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2 - - - - - - - - - - - - - - X
4 v. : U.S. Courthouse
5 Uniondale, New York BRUCE W. GORDON, WHO'S WHO
10 Defendants. :March 11, 1998
11 - - - - - - - - - - - - - - X 9:30 o'clock a.m.




17 United States Attorney One Pierrepont Plaza
18 Brooklyn, New York 11201
Assistant U.S. Attorneys

21 For the Defendants: NORMAN TRABULUS, ESQ.
For Bruce W. Gordon
22 170 Old Country Road, Suite 600
Mineola, New York 11501
24 For Who's Who, Sterling
332 Willis Avenue
25 Mineola, New York 11501


1 GARY SCHOER, ESQ. For Tara Garboski
2 6800 Jericho Turnpike
Syosset, New York 11791
4 For Oral Frank Osman
3000 Marcus Avenue
5 Lake Success, New York 11042

For Laura Weitz
7 319 Broadway
New York, New York 10007
9 For Annette Haley
400 South Oyster Bay Road
10 Hicksville, New York 11801

For Scott Michaelson
12 225 Broadway
New York, New York 10007
14 For Steve Rubin
150 Nassau Street
15 New York, New York 10038

For Marti n Reffsin 17 215 Hilton Avenue
Hempstead, New York 11551

19 Court Reporter: Owen M. Wicker, RPR
United States District Court
20 Two Uniondale Avenue
Uniondale, New York 11553
21 (516) 292-6963

Proceedings recorded by mechanical stenography, transcript
23 produced by computer-assisted transcription.
25 (Case called.)


1 THE COURT: Are we ready to proceed?

2 Who will proceed?

3 MR. NELSON: I am, Your Honor.

4 THE COURT: I will tell the jury that you are

5 ready to proceed; is that correct?

6 MR. NELSON: Yes.

7 THE COURT: And then I'll tell them that it will

8 be a short morning and we'll go over until Monday.

9 All right. Bring the jury in, please.

10 (Jury enters.)

11 THE COURT: Good morning, members of the jury.

12 Please be seat ed.

13 Thank you again for your diligence and

14 punctuality which has been extremely gratifying during

15 this trial.

16 Do the defendants wish to proceed?

17 MR. NELSON: Your Honor, I'm ready to proceed on

18 behalf of Mr. Osman at this time.

19 THE COURT: Members of the jury, the defendant

20 Osman will proceed with his case.

21 We are going to have some evidence adduced this

22 morning. We will recess early today and we will not have

23 court tomorrow nor will we have it Friday.
24 We will resume the trial on Monday morning.
25 Please do not concern yourself as to why this occurred,


1 it's because of the Court's decision to do that. So we

2 will recess early today. We will not have court tomorrow,

3 Thursday which is the 12th nor the 13th and we'll resume

4 on the 16th.

5 You may proceed.

6 MR. NELSON: Thank you, Your Honor.

7 Your Honor, with the Court's permission I would

8 like to distribute to the members of the jury a copy for

9 each of them of the transcripts of the recordings I will

10 be playing at this time. I previously provided the Court

11 and all counsel with a copy yesterday.

12 THE COURT: Very well.

13 MR. NELSON: For the record, at this time I'm

14 going to play a portion of a recording of a tape which is

15 Defendant's Exhibit BQ, the tape is BP. It's a

16 tape-record by the government which is EZ-15, between

17 Bruce Gordon, Frank Martin and other members of the Who's

18 Who Worldwide staff recorded during the period of time

19 that Mr. Zerring was employed by Who's Who Worldwide,

20 between the period of December 1994 to March 30th -- to

21 February 15, 1995.

22 THE COURT: What exhibit is this that you are

23 playing?
24 MR. NELSON: BQ is the transcript, BQ. BP is the
25 tape. EZ is indicated on the tape, side A.


1 THE COURT: Just one minute now.

2 Very well.

3 MR. NELSON: Your Honor, pursuant to the

4 stipulation previously entered with the government and all

5 counsel, I would offer into evidence prior to the playing

6 of all of these recordings, the following exhibits.

7 BM which is the transcript, and BL is the tape.

8 THE COURT: Any objection?

9 MR. WHITE: No, Your Honor.

10 THE COURT: Defendant's Exhibit BM, Baker Mike,

11 and BL, Baker Lion, in evidence.

12 (Defendant's Exhibits BM and BL received in

13 evidence.)

14 MR. WHITE: Your Honor, I thought the tape is

15 coming in, the transcript is just being used for the

16 j ury's clarification.

17 MR. NELSON: The government is correct. I'll

18 make that clear for the record.

19 The transcript of BM is being offered as an aid

20 to the jury. Being introduced in evidence is the tape BL.

21 Next would be the transcript being provided to

22 the jury as an aid, BO. The tape being introduced is BN.

23 THE COURT: N for Negative?
24 MR. NELSON: That correct.
25 THE COURT: Any objection?


1 MR. WHITE: No, Your Honor.

2 THE COURT: Defendant Osman's Exhibits BO and BN

3 in evidence.

4 (Defendant's Exhibits BO and BN received in

5 evidence.)

6 MR. NELSON: The next would be the transcript of

7 BT being offered as an aid to the jury, and the tape BS

8 being introduced as Defendant's BS, the tape.

9 THE COURT: Any objection?

10 MR. WHITE: No, Your Honor.

11 THE COURT: Defendant Osman's Exhibits BT and BS,

12 Baker Sugar, in evidence.

13 (Defendant's Exhibits BT and BS received in

14 evidence.)

15 MR. NELSON: Next would be the transcript BK-1

16 being introduced or provided to the jury as an aid and the

17 tape BJ being introduced as Defendant's Osman's Exhibit.

18 THE COURT: Any objection?

19 MR. WHITE: No, Your Honor.

20 THE COURT: Defendant Osman's Exhibits BK-1 and

21 BJ in evidence.

22 (Defendant's Exhibits BK-1 and BJ received in

23 evidence.)
24 MR. NELSON: Next would be the transcript of BR
25 which is being provided to the jury as an aid. The


1 exhibit has been previously been introduced as a tape by

2 the government and that was Government's Exhibit 1321.

3 THE COURT: Any objection?

4 MR. WHITE: As an aid, no.

5 THE COURT: Defendant's BR in evidence.

6 (Defendant's Exhibit BR received in evidence.)

7 MR. NELSON: Finally, the transcript of BQ which

8 is being offered as an aid and the tape which is BP is

9 being offered as Defendant's Exhibit.

10 THE COURT: Any objection?

11 MR. WHITE: No, Your Honor.

12 THE COURT: Defendant Osman's Exhibits BQ and BP

13 in evidence.

14 (Defendant's Exhibits BQ and BP received in

15 evidence.)

16 MR. NELSON: Thank you.

17 May I proceed, Your Honor?

18 THE COURT: Yes.

19 (Audiotape played.)

20 (Start and stop.)

21 MR. NELSON: The second tape I'm going to be

22 playing is BL. This is a recording which includes Frank

23 Martin, Ed Schaeffer and other employees of Who's Who
24 speaking during the period of time that Elliot Zerring was
25 making recording s while employed at Who's Who Worldwide.


1 This is from EZ-4, tape 1, side WB.

2 THE COURT: Just one minute now, you say this is

3 Baker Lion, BL?

4 MR. NELSON: That's correct, Your Honor.

5 THE COURT: I don't have it.

6 MR. TRABULUS: Your Honor, I think it may say BM.

7 THE COURT: I see. Thank you.

8 (Audiotape played.)

9 (Start and stop.)

10 MR. NELSON: Your Honor, the next recording I

11 would like to play is likewise a recording made by Elliot

12 Zerring which includes Frank Martin speaking to members of

13 the staff.

14 This is Exhibit BN.

15 (Audiotape played.)

16 (Start and stop.)

17 MR. JENKS: I think it's going too fast,

18 Mr. Nelson.

19 (Start and stop.)

20 THE COURT: Isn't that going too fast?

21 MR. NELSON: Judge, I 'll try to slow it down. I

22 haven't been playing the tapes too often, but I'll try.

23 (Start and stop.)
24 MR. NELSON: Your Honor, the next tape I'd like
25 to play is Exhibit BS which comes from a recording


1 entitled EZ-40, side A.

2 This is a recording made by Elliot Zerring during

3 his employment at Who's Who Worldwide and the speakers are

4 Frank Martin and Ed Schaeffer, employees of Who's Who

5 Worldwide, addressing members of the staff.

6 (Audiotape played.)

7 (Start and stop.)

8 MR. NELSON: Your Honor, the next tape I would

9 like to play is Exhibit BJ.

10 This is a recording again made by Elliot

11 Zerring. It's a recording of Bruce Gordon contained on

12 tape EZ-45.

13 (Audiotape played.)

14 (Start and stop.)

15 MR. NELSON: Your Hon or this is a transcript from

16 a tape Government's Exhibit 1321.

17 It's a recording made of Elliot Zerring of an

18 employee of Who's Who Worldwide by the name of Henry

19 Langer.

20 THE COURT: And it's BR, Baker Roger.

21 MR. NELSON: The transcript is BR. The tape is

22 1321.

23 (Audiotape played.)
24 (Start and stop.)
25 MR. NELSON: Your Honor, that's the last of the


1 tapes that I have.

2 THE COURT: Very well.

3 Does anybody wish to proceed at this time?

4 MR. SCHOER: Judge, I have some tapes I can play

5 as well.

6 Judge, I'm prepared to play tapes, I'm not as

7 organized as Mr. White or Mr. Nelson so I hope I don't

8 fumble too much.

9 The transcripts and the tapes themselves have

10 already been introduced through a stipulation b y the

11 government. The written stipulation read into the record

12 before included these transcripts and the two additional

13 tapes which I'm offering and the government has not

14 previously offered. I believe that the jury has this

15 stack already of transcripts.

16 THE COURT: That's part of the transcripts we

17 had.

18 MR. SCHOER: Yes.

19 THE COURT: All right.

20 MR. SCHOER: I believe Your Honor also has a

21 copy.

22 This is a stack that is separate. That was not

23 punched with holes and it is stapled together.
24 THE COURT: Does it have a letter or number?
25 MR. SCHOER: The first one on top is BA 1390.


1 I'll not necessarily play them in the order.

2 They are stapled together but that's the first one on the

3 top of the packet.

4 THE COURT: I don't have it separate. You say

5 1390?

6 MR. SCHOER: Sorry BA.


8 MR. SCHOER: No, BA (handing.)

9 THE COURT: May I hold onto these?

10 MR. SCHOER: I believe so.

11 The first transcript and tape that I will play

12 from this packet is labeled BB-2, that's Baker Baker-2,

13 1394. This is from tape EZ-27 already introduced and part

14 of it played by the government as 1394.

15 That tape was a tape worn by Mr. Zerring on

16 January 4, 1995 while he was at Who's Who Worldwide.

17 (Audiotape played.)

18 (Start and stop.)

19 MR. SCHOER: Judge, the next tape I wish to play

20 is --

21 THE COURT: You didn't complete this one, did

22 you?

23 MR. SCHOER: I think I did. I told you I'm
24 confused.
25 THE COURT: Well, it's up to you. You do what


1 you want to do. I don't think you completed it, though.

2 I got pieces of it here and there in the transcript, it is

3 not completely audible.

4 MR. SCHOER: Judge, I'm confused. Perhaps we can

5 get back to that one.

6 THE COURT: Very well.

7 MR. SCHOER: The next tape I would like to play

8 is the transcript marked BB-3. It's from the same

9 Government's tape, the same day, January 4, 1995. It's

10 Government's tape 1394-A.

11 It is Mr. Gordon speaking and it has been

12 recorded by, again, Mr. Zerring.

13 (Audiotape played.)

14 (Start and stop.)

15 MR. SCHOER: Judge the next tape that I'm going

16 to play is the next transcript BC-1. That is from

17 Government's tape 1395.

18 It's a recording on January 6, 1995, again, made

19 by Mr. Zerring and it's the voice of Mr. Gordon.

20 (Audiotape played.)

21 (Start and stop.)

22 MR. SCHOER: The next tape, the next transcript

23 is BC-2. It's, again, from the same day, January 6,
24 1995. It's the same Government's tape, 1395.
25 It is also Mr. Zerring recording a statement of


1 Mr. Gordon.

2 (Audiotape played.)

3 (Start and stop.)

4 MR. SCHOER: The next tape is the transcript

5 BD-2. It comes -- it is part of Government's tape 1398.

6 It's a recording, again, made by Mr. Zerring,

7 this time on January 27, 1995. The recording is of a

8 female voice and then a statement by Mr. Gordon.

9 (Audiotape played.)

10 (Start and stop.)

11 MR. SCHOER: The next tape I would like to play

12 for the jury is transcript BG. This is from Government's

13 tape 1382.

14 It's a conversation recorded by government

15 informant Ron Marsh on August 9, 1994, and the person

16 speaking is Tara Garboski.

17 (Audiotape played.)

18 (Start and stop.)

19 MR. SCHOER: The next transcript is the following

20 one, BI-1. I'm sorry.

21 Judge, may we take a break now so I can get the

22 balance of the tapes organized? What I did is

23 unfortunately my machine doesn't have the same counter as
24 the government's machine which is much better quality and
25 I would rather play the tape on the government's machine.


1 So what I have to do is roll back all the tapes on my

2 machine to the first place so I can find the second

3 attribution.

4 THE COURT: That's understandable.

5 Very well. We'll take a ten-minute recess.

6 Please don't discuss the case. Please keep an

7 open mind.

8 ( Jury exits.)

9 (Recess taken.)

10 (Jury enters.)

11 THE COURT: You may proceed.

12 MR. SCHOER: Thank you, Judge.

13 What I would like to do next is play a portion of

14 a tape that was played yesterday by the government. It

15 was Exhibit 1382. It was transcript 1382-A, I believe.

16 THE COURT: That goes back to the original

17 booklet.

18 MR. SCHOER: The government's book.

19 THE COURT: Okay.

20 Now, which is this, 1382?

21 MR. SCHOER: 1382-A.

22 THE COURT: All right.

23 MR. SCHOER: It's a Government Exhibit relating
24 to a conversation dated August 9, 1994.
25 It's a statement by Tara Green that was recorded


1 by Ron Marsh. It's the second attribute on that

2 transcript.


4 MR. SCHOER: I'll play what is on th e transcript

5 and complete the sentence that was not completed

6 yesterday.

7 THE COURT: In other words, after the asterisks,

8 the statement that is made, you'll have some additional

9 statement before that, prior to that and after that.

10 MR. SCHOER: And after that.

11 THE COURT: Okay.

12 MR. SCHOER: And unfortunately the tape breaks so

13 I'll have to flip it over.

14 THE COURT: In the interim, have you learned how

15 to work this?

16 MR. SCHOER: I'm learning. I'll try hard.

17 THE COURT: I can't help you with that.

18 Mr. White is very good at it.

19 MR. WHITE: We're trying.

20 (Audiotape played.)

21 (Start and stop.)

22 MR. SCHOER: I'm now going to flip it over.

23 (Start and stop.)
24 MR. SCHOER: Now, we'll go back to the tapes and
25 transcripts we were looking at before.


1 The next transcript is Defendant's Exhibit BA.

2 It's the first one in the packet.

3 It is a conversation recorded on December 23,

4 1994 by Elliot Zale. It's tape EZ-20. The person

5 speaking is Bruce Gordon.

6 I'm sorry, it's Government's Exhibit 1390.

7 (Audiotape played.)

8 (Start and stop.)

9 MR. SCHOER: The next transcript and the next

10 tape we'll play is transcript BB-1 which is the next one

11 in the packet. It relates to Government's tape 1394.

12 It's a conversation, again, recorded by

13 Mr. Zerring on January 4, 1995, and the party speaking is

14 Mr. Gordon.

15 (Audiotape played.)

16 (Start and stop.)

17 MR. SCHOER: The next tape that I'm going to play

18 is transcript BD-1, Government's tape 1398.

19 It's, again, a recording made by Mr. Zerring on

20 January 27, 1995. The person speaking is Frank Martin,

21 Frank Osman.

22 I just need some time to cue it up.

23 (Audiotape played.)
24 (Start and stop.)
25 MR. SCHOER: Now I'm just fast forwarding to the


1 next attribution.

2 (Start and stop.)

3 MR. SCHOER: The next tape I would like to play

4 for the jury is transcript BE. It's Government's Exhibit

5 1380.

6 It's a conversation of August 9, 1994 taped by

7 Ron Marsh. And the speaker is Tara Garboski.

8 I just have to cue the tape up.

9 (Audiotape played.)

10 (Start and stop.)

11 MR. SCHOER: I have to fast forward to the next

12 attribution.

13 (Start and stop.)

14 MR. SCHOER: The next transcript and tape I would

15 like to play is a continuation of a tape that you've heard

16 just awhile ago.

