## F I L E D United States Court of Appeals Tenth Circuit 

### JUN 30 1997 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

UNITED STATES OF AMERICA, Plainiff-Appellant,

v. TRACY PROWS, Defendant-Appellee. No. 95-4163

Appeal from the United States District Court for the District of Utah, Central Division

(D.C. No. 95-CV-388J) (No. 91-CR-49J)

Richard D. McKelvie, Assistant United States Attorn ey, Salt Lake City, Utah (Scott M. Matheson, Jr., United States Attorney, Sa lt Lake City, Utah, with him on the brief), for Plaintiff-Appellant. Craig S. Cook, Salt Lake City, Utah, for Defendant- Appellee.

Before TACHA, BALDOCKand EBEL , Circuit Judges.

EBEL , Circuit Judge.

Tracy Prows was convicted of mail fraud and wire fr aud for his role in a scheme to obtain software from WordPerfect at disco unted prices by1 United States v. Prows , 51 F.3d 287, 1995 WL 143433 (Table) (10th Cir.

1995) (unpub.). - 2 - misrepresenting the identity of the purchaser. Aft er an unsuccessful appeal, 1 Prows collaterally attacked his conviction under 28 U.S.C. § 2255, claiming that he had received ineffective assistance of counsel. The district court agreed and vacated the judgment. However, the district court misconstrued what is required for a conviction under the mail fraud and wire frau d statutes, 28 U.S.C. §§ 3141, 3143, and as a result misapplied the prejudice pron g of the Stricklandtest. Under a correct construction of those statutes, we find t hat Prows was not prejudiced by his counsel's performance. Therefore, we reverse. Background Petitioner-Appellee Tracy Prows was the owner of Co mputerland of Ogden, a retail computer store in Utah. In mid-May of 198 8, he was approached by James Baker who wanted to buy large quantities of W ordPerfect software at a discount and resell them. Prows was an authorized WordPerfect dealer. He told Baker that discount prices were available when the software was purchased under a site license. A site license is an agreement whereby WordPerfect sells a large number of programs at a discount to a buyer who agrees that t he programs will be exclusively for its own use and will not be resold. The discounts available under- 3 -

a site license are substantial. For example, at a time when the lowest wholesale price available to a WordPerfect dealer was $198 pe r unit of software, the same programs could be purchased under a site license fo r $100 per unit. A dealer who refers a site license customer to WordPerfect recei ves a 20% commission on each unit sold under the license. After speaking with Baker, Prows contacted a sales representative at WordPerfect and indicated that he had a customer, E .R.A. Realty, who was interested in obtaining a site license to purchase 5,000 units of software. At about the same time, Baker and another computer sal es representative, Richard Hirsch, contacted buyers in the retail and wholesal e trade, offering large blocks of WordPerfect for $145 a copy. One of the wholesaler s contacted was Softsell Company in Englewood, California. When Mark Wong, purchasing manager for Softsell, wa s approached, he became concerned that lower prices were available o n the market than directly from WordPerfect. Wong contacted Clive Winn, a vic e-president of WordPerfect, about the price discounting. Winn, in turn, began an internal investigation at WordPerfect. He initially suspected that a shipmen t of software had been stolen or that the merchandise was counterfeit. However, during the investigation, the E.R.A. Realty site license caught his attention bec ause it was for the same quantity of software that had been offered to Softs ell.- 4 -

Winn, a former Federal Bureau of Investigation (FBI ) agent, contacted local FBI agents and together they set up a sting. As a first step, they asked Softsell to increase its order to confirm that the source was the site license obtained by Prows. Wong contacted Baker and increa sed Softsell's order. Thereafter, WordPerfect received an order for 11,00 0 units to be purchased under the site license. The order indicated that the cus tomer was National Insurance Services Company (NISC), rather than E.R.A. Realty. When a WordPerfect employee asked Prows who NISC was, Prows said that the company was an affiliate of E.R.A. NISC was a fictitious entity created by Baker solel y for the purpose of entering into the site license. Baker assumed the name of Tom Wohlschlaeger (the name of his deceased father-in-law) as the pur chasing agent for NISC. He asked Colorado resident David Morrissey for help infurthering the scheme. Morrissey agreed to allow his Colorado phone numberand address to be listed as the business phone number and address of NISC. He also agreed to answer the phone in a manner that would lead a caller to belie ve that he or she had reached the offices of NISC. When a call came in from Word Perfect for Tom Wohlschlaeger, Morrissey would take a message and f orward it to Baker. Using his word processor, Baker created a purchase order on NISC letterhead, authorizing the purchase of 11,000 unit s of WordPerfect software.- 5 -

