and the facts set forth in the record
and such rule should be applied to a case wherein the scheme to defraud
as alleged in paragraphs |—8 of Count | is not supported by a scintilla of
evidence. Appellant was effectively denied the “due process of law” by
virtue of the Court affirming conviction upon an unsupported Indict-
ment. Amendment V, United States Constitution.
REASONS FOR GRANTING THE WRIT
Vv
Appellant was effectively denied his right to a fair trial by the Court
introducing extraneous matter not found in the record. Amendment V,
United States Constitution.
Vv
Throughout the Unpublished Opinion the Court below has introduced
extraneous facts cither not found in the record or such facts are
unsupported by the record. Appellant seeks reversal upon the following
misapprehensions of the “evidence” to wit the Court below premised
guilt:
1. The Court below alleged promises of funding by Appellant to
fourteen victim witnesses | App. A, (1-2 a.)], however Alexander, Green,
Susnjara, and Bosse never testified at trial; Dawson, Raleigh, and Boeldt,
all post-business divorce clients, testified as having no knowledge of
Appellant (Tr. 174c, Tr. 629-30c, and Tr. 294-95c respectively); the
Clarks testified as being only introduced to Appellant—no business
discussions (Tr. 367c); Jenkins couldn't recall any discussions he had
with Appellant (Tr. 474c); Herbert could only recall a 10-20 minute
discussion with Appellant limited to his problems and possible solutions
(Tr. 300-Olc); Erbe’s testimony recalls only representations of successful
funding by clients and not Century (Tr. 97c); Morgan said . . . “to do the
-2§—
consulting work, and they wanted $5000.” (Tr. 496c) . . . “Well Phase I
was for me to find $200,000—by making an offering, if you will, to 20
investors for $10,000 apiece. This was made clear to me before I parted
with any money” (Tr. 498c); and Morgan’s testimony confirms offers by
Century to seek funding (Tr. 497c: Govt. Ex. G-3, 4, 5) after he
successfully concluded his $200,000 limited offering (Tr. 498c), but
Morgan did not contract for any one of the three offers, he merely assumed
funding by Century (Tr. 498c)—Morgan never raised the $200,000 (Tr.
500c). The two remaining client’s testimony (Edelman and Webster)
proves up the existence of a contract calling for a Phase I limited offering
type of business plan and Phase II future funding services by Century
which were to be rendered upon completion of Phase I limited offering—
however such Phase II (“secondary financing”) services were foreclosed
by these clients (See, Argument II, p.7 _). The 14 “‘victim’’ witnesses did
not testify as alleged by the Court below.
2. Century did not mail an acceptance to the new client, accompanied
‘sy amemorandum. | App. A, (2 a.)] Clients either accepted or rejected the
memorandum which set forth the basis of employment. An offer is never
an acceptance; such is a basic principle of contract law.
3. Mr. Phillip Morse did not refuse to pay any more than the initial
$5000 retainer | App. A, (3 a.)] because Mr. Morse was not a victim and
he did not testify. Mr. Morse was the Government prosecutor.
4. According to the record, the written memorandum and comprehen-
sive business plan did not reinforce the clients’ belief of funding by
Century | App. A, (5 a.)] as such testimony (Tr. 162c) was objected to and
sustained by Judge Miles. Clearly the hypothetical situation (reinforced
belief) was not evidence.
5. Freeman did not misrepresent to Edelman that Century would
provide sources of investors (Tr. 123, 133, 162, 172) {App. A, (5 a.)]. As
previously discussed (Argument II, p.7 ), Edelman acknowledged his
contractual duty to seek limited offering funding, however Edelman
elected not to proceed, thus excusing Century’s future performance.
6. Contrary to the Court’s finding, Edelman understood prior to
paying $5000 (5/8/75, X-305c) and prior to receiving the business plan
what his obligations were. [App. A, (3 a.)] It was spelled out in the
agreement he signed (Tr. 155c) on 4/18/75 (X-289c); Edelman knew he
had to raise Phase I capital and repay credit extended to him (X-296,
para. 5 some 20 days prior to paying $5000 on 5/8/75.
7. The Court claims the reports repeated much of the information
originally presented to the consultants by the client [App. A, (2 a.)],
however petitioner submits for example: Mr. Herbert supplied eleven
pages of information (X-15-25c) and received 68 pages (X-33-101c);
Mr. Webster submitted four pages of information (X-236—39c) and
mI
received 84 pages (X-136-220c).
Expert witness Abel who reviewed Herbert and Webster’s business
plans (Tr. 1070c) stated, ‘‘—in each case there’s a charge set forth, and
the sections of the report are responsive to the charge. They do the things
they say they’re going to do.” (Tr. 1069c) The contracts outlined the areas
of business planning to be addressed (X-231c, para. 2), and Century
delivered as promised.
Throughout this brief, including the examples cited herein, petitioner
has demonstrated that such unpublished opinion has misapprehended:
who testified; what testimony was actually received into evidence; the
understanding of the parties as to what services were actually contracted;
as well as the differences between the financial plans (who was to raise
what funding and when and what each individual fee was being tendered
for) and all of which was clearly delineated in the exhibited contracts. One
can only conclude that where the reviewing Court substitutes argument
abound with extraneous facts not found in the record for actual evidence,
Appellant was denied the right to a fair trial and thus, the “Due Process of
Law” as guaranteed under the Fifth Amendment.
REASONS FOR GRANTING THE WRIT
VI
There is a plain conflict between the Circuits wherein the Court below
did not attempt to demonstrate: the existence of a conspiracy agreement; a
divergence from legal to illegal conduct; proof of Appellant’s membership
in the alleged conspiracy by independent evidence; and a single act
specifically alleged as “part of the scheme and artifice to defraud” as
enumerated with paragraphs | thri 8, Count 1, inclusively.
VI
No Evidence of Conspiracy
Count 8 (Indictment)
“1. The Grand Jury realleges and incorporates by reference herein, all
paragraphs of Count 1 of this Indictment excepting the last paragraph
thereof, as constituting a scheme and artifice to defraud, . . .” (Emphasis
added) [App. C, p. A-/8c, record of Court of Appeals)]
The arguments set forth under I, II, III, and IV of this brief demonstrate
the Court’s indifference toward the alleged scheme and artifice to defraud
as depicted in Count 1, paragraphs | thru 8. The testimony of the alleged
victims does not recount the misrepresentations described therein as being
made by Appellant, Wagner, or Powell. Instead, the Government and the
Court below have argued that the representations, impressions, and
conclusions of the clients’ desire for funding by Century (“‘clients’ primary
goal”) coupled with an ad, that solicited no one to Century for such
purpose somehow amounts to representations to “prepare a business plan
=27=
for each client which would show what methods of funding Century
Consultants would use to obtain funding for the client” (para. 4f, the
substantive charge of the Indictment). The Court recites various excerpts
of testimony (Tr. at 123, 133, 162, 172) relating specifically to only a
Suture performance detailed in a written contract to allegedly demonstrate
that Appellant misrepresented that Century would provide the sources of
investors for all clients beyond seed capital, however, the Court refuses to
review the limited context of such representations as to the individual
contracts and two parties’ subsequent actions which hindered such future
performance.