17 It's the conversation recorded by Mr. Zerring on

18 January 27, 1995.

19 It is transcript BD-3. Government's transcript

20 1398.

21 (Audiotape played.)

22 (Start and stop.)

23 MR. SCHOER: I'm sorry, I have the wrong tape.
24 Let's go to transcript BF which is a taped
25 conversation recorded by Ron Marsh on August 8, 1994. It


1 is Government's tape 1381 and the party speaking is Tara

2 Garboski.

3 (Audiotape played.)

4 (Start and stop.)

5 MR. SCHOER: I'm going to rewind that a little

6 because I missed the beginning.

7 THE COURT: Very well.

8 MR. SCHOER: And I'll replay back a portion.

9 (Start and stop.)

10 MR. SCHOER: And I'll fast forward to the next

11 attribution.

12 (Start and stop.)

13 MR. SCHOER: The nex t tape is transcript BD-3, a

14 continuation of a conversation which you've already heard

15 which occurred on January 27, 1995. It is Government's

16 tape 1398.

17 It was taped by Elliot Zerring and the first

18 person that will be speaking is Frank Martin.

19 (Audiotape played.)

20 (Start and stop.)

21 MR. SCHOER: Judge, I had it on the record side

22 so I'll have to rewind it.

23 After this there are only two more.
24 THE COURT: That's all right.
25 (Start and stop.)


1 MR. SCHOER: I'll fast forward it to the next

2 attribution which is Mr. Gordon speaking.

3 (Start and stop.)

4 MR. SCHOER: The next tape is the last transcript

5 in the packet. It's transcript BK. It's a tape that was

6 not introduced by the government so I've marked the tape

7 itself pursuant to the stipulation that has been entered

8 as BJ.

9 It's a conversation recorded by Elliot Zerring on

10 February 3, 1995, and the speaker is Mr. Gordon.

11 (Audiotape played.)

12 (Start and stop.)

13 MR. SCHOER: I'm just going to fast forward it to

14 the next attribution.

15 (Start and stop.)

16 MR. SCHOER: I'm just going to fast forward it to

17 the next attribution.

18 (Start and stop.)

19 MR. SCHOER: The last tape I'm going to play is

20 two different transcripts but the first transcript is

21 BI-1. This was recorded on August 5, 1994.

22 This is the recording of the interview of Eric

23 Ihlenfeldt which he testified about with Tara Garboski
24 when he came to Who's Who Worldwide seeking employment.
25 This tape has not been introduced by the


1 government. I've marked it as tape BH pursuant to our

2 stipulation.

3 (Audiotape played.)

4 (Start and stop.)

5 MR. SCHOER: If you flip to the next page,

6 transcript BI-2 is the continuation of that interview.

7 (Start and stop.)

8 MR. SCHOER: That's it, Judge.

9 Thank you for indulging me.

10 THE COURT: Anybody else at this time?

11 MR. LEE: Judge, I think I have something.

12 Judge, with Your Honor's permission, I would like

13 to play a portion of a tape. It's Government's Exhibit

14 1380.

15 With Your Honor's permission could the jury turn

16 to their exhibit books to transcript 1380-A.

17 THE COURT: Very well.

18 MR. LEE: Judge, a stipulation has been reached

19 by the government and the defendant that the transcript to

20 that tape 1380-A should be replaced by an amended

21 transcript that Mr. White and I have agreed to. I've

22 chosen, with your approval, to identify it as Government's

23 Exhibit 1380-A and I've added under it in red letters
24 amended. And we agree that the jury should insert the
25 amended transcript and replace the original 1380-A.


1 I did it this way so there would be no mistake so

2 we have an amended one.

3 THE COURT: So we have to remove the old 1380-A,

4 for Able.

5 MR. LEE: That's correct. And with your

6 permission I would like to hand up the amended to Your

7 Honor and provide the amended copy to the jurors.


9 MR. LEE: Judge, I'm ready to proceed. I've

10 observed every juror has a transcript.

11 THE COURT: Very well.

12 MR. LEE: Judge, I'm sorry. I think it is

13 apparent but I just should state that the participants

14 identified in this conversation are Ron Marsh, who Your

15 Honor yesterday advised the jury was a confidential

16 informant working on behalf of the government at the time,

17 and the other participant in Laura Winters.

18 If I may it should be made clear that the

19 tape-recording was made with a recording device hiden or

20 recorded on the body of Mr. Marsh. This is not a

21 telephone conversation.

22 THE COURT: Very well.

23 MR. LEE: This was an in-person.
24 THE COURT: Very well.
25 MR. LEE: Thank you, Judge.


1 (Audiotape played.)

2 (Start and stop.)

3 MR. LEE: That's it for me, Your Honor.

4 THE COURT: Anything else at this time?

5 All right. Come up, Counsel.

6 (Side bar.)

7 THE COURT: All right. Is it agreed we'll now

8 recess until Monday?

9 MR. NELSON: Yes, Your Honor.

10 THE COURT: Which is what, the 16th?

11 MR. NELSON: Yes.

12 THE COURT: At 9:30, at which time the defendants

13 will resume their case.

14 MR. WHITE: Yes.

15 THE COURT: We'll recess until 1:15 and then

16 renew the Rule 29 motions as we agreed upon.

17 MR. NELSON: Yes.

18 (End side bar.)

19 THE COURT: Members of the jury, this is not even

20 a half day, this is an eighth of a day, a bare start of

21 the day. However, this is my choice in the matter and

22 I've decided we'll go over until Monday at 9:30 a.m. I

23 will give you further instructions as to the duration of
24 the trial on Monday. In the meantime, you will have
25 Thursday and Friday to go to work, if you are gainfully


1 employed or ungainfully em ployed or employed in any other

2 way, or to choose not to go to work, that's up to you.

3 But what you must do is keep an open mind and

4 come to know conclusions until the very end of that case

5 when you are in that jury room when you start exchanging

6 views, after you've heard all the evidence in the case,

7 after you've heard closing arguments of counsel and

8 they'll tell you what their view is which you must

9 carefully consider. It's not evidence but it's very

10 important, and then I'll instruct you on the law.

11 Do not discuss the case either among yourselves

12 or with anyone else. You will have four and-a-half days

13 to not discuss the case and keep an open mind, and we'll

14 sea you on Monday, March 16th at 9:30.

15 Have a nice weekend.

16 (Jury exits.)

17 THE COURT: All right. We'll recess until 1:15.

18 At that time I assume all the lawyers who are looking up

19 the law, I assume you've conclude your research on the law

20 and have found some very illuminating cases for me.

21 In any event, we'll resume at 1:15 with or

22 without the illuminating cases and we'll conclude our

23 discussions on the Rule 29 motions.
24 (Luncheon recess taken.)


1 A F T E R N O O N S E S S I O N


3 (Whereupon, the following takes place in the

4 absence of the jury.)

5 THE COURT: Let's proceed. Mr. Trabulus.


7 MR. DUNN: I have a brief application on behalf

8 of Mr. Rubin, your Honor. He has a personal problem that

9 just arose. He is asking the Court if he can be excused

10 for the afternoon. He understands he has every right to

11 be here. He is waiving his right to be here for the

12 afternoon.

13 THE COURT: Is that true, Mr. Rubin?


15 THE COURT: You understand it is in your best

16 interest to be here?


18 THE COURT: You have decided not to be here

19 knowingly and intentionally?

20 THE DEFENDANT RUBIN: All right, he is then

21 excused.

22 MR. DUNN: Thank you, your Honor.

23 MR. WHITE: Before we start with new issues, your
24 Honor, can we resolve the ones which were left open as of
25 yesterday?



2 MR. WHITE: Ms. Scott will handle those.

3 MS. SCOTT: Your Honor, first I would like to

4 address your concern about the evidence that solicitation

5 letters were mailed.

6 The evidence came from Debra Benjamin as well as

7 from several v ictims who received solicitation letters,

8 and also from the other employee witnesses who testified

9 about mailings -- about what they knew about mailings

10 going out, about what they witnessed.

11 Wendi Springer or Susan Konopka testified that

12 she actually went to a mailing house and actually saw the

13 mail going out.

14 Most importantly Debra Benjamin went through the

15 entire procedure twice in the direct testimony, once in

16 response to questions from Mr. White, and secondly in

17 response to questions from your Honor which thoroughly

18 clarified the procedure.

19 THE COURT: Where is this testimony?

20 MS. SCOTT: What transcript pages?

21 MS. SCOTT: The testimony given in response to

22 your Honor's questions is on pages 3844 and goes through

23 3845.
24 THE COURT: This is the issue of whether there is
25 proof that the solicitation let ters were mailed?


1 MS. SCOTT: Yes. It starts on 3843.

2 THE COURT: This is with regard to those counts

3 where no one testified?

4 MS. SCOTT: Yes.

5 THE COURT: 3843?

6 MS. SCOTT: Yes. The account numbers are 19, 22,

7 29, and 49.

8 THE COURT: 19, 22?

9 MS. SCOTT: Count 19, Count 22, Count 29 and

10 Count 49.

11 THE COURT: The solicitation counts where nobody

12 testified?

13 MS. SCOTT: That's right.

14 THE COURT: Not nobody, but where the customer

15 did not testify?

16 MS. SCOTT: Yes.

17 THE COURT: What page is in the record?

18 MR. WHITE: 3843, where your Honor is questioning

19 Ms. Benjamin about the procedures.

20 THE COURT: I see here that I did question on

21 that subject.

22 MS. SCOTT: That's correct.

2 3 THE COURT: 3843, by the Court.
24 Question: Was there a procedure invariably
25 followed in Who's Who Worldwide in processing these


1 names?

2 Further down, the witness: There was a regular

3 procedure followed.

4 MS. SCOTT: Then your Honor clarified there was

5 one procedure as opposed to several.

6 THE COURT: Yes, by the Court on page 3844.

7 Question: Was there four ways to do it, three

8 ways, twenty ways, or one way?

9 The Witness: One way.

10 The Court: What was the way?

11 The Witness: The list went from the list broker

12 to the mailing house and then was processed. The letter

13 was processed. The BRC, Baker Roger Charles, and this

14 mailed out.

15 The Court: The letter was processed and what?

16 The Witness: The BRC -- what is a BRC?

17 MS. SCOTT: Business reply card, the reply card.

18 THE COURT: -- was put in the envelope and mailed

19 out.

20 The Court: With the letter?

21 The Witness: Yes.

22 I go on on page 3845 to find out that it was

23 mailed in an envelope, the solicitation letter and the
24 cards.
25 MS. SCOTT: And then your Honor said in the


1 middle of 3845. And that was mailed after being received

2 at the mailing house from the broker with the lists; is

3 that right?

4 And she said, that's correct.

5 THE COURT: All right.

6 Where else do you say it is?

7 MS. SCOTT: In this testimony, as in earlier

8 testimony that Ms. Benjamin gave in response to

9 Mr. White's questions, set forth at 3822 and subsequent

10 pages, Ms. Benjamin indicated she and the company relied

11 as a matter of course on these mail houses to perform the

12 mailings. This was the backbone of the company's

13 business. This is how the lead cards got to the customers

14 and generated the business that the company lived on.

15 THE COURT: Where is this?

16 MS. SCOTT: The first part is on page 3822, the

17 first time she describes this process. And the second

18 time is what your Honor had been through, 3844.

19 THE COURT: Just one minute now.

20 (Whereupon, at this time there was a pause in the

21 proceedings.)

22 THE COURT: I see what it says now.

23 What else?
24 MS. SCOTT: The lead cards that went out from --
25 with the letters were returned to the company, we have


1 testimony of Springer, Benjamin and Saffer that the lead

2 cards came in everyday in the mail. They were sorted in

3 the conference room, we have Ms. Springer and Benjamin

4 testifying to that. So we know the lead cards included

5 with the solicitation letters that went out by mail came

6 back to the company with the names of the people on them.

7 THE COURT: In each one of these counts?

8 MS. SCOTT: In general what we know is the lead

9 cards sent to people on these mailing lists came back

10 having been filled out by these people.

11 What we have with almost all of our counts is a

12 match with the lead cards we have in our possession with

13 the form solicitation letter which I will describe in a

14 minute, which is kept in the company's records to record

15 the solicitation mailing.

16 I am kind of ahead of myself.

17 THE COURT: As to counts 19, 22, 29 and 49, which

18 you say are the counts at issue in this mailing problem,

19 are there lead cards for each one of these counts.

20 MR. SCHOER: I will check that.

21 MS. SCOTT: 49, yes.

22 THE COURT: Filled out, right?

23 MS. SCOTT: Yes.
24 THE COURT: Who is the person who filled it out,
25 where did the person live.


1 MS. SCOTT: Renton, R E N T O N, Washington. Her

2 name is Jodie Welch, W E L C H. This is count 49.

3 THE COURT: You are talking about the State of

4 Washington?

5 MS. SCOTT: Right.

6 Her lead card is Government's Exhibit 49-D, as in

7 Daniel. And her solicitation letter is 49-F, as in

8 Frank.

9 We have the card for 19. It was sent to Memphis,

10 Tennessee. The name of the person is Brian Watts, W A T T S.

11 With respect to count 29 we have the lead card.

12 That arrived from Chicago, Illinois. The name of the

13 customer is D avid Purdy, P U R D Y.

14 We have the lead card for count 22. And that was

15 sent from Oregon. The name of the customer is Wayne

16 Rieskamp, R I E S K A M P.

17 Now in connection with the system that

18 Ms. Benjamin described twice in her testimony, she

19 described there is a record keeping procedure where copies

20 of each draft solicitation letter mailed out from the

21 company -- to be more specific, she stated that copies of

22 the actual letters, the final versions of each letter that

23 were sent out were -- copies of these letters were kept in
24 the company. And at the top of these letters where
25 written in hand the mailing list or lists that that letter


1 was sent to, is the number of recipients total.

2 The numbers were usually fairly high. They went

3 from five to s ix figures. These numbers were very

4 accurate numbers. They went down to the last decimal

5 point, the last digit, rather.

6 Rather than having a number like 59,000, the

7 number would be like 59,283. They were the exact numbers

8 indicating the number of people who these mailings had

9 been sent to.

10 We have in connection with these four counts, the

11 drafts, the copies of the final letters that were sent to

12 those individuals, that we believe were sent to those

13 individuals. And each of these letters contains this

14 handwriting on the top, indicating the mailing list used,

15 is the number of recipients that were intended to receive

16 this mailing, and I can pass these up to your Honor if you

17 are interested in seeing those.

18 THE COURT: Not necessary.

19 MS. SCOTT: Okay.

20 THE COURT: Did you say someone else testified

21 about this p rocedure?

22 MS. SCOTT: We have Mr. Saffer testifying about

23 the frequency of what he would call drop mailings, that
24 Bruce Gordon would drop a mailing at this or that time.
25 We have his testimony regarding his memory of mailings


1 that would go out and that would generate a certain number

2 of lead cards that would maybe be a little heavier at

3 first and then taper off after a time.

4 We have the testimony of Suzanne Konopka who

5 actually went to assist with the mailing on one occasion

6 at the mailing house.

7 We have tape recordings in which people who

8 worked at the companies stated that they were aware of

9 different mailings that had recently gone out and were

10 generating lead cards that came back into the company.

11 And that's in different sections of the tapes p layed

12 throughout the course of the trial.

13 Finally, we have the testimony of most of the

14 customers who came into this courtroom who stated that

15 their first contract with the companies were by a

16 solicitation letter that they received in the mail.

17 THE COURT: Excuse me.

18 (Whereupon, at this time there was a pause in the

19 proceedings.)

20 THE COURT: Is that it?

21 MS. SCOTT: Yes, your Honor, that is the

22 evidence.

23 THE COURT: Anybody want to talk on that
24 subject?
25 MR. NEVILLE: Your Honor, I have a very important


1 question.

2 My I go to the men's room?

3 THE COURT: Do you wish to walk out of the

4 courtroom while we are discussing this question of the

5 counts that involve your client?

6 MR. NEVILLE: I don't wis h to, but I have to.

7 THE COURT: We will excuse you then.

8 MR. NEVILLE: Thank you.

9 THE COURT: We will wait until you get back

10 then.

11 (Mr. Neville exits the courtroom.)

12 MS. SCOTT: I submit this is clear --

13 THE COURT: We will wait until he gets back.

14 MS. SCOTT: All right.

15 (Whereupon, at this time there was a pause in the

16 proceedings.)

17 Q Anyone want to discuss the solicitation letter

18 issue?

19 MS. SCOTT: I need to finish one point and

20 clarify one thing, your Honor.

21 First of all, the procedure that they use to keep

22 track of the letters that were sent out to which mailing

23 lists they were sent, and how many pieces they were sent,
24 is all set forth on page 3793 to 3794 of the trial
25 transcript. This is about what Liz Sautter would do to


1 keep track of the solicitation letters.