After receiving the order, WordPerfect mailed a sit e license to Prows. Baker signed the license as Tom Wohlschlaeger, purchasing agent for NISC. The license was then returned to WordPerfect. On June 17, 1988, WordPerfect made a partial delive ry of software to Prows at a loading dock in Ogden, Utah. Baker and Prows met the shipment. Winn and FBI agent John Nelson also were at the loa ding dock, posing as representatives of a trucking company that was to t ransfer the shipment to Softsell. Prows instructed Nelson and Winn that W ordPerfect could not know about the reshipment to Softsell. As payment for the software, Winn gave Prows a chec k for $870,000, purportedly from Softsell. The check, which had be en manufactured by the FBI, was made out to Computerland. After Prows accepted the check, several more FBI agents appeared. Prows and Baker were subsequ ently questioned by the FBI.

A Grand Jury returned an indictment against Baker, Prows, and Morrissey, charging mail fraud, wire fraud, and aiding and abe tting, pursuant to 18 U.S.C. §§ 1341, 1343, and 2. Baker pled guilty to all counts of the indictment and agreed to testify against Prows and Morrissey at the trial.- 6 -

The Trial The government's theory at trial was that Prows kne w of the scheme to defraud and that he intended by his actions to furt her the scheme. The case was supported by the testimony of numerous witnesses, and in some cases, by Prows' own testimony. Prows, on the other hand, maintaine d that he believed that NISC was a real company, although he admitted that he kn ew that some of the computer software ordered under the site license would be so ld to companies other than NISC. He also testified that he did not intend to defraud WordPerfect and that "sideways deals" were common in the computer industry. The Prosecution's Case Baker's testimony supported the government's theorythat he and Prows planned the scheme together. Baker testified that Prows knew all of the following: that Richard Hirsch was soliciting buye rs for the computers; that Baker was paying someone $10,000 to answer a phone in Denver as if it were the office of an insurance company; and that Baker had signed the NISC purchase order. Baker testified that it was Prows who arran ged with WordPerfect to ship the goods to Computerland so that they could be res hipped to other buyers. He also testified that the profits from the venture, i ncluding profits from the resale of the computers and the commission from the site lice nse, were to be divided between himself and Prows.- 7 -

FBI agent John Nelson testified that during questio ning Prows admitted: that he had realized that NISC was a nonexistent co mpany and that Wohlschlaeger was not a real person; that Baker had made phone c alls from Prows' office to find buyers for the software; that profits from the sche me were to be split three ways among Baker, Prows, and Hirsch. Nelson also testif ied that at the loading dock, when he handed Prows the check purportedly from Sof tsell, Prows said that WordPerfect could not know anything about the sale. He said that Prows' reaction to receiving the check was to remark that it was to o large. WordPerfect Vice President Winn testified that he h ad told Prows that he had spoken to Tom Wohlschlaeger who had confirmed the NISC order, and that Prows then requested that WordPerfect ship the software to Computerland for delivery to NISC's insurance agents around the country. Like Agent Nelson, Winn testified that Prows commented that the check from Softsell was in the wrong amount and that WordPerfect could not know anything about the check. Karen Fossum-Zumkowski, a marketing assistant at Wo rdPerfect, testified that Prows contacted her about arranging a site lic ense under which E.R.A. Realty would purchase 5,000 units of WordPerfect software. She said that Prows arranged for the software to be sent to Computerlan d for redistribution to E.R.A. Zumkowski testified that she told Prows that she co uld not ship the product to Computerland without authorization on company lette rhead from the customer.- 8 -

The next day she received a purchase order on NISC letterhead for 11,000 units, authorizing delivery to Computerland. Zumkowski te lephoned Prows to ask about the increase in the number of units and the change in buyer from E.R.A. to NISC. She said that Prows told her that NISC was an affil iate of E.R.A. Realty. According to Zumkowski, Prows urged her to send the site license agreement immediately because the customer would be vacationi ng in Utah and would be available to sign it. Zumkowski mailed the license to Prows by overnight mail. It was returned to WordPerfect by Prows' sister, signe d by Tom Wohlschlaeger for
NISC. The Defense Case Prows testified in his own defense that his role inthe transaction was simply to send WordPerfect a site license referral for NISC, which he believed was a real company because it was represented as su ch to him by Baker. He testified that he relied on WordPerfect to do a bac kground check on NISC because the site license ultimately was between NIS C and WordPerfect. He admitted knowing that Richard Hirsch was arranging to sell part of the software shipment. However, he said he did not think much o f the resale because "sideways deals" were common in the computer industry. Prows testified that when he asked Baker about the diversion of software to other buyers, Baker said that certain units were going to car dealers, which were subsidiaries of NISC.- 9 -