The testimony of Haas (Tr. 1104-09c) and Whitmer (Tr. 1084—90c)
demonstrate that Appellant’s prior dealings with clients (pre-Indictment)
were consistent with Century’s dealings with Herbert, Erbe, Morgan, the
Clarks, Jenkins, Edelman and Webster—only, these two previous clients
and others, succeeded (i.e., Brown, Fouts, Coville, and the like). The
Government did not prove that Appellant ever departed from legitimate
consulting services to an illegal activity. U.S. v. Wieschenberg, 604 F.2d
326, 331 (Sth Cir. 1979) The “clients’ primary goal,” as previously
stated, was their desire and not Appellant’s representation to satisfy such
desire. The Wieschenberg Court held:
“The proof adduced, which we must measure by the standard of
United States v. Warner (5th Cir. reasonable doubt standard), must be
proof of an agreement to depart from the legal course and proof of an
overt act in furtherance of the illegal, not the legal, objective.” Jd at 331
The testimony and exhibits adduced at trial clearly indicated that all
consultants acted pursuant to the contractual arrangements made between
the parties. The Court and the Government seem to ignore the fact that
prior to 12/31/74, the day Appellant resigned as officer, director and
employee and became a sub-contractor (Tr. 1607c), only three clients
were alleged to become victims. Appellant’s actions were consistent with
the agreed upon contractual performance. Herbert’s itemized time sheets
(X-10-12c) reveal about 37 hours of work by Appellant on his business
plan and a 10-20 minute discussion with Appellant concerning Herbert’s
problems and some possible solutions (Tr. 300-Olc). Erbe’s testimony
recalls Appellant explaining how other clients funded their own businesses
(Tr. 97c) and the presentation of the Erbe offer of service. And Morgan’s
testimony relates how the whole process was laid out— Morgan to find 20
investors at $10,000—before I parted with any money (Tr. 496—98c) and
Appellant only took an eight hour trip with Morgan to meet land owner:
(X-278c).
After 12/31/74, Appellant’s contact with Century Inc. and the clients
and/or their projects came at the request of Century management via a
~ 28 -
sub-contracting relationship which began 1/3/75. Appellant was no
longer a full time consultant at Century Inc. after Powell purchased the
stock (Tr. 1474c). Appellant was paid only for task assigned and
performed (Tr. 1030; 1495-96c); Appellant was paid to attend Jenkins’
free exploratory meeting and author the retainer letter whether or not
Jenkins retained Century Inc. Appellant had no further interest in Jenkins
(Tr. 1503c). Other than the two tasks relating to Jenkins, the only other
client work Appellant was assigned prior to 5/14/75 relates to going with
Edelman to get buy-out option for Kelly Color Labs in Morganton, North
Carolina (X-299-301c); holding a couple meetings to discuss offer of
services with Edelman and his attorney prior to the trip; and designing the
financial section of the business plan Edelman authorized Century Inc. to
prepare. Century Inc. did not request Appellant’s help with regard to the
Clarks; they only met informally with Appellant and discussed World
War II (Tr. 367-68c) . . . such limited interaction however did not deter
the Court below from finding Appellant guilty on the substantive charges
relating to the Clarks’ (Count 3 and 4).
Appellant’s sub-contracting arrangement continued through Powell
and Wagner’s partnership and into Century Corp. (Tr. 1495-96c), a
company whch was run independently by Powell and Wagner (Tr. 1492-
1520c). Appellant was assigned to design Webster’s financial section of
the business plan; to attend meetings with Wagner and Webster; and
negotiate a land option for Webster’s shopping center. However, Appel-
lant had no interest in the $7500 allegedly taken by fraud from Webster
(Tr. 910; Tr. 1500-O1c); he was only paid for hours worked (Tr. 1030;
Tr. 1493c). In U.S. v. Shelton, 669 F.2d 446, (7th Cir. 1982) the Court
below claimed similar facts with the instant case, however, with regard to
the conspiracy, the 7th Circuit Court noted an exact split of the monies
between defendant’s and various written and oral misrepresentations
regarding the soundness of the investment when such company was
shown by competent evidence to be in trouble absent defendant’s creative
bookkeeping methods. The Court in U.S. v. Klein, 515 F.2d 751, 753
(3rd Cir. 1975) states:
“To support a conspiracy conviction, the Government must show
both an agreement and a specific intent to achieve some unlawful
goal.” Id at 753
Appellant has argued from the outset that the above alleged scheme
involved no more than a client receiving:
“*... exactly what Century contracted to give him. The real question
is whether or not a person who delivers what he promises in language
at least plain enough for most people to understand, can be guilty of
fraud because of a failure to deliver what the customer desired and
believed (in some instances) would be forthcoming.” Appellant’s
=~ 29 .
Brief at 13 [App. A, (3 a.)|
The evidence demonstrates that Appellant’s actions were consistent
with his oral representations and the written contracts . . . with pre-
Indictment clients as a sole proprietor . .. with Herbert, Erbe, and Morgan
as a Century employee, consultant . . . and with Jenkins, Edelman, and
Webster as a sub-contractor/independent consultant. How clients were
treated by Century Corp. after Appellant ceased doing business with
Powell and Wagner (business divorce—Fall, 1975), Appellant has no
knowledge.
The agreement and specific intent to achieve some unlawful goal as
described in Klein, supra cannot be founded upon inferences (i.e.,
“client’s primary goal’’) and innuendos |i.e., falsely the Court stated the
ad solicited seekers of venture capital, App. A, (3-4 a.)|. The Supreme
Court has warned, “(c)harges of conspiracy are not to be made out by
piling inference upon inference.” /ngram v. U.S., 360 U.S. 672, 680, 79
S. Ct. 1314, 1320 (1959) (quoting Direct Sales Co. v. U.S., 319 U.S.
703, 711, 63 S. Ct. 1265 (1943). All evidence points toward the legal
activity—producing a limited offering type business plan pursuant to the
contracts. The alleged overt acts were simply mailings made pursuant to the
legal acts (i.e., billing for work tendered and received, Count 3 and 4).
Notwithstanding the Court’s collateral theory of a scheme to defraud
which is contrary to the charge set forth in Count 8, para. 1., the Court
still failed to meet the test of Klein, supra at 753. The Court | App. A, (9
a.)| merely concludes that the Government has presented sufficient
evidence to establish . . . a conspiracy, however, such Government briefs
and the evidence cited therein, fall short of the tests for conspiracy as
enumerated in Wieschenberg and Klein, supra.
CONCLUSION
We respectfully pray that the petition for certiorari be granted, and
that this conviction be reversed and remanded for such further
proceedings as this Court may order.
Respectfully submitted,
D.L. Dertelle
1 N. La Salle Street
Chicago, Illinois 60602
Vrrald A Gisira.-
GERALD D. FREEMAN
Attorney for Petitioner
4755 N. Washtenaw
Chicago, Illinois 60625
- 30 —
APPENDIX A
UNPUBLISHED OPINION
No. 80-1624
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
UNITED STATES OF AMERICA
, On Apreat From The
Plaintiff-Appellee, United States District
¥. Court for the West-
Gurn H. FreeMan ern District of Michi-
Defendant-Appellant.| 8°”
Decided and Filed October 1, 1982.
Before: Livety, Kerra and Mennrrt, Circuit Judges.
Mennitt, Circuit Judge. We affirm Gurn Freeman's convic-
tion of six counts of mail fraud, transportation of a check
“knowing the same to have been taken by fraud,” and conspira-
cy to commit mail and wire fraud in violation of 18 U.S.C.
§§ 1341, 2314. He was sentenced to five years imprisonment
followed by five years of probation and fined $11,000. Most
of the issues presented on appeal were considered by District
Judge Miles in his opinion denying a motion for a new trial.