2 Now, what she says is that Liz Sautter would keep

3 samples of each letter that went out to each mailing

4 list. And by sample I mean a copy of the letter with one

5 person's address on it that may or may not have been a

6 person that actually appeared on the mailing list. And

7 that she wrote on top the name of the mailing list, the

8 code that they used for the mailing lists, which, by the

9 way, would match the code on the lead card that would go

10 out with that solicitation letter. And that's why, your

11 Honor, when we placed the later customers on the witness

12 stand and had them testify about these lead cards that

13 they filled out, we always had them read the code that

14 appeared in the lower corner, because that's the code that

15 matches up with the code that also appears on the sample

16 letter, the copy of the letter that would have been sent

17 to that person.

18 I will just read for you the segment of the

19 transcript which makes clear that this is the procedure

20 that was used.

21 THE COURT: If you read slowly.

22 MS. SCOTT: Okay.

23 On page 3793.
24 Question: Did she perform that function -- well,
25 going back a little bit actually.


1 Question: Who was responsible for maintaining

2 copies of these letters?

3 Answer: Liz Sautter.

4 Question: Tell us who Liz Sautter is.

5 Answer: She was the office manager.

6 Question: The office manager for which company?

7 THE COURT: Let's cut to the chase.

8 MS. SCOTT: I am doing that, your Honor. But I

9 am establishing here that it is both Who's Who Worldwide

10 and Sterling. S he testified it is for both.

11 THE COURT: Okay.

12 MS. SCOTT: Question: Now where is it that

13 Ms. Sautter will maintain these letters?

14 Answer: They were in binders kept in the

15 administration office.

16 Question: Would any notation be made on these

17 letters before being placed in these binders?

18 Answer: Yes.

19 Question: First of all, who would put the

20 notation in?

21 Answer: In most cases it would be Liz.

22 Question: And what sort of notation would she

23 put?
24 Answer: It would have -- it would have what
25 lists it was, what mailing house took care of it, how many


1 pieces were mailed, and any code on the BRC, business

2 reply card.

3 Question: And the business reply card would be

4 included with the letter?

5 Answer: Yes.

6 THE COURT: Anything else?

7 MS. SCOTT: That's our argument.

8 THE COURT: Anybody wish to discuss this point?


10 THE COURT: All right.

11 The motion to dismiss under Rule 29, or for a

12 judgment of acquittal with respect to counts 19, 22, 29

13 and 49 is denied. There is ample evidence, substantial,

14 strong evidence that the mailing procedures, without

15 alternative procedures, were to give the letters to the

16 mailing housing.

17 Debra Benjamin described the procedure.

18 Also, the lead cards were returned which

19 invariably were included with the solicitation letters,

20 which means that's the solicitation letters were mailed.

21 The letters went to Memphis, Tennessee, Oregon, Chicago

22 and the State of Washington.

23 There is overwhelming, overwhelming
24 circumstantial evidence that these letters were mail ed.
25 In addition, copies of the letters were kept in


1 the company with handwritten confirmations. Witness

2 Konopka testified she assisted in the mailing on one

3 occasion. And also, customers came in, and all of them

4 testified that they got the solicitation letters which led

5 to the lead cards by mail.

6 Debra Benjamin testified that Liz Sautter took

7 charge of the procedures to keep track of the letters,

8 kept samples with matching codes.

9 The motion to dismiss those counts is denied.

10 MR. JENKS: With respect to 49, you are going to

11 come back to it on a jurisdictional issue. Those are the

12 only Sterling counts out of those four counts. The others

13 were Who's Who Worldwide.

14 THE COURT: That was just the solicitation

15 letters, mailing issue.

16 MR. JENKS: All right.

17 THE COURT: I don't know who raised it. But

18 somebody raised that.

19 MR. SCHOER: I did.

20 THE COURT: What?

21 MR. SCHOER: I raised it, Judge.

22 THE COURT: All right.

23 Now, the next open point, continuing with the
24 mail fraud, is defendant Osman moved to dismiss count 6 to
25 52, because he wasn't employed during that period of time.


1 What about that?

2 MS. SCOTT: Before we get to that can I just

3 address the venue issue, because I believe that's a fairly

4 simple one.

5 THE COURT: Just one minute now.

6 All right.

7 MS. SCOTT: The motion was to dismiss counts 42,

8 49, 50, 52 and 54 for lack of venue.

9 THE COURT: Those are the Sterling counts, yes,

10 your Honor.

11 THE COURT: One minute, and let me take a look

12 here.

13 I have count 52 in here also. Did you say 52?

14 MS. SCOTT: I did say 52, yes.

15 THE COURT: And 54, correct?

16 MS. SCOTT: That's correct.

17 THE COURT: Okay.

18 MS. SCOTT: First of all, your Honor, we have

19 Debra Benjamin's testimony that she was responsible for

20 the mailing of letters for customers of Sterling, as well

21 as customers of Who's Who Worldwide. And for that I would

22 refer you to pages 3832 through 3833 of the transcript.

23 THE COURT: One moment now.
24 What numbers?
25 MS. SCOTT: Page numbers?



2 MS. SCOTT: 3832 through 3833 of the transcript.

3 THE COURT: Well, it is clear.

4 Question: Did you perform that function for both

5 Worldwide and Sterling?

6 Answer: Yes.

7 MS. SCOTT: Then flipping back, your Honor, to

8 pages 3823 to 3824, that's where Ms. Benjamin described

9 the mailing houses where the letters were mailed from.

10 She gives their names as --

11 THE COURT: You don't have to give the names.

12 MS. SCOTT: Okay.

13 THE COURT: Fala and Show Case was located in

14 Long Island.

15 MS. SCOTT: Metro Seliger was in Queens.

16 THE COURT: Metro, M E T R O. Seliger,

17 S E L I G E R.

18 MS. SCOTT: Yes.

19 Then she testified about where the post offices

20 that these houses use are located.

21 She has already testified on 3823 that Fala and

22 Show Case were located on Long Island, and that Metro

23 Seliger were in Queens or Astoria, Long Island City. Then
24 she turns to the question of the post offices where those
25 are located. She says that Fala's post offices are


1 located on its premises on Long Island. She says that

2 Metro Seliger's post office is located in its post office

3 in Queens.

4 With respect to Show Case, she says that the post

5 office is -- that the post office that Show Case used was

6 either Hauppauge or where the Show Case office was

7 located, which she has already said was on Long Island.

8 It is clear that all the mailings, Sterling Who's

9 Who or Who's Who Worldwide was going from Queens to Long

10 Island.

11 In addition, it makes no sense that a company

12 located on Long Island would travel the whole length of

13 Long Island -- Show Case in particular, which may have

14 been out -- as far as Hauppauge, would travel the whole

15 length of Long Island to get to Manhattan to mail a bulk

16 load of letters.

17 So, your Honor, the standard for proof of a venue

18 issue has been met.

19 The standard is since venue is not an element of

20 the offense the government can prove that by a

21 preponderance of the evidence. It does not have to go to

22 beyond reasonable doubt. In this case we more than met

23 the preponderance standard.
24 If you need a cite for the standards, your Honor,
25 I have two cases from the Second Circuit. U.S. against


1 Rosa, R O S A, 17 F.3d 1,500 31. Maldonado-Rivera,

2 M A L D O N A D O dash Rivera, R I V E R A, 922 F.2d 934.

3 That's our argue on the venue issue, your Honor.

4 (Whereupon, at this time there was a pause in the

5 proceedings.)

6 THE COURT: Who raised the issue, the venue

7 issue?

8 MR. JENKS: I raised the issue. But Ms. Scott's

9 reading of the record has been acc urate.

10 THE COURT: All right.

11 I find that there is sufficient venue

12 established, certainly by a preponderance of the evidence,

13 which seems to be the standard. But certainly even by a

14 greater standard than that, more onerous standard.

15 An essential part of this mail fraud was done in

16 the Eastern District of New York, namely, the mailings.

17 It is as simple as that.

18 Therefore, the motion to dismiss counts 42, 49,

19 50, 52 and 54 are denied.

20 MR. SCHOER: That's the venue issue. We have

21 another issue on those counts that were still open from

22 yesterday. That's the issue with respect to all the other

23 defendants other than Sterling, whether or not those
24 counts ought to be dismissed against them because there is
25 no connection to Sterling with respect to the substantive


1 counts.

2 THE COURT: We are going to go in order.

3 What is the next -- the next is that the

4 defendant Osman moves to dismiss --

5 MS. SCOTT: I would ask with the Court's

6 permission to put that argument over until a little later

7 today. I need to pull together some material with respect

8 to that.

9 THE COURT: All right. What do you wish to

10 discuss next?

11 MS. SCOTT: The issue that Mr. Schoer raised.

12 THE COURT: Let me find it.

13 Is that the motion to dismiss all the defendants

14 except Gordon and Sterling, moving to dismiss the Sterling

15 counts?

16 MR. SCHOER: Yes.

17 THE COURT: Because you are not employed by

18 Sterling?

19 MR. SCHOER: Yes.

20 MR. JENKS: Judge, I made that motion on behalf

21 of Who's Who Worldwide as well.

22 THE COURT: I included you.

23 MR. JENKS: Okay.
24 THE COURT: What about that?
25 MS. SCOTT: The most telling legal requirement


1 that governs this is the requirement that when a

2 transaction, meaning any of these mail fraud transactions

3 that was -- that came out of Sterling Who's Who, when such

4 a transaction is within the general scope of a scheme on

5 which all of the defendants had agreed to participate,

6 then a defendant not directly involved with the particular

7 fraudulent act is chargeable with that act for purposes of

8 the mail fraud statute.

9 I have United States against Amrep Corporation,

10 A M R E P, to support that position, your Honor. I have a

11 copy to give you if you like.

12 THE COURT: What is the citation?

13 MS. SCOTT: 560 F.2d, 539.

14 I am reading from page 545, about the middle of

15 the page.

16 So long as a transaction is within the general

17 scope of a scheme on which all defendants had embarked, a

18 defendant not directly connected with a particular

19 fraudulent act is nonetheless responsible, therefore, if

20 it was of the kind as to which all parties had agreed.

21 Now, in this case, in Amrep there was a

22 corporation found to have defrauded its customers. And

23 the question was whether officers and employees of that
24 corporation can be chargeable for the fraudulent acts of
25 the corporation. And the determining was whether -- the


1 question to be resolved was whether these officers were

2 conscious promoters of the illicit scheme. That's all

3 that was needed. Once it was found that they were, then

4 they were chargeable for any of t he fraudulent acts

5 perpetuated by the corporation.

6 In this case we have proof of one conspiracy. We

7 have proof of two parts of it, two branches, which engaged

8 in the same illegal activity. They were owned by one

9 person who wrote the pitches substantially identical for

10 both companies, and substantially the same letters from

11 both corporations went out, saying you were nominated, a

12 board has approved your nomination, etcetera, etcetera.

13 The same procedure was followed, your Honor. A

14 lead card was returned to the company by an interested

15 customer and a follow up phone call was made, in which

16 pitches were read from, pitches which, again, were

17 substantially identical.

18 For support for our position that this was just

19 one conspiracy as opposed to two, I have another --

20 THE COURT: I am not talking about a conspiracy.

21 I am t alking about the mail fraud count.

22 MS. SCOTT: A scheme is what I am talking about,

23 your Honor.
24 THE COURT: Do you have a case that says
25 employees of corporation A are criminally responsible for


1 frauds committed only by employees by corporation B?

2 Because the Amrep case as I understand it, the employees

3 were officers, directors, as I understand it of the same

4 corporation.

5 MS. SCOTT: I have an analogous corporation

6 discussing mail fraud in one scheme as compared to --

7 THE COURT: My question is: Do you have a case

8 that says that the employees of corporation A are

9 criminally responsible for frauds committed by the

10 employees of corporation B which was of no benefit

11 financially to the corporations A employees?

12 MS. SCOTT: No. But I would like to put forth

13 our analogous case which sets light on that.

14 The Amrep case says that the absent declarations

15 to each party to the scheme made in furtherance or in

16 execution thereof are admissible against all.

17 I can show you this case. In addition, I have

18 another case, United States against Amiel, A M I E L.

19 THE COURT: I don't know how to spell that.

20 MS. SCOTT: A M I E L, the citation is 95 F.3d

21 135; Second Circuit, 1996.

22 In that case the two defendants were involved in

23 procuring pieces of artwork that they passed off as being
24 original Picassos or original limited edition pieces of
25 art by famous painters. They sold these artworks to


1 dealers. And the evidence showed that the dealers were

2 aware that they were fakes, but the dealers then contin ued

3 in this process of passing off the artworks as genuine.

4 The profit that the original procurers were made

5 from the money sold to the dealers. They sold the artwork

6 to the dealers and that was the end of it. They lost

7 contact with it then. The dealers sold it to the public.

8 The case held that the jury could convict the

9 procurers, the original defendants, on the charges

10 pertaining to the dealers, if the jury concluded that the

11 defendants acted with knowledge that the products would be

12 sold through the misrepresentations of the dealers.

13 This was the case, even though the defendants did

14 not stand to gain any benefit from what the dealers made

15 on the subsequent sales of these artworks.

16 MR. NEVILLE: They would benefit. If the dealers

17 do not sell the artwork, the people who sold the artwork,

18 they will not benefit.

19 THE C OURT: Mr. Neville restrain yourself, will

20 you?

21 MR. NEVILLE: I am sorry.

22 THE COURT: We will give you a chance.

23 MS. SCOTT: I have one more case, your Honor,
24 which is.
25 This case involves the alleged duplicitousness of


1 an indictment, which the defense contended raised two

2 conspiracies, when in fact it charged only one. And this

3 case was about activity very similar to the instant one.

4 It involved two corporations, it involved

5 misrepresentations made over the telephone to prospective

6 customers, using pitches describing products. And it

7 explains, as in this case, the two corporations are

8 engaged in the same exact business. They are selling the

9 same type of products and using the same

10 misrepresentations for their pages. For purposes of

11 determining as to whether the indictment was duplicitous

12 or not, the Court determined there was one conspiracy and

13 not two.

14 I would like to hand that case up as well as the

15 Amrep case is the Amiel case.

16 MR. NELSON: Can we have the citation of the

17 third case?

18 MS. SCOTT: 1998 West Law 54762. A Ninth Circuit

19 case.

20 MR. TRABULUS: The name of the case?

21 MS. SCOTT: United States against Veltri,

22 V E L T R I.

23 I wish to express that for a mail fraud scheme it
24 is the same analysis as applied to a conspiracy.
25 THE COURT: But different elements of the crime.


1 MS. SCOTT: For purposes of determining the

2 participation --

3 THE COURT: There is no element in the conspiracy

4 charged that there be a deprivation or attempted

5 deprivation of money and property. All there is is a

6 conspiracy, an unlawful agreement and participation and

7 overt acts in furtherance.

8 In the mail fraud you have to prove -- a major

9 part of it is that there was a scheme to defraud by means

10 of false promises and representations to -- let's get the

11 exact language -- to obtain money or property by means of

12 false or fraudulent pretenses.

13 MS. SCOTT: We are both going to argue this

14 because we have both done this research.

15 THE COURT: Go ahead.

16 MR. WHITE: Your Honor, I take your point that

17 there has to be a deprivation of money or property. But I

18 think so that the requirement is not as strict that each

19 individual defendant has to be involved in each individual

20 deprivation of money or property.

21 In other words, your Honor, they can jointly

22 agree to a scheme to d eprive the customers of the two

23 companies of money or property.
24 For example --
25 THE COURT: What proof is there that these


1 employees conspired or agreed to deprive the Sterling

2 employees of money or property? Where is the proof of

3 that?

4 MR. WHITE: You don't have to be aware of every

5 element of the scheme.

6 THE COURT: Where is the proof that there was a

7 scheme of the employees of Who's Who who were interested

8 in commissions and making sales for Who's Who Worldwide

9 and not Sterling? That's the problem I have. They have

10 had nothing to do with Sterling. Why should they be

11 criminally responsible for things they had nothing

12 whatsoever to do, nor is there any evidence here that they

13 agreed as a result of what they are doing for Who's Who

14 Worldwide, who is going to help Sterling do the same

15 thing? They were two independent companies.

16 Yes, the companies had mutual administration.

17 They had some employees who worked for both, but not the

18 salespeople. They were separate units.

19 MR. WHITE: That's true, your Honor, but the

20 salespeople are as separate -- each individual salesperson

21 charged here is also separate from every other defendant.

22 In other words, Annette Haley doesn't care what

23 Scott Michaelson is doing and vice versa. They are both
24 working for their own commissions presumably. They don't
25 have to know what some other participant in the scheme is


1 doing for them to be part of the same scheme.

