State v. Louchheim

250 S.E.2d 630 (1979) 296 N.C. 314

STATE of North Carolina
v.
Jerome H. LOUCHHEIM, III.

No. 50.

Supreme Court of North Carolina.

January 4, 1979.

Atty. Gen. Rufus L. Edmisten by Associate Atty. Gen. R. W. Newsom, III and Associate Atty. Gen. J. Chris Prather, Raleigh, for the State.

Akins, Harrell, Mann & Pike by Bernard A. Harrell and Ragsdale, Liggett & Cheshire by Joseph B. Cheshire V and Peter M. Folley, Raleigh, for defendant.

COPELAND, Justice.

For the reasons stated below, we have determined that the defendant had a trial free from prejudicial error. His conviction is affirmed.

In his first assignment of error, the defendant contends the trial court erred in denying his motion to suppress the evidence seized pursuant to the search warrant. He claims the affidavit on which the warrant was based contained false information that was crucial for the probable cause determination. We do not agree.

In Franks v. Delaware, 438 U.S. 154, 98 S. Ct. 2674, 57 L. Ed. 2d 667 (1978), the United States Supreme Court squarely addressed this issue.

"[W]e hold that, where the defendant makes a substantial preliminary showing that a false statement knowingly and intentionally, or with reckless disregard for the truth, was included by the affiant in the warrant affidavit, and if the allegedly false statement is necessary to the finding of probable cause, the Fourth Amendment requires that a hearing be held at the defendant's request. In the event that at that hearing the allegation of perjury or reckless disregard is established by the defendant by a preponderance of the evidence, and, with the affidavit's false material set to one side, the affidavit's remaining content is insufficient to establish probable cause, the search warrant must be voided and the fruits of the search excluded to the same extent as if probable cause was lacking on the face of the affidavit. Id. at 155-156, 98 S. Ct. at 2676-77, 57 L.Ed.2d at 672.

In this case there was a pretrial hearing on defendant's motion to suppress the evidence seized during the search. The defendant presented witnesses tending to show that some of the information in the affidavit of the S.B.I. agent was false. Thus, the requirement in Franks that a defendant have the opportunity to prove falsity has been met. See also G.S. 15A-978(a).

The affidavit in question contained an assertion that Judith Justice, a former employee of CCI, "confirmed the existence of two sets of incompatible and different invoices from Ad-Com International to CCI and Louchheim, Eng and People, Inc." At the motion hearing Mrs. Justice testified she had never said there were "incompatible" sets of invoices. Instead, she had told the agents there were two sets of invoices but that she did not know whether they were alike or different. The S.B.I. agent took the stand and essentially corroborated Mrs. Justice's testimony.

The court found that "the affidavit was truthful as defined in Section 15A-978(a) of the General Statutes in that it reported in good faith, although exaggerated, the circumstances relied upon to establish probable cause." We need not now decide whether the "good faith" test for truthfulness set forth in G.S. 15A-978(a) meets the standards in Franks or whether the court's determination of good faith in this case is supported by the evidence. Rather, we find that there was probable cause to support the search warrant on the face of the affidavit when this false information is disregarded.

The defendant attacks the magistrate's finding of probable cause in this case on the ground that there was no reason to believe the materials sought were located at that time in the place to be searched, the defendant's business offices. It is beyond dispute that probable cause must exist at the time the warrant issues. "[I]t is manifest that the proof must be of facts so closely related to the time of the issue of the warrant as to justify a finding of probable cause at that time." Sgro v. United States, 287 U.S. 206, 210, 53 S. Ct. 138, 140, 77 L. Ed. 260, 263 (1932.) Whether probable cause exists, however, is a determination based on practicalities, not technicalities, United States v. Ventresca, 380 U.S. 102, 85 S. Ct. 741, 13 L. Ed. 2d 684 (1965), and each case must be decided on its own facts. Sgro v. United States, supra.

The affidavit in question stated in part:

"The confidential source of information disclosed that CCI maintained two different sets of invoices detailing the production costs purported to be incurred as a result of the State advertising contract. . . . The informant further related that records concerning the actual and true production costs incurred by Ad-Com International, Inc., were in the possession of Jerome M. Louchheim at the Raleigh offices of Louchheim, Eng and People, Inc. (Formerly CCI). . . . The informant further related based on personal knowledge and observation of the said records and invoices, that said records and invoices were never removed from the offices of Louchheim, Eng and People, Inc. and Jerome H. Louchheim, but were kept in those offices in compliance with the State advertising contract previously entered into with the State of North Carolina. The informant's last personal knowledge of and observation of the said records and invoices was during the month of March of 1975, at which time the said records and invoices were located under lock in the Raleigh offices of Louchheim, Eng and People, Inc. and Jerome H. Louchheim."

