United States v. Leon Weiss

491 F.2d 460
CourtCourt of Appeals for the Second Circuit
DecidedJanuary 15, 1974
Docket532-535, Dockets 73-1964 to 73-1967
StatusPublished
Cited by57 cases

This text of 491 F.2d 460 (United States v. Leon Weiss) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Leon Weiss, 491 F.2d 460 (2d Cir. 1974).

Opinion

MANSFIELD, Circuit Judge:

Following a nine-day trial before Judge MacMahon appellants Leon Weiss, Melco International, Inc. and its wholly-owned subsidiary, Melco International, Ltd. (sometimes collectively referred to as “Melco”) were on May 30, 1973, convicted of (1) conspiracy to violate 18 U. S.C. § 1001 by causing false invoices and documents to be submitted to the Army and Air Force Exchange Service of the Department of Defense (“Exchange” herein) (Count 1), (2) causing invoices containing false statements to be submitted to an agency of the Exchange in violation of 18 U.S.C. §§ 1001 and 2 (Counts 2-17), and (3) mail fraud in furtherance of the scheme in violation of 18 U.S.C. § 1341 (renumbered Count 18). Appellants Weiss and his wife, Ethel Weiss, were also convicted of corruptly endeavoring to obstruct justice in violation of 18 U.S.C. § 1503 by failing to produce documents subpoenaed by the Grand Jury investigating the scheme (renumbered Count 19).

Upon this appeal all defendants contend that the trial judge denied them a fair trial. Mr. Weiss and the two corporate defendants argue that certain evidentiary rulings were erroneous and require a new trial. The Weisses further urge that Count 19 (alleging a violation of 18 U.S.C. § 1503) fails to state a crime. Mrs. Weiss adds the argument that she was improperly joined, and the corporate defendants assert that the district court’s jurisdiction over them was not established. As to the last claim we remand the proceedings against the corporate defendants for a hearing to determine whether the court had jurisdiction over them. Finding no merit in the other contentions, we affirm.

The record, viewed in the light most favorable to the government, United States v. McCarthy, 473 F.2d 300, 302 (2d Cir. 1972), reveals a scheme engineered by Weiss to defraud the Exchange of thousands of dollars upon the termination of a concession agreement with the Vietnam Regional Exchange by inflating the actual costs incurred in *463 connection with performance of the contract, thus falsely increasing the amounts to which companies controlled by Weiss would be entitled by way of settlement. Beginning in 1966 Weiss was the President and controlling stockholder of defendant Melco International, Inc., a Liberian corporation which represented manufacturers in the sale of goods to Army and Air Force Post Exchanges (“PXs” herein) in the Far East. Weiss maintained his principal office in New York for the furnishing of supplies to PXs operated by the Exchange in various parts of the world.

In March 1967 Herbert J. McElroy, salesman for Melco International, Ltd., a wholly-owned Hong Kong subsidiary of Melco International, Inc., with Weiss’ approval entered into a contract for the sale of Thai-manufactured goods to PXs in Vietnam. One month later, on April 18, 1967, the contract was terminated by the Exchange for reasons arising out of the adverse gold flow in the international balance of payments, which placed a strain upon the American dollar. Under the contract the termination entitled Melco to compensation for actual expenses and bona fide costs incurred in connection with its performance of the contract prior to its receipt of the termination letter.

Prior to the receipt of the notice of termination McElroy had on behalf of Melco obtained the agreement of three Thai suppliers (Longsan Limited, Thai Lapidary, and Thai Celanese) to furnish one month’s supply of goods at a cost of approximately $43,000. At the same time, in order to gain a secret mark-up for Melco, McElroy had, with Weiss’ approval, arranged with two of the Thai suppliers (Longsan and Thai Lapidary) that they would prepare double sets of invoices covering approximately $40,000 of the goods, one set showing the actual wholesale price to Melco and the other a higher wholesale price (increased by 10% on goods to be furnished by one supplier and 25% on goods from the other) for submission to the Exchange. Under this arrangement the two Thai suppliers, who were themselves realizing their profit on the lower invoiced price, would collect and “kick back” to Melco the difference between the two invoiced prices. In this way Melco would realize not only a mark-up amounting to the difference between the wholesale and retail prices disclosed to the Exchange but the secret “kick back” as well.

After receiving the notice of termination McElroy, again with Weiss’ approval, secured the agreement of the Thai suppliers to a plan whereby they would cooperate with Melco in enabling it falsely to represent to the Exchange that it, prior to the termination of the Exchange contract, had made irrevocable commitments to them to buy approximately $300,000 worth of Thai goods instead of the actual commitments of approximately $43,000. Accordingly a settlement proposal based on the false $300,000 commitment was submitted in June 1967 by Melco to the Exchange with Weiss’ approval, supported by back-dated letters from the two collaborating Thai suppliers, falsified invoices, and fraudulent affidavits signed by McElroy.

Upon McElroy’s being transferred by Weiss to Germany, John Moore, a Melco representative in Hong Kong, was assigned to conclude the settlement negotiations after being fully briefed by Weiss regarding the fraud and the hidden markup to be realized by Melco. Rather than risk delaying receipt of the kick back from the two suppliers until after they had received the inflated prices from the Exchange, Weiss arranged through a Swiss bank to pay each supplier the agreed-upon lower secret price (10% lower than the price on each invoice bearing the Exchange stamp in the case of Longsan and 25% lower in the case of Thai Lapidary) upon proof that the goods had been shipped to the Exchange at the inflated price. He then received from the suppliers releases falsely acknowledging that they had received the inflated amounts in payment when in fact they had been paid the lower true amounts. *464 Melco was thus in a position directly to collect the inflated sums from the Exchange. As a result it realized approximately $42,000 to which it would not have been entitled if the truth had been revealed to the Exchange.

Mrs. Weiss became involved in the scheme after the Grand Jury began an investigation into Weiss’ activities and a subpoena was on March 5, 1971, served on Weiss for production of invoices and records relating to the settlement of the Vietnam PX contract. Thereupon Mrs. Weiss, after discussing the matter with her husband, made a secret trip from New York to Hong Kong where, aided by Leland Gage, Moore’s successor at Melco’s office there, she obtained the incriminating invoices showing the actual prices paid by Melco to the Thai suppliers.

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491 F.2d 460, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-leon-weiss-ca2-1974.