2 THE COURT: But there is a scheme, you tried to

3 prove, whether you did or not is another que stion, but you

4 tried to prove that there was a scheme among all the

5 employees and Mr. Gordon and the corporation to obtain

6 money or property by false pretenses. That is what you

7 tried to prove.

8 MR. WHITE: Correct.

9 THE COURT: Where do they come into the Sterling

10 picture?

11 The opinion you have just given me, an

12 unpublished opinion, the first thing I see is that it is

13 not appropriate for publication and may not be cited to or

14 by the courts of this circuit.

15 MS. SCOTT: Your Honor, we are not using it as a

16 citation authority. We are using it to clarify what we

17 mean about how this conception works, that you have two

18 companies involved in the same business involved in the

19 same conspiracy. We are not citing it as authority. We

20 are using it as an example to clarify this.

21 THE COURT: That is as good foot work as I h ave

22 seen with Gale Sayers. You were not born when he was

23 playing. He is probably the best running back in the
24 history of the National Football League. Unfortunately he
25 suffered a devastating injury after five or six years. I


1 saw him play. He could run at top speed, Olympic sprinter

2 speed, and without slowing down turn 180 degrees in the

3 opposite direction. Unstoppable. And that's what you

4 just did.

5 Secondly, the duplicitous argument is not exactly

6 on point with what I am raising.

7 MS. SCOTT: I said we have analogous

8 propositions.

9 THE COURT: I don't want analogous. I want a

10 proposition -- you show me a case that somebody employed

11 by A corporation, entirely separate, works at a different

12 office, makes different commissions, has nothing t o do,

13 and not paid by B corporation, why he should be criminally

14 responsible for frauds committed by the fraud committed by

15 corporation B?

16 If it is such an easy proposition, why can't you

17 show me a case for this? I think the obvious answer is

18 because it never got to that point. What happened to it

19 is probably what is going to happen in a few minutes now.

20 MR. WHITE: Well, the Amrep case says you are

21 supposed to analyze the participants of a mail fraud

22 scheme in the same way you would in a conspiracy, namely,

23 that someone could be responsible for another person,
24 doesn't have to know what they are doing, if they are a
25 participant in the same scheme.


1 THE COURT: Not the same thing. The conspiracy

2 is an agreement you tried to prove, and we will talk about

3 that.

4 The conspiracy is an agreement to commit crimes

5 by all these defendants together. They don't have to be

6 salespeople of both A and B to do that. In other words, A

7 salespeople can commit crimes with salespeople of B

8 corporation, or with B corporation, on a conspiracy basis;

9 but not in my opinion under the facts of this case on a

10 substantive mail fraud. It is not the same.

11 MR. WHITE: I guess what I don't understand, it

12 seems like that is simply exalting form over substance

13 just by the fortuity that Mr. Gordon incorporated

14 Sterling.

15 If he opened Who's Who Worldwide's New York

16 office, as I understand your Honor's analysis, then they

17 would be responsible.

18 THE COURT: I don't understand why you don't

19 understand. You keep saying to me you don't understand

20 certain things. Too bad.

21 If I have not made it clear, tough.

22 MR. WHITE: I am trying to understand.

23 THE COURT: If you didn't understand what I am
24 saying, fine. I don't agree with you. I don't think
25 there is ever going to be criminal liability for mail


1 fraud for employees who have no benefit whatsoever from

2 that, have nothing to do with that corporation. They are

3 a separate sales office, separate offices, physically

4 located in two different places.

5 Whether you like the fact that Mr. Gordon did

6 this to frustrate you --

7 MR. WHITE: He didn't do it to frustrate me, your

8 Honor.

9 THE COURT: He did it. And there is nothing

10 wrong with doing it. People do that all the time. Fancy

11 corporations that dine at the Four Seasons do it all the

12 time. I have not seen it. You have not shown me a case

13 to persuade me otherwise.

14 MR. WHITE: May I make two points?

15 With respect to the Amiel case that Ms. Scott

16 cited to you, that's one where the originators of this

17 bogus art have nothing to do with the fraud down the

18 stream. They pass the bogus art to defraud the public

19 that they pass down the stream.

20 The Second Circuit said that they can be

21 responsible under an aiding and abetting theory for mail

22 fraud although they don't know what down the stream they

23 were doing?
24 THE COURT: How could these employees be
25 responsible for aiding and abetting what went on at


1 Sterling? I don't understand that. In the art situation

2 here there is some kind of tie. They passed the art

3 down. Here they don't put a finger on it. Nothing to do

4 with it. Two separate companies.

5 Maybe if the employees of Worldwide had some tie

6 in to Sterling employees, maybe if they subcontracted the

7 deals to them that would come into the Amiel picture.

8 There are no ties, nothing.

9 MR. WHITE: Your Honor, what I don't

10 understand -- I am not saying it because I am trying to

11 argue. I am trying to respond appropriately to what the

12 Court is saying.

13 THE COURT: All right.

14 MR. WHITE: If I am correct, I want to make sure

15 I understand the analysis.

16 Your Honor is saying if Sterling were simply

17 Who's Who Worldwide's Manhattan's office, and had a

18 separate sales force, then this would be -- then you could

19 hold them responsible?

20 THE COURT: I am not saying that.

21 I am saying if Sterling or Worldwide were tied

22 together in some ways, shared the sales situation, or had

23 exchange customers, and so forth and so on, or had mutual
24 customers, I can see it. But not two different companies
25 with different sales forces. Those are legitimate


1 severances. They are two separate companies now.

2 It might have been done for tax purposes, or to

3 get additional customers under an additional alleged

4 scheme and so forth. But they were two separate

5 operations. And I can't see the salespeople of Who's Who

6 Worldwide, who had nothing whatsoever to do with Sterling,

7 and no benefit from Sterling, for being criminally liable

8 for acts made by people they had nothing to do with, had

9 no benefit, no potential benefit or anything else.

10 Maybe we will make new law with this, Mr. White.

11 But apparently there is no reported case. I know that

12 Ms. Scot t is a prodigious researcher. I heard all about

13 her research ability. She was terrific. I heard it from

14 her former boss, as a matter of fact. By the way, she was

15 a law clerk to a federal Judge, that's why.

16 MR. WHITE: Maybe we will sit down when we are

17 behind, and if we can come up with some additional cases

18 we will do that.

19 THE COURT: Until the jury is discharged.

20 MR. WHITE: I am hanging my hat on that.

21 THE COURT: I will call them back and recharge

22 them on that.

23 MR. WHITE: Okay.
24 THE COURT: At this point do you wish to have an
25 opportunity to submit additional cases?


1 MR. WHITE: Considering that we will be off for

2 the weekend, I would like to do that.

3 THE COURT: Anybody wish to be heard on the other

4 side?

5 THE COURT: I will tell you now that I intend to

6 dismiss these counts against all the defendants except

7 Gordon and Sterling, on counts 42, 49, 50, 52 and 54,

8 unless you show me something in the next few days.

9 I am marking it in my own papers, because I have

10 to prepare a verdict sheet -- which incidentally, I wanted

11 to tell you about.

12 What I would suggest you think about and approve

13 is that these dismissed counts, some of them dismissed

14 altogether, that we should do the indictment over again

15 and remove these counts, and move the numbers

16 consecutively.

17 Anybody have any objection to that? We are not

18 amending any indictment nor constructively amending it or

19 doing anything else. All we are doing is realistically

20 presenting it to the jury, because they will get a copy of

21 the indictment as to what it now is.

22 Anybody objectio n to that?

23 MR. WHITE: No objection. But I am wondering if
24 it ends up to be confusing. We have been talking about
25 one number and then the verdict will be another number.


1 THE COURT: Confusing to who? To you?

2 MR. WHITE: Yes, on appeal --

3 THE COURT: Nothing would be confusing to you.

4 MR. WHITE: Apparently this issue is confusing to

5 me.

6 THE COURT: I will have you prepare a new

7 indictment, a superseding indictment, and you have your

8 old indictment. And I will give you the new one with the

9 new numbers.

10 MR. WHITE: All right.

11 THE COURT: In the mail fraud 2 is dismissed, so

12 it will be a new 2, but it will not be as numerous,

13 depending on what I do.

14 I think that's the only way to be able to present

15 it to the jury. You wan t the jury to have a copy of the

16 indictment, don't you?

17 MR. WHITE: Yes.

18 THE COURT: All right.

19 We don't want them to look at counts and mix it

20 up. It is not fair to do that.

21 MR. WHITE: I was thinking perhaps it is redacted

22 so there is no 2, and it goes from 1 to 3. But I don't

23 feel strongly about that.
24 THE COURT: I think it makes more sense to
25 renumber them, if there is no objection from the


1 defendants. I don't hear any.

2 What is the next issue you want to take up,

3 Ms. Scott?

4 MS. SCOTT: The last issue is the issue relating

5 to Mr. Osman. We will be making the same argument with

6 respect to Mr. Osman and Mr. Rubin, and I would ask to do

7 that a little later today.

8 THE COURT: Let me see.

9 That's the employm ent situation?

10 MS. SCOTT: Yes.

11 THE COURT: That's open, Rubin is open, Osman is

12 open. And let's see if there is anything else on that.

13 Sterling we have taken care of. The nexus or the

14 venue we have taken care of. Now we are up to the

15 conspiracy or back to the conspiracy, I should say.

16 MR. TRABULUS: A little under the weather today

17 and hopefully it would slow me down a bit.

18 THE COURT: Somehow I doubt it.

19 MR. WALLENSTEIN: Before Mr. Trabulus takes off,

20 may I ask to be able to use the men's room for a moment,

21 or I do anyway?

22 MR. LEE: I join in that.

23 THE COURT: Since you are all involved in the
24 conspiracy we will have to take a break.
25 MR. LEE: Can we have the permission to use the


1 bathroom down here now to save time?


3 MR. NELSON: Since the government wishes to

4 address the issue I addressed at some later point in time,

5 I am curious if I will be provided with some brief? It

6 seems they are stalling for time here.

7 THE COURT: They are what? Did I hear you say

8 stalling for time? Ms. Scott cannot be accused of

9 stalling. She is right on the ball, and probably works

10 all night to get to do this. So she is not stalling.

11 MR. NELSON: I am just inquiring as to whether or

12 not there will be some papers.

13 THE COURT: Rather it is better to say she wants

14 additional time.

15 MR. NELSON: That is more appropriate.

16 THE COURT: She will give you the papers as soon

17 as she gets to it.


19 (Whereupon, a recess is taken.)


21 THE COURT: Please proceed.

22 MR. WHITE: I wanted to go through the indictment

23 and point out some of the factual averments contained in
24 it which were not made out. I can do it on a paragraph by
25 paragraph basis.


1 Paragraph 2 lists a series of directories, and I

2 believe with respect to some of those directories there

3 was no evidence of in this case.

4 I believe there was evidence of the Global

5 Edition. I know there was evidence of the Sterling Who's

6 Who Executive edition. And I believe the government

7 introduced the 1991 edition.

8 Frankly, I do not believe there was any edition

9 in the Gold Book edition of the Who's Who Registry.

10 THE COURT: Was there?

11 MR. WHITE: Your Honor, my understanding that the

12 Gold Book edition was the one that they were selling but

13 didn't publish because they were arrested in the interim.

14 I am looking now, and I believe that references

15 to that -- well, that paragraph says that that is what

16 they -- the directory sold by the company included the

17 following.

18 I believe if you look at the scripts that they

19 followed there are references as you go through the years

20 that that is the edition that they are selling at that

21 time.

22 THE COURT: My question -- I will give you an

23 opportunity to respond, but my question is that
24 Mr. Trabulus says that there is no evidence of the Gold
25 Book edition of Who's Who Registry in evidence; is that


1 so?

2 MR. WHITE: You mean is the actual book in

3 evidence?


5 MR. WHITE: No.

6 MR. TRABULUS: There is none.

7 THE COURT: All right.

8 MR. TRABULUS: If there is any evi dence that it

9 was ever sold it would be in the scripts which we don't

10 have any definitive indication that that particular script

11 was ever used, and that may be true for any given script,

12 because we have Mr. Saffer saying some of them were used

13 and some weren't.

14 That would apply to some of the earlier

15 editions. But be it as it may, it is hardly the most

16 important point.

17 Going to paragraph 5.

18 Even before that, paragraph 3, your Honor, and I

19 don't think I want to be nitpicking, but there was some

20 evidence of some memberships costing less than $200 in

21 some instances.

22 Going to paragraph 5, it says in the last

23 sentence that the defendant Tara Garboski had supervisory
24 authority of all members of the sales staff of Who's Who
25 Worldwide. I don't think that's the evidence. The


1 evidence is that she had supervisory authority over some.

2 In addressing some of these paragraphs, I am not

3 conceding they are true, but I am saying that there

4 appears to be no evidence to support them the way they

5 were drafted.

6 Paragraph 15, I don't believe there is any

7 evidence to indicate high pressure.

8 THE COURT: You have to go slow, because I have

9 to follow it.

10 MR. TRABULUS: Paragraph 15 they talk about high

11 pressure sales techniques being used.

12 I am going to argue shortly that the evidence

13 doesn't make up fraud either. But high pressure is a more

14 factual assertion. And I don't believe that there is any

15 evidence of high pressure.

16 Now getting to the meat of it, let's go to

17 paragraph 16.

18 I don't believe there is any evidence of any

19 misrepre sentation of the benefits of membership, at least

20 in the sense that benefits would be understood to mean the

21 benefits that are offered, the discounts, etcetera.

22 Your Honor, I am going to return to this because

23 there is an argument that the allegations do not make out
24 any misrepresentations to the nature, quality and value of
25 the memberships, and let me go back to some of the more


1 specific allegations here.

2 Paragraph 17, in solicitation letters and

3 telephone sales calls by the company's sales staffs, the

4 defendants misrepresented and caused to be misrepresented

5 to potential customers that, A, they had been personally

6 nominated for prestigious membership in one of the

7 company's directories by an established member on the

8 basis of their outstanding career achi evements.

9 Well, not a single solicitation letter, although

10 many of them speak of nomination, not a single one speaks

11 of the nomination by an established member, not a single

12 one, of all the solicitation letters in evidence. There

13 is not a single one saying you have been nominated by

14 another member.

15 Now, there were telephone sales calls, and we

16 heard tapes, in which individual defendants made

17 statements to that effect. And whether or not they were

18 misrepresentations or not in particular cases, we can

19 leave aside.

20 Certainly, there was evidence that there were

21 people who were nominated by other members. But

22 Mr. Gordon and the company did not include that in their

23 pitches. The pitches indicated that that would be one
24 source, and then indicated other sources as well, and that
25 would be in the objections.


1 With regard to their names not being taken from

2 the mass mailing lists, although there were tape

3 recordings that said that, but certainly it wasn't in the

4 solicitation letter. And the evidence with regard to

5 Mr. Gordon and the company, the only evidence with regard

6 to that I think came from Mr. Saffer and I believe one of

7 the other informants. And Mr. Saffer said that Gordon had

8 told him not to mention mailing lists. Certainly it was

9 not in the pitch sheets. And in reference to other media,

10 the objection sheets or pitch sheets could be read not to

11 exclude the possibility of mailing lists.

12 With regard to the company not soliciting new

13 members, I just wanted to -- yes, there were statements to

14 that effect that were made, but nobody could reasonably

15 rely on th em. Because at the same time there was

16 information that they were soliciting new members.

17 THE COURT: I don't know what your ailment is.

18 It has not slowed you down. I am happy to see you are

19 full of whim and vigor. It is apparently not too serious

20 an ailment?

21 MR. TRABULUS: No. I have a headache. This is

22 therapeutic.

23 THE COURT: I think when you get on your feet you
24 forget about the headache. Do you want an Excedrin or
25 aspirin.


1 MR. TRABULUS: I am fine. Those things don't

2 work for me.

3 The memberships being limited in number and being

4 available only through attrition of existing members, that

5 was said at sometime in some of the pitch sheets.

6 A large majority of the candidates nominated were

7 not accepted for inclusion. The gov ernment failed to

8 prove that. They didn't call anybody to talk about what

9 happened once the cards came in, whether there was an

10 exclusion there, in other words, what percentage of cards

11 were handed out. It is something they skirted around. It

12 was never clearly established.

13 With regard to a board of review or other

14 committee within the companies, well, the evidence was

15 that the public affairs department did engage in such

16 review. It is just a question of what the name of it is.

17 Let's continue.

18 The next paragraph contains allegations of

19 representations regarding the operation, reputation and

20 longevity of the companies.

21 THE COURT: That's paragraph 18?


23 There certainly were representations. There are
24 evidence of representations made that the publications
25 were prominent and reference pu blications leading and


1 authoritative.

2 It is a subjective assertion. I submit it could

3 not be the basis for a mail fraud prosecution. Nor has

4 the government proved that they were not.