Mr. Freeman forcefully and effectively argued his own ap-
peal. The main issue on appeal is whether the prosecution
presented sufficient evidence of a scheme to defraud to con-
stitute a violation of 18 U.S.C. § 1341, viewing, as we must,
the evidence “ ‘in the light most favorable to the government.’ ”
United States v. Stull, 521 F.2d 687, 689 (6th Cir. 1975), cert.
denied, 423 U.S. 1059 (1976). Fourteen “victim” witnesses in
need of “venture capital” testified about Freeman's alleged
“scheme to defraud” them of money through false representa-
(1 a)
(2 a)
2 United States v. Freeman No. 80-1624
tions that Century Consultants could provide them with
needed capital for expanding or recapitalizing their present
business or starting new enterprises. Century Consultants
placed an advertisement in the Wall Street Journal which of-
fered: “Need Venture Capital? Marketing Assistance? Busi-
ness Guidance? Century Consultants [phone number].” Each
of Century's clients stated their needs for capital from the
beginning. The initial interview consisted of a Century prin-
cipal describing the many successful enterprises Century had
financed, and the interviewee atempting to “sell” his project
to the firm. The prospective client left with an elaborate ap-
plication requesting extensive information on his financial
status, the history of the company or business to be capitalized,
the projected plan, and personal history. After the form was
returned, Century would then submit the project to its “New
Client Committee,” which was invariably enthusiastic about
the profit potential and investment feasibility of the planned
project and accepted the new client.
Century mailed an acceptance to the new client, accom-
panied by a memorandum which set forth a rough plan for
recapitalization by incorporation, limited partnership, joint
venture, or similar device, and divided investment potential
into at least two phases. The potential client was always told
that he must first present a stronger position to investors by
obtaining an initial capitalization through “A Limited Offering”
which Century Consultants, if retained, would help the client
prepare. The retainer for such work was $5,000, out of which
would come the $50 per hour consulting fee, and the total fee
was estimated to range from $7,500 to $16,000. See, e.g.,
Exhibits App. at 5-8, 105-09, 111-14, 230-34, 293-98,
If the client retained Century and sent $5,000, the consul-
tants would then prepare a “Confidential Business Report.”
This report repeated much of the information regarding back-
ground, history and details of the proposal, as originally pre-
sented to the consultants by the client. This report would
No. 80-1624 United States v. Freeman 3
suggest a limited offering to raise the initial or “sced capital.”
Should the client manage to raise the required seed capital,
Century would then offer further services for obtaining the
second, larger phase of capital on a contingent fee basis. Con-
sulting fees continued, however, at $50 per hour plus all
expenses for travel and accommodations, and the fees were
paid from the seed capital raised by the client.
Clients became disenchanted with Century at various stages
of the scheme. Mr. Edleman realized after paying $5,000
and receiving the comprehensive business plan that he would
be raising money on his own, while paying a fee to Century.
(Tr. at 155.) Mr. Phillip Morse refused to pay any more
than the initial $5,000 retainer because of “nebulous” answers
to his repeated queries as to the exact financial sources Cen-
tury would tap to obtain the needed capital for the second
and third phases of his project. (Tr. at 509.) Gorden Webster
was the most tenacious of the clients who testified. He raised
his own “seed capital” of $25,000 even before Century com-
pleted the comprehensive business plan. From April, 1975,
through September, 1976, Webster continued paying Century
consulting fees totaling some $27,000. (Tr. at 729; Exhibits
App. at 122-45.) Webster never received any funds through
Century,
Essentially, defendant argues that the above scheme in-
volved no more than a client receiving:
.. + exactly what Century contracted to give him. The
real question is whether or not a person who delivers
what he promises, in language at least plain enough for
most people to understand, can be guilty of fraud be-
cause of a failure to deliver what the customer desired
and believed (in some instances) would be forthcoming.
Appellant's Brief at 13. Defendant argues that the written
memorandum explained, before the client parted with any
money, that the client would be responsible for raising the
seed capital. Second, the memorandum and the comprehen-
(3 a)
(4 a)
4 United States v. Freeman No. 80-1624
sive plan stated that subsequent phases of raising capital
would not begin until after the client had succeeded in
obtaining the seed capital. Third, a separate agreement was
signed on a contingent fee basis for Century to act as a
finder for the bulk of the desired capital. And fourth, the
client was always encouraged to employ a lawyer and an
accountant to participate in the proceedings. Finally, defen-
dant offered the testimony of an expert witness that the com-
prehensive business plan had “some value.” (Tr. at 1069.)
Even assuming the five factors noted above to be true, there
is sufficient evidence in the record of a scheme to defraud.
In order to be prosecuted under the mail fraud statute, the
defendant must commit an actual fraud; that is, he must have
a specific intent to deceive or defraud. Epstein v. United
States, 174 F.2d 754 (6th Cir. 1949). The scheme must
include representations made by the defendant which are
known to be false, and one or more persons must be defrauded.
United States v. Rabinowitz, 327 F.2d 62 (6th Cir. 1964). Prov-
ing intent through misrepresentations does not require a show-
ing that Freeman never entertained any hope that his clients’
ventures would be successful. Rather, the jury may find that
Freeman had “no basis in fact for believing that the business
to be operated . . . would be profitable, and that appellants’
expressed opinion to that effect was therefore not actually
entertained or at least not honestly entertained.” Irwin v.
United States, 338 F.2d 770, 774 (9th Cir. 1964), cert. denied,
381 U.S. 911 (1965). Nor is proof that a defendant intended
or desired to complete a project for his investors an excuse for
knowing misrepresentations. United States v. Habel, 613 F.2d
1321, 1325 (5th Cir.), cert. denied, Carcaise v. United States,
447 U.S. 925 (1980).
Whether or not the comprehensive business plans had some
value as a basic outline for business reorganization and market-
ing, they did nothing to further the clients’ primary goal:
to have Century Consultants find investors for their projects.
Not only did the advertisement solicit seekers of venture
No. 80-1624 United States v. Freeman 5
capital, but the government witnesses testified that such was
their purpose in hiring Century Consultants, and that that
purpose was emphatically set forth during initial consultations.
Further, although the written memorandum and comprehen-
sive business plan are written in suitably ambiguous language,
those documents read in light of oral misrepresentations made
to the clients reinforced their belief that Century would
provide at least the bulk of the sources of investment. Free-
man misrepresented to various clients that Century had suc-
cessfully funded other businesses. (See, e.g., Tr. at 648, Web-
ster testimony that Freeman represented that Century had
helped finance Americana Amusement Park when, in fact,
Americana’s promoter was one of Century’s dissatisfied clients
who testified against Freeman at trial.) Freeman further
misrepresented that Century would provide the sources of
investors for his clients. (Tr. at 123, 133, 162, 172.) Freeman
offered the testimony of a single “source,” to rebut the charge
that he had no such sources. Ike Oberman, a certified
accountant, testified that he became interested in a project
for which Mr. Freeman had asked him to prepare a financial
projection. (Tr. at 1211.) Taking the initiative, Oberman
suggested that he might be interested in becoming a principal
for the project and could ask other sources to invest as well.
(Tr. at 1212 et seq.) Although Freeman agreed and a good
deal of potential capital was raised, that particular project
never progressed past the planning stage. None of Century's
clients who testified ever had their project presented to
Mr. Oberman, and Mr. Oberman testified that Freeman never
presented a project to him as a possible investment after the
project fell through.
