## United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 97-2486

___________ United States of America, * * Appellee, * * v. * * * Vince Kelley, * * Appellant. *

____________ Appeals from the United States No. 97-2487 District Court for the

____________ Eastern District of Missouri United States of America, * * Appellee, * * v. * * Jan Kelley, * * Appellant. *The Honorable Richard S. Arnold stepped down as Chief Judge of the 1 United States Court of Appeals for the Eighth Circuit at the close of business on April 17, 1998. He has been succeeded by the Honorable Pasco M. Bowman. The Honorable Catherine D. Perry, United States District Judge for the Eastern 2 District of Missouri. -2- ____________ No. 97-2488

____________ United States of America, * * Appellee, * * v. * * Pavco Co., * * Appellant. *

___________ Submitted: November 18, 1997 Filed: August 14, 1998

___________ Before RICHARD S. ARNOLD, Chief Judge, and McMILLIAN and MAGILL, 1 Circuit Judge.

___________ McMILLIAN, Circuit Judge. Vince Kelley, Jan Kelley, and PAVCO Co. ap peal from final judgments entered in the United States District Court for the Eastern District of Missouri upon a jury 2-3-

verdict finding ap

pellants guilty of 5 counts of mail fraud. For reversal, appellants contend that the district court erred in (1) failing to hold an evidentiary hearing on and denying their motions to dismiss the indictment because of selective or vindictive pr osecution, (2) denying their motions for judgment of acquittal on the mail fraud counts because of the insufficiency of the evidence , and (3) refusing to withdraw the evidence related to the

dismissed counts and to instruct the jury not to consider that eviden ce in its deliberations on the mail fraud counts. For the reasons discusse d below, we affirm the judgments of the district court.
JURISDICTION
Jurisd iction in the district court is based upon 18 U.S.C. § 3231 and in thi s cour t upon 28 U.S.C. § 1291. The appeals were timely filed pursuant to Fed. R

. App. P. 4(b).
BACKGROUND FACTS
This cas e involved a scheme to obtain money in which appellants falsel y re presented that their employees were union members entitled to union scale wages , union dues and other benefits when in fact only a small number of such empl oyees were union members. Appellants pock eted the difference (which amounted to thousands of dollars) and did not pass on the moneys to the union or the employees.
In 19 84 or 1985 Clyde “Nip” Kelley, who is Vince Kelley’s father, decided to begin a new construction company in Cape Girardeau, Missouri. According to th e gove rnment’s theory of the case, Nip Kelley had two problems-- he wanted the ne w company to be eligible to bid on contracts as a special category cont ractor, even though he was not a member of a special category, and he wanted the new company to be a non-union employer, even though he was contractually obligated to operate as a union-4-

employer. In order to circumvent these problems, Nip Kelley enlisted the aid of his son and his son’s wife, Vince Kelley and Jan Kelley. Nip Kelley in essence asked Vince and Jan Kelley to “front” for him and run the new company (PAVCO).
PAVCO bid on contracts as a special category contractor and hired mostl y non-union

employees. One of the contracts was the Procter & Gamble plant i n Neely s Landing, Missouri; Fru-Con Construction Co. (Fru-Con) was the genera l contractor. Fru-Con hired PAVCO as one of its subcontracto rs. The subcontractors signed 2-year contracts. PAVCO bid on and was awarded three 2-year contracts for 1991-1993, 1993-1995 and 1995-19 97. Vince Kelley prepared the bid package and submi tted it to Fru-Con. The Craftsmen Independent Union (union) prepared a n “affiliation letter” to notify Fru-Con and other contractors which subcontractor s were affiliated with the union. According to the government’s theory of the case, in th e construction industry, “affiliation” means that all of the employees of th e subc ontractor are members of the union with which the subcontractor claime d a f filiation. PAVCO represented to the union that it was “affiliated” and the union so informed Fru-Con (and others).
Fru-Con required its subcontractors to complete time and material form s showing t heir employees’ base rate of pay, their union affiliation, if any, and th e requ ired union dues and benefits payments. Vince Kelley filled in these form s showing the union base rate of pa y, union dues and union benefits. However, most of the PAVCO employees were not union members. The forms thus misrepresented the union status of PAVCO employees and caused Fru-Con to believe erroneously that PAVCO w

as affiliated with the union. Fru-Con relied on the bid packag e informati on

in reviewing and awarding contracts and as a basis for payin g su bcontractors’ employees. In other words, on the basis of the informatio n submitted by PAVCO in its bid package, including the time and material forms,-5-

