Opinion ID: 702500
Heading Depth: 1
Heading Rank: 2

Heading: Mail Fraud Conviction

Text: 11 Coyle first argues that the evidence with respect to the mail fraud was insufficient for the jury to find that he engaged in a scheme intended to defraud the Fund or that the mailings of the Schedules A were in furtherance of the fraudulent scheme. When the sufficiency of the evidence at trial is challenged, we must view the evidence in the light most favorable to the government. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942). A claim of insufficiency of evidence places a very heavy burden on the appellant. We must affirm the convictions if a rational trier of fact could have found defendant guilty beyond a reasonable doubt, and the verdict is supported by substantial evidence. United States v. Gonzalez, 918 F.2d 1129, 1132 (3d Cir.1990), cert. denied, 498 U.S. 1107, 111 S.Ct. 1015, 112 L.Ed.2d 1097, and cert. denied, 499 U.S. 968, 111 S.Ct. 1604, 113 L.Ed.2d 667 and cert. denied, 499 U.S. 982, 111 S.Ct. 1637, 113 L.Ed.2d 733 (1991). 12 The mail fraud statute, 18 U.S.C. Sec. 1341, proscribes any scheme or artifice to defraud in which the defendant participated with the specific intent to defraud and in which the mails were used in furtherance of the fraudulent scheme. United States v. Hannigan, 27 F.3d 890, 892 (3d Cir.1994). The scheme need not be fraudulent on its face but must involve some sort of fraudulent misrepresentations or omissions reasonably calculated to deceive persons of ordinary prudence and comprehension. United States v. Pearlstein, 576 F.2d 531, 535 (3d Cir.1978) (citation omitted). Proof of specific intent is required, id. at 537, which may be found from a material misstatement of fact made with reckless disregard for the truth. Hannigan, 27 F.3d at 892 n. 1. 13 Coyle argues that the Fund was not induced to enter into these contracts by fraud. The issue before us is not whether there was fraud in the inducement of the contract, but whether Coyle intentionally engaged in a scheme by which the Fund was defrauded of premiums under the guise of administrative costs. There is sufficient evidence that there was such a scheme, and that Coyle knowingly participated in it. 14 There was testimony that the amounts reported on the Schedules A which Coyle prepared for the Fund did not accurately reflect the administrative costs retained and the amounts paid to providers. App. at 259-64. Cusumano, who was intimately involved in the scheme, testified that we reported improperly, with my full knowledge, and kept more dollars for administration than we were supposed to where we were compelled to by the New Jersey contract and kept more dollars in Pennsylvania by not paying the dentists as many dollars as we were supposed to pay them, through various functions, we kept an excessive amount of dollars for administration so that we could keep the company going. App. at 54. 15 Cusumano also testified that Coyle was the HCA representative who dealt with the Fund. App. at 56. Moreover, it was Coyle who supervised the preparation of the Schedules A by the HCA staff and he personally provided the figures for administrative costs. App. at 44. 16 HCA accountant Keith Geyer explained that, rather than following standard accounting procedures, Coyle set an amount to report for administrative retention and directed him to subtract that amount plus the amount of Smith's commissions from the premiums received to arrive at the amount HCA reported as claims paid. Cusumano testified that a fair retention rate for administrative costs would have been at most in the low 20% of the total premiums received, App. at 60, and Alex Johns, a consultant hired by the Fund, testified that 10% was a fair rate. Agent Black produced documents evidencing that HCA's actual retention rate (including the amount paid in commissions) was between 30% and 70%. See App. at 251-64. 17 Coyle argues that the Fund Trustees were not deceived by HCA because they knew that HCA was not accounting to the Fund based on HCA's actual payments to the providers but was instead accounting to the Fund on the basis of the usual, customary and reasonable value of the providers' services. Coyle notes that although Johns had advised the Trustees that the Fund might be entitled to a refund from HCA and that it should cancel its contracts with HCA, the Fund did not take that advice. In addition, Coyle argues that the government failed to produce any evidence that the Fund Trustees reviewed the Schedules A. 18 To the extent that Coyle is arguing the Fund was negligent in ignoring Johns' advice and in failing to review the Schedules A, we reject the relevance of those allegations, even