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United States v. Fulk

decided: April 16, 1987.


Appeal from the United States District Court for the Northern District of Illinois, Western Division, No. 85-CR-20011, Stanley J. Roszkowski, Judge.

Author: Eschbach

Before WOOD, and POSNER, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

ESCHBACH, Senior Circuit Judge. After a jury trial, Paul F. Fulk was convicted of two counts of causing the transportation in interstate commerce of securities, i.e. checks, of a value of $5,000 or more, knowing them to have been obtained by fraud, in violation of 18 U.S.C. ยง 2314 (1982).*fn1 On appeal, he challenges: (1) The admission of his ex-wife's testimony over his assertion of the marital communications privilege; (2) The refusal of the trial court to grant a mistrial as a result of the government's allegedly improper impeachment questioning; and (3) The sufficiency of the evidence.*fn2 We find his contentions to be without merit; therefore, we affirm.


In January of 1980, the defendant approached several investors in an attempt to interest them in investing in a project to develop a fuel-efficient carburetor which he had been working on since the early 1970's. He had previously dealt with the investors, when they purchased silver from him several years earlier when he was an agent for Constitution Mint. He managed to convince Barbara and Warren Swanson, Robert and Dorothy Hood, and Wayne Benson to purchase stock in Par Industries, a corporation which had been formed to develop the carburetor. The Hoods sent Fulk $15,000; the Swansons gave him $25,000; and Benson gave him $2,000. All of these amounts were either cashier's checks or personal checks.

The transaction was structured so that the investors would purchase shares that had already been issued in Fulk's name for $1,000 per share. A "subscription agreement" was executed acknowledging that the investment was "speculative," that the corporation had "no physical assets," and that the "book value per share of common stock" was "zero." The agreement had a standard integration clause which provided:

This subscription contains the entire contract between subscriber and the corporation. No agent or representative of the corporation or any other person has any power to change or alter the terms of this subscription, and no information or representation not contained herein should be relied upon as having been authorized by the corporation.

TR. 57.

At the same time, Fulk executed a repurchase agreement which purported to obligate him, at the investors' option, to repurchase the shares at the end of one year.*fn3

In order to persuade the investors, he represented to them that the carburetor was near completion and that he needed more money to finish research and development on it. He represented to them that he had had an offer for the purchase of the patent on the carburetor from NAPA for $124 million. He also represented that he had retained an eminent scientist named Wrigley, who had been one of the investors of the atomic bomb, to help him complete the project. All of the investors believed that the money that they invested was to be used solely for the purposes of research and development on the carburetor.

However, the corporation had not conducted any business as a corporation since 1977, when its board determined that no further shares should be issued or transferred until Fulk accounted for funds which had been received from previous investors, who then constituted a majority of the board. He was unable to make an accounting to the satisfaction of the Board because some of the funds had been spent on his personal expenses. At a board meeting, Fulk took the position that since the stock which those investors had purchased had (like that involved in the present case) been held by him individually, he was free to do what he wanted with the purchase proceeds. It had been the understanding of the Board that he was obligated to make those funds available for corporate purposes, perhaps in the form of a loan.*fn4 The following year, Fulk tried to have some stock transferred, but was refused by the board because of the earlier problems.

Few, if any, of the funds received from the Swansons, the Hoods, and Benson were used for research and development of the carburetor. Some of the funds were deposited into the checking account of the chiropractic clinic operated by Fulk and his wife. No shares were ever transferred to the investors, apparently because the board of the corporation again refused to transfer shares as a result of the earlier unaccounted-for funds. When the investors inquired about the shares, Fulk said that there had to be a meeting of directors for the transfers to be effected. He later told the investors that the reason the meeting had not yet occurred was that the shareholders were all over the country and that it would take some time to assemble them.

In the Spring of 1980, the Hoods and Swansons went to see Fulk in Ohio to ascertain what progress was being made on the carburetor and on the share transfers. Before the meeting, Fulk told his wife to conceal the fact that they had separated. When she asked him about their visit, he told her that he did not plan to sell them any stock in the carburetor. He finally admitted to her that he did plan such a sale, but did not tell her that he had already received money for the shares.

The investors invoked the buyback agreement when it became apparent that they were not going to receive any shares, apparently after the spoke to Fulk's wife and to the directors of the corporation. Eventually Fulk ...

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