Viewed as a whole, the evidence is sufficient for the jury
to conclude that Century Consultants’ clients, based on ad-
vertisements in the Wall Street Journal, approached that
organization for the sole purpose of finding a source of venture
capital; that Freeman intentionally misrepresented to them
that Century had procured investors for several projects and,
(5 a)
(6 a)
6 United States v. Freeman No. 80-1624
should they be accepted as clients, could tap extensive sources
for financing; that the clients never received any funding
from Century; and that Freeman could not have believed,
or honestly believed, that he would procure such sources of
capital.
These misrepresentations distinguish this case from United
States v. Rabinowitz, 327 F.2d 62 (6th Cir. 1964), cited by
the appellant as requiring reversal of his conviction. In
Rabinowitz, this Court analyzed the permissible bounds of
sales talk in overturning a mail fraud conviction. Customers
in that case never paid any money until they had been shown
the object of their purchase, a knitting machine, and had a
lesson on how to use it. The machine “was not a flimsy fake.
It was excellently designed and well built.” Id. at 80. Only
14 of 689 purchasers testificd for the government that they
could not make the garments fast enough to make the pay-
ments on the machine, while “a number” testified that they
had indeed been able to make enough garments to make the
payments easily. Thus this Court concluded:
There was sales talk, yes — there were exaggerations.
But they were made to people who had seen the ma-
chines and could presumably know ther own capabilities.
That both salesmen and purchasers were mistaken as to
this does not spell out an intent to deceive.
Id. at 81. In the case before us, in contrast, clients were
never given an opportunity to examine potential financial
sources because there were none. Whatever hopes Freeman
might have had that the “I.imited Offering” presented by his
clients might help them raise money, he could not have an
honest belief that such would raise upwards of $20 million.
In sum, Freeman’s sales talk exaggerated and puffed up an
underlying illusion, not a well built machine available for a
customer's inspection.
The recent case of United States v. Shelton, 669 F.2d 446
(7th Cir.), cert. denied, Bledsoe v. United States, 102 S.Ct.
No. 80-1624 United States v. Freeman 7
1989 (1982), is similar on the facts te the case before us. In
what was described by the Court as “a bucolic variant of a
‘Ponzi scheme,’” the defendants in Shelton sought investors
for a farmers’ cooperative which would establish facilities for
the buying and selling of farm products and equipment. The
defendants, though very successful at raising funds, paid them-
selves so much in management and “consulting fees” that
the cooperative’s proposed facilities “remained an improbable,
if not impossible, dream.” Id. at 450. The Court concluded
that there was sufficient evidence for the jury to infer that
the defendants defrauded investors with the farmers coopera-
tive concept, which provided “the potential for lucrative
personal returns through the . . . consulting agreement” and
that the defendants had made “various misrepresentations
about the success of [a prior] operation.” Id. at 453. The
case before us also involves an unsound concept for raising
large sums of capital which offers lucrative personal gain for
the defendants through consulting fees and includes mis-
representations about the success of prior financing projects.
Even if a scheme to defraud is proven, 'reeman contends,
Count One of the conviction must be vacated because the
government failed to prove that the letter involved was mailed
to witness Jenkins rather than hand delivered. Title 18 U.S.C.
§ 1341 is violated when the perpetrator of a fraudulent scheme
“places in any post office or authorized depository for mail
matter, any matter or thing whatever to be sent or delivered
by the Postal Service . . . or knowingly causes to be delivered
by mail. . .” any such matter. As has been stated by both
this Court and the Supreme Court, ““Where one does an act
with knowledge that the use of the mails will follow in the
ordinary course of business, or where such use can reasonably
be foreseen, even though not actually intended, then he
‘caused’ the mails to be used.’” United States v. Talbott,
590 F.2d 192, 195 (6th Cir. 1978), quoting Pereira v. United
States, 347 U.S. 1, 8-9 (1954). Further, “‘[t]hat the confirma-
tion letters and mailed check could have been hand-delivered
(7 a)
(8 a)
8 United States v. Freeman No. 80-1624
or delivered otherwise than through the mails, is immaterial.’”
Talbott, supra, at 195, quoting United States v. Stull, 521
F.2d 687, 689 (6th Cir. 1975), cert. denied, 423 U.S. 1059
(1976). Mr. Jenkins received the letter in question in March,
1975. (Tr. at 475; Exhibits App. at 110). At that time, Free-
man ran the company. (Tr. at 867). He continued to be
active on a regular basis after the sale of Century to Misters
Powell and Wagner, completed May 14, 1975 (Tr. at 867;
Exhibits App. at 329). The above is ample evidence that
Freeman “caused” the letter to be mailed.
Freeman raises three more issues which may be dealt with
briefly. First, he asserts that the trial judge committed pre-
judicial error by allowing a question and answer which in-
formed the jury that Wagner had been indicted for activities
concerning Century Consultants. Wagner was a co-defen-
dant, but entered a plea of guilty before the trial began. In
this same assignment of error, Freeman claims to have been
prejudiced by the testimony of a witness that Powell had been
“duped” when he bought Century from Freeman, and by
questions during cross-examination concerning two civil cases
bought against Freeman in 1964 and 1970. We agree with
Judge Miles that “in neither case was the potentially prejudi-
cial testimony allowed to proceed beyond the point at which
the possible prejudice to defendant became evident, and in
both these instances any prejudice to defendant was mini-
mized by prompt remedial action.” (Opinion and Order on
Motion for New Trial, App. at 47; see Tr. at 1126-32; 1735-45. )
Second, Freeman asserts that the trial judge considered mat-
ters outside of the trial record when a directed motion for
acquittal was denied. Specifically, the trial judge mentioned
in his oral denial that:
They [the Government witnesses] came as a result of
ads in the papers or otherwise. Some of them came to
an individual known as Angel or Angel Wilson, known to
this Court as a person who has been convicted of a
similar type of offense as that charged here, and in those
. No. 80-1624 United States v. Freeman 9
instances, when they came to Angel Wilson, . . . they
were routed to the defendants... .
(Tr. at 1052-53.) Judge Miles sets out his reasons for denying
the motion for acquittal carefully and thoroughly in pages
1048 through 1055 of the Transcript. It is quite apparent
that the reference to Mr. Wilson’s past history with that
court is merely made in passing and that Judge Miles did not
rely on it in any way in making his ruling. It was clearly
harmless error which did not affect any substantial rights of
the defendant. Rule 52(a), F.R.Crim.P.
Third, the defendant complains that he should have been
allowed to obtain credit reports on the government's witnesses
in order to refute the suggestion that Century Consultants
was the cause of their business failures. The rule for appellate
review of discovery orders is:
If the order is adverse to the defendant it may be re-
viewed on appeal after conviction, but the possibility of
reversal is slight, since the courts hold that they must
affirm unless the trial court abused its discretion and
will not reverse if the court order was not prejudicial.
1 Wright, Federal Practice and Procedure § 261, p. 534, and
cases cited therein (1969 & 1980 Cum. Supp.). Judge Miles
denied the appellant’s motion for the discovery order after
carefully weighing the minimal, collateral relevance of the
credit reports of the witnesses against the substantial privacy
right of and potentially serious prejudice to the witnesses.
(Tr. 28-31.) He did not abuse his discretion in such a ruling.
Finally, Freeman submitted to this Court a pro se brief
attacking virtually every element of his conviction. We have
considered the arguments presented therein and have con-
cluded that appellant received a fair trial on all counts.
Specifically, the Government presented sufficient evidence to
establish intent to defraud, a conspiracy, and use of the mails;
the trial court’s denials of several motions for severance were
(9 a)
10 United States v. Freeman No. 80-1624
proper; the trial judge did not abuse his discretion in admitting
evidence of the sale of stock; and the prosecutor did not go
beyond the acceptable bounds of argument in his closing
statement.
