Opinion ID: 529387
Heading Depth: 3
Heading Rank: 4

Heading: Mr. Anderson

Text: 99 Appellant Anderson claims that he was merely a gofer in the clearinghouse operations and that, at most, his duties were ministerial in nature. Consequently, he argues that there was insufficient evidence to support his conviction on the RICO and ITSP counts. 100 Mr. Anderson was a relative latecomer to the clearinghouse operation. By all accounts he was hired because of his banking background, and the evidence showed that he had substantial, day-to-day involvement with the clearinghouse bank accounts. Not only was he familiar with the source of clearinghouse funds (undertaker contacts) he was also aware of the fact that speculative ventures were being organized and funded via diverted undertaker funds. 44 Additional evidence of Mr. Anderson's knowledge of, and participation in, the scheme to defraud was his statement to a clearinghouse sales agent to the effect that the bankruptcy petition had been filed to hold regulatory agencies at bay, but that the clearinghouses had ample assets to cover undertaker investments. This representation of clearinghouse assets was false, and Mr. Anderson's knowledge of the financial condition of the operation was well established. 101 Particularly relevant to his convictions was evidence that, in addition to the clearinghouse accounts, Mr. Anderson controlled other accounts 45 in which hundreds of thousands of dollars in undertaker funds were deposited. From those accounts Mr. Anderson made various disbursements to himself 46 and others, including a $10,000 loan, to cover a third person's mortgage payment which was never repaid. 47 Anderson-controlled undertaker funds were diverted even after bankruptcy was declared, and those accounts were not listed as part of the bankrupt estate. Mr. Anderson's own affidavits omitted reference to those accounts. From these facts the jury could have found beyond reasonable doubt that Mr. Anderson was a full and knowing participant in the scheme to defraud, including its ITSP, bankruptcy fraud, and mail fraud aspects. 102 Finally, Mr. Anderson challenges the RICO conviction. In light of our preceding discussion of his extensive involvement in the clearinghouse operation, we find no merit to his RICO challenge. Mr. Anderson's convictions are affirmed. 103 G. Mailings Required by Law as Basis for Mail Fraud Conviction 104 Messrs. Cardall and Crowther appeal their conviction on a mail fraud count, arguing that the mailing which served as the basis for the count was a legally compelled mailing; consequently, it could not be the basis for a criminal conviction under 18 U.S.C. Sec. 1341 unless the government proved the mailings were necessary to the execution of the fraudulent scheme. The legally compelled mailing in this case was a notification by the Bureau of Land Management that appellants had successfully bid on a BLM lease of potential oil properties in Wyoming. 48 105 In order to convict a defendant under 18 U.S.C. Sec. 1341 (1982) the government must prove two elements: (1) a scheme or artifice to defraud or obtain money or property by false pretenses, representations or promises; and (2) use of the United States mails for the purpose of executing the scheme. See Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435 (1954); United States v. Taylor, 832 F.2d 1187, 1192 (10th Cir.1987). The crux of the parties' disagreement on this point of appeal concerns the second element--whether the use of the mails was for the purpose of executing the scheme. The government argues that 106 [t]he scheme involved here had many aspects, one of which was the diversion of clearinghouse funds for purposes other than that represented to undertakers. Count 21 dealt with such a diversion. Undertaker money were used for acquisition of oil leases and exploration of the leases. The evidence showed that Business Consultants engaged in the acquisition of a number of oil leases and that the one involved in Count 21 was merely a part of a larger plan.... Clearly, the development of land leased by the BLM could not have commenced until receipt of notice of a successful bid.... The notification that one bid had succeeded furthered the scheme. Since the notification came from Wyoming, receipt via the mail was not unexpected. 107 Appellee's brief, at 32-33. 108 For their part appellants contend that the object of the fraud was to obtain money from undertakers. Once the money came into the clearinghouse, the fraud as to that investor was complete. Therefore, notification by the BLM that they had been awarded the oil lease did not further the scheme in violation of the mail fraud statute. 109 In defining the scope of the mail fraud statute, the Supreme Court has instructed that [t]he federal mail fraud statute does not purport to reach all frauds, but only those limited instances in which the use of the mails is a part of the execution of the fraud, leaving all other cases to be dealt with by appropriate state law. Kann v. United States, 323 U.S. 88, 95, 65 S.Ct. 148, 151, 89 L.Ed. 88 (1944). To be part of the execution of the fraud, however, the use of the mails need not be an essential element of the scheme, as long as it is incident to an essential part of the scheme, Pereira, 347 U.S. at 8, 74 S.Ct. at 363, or a step in [the] plot. Badders v. United States, 240 U.S. 391, 394, 36 S.Ct. 367, 368, 60 L.Ed. 706 (1916). The question in this case is whether this mailing was sufficiently related to appellants' scheme to bring their conduct within the statute. We conclude it was not. 110 In Kann the Supreme Court reversed a mail fraud conviction on the basis that the alleged use of the mails had not been for the purpose of executing the scheme in violation of federal law. In that case certain corporate officers and directors had set up a dummy corporation to which they diverted for their own use profits from their employer-corporation. As part of the scheme, certain checks drawn on two separate banks were sent by mail. Those transactions became the basis of the mail fraud counts. The Court held that since the checks had been deposited and the money irrevocably received by defendant, [t]he scheme in each case had reached fruition. 