Source: https://law.justia.com/cases/federal/appellate-courts/F3/376/1303/597587/
Timestamp: 2017-11-20 15:32:52
Document Index: 537253410

Matched Legal Cases: ['§ 1341', '§ 371', '§ 371', '§ 371', '§ 1341', '§ 371']

United States of America, Plaintiff-appellee, v. George Chandler, Jerome Pearl, Kevin J. Whitfield, John Henderson, Defendants-appellants, 376 F.3d 1303 (11th Cir. 2004) :: Justia
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United States of America, Plaintiff-appellee, v. George Chandler, Jerome Pearl, Kevin J. Whitfield, John Henderson, Defendants-appellants, 376 F.3d 1303 (11th Cir. 2004)
U.S. Court of Appeals for the Eleventh Circuit - 376 F.3d 1303 (11th Cir. 2004)
COPYRIGHT MATERIAL OMITTED Curtis Fallgatter, Jacksonville, FL, Joseph S. Paglino, N. Miami Beach, FL, Alexander L. Zipperer, III, Zipperer & Lorberbaum, P.C., Savannah, GA, Martin D. Hastings, Las Vegas, NV, for Defendants-Appellants.
Before DUBINA and HILL, Circuit Judges, and OWENS* , District Judge.
This trial clearly demonstrates the inherent danger in a multi-defendant conspiracy prosecution — that individuals who are not actually members of the group will be swept into the conspiratorial net. Because the government is permitted broad prosecutorial discretion to prove the conspiracy, the likelihood exists that those who associate with conspirators will be found guilty of a crime that they have not intended to commit, and part of a group that they never joined. See Dennis v. United States, 384 U.S. 855, 860, 86 S. Ct. 1840, 16 L. Ed. 2d 973 (1966).
This danger is compounded when the grand jury indicts on one theory of the illegal conduct, but the government prosecutes the case on an entirely different theory. This roaming theory of the prosecution can produce trial error of constitutional proportions. See Russell v. United States, 369 U.S. 749, 768, 82 S. Ct. 1038, 8 L. Ed. 2d 240 (1962) (ill-defined charges leave "the prosecution free to roam at large — to shift its theory of criminality so as to take advantage of each passing vicissitude of the trial and appeal").
We have seen such conspiracy prosecutions before. In United States v. Adkinson, 135 F.3d 1363 (11th Cir. 1998), we reversed convictions obtained by the government upon an indictment that alleged conduct not a crime under the prevailing law. In that case, the district court was persuaded to permit the government to proceed upon the assumption that the controlling law of mail fraud would change prior to the end of trial. Id. at 1369. At the close of the government's case, with the law unchanged, the court attempted to cure the defect by redacting the indictment of the allegations not stating a crime, and instructing the jury as to the correct law. Id. at 1376. But the damage had been done. The jury had listened to months of testimony from numerous witnesses whose testimony, as it turned out, was both irrelevant and highly prejudicial. Id. at 1372. Under these circumstances, we held that fundamental due process was denied the defendants and vacated their convictions. Id. at 1374.
Very early in the pre-trial proceedings,4 the defendants focused on whether the allegations of the indictment were sufficient to state a crime.5 Under federal conspiracy law, the government must allege and prove that the defendants knowingly entered into an agreement to commit an unlawful act. United States v. Parker, 839 F.2d 1473 (11th Cir. 1988). The indictment did allege an unlawful act in the embezzlement of the game stamps. Nowhere, however, did the indictment allege that any of these defendants knew that the game stamps they redeemed had been stolen. The defendants moved to dismiss the indictment, alleging that it was fatally defective in its failure to allege an essential element of the crime of conspiracy — knowing agreement to commit the illegal act.
During the ensuing months and in filed pleadings, the defendants argued that under the law, even if acquisition of a game stamp by transfer from another person violated McDonald's game rules, which they did not concede, it was certainly no crime. The magistrate judge agreed, adopting the well-settled rule that the rules of a private contest are mere offers for a unilateral contract, violation of which either voids or breaches the contract. Waible v. McDonald's Corp., 935 F.2d 924 (8th Cir. 1991).
The government also argued, without citation to law, that " [i]t is an incorrect statement of the law for a defendant to argue that if the violation or breach of the contest rules of a private game is not a state, local or federal crime, than (sic) the defendants in this case cannot be found guilty of conspiracy to commit mail fraud." Thus counseled, the district court granted the motion in limine precluding the defendants from arguing that knowledge of Jacobson's theft was essential to convict them of the conspiracy.
Three witnesses from McDonald's and Simon were extensively questioned, over defendants' objection, about the "rules of the game." These witnesses were permitted to testify that, under the rules, there were only three "authorized, legitimate" ways to obtain a game stamp. Since there were over twenty different games9 played during the relevant time period, over twenty different sets of game rules were admitted into evidence. An audio-visual "blow-up" of one set of rules was published to the jury, over objection. Over two hundred other exhibits were admitted, many regarding these rules. At one point, the court commented that the policy behind the rules was unimportant because " [t]he rules is what's going to control, if anything is going to control."