Disregarding the allegedly false information, the affidavit also stated that Judith Justice confirms the existence of two sets of Ad Com invoices based on her own observation during her employment at CCI.

We find that the above information was sufficient to establish probable cause for the magistrate to issue the search warrant. Two people had seen different sets of invoices at defendant's offices. Although it was fourteen months since either one had personally observed the invoices, that fact is not conclusive.

"The ultimate criterion in determining the degree of evaporation of probable cause, however, is not case law but reason. The likelihood that the evidence sought is still in place is a function not simply of watch and calendar but of variables that do not punch a clock: the character of the crime (chance encounter in the night or regenerating conspiracy?), of the criminal (nomadic or entrenched?), of the thing to be seized (perishable and easily transferable or of enduring utility to its holder?), of the place to be searched (mere criminal forum of convenience or secure operational base?), etc." Andresen v. Maryland, 24 Md.App. 128, 172, 331 A.2d 78, 106 (1975), cert. denied, 274 Md. 725 (1975), aff'd, 427 U.S. 463, 96 S. Ct. 2737, 49 L. Ed. 2d 627 (1976). See also United States v. Steeves, 525 F.2d 33 (8th Cir. 1975).

In this case, the alleged crime is a complex one taking place over a number of years. The place to be searched is an ongoing business. The affidavit further alleged that the invoices "were never removed from [defendant's] offices . . . but were kept in those offices in compliance with the State advertising contract."

Most important, the items to be seized included "corporate minutes, bank statements and checks, sales invoices and journals, ledgers, correspondence, contracts,. . . and other books and documents kept in the course of business by Louchheim, Eng and People and Capital Communications, Incorporated, of N.C. during all periods which said corporations were under contract to perform any advertising services [for] the State of North Carolina." Thus, the supposedly incompatible invoices that had been seen fourteen months earlier were not the only items to be seized during the search. All these materials could constitute evidence of defendant's alleged crime of obtaining property from the State by false pretense pursuant to the advertising contract.

We think there was a "substantial basis" for the magistrate to conclude that these business records were "probably" located at defendant's business offices on 25 May 1976 when the search warrant issued. "No more is required." Rugendorf v. United States, 376 U.S. 528, 533, 84 S. Ct. 825, 828, 11 L. Ed. 2d 887, 891 (1964). See also Andresen v. Maryland, 427 U.S. 463, 96 S. Ct. 2737, 49 L. Ed. 2d 627 (1976). Moreover, reviewing courts are to pay deference to judicial determinations of probable cause, Aguilar v. Texas, 378 U.S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723 (1964), and "the resolution of doubtful or marginal cases in this area should be largely determined by the preference to be accorded to warrants." United States v. Ventresca, supra at 109, 85 S. Ct. at 746, 13 L.Ed.2d at 689. This assignment of error is overruled.

The defendant claims the court improperly denied his motion to dismiss the indictments on the ground that venue was improper.

It is clear that when a defendant makes a motion to dismiss for improper venue in North Carolina, the burden is on the State to prove by a preponderance of the evidence that the offense occurred in the county named in the indictment. State v. Batdorf, 293 N.C. 486, 238 S.E.2d 497 (1977). In this case the indictment specified that venue lay in Wake County.

At the pretrial hearing on defendant's motion, the State introduced testimony that the defendant came to North Carolina when he received the State advertising contract. His place of business, CCI, was located in Raleigh, North Carolina, and vouchers were issued by the State to his Raleigh office pursuant to the contract. In addition, bills or invoices were submitted by the defendant on behalf of CCI to the North Carolina Department of Natural and Economic Resources, which we note is also located in Raleigh. The defendant offered no evidence. Thus, the State proved by a preponderance of the evidence that if the substantive charges of obtaining property by false pretense were committed, they occurred in Wake County.

"It is generally held that the venue in an indictment for conspiracy may be laid in the county where the agreement was entered into, or in any county in which an overt act was done by any of the conspirators in furtherance of their common design." State v. Davis, 203 N.C. 13, 25, 164 S.E. 737, 744 (1932), cert. denied, 287 U.S. 649, 53 S. Ct. 95, 77 L. Ed. 561 (1932). Again, the evidence recounted above is sufficient to prove that overt acts pursuant to the conspiracy were performed in Wake County; to wit: submission of allegedly false bills to the State from defendant's Raleigh business and receipt of the State vouchers by that office.