Accordingly, the conviction is affirmed.
(10 a)
APPENDIX B
FILED
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT OcT 1 1962;
No. 60-1624 JOHN P. HEHMAN, Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
vs.
GURN H. FREEMAN,
Oefendant-Appellant.
Before: LIVELY, KEITH and MERRITT, Circuit Judges.
ALO GMENT
APPEAL from the United States District Court for the western
District of Michigan.
THIS CAUSE came on to be heard on the record from the United States
District Court tor the western District of michigan :
and was argued by Guin Freeman for appellant, Phillip Morse for appellee.
ON CONSIDERATION WHEREOF, It is now here ordered and adjudged by
this Court that the judgment of the said District Court in this cause be
and the same is hereby a¢sirmed.
No costs taxed.
ENTERED BY ORDER OF THE COURT
John P. Hehman, Clerk
nin YR ne
+3
Clerk
Tasued as Mandate: yovemper 29, 1962
A True Copy.
COSTS: NONE Attest:
Fil SOO sv cccccveccces
Pristine ; “7 y) a a
Total $ pal Reputy. Clerk
(1 b)
to. 80-1624 FILED
UNITED STATES COUPT OF APPEALS
NOV 24 1982
FOR THE SIXTH CIRCUIT
JOHN P. HEHMAN, Clerk
UNITED STATES OF AMEPICA,
Plaintiff-Appellee
ORDER DENYING PETITION
v. FOR REHEARING EN BANC
GURN H. ?REEMAN,
)
)
)
)
)
)
)
)
Defendant-Appellant
Before: LIVELY, KEITH and MERRITT, Circuit Judges
A majority of the court having not voted in favor
of an en banc rehearing, the petition for rehearing has
been referred to the hearing panel for disvosition.
Upon consideration, it is OPDEPED that the
petition for rehearing be and herebv is denied.
ENTERED BY O?DEP OF THE COURT
A
er
(2b)
No. 80-1624
UNITED STATES COURT OF APPEALS FILED
FOR THE SIXTH CIRCUIT bee 9 19g
JOHN P. HEHMAN, Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee
ORDER DENYING PETITION
Vv. FOR REHEARING EN BANC
GURN H. FREEMAN,
Defendant~-Appellant
Before: LIVELY, KEITH and MEKRITT, Circuit Judges
A majority of the court having not voted in favor
of an en banc rehearing, the petition for rehearing has
been referred to the hearing panel for disposition.
Upon consideration, it is ORDERED that the
petition for rehearing be and hereby is denied.
ENTERED BY ORDER OF THE COURT
a hae
(3 b)
(1 d)
APPENDIX C
Appendix C is comprised of the record (Indictment, Argument,
Testimony and Exhibits) from the United States Court of Appeals, Sixth
Circuit. Petitioner intends to supply this Court with such number of copies
of same as the Court shall advise and render same as soon as petitioner
and respondent agree upon its (App. C) contents.
APPENDIX D
Title 18, Chapter 63—Mail Fraud, § 1341. Frauds and swindles,
p. 4301, U.S.C.A.
§ 1341. Frauds and swindles.
Whoever, having devised or intending to devise any scheme
or artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or
promises, or to sell, dispose of, loan, exchange, alter, give
away, distribute, supply, or furnish or procure for unlawful use
any counterfeit or spurious coin, obligation, security, or other
article, or anything represented to be or intimated or held out
to be such counterfeit or spurious article, for the purpose of
executing such scheme or artifice or attempting so to do,
places in any post office or authorized depository for mail
matter, any matter or thing whatever to be sent or delivered by
the Postal Service, or takes or receives therefrom, any such
matter or thing, or knowingly causes to be delivered by mail
according to the direction thereon, or at the place at which it is
directed to be delivered by the person to whom it is addressed,
any such matter or thing, shall be fined not more than $1,000
or imprisoned not more than five years, or both. (June 25,
1948, ch. 645, 62 Stat. 763; May 24, 1949, ch. 139, § 34,63
Stat. 94; Aug. 12, 1970, Pub. L. 91-375, § (6) (j) (11), 84
Stat. 778.)
Title 18, Chapter 113—Transporation of stolen goods, securities,
money, fraudulent State tax stamps, or articles used in counterfeit-
ing, § 2314, p. 4371, U.S.C.A.
§ 2314. Transportation of stolen goods, securities, moneys,
fraudulent State tax stamps, or articles used in counterfeiting.
Whoever transports in interstate or foreign commerce any
goods, wares, merchandise, securities or money, of the value of
$5,000 or more, knowing the same to have been stolen,
converted or taken by fraud; or
Whoever, having devised or intending to devise any scheme
or artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or
promises, transports or causes to be transported, or induces any
person to travel in, or to be transported in interstate commerce
in the execution or concealment of a scheme or artifice to
defraud that person of money or property having a value of
$5,000 or more; or
Shall be fined not more than $10,000 or imprisoned not more
than ten years, or both.
This section shall not apply to any falsely made, forged,
altered, counterfeited or spurious representation of an obliga-
tion or other security of the United States, or of an obligation,
bond, certificate, security, treasury note, bill, promise to pay or
bank note issued by any foreign government or by a bank or
corporation of any foreign country. (June 25, 1948, ch. 645,62
Stat. 806; May 24, 1949, ch. 139, § 45, 63 Stat. 96; July 9,
1956, ch. 519, 70 Stat. 507; Oct. 4, 1961, Pub. L. 87-371, § 2,
75 Stat. 802; Sept. 28, 1968, Pub. L. 90-535, 82 Stat. 885.)
Title 18, Chapter 19—Conspiracy, § 371. Conspiracy to commit
offense or to defraud United States, p. 4190-91, U.S.C.A.
§ 371. Conspiracy to commit offense or to defraud United
States.
If two or more persons conspire either to commit any offense
against the United States, or to defraud the United States, or
any agency thereof in any manner or for any purpose, and one or
more of such persons do any act to effect the object of the
conspiracy, each shall be fined not more than $10,000 or
imprisoned not more than five years, or both.
If, however, the offense, the commission of which is the object
of the conspiracy, is a misdemeanor only, the punishment for
such conspiracy shall not exceed the maximum punishment
provided for such misdemeanor. (June 25, 1948, ch. 645, 62
Stat. 701.)
Title 18, Chapter 1—Principals, § 2, p. 4151-52, U.S.C.A.
§ 2. Principals.
(a) Whoever commits an offense against the United States or
aids, abets, counsels, commands, induces or procures its
commission, is punishable as a principal.
(b) Whoever willfully causes an act to be done which if
directly performed by him or another would be an offense
against the United States, is punishable as a principal. (June 25,
1948, ch. 645, 62 Stat. 684; Oct. 31, 1951, ch. 655, § 17b,65
Stat. 717.)
Amendment V, Constitution
“No person shall be held to answer for a capital, or otherwise
infamous crime . . . be deprived of life, liberty, or property,
without due process of law... .”
(3 d)
Corbin on Contracts, / Vol. Ed. (1980): Chapter 2, § 25. Offer by
Publication or Advertisement, p. 43.
It is quite possible to make a definite and operative offer to
buy or sell goods by advertisement, in a newspaper, by a
handbill, or on a placard in a store window. It is not customary
to do this, however; and the presumption is the other way.
Neither the advertiser nor the reader of his notice understands
that the latter is empowered to close the deal without further
expression by the former. Such advertisements are understood
to be mere requests to consider and examine and negotiate; and
no one can reasonably regard them otherwise unless the
circumstances are exceptional and the words used are very
plain and clear.
