## Facts

- Senior officers of Cenco, Inc. and its subsidiary, Cenco Medical Health Supply Corp. (CMH), were charged with a multi-year plan (about 1970–1975) to overstate CMH’s year-end inventory and profits.
- Branch inventory counts were recorded on computer cards and sent to CMH’s Chicago office, where inventory quantities were increased and related computer listings were altered before being provided to auditors.
- The reported inventory was inflated by millions of dollars annually, with prior years’ inflation carried forward; estimated total overstatement ranged from roughly $20–$25 million.
- The scheme also included accounting practices that accelerated revenue recognition and deferred expenses, and the use of “bogus inventory” assembled through an outside packaging firm, with evidence of kickbacks to some participants.
- The defendants were indicted in the Northern District of Illinois for conspiracy, mail fraud, and securities fraud, and were convicted after trial.

## Issues

1. Whether the proof at trial established the single conspiracy charged, or instead multiple separate conspiracies producing a prejudicial variance.
2. Whether the conspiracy prosecution of one defendant (Spiegel) was barred by the statute of limitations due to withdrawal, and whether the jury was improperly instructed on which party bore the burden of proof on withdrawal.
3. Whether the evidence was sufficient to sustain the conspiracy and substantive mail-fraud and securities-fraud convictions.

## Decision

- The court held the evidence supported a single, continuing conspiracy to manipulate CMH’s financial statements and deceive auditors and investors.
- The convictions of Read and Swiger were affirmed on all counts.
- Spiegel’s convictions on the substantive mail-fraud and securities-fraud counts were affirmed.
- Spiegel’s conspiracy conviction was reversed and remanded for a new trial because the withdrawal/statute-of-limitations instruction improperly placed the burden of proving withdrawal on the defendant.

## Legal Principles

- A complex, multi-year financial fraud may be treated as a single conspiracy when the proof shows a common objective, continuity, overlapping participants, and interdependent acts, even if methods vary over time.
- Withdrawal from a conspiracy ends liability for future conspiratorial acts but does not erase liability for the prior agreement and prior acts committed in furtherance of the conspiracy.
- When the statute of limitations is properly raised in a conspiracy case, the government must prove beyond a reasonable doubt the defendant’s participation (or continued membership) within the limitations period; jury instructions that shift the burden of persuasion on withdrawal to the defendant can require reversal.

## Conclusion

The Seventh Circuit largely upheld convictions arising from an inventory-inflation and accounting-fraud scheme, finding a single overarching conspiracy and sufficient evidence on substantive counts, but ordered a new trial on one defendant’s conspiracy charge because the jury was instructed to place the burden of proving withdrawal (for limitations purposes) on the defendant rather than the government.


United States v. Read, 658 F.2d 1225 (7th Cir. 1981)