The government, having its theory of the case — that such knowledge was irrelevant — totally undone by this instruction, sought a recess. The defendants represent, without government contradiction, that government counsel sought the recess to telephone his office to request permission to dismiss the case. Unfortunately for all, the court refused the recess.
The mail fraud statute makes it a crime to "devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations or promises...." 18 U.S.C. § 1341. The phrasing of the statute in the disjunctive prohibits two separate unlawful acts, each constituting an independent ground for prosecution. United States v. Scott, 701 F.2d 1340, 1343 (11th Cir. 1983). In this case, the government charged a conspiracy to commit both unlawful acts.
The government also charged that defendants conspired to obtain money by false and fraudulent pretenses and representations. The indictment alleged that the defendants falsely represented themselves to McDonald's as "legitimate" winners in order to obtain the prize money.
Thus, the government charged a single conspiracy with two unlawful objects — to steal the game stamps, and to redeem them by misrepresentations amounting to criminal fraud. Defendants' first allegation of error is that the second of these two objects — the allegedly fraudulent redemptions — either were not unlawful at all, or did not amount to criminal fraud and, therefore, cannot support their conviction.
1. Transfer of Game Stamp as a Violation of the Game Rules
The indictment charges that the defendants' conspired to represent themselves fraudulently as "legitimate winners" when they checked the box on McDonald's prize redemption form to indicate that they obtained their game stamps through "authorized, legitimate channels." Although conceding, that there was no rule that explicitly prohibited the transfer of the game stamps,14 it was the government's position that the rules affirmatively demanded acquisition of the game stamps through "authorized channels" and that this meant in one of the three ways McDonald's disseminated the game stamps. Since the defendants obtained their game stamps by transfer from others, the government repeatedly referred to the "lies" the defendants told McDonald's by representing themselves as "legitimate" winners.
In fact, however, the evidence was, from the government's own witnesses, that game stamps were publicly traded, including on E-bay and on McDonald's own website. A McDonald's representative testified that game players could transfer stamps to anyone — including the stranger in the next booth — prior to sending the piece to McDonald's. Under these circumstances, defendants argue, it cannot be said that the rules unequivocally prohibited defendants from representing themselves as "legitimate" winners when they acquired their game stamps by transfer from someone else.
We agree. In the absence of any explicit prohibition of transfer, and in view of the evidence that such transfers were publically tolerated by McDonald's, only if defendants redeemed game stamps that they knew were stolen could it be said unequivocally that they knew that they were not "legitimate" winners, since it is a crime to receive stolen property. Absent such proof, we do not think that representations to McDonald's that may have violated the rules of its games could form the basis for a criminal prosecution. Defendants' conduct was not "plainly and unmistakably" proscribed by 18 U.S.C. § 371. See United States v. Porter, 591 F.2d 1048, 1057 (5th Cir. 1979).
The rule of lenity requires that a criminal conviction not be predicated upon a problematic interpretation and retroactive application of the rules of a private game. Ladner v. United States, 358 U.S. 169, 178, 79 S. Ct. 209, 3 L. Ed. 2d 199 (1958). If there is doubt whether the defendants' conduct is criminal, the rule of lenity requires that the doubt be resolved in favor of the accused. Id.
2. Violation of the Game Rules as Unlawful Act
Even if the transfers had been unequivocally against the rules of McDonald's games, however, defendants' alleged misrepresentations would still not constitute criminal fraud. Under the prevailing law, as well as the law of this case,15 a violation of McDonald's game rules is not a crime. See Waible, 935 F.2d at 926 (interpreting rule stating that " [g]ame materials are null and void and will be rejected if not obtained through authorized, legitimate channels ..."). The game stamps constitute an offer for a unilateral contract that can be accepted by performing all the terms and conditions of the game. Id. A violation of these rules, therefore, is, at most, a breach of contract. It is not a crime. Id.16 See also Barnes v. McDonald's Corp., 72 F. Supp. 2d 1038, 1042 (E.D. Ark. 1999) (rules are offer of contract, which are accepted by performance of the contract's terms); Johnson v. BP Oil Co., 602 So. 2d 885, 888 (Ala.1992) (same).
The government's theory was that the defendants'"false" statements constituted an event totally separate from the violation of the rules that made the statements false. This theory is clearly reflected in the government's response to a proposed defense instruction that it is not a crime to give a false statement to a company or person to whom you have no legal duty to tell the truth:
The government's position, then, is that conduct not illegal, but, perhaps, "illegitimate" may, if the mails are used, be prosecuted as mail fraud.