PA VCO was over-billing Fru-Con because Fru-Con paid PAVCO employees th e union base pay rate, union dues and un ion benefits. Fru-Con could have contracted with non-union companies and would have paid non-union rates.
Vince Kelley and Jan Kelley prepared and mailed “subcontract receip t affidavits and lien waivers” with billing statements to Fru-Con. Most of thes e documents were prepared and mailed to F ru-Con by Jan Kelley. Fru-Con reviewed them and paid PAVCO on the basis of these document s. As noted, these documents sho wed PAVCO employees as union employees and requested payment for thei r labor as union employees. Jan Kelley knew that the docume nts represented PAVCO empl oyees

as union employees even though she also knew that few PAVC O employees

were in fact union employees and thus were not entitled to union wage rates, union dues or union benefits.
As a result of this

scheme, Fru-Con overpaid appellants $38,879.60 in union dues and union benefits payments for the 1991-1993 contract. According to th e government’s theory of the case, appellants did not forward these funds to the union or to PAVCO employees but instead simply kept them. The same thing happened with respect to the 1993-1995 (total of $87,570.83 in overpayments) and 1995-1997 contracts. Fru-Con discovered the inconsistencies in the 1995-1997 bid package and requested clarification from Vince Kelley. Vince Kelley sent Fru-Con document s which sh owed that PAVCO was not “affiliated” with the union and that PAVC O employees were non-union but had been paid union wage rates and benefits

. Fru-Con stopped contracting with PAVCO. Ironically, during thes

e years, Vince Kelley was a trustee of the union health and welfare fund. In addition, several PAVCO employees had asked Vince Kelley about health insurance and he told them that there was no health insurance, even-6-

though Fr u-Con had paid PAVCO more than $83,000 for benefits including health insurance. This case began as an investigation by the United States Department of Labor of alleged union misconduct. Government agents discovered the PAVCO scheme and suspected union officials might be involved. During this period, Fred Kelley, wh o is Nip Kelley’s brother and Vince Kelley’s uncle, was the head of the union

. Government

agents met with Vince Kelley and his attorney and sought Vinc e Kell ey’s cooperation in the investigation of the union. Vince Kelley essentiall y denied he knew anything and refused to cooperate. After further investigation, labor investigat

ors met with Vince Kelley and his attorney a second time. Governmen t age nts outlined their case and proposed that, in return for his cooperation, Vinc e Ke lley could plead guilty and his wife would not be charged. Vince Kelley agai n denied any knowledge and refused to cooperate.
In August 1996 a federal grand jury charged Vince Kelley, Jan Kelley an d PAVCO with mail fraud, making false statements and concealing facts in report s required to be kept under Title I of the Employee Retirement Income Security Act of 1974 (ERISA), and embezzlement of union assets. Counts I through V alleged that each ap pellant committed mail fraud in violation of 18 U.S.C. § 1341; Counts V I through X alleged that each a ppellant made false statements in documents required by ERISA in viol ation of 18 U.S.C. § 1027; and Counts XI through XVI alleged tha t Vince Kelley embezzled union as sets in violation of 18 U.S.C. § 664. The day before trial was scheduled to begin, appellants filed motions to dismiss the indictment alleging selective and vindictive prosecution and requested an evidentiary hearing. The basis for the motio ns was the discovery of Painters & Allied Trades Local Union No. 1292
v. Lo yd Slinkard Painting Co. , No. 1:96CV57 LMB (E.D. Mo.) ( Slinkard ), a civi l ERISA action filed against a contractor by a union to collect union dues and benefits payments allegedly due under a collective bargaining agreement. The district court-7-

denied the motions to dismiss and for an evidentiary hearing.
Th e case was tried to a jury. At the close of the case, the district cour t granted judgment of acquittal in favor of all appel lants on the ERISA false statement counts (V I-X) and in favor of Vince Kelley on the union embezzlement count s (XI-XVI). The jury found appellants guilty on the remaining 5 mail fraud counts. The district court sentenced Vince Kelley to 21 months imprisonment, 2 year s supervised release, restitution in the amount of $35,000, and a special assessment of $250; Jan Kelley to 15 months imprison ment, 2 years supervised release, restitution in the amount of $30,000, and a special assess ment of $250; and PAVCO to 5 years proba tion, restitution in the amount of $37,683.18, and a special assessment o f $1,000. These consolidated appeals followed.
VINDICTIVE OR SELECTIVE PROSECUTION First, appellants conten