Chapter 68, § 1252. Discharge of Duty by Non-Performance of a
Condition, p. 1010-11.
When a contractual duty is subject to a condition precedent,
whether that condition is express, implied, or constructive, there
is no duty of immediate performance and there can be no breach
of that contractual duty by mere nonperformance, unless the
condition precedent is either performed or excused. If such a
condition precedent is neither performed nor excused within the
time that is required, such failure now makes it impossible for a
breach of contract to occur. Nonperformance of the primary
contractual duty can now never operate as a breach of it; and no
remedy for enforcement will ever be available. Therefore, the
contractual duty must be regarded as discharged.* Jd at 1010
Frequently, the condition precedent consists of the per-
formance, in part or in full, of the agreed exchange by the other
party. That party’s failure to render such performance ordinar-
ily constitutes a breach of contract on his part; and the discharge
of the one party may be said to be a discharge by the breach of
the other. But even though the other party has not promised to
render the agreed exchange, and his failure to perform is no
breach whatever, nevertheless if his performance is a condition
precedent of the first party’s duty, that duty is discharged as
1. Restatement, Contracts, § 395: “A contractual duty is discharged by the unexcused
failure of a condition to occur within the time necessary to create a right to the immediate
performance of the duty.”
Restatement, Contracts, § 274; “*(1) In promises for an agreed exchange, any material
failure of performance by one party not justified by conduct of the other discharges the
latter’s duty to give the agreed exchange even though his promise is not in terms
conditional. An immaterial failure does not operate as such a discharge.
(4d)
soon as the condition cannot be performed. In such case, the
discharge is a discharge by nonperformance of a condition
precedent, not a discharge by breach of the other’s contractual
duty. Jd at 1011
Michigan Securities Regulations, Chapter 188, Uniform Securities
Act, Act 265 of 1964, Title 19—Trade and Commerce, Part IV, §
19.776 (402), § § 10(A), page 247, M.S.A.
§ 19.776 (402) Exempt securities and transactions.| SEC.
402. (a) The following securities are exempted from sections
301 and 403:
(10) Any offer or sale of a preorganization certificate or
subscription [in a corporation], and the issuance of securities
pursuant thereto, if:
(A) No commission @ is paid or given directly or indirectly
for soliciting any prospective subscriber,
Securities and Exchange Commission Regulations, Securities and
Exchange Act of 1933, Title 15—Commerce and Trade, § 77c.
Exempted Securities, (a) (11) page 2648-49, U.S.C.A.
§ 77c. Exempted securities.
(a) Except as hereinafter expressly provided, the provisions
of this subchapter shall not apply to any of the following classes
of securities:
(11) Any security which is’a part of an issue offered and sold
only to persons resident within a single State or Territory, where
the issuer of such security is a person resident and doing
business within or, if a corporation, incorporated by and doing
business within, such State or Territory. (May 27, 1933, ch. 38,
title I, § 3, 48 Stat. 75; June 6, 1934, ch. 404 § 202, 48 Stat.
906; Feb. 4, 1887, ch. 104, title II, § 214, as added Aug. 9,
1935, ch 498, 49 Stat. 557, and amended June 29, 1938, ch.
811, § 15,52 Stat. 1240; May 15, 1945, ch. 122, 59 Stat. 167;
Aug. 10, 1954, ch. 667, title I, § 5, 68 Stat. 684; Aug. 21,
1958, Pub. L. 85-699, title III, § 307 (a), 72 Stat. 694.)
(5 d)
Uniform Commercial Code § 2-202
Sec. 2-202. Final Written Expression: Parol or Extrinsic
Evidence.
Terms with respect to which the confirmatory memoranda of
the parties agrec or which are otherwise set forth in a writing
intended by the parties as a final expression of their agreement
with respect to such terms as are included therein may not be
contradicted by evidence of any prior agreement or of a
contemporaneous oral agreement but may be explained or
supplemented
(a) by course of dealing or usage of trade (Section 1-205)
or by course of performance (Section 2-208); and
(b) by evidence of consistent additional terms unless the
court finds the writing to have been intended also as a
complete and exclusive statement of the terms of the agreement.
(6 d)
APPENDIX E
GOVERNMENT ADMISSIONS:
Reference, Government’s First Reply Brief, dated Sept. 4, 1981, p. 21:
“He did promise plans, and in fact did provide them.”
Reference, Government’s Second Reply Brief, dated Oct. 14, 1981, p.
23:
“Appellant did provide his victims with a plan pursuant to his
contract with them.”
Reference, Government's First Reply Brief, dated Sept. 4, 1981, p. 28:
“Equity” financing was the ‘limited offering’ or ‘seed capital’
which the witnesses, at least some, indeed testified they knew
they had to raise themselves. Significantly, it was the secondary
financing Appellant promised, but never delivered.”
Reference, Government’s Second Reply Brief, dated Oct. 14, 1981, p.
27:
“Coville project failed for reasons not attributable to financing.”
Reference, Appendix C, see Tr. 1787:
“Your Honor, that information I get out of my notes, and I have
reason to believe they’re fairly accurate, that there were 11
companies that were successful in every instance.”
(le)
APPENDIX F
1. SBA (booklet) What it is... What it does. U.S. Small Business
Administration, Office of Public Information (OPI-6) August 1974, at p.
25:
“Most businesses fail for lack of good management.”
2. Guide to Venture Capital Sources (Green Book), Fourth Edition
edited by Stanley M. Rubel. Copyright © 1977, 1974, 1972 and 1970
(Library of Congress Catalog Card Number 76~51894).
PREFACE
Guide to Venture Capital Sources has been prepared by
Capital Publishing Corporation as part of its series of special
resource book-directories, which are designed to be of assistance
to owners of small and medium-sized businesses and entre-
preneurs.
The Guide to Venture Capital Sources has been designed to
assist businessmen who are currently seeking venture capital for
their companies and for entrepreneurs who are thinking of
founding their own businesses. It will also be helpful to anyone
who is interested in preparing themselves to start a business
someday and must know how the venture process works. The
book will also be valuable to the many professionals who can
assist early-stage companies—investment bankers, commercial
bankers, consultants, lawyers, accountants, and others. This
fourth edition again represents a major expansion of the editions
published in 1970, 1972, and 1974, both in amount of text
material and in number of directory listings.
A second book in this series of special resource books is
Source Guide for Borrowing Capital. It provides a wealth of
easy-to-use information on the myriad of federal government,
state government, and local and community business develop-
ment programs. It also contains new information on such
traditional sources of debt financing as banks, insurance
companies, finance companies, and leasing companies. The
book contains directory information on all of these sources of
borrowed capital.
A third book in the series is Guide to Selling a Business. This
book-directory identifies corporations that have active acquisi-
tion programs and also the more successful intermediaries in the
field. It also contains twenty articles written by leading cor-
porate executives and professionals in the merger and acquisi-
tion business.
Capital Publishing Corporation also prepares newsletters on
(1 f)
related fields. In all, these books and newsletters are designed to
assist business owners and their advisors in utilizing to best
advantage the many sources available to help them succeed in
their businesses.