This is exactly the position rejected by the Second Circuit in United States v. Handakas, 286 F.3d 92 (2nd Cir. 2002). In that case, the government charged Handakas with a mail fraud conspiracy for failing to pay his construction workers the prevailing rate of wage as provided by his contract with New York City, but misrepresenting to the City that he had done so in order to receive contract payments from the City.18 At trial, according to the Second Circuit:
In rejecting this argument, the Second Circuit said, "If we were to affirm Handakas's mail fraud conviction on [these] grounds ... we would effect a breathtaking expansion of mail fraud. Every breach of a contract ... would become punishable as a felony in federal court." Id. at 107. Such an application of the mail fraud statute violates the fundamental guarantee of due process because it fails to provide notice of what conduct is criminal. Id. It permits "policemen, prosecutors, and juries to pursue their personal predilections." Id. (citing Smith v. Goguen, 415 U.S. 566, 94 S. Ct. 1242, 39 L. Ed. 2d 605 (1974)).
Here too the government sought to prove conduct not otherwise a crime as the underlying illegal activity supporting the charged mail fraud conspiracy. The government's theory of the charged conspiracy is that, just as did Handakas, the defendants falsely represented that they had performed as required by the terms of a contract — the rules of McDonald's game — and that they are guilty of a mail fraud conspiracy for having used the United States mails to do so.
As did the Second Circuit, we find the implications of such a theory very troubling. The federal conspiracy statute proscribes an agreement to violate the law. 18 U.S.C. § 371; United States v. Toler, 144 F.3d 1423, 1426 (11th Cir. 1998) (" [T]he essential element of a conspiracy [is] that the object of the agreement must be illegal") (emphasis added). Breach of contract, however, even fraudulent breach of contract, is not a crime. Nor does use of the mails, as the government apparently believes, make it a crime.
Although the indictment alleges unlawful conduct — a scheme to defraud McDonald's by stealing game stamps and redeeming them for money — the government's theory all along and the proof adduced at trial, at most, proved only that defendants illegitimately, not unlawfully, redeemed the game stamps.20 The redemptions were illegitimate in the government's view because they violated the rules of McDonald's game.21
Illegitimate conduct, however, is not the same thing as unlawful conduct. Not all conduct that strikes a court as sharp dealing or unethical conduct is a "scheme or artifice to defraud." United States v. Holzer, 816 F.2d 304, 309 (7th Cir. 1987). "Such a broad meaning of fraud for the mail and wire fraud statutes `would put federal judges in the business of creating what in effect would be common law crimes, i.e., crimes not defined by statute.'" Reynolds v. East Dyer Dev. Co., 545, 882 F.2d 1249, 1252 (7th Cir. 1989) (quoting United States v. Holzer, 816 F.2d 304, 309 (7th Cir. 1987)); see also Porter, 591 F.2d at 1057 (reversing conspiracy conviction predicated upon conduct not prohibited by a statute or regulation).
If we were to hold allegations of an agreement to participate in "illegitimate" conduct — a fraudulent breach of contract — sufficient to convict under the federal conspiracy statute, then we would permit a "breathtaking" expansion of a statute that already is "harnessed into service" by the government when other prohibitions will not serve. Id. at 108. The mail fraud conspiracy statute applies broadly enough as it is. We shall not extend its reach even further. The allegations that defendants' claims to be legitimate winners of McDonald's games violated the mail fraud statute should have been stricken from the indictment.
B. Single or Multiple Conspiracies?
Despite having charged a single conspiracy with two criminal objects, the government's prosecution of the case severed the connection between Jacobson's illegal act of embezzlement and the defendants'"fraudulent" redemptions. The government's position was that it did not matter how the defendants obtained the game stamps. The government asserted on numerous occasions that Jacobson's theft of the stamps was legally irrelevant to the culpability of the defendants for their redemptions. The government even argued that the game stamps could have been legitimately obtained by someone other than the individual that redeemed the game stamp,22 or even been found on the street, and the defendants representations would still have been fraudulent. In the government's view, it was the defendants'"misrepresentations" to McDonald's that they were "legitimate" winners that constituted the underlying illegal activity to which the defendants agreed.
A conspiracy is an agreement between two or more persons to accomplish an unlawful plan. 18 U.S.C. § 371; Parker, 839 F.2d at 1477. The essence of the conspiracy is this agreement to commit an unlawful act. Toler, 144 F.3d at 1425. What distinguishes the offense of conspiracy from a substantive offense, is that "agreement is the essential evil at which the crime of conspiracy is directed." Iannelli v. United States, 420 U.S. 770, 777 n. 10, 95 S. Ct. 1284, 43 L. Ed. 2d 616 (1975). The agreement itself "remains the essential element of the crime." Id. Thus the government must prove the existence of an agreement to achieve an unlawful objective and the defendant's knowing participation in that agreement.23 United States v. Adkinson, 158 F.3d 1147, 1155 (11th Cir. 1998).