The defendant argues that at the motion hearing the State had the burden of proving a crime actually occurred in addition to proving where it allegedly took place. This contention is without merit. The issue of whether there is reason to believe a crime was committed is properly raised at the probable cause hearing and at trial, not at a pretrial hearing on a motion to dismiss for improper venue. At the motion hearing, the State has to prove merely that if a crime took place, it occurred in the county indicated in the indictment.

The State introduced the affidavit of Charles Randell Lassiter III over defendant's objection at the pretrial hearing. The defendant claims that this action constituted error in that the affidavit was inadmissible hearsay and violated defendant's Sixth Amendment right to confront the witnesses against him.

We need not decide whether the admission of that document was improper. As shown above, the oral testimony properly admitted at the hearing was sufficient to show that the alleged crimes were committed in Wake County. Therefore, the admission of the affidavit, if error, was nonprejudicial beyond a reasonable doubt. This assignment of error is overruled.

Defendant next assigns as error the fact that Donnie Wheeler testified before the jury regarding CCI's total overbillings to the State and used State's Exhibit Number 45 to illustrate his testimony. The defendant argues that this evidence was incompetent and inadmissible because it was based on the auditor's unfounded assumptions and on evidence not admitted at trial.

Before Mr. Wheeler testified, a voir dire was conducted, and he was found to be an expert in accounting and auditing. The trial court stated that his testimony was necessary for the understanding of both the court and the jury because of the complexity of the case.

Mr. Wheeler compared dollar amounts in certain invoices CCI sent the State for Ad Com work with corresponding invoice entries in State's Exhibit Number 24, a copy of a sheet in Ad Com's ledger. He pointed out specific discrepancies in the figures. Defendant raises no objection to that testimony to this Court.

The State auditor was then going to use State's Exhibit Number 45 to illustrate his testimony regarding the aggregate amount of CCI's overbilling to the State. That exhibit was a three-page chart prepared by Mr. Wheeler purporting to compare the total amount CCI billed the State for Ad Com work with the total amount CCI paid Ad Com for production work pursuant to the State contract. Another voir dire examination was conducted, and the court ruled that the testimony and use of the exhibit would be allowed.

In preparing State's Exhibit Number 45, Mr. Wheeler added all the checks from the State to CCI, which had been admitted into evidence at trial. He then added all the Ad Com invoices that were sent to CCI, which also had been introduced into evidence. The defendant had told Mr. Wheeler during the second audit of CCI that some of the Ad Com invoices included work done for CCI that was unrelated to the State contract. The auditor subtracted those amounts he concluded were unconnected to work done for North Carolina. Mr. Wheeler also deducted an amount totalling the monthly service charges between Ad Com and CCI for the period in question because the defendant had stated "that the $1,500 was a 5% agency service fee payable to Ad Com that was not in the bill to the State." The auditor also subtracted postage because he determined that it was not part of production costs. Defendant's objection is partly based on the fact that the auditor made these deductions. This argument is without merit.

An auditor is defined as "[a]n officer who examines accounts and verifies the accuracy of the statements therein;" an audit is "[a]n official examination of an account or claim, comparing vouchers, charges, and fixing the balance." BLACK'S LAW DICTIONARY 166-67 (Rev. 4th ed. 1968). An expert conducting an audit must regularly make the very types of conclusions of which defendant now complains. Determining whether a particular charge falls within a specific account is certainly within an auditor's area of expertise.

Apparently the defendant claims that because Mr. Wheeler did not actually know whether certain Ad Com charges were unrelated to the State contract or whether postage was not properly included in production costs, his testimony was incompetent. On the contrary, these determinations logically stemmed from Mr. Wheeler's expertise and experience in auditing and accounting and from his own personal examinations of the documents. If some of his deductions were erroneous, the defendant had the opportunity to and actually did bring this fact to the attention of the jury during cross examination of Mr. Wheeler and during direct examination of his own witnesses.

Before Mr. Wheeler testified to these matters, the trial judge properly instructed the jury that State's Exhibit Number 45 was not direct evidence. He stated that it is "received solely for the limited purpose of illustrating and explaining the testimony of the witness and it is for you alone to say whether it does so." Furthermore, although the jury asked for and was given the exhibits to consult during its deliberation, with the consent of the State and defendant, State's Exhibit Number 45 was not included among them.