Stanley M. Rubel
Editor
3. Guide to Venture Capital Sources, supra: chapter entitled “ How to
Raise and Utilize Venture Capital; article, “Selecting the Right Venture
Capitalists,”’ sub-section “Financial Intermediaries” by Ernest D. Chu,
vice president of Roussel Capital Corp., a venture capital and merchant
banking organization that invests in early-stage companies. Prior to
joining Roussel he was senior vice president and director of the
investment banking firm of Danes Cooke & Keleher, Inc. /d at48
at p. 51
“Don’t expect to get names of venture capital firms unless you
become a client.” /d at 51
4. Guide to Venture Capital Sources, supra, “The Financial Inter-
mediary” by A. David Silver. Mr. Silver has operated an investment
banking business since 1970, specializing in venture capital and debt
financings for small companies. During the last six years, he has assisted
more than thirty companies in raising over $50 million. Prior to the
formation of his investment banking business, Mr. Silver was for six years
an associate in the corporate finance department of Kuhn, Loeb & Co.,
responsible for that firm’s venture capital activities, and prior to that, for
three years, in the credit department of Chase Manhattan Bank. He
received A.B. and M.B.A. degrees from the University of Chicago. Mr.
Silver has written several books and magazine articles for entrepreneurs
and is a frequent speaker on the subject of entrepreneurship. /d at 53, 54
There are three models of financial intermediaries to choose
from: the finder, the financial consultant, and the investment
banker. Unfortunately, they are less distinguishable by price
than by performance. Finders merely locate money. Financial
consultants will frequently analyze the need for funds, prepare a
private placement memorandum, and make introductions to
sources of money. Investment bankers will break down the need
for funds into different securities, investigate the business in
depth, prepare a private placement memorandum, locate dif-
ferent sources of money, and negotiate terms. All three financial
intermediaries charge a fee at closing of approximately 5% for
venture capital, 2% for unsecured loans, 1% for secured loans
(2 f)
or a combination of slightly smaller cash fees plus warrants,
options, or common stock. Consultants and investment bankers
normally charge retainers for preparing private placement
memorandum plus reimbursement of out-of-pocket expenses.
“The financial intermediary might also be judged by the
depth of his investigation of the entrepreneur, the thoroughnes
with which he reviews information about the client company.”
“Cost of Search
To the entrepreneur who needs venture capital but doesn’t know
where to find it, the financial intermediary reduces his cost of
search.”
“The financial intermediary offers the client a personal rela-
tionship and knowledge of the venture community that should
save time and facilitate much greater impact with venture
sources.” Jd at 54
5. Guide to Venture Capital Sources, supra, “Preparing a Business
Plan;” Brian Haslett and Leonard E. Smollen. /d at 21. Leonard E.
Smollen is co-founder of the Institute for New Enterprise Develepmont
(INED). He previously held executive positions at EG&G, Inc., and
subsequently worked with Alexander Dingee on the Sloan School project.
Brian Haslett is development director of INED and played a leading role
in many of the new businesses INED helped create and finance. He is also
the eastern associate of S.M. Rubel & Associates, has managed CPC
seminars on raising venture capital, and is a contributor to Venture
Capital. Previously he was with Arthur D. Little, Inc. Jd at 15, 16.
“When raising equity capital, your business plan is a vital sales
tool. Before risking their money for what may be a period of five
years or longer, most venture capital investors will want to
satisfy themselves that you have thought through your plan
carefully and that you and your associates have enough skill and
experience in your chosen business area to manage effectively,
seize opportunities, solve problems and make profits. These
prospective backers will—or should—insist on reviewing your
proposal before considering any investment seriously. Some
will not even meet with an entrepreneur without first seeing his
business plan.” /d at 22
6. Guide to Venture Capital Sources, supra, “Legal Considerations
for the Entrepreneur Seeking Venture Capital,” by Alan J. Barton. Mr.
Barton is a partner in the firm of Nossaman, Krueger & Marsh, Los
(3 f)
Angeles, California, and specializes in corporate and securities matters
with special emphasis on venture capital. He acts as counsel for the
National Venture Capital Association and is a writer and lecturer on
corporate and securities law matters. Jd at 76
“Since registration, which requires the filing with and clear-
ance by the SEC of a lengthy disclosure document, is a
relatively burdensome and costly procedure, the exemptions
provided by the 1933 Act are very significant to the venture
entrepreneur, and he wil have to structure financing trans-
actions to enable him to these exemptions.”
“Section 4(2) of the 1933 Act exempts from the registration
requirements “transactions by an issuer not involving any
public offering.” Jd at76
7. Guide to Venture Capital Sources, supra, “United States Venture
Capital Companies.”
“Information about 521 venture companies located in the
United States has been compiled largely on the basis of
questionnaires received from them. While this information is
believed to be accurate, there was no way to verify the data
received.
Names of officers or partners are shown for the independent
venture firms, but only appropriate officers are listed for
investment banking operations, commercial banks, insurance
companies, and operating companies with venture activities.
The companies have indicated the officer or person that should
be contacted about new financing proposals. Each venture firm
listed has been categorized by type of organization, that is,
private venture firm, SBIC, subsidiary of operating company,
and so forth. Differences between these types of firms have been
described in the articles in this book.”
Each entry in the directory shows project preferences. While
some firms have indicated that all types of financing are of
general interest to them, most prefer to finance either early-
stage projects (start-ups and first-stage financing) or later-stage
projects (second- and third-stage financing or buy-out or
acquisition financing).” Jd at 171
“The venture companies have also indicated minimum operating
data they will consider in new financing proposals. This feature
of the directory is designed to indicate the range of interests of
the venture firms, but the minimum does not mean that most of a
venture company’s financings will be of this nature.” /d at 172
(4f)
The venture capital firms generally indicated their own
minimum and preferred investment, but most of these firms will
help raise more money for larger projects, for which they will act
as the lead investor. Some financings have run up to $5 million,
although the venture firm itself may only have invested $500,000.
On the other hand, investment bankers and consultants generally
described the minimum and preferred size of the total private
placement, and not the amount the firm itself is interested in
investing (which is likely to be a far smaller amount). In some
cases, both of these amounts are indicated. Jd at 173
Note: First 3 pages of 156 pages of listings of venture capital firms from
this book have been inserted in this Appendix (7f, 8f, 9f) to demonstrate
availability of sources.
8. Source Guide for Borrowing Capital, edited by Leonard E. Smollen,
Mark Rollinson and Stanley M. Rubel. Copyright © 1977 (Library of
Congress Catalog Number 76-5 1983). Stanley M. Rubel is the founder of
Capital Publishing Corporation and has been its president since 1961.
The firm produces resource books and newsletters for use by small and
medium-sized businesses engaged in raising debt and equity capital and in
selling businesses. Mr. Rubel is a principal of S.M. Rubel & Company, an
affiliated business that provides consulting services in these areas. Mr.
Rubel is also Executive Director of the National Venture Capital
Association. Jd at 63
Chapter, “Private Financing Sources”
“There are a variety of sources for private financing. The
greatest amount of capital to start a business is raised from
friends, relatives, customers, suppliers, and individual investors.
General estimates indicate that most capital for new and
emerging businesses is raised from these informal sources.” /d
at 63
“Start-ups (also called seed deals) involve companies either in
the process of being organized or those that have been in
business a short time (one year or less) but have not yet
completed a prototype or taken orders for a product. Generally,
such firms have selected their key officers, prepared a business
plan, made market studies, etc.
Capital for start-ups is generally provided by informal
sources, such as relatives, friends, customers, clients, and
wealthy individuals. There are a few projects of this nature that
are funded by the organized venture capital industry, but they
must meet exceptionally high standards, both in the quality of
the people involved and in the potential for the business being
(5 f)
established.