Because the essential nature of conspiracy is secrecy, a conspiracy conviction may be proved by circumstantial evidence. Glasser v. United States, 315 U.S. 60, 80, 62 S. Ct. 457, 86 L. Ed. 680 (1942). The government must, however, show circumstances from which a jury could infer beyond a reasonable doubt that there was a "meeting of the minds to commit an unlawful act." Adkinson, 158 F.3d at 1154 (quoting Parker, 839 F.2d at 1478).
Since no one can be said to have agreed to a conspiracy that they do not know exists, proof of knowledge of the overall scheme is critical to a finding of conspiratorial intent. "Nobody is liable in conspiracy except for the fair import of the concerted purpose or agreement as he understands it." United States v. Peoni, 100 F.2d 401, 403 (2nd Cir. 1938). The government, therefore, must prove beyond a reasonable doubt that the conspiracy existed, that the defendant knew about it and that he voluntarily agreed to join it. United States v. Hernandez, 896 F.2d 513, 519 (11th Cir. 1990).
We have reversed conspiracy convictions where there was no direct proof of an agreement, and the circumstantial evidence of agreement was insufficient to support such an inference. Adkinson, 158 F.3d at 1159 (reversing conspiracy convictions where government failed to prove defendants knowingly agreed to unlawful act); United States v. Awan, 966 F.2d 1415, 1434-35 (11th Cir. 1992) (insufficient evidence to support finding of unlawful agreement); Parker, 839 F.2d at 1478 (insufficient evidence of common agreement). Proof of a true agreement is the only way to prevent individuals who are not actually members of the group from being swept into the conspiratorial net.
In this case, the indictment charged a single conspiracy in which Jacobson was the "key man" who stole the game stamps and then constructed a vast network of co-conspirators who would both redeem the game stamps and recruit others to do so. To convict the defendants of this conspiracy, the government had to prove that the defendants knew of the "essential nature of the plan" and agreed to it. See Blumenthal v. United States, 332 U.S. 539, 557, 68 S. Ct. 248, 92 L. Ed. 154 (1947); Adkinson, 158 F.3d at 1155.
2. What the Government Proved about the Agreement
There are no allegations in the indictment that any of these defendants knew of Jacobson's plan to steal the game stamps and distribute them to a vast array of recruiters and winners. There are none because Jacobson deliberately set out to keep the fact that there was any overall scheme secret from the defendants. In fact, the government conceded in its opening remarks, " [e]vidence will establish, which will be uncontroverted by the defense, that many of the winners did not know that the winning game stamps(s) that they redeemed had originally been embezzled or stolen."24
At trial, Jacobson testified that he had ten different recruiters to whom he gave game stamps. These recruiters in turn found "winners" to redeem the game stamps. Jacobson testified that not one of his recruiters knew any of the others, or even about his theft of the stamps. Nor did any of the winners know of Jacobson, or his embezzlement of the game stamps. It was part of Jacobson's scheme deliberately to keep each recruiter and the winners developed by each recruiter separate from and ignorant of the existence of the others.
Jacobson's scheme was a classic "hub-and-spoke" conspiracy, in which a central core of conspirators recruits separate groups of co-conspirators to carry out the various functions of the illegal enterprise. See Kotteakos v. United States, 328 U.S. 750, 755, 66 S. Ct. 1239, 90 L. Ed. 1557 (1946); United States v. Perez, 489 F.2d 51, 58 (5th Cir. 1973). In such a conspiracy, the core conspirators are the hub and each group of co-conspirators form a spoke leading out from the center in different directions. Kotteakos, 328 U.S. at 755, 66 S. Ct. 1239. The core conspirators move from spoke to spoke, directing the functions of the conspiracy. Id.
The Supreme Court has characterized such a conspiracy as a "rimless wheel" because there is no rim to connect the spokes into a single scheme. Kotteakos, 328 U.S. at 755, 66 S. Ct. 1239. In Kotteakos, several different defendants fraudulently obtained loans through the central key man, Brown. There was, however, no connection between the defendants. They were connected only to Brown. The trial court had upheld the jury's convictions of these defendants on the theory that "it was possible on the evidence for the jury to conclude that all were in a common adventure because of [each defendant's connection to Brown in one or more transactions] and the similarity of purpose presented in the various applications for loans." Id. at 768-69, 66 S. Ct. 1239.
The Supreme Court, however, reversed the convictions, holding that the trial court "confuse [d] the common purpose of a single enterprise with the several, though similar, purposes of numerous separate adventures of like character." Id. at 769, 66 S. Ct. 1239. As the Court put it:
[T]he pattern was "that of separate spokes meeting at a common center," though we may add without the rim of the wheel to enclose the spokes. The proof therefore admittedly made out a case, not of a single conspiracy, but of several, notwithstanding only one was charged in the indictment.