323 U.S. at 94, 65 S.Ct. at 151. Thus, it was immaterial that the depositor bank had used the mails to seek collection from the drawee bank. The Court concluded that [i]t [could not] be said that the mailings in question were for the purpose of executing the scheme, as the statute requires. Id. The Court distinguished cases where the mails are used prior to, and as one step toward, the receipt of the fruits of the fraud, id., or when they are used as a means of concealment so that further frauds which are part of the scheme may be perpetrated. Id. at 94-95, 65 S.Ct. at 151. 111 By contrast, in Pereira, the Court upheld the conviction of a man accused of defrauding a widow of her property after marrying her. Defendant had convinced his wife to sell securities she owned in California and to advance him the money for a proposed venture. The securities were sold and a check was sent to Texas, where it was deposited for collection. After the check cleared, a cashier's check was drawn in favor of the defendant, who thereafter disappeared with the money. The Court held that the mailings in Pereira played a significant part in enabling the defendant to acquire dominion over the funds with which he later absconded. Consequently, the conviction under section 1341 was affirmed. 112 In Parr v. United States, 363 U.S. 370, 80 S.Ct. 1171, 4 L.Ed.2d 1277 (1960), the Court reversed mail fraud convictions on the basis that the evidence could not support a judgment that the mails had been used as part of a scheme to defraud. The evidence showed, inter alia, that the Parr defendants had misappropriated, converted, and embezzled funds and property of the Benavides Independent School District in Duval County, Texas, by (1) arranging to have district checks issued in the name of fictitious persons and/or family members; which checks were then cashed for the benefit of defendants; (2) converting checks received by the school district in payment of taxes; and (3) obtaining gasoline and other services through the unauthorized use of school district credit cards. 113 Defendants argued, and the Court agreed, that those crimes were essentially state crimes and could become federal ones, under the mail fraud statute, only if the mails were used 'for the purpose of executing such a scheme.'  363 U.S. at 385, 80 S.Ct. at 1180 (quoting 18 U.S.C. Sec. 1341). The Court concluded that legally compelled mailings, which were lawful in and of themselves, could not be made the basis for a criminal conviction under Sec. 1341 simply because certain individuals who were authorized to make the tax assessment planned to steal some of the tax money after it was received. Moreover, the mailings associated with the unauthorized use of district credit cards could also not support a conviction under section 1341 because there was an insufficient connection between the mailings and the execution of the scheme to defraud. Relying on Kann, the Court held that  '[t]he scheme had reached fruition' when [defendants] received the goods and services ... 'irrevocably. It was immaterial to them, or to any consummation of the scheme, how the [oil company] ... would collect from the [District].'  Id. at 393, 80 S.Ct. at 1184 (quoting Kann, 323 U.S. at 94, 65 S.Ct. at 151). 114 In United States v. Maze, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974), another case involving the fraudulent use of credit cards to receive goods and services from motel operators in several states, the Supreme Court again held that the mailings at issue were not sufficiently closely related to the scheme to defraud and therefore did not fall within the purview of section 1341. According to the Court, the scheme to defraud reached fruition when defendants checked out of the motels, and the scheme did not depend on which victim ultimately bore the loss. Maze, 414 U.S. at 402, 94 S.Ct. at 649. 115 The most recent Supreme Court discussion of this issue is found in Schmuck v. United States, --- U.S. ----, 109 S.Ct. 1443, 103 L.Ed.2d 734 (1989). There, a used-car distributor was charged with multiple counts of mail fraud. The scheme to defraud involved the rolling back of automobile odometers in used cars and resale of those cars to retail dealers who, in turn, sold the cars to consumers. The mailing of the title-application forms on behalf of the final purchasers formed the basis for the various counts. 116 Petitioner contended that the title applications were not in furtherance of the fraudulent scheme and, thus, did not satisfy the mailing element of the crime. In holding that the mailing in question fell within the scope of the statute, the Court reemphasized that the mailing must be related to an essential part of the scheme, although the relationship need not be direct. Id. 109 S.Ct. at 1448. The Court stated: [A]lthough the registration-form mailings may not have contributed directly to the duping of either the retail dealers or the customers, they were necessary to the passage of title, which in turn was essential to the perpetuation of Schmuck's scheme. Id. The Court distinguished Kann, Parr, and Maze in that in all three of those cases the fraud had reached fruition, and the longterm success of the fraud did not turn on which of the potential victims bore the ultimate loss. Id. at 1449. By contrast, in Schmuck the fraud had not reached fruition because a failure in [the] passage of title would have jeopardized Schmuck's relationship of trust and goodwill with the retail dealers upon whose unwitting cooperation his scheme depended. Id. In sum, then, the mailings related to passage of title were necessary in maintaining the ongoing viability of the fraud. 