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United States v. Cavale

decided: September 7, 1982.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
RONALD CAVALE, DEFENDANT-APPELLANT; UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, V. TERRENCE FAUL, DEFENDANT-APPELLANT; UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, V. THOMAS KURZ, DEFENDANT-APPELLANT; UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, V. ANTHONY C. KOVIC, DEFENDANT-APPELLANT; UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, V. DANIEL PACELLA, DEFENDANT-APPELLANT



Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 80 CR 499 -- Susan Getzendanner, Judge.

Wood, Coffey, Circuit Judges, and Campbell,*fn* Senior District Judge.

Author: Coffey

COFFEY, Circuit Judge.

This case is a consolidation of five appeals from the defendants' jury convictions, of mail fraud and extortion.

The appellants herein whose cases were joined for trial, were charged with violating 18 U.S.C. § 1341 (mail fraud) and 18 U.S.C. § 1951 (extortion and attempting extortion), for their involvement in a scheme to defraud the City of Chicago and its Police Department by submitting fraudulent billings for the repair of squad cars and other vehicles of the Chicago Police Department. The appellants include one officer of the Chicago Police Department, three civilian supervisory personnel of the Police Department, and one private garage vendor under contract to the City of Chicago Police Department. Essentially, the defendants allege three grounds for reversal exist: The trial court abused its discretionary power in denying the defendants' motion for severance on the grounds of prejudicial joinder; the evidence at trial was insufficient to support the convictions of appellants Kovic and Cavale; certain remarks by the trial court judge deprived Cavale of a fair trial.

BACKGROUND

The Chicago Police Department organizational chart lists six bureaus, with each bureau further divided into divisions. One of these divisions, the Electric Motor Maintenance Division, is responsible for the repair of Chicago Police Department vehicles, and during the course of the events herein operated four police garages located in different areas of the city. The City of Chicago awarded yearly contracts to private automobile repair vendors under established procedures. These vendors were responsible for repairing vehicles which could not be repaired by the department's own Motor Maintenance Division because the mechanical repairs were too extensive and expensive or because the repairs involved body work which the division was not equipped to handle. Vendors interested in bidding for the contract work submitted sealed bids that were forwarded to the Chief of the Motor Maintenance Division, the highest ranking civilian in the Chicago Police Department. The Chief was authorized to approve or disqualify vendors if he determined that their repair facilities were inadequate. Once the head of the department determined that certain garages were qualified vendors, he would then recommend to the Purchasing Department that these vendors with adequate facilities be awarded contracts, and the Purchasing Department would, in turn, award contracts to the lowest qualified bidders.

Once the department and a repair vendor had agreed on a contract price to perform services for the department, the vendor was assigned work from the police garage located in his (vendor's) particular area of the city. When a police department vehicle was found in need of mechanical repair, other than bodywork, it was taken to the nearest of the four police garages located throughout the city and examined by a police department mechanic. If the mechanic discovered that the necessary repairs were too extensive and costly, the mechanic obtained the approval of a garage supervisor to have the car repaired by the designated vendor in that area. The damaged vehicle was then transported to the vendor, along with two copies of the Vehicle Work Order (VWO) describing the necessary repairs and containing the mechanic's signature as well as his supervisor's authorization for the work described thereon.

If a police department vehicle was involved in an accident, a somewhat different procedure was involved. Initially, an evidence technician was dispatched to the scene of the accident to photograph the damage to the squad car and the vehicle was then inspected by an accident investigator who determined the extent of the necessary repairs. Since the Motor Maintenance Division was not equipped to do any bodywork, the investigator would then record the needed repairs on a vehicle work order, and the car would be towed to the private vendor. Each month, the private vendors doing repair work would submit their invoices with supporting VWO's to the police billing department. These documents would then be forwarded to the Chief of the Motor Maintenance Division for his inspection and approval. If the Chief approved the billing, he would then sign the invoice and transmit same with the VWO's to the finance division for payment via the U. S. mail service. If the Chief did not approve of the payment, the city would not issue a check.