Id. at 755, 66 S. Ct. 1239. Thus, where the "spokes" of a conspiracy have no knowledge of or connection with any other, dealing independently with the hub conspirator, there is not a single conspiracy, but rather as many conspiracies as there are spokes. Id. at 754-55, 66 S. Ct. 1239.
Recently, the Fourth Circuit applied Kotteakos to affirm the dismissal of an indictment charging a similar rimless wheel conspiracy. Dickson v. Microsoft Corp., 309 F.3d 193, 203 (4th Cir. 2002). The court noted that Kotteakos made clear that a rimless wheel conspiracy is not a single, general conspiracy but instead is a series of multiple conspiracies between the common defendant and each of the other defendants. Id."A rimless wheel conspiracy is one in which various defendants enter into separate agreements with a common defendant, but where the defendants have no connection with one another, other than the common defendant's involvement in each transaction." Id.
We too have noted " [t]he importance in a wheel type conspiracy of such knowledge by individual spokes of the existence of other spokes." Perez, 489 F.2d at 60 n. 11 (citing Federal Treatment of Multiple Conspiracies, 57 Columbia Law Review 387). " [F]or a wheel conspiracy to exist, those people who form the wheel's spokes must have been aware and must do something in furtherance of some single, illegal enterprise. If not, there is no rim to enclose the spokes." United States v. Levine, 546 F.2d 658, 663 (5th Cir. 1977) (emphasis added). See also United States v. Abraham, 541 F.2d 1234, 1238 (7th Cir. 1976) (the parties to an agreement must know of each other's existence).
We have reversed convictions where such knowledge was lacking, finding no agreement to the overall conspiracy, and holding that the individual spokes constituted separate conspiracies. United States v. Ellis, 709 F.2d 688, 690 (11th Cir. 1983); United States v. Nettles, 570 F.2d 547, 551 (5th Cir. 1978); Levine, 546 F.2d at 663. We have never upheld a conspiracy conviction where a single key man moved alone from spoke to spoke, agreeing with no one else common to more than one spoke.
In this case, there was no connection whatsoever between the various spokes of Jacobson's scheme. Just as with Brown in Kotteakos, Jacobson was the only person common to the ten otherwise completely separate undertakings, no other person moving with him from spoke to spoke. The government conceded early on and at trial that the spokes knew nothing about each other or, indeed, about Jacobson's theft of the game stamps and his overall scheme. Jacobson, himself, so testified. In the face of this fact, the government took the only position it could — that such knowledge was irrelevant to proof of the charged conspiracy.
This was error of constitutional proportions. In order to prove the charged conspiracy, the government had to show that the defendants knew and agreed to some scheme larger than their own spoke, involving only receipt of a game stamp from their immediate recruiter and its "illegitimate" redemption. Iannelli, 420 U.S. at 777, 95 S. Ct. 1284; Toler, 144 F.3d at 1425. Without evidence of an agreement to participate in the larger scheme charged in the indictment, the government proved only that there may have been multiple conspiracies, each with Jacobson as the unknown key man, the recruiter and, had they known of Jacobson's thefts, the redeemers. See Barnard v. United States, 342 F.2d 309, 312-13 (9th Cir. 1965) (without some evidence that individual spokes knew about others, there was not a conspiracy for a succession of fraudulent collisions, but rather a succession of separate collision conspiracies); United States v. Varelli, 407 F.2d 735 (7th Cir. 1969) (reversing conviction where insufficient evidence that similar hijackings part of one overall conspiracy).
The Third Circuit reached a similar conclusion in United States v. Pearlstein, 576 F.2d 531, 544 (3d Cir. 1978). In that case, a jury convicted salesmen of mail fraud based on their alleged participation in a conspiracy to defraud investors in a writing pen distributorship. While conceding the existence of an overall scheme to defraud, the salesmen maintained that they were ignorant it. In the absence of any direct proof that they did know of the scheme, the government sought to convict the defendants based on certain false or misleading statements made by them in their sales pitches, arguing that these statements established the necessary link between them and the overall scheme to defraud.
[A]lthough the defendants might have made fraudulent misrepresentations during the course of their individual sales presentations, the jury could not reasonably infer that the salesmen knew of the fraudulent purpose of the overall ... scheme.
Furthermore, the court rejected the idea that these misrepresentations could form the some sort of independent basis for their conspiracy convictions because " [a]lthough ... a separate scheme to defraud could have been hatched by these salesmen within the overall scheme, such individual schemes were neither alleged nor proved by the government in this case." Id. The court noted that:
Even if the evidence established independent schemes of the salesmen, such evidence could not properly convict the defendants here since the only scheme alleged in the indictment was that of the ... principals, and it was incumbent upon the Government to prove that scheme substantially as it was alleged.
Id. n. 7 (emphasis added); see also Toler, 144 F.3d at 1426 (" [T]he government must prove the conspiracy it charged in the indictment rather than some other conspiracy").