Prows testified that he thought that was a "good st ory" and he repeated it to WordPerfect. On direct examination, Prows testified that he did not arrange to have the product delivered to him, and that he was surprised when it arrived. He also said that he had not expected a check from Softsell. Ho wever, on cross examination, Prows admitted that he had requested that the produ ct be delivered to him. He also admitted that he knew that Baker was using the false name Wohlschlaeger and that he had told Winn that he did not want Word Perfect to find out about the check from Softsell. Prows' sister, Annette P. Snelgrove, testified thatshe hand-delivered the site license from Prows to Baker, waited for Baker to sign it, and then returned it to WordPerfect. Although the indictment charged Prows as both a pri ncipal and an aider and abetter in the scheme, the government abandoned the charge of aiding and abetting against Prows at the time of the jury inst ruction conference. The jury convicted Prows on one count of mail fraud and thre e counts of wire fraud. After this Court rejected his direct appeal, Prows brought a habeas action pursuant to 21 U.S.C. § 2255, claiming ineffective assistance of counsel.- 10 -

Ineffective Assistance of Counsel Claim At the trial, Prows was represented by attorney Edw in Guyon. Prows' claim of ineffective assistance focuses on Guyon's failur e: (1) to interview James Baker, a key witness in the prosecution's case; (2) to in terview or call as a witness John P. Sampson, a civil attorney who had previously rep resented Prows and who had earlier interviewed Baker; (3) to obtain or offer W ordPerfect records at the trial or to call WordPerfect employees as witnesses; and (4) generally to investigate the allegations, to interview witnesses, and to pre pare for trial. The district court held a hearing on the claim. Atthe hearing, John Sampson testified that he is an attorney in Ogden, Utah, and that he represented Prows on certain civil matters in 1988, during the time that the FBI interrogated Prows. Sampson testified that he had spoken to Ba ker several times after the FBI began their inquiry and that Baker assured him thatProws "did not have a part in organizing any scheme or the company that was going to take the ultimate distribution of these programs, that that was total ly his doings, and that he had asked [Prows] to get him a site license, as far as it was to get them transferred." Sampson also testified that Baker said that Prows d id not know the software was going to be distributed to other places. Prows testified at the hearing that he had told his criminal attorney Edwin Guyon about the conversations Sampson had with Bake r. He claimed that he- 11 -

urged Guyon to contact Sampson. Prows testified fu rther that his only meetings with Guyon prior to trial were a two-hour initial m eeting and a brief conversation before the arraignment. He said that Guyon did notprepare him for trial. He testified that he did not learn when the trial was to take place until a day before the trial was to begin. In fact, the trial was pos tponed for a day to allow him to return from California, where he was operating anot her business. Guyon also testified at the hearing. He explained that he had contacted Baker's attorney who said that Baker would not volu ntarily speak with him. He also said that he thought Baker would be a weak wit ness whose credibility could be attacked because, although he had pled guilty, h e had not yet been sentenced. Guyon testified that he had not interviewed anyone at WordPerfect because he believed that he could make his case with statement s taken from WordPerfect employees by the FBI. Guyon admitted that he hadn' t contacted Sampson in preparation for the trial and that he hadn't inform ed Prows of the trial date until the day before the trial was to begin. The district court granted Prows' motion to vacate the judgment pursuant to 28 U.S.C. § 2255. The court found that Guyon's fai lure to interview or call Sampson as a witness to impeach Baker's testimony f ell below the standard of conduct for a reasonable attorney. Further, the co urt found that because Baker2 "[B]oth the performance and prejudice components of the ineffectiveness inquiry are mixed questions of law and fact," Stric kland v. Washington , 466 U.S. 668, 698 (1984), that we review de novo. United St ates v. Haddock , 12 F.3d 950, 955 (10th Cir. 1994). However, we accept the factual findings of the district court unless they are clearly erroneous. Brewer v. Reyno lds , 51 F.3d 1519, 1523 (10th Cir. 1995), cert denied, 116 S. Ct. 936 (1996). - 12 - was the only witness who identified Prows as an arc hitect of the scheme, the failure to impeach Baker prejudiced Prows. The go vernment now appeals.