d that the district court erred in denying their motions to dismiss the indictment for vindictive or selective prosecution. Appellants argue the prosecution was vindictive because Vince Kelley refused to cooperate with the Department of Lab

or’s investigation of the union. They also argue the prosecution was sel ective because a similarly situated employer was not criminally prosecuted. Appellants also argue the district court erred in failing to hold an evidentiary hearing becau se they proffered sufficient evidence to raise a reasonable doubt about th e propriety of the government’s conduct. The district court d enied their motions, filed on the day before trial was to begin, as untimely and refused to hold a hearing. Whether to hold an evidentiary hearing and whether to grant a pre-t rial motion to dismiss an indictment are matters within the trial cou rt’s discretion. United States v. Aanerud

, 893 F.2d 956, 960-61 (8th Cir.) (discovery and hearing on selective-8-

prosecution defen

se based on tribal membership only if defendant alleges sufficient facts to take the question past the frivolous state and raises reasonable doubt as t o prosecutor’s purpose) , cert. denied , 498 U.S. 822 (1990); United States v. Valona , 834 F.2 d 1334, 1340 (7th Cir. 1987) (hearing on outrageous government conduc t defense only when defendant presents specific facts sufficient to raise significan t do ubt about propriety of government action). The burden of proof of selective o r vindictive prosecution is on the defendant. United States v. Huff , 959 F.2d 731, 735 (8th Cir.), cert. denied

, 506 U.S. 855 (1992).
In order to make out a prima facie case of selective prosecution, th e defendants

must show: (1) that they were singled out for prosecution while others similarly situated were n ot prosecuted for similar conduct; and (2 ) that the decision to prosecute was based on an impermissibl e motive such as race, religion, or an attempt by the defendant to secure other constitutional rights.

Id. (citat ions omitted). “The defendant’s burden is a heavy one, and because w e afford broad discretion to prosecuting authorities, we require ‘a showing o f “intent ional and purposeful discrimination.”’” United States v. Matter , 818 F.2 d 653 , 654-55 (8th Cir. 1987) (citations omitted) (rejecting defense of selectiv e prosecution based on mem bership in motorcycle club). This is because “so long as the prosecut

or has probable cause to believe that the accused committed an offense defined by statute, the decisio n whether or not to prosecute, and what charge to file

. . . generally rests entirely in [the prosecutor’s] discretion.” Bordenkircher v

. Hayes, 434 U.S. 357, 364 (1978); e.g., United States v. Jacobs , 4 F.3d 603, 60

4 (8th Cir. 1993) (per curiam) (retaliatory or vindictive prosecution).
We ho ld the district court did not abuse its discretion in refusing to hold a n evidentiary hearing or in denying th eir motions to dismiss the indictment for vindictive-9-

and selective prosecution. First, appellants did not raise the defense of vindictive o r selecti ve prosecution in a timely manner. The district court ordered that all pre-tria l motions be filed for a hearing on September 5, 1996. Appellants filed no pre-tria l moti ons, and thus there was no hearing on any issue. Appellants also failed to allege spe cific facts sufficient to raise a significant doubt that the government’s decision t o prosecute was vindictive or retaliatory because Vince Kelley refused to cooperate or selective because the government did not prosecute the Slinkardcase. In the district court appellants acknow ledged that their claim of vindictive or retaliatory prosecution was insubstantial. Tr. at 13-14. Appellants did not allege that the deci sion to prosecute them was bas ed on an impermissible motive such as race, religion or an attempt t o secure other constitutional rights. In addition, this prosecution and the Slinkardcase didnot involve similarly situated employers. As noted above, the Slinkardcase was a civil ERISA action to collect union dues and payments and involved a subcontractor at t he same Procter & Gamble plant. However, there were no allegations that th e employerhad concealed its employment of non-union workers, had made any fals e representations about the union status of its employees in order to obtain highe r payments from the general contractor or had kept the higher payments, concealing them from its employees and the union. MOTIONS FOR JUDGMENT OF ACQUITTAL Next, appellants argue that the district court erred in denyin g their motions for judgment of acquittal on th e mail fraud counts as a matter of law because there was insufficient

evidence of the requisite intent to defraud. Appellants argue that the y never made any representation that all the PAVCO employees were unio n employees and that in fact Fru-Con mistakenly assumed that PAVCO employees were unio n employees

because Vince Kelley was the nephew of the head of the union

. Appellants also argue that Jan Kelley was only a bookkeeper who mailed-10-

forms to Fru-Con that did not contain false informa tion or misrepresent any material fact. We disagree. “[A] motion

for a judgment of acquittal should be denied when ‘there i s substantial evidence justifying an inference of guilt irrespectiv e of any countervailing testimo ny that may be introduced.’” United States v. Cunningham , 83 F.3d 218