In United States v. Simon, 839 F.2d 1461, 1468 (11th Cir. 1988), we acknowledged the persuasiveness of the Pearlstein rule that individual and independent misrepresentations do not permit an inference of knowledge of and agreement to join the overall scheme. If the defendants have no knowledge of the overall conspiracy, their independent, even fraudulent, misrepresentations do not supply that link. Id.
In this case, it was the government's position from the beginning that the defendants' alleged misrepresentations were totally independent of Jacobson's underlying scheme. The government consistently maintained, and argued to the jury, that the defendants' claims to be "legitimate" winners were false totally irrespective of Jacobson's embezzlement.26 The defendants' claims were criminally fraudulent, the government insisted, solely because they received the stamps by transfer, rather than by buying food items at McDonald's. Defendants' misrepresentations, then, were made "on their own," without any knowledge of Jacobson's embezzlement and scheme. As such they were utterly incapable of permitting any inference that defendants knew of and agreed to the charged conspiracy. See Pearlstein, 576 F.2d at 545; Simon, 839 F.2d at 1468.
And I'll point out that I think one of the major issues is whether or not we're dealing with a single conspiracy or multiple conspiracies.... I am going to instruct the jury in this case that if you should find that a reasonable doubt exists as to whether a defendant had knowledge that the game stamp he obtained had been embezzled, stolen or otherwise unlawfully acquired, then you must find that defendant not guilty. I think other — otherwise, then you — the issue of a bunch of conspiracies looms more prevalent.
The government may not rest upon proof that a defendant acted in a way that would have furthered the goals of the conspiracy if there had been one. Without some independent evidence that these defendants knew there was a [ ] conspiracy in progress and that they voluntarily and knowingly joined this conspiracy, the proof of the requisite agreement to [commit the offense] is insufficient.
In order to prove a single, unified conspiracy as opposed to a series of smaller, uncoordinated conspiracies, the government must show an interdependence among the alleged co-conspirators. Toler, 144 F.3d at 1426. Separate transactions are not necessarily separate conspiracies, so long as the conspirators act in concert to further a common goal. United States v. Powell, 982 F.2d 1422 (10th Cir. 1992). If there is one overall agreement among the various parties to perform different functions in order to carry out the objectives of the conspiracy, then those performing the functions are engaged in one conspiracy. " [I]f a defendant's actions facilitated the endeavors of other coconspirators or facilitated the venture as a whole," then a single conspiracy is shown. Id. at 1429.
Nor was there any evidence of an overlap of membership between the spokes. There was none. The only member common to each separate spoke was Jacobson. The government's argument in its brief notwithstanding, a single conspiracy is not shown if Jacobson was the only overlapping member. Adkinson, 158 F.3d at 1153 ("The government must prove an agreement between at least two conspirators to pursue jointly an illegal objective"); Parker, 839 F.2d at 1478 ("The law is well settled that existence of a coconspirator is not only an element of the crime, but the very essence of the crime").
All the evidence, especially that from the government's own witnesses, was that every effort was made not to put a rim on the wheel of Jacobson's conspiracy. Not only was there no connection between the spokes, but the spokes had no knowledge of the hub. This is not a single conspiracy. Kotteakos, 328 U.S. at 769, 66 S. Ct. 1239. If conspiratorial, it is a series of uncharged separate conspiracies. See Pearlstein, 576 F.2d at 545.
The government argues that this variance between the conspiracy charged and the proof at trial is harmless error. Kotteakos, 328 U.S. at 775, 66 S. Ct. 1239. The remaining question is whether the variance in the proof prejudiced the defendants. There can be no doubt that it did.
As in Adkinson, the government alleged conduct not a crime, spent hours eliciting testimony regarding that "crime," only to concede to the court at the end of trial that the law was to the contrary. As then, " [d]efendants were forced to defend themselves against charges which were not offenses under the prevailing law." 135 F.3d at 1373. Defendants herein were forced to decide whether to defend against or not defend against the charge that they violated the rules — precisely what the right to indictment was meant to prevent. Id.
Then, at the conclusion of a trial filled with evidence of these rules, the district court decided that this was not what the trial had been about, and that the only unlawful conduct upon which convictions lawfully could have been based all along was the charged conspiracy to redeem stolen game stamps. The court decided it must give the previously rejected proposed defense instruction to this effect. Thus, the court announced it would instruct the jury that they could convict only if they found that the defendants redeemed game stamps that they knew were "embezzled, stolen, or unlawfully acquired." This instruction, announced by the court five minutes prior to charging the jury, completely reversed the court's prior position that such knowledge was unnecessary for conviction,29 rendered totally irrelevant most of the government's case, and left totally exposed the utter absence of any such proof in the record.30
Despite the court's instructions to the jury that they could not convict absent proof that defendants knowingly agreed to the charged conspiracy, that they could not find the defendants guilty of violating the rules of McDonald's games, and that transfer of a game stamp from another person was not proof of fraud, the defendants were convicted. It appears that the jury convicted these defendants of violating the rules of McDonald's games. In the utter absence of any proof,31 plus the government's avowed concession that these defendants did not know that the game stamps had been embezzled or stolen (or even "unlawfully acquired"), there is no other explanation for the jury's verdict. Thus, we do not believe that the court's last minute attempts to cure the problems inherent in the government's theory of the case (and to salvage something of the time and effort devoted to the case) adequately protected the defendants from the prejudice that resulted.