5 Member-run or member owned.

6 Certainly nobody was told upon becoming a member

7 they would be entitled to participate in the governance of

8 the corporation.

9 There was some evidence introduced that in

10 individual instances some people said, not for profit.

11 But there is no indication it came from Mr. Gordon or the

12 company. It is not at all in the pitch sheets.

13 Had been in business many, many years, or many

14 years, again, that is subjective, and, again, doesn't go

15 to the nature and value of the -- of what is being

16 offered.

17 Indeed it would only bear upo n the responsibility

18 and longevity of the company. And the only indication,

19 the only reason the company did not last was frankly

20 nothing having to do with the company itself, but because

21 it was shut down by Reed and the government.

22 Next paragraph --

23 THE COURT: When you say "next," please number
24 it.
25 MR. TRABULUS: 19.


1 Such misrepresentations that may have been made

2 about seminars, to the extent that they conceivably could

3 have been considered material, and I don't think it could

4 have been, did not emanate from the company itself. The

5 evidence is that Gordon and the company instructed people

6 not to make representations about things which were

7 cancelled.

8 Certainly the representations made at the time

9 that these things were pla nned were not in good faith and

10 not the basis of -- were in good faith and not the basis

11 for any fraud. It is conceivable there were instances

12 where salespeople gave innocent misinformation, not being

13 available -- not being informed at the time they did so of

14 such things being cancelled.

15 Paragraph 20 is really unsupported, and that

16 suggests that that there was a plan, a conspiracy to

17 misrepresent the B-Balance, that additional $97, or $137,

18 that would be paid at the time of the directory.

19 Every pitch sheet indicates the B-Balance.

20 Every tape recording introduced in evidence, the

21 salesperson on the tape explains the B-Balance with one

22 exception, and that is one tape where one of the

23 salespersons himself cut the conversation short saying he
24 had another phone call before the issue of price terms
25 were discussed. So the whole subject matter of the price


1 did not come up. But every time that price came up the

2 B-Balance was represented.

3 You had the documents which came in with the

4 customers to show the B-Balance. And there is absolutely

5 no basis for a conspiracy of this sort.

6 THE COURT: I am curious. I don't recall what

7 B-Balance is supposed to be. I know it is the split

8 billing.

9 MR. TRABULUS: Basically that the member would

10 have to pay an initial fee upon becoming a member, and

11 then the balance of the fee would be due when the

12 director --

13 THE COURT: I understand. Why is it called

14 B-Balance?

15 MR. TRABULUS: I think it was has name used

16 within the company. It was like an expression for it, a

17 shorthand.

18 THE COURT: All right.

19 T he indictment adopts it and that's what I am

20 referring to. The indictment calls it the B-Balance.

21 There is no evidence of any conspiracy there. I

22 know Mr. Saffer said in 1990, in testimony that was

23 incredible, incredible to me, but it wouldn't suffice it
24 to make a conspiracy anyway. There was a one week period
25 during which Mr. Gordon said don't tell them about the


1 B-Balance. Apparently Saffer took credit for getting

2 Mr. Gordon to completely reverse himself and from that

3 point on he told people to always tell them about the

4 B-Balance.

5 In any event, there is no basis for that being

6 part of the conspiracy.

7 Paragraph 21, completely unsupported. Billing

8 potential customers -- a conspiracy to bill potential

9 customers for memberships they had not agreed to purchase.

10 There is no evidence of that, your Honor.

11 Overt acts.

12 There is no evidence of some of the overt acts.

13 Overt act C, telephone conversation with Thomas Dale.

14 D letter to Donald Wharton.

15 It is conceivable that there is -- I have not

16 gone through it the way other counsel did with regard to

17 some of the individual counts, and it is conceivable maybe

18 there is a letter in evidence with regard to these

19 particular individuals, or perhaps an order sheet that

20 arguably can reflect a telephone call. But aside from

21 that there appears to be no evidence of that.

22 THE COURT: They only have to have one, don't

23 they?
24 MR. TRABULUS: Right. But at the same time, your
25 Honor, I don't believe -- true, he only need -- they only


1 n eed to have one. I am trying to establish some are not

2 established there.

3 THE COURT: You don't have to do that. They have

4 certainly established a number of them.

5 MR. TRABULUS: Yes, quite a few of them are

6 there.

7 THE COURT: It would not give rise to a Rule 29

8 motion on that point.

9 MR. TRABULUS: Your Honor, there are two basic

10 things here concerning the conspiracy charge and the mail

11 fraud charge. And one of them is whether or not what has

12 been -- whether the government's evidence made out a mail

13 fraud, and in light of the Regent Office Supply case. And

14 basically the principle there is not every untrue

15 statement which is designed to obtain a sympathetic ear of

16 a potential customer can constitute mail fraud. And that

17 is really practically verbatim out of Regent Office Supply

18 case.

19 And it then goes on to say that if something does

20 not go to the quality, adequacy or price of goods to be

21 sold, or otherwise to the nature of the bargain, it can't

22 constitute a scheme to defraud or obtaining money by false

23 pretenses.
24 Of course, here we don't have the goods as such.
25 We have more than that. We have the membership package.


1 But the principle would be the same.

2 I submit to you, your Honor, what they have made

3 out in terms of what the company and Mr. Gordon was

4 responsible for, do not go to those things and cannot

5 support a mail fraud prosecution.

6 I will not belabor it more. I believe the issue

7 is clear-cut.

8 There are other things that individual

9 salespeople did, contrary to the instructions of

10 Mr. Gordon or the company.

11 Also, I don't bel ieve there is evidence that

12 those individual salespeople have knowledge of what the

13 government was relying upon to establish falsity. I mean,

14 that to me goes to the heart of whether or not there could

15 be a conspiracy here.

16 On top of that, your Honor, out of the

17 government's own case, there is very strong evidence of

18 lack of specific intent on the part of Mr. Gordon and

19 virtually everybody else.

20 This is a remarkable situation in which someone

21 supposedly committing a mail fraud instructs his people to

22 give out the name of Inspector Biegelman to the customers

23 and telling them to call him if there is any problem.
24 It is like a robber saying this is a stick up,
25 and if you have any problems, call 911.


1 The government has argued that the directori es

2 were not as selective as they were represented to be.

3 But, indeed, they were highly selective as the evidence

4 shows in terms of the nature of the membership of the

5 directories.

6 I think the issue -- what the government has

7 shown is that the members were led to believe that perhaps

8 a higher proportion of the people in it were named by

9 nomination rather than from a mailing list or some other

10 source. But that doesn't really go to the nature of the

11 directory or the organization itself, or the membership.

12 It is the means by which the members are chosen rather

13 than the actual selectivity of the membership.

14 I mean, the evidence here is that the people who

15 are running and working for this company, believed in it,

16 and did not think they were engaged in any kind of scheme

17 to defraud, and believed in what they were doing.

18 The ir actions are inconsistent -- the way it was

19 conducted, their actions, the way they dealt with the

20 government and Biegelman are just inconsistent with an

21 intent to defraud.

22 So, your Honor, I believe the government has not

23 made out either a conspiracy, or for that matter a mail
24 fraud.
25 THE COURT: Any other defendants wish to be heard


1 on that?

2 MR. SCHOER: Yes, I think I want to be heard.

3 I think with respect to the conspiracy on the

4 whole, I believe the government's position is that this

5 business in and of itself was a conspiracy to commit a

6 mail fraud. And I don't think that they have established

7 that the people who were working there at all believed

8 that this was some sort of agreement -- that their working

9 was part of an agreement to commit a criminal act.

10 That's the key to the conspiracy, your Honor, was

11 there an agreement among the parties to commit a criminal

12 act?

13 I believe all the evidence demonstrates at least

14 with respect to the salespeople on a whole -- then I will

15 speak to my client -- at least with respect to the

16 salespeople as a whole, there is no evidence that the

17 salespeople intended to misrepresent to anyone things

18 which they believed were misrepresentations which were

19 part of, and material to the bargain. They believed that

20 they had a selective group that they were soliciting.

21 They believed they had a product which they were selling

22 to that selective group. And it didn't matter as to

23 whether those people were nominated or how they were
24 selected.
25 The question is, as Mr. Trabulus said, whether it


1 was a selective group. And I think we have

2 demonstrated -- there is an exhibit that demonstrates the

3 numbers of people in different job classifications. I

4 think we have demonstrated this was a selective group. We

5 have demonstrated that there was a criteria for rejecting

6 people; that there were people rejected. And we have

7 demonstrated that the salespeople were told which people,

8 or what type of person was not acceptable, and those

9 people were not accepted.

10 I don't think that the government can hold these

11 people criminally responsible for this kind of activity,

12 when they in their hearts believed that there was nothing

13 that they were doing other than selling a product which

14 had a value to people.

15 Yes, there may have been some puffing, but

16 puffing, as we know is not criminal ma il fraud.

17 There may have been some exaggeration. But

18 exaggeration and puffing just doesn't rise to the level of

19 an intent to deceive and to take money from people.

20 I don't believe that there has been any evidence

21 of any agreement by the salespeople to commit any criminal

22 act. What they did is they did -- they did what they

23 believed based on their employment what was necessary in
24 order to maintain a business which they believed was
25 viable and which was providing a service to people who


1 were purchasing.

2 That's on the issue of the conspiracy as a

3 whole. I don't know if there is anyone else who wants to

4 speak to that. After your Honor has ruled on that I may

5 have additional information with respect to whether my

6 client was a member of the conspira cy.

7 THE COURT: Let's do it one at a time, as to

8 whether there is proof of a conspiracy which would involve

9 the question of mail fraud. Let's get to that, which is

10 really the main issue in the case.

11 MR. NELSON: I would wish to add on the issue of

12 whether or not there has been proof of a conspiracy to

13 commit mail fraud, that under the mail fraud statute

14 itself, one of the elements of the offense is that the

15 government must prove an intent to defraud. And I would

16 submit that as it relates both to the managers and to the

17 sales personnel, the government has not sustained that

18 burden because the government must prove under the mail

19 fraud statute, even if there were false representations,

20 statements or omissions made, one that there were material

21 facts.

22 Even if they were of material facts, still the

23 government would no t have proven that the statements were
24 made with fraudulent intent if there is a good faith
25 reliance, or good faith belief by the employees either


1 what they believe they were saying was true, that they

2 honestly believed that the business itself was practical

3 or reasonable; or, third, the business was capable of

4 producing the product to which they were pretending to

5 individuals that they would present, that it would

6 present.

7 There was a plethora of evidence presented that

8 indeed the government pro -- the defendants produced the

9 product and there was evidence that the product was

10 provided. And all of the salespeople and managers were

11 specifically available of the benefits provided.

12 In addition, they were aware of the fact that

13 whether or not they i ndividually were accepting the vast

14 majority, even if it was 99 percent of the people whom

15 they were interviewing, they had been apprised and were

16 aware of the existence of other levels of screening that

17 were claimed to have taken place.

18 Now, the evidence has demonstrated because of the

19 compartmentalization of the business itself, they were

20 unaware as to whether or not the procedures they were

21 being advised were in fact being implemented. But they

22 were advised that indeed, there was a level of screening

23 that took place when the lead cards first came in before
24 they were provided to the group leaders for distribution
25 to the sales staff for purposes of making the telephone


1 calls.

2 While people were aware of the fact that there

3 were mailing list s being utilized, clearly there was ample

4 testimony presented by Debra Benjamin that those mailing

5 lists were exclusive and selective in nature. She

6 explained it in two different bases, that they were a

7 selective group of mailing lists, and, two, she selected

8 segmented areas of those lists.

9 The lower level employees were aware of some

10 level of screening there as well.

11 Finally they were apprised of the fact that there

12 was a third level of screening that took place after the

13 order forms were completed, and handed to Wendi Springer

14 for purposes of review. Indeed, there was evidence

15 presented that on occasion they were returned because

16 those people did not qualify.

17 I submit that the government was not able to

18 demonstrate that there was an agreement on the part of the

19 sales personnel and the group leaders to intend to defraud

20 any individual because of their good faith reliance

21 because of the good faith representation made to them by

22 the company, which is backed up by objective facts

23 demonstrated in the record of the testimony of
24 Ms. Benjamin, Ms. Springer, Mr. Saffer and a number of
25 other employees as well as the recordings.


1 Therefore, I would submit that on that crucial

2 issue the government has not demonstrated an intent to

3 defraud.

4 MR. LEE: Your Honor --

5 THE COURT: Before you do that, I have not taken

6 a recess, so we will take a ten-minute recess.


8 (Whereupon, a recess is taken.)


10 MR. LEE: If I understand correctly, your Honor,

11 we are only addressing the issue now as to the existence

12 of a conspiracy. With that in mind, I have nothing to add

13 to what my co-counsel had to say.

14 MR. WHITE: Anybody else?

15 MR. GEDULDIG: One comment, your Honor.

16 The government in their case put on the witness

17 stand, Ms. Springer --

18 THE COURT: Talk up, would you, please?

19 MR. GEDULDIG: Yes, Judge. I am sorry.

20 The government in their case in an effort to show

21 the conspiracy put Wendi Springer on the stand. She was a

22 person directly involved with handling these lead cards,

23 putting them together.
24 She testified how some lead cards were taken out
25 of packs. She was deeply involved in the administration


1 of the lead cards which ultimately led to the phone calls

2 and the customers that the government brought into court.

3 She was a government witness, and I believe they

4 would say she was e ssential to the proof of the existence

5 of a conspiracy. She was part and parcel of the operation

6 to the company.

7 She fit into a very important niche. And yet,

8 she was never arrested, never charged. I don't think she

9 was given a grant of immunity, I may be wrong. But the

10 government never sought any criminal action against her.

11 They apparently never believed she part of a conspiracy.

12 Yet she is an important cog in what they claim is a

13 conspiracy.

14 I believe the government has taken a

15 contradictory and somewhat hypocritical position with

16 regard to several people whom they would say are critical

17 to their proof and never got charged.

18 I am talking about Colletti, Konopka and

19 Springer. Springer when she testified was asked if she

20 believed she had done anything wrong. And she said she

21 did not. She said she believed that ev erything she did at

22 that Who's Who was legitimate. She was, I believe, as I

23 recall her words, she was proud of the work she had done
24 there.
25 One of the people, Konopka, came back after the


1 place was closed down and worked for several weeks at

2 absolutely no pay at all.

3 These were people who knew as much, if not more

4 than the salespeople. And they were never charged, and

5 they have believed they had done something wrong, and some

6 of them continued to work even after the operation had

7 closed down.

8 They certainly do not go back into a criminal

9 conspiracy and criminal enterprise and work for nothing,

10 if you thought what you were doing was criminal.

11 I believe that the government's witnesses bare

12 proof of the fact that there was not here a con spiracy,

13 that people did things with good intentions, believing

14 what they were doing was legitimate and proper.

15 I believe the beliefs of Konopka and Springer and

16 Colletti should inure to the people in this courtroom

17 today, your Honor. They did not believe they were doing

18 anything conspiratorial, illegal or improper.

19 MR. NELSON: If I might add one point, your

20 Honor.

21 Both Debra Benjamin and Wendi Springer would have

22 been the sources of information, to impart information to

23 all of the individuals here on trial, absent Mr. Gordon,
24 as to both the selectivity and the benefits being
25 provided. They were both in a more superior position and


1 more managerial position in the business, and each of

2 those individuals testified that it was their belief th at

3 a proper product was provided, and they communicated that

4 information to other members of the corporation, such as

5 the defendants who are here on trial.

6 I believe that that would bear directly on the

7 good faith reliance of all of the defendants and thereby

8 negating any intent they would have to defraud. And I

9 bring that once again to the Court's attention.

10 THE COURT: Anybody else?

11 MR. NEVILLE: Your Honor, it wasn't part of the

12 evidence at the trial, but I think it is important, and it

13 dovetails well with what Mr. Geduldig has said about the

14 government's case, potentially being somewhat hypocritical

15 in the way they brought it according to the way how they

16 wanted to try to prove their case, and not really about

17 criminal conspiracy and the people allegedly being

18 involved that are here in this courtroom.

19 We had sessi ons with Mr. White at the trial where

20 Mr. White explained to my client Scott Michaelson what he

21 felt the evidence was against him, and he said to

22 Mr. Michaelson, the reason you are here is because you

23 worked there for so long and the money you made, that you
24 were really a good salesperson, or you were one of the
25 better ones, he said.


1 And Mr. Michaelson indeed was there for a long

2 time and was a good salesperson, but believed in what he

3 was doing, and certainly didn't conspire with anybody to

4 defraud anybody else.

5 THE COURT: Mr. White, where is there evidence of

6 a conspiracy?

7 MR. WHITE: Your Honor, let me address this in a

8 couple of stages.

9 First the issue of the whole Regent Office Supply

10 and materiality and then I will address as to whether

11 there is a scheme to defraud and conspiracy.

