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United States v. Billingsley

March 19, 1971


Knoch, Senior Circuit Judge, Cummings and Kerner, Circuit Judges.

Author: Cummings

CUMMINGS, Circuit Judge.

In September 1966, appellants and John R. Birdsell were indicted for mail fraud under Section 1341 of the Criminal Code (18 U.S.C. ยง 1341). Billingsley, Birdsell and Mrs. Friend were named in all eight counts.*fn1 Defendant Jaeger was named only in Count Eight. After a six-week jury trial, Billingsley was found guilty on six counts, Mrs Friend on five counts and Jaeger on Count Eight. All three received varying prison sentences, and fines were also imposed on Billingsley and Jaeger.

The indictment charged that commencing in July 1961 the four defendants devised a scheme to obtain funds by false pretenses from persons induced to make investments in seven trusts and three corporations. The evidence showed that Billingsley, Birdsell and Mrs. Friend solicited the funds for the Madrigal process of converting iron ore into steel, for a real estate complex in Denver, Colorado, and for mineral extraction. In soliciting these funds, defendants represented their projects to be nonspeculative and imminently profitable. Funds invested in the projects were administered through seven trusts. By the time of trial, most investors had received no return.

Billingsley was the organizer of these projects and Mrs. Friend was the secretary-treasurer of the various trusts. In 1965, Jaeger became associated with Billingsley to reorganize the trusts into Trans-American Minerals and Expediting Corporation, into which the assets of all the trusts were to be placed.

Dr. Leroy H. Gander, a chiropractor, solicited about $120,000 in investments for the projects from 30 persons. On April 14, 1965, he first commenced cooperating with the FBI in its investigation of these projects. Howard A. Schaad, an associate of Billingsley, was contacted by the FBI in the fall of 1964 concerning Billingsley's Madrigal steel process and defendant Birdsell. On April 14, 1965, he was again interviewed by the FBI and continued to cooperate with that organization thereafter.

In February 1965, plans were begun for the consolidation of all the trusts into Trans-American, with the trust investors to receive shares therein in exchange for their trust receipts. On March 8, 1965, Jaeger and Dr. Gander were named acting president and acting secretary-treasurer of Trans-American, and Jaeger was authorized to secure its incorporation. On March 15, 1965, Jaeger went to the office of attorney Robert M. Magill in Springfield, Illinois, to arrange for the incorporation. Trans-American was chartered later that day. One copy of the charter was then given to Mr. Jaeger and the other copy was placed in a hard-bound corporate record book being compiled by Magill, who also prepared minutes of the first shareholders' and board of directors' meetings, and a voting trust agreement among Jaeger, Billingsley and Schaad. These documents were mailed by Magill to Jaeger at his Chicago office on April 17, 1965, at the direction of Jaeger.

On March 19, 1965, Jaeger was elected president and Dr. Gander secretary-treasurer of Trans-American. Its directors held several meetings. Gander, Schaad and Hugh Olsen endeavored to develop working projects for Trans-American until September 1965. Thereafter Trans-American ceased to operate.


Defendants first contend that they were not given proper latitude at the hearing on the motion to suppress the records taken from Mrs. Friend's home by Dr. Gander on March 17, 1965, and delivered to FBI agents on April 23, 1965. Defendants claim that Dr. Gander acted unlawfully under directions from FBI agents concerned with investigating these defendants and that the material thus obtained was inadmissible under the Fourth Amendment. Specifically, defendants object to the evidentiary rulings of the trial judge during the examination of Agents McQueen and Wolfarth. Our study of the transcript, however, convinces us that the district court permitted sufficient latitude for defendants to show whether Dr. Gander was acting as an agent of the FBI when he entered Mrs. Friend's home and removed the files.

The record shows by stipulation and by testimony that the FBI commenced this investigation in late 1964 or on January 19, 1965. Although Gander removed the files on March 17, he did not proffer them to the FBI until April 14. Prior to that date, the FBI had not contacted Dr. Gander with respect to this case. Thereafter, at the request of Agent Wolfarth, McQueen removed the records from Gander's residence on April 23. Both McQueen and Wolfarth testified that neither they nor any other law enforcement officer suggested to Gander that he obtain the records.

According to Gander, he had no conversations with the FBI concerning this matter before April 14. He did not discuss it with the FBI at the time of Billingsley's February 24, 1965, check-kiting trial. He also testified that before the April 23rd date on which he delivered the documents to McQueen, the FBI had never questioned him about his connection with defendant Billingsley. He was not interviewed by the FBI until June 29, 1965. At the time he removed the records from Mrs. Friend's home, he testified that he was not under investigation. His first contact with the FBI about these transactions was on April 14 when he phoned McQueen to tender the files. Neither the FBI nor any state or local law enforcement officer "directly or indirectly" induced him to go to Mrs. Friend's home to obtain the records on March 17. In a telephone conversation with Mrs. Friend in the first week of April, Gander told her that if his examination of the records indicated wrongdoing, he would go to the FBI. He told Billingsley the same thing on March 28 or later.

Defendants complain that they should have been permitted to elicit the exact date the FBI started this investigation. However, they were permitted to show its inception was in late 1964 or no later than January 19, 1965, thus proving their point that it occurred prior to the March 17th file removal.*fn2 Although the trial judge might have permitted a fuller interrogation of Gander, McQueen and Wolfarth, he permitted defendants to explore their relationship in depth. We cannot say that in sustaining the objections to defense counsel's questions, the trial judge abused his discretion, particularly since answers to these questions were usually contained elsewhere in the suppression hearing record or else ...

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