Not only were defendants convicted of conspiracies not charged in the indictment, but the government has conceded that there is no proof to support defendants' membership in the indicted conspiracy — Jacobson's conspiracy. Thus, there is a complete failure of proof as to the charged conspiracy. The motions for judgments of acquittal should have been granted.
The indictment superceded an earlier one. Some defendants, but not appellants, were also charged with the substantive offense of mail fraud, 18 U.S.C. § 1341
Game stamps were also available upon written request to McDonald's or in newspaper advertisements
Chandler is from Walhalla, South Carolina, Pearl from Miami, Florida, Whitfield from Savannah, Georgia, and Henderson from Las Vegas, Nevada. The defendants challenged venue and raise the issue again on appeal, but we need not address it as we decide the case on other grounds
The five defendants filed numerous pre-trial pleadings to which the government responded, but which do not always correspond chronologically to each other. In addition, the parties learned a significant amount of information about each others' cases informally in conversation and by letter. Therefore, to convey a sense of the chronology of the pre-trial developments in the case, we have resorted to synthesizing the various pleadings and responses and summarizing the parties' positions
Chandler and Pearl filed motions to dismiss. Pearl also filed a motion for particulars, adopted by Chandler
The government made this statement in another defendant's plea colloquy before the magistrate judge
The court, in granting defendants' motion for a bill of particulars, noted the importance of defining the term "legitimate" in a criminal prosecution and held that the government's definition was binding upon them
One of these co-defendants was Whitfield's aunt, to whom he gave a winning game stamp, given to him by a Jacobson recruiter
The evidence was that over 50 games were played from 1979 to the time of indictment
During these proceedings, the court expressed serious doubt about the charges and the proof on more than one occasion. Midway through Jacobson's testimony, in response to the government's elicitation of co-conspirator hearsay, the court remarked that:
Well, let me say this. I'm sure that, I am positive that there is not enough evidence of a conspiracy involving these defendants; in fact, there is no evidence of a conspiracy at this point involving these defendants.
The government continued to maintain, however, that defendants' representations to McDonald's that they received their game stamps through authorized, legitimate channels were criminally fraudulent
The court instructed the jury prior to closing argument
The court said that without knowledge that the game stamps had been "improperly" acquired that "the issue of a bunch of conspiracies looms more prevalent." We agree. See discussion below at II. B
Although there were several different games and numerous versions of rules, there was no rule anywhere that affirmatively prohibited a transfer of a game stamp prior to verification as a winner
The magistrate judge ruled that a violation of the McDonald's rules was a mere contract breach, without objection from the government. The government conceded this point at the charge conference and the jury was instructed that a violation of the rules of McDonald's games is not a crime
Nor were defendants under any legal duty to tell McDonald's the truth See Johnson, 602 So. 2d at 889 (contest winner had no legal duty to disclose information regarding how he obtained the winning game piece). Despite the government's repeated references to the "affidavit" that the defendants completed stating they had obtained their game stamps through "authorized channels," the contest form was neither sworn nor attested to in any way. Nor were defendants in any fiduciary relationship with McDonald's. Even if they lied on their prize redemption forms, the lies represented, at most, under the prevailing law and the law of the case, only a breach of the unilateral contract offered by the rules of the game, not a crime.
The government finally conceded this point during a charge conference discussion of a proposed defense instruction that a violation of McDonald's game rules would not be a crime, saying, "The horse is dead. I'm not going to ride that horse."
Handakas submitted certified payroll records that reflected compliance with the prevailing rate of wage requirement. Handakas, in fact, paid his workers substantially less than half the prevailing rate of wage. 286 F.3d at 96
The contract at issue in Handakas was with a governmental agency so the government argued that Handakas owed a duty of honest services to the City, thereby creating a fiduciary relationship recognized by federal law. The Second Circuit rejected this argument as well. The defendants herein, of course, are alleged to have breached a contract with McDonald's, not the government, thereby eliminating the possibility that they owed a duty of "honest services" to McDonald's which they breached, even if the Second Circuit had not already rejected this argument. 286 F.3d at 109
The real unlawful activity — the theft of the game stamps — was abandoned as irrelevant to the defendants' culpability. See discussion below at II.B.2
Again, we note that this interpretation of the rules is, itself, problematic
The government stated in opening remarks, " [i]n fact, some of the `winners' believed that the game stamp(s) that they redeemed had actually been legitimately won by someone."