12 All of the defendants' arguments are the kind

13 that is most appropriately directly to the jury in

14 summation and not at this point. Because there is

15 evidence in the record that this was a scheme to defraud,

16 and that the misrepresentation were material.

17 They ignore the testimony from the customers,

18 your Honor. That's the evidence that was not present when

19 your Honor ruled on a similar issue in the civil

20 proceedings in this case three years ago. That's what is

21 missing -- that's what was missing then, but is present

22 now. That is what they are ignoring.

23 In a nutshell, if the jury believes the
24 customers, there is evidence that these misrepresentations
25 were material.


1 We should start with the Second Circuit's

2 decision in this case. We are not starting with a blank

3 slate. And they didn't have the customer testimony before

4 them, as your Honor did not, and they said, quote,

5 although the members did obtain membership in, quote,

6 selective, unquote, registries, they had bargained to join

7 registries of a more exclusive nature than ones whose

8 members were merely culled from mailing lists. As a

9 result this may be a different situation than that

10 presented in Regent where the consumers received the

11 products for which they had bargained for.

12 Now, in this case, I believe what the defendants

13 are missing, they want to focus on the tangible items, the

14 tangible products given to the customers. But what they

15 miss is that this is not just a business networking

16 directory. This is a Who's Who directory. They planned

17 it that way , or Mr. Gordon planned it that way. They

18 conceived of it that way.

19 You hear on the tapes how he is talking about it

20 appeals to people's ego. That's what gets them to buy

21 this.

22 Now, all of the customers have come in and said,

23 one after the other, after the other. That when you are
24 talking about a Who's Who directory, how you get selected
25 is important. It was important to me is what each of them


1 have said in a nutshell. If I had known I come from a

2 mailing list I wouldn't have purchased this.

3 Regent Office Supply says, quote, where the false

4 representations are directed to the quality, adequacy or

5 price of the goods themselves, the fraudulent intent is

6 apparent because the victim is made to bargain without

7 facts obviously essential in deciding w hether to enter the

8 bargain.

9 The fact of how they are -- how their names were

10 selected, how they came to the company's attention, were

11 facts that at a minimum they should have been advised of.

12 Then if they wanted to purchase, that's fine, they made an

13 informed decision. But they were deprived of facts

14 essential in deciding as to whether or not to enter into

15 the bargain.

16 They want to say, and they are perfectly able to

17 argue to the jury that the company -- customers got what

18 they bargained for.

19 All the customers say here is coming from a

20 mailing list in my mind is different from being nominated

21 and selected and what have you.

22 You know that they know this is material -- I am

23 sorry, you know that both parties regard these
24 misrepresentations as material for several reasons.
25 The customers' testimony tell you that on their


1 side they thought it was material.

2 You know that these defendants thought it was

3 material through other evidence. For example Ms. Benjamin

4 talked to Mr. Gordon about the letters that say

5 nomination, you shouldn't use that.

6 His response was, no. The letters that have

7 nominations, they pull. In other words, they get the

8 response from people.

9 You know that these defendants thought and

10 Mr. Gordon thought that mailing lists were different from

11 nominations because Mr. Saffer, according to this

12 testimony, Mr. Gordon told people, that we never tell

13 people, Mr. Gordon said, they come from mailing lists.

14 You have these defendants and a host of others at

15 both Worldwide and Sterling and do the same thing. When

16 people ask do I c ome from a mailing list -- as the CI's

17 did on the tape and some of the victims say they asked --

18 they are told emphatically, no, no, absolutely not. It is

19 not what we do.

20 If it wasn't material they would say yes, we are,

21 and let me tell you how -- how we do it, we are selective

22 and use only segments.

23 They instead vehemently deny that. They know it
24 is material and a deal breaker that the customer will not
25 buy if they are told it is from a mailing list.


1 For example, one tape where Mr. Martin gets on

2 the line, and the caller asks, you didn't get my name from

3 a mailing list?

4 Mr. Martin responds, no, no, we don't do that.

5 It is the last thing in the world we do. That's a quote,

6 we so selective. It is the last thing in the world we

7 do. He is saying it is 180 degrees, polar opposite of

8 what we do.

9 He knows that's material just like all the rest.

10 Your Honor said earlier in the trial where I was

11 trying to introduce complaint letters from customers,

12 where they essentially complain in substance about these

13 alleged misrepresentations.

14 I was arguing to your Honor that it should be

15 included because we need to show materiality, namely that

16 Mr. Gordon and the defendants knew that this matter was a

17 misrepresentation, and at page 3515 of the transcript the

18 Court said, quote, how can any reasonably prudent

19 intelligent person not believe by telling people you are

20 nominated and only seven percent or ten percent are

21 accepted and you are the honored few, how would they not

22 believe that that was material?

23 And a couple of lines down I said, well, I am
24 glad you fe el that way, your Honor. I don't know how the
25 jury -- I have to prove it to the jury.


1 You said, your Honor, common sense will let

2 people believe that it is material. You don't have to

3 prove the obvious, Mr. White.

4 Putting aside the whole issue about Regent and

5 whether people are getting what they bargained for, there

6 is another basis in which a mail fraud conviction could be

7 sustained here and that's the Schwartz case, United States

8 v. Schwartz, 924 F.2d 410, Second Circuit 1991.

9 Your Honor, that's a case that stands for the

10 proposition that even if the so-called defrauded party

11 receives something, even something of equal value for what

12 they paid, if they were misled with respect to a material

13 element of the bargain, even if it wasn't monetary in that

14 sense, they could still be the victim of a fraud.

15 In that Schwartz case, a military equipment

16 manufacturer, Litton Industries, was selling military type

17 goggles to the defendants. The defendants misrepresented

18 that they did not -- that they would not export them

19 without a valid government license to certain countries.

20 Someone from Litton testified at the trial that

21 we would not have engaged in this transaction had the

22 defendants not misled us with respect to that element of

23 the deal, because the proof was that the defendants got
24 the material from Litton and sold it to someone else. For
25 whatever reason they were charged with defrauding Litton


1 in connection with that transaction.

2 Litton got what it paid for. They gave night

3 vision goggles to these defendants, and the defendants

4 paid whatever the appropriate price was.

5 In that case, your Honor, the Second Circuit

6 approved this specific instruction. It says basically

7 that the defendant must contemplate harm in order to

8 establish a scheme to defraud. And it says, quote, for

9 example, you may find that the requirement of contemplated

10 harm is satisfied if the defendants intended by fraud or

11 misrepresentations to obtain from Litton Industries night

12 vision equipment that Litton would not otherwise have sold

13 to the defendant were it not for the fraudulent

14 representation.

15 The Second Circuit also said, the fact that

16 Litton was paid for its -- had not paid for its night

17 vision goggles, does not mean that Litton received all

18 that it bargained for. In fact, it did not. Litton

19 insisted its product not be exported from the country

20 illegally, and the defendant's conduct deprived the Litton

21 of the right to define the terms of the sale of its

22 property.

23 The same thing in reverse here. The customers
24 are being deprived of the material information about
25 whether or not to enter into this bargain.


1 Now, with respect to whether or not there is a

2 scheme here, it is clear that there was a scheme, an

3 artifice created here.

4 Mr. Gordon starts the company. He writes the

5 solicitation letters. He writes the pitch sheets and the

6 other scripts that these people are supposed to follow.

7 He sets the policies of the company.

8 You have proof, certainly of a conspiracy, and

9 even a scheme to defraud where you have even a tacit

10 understanding, that's what the Second Circuit said, a

11 t acit understanding among the defendants.

12 You can -- if they simply act in concert, you can

13 infer that there is a conspiracy or a scheme to defraud.

14 Here that is precisely what you have. In most

15 conspiracies or schemes to defraud, you don't have the

16 precise roles of people set out, and the actions that they

17 follow are not always directly pursuant to instructions by

18 the higher members of the scheme or the conspiracy.

19 Here you have that. They are quite literally

20 following a script.

21 No, in those letters, or in the scripts that

22 Mr. Gordon gives to the other defendants, or has the

23 managers give to the salesperson defendants, if those
24 contain the material misrepresentations which they do,
25 then that's a scheme. They are acting in concert. They


1 do n't all have to sit around the table and say, okay, we

2 are going to defraud people. If they know that these are

3 misrepresentations and they continue to do that, they act

4 in concert to obtain money and property from the

5 customers. They get a cut of every sale they make and the

6 managers collects the salary, and Mr. Gordon collects the

7 profits.

8 I don't want to go into, unless your Honor wants

9 me to, responding point by point to specific arguments, I

10 know it is a contentious issue.

11 THE COURT: The argument raised by Mr. Geduldig

12 that you didn't indict all the other people that are worse

13 than the defendants you did indict, is not a serious

14 argument, because the government has a right to indict

15 whomever they wish to indict.

16 I will advise the jury that because of the many

17 inferences that have been raised here, you see him in this

18 courtroom, you don't see her in this courtroom, you don't

19 see them in this courtroom, and I thought that it was very

20 effective. Except that we know that the executive branch

21 of government in this case delegated to the United States

22 Attorney for the Eastern District of New York has a right

23 to indict who they want to. And the jury cannot infer
24 anything from the fact that people weren't indicted. So
25 much for Mr. Geduldig's erudite argument, and you don't


1 have to go into that. You went into the key issues of the

2 case, which is the issue I addressed in my previous

3 opinion; the Second Circuit addressed. Now we see what

4 the proof is.

5 MR. WHITE: Your Honor, I guess I am suggesting I

6 would like to spend my remaining time, if your Honor has

7 question with respe ct to specific things I wish -- you

8 wish I address.

9 THE COURT: I have no questions.

10 MR. WHITE: I will sit down.

11 THE COURT: Anyone wish to respond to this

12 briefly?

13 MR. TRABULUS: Yes, your Honor.

14 Briefly, with regard to the claim that something

15 is material simply because it may have entered into the

16 decision on the part of somebody to purchase a membership,

17 that is not the law, because to be material it must not

18 only enter into the decision, but also relate to the

19 nature and adequacy and quality of what is sold, or the

20 nature of the bargain.

21 The Schwartz case --

22 THE COURT: Mr. Trabulus, I don't want to

23 interrupt you, but if anything is material in this case,
24 it is material to the purchase of memberships that they
25 were exclusive, that they were picked out, that they did


1 something, that they had some achievement, and that it was

2 because someone nominated them, because their name was out

3 of a book or a magazine, virtually every witness said

4 unequivocally, most of them, if they knew they were picked

5 out of a mailing list, they would not have spent the 200,

6 300 or 500 or 700 dollars that they did spend.

7 So how could you say it is not material?

8 MR. TRABULUS: Your Honor, it is as to whether

9 they ought to buy or not, but not with respect to the

10 nature of their bargain.

11 THE COURT: You said that so fast that I don't

12 know what you said.

13 MR. TRABULUS: Okay.

14 The Regent Office Supply case gave examples of

15 misrepresentations that would not support mail fraud, such

16 as, you were recommended to me by another customer, and

17 that's why I a m calling you, a salesperson doing that.

18 And that could be false. And it may induce somebody to

19 purchase, to make a purchase. Sure, it is different in

20 this case, sure, it is distinguishable. But the point of

21 the matter is although it might be an inducement and but

22 for that somebody might not purchase, that is not going to

23 support mail fraud according to the Regent Office Supply
24 case. They at least indicate that in dicta.
25 In the Schwartz case it seems that Litton


1 specifically bargained that it is not to be sold to this

2 third country, for reason of Litton having to protect its

3 own decision. So that is distinguishable, too.

4 Your Honor, we also -- sure, these people's egos

5 were deflated after the fact, when they may have been

6 informed whatever they were. And there were people who

7 largely had problems with the payment arrangements. I

8 believe 28 customers were called, and 20 of them had a

9 problem with the B-Balance. They don't appear to be

10 typical.

11 You also heard evidence from Mr. Saffer, a

12 salesperson doing lots of upgrades, speaking to lots of

13 customers, and in circumstances where the customers along

14 the way might very well have determined or found out they

15 had been on mailing lists.

16 I mean, the same people would be mailed multiple

17 times, even after they were members. There was a tape

18 played a couple of days ago where someone was a member and

19 got another nomination letter.

20 Nobody complained to Mr. Saffer that that name

21 came from a mailing list, yet you would have expected it.

22 It is different from people coming in here, years

23 after the company was shut down, people w ho had a gripe
24 beforehand with respect to the B-Balance, and having it
25 put to them, your name came from a mailing list, and a few


1 of them implied that, but it appeared they were nominated

2 from another member because they got a phone call first.

3 I have to step back and say at the beginning of

4 the case we heard witnesses who said I got a phone call

5 first. And after Debra Benjamin made it clear there was

6 no way for a phone number to come from a mailing list, you

7 had a bunch of witnesses who testified in the

8 questionnaire they said it was a phone call first, and

9 then got up and said it was a letter first.

10 THE COURT: You are getting very fast. And I

11 wouldn't count too much on the telephone calls from the

12 memory of a person five years ago as to whether the phone

13 call or the letter came first. Many of the witnesses

14 testified that a letter came first. Some said phone

15 call. The jury could reasonably infer that in the passage

16 of time they really didn't know what came first.

17 MR. TRABULUS: It could go another way, so it

18 creates uncertainty there.

19 The point of the matter is that these people were

20 a selective group, and many of them had cause for

21 dissatisfaction -- that your name came from a mailing

22 list, or might have. And, sure, it is one more thing for

23 them to gripe about.
24 There is no evidence -- there is no evidence
25 during the course of the operation of Who's Who Worldwide


1 when people might well have found it out that anybody ever

2 complained about it, or anybody ever really raised that.

3 We h eard the confidential informants invariably

4 bringing it up. But the testimony as to how much of that

5 would come up or be questioned was, you know,

6 occasionally, from time to time, it came up. I think

7 that's what Mr. Saffer said.

8 Certainly, it didn't appear to enter into the

9 calculus for most of the prospective members.

10 We have an objective test here, you can't go to

11 each individual member and say, gee, this particular

12 person, especially in hindsight, and say, yes it made a

13 difference. And you can't infer when you look at what was

14 actually happening, nobody cared about it, you can't just

15 infer that it was material.

16 THE COURT: All right.

17 MR. NEVILLE: Your Honor, may I be heard?

18 THE COURT: Yes.

19 MR. NEVILLE: The government has made mailing

20 list to be the critical or one of the critical issues in

21 the case.

22 I believe in this trial the evidence is clear

23 through a manner of witnesses and question from the
24 lawyers and the answers of the witnesses that Marquis
25 Who's Who also uses mailing lists.


1 If some of these people who got calls from Who's

2 Who and also would here that Marquis Who's Who used

3 mailing lists, maybe they would answer the same way.

4 The salespeople are trained, as we heard on the

5 tapes, to make certain answers to questions.

6 Mr. Gordon was a salesman of many years

7 experience. And the reason for the objection sheet was to

8 be able to anticipate every question that a prospective

9 customer would ask.

10 The mailing list question came up all the time

11 with the confidential informants.

12 Yes, one or two, or a smattering of customers

1 3 said they asked about it. But I respectfully submit that

14 Marquis Who's Who should also be on trial. Where is the

15 crime?

16 Is it a crime to use mailing lists? If a

17 salesperson isn't sure that a person's name came from a

18 mailing list, or from a nomination, or from a Tribute

19 Magazine whatever, how could that salesperson be deemed to

20 join in a conspiracy to defraud?

21 I submit even if the salesperson knows there is a

22 mailing list, even so, they are not defrauding the

23 person. They are delivering a product which is what it is
24 represented to be.
25 MR. TRABULUS: Your Honor, there is one point I


1 meant to make and very briefly.

2 MR. NEVILLE: And there was nothing about mailing

3 lists on the objection sheet, your Honor.

4 MR. TRABULUS: Your Honor, the evidence is not

5 merely that Reed used mailing lists, but Mr. Gordon was

6 well aware of it.

7 He discussed with Debra Benjamin, and expressed

8 his sincere belief that it is okay to use the word

9 "nomination" when you have a selection of someone from a

10 mailing list.

11 Now, specifically intent I believe requires an

12 intent to make what one knows to be a material

13 misrepresentation, going to the nature, adequacy and

14 product of the nature of the bargain. I believe the

15 evidence shows that Mr. Gordon did not have that specific

16 intent.

17 MR. LEE: Judge, since we are going into

18 everything, first of all, I respectfully point out, your

19 Honor, that I think your reliance upon the testimony we

20 had from the 60,000 members, that something that may have

21 occurred, the crucial occurrence, the conversation many

22 years back, is un justified. I believe your Honor should

23 take into consideration also that they were testifying, as
24 I recall it, just to the conversation with the
25 salesperson. And I think what was brought to the


1 bargaining table, if you will, that the bargain was also a

2 fair state of mind as a result of the letter that they

3 received, when they came to the phone and spoke to a

4 salesperson they were all right in their mind, if they had

5 expectations that they brought to the bargain something

6 that was input into their mind from the letter, which is

7 something the salespeople had absolutely nothing to do

8 with. And I think you should take it into consideration,

9 and their statement is a one-sided statement.