ANALYSIS Whether a defendant received effective assistance o f counsel is a mixed question of law and fact that we review de novo. S elsor v. Kaiser , 81 F.3d 1492, 1497 (10th Cir. 1996). 2 To prevail on a claim of ineffective assistance o f counsel, a convicted defendant "must show that counsel's rep resentation fell below an objective standard of reasonableness," Strickland v . Washington , 466 U.S. 668, 688 (1984), and that the deficient performance prej udiced the defendant. Id. at 687. To establish prejudice, the defendant "must s how that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." Id. at 694. The district court rejected most of Prows' content ions regarding the performance of counsel, finding that overall Guyon' s representation of Prows3 Prows does not raise the correctness of these rulin gs on appeal. Thus, we

decline to address them. - 13 - "evidenced professional competence." 3 D.Ct. Order at 24. However, the court did find counsel's performance deficient in one "ve ry precise--and narrow" respect: that Guyon failed to investigate whether J ohn Sampson should be called as a witness to rebut Baker's testimony at trial. Id . at 25. The court held that the failure was prejudicial because Baker's testimony w as the only evidence that directly implicated Prows as an architect of the sc heme. "Baker's testimony--and only Baker's testimony--directly inculpated Prows i n the formation of the alleged scheme or artifice to defraud." Id . at 18. The district court emphasized that [w]hile Baker's testimony concerning Prows' overall knowledge of the alleged nature of the transaction with WordPerf ect was not by any means the only evidence upon which a reasonable juror could base a finding of guilt, as to the crucial facts be aring upon whether Prows had "devised. . . any scheme or artifice to defraud, or for obtaining money or property by means of false or fr audulent pretenses, representations, or promises," Baker's t estimony largely stands alone. That the Government's case against P rows was submitted to the jury withouta theory of aiding and abetting only amplifies the importance of Baker's testimony that, as the Government argued, "he and Mr. Prows together desig ned this scheme from the outset." D.Ct. Order at 22 (emphasis in original). The district court held that to find Prows guilty o f mail fraud or wire fraud the jury would have had to find beyond a reasonable doubt that "Prows 'devised or intend[ed] to devise a scheme or artifice,' not mer ely that Baker had devised such- 14 -

a scheme and that Prows knowingly lent assistance o f some kind to Baker." D.Ct. Order at 13 (emphasis in original). In fact, the c ourt stated that "proof that Prows lent Baker substantial assistance--even knowing assistance--in furthering Baker's scheme to obtain WordPerfect products under the nam e of National Insurance Service Company, and on terms otherwise unavailable to him as an individual, cannot suffice." Id . at 26-27 (emphasis in original). Based on this v iew of the case, the court found that Guyon's failure to inves tigate calling Sampson as a witness to impeach Baker prejudiced Prows because h ad Sampson testified there was a reasonable probability that the outcome of th e trial would have been different. The court's premise--that to convict Pr ows under the mail and wire fraud statutes it was necessary to prove that he al one or with Baker initially devised the scheme--was incorrect. Although both the mail fraud and the wire fraud statutes, 18 U.S.C. §§ 1341, 1343, contain th e language "whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtainin g money or property by means of false or fraudulent p retenses . . . ", (emphasis added) under well-established Tenth Circuit precede nt a defendant may be convicted under either statute if the government sh ows that the defendant joined a scheme devised by someone else, as long as the defe ndant possessed the intent to defraud. United States v. Wright , 826 F.2d 938, 947 (10th Cir. 1987) (affirming conviction for wire fraud based on "participation i n [a] fraudulent scheme");- 15 -