FACTS

In February of 1976, Miles Coleman, a police department mechanic assigned to Garage No. 1 and a defendant herein, arranged for Richard Nawrocki, and Nawrocki's partner, the defendant-appellant Ron Cavale, to meet with defendant-appellant Anthony Kovic, the Chief of the Motor Maintenance Division, at the headquarters of the Motor Maintenance Division. Richard Nawrocki was a garage vendor who was originally charged with the other defendants in the indictment but who, pursuant to a plea bargain, pleaded guilty and became the government's chief witness at trial. Nawrocki and Cavale were interested in becoming garage repair vendors to recondition damaged city police vehicles and met with Chief Kovic to explain that they were interested in entering into a contract with the Chicago Police Department to do repair work on police vehicles. After this initial meeting, Nawrocki and Cavale formed "Mar-Lin Automotive," rented a garage and filed a bid for a police repair contract. During the trial Nawrocki testified that several days after this bid was filed with the city, and after the bidding deadline had passed, Coleman, the mechanic at Garage No. 1, telephoned him (Nawrocki) and told him that he should reduce his "Mar-Lin Automotive" hourly bid rate from $11.00 per hour to $10.00 per hour. Nawrocki further testified that Coleman provided him with a model letter from Allied Automotive,*fn1 addressed to defendant Kovic for Nawrocki to use when sending the letter of transmittal reducing Mar-Lin's bid from $11.00 to $10.00 per hour. Several weeks later, Mar-Lin was awarded a city contract to repair Chicago Police vehicles.

On July 1, 1976, the first day of the contract, Nawrocki and Cavale opened the Mar-Lin Automotive repair business at 455 West 61st Street, Chicago, Illinois. After Mar-Lin failed to receive any business from the police garages during their first few weeks of operation, Nawrocki and Cavale contacted Coleman in mid-July and complained about the lack of work. Shortly thereafter, Coleman visited Nawrocki at the Mar-Lin garage and presented him with a number of blank VWO's, declaring "here is some work orders. [sic] Write them up and we'll split them 50/50." Coleman instructed Nawrocki to fill out the work orders, contemplating a 50/50 split on the proceeds from the fraudulent billings, and Coleman stated that half of his 50 percent was going to be turned over to the defendant Kovic. Nawrocki testified that he noticed the work orders he received from Coleman contained the vehicle numbers of squad cars that had never been repaired by Mar-Lin Automotive.

After this initial meeting between Coleman and Nawrocki, Nawrocki testified that he discussed Coleman's proposal with Cavale, his co-owner. Cavale agreed with Nawrocki that the two owners had no choice but to accept Coleman's billing procedure and terms as there were no other business prospects at that time. Cavale was reported to have stated "as long as we don't have to do the work, I guess it's all right."

Several days later, Nawrocki filled out the blank VWO's with false billing numbers and submitted the orders and corresponding invoices to the police billing office. Nawrocki then gave Coleman $500 to cover Coleman's half of the expected $1,000 check. At the time Nawrocki made this payment, Nawrocki asked Coleman if Mar-Lin could wait until after Mar-Lin had received the city check for the phony VWO's before making its next payment. Coleman refused to allow this, explaining "We want to make sure you are good payers."

Thereafter, until late 1979, Coleman continued to make monthly visits to the Mar-Lin garage, bringing with him between 5 and 15 fraudulent vehicle work orders on each visit for cars which had never been brought to Mar-Lin for repairs (no-goes). Coleman also authorized additional unnecessary repairs on cars that had actually been taken to the garage (add-ons), even though these repairs were never performed but were nonetheless charged to and paid for by the city. Ultimately, Coleman was receiving an average of $2,000 a month, a total in excess of $100,000 from the summer of 1976 through fall of 1979.