10 If we had the true evidence, the dispositive

11 evidence of an intercepted call of a customer with a

12 member, and we actually hear the conversation, that would

13 be totally dispositive, at least substantive, and maybe as

14 a conspiracy.

15 THE COURT: How do you propose that could be

16 gotten, Mr. Lee.

17 MR. LEE: It is a defect in the government's

18 proof.

19 THE COURT: Not at all. You had all kinds of

20 telephone conversations. I heard more than 20 telephone

21 conversations from at least one of the parties, an

22 impartial party.

23 MR. LEE: I am not sure what you are referring
24 to.
25 THE COURT: I didn't have to have a tape


1 recording, although that would be better, of course. But

2 I heard the customers tell us about the telephone

3 conversations.

4 MR. LEE: The specific intent to participate in a

5 scheme, a p articular salesperson, your Honor, I believe it

6 is particularly noteworthy that no salesperson spoke at

7 length -- I will speak with respect to Ms. Weitz, but

8 really spoke much to what the government has really

9 reduced their case to, the nomination and the mailing

10 lists.

11 If you look at the particular conversations where

12 the defendants are actually speaking, Ms. Weitz in her

13 tapes, the only person who broaches the issues which by

14 their own member witnesses become the material

15 misrepresentations, nomination and mailing lists, those

16 issues are approached by Mr. West, the CI. And in

17 response these defendants, Ms. Weitz in particular, do not

18 make it material. They don't speak to it.

19 THE COURT: I would suggest that we wait to see

20 each individual's participation in the conspiracy as a

21 separate matter. And the government would have t o show

22 that each individual defendant participated in the

23 conspiracy that is the next step. Now we are talking
24 about the heart of the step, conspiracy to commit mail
25 fraud or was there mail fraud. That's the heart of the


1 case; as to whether each member contributed or was a

2 member of the conspiracy, or participated in the scheme to

3 defraud is another matter, which I will ask the government

4 to show me where they did, because I didn't follow all of

5 it as closely as the government, who I am sure has all the

6 citations and transcript pages.

7 As I recall there are a number of salespeople who

8 made misrepresentations on the phone in the tape

9 recordings and on the conversations with the customers.

10 The specific ones of whether they deal with your

11 client is a nother matter. But right now I need to deal

12 with the main issue, which is, is this sales policy the

13 way they sold the memberships susceptible of being a

14 criminal fraud? That's the main issue in the case. Or is

15 it merely puffery, exaggeration, leaving out unimportant

16 things or salesmanship. That's the main issue in the

17 case, which I am about to decide.

18 Anybody else?

19 MR. NELSON: I would like to add one further

20 point, and it is somewhat distinguishing the government's

21 reliance on the night vision case. I don't recall the

22 name of the case itself. But in that case --

23 THE COURT: You mean the Schwartz case?
24 MR. NELSON: Yes.
25 To a large extent the Second Circuit in that


1 decision cites the fact that the loss that would occur to

2 the claim ant there would have been, it is possible,

3 license, or prosecution or criminal charges by violating

4 the federal statutes in the export of certain types of

5 weaponry, and they were relying on representations that

6 were being made by the purchasers at that time in making a

7 determination that there was either a value or potential

8 loss of value to the purported victim there.

9 I would submit, your Honor, that in the instant

10 proceedings, and based upon the testimony of the 20 some

11 witnesses we heard who are customers, it is not quite the

12 same situation.

13 Certainly, virtually every person who got on the

14 witness stand indicated it was of value and significance

15 to them that they came from -- that they weren't nominated

16 and they came from some form of a mailing lists and that

17 affected the value of how they perceived the property.

18 Likewise, v irtually every single one of those

19 people said one of two things: Either, A, I didn't feel

20 that the value of the product was what I expected it to

21 be, because I never saw what the product was because I

22 didn't pay the additional money for this B-Balance, which

23 I thought, for whatever reason it was, I wasn't advised
24 about. And I guess it is going to be a factual issue to
25 be resolved.


1 I believe the evidence to a large extent

2 demonstrates that it was the policy of the company to tell

3 everybody about that balance.

4 It is my understanding that there were 50,000

5 questionnaires sent out. And there were 7,000 responses

6 to that. And that we heard from 20 witnesses, your

7 Honor. From those 20 witnesses somewhere in the area of

8 17 said their biggest problem w as that I didn't know if

9 there was any value because of the fact that I didn't get

10 the registry because I wasn't told about the B-Balance, or

11 didn't read what was on the invoice that was sent to me so

12 I never had the opportunity to avail myself of the

13 benefits that the company had to offer.

14 Now, I would submit, your Honor, under those

15 circumstances the individuals who testified that there was

16 value here, and they didn't just avail themselves of that

17 value as it relates to those particular witnesses. There

18 were other witnesses who testified that as far as they

19 were concerned, they were interested in the networking

20 capabilities that existed in this company. But, yet, by

21 the same token they basically sat back and didn't avail

22 themselves of those benefits from the networking.

23 The inside recordings -- particularly the ones
24 pla yed today by Mr. Schoer and myself -- demonstrate over
25 and over again that as it related to those benefits, the


1 employees were advised, the materiality of those benefits

2 were that people had to actively seek to utilize those

3 benefits. And the people who testified as customers

4 basically sat back and didn't avail themselves of those

5 benefits.

6 I would submit, your Honor, that on the issue of

7 value, which really goes to the issue of materiality --

8 the evidence here is short. And reliance on the Schwartz

9 case and similar type of cases is not really dispositive

10 because it is not an analogous situation.

11 In every mail fraud case and I have gone through

12 the vast majority of Second Circuit decisions, almost

13 everyone involves a situation in which there was an actual

14 loss, a potential loss, or an actual loss of an intangible

15 right. As we know it took the United States Congress to

16 change the law as it relates to intangible rights after

17 the Margiotta decision to assign a value to that.

18 We are in an amorphous area and the Court is

19 aware of that based on its role in the Regent decision and

20 prior decisions, your Honor, and I guess I am speaking to

21 the Second Circuit now of the review of this case if it

22 comes at a later time, that the Second Circuit basically

23 said in a decision in your ruling, Judge, your attention,
24 I think a good idea for the government might be to send
25 out these questionnaires so a jury can make a


1 determination with respect to the question of value, or

2 maybe you can make that determination in the course of a

3 Rule 29 application as it is determined before it gets to

4 the jury.

5 We are at that stage now. In essence the Second

6 Circuit said send out your 50,000 questionnaires and let's

7 hear what the people have to say in response to those

8 50,000 questionnaires.

9 Bottom line when we get to it, Judge, we have 20

10 people who came here to the courtroom. 90 percent or 80

11 percent of which said I didn't get the books, so I don't

12 know if it is a value because I didn't get the B-Balance

13 and I didn't pay the $97 to find out what it is worth, and

14 the other half sort of sat back and said, you know, I

15 didn't avail myself of any have a the value.

16 Now the government is getting up and saying, you

17 know, the most important thing had to do with the fact

18 that they didn't tell them about mailing lists.

19 It is the government who planted that in their

20 minds after the Second Circuit told them to send out the

21 mailing list to ask them about it.

22 Quite frankly, Judge, with 20/20 hindsight it is

23 awfully nice to look back and see materiality.
24 I know the next issue we are going to address is
25 intent to defraud. And interestingly enough in the good


1 faith defense of intent to defraud it specifically says

2 with 20/20 hindsight you should look back and see what it

3 was that all these people were doing at the time, not for

4 a crystal ball in the future as to where things stand, but

5 what it was at the time that was material and how people

6 viewed it then as material.

7 I would split to your Honor on the question of

8 value, there really hasn't been proof of materiality as it

9 relates to value.

10 To a large extent it was so close that the

11 government had to go out and bring these people in. And

12 after they did there is still rather significant questions

13 about that.

14 I would ask the Court to consider that very

15 closely in light of the procedural history of how these

16 people came to be on the witness stand during this trial.

17 Thank you, your Honor.

18 THE COURT: As I said, it is the key issue in the

19 mail fraud case or conspiracy to commit mail fraud.

20 We start out with Rule 29 itself, motion for

21 judgment of acquittal; subdivision A, motion before

22 submission to jury. Motions for directed verdict are

23 abolished and motion for judgment of acquittal shall be
24 used in their place.
25 The Court on motion of a defendant or of its own


1 motion shall order the entry of judgment of acquittal of

2 one or more offenses charged in the indictment . . .

3 after the evidence on either side is closed if the

4 evidence is insufficient to sustain a conviction of such

5 offense or offenses.

6 The Court may reserve a motion -- on a motion for

7 judgment of acquittal, proceeds with the trial where the

8 motion is made before the close of all the evidence;

9 submit the case to the jury and decide the motion either

10 before the jury returns a verdict or after it returns a

11 verdict of guilty, or is discharged without having

12 returned the verdict.

13 If the Court reserves decision it must decide the

14 motion on the basis of the evidence at the time the ruling

15 was reserved.

16 You also know that at the end of the government's

17 case the Court should presume that the evidence favored

18 the government's evidence to some extent.

19 Now, where a conspiracy is involved the law in

20 the Second Circuit is clear that the standard of

21 deference, viewing the evidence most favorable to the

22 prosecution at this point is especially important.

23 Commenting on a motion for a judgment of
24 acquittal after a guilty verdict the Second Circuit in
25 United States against Pitre, P I T R E, 960 F.2d 1112,


1 Second Circuit 1992, said this: The above standard of

2 deference is especially important when reviewing a

3 conviction of conspiracy.

4 Of course, we don't have a conviction here, but

5 it is applicable also.

6 This is so because a conspiracy by its very

7 nature is a secretive operation and it is a rare case

8 where all aspects of a conspiracy can be laid bare,

9 B A R E, in court, with the precision of a surgeon's

10 scalpel, citation omitted.

11 The evidence of and participation in a conspiracy

12 may be established through circumstantial evidence.

13 Citation omitted.

14 However, there must be some evidence from which

15 it can reasonably be inferred that the person charged with

16 conspiracy knew of the existence of the scheme alleged in

17 the indictment, and knowingly joined in and participated

18 in it. Citation omitted.

19 Finally, we note that once a conspiracy is shown

20 to exist, the evidence sufficient to link another

21 defendant to it need not be overwhelming, citing United

22 States against Casamento, C A S A M E N T O, 887 F.2d at

23 1156.
24 The same standard with respect to a conviction,
25 of course, is cited recently in United States against


1 Taylor, 92 F.3d 1313, Second Circuit, 1996.

2 Even more recently than that in United States

3 against Leslie, L E S L I E, decided January 8th, 1997 by

4 the Second Circuit.

5 Now, let's look at the seminal case, United

6 States against Regent, 421 F.2d 1174, Second Circuit 1970

7 with regard to mail fraud.

8 A scheme or artifice to defraud under the statute

9 is interpreted broadly and includes everything designed to

10 defraud by representations as to the past or present or

11 suggestions and promises as to the future, and I am

12 leaving out the citations.

13 The scheme to defraud need not have been

14 successful or complete, and the victims need not have been

15 injured. Rather, the government must show that some

16 actual harm or injury was contemplated by the schemer.

17 I took that from the Second Circuit opinion

18 statements on Uni ted States against Regent.

19 In my decision, which is reported -- I think it

20 is reported --

21 MR. TRABULUS: 887 F. Supp.

22 MR. DUNN: 897 F. Supp. 463.

23 THE COURT: I went through all the
24 representations that are alleged to have been fraudulent
25 and discussed the Regent case.


1 In Regent a company selling office supplies was

2 accused of mail fraud, allegedly resulting from its

3 salesperson's sales pitch during solicitation of orders

4 for its merchandise.

5 In that case the defendant stipulated that the

6 agents secured sales by making false representations to

7 potential customers that, one, the agent had been referred

8 to the customer by a friend of the customer; two, the

9 agent had been referred to the customer by officers of the

10 firm of the c ustomer; three, the agent was a doctor or

11 other professional person who had stationery to be

12 disposed of; 4, stationery of friends of the agent had to

13 be disposed of because of a death. And the customer would

14 help to relieve this difficult situation by purchasing the

15 office supplies.

16 The District Court determined that the

17 defendant's conduct constituted a scheme to defraud under

18 the mail fraud statute and found the defendants guilty.

19 It was a bench trial, based on stipulated facts.

20 The Second Circuit reversed, finding that the

21 agent's representations during the solicitation were,

22 quote -- not my language, it is theirs -- white lies,

23 repugnant to the standard of business morality but did not
24 constitutes a fraudulent scheme because the solicitations
25 were not directed at the quality, adequacy or price of the


1 goods to be sold, or otherwise to the nature of the

2 bargain.

3 That's the key language. Were there

4 representations, the false representations, directed to

5 the quality, adequacy or price of the goods to be sold, or

6 otherwise as to the nature of the bargain?

7 In other words, did the customer get what she

8 paid for? That's the key, did the customer get what she

9 thought she was going to get based on the representations

10 made by the salesperson?

11 The customers in Regent got what they paid for,

12 the office supplies, the stationery. The Regent court

13 rejected the government's contention that although the

14 purchasers received what they bargained for, the office

15 supplies, the stationery, the sales tactics by the

16 defendant's agents constituted a fraudulent scheme because

17 the customers did not have knowledge of all the facts,

18 namely, they were deceived as to how the salesperson got

19 their names, who the salesperson was.

20 They distinguished another case, United States

21 against Rowe, R O W E, 56 F.2d 747, Second Circuit, 286 --

22 cert. denied 286 U.S. 554 because the false

23 representations in Rowe concerned facts which were
24 material to the bargain. In Regent the Second Circuit
25 said the false representations as to how the salesperson


1 got to the customer were not material to the bargain

2 because they received the stationery which they paid for.

3 In other words, the misrepresentations were ancillary,

4 tangential, collateral to the main misrepresentation, and

5 not the reason -- and didn't deprive the customer of the

6 bargain.

7 The customer could use the stationery and office

8 supplies, no matter how the salesmen got to the customer.

9 In my decision this is what I said: It is the

10 Court's view that the representations regarding the

11 nomination of members do not implicate matters that are

12 material to the bargain; rather like the representations

13 regarding prestige and membership, selectivity, these

14 representations are a tactic to gain the immediate

15 attention of the customer. Further, the Court believes

16 that the allegations in the complaint concerning

17 nominations are in part incorrect because the solicitation

18 letters state that candidates for inclusion in the

19 registry are nominated either by members or by some other

20 process that is selective.

21 Such other process, I said, could have included

22 use of selective mailing lists.

23 I also said that the false sta tement that the
24 majority of candidates are not accepted for inclusion was
25 sales hyperbole, that's what I said, directing that it


1 gains the customers' attention.

2 I also indicated my concern with the government

3 seizing the assets with devastating pecuniary effects in

4 this kind of a case, and that a small number of

5 questionnaires were involved.

6 I wasn't too impressed with the conferences, and

7 I stated finally that the company's sales approach

8 involved grandiose and misleading statements, puffery, but

9 not criminal fraud.

10 The Second Circuit somewhat disagreed and went

11 through the mail fraud statute and discussed United States

12 against Regent Office Supply, and stated, quote,

13 accordingly, in order for sales tactics to rise to the

14 level of ma il fraud, misrepresentations must be material

15 to the bargain that the customer is induced to enter into

16 with the company.

17 In Regent the Second Circuit held that the

18 misrepresentations were not material. Quote, in that case

19 customers bargained for office stationery. And although

20 misrepresentations were made by the stationery companies

21 in order to gain the attention of the customers, the

22 customers received the products for which they had been

23 bargained.
24 Accordingly, such false claims were not material
25 to the bargain between the customers and companies.


1 They cited United States against Rowe. In Rowe

2 the victims of the scheme did not prove they suffered any

3 loss, but they still were convicted of mail fraud, quote,

4 a man is nonetheless cheated ou t of his property when he

5 is induced to part with it by fraud because he gets a quid

6 pro quo of equal value. It may be impossible to measure

7 his loss but the gross scales available to a court, but he

8 has suffered a wrong. He has lost his chance to bargain

9 with the facts before him.

10 That was stated in Regent, namely, a wrong is

11 suffered when a man is deprived of his chance to bargain

12 with the chance before him, where the absent facts are

13 facts material to the bargain he is induced thereby to

14 enter.