if true. The negligence of the victim in failing to discover a fraudulent scheme is not a defense to criminal conduct. United States v. Kreimer, 609 F.2d 126, 132 (5th Cir.1980). As Cusumano explained, the false reporting was necessary to the scheme to retain the excessive administrative costs, because the consequence of accurate reporting would have been that they would have had to lower the price for the ensuing year for that contract. App. at 54. As for the Fund's reliance, Jack Klein, the Fund's accountant, testified that he had no obligation to independently verify the validity of the figures provided by HCA and, therefore, did not do so. An employer trustee for the Fund, Theodore Seidenberg, who was later co-chair of Local 286's health and welfare and pension boards, testified that the Trustees would never have agreed to contract with HCA if they had known that HCA was withholding between 50% and 70% for administrative costs. App. at 165. A rational jury could infer that the Fund was deceived by the intentional actions of Coyle and his associates. Coyle's participation in HCA's unlawful activities by preparing the Schedules A or directing their preparation with false figures and the knowledge that the Schedules A would be sent to the Fund's accountant and, eventually, to the IRS fully supports the conclusion that he intended that the scheme's illicit objectives be achieved. Pearlstein, 576 F.2d at 541. 19 Coyle also contends that even if the three Schedules A on which the three mail fraud counts are predicated were intended to conceal HCA's true profits from the Fund, the mailings did not further the scheme. The three mailings which formed the basis of the three mail fraud counts were a mailing of a Form 5500 with a Schedule A by the Fund to the IRS in 1987, (Count One), a mailing of a Schedule A by HCA to the Fund's accountant in 1988, (Count Two), and a mailing of a Form 5500 with the Schedule A by the Fund's accountant to the IRS in 1990, (Count Three). 20 The federal mail fraud statute reaches only the use of the mails when that mailing is part of the execution of a fraud. Schmuck v. United States, 489 U.S. 705, 710, 109 S.Ct. 1443, 1447, 103 L.Ed.2d 734 (1989) (citing Kann v. United States, 323 U.S. 88, 95, 65 S.Ct. 148, 151, 89 L.Ed. 88 (1944)). However, the use of the mails need not be an essential element of the scheme. Id. (citing Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435 (1954)). It is sufficient if the mailings are  'incident to an essential part of the scheme' or 'a step in [the] plot.'  Id. at 710-11, 109 S.Ct. at 1448 (quoting Badders v. United States, 240 U.S. 391, 394, 36 S.Ct. 367, 368, 60 L.Ed. 706 (1916)). We have held that the mailings must be sufficiently closely related to the scheme to bring the conduct within the ambit of the mail fraud statute, United States v. Lebovitz, 669 F.2d 894, 896 (3d Cir.), cert. denied, 456 U.S. 929, 102 S.Ct. 1979, 72 L.Ed.2d 446 (1982), and the scheme's completion [must] depend[ ] in some way on the charged mailings. United States v. Otto, 742 F.2d 104, 108 (3d Cir.1984), cert. denied, 469 U.S. 1196, 105 S.Ct. 978, 83 L.Ed.2d 980 (1985). Even mailings made after the fruits of the scheme have been received may come within the statute when they are designed to lull the victims into a false sense of security, postpone their ultimate complaint to the authorities, and therefore make the apprehension of the defendants less likely than if no mailings had taken place. Id. (citation and quotation omitted). 21 In this case, there was a basis for the jury to conclude that the mailings induced the Fund Trustees to accept the accuracy of the financial figures on the Schedules A and made apprehension of HCA's fraudulent scheme less likely. There was sufficient evidence for the jury to infer that but for the mailings of the Schedules A with the false amounts HCA would have been unable to carry out its scheme either because the true figures would have prompted an investigation by the Department of Labor, see Transcript of Jury Trial, Dec. 1, 1993 (9:30 a.m.) at 103-16 (Testimony of Howard Hensley, Chief of Division of Reporting and Disclosure, Department of Labor), or because the Fund's accountants or consultant would have alerted the Fund to the amount of HCA's profit, see Transcript of Jury Trial, Dec. 1, 1993 (9:30 a.m.) at 25-55 (Testimony of Alex Johns), and Transcript of Jury Trial, Nov. 30, 1993 (9:30 a.m.) at 133-52 (Testimony of Jack Klein). 22 Thus, the mailings were incident to an essential part of the scheme, i.e., concealing HCA's true profits. We hold that there was sufficient evidence to sustain Coyle's conviction on the three counts of mail fraud.