In September of 1976, defendant-appellant Pesha, a police officer working as an accident investigator, approached Nawrocki at his Mar-Lin office and told Nawrocki that he had learned from Coleman that Mar-Lin Automotive was interested in "doing some work." Nawrocki further testified as to his dealings with Pesha that Pesha stated "we work it the same way with the body work as [Coleman] does with you," adding that half of the percentage had to go to the defendant Kovic. After Pesha left the garage, Nawrocki spoke with Cavale and told him that Pesha also wanted to join in the fraudulent scheme of submitting inflated accident repair bills and also split the proceeds on a 50/50 basis. Cavale agreed to Pesha's proposition and, since Mar-Lin was without any accident repair forms, Cavale ordered and obtained more than 1,000 forms for accident repair from a local printer for use in preparing the fraudulent accident repair billings. Nawrocki, describing Pesha's actions in further detail, testified that Pesha arrived at Mar-Lin Automotive the very next day to demonstrate to Nawrocki how to fill out the fraudulent accident reports. Pesha described how to inflate billing figures through recording "accumulated damage"*fn2 repairs on the estimate forms. Pesha was described as also having given Nawrocki a number of inflated billing figures recorded as "accumulated damage" repairs on the estimate form. Nawrocki followed through with the proposed scheme, later billing the city for the fraudulent claim as demonstrated by Pesha and split the proceeds with him (Pesha).*fn3

Thereafter, from 1976 until the end of 1979 when the federal government undertook to begin its investigation, Nawrocki and Pesha submitted phony "accident and accumulated damage" reports and bills to the city. Nawrocki wrote up the phony estimate sheets for repair damage, while Pesha supplied the corresponding false vehicle work orders. At one point in the trial, it was recited that Pesha confided to Nawrocki that he was routinely increasing his fraudulently obtained take home pay by supplying his own accident cases by taking a tour of the parking lot and side-swiping a few squad cars parked on the lot every morning when he reported for duty. As a result of this intentional damage to the city vehicles and other fraudulent activities, Pesha was able to increase his income anywhere from $3,000 to $8,000 a month from 1976 through 1979.

In June of 1977, Nawrocki bought out Cavale's partnership interest in Mar-Lin Automotive but Cavale continued to work for Nawrocki only as a mechanic (employee) for the firm.

In the fall of 1977, defendant-appellant Terry Faul, a machinist foreman assigned to Garage No. 3 of the Motor Maintenance Division also joined in with the fraudulent scheme to inflate income, and approached Nawrocki at his (Nawrocki's) Mar-Lin garage and told Nawrocki that he wanted Mar-Lin to do some repair work on his (Faul's) personal recreational van. Nawrocki agreed and Faul paid for the repairs to his van by giving Nawrocki fraudulent VWO's. Thereafter, Faul brought phony work orders to the Mar-Lin garage on an average of once a month, and received payments from Nawrocki ranging from $200 to $1,400 monthly. The defendant-appellant Danny Pacella, an electrician at Garage No. 2 of the Motor Maintenance Division, also paid Nawrocki in 1979 with fraudulent VWO's for repairing his (Pacella's) private car. While a number of the VWO's purportedly contained the signature of other electricians at Garage No. 2, it was testified that Pacella either forged the other electricians' signature without authorization, or ordered one of his subordinate mechanics to approve of the work order by placing his signature on the VWO that Pacella had filled out.

Nawrocki further testified that in April of 1978, defendant Kovic met with Nawrocki at the headquarters of the Motor Maintenance Division and informed Nawrocki that "a guy downtown" was going to give the Mar-Lin business to another vendor unless he (the guy downtown) received 10 percent of Mar-Lin's gross city billings. The following morning, in response to Nawrocki's statement to Kovic that he could not afford to "go out-of business" Kovic replied that he did not want Mar-Lin to lose any money and suggested that Nawrocki add 10 percent to every bill submitted to the city in order to pay this new "johnny come lately," the man downtown. When asked how this would be accomplished, Kovic remarked that Pesha and Coleman would approve it and that Pesha's and Coleman's approval of the 10 percent mark-up would be accomplished under Kovic's direction. Kovic explained that he would advise Nawrocki on the phone daily how much money was due, referring to the 10 percent mark-up, and would then arrange to meet with Nawrocki at 5:00 A.M. the following morning at Mar-Lin and receive the increased payment. Thereafter, from April of 1978 to the summer of 1979, Nawrocki made monthly payments to Kovic ranging from $3,000 to $15,000. During this period, approximately 30 percent of Mar-Lin's city billings were fraudulent, exclusive of the 10 percent added to the bills in order to accommodate the payments to Kovic.