15 This is what they said about my opinion: Quote,

16 although the Court concluded that the companies'

17 misrepresentations were not material to the bargain

18 between the companies and the members, we think that the

19 Court did not fully evaluate the true nature of the

20 bargain. The members had bargained with the companies to

21 join ex clusive registries -- this is the key part of the

22 decision. The members had bargained with the companies to

23 join exclusive registries that would provide opportunities
24 for networking among a prominent group of individuals.
25 Although the members did obtain membership in


1 selective registries, they had bargained to join

2 registries of a more exclusive nature than ones whose

3 members were merely culled from mailing lists. As a

4 result this may be a different situation than that

5 presented in Regent, where the consumers received the

6 products for which they had bargained.

7 In the present case membership in the registry

8 may not have provided the members with the full networking

9 capability they expected to receive from the companies.

10 On remand the District Court should ree xamine,

11 with the benefit of the information provided by the new

12 questionnaires, the nature of the argument again and the

13 inducement that compelled the members to join, and whether

14 any misrepresentations were material to the bargain.

15 One other case I would like to mention in this

16 regard is United States against Press, an older case, 336

17 F.2d 1003, Second Circuit 1964. This was a mail order

18 merchandising case. In which the customers were enticed

19 to buy a catalogue in which they could get factory price

20 list goods.

21 The defendants were convicted of mail fraud and

22 this is what the Court said: Quote, thus a prospective

23 buy-rite B U Y-R I T E, member, was led to understand that
24 for seven dollars he would receive an extensive 700 page
25 catalogue and he could make purchases from that catalogue


1 at substantial savings. This was not true. Although most

2 members did receive a 700 page catalogue, it was at best a

3 hollow offering since they were not entitled to make

4 purchases from this catalogue at the savings anticipated.

5 The initial mailing in itself, therefore, was

6 some evidence from which the jury could infer that

7 appellants knowingly engaged in a scheme to defraud by

8 inducing the recipients to pay seven dollars for benefits,

9 appellants knew not to be included in the offer.

10 This is a close case.

11 It is not as close as when I first saw it because

12 I heard the testimony. I heard the testimony of the

13 customers who said, all of whom said in effect, that they

14 we deceived into buying a membership because of the

15 selectivity, the exclusivity, the elitism and the appeal

16 to their ego. Al l of them testified that they were told

17 they were nominated by another member anonymously or by

18 some trade journal or some creativity or act of fame on

19 their part. And there is no part that it was material to

20 them that this had occurred.

21 All of them testified if they knew their name

22 came from a mailing list they wouldn't have paid the money

23 they did.
24 They did get a plaque. Most of them did get a
25 magazine. They did get certain benefits that they can be


1 availed of, but every one of these witnesses testified

2 that that was not important to them. Networking was, that

3 was important. But based on the fact that it was a

4 selective group of people.

5 The evidence in the case, and I will not trace

6 all of it, included every customer saying that I bought

7 this because I was selected for some reason by a peer, by

8 my contemporary, and because of ego considerations.

9 Debra Benjamin testified that a number of these

10 witnesses who testified all came off mailing lists and

11 that all solicitation letters came from a mailing list.

12 Alan Saffer testified that approximately 98

13 percent of the applicants were accepted. The

14 representations made in the tape recordings and otherwise

15 were that 7 percent, 10 percent, 14 percent, 20 percent,

16 were accepted.

17 Saffer who was with the company five years said

18 that 98 percent of the people solicited were accepted.

19 That's a major difference.

20 Saffer also testified that, quote, way less than

21 one percent were actually nominated; and after telephone

22 calls 99 percent were accepted. Only one or two was

23 rejected by Wendi Springer. That's evidence that t his
24 jury can consider, and it is powerful evidence.
25 The case is a simple one as far as mail fraud is


1 concerned. The government has alleged and proven,

2 sufficient to go to a jury, that there were false

3 representations made to the customers in order to induce

4 them to enter into a membership which cost them

5 substantial sums of money. This is not a ten or 15 or 20

6 dollar deal. It is a 200, 300, 500, 750 dollars to belong

7 to this exclusive club, which wasn't exclusive. They did

8 not get what they bargained for. The nature and quality

9 of what they got was not what they thought they were going

10 to get, notwithstanding the plaque and notwithstanding the

11 fact that they could buy a CD-ROM and do some networking.

12 They didn't get what they bargained for, the prestige, the

13 ego, the glory of being in a selective group, when in fact

14 their name was taken out of a mailing list, which they

15 never would have bought, if they knew. Depriving them of

16 that knowledge was a key and material element in this case

17 sufficient to go to the jury.

18 Now, I said that it was a close case, and it is.

19 But having listened to all of the evidence in the

20 government's case, I am persuaded that it is sufficient

21 that the government has proven enough for a reasonable

22 jury to find beyond a reasonable doubt that there was mail

23 fraud involved in this case.
24 Now, as far as the conspiracy is concerned, also
25 a close case. I am not too much impressed by the


1 B-Balance evidence, the split billing, because every

2 invoice showed it was a split billing. The fact that they

3 didn't read it is their problem.

4 I am not as much impressed with the seminar

5 information, because the defendants did attempt to run

6 seminars. Of course, some of them had been told that it

7 had occurred. I am not too much impressed with that.

8 But the totality of the circumstances, including

9 the major element in this case, this case is an ego case.

10 They wouldn't have bought this or paid this kind of money

11 if they didn't think they were something special. The

12 rest of the things are all collateral.

13 As far as the screening is concerned, yes, there

14 is some evidence of screening, it is very minimal. But it

15 is up to the jury to decide. You can argue that in

16 summation.

17 As to proof of conspiracy, Mr. Gordon set the

18 policies, Mr. Gordon had sales meetings. They are on

19 tape. There is enough evidence of a tacit understanding

20 about all of the defendants and the company, that this was

21 the way to get these people to, as they put it, to close.

22 Number one, make them think it is exclusive, appeal to

23 their ego, and don't tell them about the mailing list.
24 Don't tell them how they were nominated. Everything in
25 this case points to the fact that there was an agreement


1 by everybody to sell this product in this manner. This

2 was the heart and soul of this case and their appeal and

3 the sales. The salespeople knew it. The management knew

4 it. Mr. Gordon certainly knew it. The corporations knew

5 it.

6 They sold a product based on a fraudulent

7 misrepresentation, namely that you are not exclusive, you

8 are not being picked out because you are a -- because you

9 have achieved so mething in your field.

10 Yes, Mr. Gordon says, he didn't want one pizza

11 parlor or one restaurant, he wants three. That's for the

12 jury to determine. But he was the master, the captain of

13 the ship. And others knew the heart and soul of this

14 scheme. They had to know it. The proof is clear that

15 they knew it.

16 If the jury finds that this was a -- that this

17 was in truth false representations which induced people to

18 part with their money -- that part is very simple. We

19 don't have to get into the Margiotta situation or McNally

20 situation, or anything else. It is a simple case.

21 I tell you you were selected because you are

22 something special. Give me $200 and we will give you a

23 wall plaque and put you in a magazine from time to time.
24 Yes, they go some benefits, but not the real benefit, the
25 benefit of exclusivity, of elitism, which is what a


1 reasonable jury could find drove this whole bargain.

2 As far as Mr. Nelson's contention that the

3 customers didn't appreciate what they got because they

4 didn't get the directories, as I recall it, every customer

5 who didn't get the directory wasn't interested in the

6 directory according to what they testified. After they

7 saw it they said it wouldn't have made one bit of

8 difference. That's what they testified to.

9 I don't know how many customers testified, but

10 there were at least 20, maybe more.

11 In sum, in the Court's view, the government has

12 made out a conspiracy to commit mail fraud, which the jury

13 could find beyond a reasonable doubt was committed.

14 So, the motion to dismiss -- rather, for a

15 judgment of acquittal on that ground, as far as Coun t 1 on

16 the conspiracy is denied.

17 Now, what about the individual defendants?

18 Anybody have anything to say with respect to the

19 individual defendants?

20 MR. SCHOER: I believe you already ruled on it,

21 but to place it on the record.

22 THE COURT: You said you didn't want to go into

23 that yet.
24 MR. SCHOER: I understand. But in the course of
25 what you just stated, you sort of indicated that you


1 believe that all the defendants were a part and parcel of

2 this.

3 THE COURT: I do. I think it is very clear that

4 this was the essence of this whole thing.

5 Although there were other things involved in

6 sales techniques, and how to say "wonderful," to be

7 sincere and all the other sales tactics that I have no

8 problem with because salespeopl e do talk that way, in my

9 view the government has proven that they couldn't have

10 avoided knowing that the essence of this case was to

11 appeal to the ego of the customers. They couldn't have

12 avoided knowing that.

13 MR. SCHOER: Judge, I would like to place on the

14 record that I believe very simply that the evidence

15 relating to Ms. Garboski is not sufficient to show that

16 she herself did anything to join this scheme that your

17 Honor set forth, to further that scheme, or she did

18 anything in particular with the intent to deceive for

19 purposes of causing someone some financial loss. I think

20 it is clear based on the testimony that all they have is

21 her handing out some cards on a daily basis to people, not

22 making any determination with respect to those cards.

23 They have her on tape on several occasions making
24 sales pitches -- not sales p itches, but making pep talks
25 to salespeople, instructing salespeople to follow the


1 script.

2 There is no evidence that she knew or had any

3 reason to believe that the things that she was being told

4 by Mr. Gordon concerning nominations, concerning what was

5 in or what was not in the letter that was sent to people,

6 the solicitation letter, concerning the statistics as to

7 the number of people who were accepted, and the number of

8 people who applied, when she was not allowed in the

9 administration office, anywhere near the mail, to know how

10 many cards were coming in, how many letters were going

11 out, your Honor. There is no way for her to have known,

12 and I believe it is true with respect to all the

13 salespeople -- whether they got six million returns, your

14 H onor, and handed out a thousand cards on a daily basis.

15 There was no way to know because they were not allowed

16 across the threshold and not allowed in the room in

17 administration where they opened the mail.

18 They believed based on all the testimony you

19 heard that there was some selection process in that end.

20 And they believe in addition that there was an additional

21 selection process after people were talked to on the

22 phone. And they believed, or she believed, that people

23 were handing her back cards which we heard over and over
24 again. If the person doesn't qualify hand it back, you
25 will get another card.


1 She also believed, and I think the testimony

2 shows, that she believed the salespeople were

3 disqualifying people after they spoke to them as well.

4 So, there were all these different levels, and

5 she had no reason not to believe what Mr. Gordon was

6 telling her, no reason to not believe that that statistic

7 was true, no reason to believe that there was some

8 selective process that was leading to the use of the word

9 "nomination."

10 The bottom line is I don't think there is any

11 proof that shows that Ms. Garboski intended to defraud.

12 There is no tape, your Honor, of her making any

13 sales. There is no proof that she intended to defraud by

14 knowingly acting with the specific intent to deceive for

15 purposes of causing someone to give up their property.

16 MR. LEE: Judge, I need to be heard. I know it

17 is very late --

18 THE COURT: We will have to come back tomorrow

19 obviously.

20 MR. LEE: Judge, my argument is not that long, if

21 you allow me to state it now.

22 THE COURT: First of all, I would like to do one

23 at a time.
24 Mr. Schoer has raised what evidence of membership
25 in the conspiracy, or evidence of a scheme to defraud on


1 behalf of Tara Garboski.

2 MR. WHITE: Do you want me to respond to that

3 now?


5 He says there is no evidence in the case, that

6 there was no telephone conversation.

7 MR. WHITE: Let me make some general comments. I

8 am not sure I can give you exhibit number, or catalogue

9 the precise tape, but let me make a couple of remarks with

10 respect to this defendant.

11 THE COURT: Yes.

12 MR. WHITE: Her position is a manager. She is

13 giving out the sales pitches containing the fraudulent

14 representations. She is one of the people telling the

15 customers what to do, what to say, how to say it.

16 She is on one of the tapes saying pump up the

17 ego, we are hitting a little more on the prestige. I have

18 to get the tape number. She was there starting 1990, I

19 believe, after Mr. Saffer joined in mid-1990. She rose

20 through the ranks as a salesperson and then as a manager.

21 She was there for five years. As your Honor said, she had

22 to know, especially given her position.

23 We heard from Mr. Saffer who said Ms. Garboski
24 was his boss, his supervisor.
25 The same Mr. Saffer said 98 percent of the people


1 got accepted, way less than 1 percent were nominated.

2 Even at the height of the nomination ballots only two

3 percent were nominations.

4 What that means is she is right in the middle.

5 Mr. Gordon above her, me knows there is mailing lists and

6 knows what is going on.

7 The people below her, salespeople, they know

8 because there are tapes where they talk about mailing

9 lists.

10 We know Steve Rubin knows: He was there a year.

11 He told agent Jordan he knows they were lying, that there

12 were mailing lists. She is there five years, his

13 supervisor.

14 It is impossible that when everybody above her

15 and below her knows, that she doesn't know as well.

16 If you give me a couple of minutes, I can find a

17 couple of tapes. I think it addresses the whole knowledge

18 issue.

19 THE COURT: We will give you tomorrow, if you

20 wish.

21 MR. SCHOER: Your Honor, I didn't say she had no

22 knowledge that mailing lists weren't used.

23 There is not one tape where she or anybody is
24 giving a training session where people are directed to
25 answer that question by lying t o them, was my name taken


1 from a mailing list? Of all the hours of tape that the

2 government has, Mr. Zerring there for ten weeks taped --

3 wired, with all these various training sessions, there is

4 not one session where Ms. Garboski says to anyone or

5 anybody else really says to anyone, if you are asked about

6 mailing lists tell them no, no, no, no.

7 I am not saying, and I didn't say that she didn't

8 know that there were or were not mailing lists. It is not

9 intent to deceive. What I am saying is she didn't have

10 the intent to deceive. She didn't know the statistics

11 with respect to what is in the pitch, the six to one, or

12 the 14 percent. She had no way of knowing that, because

13 of what Mr. Gordon said, your Honor. She didn't know what

14 was in the letters.

15 It is clear to everyone who testified that the

16 letters were locked up in the administration office and

17 none of the salespeople were ever able to see what was in

18 the letters. She didn't know whether the word

19 "nomination" was used in the letter or any other word.

20 She knew the word "nomination" was used in some of the

21 pitches, not all the pitches. But she didn't know what

22 the process was, other than the fact that mailings were

23 being made. She didn't know what the mailing lists were,
24 whether they got their names from mailing lists. They
25 just proved that these people knew there were mailings,


1 and not how the company got the people to whom they were

2 making the mailings.

3 THE COURT: All right.

4 I believe there is sufficient evidence for the

5 jury to fi nd beyond a reasonable doubt that Tara Garboski

6 was involved in the conspiracy, knowingly involved and

7 involved in the scheme to defraud.

8 So, your motion for a judgment of acquittal on

9 her behalf in Count 1 is denied.

10 I think --

11 MR. SCHOER: For the record, it is with respect

12 to all the substantive counts as well with respect to the

13 scheme to defraud?

14 THE COURT: Yes, yes.

15 We are going to have to continue because there

16 are going to be other motions made, I assume, and they are

17 going to be lengthy -- not as lengthy as this perhaps, but

18 lengthy.

19 When do you want to do it?

20 Do you want to do it tomorrow afternoon and start

21 early and get through early?

22 MR. WHITE: The government votes for early.

23 THE COURT: If you do it early you will be
24 through by lunchtime.
25 MR. NEVILLE: That is fine w ith me. Although I


1 scheduled something in the court of claims in White Plains

2 tomorrow morning. If your Honor would consider calling

3 the judge up there and explaining?

4 THE COURT: Give it to me right now and I will

5 call him or her.

6 MR. NEVILLE: Thank you.

7 THE COURT: Who is it?

8 MR. NEVILLE: The Honorable Terry Jane Rudderman.

9 THE COURT: The New York Court of Claims judge.

10 MR. NEVILLE: Yes, in White Plains.

11 THE COURT: We will recess until 9:30 tomorrow

12 morning. Is that all right?

13 MR. NELSON: I will note for your recollection

14 that Ms. Scott provided me, indeed provided to me both a

15 decision and a citation of cases on the issues relative to

16 the substantive counts. I noted earlier the government

17 was awaiting the arrival of that. And she in fact

18 provided professionally that information to me.

19 THE COURT: Thank you very much.

20 See you tomorrow morning at 9:30.

21 (Case on trial adjourned until 9:30 o'clock a.m.,

22 Thursday, March 12, 1998.)



1 I-N-D-E-X



4 E-X-H-I-B-I-T-S


7 Defendant's Exhibits BM and BL received in
evidence......................................... 7505 12
8 Defendant's Exhibits BO and BN received in
evidence......................................... 7506 4
9 Defendant's Exhibits BT and BS received in
evidence......................................... 7506 13
10 Defendant's Exhibits BK-1 and BJ received in
evidence......................................... 7506 22
11 Defendant's Exhibit BR received in evidence...... 7507 6
Def endant's Exhibits BQ and BP received in
12 evidence......................................... 7507 14













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