Defendant claims that the chart was overly prejudicial in that it "invited the jurors to disregard the assumptions made by the witness and concentrate on the bottom line figure." This assertion is belied by the fact that the jurors, instead of blindly accepting the total amount stated in the exhibit, returned verdicts of guilty in four of the substantive charges and not guilty in three of them.

The defendant further objects that Mr. Wheeler based at least part of his testimony and State's Exhibit Number 45 on hearsay. This claim is controverted by the record.

It is well settled that an expert can base his opinion on his own personal knowledge and observations, or on evidence introduced at trial presented to the expert through a hypothetical question, or both. See, e. g., State v. Holton, 284 N.C. 391, 200 S.E.2d 612 (1973). Mr. Wheeler admitted using several documents not in evidence to reach his conclusion as to CCI's total overbillings. The record indicates, however, that these materials were personally viewed and considered by him in his expert capacity. He testified to their existence and where he got them, to what they contained, and to how they were used in preparing State's Exhibit Number 45. "Since it is the jury's province to find the facts, the data upon which an expert witness bases his opinion must be presented to the jury in accordance with established rules of evidence." Todd v. Watts, 269 N.C. 417, 420, 152 S.E.2d 448, 451 (1967). Mr. Wheeler's oral testimony was sufficient in this respect. This assignment of error is overruled.

The defendant next contends the trial court erred in denying his motion as of nonsuit as to all the crimes with which he was charged. We do not agree.

In ruling on a motion as of nonsuit, it is beyond dispute that the evidence is to be considered in the light most favorable to the State, and the State is allowed every reasonable inference therefrom. State v. Bell, 285 N.C. 746, 208 S.E.2d 506 (1974).

"A motion for nonsuit of a charge of obtaining property by false pretense must be denied if there is evidence which, if believed, would establish or from which the jury could reasonably infer that the defendant (1) obtained value from another without compensation, (2) by a false representation . . ., (3) which was calculated and intended to deceive and (4) did in fact deceive." State v. Agnew, 294 N.C. 382, 387-88, 241 S.E.2d 684, 688 (1978), cert. denied, ___ U.S. ___, 99 S. Ct. 107, 58 L. Ed. 2d 124 (1978).

The defendant claims the State failed to meet its burden of proving in both the conspiracy charge and in the substantive ones that there was a false representation. He argues there was no competent evidence introduced at trial that the bills CCI submitted to the State did not represent true production costs. This argument is without merit.

Under the State advertising contract, CCI was to be paid for production work purchased from outside sources "for actual amounts paid by the agency or in accordance with the prevailing rate for this type of work, whichever is lower." State's Exhibit Number 24 was admitted into evidence and identified by Toni Brennan as a copy of one of Ad Com's ledger sheets. She testified that in preparing the first set or "true" Ad Com invoices, she would assemble the invoices from other companies and give the compilation to Mr. Eng. He would then make up a bill, and she would type the invoice and enter the invoice number and amount in Ad Com's ledger. Thus, although the entries in State's Exhibit Number 24 cannot be used to show the true costs to the third party producers who actually performed the work, they can be used to show the amount CCI had to pay Ad Com for that work. Those figures were different from the corresponding amounts CCI billed North Carolina. Therefore, there was sufficient evidence from which a jury could reasonably infer that false representations were made.

The defendant claims the State did not show that the defendant personally committed any crime because the allegedly false representations were made by CCI in its corporate capacity. This contention likewise is without merit.

The indictments charged and the trial judge properly instructed the jury that CCI was alleged to be the alter ego of the defendant. The evidence at trial showed that the defendant owned seventy-five percent of the stock of CCI; the other twenty-five percent was held in a blind trust for Stephen Crouch. The defendant was at all times the president and managing officer of the advertising company. There was testimony that the defendant was the person who ordered the inflated Ad Com invoices typed from State bills, and he and Mr. Eng decided to "milk" the State contract. The record is replete with evidence that CCI was run according to defendant's wishes.

"[W]hen, as here, the corporation is so operated that it is a mere instrumentality or alter ego of the sole or dominant shareholder and a shield for his activities in violation of the declared public policy or statute of the State, the corporate entity will be disregarded and the corporation and the shareholder treated as one and the same person." Henderson v. Security Mortgage and Finance Co., 273 N.C. 253, 260, 160 S.E.2d 39, 44 (1968). See also State v. Salisbury Ice and Fuel Co., 166 N.C. 366, 81 S.E. 737 (1914).

This assignment of error is overruled.

For the foregoing reasons, the defendant had a trial free from prejudicial error. The decision of the Court of Appeals is

AFFIRMED.

BRITT and BROCK, JJ., did not participate in the consideration or decision of this case.