In late April of 1978, Nawrocki arranged individual meetings with Pesha and Coleman. When Pesha and Coleman learned that Kovic was skimming 10 percent off the top of Mar-Lin's gross city billings, Coleman and Pesha each individually stated that they were unwilling to be shortchanged and would not continue to participate in the risks of the fraudulent scheme without receiving an increase in payments. Both Coleman and Pesha stated that they would no longer split with Kovic their respective 50 percent of the amount paid to Mar-Lin for the fraudulent billings but would keep the entire amount for themselves. When Nawrocki protested that the payment was excessive, Nawrocki testified that Coleman declared "it's either that or nothing."

In March of 1979, Cavale had a change of heart, and after having resigned as a co-owner of the garage at an earlier date now demanded that he again be paid a portion of the money received from the fraudulent billing scheme, or he (Cavale) would get out of the business altogether. Nawrocki agreed and suggested that Cavale rejoin Mar-Lin as a full partner in the enterprise, and further suggested that Cavale open and operate a second garage on Chicago's Northside in order to expand the fraudulent billing scheme of defrauding the Chicago Police Department. Cavale acquiesced, opened a new garage on the Northside and increased his salary from $30,000 to $95,000 a year.

In March of 1979, Nawrocki and Cavale discussed the various percentages that Kovic, Coleman, Pesha, and Faul were receiving from the fraudulent billing schemes. When Nawrocki told Cavale that the partnership was now no longer making as much money, but was still existing, Cavale remarked "well, okay. We'll leave it that way."

Also, during March of 1979, Nawrocki received a phone call from the defendant-appellant Thomas Kurz, an accident investigator assigned to the Northeast side of Chicago, who explained that "Tony [Pesha] explained everything to me. . . . The deal is fine with me." Nawrocki agreed to split the proceeds from Kurz's fraudulent billings on a 50/50 basis, and invited Kurz to come on board, adding that Kurz would be dealing with his partner, Ron Cavale of the Northside enterprise, who knew all about the fraudulent billings and who would be advised of this conversation. That same day, Nawrocki spoke with Cavale and told him that Kurz was joining in and would send them some "body work" from the north side of the city. A short time later, Cavale told Nawrocki that Kurz was not as easy to deal with as Pesha because Kurz's fraudulent billing was not as extensive. However, Cavale continued to supply the authorizing signature for the Mar-Lin documents that supported Kurz's fraudulent billing until October of 1979, when Cavale left Mar-Lin after a dispute with Nawrocki over the division of profits from the partnership income.

In August of 1979, as a result of the commencement of the federal investigation into the fraudulent submission of billing to the Chicago Police Department, Kovic was removed from his position of authority, resulting in Mar-Lin's city business declining sharply. In early fall after the investigation had commenced, Nawrocki testified that he and Cavale discussed the options available to them in their business and adopted a "wait-and-see approach." Also at that time Nawrocki met with the defendant Coleman, and Coleman suggested that now with Kovic out of the picture, it would be difficult, if not impossible, to obtain the proper authorization for the fraudulent billings, and that Coleman and Nawrocki should "quit writing" for a time, and recited that he would certainly miss his monthly $2,000 take. In late 1979, Nawrocki received a phone call from Danny Pacella, and Pacella informed Nawrocki that "they got us . . . we forgot to think about the A & A Sheets." These records, entitled "Assignments and Attendance Sheets," were daily records maintained by the police department of the specific assignment of an officer to a specific police department vehicle on a day certain. Pacella explained to Nawrocki that the A & A Sheets would prove that specific vehicles were actually on the city streets and not under repair at the Mar-Lin garage on these days as set forth in the phony billings.

In support of Nawrocki's testimony, the government introduced a payment ledger which Nawrocki testified that he had maintained during the calendar year of 1978. Nawrocki testified that by the end of 1977 he felt that he was making so many payments to so many police department employees that he could no longer keep track of the payments in his head and was thus forced to set up a ledger to record them. The ledger reflects the following information:

During 1978, Terry Faul received monthly payments ranging from $150 to $1,420; Miles Coleman received monthly payments ranging from $1,958 to $4,905; Tony Pesha received ...


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