First-stage financing involves companies that have expended
their initial capital on the prototype, developed some evidence
of commercial interest in the product, evolved a going organiza-
tion, perhaps acquired some pilot production equipment, and
even obtained a small line of bank credit. It is generally at this
stage that the first outside capital flows in from organized
venture capital sources.
Second-stage financing describes an investment in a com-
pany that is producing and shipping, whose accounts receivable
and inventories are building up, and whose marketing expenses
have begun to mount. The company needs working capital and
expansion capital. Although it has clearly made progress, it is
probably still operating at a loss. Both venture capital com-
panies and SBICs tend to invest at this stage.” Jd at 65
9. Forbes Magazine, October 1982, entitled, “Venture Capital, The
Business Plan,” by Thomas P. Murphy. Mr. Murphy heads a venture
capital firm. Partnership Dankist; Stanford, Connecticut.
This article, the seventh in a series is about the Business Plan,
that dull-as-dishwater, absolutely essential document you should
assemble before launching a new business. Starting without a
business plan is like starting a cross-continent road trip without
a map. You will get somewhere, but it might not be where you
intended to go.
To put this in context, the preceding articles have taken you
through the scanning process—how to think about yourself as
an entrepreneur, how to consider new business ideas; how to
buy a company; and how to approach franchising. All this is
“dining-room-table”’ planning. Its end product is the Business
Plan. It becomes a “Private-Placement Memorandum” if you
intend to expose your plan to very many people to raise capital. If
that is the purpose, you should have it reviewed by a lawyer. He
will keep you this side of the SEC’s limitations on private
offerings and make his presence known by pointing out risk
factors: “There can be no assurance this turkey will ever get off
the ground with his scheme to...”
10. Business Week Supplement, September 13, 1982 entitled “Ven-
turing into Venture Capitalism.”
(6 f)
“Generally, seed companies can require up to $300,000,
while start-up financing begins at $500,000. Entrepreneurs are
usually reluctant to give up majority ownership.”
PRIVATE CAPITAL CORPORATION
First National-Southern Natural Bidg. 1222
Birmingham, AL 35203
205-251-0152
Officers
William W, Featheringill, Pres.
William P. Acker til, V.P.
Whom to contact
Either of above
Type of company
Private venture capital firm investing own
capital
Consulting or investment banking firm
evaluating and analyzing venture projects
and arranging private placements
Consulting firm preparing proposals
Finder
Project preferences
Type of financing
First-stage financing
Second-stage financing
Third-stage financing
Buy-out or acquisition financing
Minimum operating date
Annual! sales— $500 000-1 500,000
P & L—losses (profits projected in 2 years)
Industry preferences
Tech
Pollution control
Computer related
Computer peripherals
Card readers, printers
Manufacturing
Crime prevention and detection equipment
Food products
Machine tools
Patented proprietary
Plastics
Materials handling equipment
Sports equipment
Furniture
Metals fabrication
Merger and acquisition orientation
ALABAMA, ALASKA
Additional information about company
Years in business—2-5
Minimum investment—$100-300,000
Preferred vestment—$300-600,000
Preter active role as a deal originator
Deals completed in past year—0.2
Invested during past year—under $1 million
ALASKA BUSINESS INVESTMENT
CORPORATION
Box 600
Anchorage, AK 99501
907-279-6913
Officers
D. L. Mellish, Pres.
Michael O. Barry, Mgr.
Whom to contact
Michael O. Barry
Type of investor
SBIC
Affiliation
National Bank of Alaska
Project preferences
Type of financing
Second-stage financing
Industry preferences
None
Geographical preferences
Alaska
Additional information about company
Years in business—3-5
Minimum investment—$100-300,000
Preferred investment—$300-600,000
Preter active role as a deal originator
Deals completed in past year—0-2
Invested during past year—$1 million or less
(7 f)
U.S. VENTURE CAPITAL COMPANIES
ALYESKA INVESTMENT CO.
1815 South Bragaw Street
Anchorage, AK 99504
907.279.9584
Officers
C. R. Elder, Jr., Pres.
N. Roy Goodman, Gen. Mgr.
Whom to contact
N. Roy Goodman
Type of investor
MESBIC
Affiliation
Alyeska Pipeline Service Company
Project preferences
Type of
First-stage financing
Second-stage financing
Industry preferences
None
Geographical preferences
Alaska only
Methods of compensation
Return on investment is primary concern;
no fees
Additional information about company
Years in business—over 5
Minimum mere tanh 000 or less
Preferred investment—$100,000 or less
Will function in either active or passive role
Deals completed in past year—over 5
Invested during past year—$1 million or less
(8 f)
DINEH COOPERATIVES,
INCORPORATED
P.O. Box 569
Chinle, AZ 86503
602-674-3411
Officers
Robert €. Salabye, Pres.
Jon D. Colvin, Treas.
Whom to contact
Either of above
Type of investor
Community development corporation
Project preferences
Minimum operating data
Annual sales—nominal or up to $500,000
P& —— (profits projected in 2 years or
more
industry preferences
Manufacturing
Various types
Retail
Various types
Services
CATV
Hotels and motels
Various types
Geographical preferences
Within two hours of office in Navaho Nation
grazing districts 4, 5, and 10
Methods of compensation
ae investment is primary concern:
no
Additional information about company
Years in business—3-5
Minimum investment—$100,000 or less
Preferred investment—$100-300,000
Will function in either active or passive role
Invested during past year—$1 million or less
ALASKA, ARIZONA, ARKANSAS, CALIFORNIA
AMERICAN-EURO INTERFUND
CORP.
44 Montgomery Street
San Francisco, CA 94104
415.391.1545
Officers
Wallace FR. Hawley, Pres
Scott Hedrick, V.P.
Whom to contact
Scott Hedrick
Type of investor
SBIC; subsidiary of operating company
Affiliation
SHV-North American Holding Corp., offshore
company interested in larger investments
Project preferences
Type of f
Second-stage financing
Third-stage financing
Buy-out or acquisition financing
Minimum operating data
Annual sales— $500 ,000-3,000,000
P & L—break even
Industry preferences
Distribution
Industrial products
Medical products
Sports equipment—wholesale
Various other types
Retail
Franchise businesses—food
Franchise businesses—nontood
Mail order
Various other types
Services
Various types
Geographics! preferences
one
Methods of compensation
Return on investment is primary concern
Additional information about company
Years in business—3-5
Minimum investment—$100-300,000
Preferred investment—$300-500 000
Will function in either active or passive role
Deals completed in past year—2-5
Invested during past year—$1-5 million
JEFFERSON W. ASHER, JR.
4118 Stansbury Avenue
Sherman Oaks, CA 91423
213-789-0266
Owner
Jetterson W. Asher, Jr.
Type of company
Private venture firm investing own capital
Consulting firm evaluating and analyzing
venture projects and arranging private
placements
Finder
Project preferences
Type of financing
First-stage financing
Second-stage financing
Minimum operating data
Annual sales—$500,000-1 500,000
P & L—losses (profits projected in 2 years)
Industry preferences
Technology
Telephone-related products
Chemicals
Plastics
Merger and acquisition orientation
Medical
Clinical laboratories
Diagnostic centers
Drugs and medicines
Natural resources
Specialty raw materials
Geographical preferences
West Coast
Methods of sation
Return on investment is most important but
also charge closing fees, service fees, etc.
Professional fee whether or not deal closes
(varies with the situation)
Additional information about company
Years in business—over 5
Minimum investment—$100-300,000
Preterred investment—$300,000 and over
Will function in either active or passive role
Deals completed in past year—0-2
Invested during past year—$1 million or less
(9 f)
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.