, 222 (8th Cir. 1996

), citing United States v. Armstrong , 16 F.3d 289, 292 (8th Cir. 1994). “The standard of review of an appeal concerning the sufficiency of th e evidence is very strict, and the verdict of the jury should not be overturned lightly.” United States v. Burks

, 934 F.2d 148, 151 (8th Cir. 1991). “The jury’s verdict must be uphe ld if there is an interpretation of the evidence that would allow a reasonable-minded jury to conclude guilt beyond a reasonable doubt.” United States v. Erdman

, 953 F.2d 387, 389 (8th Cir.), cert. denied , 505 U.S. 1211 (1992). “In reviewing the sufficiency of the evide nce on appeal, the court views the evidence in the light most favorable to the government, resolving evidentiary conflicts in favor of the government, and accepting all reasonable inferences drawn from the evidence that support the jury’s verdict.” Id. To estab lish a case of mail fraud, the prosecutor must show the defendan t (1) voluntarily and intentionally devised or parti cipated in a scheme to obtain money or property by means of false representations or promises, (2) entered into th e scheme with the intent to defraud, (3) knew it was reasonably foreseeable that th e mails would be used, and (4) used the mails in furtherance of some essential step in the scheme. E.g., United States v. Manzer , 69 F.3d 222, 226 (8th Cir. 1995). It wa s established at trial that appellants used the mails in furtherance of the schem e and that the use of the mails was reasonably forese eable. The existence of a scheme to defraud w

as also established at trial. Hence, the question on appeal is the intent to defraud. Counts I-III covered conduct during the 1991-1993 contract period; counts-11-

IV-V covered conduct duri ng the 1993-1995 contract period. During each contract period, Fru-Con sent out bid forms to subcontractors. PAVCO received a bid form in each peri od. Vince Kelley completed and signed the bid forms for PAVCO. In the 1991-1993 contract period, the bid form asked appellants to fill out a rate sheet identifying

their labor costs. This sheet included a line for union benefits

. Appellan ts knew that non-union employees were not entitled to union benefits

. None theless, Vince Kelley filled out this form indicating all PAVCO employee s were to be paid union benefits at union ra tes. Further, the union contacted PAVCO and inquir ed if PAVCO was affiliated with the union for this contract period

. PAVCO assured the union of its affiliation. After receiving this assur ance, the union issued a l etter to Fru-Con identifying PAVCO as an affiliate. The evidence wa s sufficient to allow the jury to find beyond a reasonable doubt that appellants acted wit h the intent to defraud Fru-Con by intentionally misrepresenting the status o f PAVCO employees in order to make Fru-Con pay PAVCO moneys to which it was not entitled. See United States v. Duncan , 29 F.3d 448, 450 (8t

h Cir. 1994); United States v. Costanzo

, 4 F.3d 658, 665 (8th Cir. 1993).
For the 1993-1995 contract period, the bid form asked additional questions: whe ther the bidder was affiliated with any union and, if so, what union. Vinc e Kelley on behalf of PAVCO filled ou t the bid form and represented appellants were af filiated with a union, specifically, the CIU. Appellants even signed a Projec t Ag reement with the CIU agreeing to this affiliation, and that agreement became a part of the contract between Fru-Con and PAVCO. In addition, on the rate sheet in the bid package, appellants again requested payment for all their employees at the union wage scale and union benefit rates. At this time appellants knew that most of their employees were non-un ion and thus were not entitled to union wages or union benefits. The eviden

ce was sufficient to allow the jury to find beyond a reasonable doubt that appellants acted with the intent to def raud Fru-Con. In neither period did-12-

appel lants

do anything to negate the intent to defraud by simply passing the unio n benefit monies back to CIU or to its employees. In her testimony at tri al, Jan Kelley admitted that she prepared the billings to Fru-C on for PAVCO by multiplying the labor hours and skill categories provide d by Fru-Con by the rates she found on the t ime sheets Vince Kelley had prepared for the bid package. She acknowledged that the rate sheets showed she was billin g Fru-Con for union benefits for all PAVCO employees, even though she knew most of the m were not union members and thus not entitled to such benefits. She als o admitted that none