United States v. Gamble , 737 F.2d 853, 856 (10th Cir. 1984) (mail fraud); United States v. Washita Constr. Co. , 789 F.2d 809, 817 (10th Cir. 1986) (mail fraud); United States v. Gann , 718 F.2d 1502, 1505 (10th Cir. 1983) ("A defendant may be convicted of mail fraud if he knowingly and will fully participates in a fraudulent scheme created and set in motion by othe rs."); Hofmann v. United
States , 353 F.2d 188, 191 (10th Cir. 1965) (conviction fo r mail fraud does not require proof that defendant originated a scheme to defraud but only "knowing participation by the defendant in a scheme to defra ud"). See also United States v. Earles , 955 F.2d 1175, 1177 (8th Cir. 1992) ("One who kno wingly participates in an ongoing mail fraud devised by another is guilty of mail fraud."); United States
v. Sturm , 671 F.2d 749, 751 (3rd Cir. 1982) (intent to comm it mail fraud "may be shown by evidence that the defendant devised the sc heme or participated in it with knowledge of its fraudulent nature") (internal citations and punctuation omitted). Furthermore, a scheme to defraud under 1 8 U.S.C. § 1341 may be shown by a defendant's reckless indifference to the truth of representations. United States v. Reddeck , 22 F.3d 1504, 1507 (10th Cir. 1994) (internal quotations omitted). As the authors of a recent s urvey of criminal law explain in connection with the intent requirement of mail and wire fraud, [b]ecause intent involves the defendant's state of mind, and is difficult to prove directly, it is usually proven b y circumstantial evidence. A variety of circumstantial evidence has been held relevant to infer fraudulent intent. Intent may be inferred from- 16 -

evidence that the defendant attempted to conceal ac tivity. Intent to defraud may be inferred from the defendant's misrep resentations, knowledge of a false statement as well as whether t he defendant profited or converted money to his own use.
Kathleen Flavin & Kathleen Corrigan, Eleventh Surve y of White Collar Crime: Mail Fraud and Wire Fraud , 33 Am. Crim. L. Rev. 861, 869-70 (1996) (citations and internal punctuation omitted). In this case, the government introduced abundant ev idence, apart from Baker's testimony, of Prows' intent to defraud. Th ere was evidence that Prows made statements to WordPerfect knowing them to be f alse or, at the very least, without regard to their truthfulness. FBI agent J ohn Nelson testified that Prows admitted knowing that NISC was a nonexistent company and that Tom Wohlschlaeger was a nonexistent person. According to WordPerfect Vice President Winn, Prows requested that the software b e shipped to Computerland for reshipment to NISC's insurance agents around th e country. Karen FossumZumkowski, a marketing assistant at WordPerfect, te stified that Prows told her that NISC was an affiliate of E.R.A. Realty. Prows himself admitted that he told WordPerfect a "story" about the diversion of software. The government introduced evidence that Prows attempted to conceal his activities. Nelson and Winn testified--and Prows a dmitted--that Prows told them not to tell WordPerfect about the resale of the sof tware to Softsell or of the- 17 -

existence of the check from Softsell. There was ev idence that Prows knew that Baker was misrepresenting himself to WordPerfect. Nelson testified that Prows admitted that Baker had made phone calls from Prows ' office to find buyers for the software. Prows admitted knowing that Baker wa s using the fictitious name Wohlschlaeger to sign NISC documents. Finally, evi dence showed that Prows would have profited from a successful scheme. Nels on testified that Prows said that he would have received perhaps one-third of th e profits from the scheme. Even if Sampson had been called as a witness and ha d discredited Baker's testimony, Prows has not established that there is a reasonable probability that the outcome of the criminal trial against him would hav e been different. There was still overwhelming evidence from other witnesses, i ncluding Prows himself, to establish Prows' guilt. See Nickel v. Hannigan , 97 F.3d 403, 408-09 (10th Cir. 1996) (attorney's failure to suppress testimony of one witness not prejudicial under Stricklandwhere other witnesses' testimony was sufficient to establish government's case), cert. denied , 117 S. Ct. 1112 (1997); United States v. Haddock , 12 F.3d 950, 956-57 (10th Cir. 1993) (failure to investigate rebuttal testimony not prejudicial under Stricklandwhere conviction was supported by testimony from other witnesses). Thus, we cannot f ind that Prows was prejudiced by his counsel's failure to interview or call Samps on. Because Prows has failed to demonstrate that he was prejudiced by his counsel's performance, we need not- 18 -

decide whether such performance fell below the stan dard for a reasonable attorney. See Strickland , 466 U.S. at 697; Davis v. Executive Dir. , 100 F.3d 750, 760 (10th Cir. 1996), cert. denied, 117 S. Ct. 1703 (1997). For the reasons set out above, we REVERSE the distr ict court's grant of Prows' petition on the grounds of ineffective assis tance of counsel.