117 Unlike the situation in Schmuck, the BLM mailing in this case was not necessary in maintaining the ongoing viability of defendant's fraud, either directly or indirectly. 49 It is clear that undertaker funds were employed to acquire and exploit various oil properties, including the successful BLM lease bid, and that those funds were largely acquired by fraud. However, the success of defendants' fraudulent scheme in no way depended upon the receipt of a BLM bid award. The scheme had reached fruition at the point that defendants acquired undertaker funds through misrepresentation; we hold that the BLM's use of the mail to notify defendants of the bid award was not for the purpose of executing the scheme. Consequently, we reverse defendants' convictions on Count 21. 118 In light of our disposition, we find it unnecessary to decide whether the BLM bid award constituted a legally compelled mailing; and, if so, whether Parr would apply to this case in order to defeat the mail fraud conviction. 119 H. Argument that Reversal of a RICO Predicate Offense Requires Reversal of the RICO Convictions. 120 As a final matter, appellants Cardall and Crowther argue that reversal of one or more of the predicate offenses requires reversal of their RICO convictions. 50 Because we have reversed their convictions on one count of mail fraud, we examine the effect of our action on the RICO counts. 121 We begin our analysis by examining what the government must prove in order to secure a conviction under 18 U.S.C. Secs. 1962(c), (d) (1982). Section 1962(c) prohibits any person associated with an enterprise (affecting interstate commerce) from conducting the enterprise's affairs through a pattern of racketeering activity. Section 1962(d) prohibits persons from conspiring to violate any of the substantive RICO provisions, including section 1962(c). 122 The definition of pattern of racketeering activity in the RICO statute requires at least two acts of racketeering activity within a ten-year period. 18 U.S.C. Sec. 1961(5) (1982). Racketeering activity encompasses a number of crimes identified in the statute, including mail fraud, wire fraud, ITSP, and bankruptcy fraud. 18 U.S.C. Sec. 1961(1) (Supp. V 1987). In order to prevail under section 1962(c) the government had to prove beyond reasonable doubt that defendants conducted the affairs of the clearinghouse enterprise, which undisputedly affected interstate commerce, through a pattern of behavior which included at least two predicate acts of mail fraud, wire fraud, ITSP, or bankruptcy fraud within a ten-year period. In addition, under section 1962(d), the government had to prove agreement among defendants to perform the necessary racketeering acts in furtherance of the affairs of the enterprise. 123 In addition to the RICO counts, Mr. Cardall was separately convicted on twenty-five other counts, and Mr. Crowther was convicted on eighteen other counts. All of these offenses qualify as RICO predicate offenses. The fact that we have overturned their conviction on one mail fraud count does not eliminate the fact that ample independent grounds exist to sustain the RICO conviction. 124 Appellants' reliance on United States v. Ruggiero, 726 F.2d 913 (2d Cir.), cert. denied, 469 U.S. 831, 105 S.Ct. 118, 83 L.Ed.2d 60 (1984), is unwarranted. In Ruggiero the Second Circuit reversed a defendant's RICO conspiracy conviction after concluding that one of the crimes charged did not qualify as a RICO predicate act. However, the Ruggiero court's decision turned on the fact that defendants were never separately convicted of the predicate offenses alleged in support of the RICO count. The jury's finding that defendant had violated Sec. 1962(d) therefore depended on the inference that the jury had found that defendants committed at least two of the alleged offenses. Since the jury's verdict may have rested on a legally insufficient basis, the RICO conviction had to be reversed. 125 The circumstances in this case clearly differ from those in Ruggiero. In our judgment, this case is more like United States v. Weisman, 624 F.2d 1118 (2d Cir.), cert. denied, 449 U.S. 871, 101 S.Ct. 209, 66 L.Ed.2d 91 (1980). In Weisman the appellant challenged his RICO conviction claiming that certain conspiracy counts were improperly considered as predicate acts under RICO. Although the court squarely rejected that contention, it noted that even if defendant's contentions were correct, the RICO conviction was nevertheless valid because the separate substantive crimes charged in the indictment were also alleged in the RICO count as predicate acts of racketeering. Weisman, 624 F.2d at 1123-24. As a result, the [Weisman ] court was assured by the separate convictions that the jury had found defendant guilty of committing at least two of the predicate acts necessary for conviction. Ruggiero, 726 F.2d at 922 (distinguishing Weisman ). Here, likewise, the substantive crimes of mail fraud, wire fraud, ITSP, and bankruptcy fraud were specifically alleged as predicate racketeering acts in the RICO counts. Thus, the separate convictions justify our conclusion that the jury found the necessary predicates to the RICO convictions. Messrs. Cardall and Crowther's RICO convictions are affirmed.