of the benefits money went to non-union employees, but instead to PAVCO, and that she never brought any of these facts to Fru-Con’s attention , even though she knew that Fru-Con had been deceived by the bid rate sheet. The evidence was sufficient to allow the jury to find beyond a reasonable doubt that Jan Kelley acted with the requisite intent to defraud Fru-Con.
We hold that the district court did not err in denying appellants’ motions for judgme nt of acquittal based upon the insufficiency of the evidence of the intent t o defraud.
EVIDENCE RELATING TO DISMISSED COUNTS
As noted above, at the close of the case, the district court granted judgment of acquittal in favor of all appellant s on the ERISA false statement counts and in favor of Vince Kelley on the union embezzlement counts and instructed the jury accordingl y (instructio n

No. 6). First, appellants argue that the district court erred in refusing t o withdraw the evidence related to the dismissed counts. Appellants argue the evidence relate d to the dismissed counts was too prejudicial, particularly in light of th e government’s argument that appellants were engaged in a “two-part” scheme that-13-

involved o btaining money from Fru-Con by falsely billing for its employees as unio n mem bers without passing that money on to those employees or the union. Appellants thus argue the jury may have found them guilty for not filing ERISA reports or for not forwarding union benefits payments rather than for mailing fraudulent documents t o Fru-Con. Appellants also argue the district court erred in refusing to instruct the jury not to consider

that evidence in its deliberations on the mail fraud counts. The district court refused to so instruct the jury on the ground that the evidence was relevant to the remaining mail fraud counts. Appel lants argue the instruction given did not adequately explain to the jury what had happened to the dismissed counts and thus impermissibly allowed the jury to speculate that t hey may have pleaded guilty to those counts or been found guilty by the district court on those counts. To sustain what is essentially a challenge to an evidentiary ruling, appellants must p rove that the district court abused its discretion and that the improper ruling affected their substant

ial rights or that the error had more than a slight influence on the verdict. Unit ed States v. Darden , 70 F.3d 1507, 1528 (8th Cir. 1995), cert. denied , 517 U.S

. 1149 (1996). We hold the district court did not abuse its discretion in refusing t o withdraw the evidence related to the dismissed counts. The evidence related to th e dis missedERISA counts and the union embezzlement counts was inextricabl y intertwined with and was relevant to prove appellants’ scheme to defraud Fru-Co n through t he use of the mails. Appellants obtained money from Fru-Con b y mi srepresenting their employees as members of a union who were entitled t o union- scale wages, union dues and union benefits. In order to obtain those amounts , appellants submitted requests for payments of their labor expenses as if their employees were union m embers and they were paid on that basis by Fru-Con. Fru-Con pai d ap pellants in reliance on an “affiliation letter” it had received from the union

. Thereafter, appellants represented to the union that they were affiliated and the union so informed Fru-Con. Fru-Con required appellants to co mplete time and material forms-14-

showing their employees’ base rate of pay, their union affiliati on, if any, and the amount of union dues and benefits payments due. Vince Kelley filled out these forms, an d Vince and Jan Kelley prepared and mailed the subcontract receipts affidavits and lien waivers with billing statements to Fru-Con. Jan Kelley prepared most of thes e documents which represented PAVCO employees as union employees even though she knew few of PAVCO employees were union-affiliated. In light of our holding on the evidentiary issue, we also hold that the district court did not err in refusing to instruct the jury not to consider the evidence related to th e dismissed counts in its deliberati ons on the mail fraud counts. As discussed above, the evidence related to the dismissed counts was intertwined with and relevant to the overall mail fraud scheme and to the remaining mail f raud counts. The instruction given by the district court was based on 8th Cir. Model Crim. Jury Instructions § 2.11 (1996), and
corre ctly informed the jury that “certain of those charges (referring to all the crime s ch argedin the indictment) have been disposed of, specifically, the ones dealing with ERISA violations and embezzlement from employee benefit funds,” “[t]hose charges are no longer before you, and the only crimes that the defendants are now charged with
are the mail fraud counts,” and “[y]ou should not guess about or concern yourselve s withthe reason for this disposition of the other charges. You are not to consider this fact when deciding if the government has proved, beyond a reasonable doubt, the mail fraud counts that remain.” Appellants’ Appendix at 106 (instruction No. 6). Accordingly, the judgments of the district court are affirmed.-15-

A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.