The final requirement for conviction is proof of the commission of an act in furtherance of the conspiracy. 18 U.S.C. § 371
The defendants did not controvert this evidence because lack of knowledge, and therefore, lack of agreement, formed the core of their defense
The government employed a similar tactic in Parker. Unable to prove that the defendants knew of the overall scheme, the government argued "even if appellants truly were unaware of the [overall fraudulent scheme], it does not follow that their representations to investors were not fraudulent." 839 F.2d at 1480. In that case, we decided that the appellants' representations were not "wholly unfounded" and "certainly not criminal." Id. at 1481. We reached a similar conclusion above.
The government's claim that Jacobson's theft of the game stamps was legally irrelevant to defendants' culpability for the overall conspiracy charged in the indictment really turned the case on its head. In fact, it was defendants' alleged misrepresentations to McDonald's that were, in fact, legally irrelevant to their culpability for the charged conspiracy. Defendants' redemptions would have been criminally fraudulent even without any misrepresentations had they known that the game stamps were stolen. Without such knowledge, no amount of representations violating McDonald's rules could make defendants liable for the conspiracy charged by the government to fraudulently redeem stolen game stamps. See United States v. Christo, 614 F.2d 486, 492 (5th Cir. 1980) (evidence of violations of civil banking regulation legally irrelevant to defendant's guilt for criminal bank fraud).
Unfortunately, the court's attempt to cure the problem only aggravated it. The court's new instruction permitted the jury to find the defendants guilty if they knew the game stamps were "embezzled, stolen, or otherwise unlawfully acquired." This language is not found in the indictment. Although the government argues that it narrowed rather than broadened the indictment, thus rendering the error harmless, we disagree.
The government's theory throughout the case, reflected in the extensive testimony and numerous exhibits about the rules of McDonald's games, was that the defendants had "illegitimately" redeemed these game stamps by virtue of the fact that they did not personally acquire them from McDonald's. The government interpreted the rules of McDonald's games to prohibit acquisition of the game stamps by transfer from another person. In closing argument, the government argued that acquisition of the game stamp by transfer made the winner "illegitimate," thereby implying that acquisition in this way was "unlawful." Thus the government's argument tied the court's unwitting addition of "unlawfully acquired" language into the government's theory that transfer of the game stamps made the winners "illegitimate."
Furthermore, in rebuttal, the government argued that one defendant knew his game stamp was "unlawfully acquired" because he was asked to redeem it for someone who wanted to avoid splitting the proceeds with his soon-to-be divorced wife. This argument could not have been made if the court's instruction had required the jury to find defendants knew the game stamps were embezzled or stolen.
In a drug conspiracy, in which the object of the conspiracy is clearly illegal and there are various clandestine functions to perform, the conspirators can be charged with knowledge that others are performing these different functions See United States v. Bruno, 105 F.2d 921 (2d Cir. 1939). In this case, however, such knowledge may not be imputed to defendants since each of their redemptions was complete unto itself.
Induced, of course, by the government's motion in limine requesting such a ruling, and counseled by the government that such knowledge was irrelevant under the government's theory
Indeed, as we noted above, the government sought a recess to call the Justice Department for permission to dismiss the case
The government's only theory of culpability capable of withstanding the test for relevance imposed by the court's ultimate jury instructions was that the defendants showed a "reckless disregard" for the truth by failing to ask the right questions regarding the origin of the game stamps. Sufficient evidence of such a reckless disregard would support a jury inference that the defendants should have known of the unlawful origin of their game stamps, thus permitting conviction. Parker, 839 F.2d at 1479; United States v. Sawyer, 799 F.2d 1494, 1501-02 (11th Cir. 1986). Although the government propounded this argument, it offered little but speculation to support it. We find nothing in the evidence that would permit an inference beyond a reasonable doubt that the defendants recklessly disregarded strong indications that their redemptions were unlawful. On the contrary, the evidence was that the defendants were repeatedly told there was nothing unlawful about their redemptions. They were told various stories regarding the need for their redemptions, ranging from hiding the proceeds from divorced or divorcing wives, to aiding McDonald's in maximizing the geographical diversity of winners, to avoiding taxes by finding winners in lower income tax brackets. Whatever the illegitimacy of these reasons for agreeing to redeem game stamps, none was illegal. The most the government was able to show was that one defendant was told the game was "fixed." In view of the record evidence that McDonald's itself could be viewed as having "fixed" the game — by deliberately excluding Canada from receiving any high-value winning game pieces — we cannot hold that it established beyond a reasonable doubt that defendants had a reckless disregard for the truth. There was no proof whatsoever that any defendant recklessly disregarded the truth about the unlawful activity underlying the criminal conspiracy charged — the embezzlement of the game stamps.