Opinion ID: 400105
Heading Depth: 1
Heading Rank: 2

Heading: sufficiency of the evidence-mail fraud

Text: 7 The essential elements of a violation of the mail fraud statute, 18 U.S.C.A. § 1341 (West Supp.1981), 2 were recently set forth in United States v. Goss, 650 F.2d 1336 (5th Cir. 1981). There, we stated: 8 To establish a mail fraud violation, the government must prove the existence of a scheme to defraud that involved use of the mails for the purpose of executing the scheme. The evidence must demonstrate the defendant's specific intent to commit fraud. 9 Id. at 1341 (citing United States v. Freeman, 619 F.2d 1112, 1117 (5th Cir. 1980), cert. denied, 450 U.S. 910, 101 S.Ct. 1348, 67 L.Ed.2d 334 (1981); United States v. Zicree, 605 F.2d 1381, 1384 (5th Cir. 1979), cert. denied, 445 U.S. 966, 100 S.Ct. 1656, 64 L.Ed.2d 242 (1980); United States v. Kent, 608 F.2d 542, 545 n.3 (5th Cir. 1979), cert. denied, 446 U.S. 936, 100 S.Ct. 2153, 64 L.Ed.2d 788 (1980)). Appellants Bragg and Bethea argue that the evidence adduced at trial was insufficient to establish that the authorization of SITO was part of a scheme to defraud and insufficient to prove that the defendants had the requisite specific intent to defraud. We now turn to a review of the sufficiency of the proof offered by the government. 10 The standard for appellate review of criminal convictions for sufficiency of the evidence is well established. This court 11 must view the evidence, direct or circumstantial, in the light most favorable to the government and must accept all reasonable inferences and credibility choices that tend to support the jury's verdict. The standard of review is whether a jury could reasonably find that the evidence is inconsistent with every reasonable hypothesis of innocence or, put another way, whether a reasonably-minded jury must necessarily entertain a reasonable doubt of the defendant's guilt. 12 United States v. Marx, 635 F.2d 436, 438 (5th Cir. 1981), quoted in United States v. Glasgow, 658 F.2d 1036, 1040 (5th Cir. 1981) (citations omitted). For a conviction to stand, it must be supported by substantial evidence. United States v. Goss, 650 F.2d at 1343 n.3, United States v. Ferg, 504 F.2d 914, 916 (5th Cir. 1974). 13 Viewed in the light most favorable to the government, the evidence supporting the conclusion that Bethea and Bragg knowingly participated in a scheme to defraud the government is as follows: 14 1. The governing Department of Defense regulations contemplate, and the practice at the Fort Benning, Georgia, transportation office normally called for, the service member whose goods were being moved to request storage-in-transit at origin (SITO) before SITO would normally be authorized. 15 2. The regulations contemplate, and the general custom and practice at Fort Benning reflected, a preference for storage-in-transit at destination (SITD) when it was necessary to place goods in temporary storage. 16 3. Delcher Moving and Storage, Inc. received more SITO than did other carriers doing business with the Fort Benning Transportation Office, especially during the period of June-August, 1974. 17 4. From time to time, Bragg's secretary brought in government bills of lading (GBL's) to the transportation office at Fort Benning, as was common practice, in order that changes could be made to reflect that Delcher was providing different service than the GBL reflected. Stapled to these GBL's were handwritten notes to the effect that Mr. Bethea had authorized a given number of days of SITO. 18 5. SITO would be authorized in cases involving Delcher by a certified transportation agent (CTA) at Fort Benning, either on the authority of these notes or after consultation with Mr. Bethea, or Mr. Bethea would personally authorize SITO. 19 6. Of the service member transportation files introduced into evidence, most of the files with respect to which Delcher had been paid for SITO did not contain a Fort Benning Form 48, government telegram (TWIX) or other documentation of a request by a service member for SITO or other justification for its authorization. 20 7. Many service members testified that they had not personally requested SITO in connection with the shipment of their goods where charges for SITO had been paid to Delcher. 21 8. In one file, a certain service member's goods had been ordered out of nontemporary storage, which was at the service member's expense, to SITO at Delcher, which was at the government's expense. That file contained a handwritten note from Bethea instructing a secretary to call Ft. Reily, Kansas, about charges for storage, stating that a letter wouldn't be too wise in a crooked deal like this. 22 9. In March 1971, Bragg co-signed a loan of $6,000 for Bethea, who would not have received the loan without such a co-signature. Bethea gave Bragg a second mortgage on Bethea's home in the amount of $6,000 in the same month. This transaction was contrary to Army conflict-of-interest regulations. 23 10. Bethea was delinquent in repaying his loan on approximately 12 occasions. In three such cases, the bank contacted Bragg to inform him of the delinquency. Payment was thereafter received in each case, although there is no evidence that Bragg made any of the payments, and the loan was fully repaid. 24 The inferences that the government would have us draw from this evidence are as follows: 25 1. The notes were a signal to Bethea to authorize SITO for Delcher or a manifestation of communication between the two that SITO should be authorized despite the lack of need for it. 26 2. The lack of documentation in the files indicates that there was no legitimate reason for authorizing SITO. 27 3. The greater frequency of SITO's for Delcher indicates that SITO was being improperly authorized for Delcher's benefit. 28 4. Endorsement of the bank loan was a payment to Bethea in return for his cooperation in funnelling unnecessary SITO's to Delcher. 29 5. The security deed reflects a separate loan from Bragg to Bethea and not security for the endorsement of the bank loan. 30 6. The words crooked deal contained in the note mentioned above referred to Bethea's authorization of SITO contrary to regulations and practice for the purpose of passing a benefit to Delcher. 31 We acknowledge that it is possible that Bragg and Bethea participated in a scheme to defraud the government. After a painstaking review of the voluminous record in this case, however, we are not satisfied that, based on the evidence adduced at trial, a reasonable jury could have concluded beyond a reasonable doubt that the authorization of and charges for SITO were part of a scheme to defraud the government. We reach this conclusion because the evidence supporting the existence of a scheme to defraud is also strongly consistent with innocent activity. In this regard, we believe that a reasonable jury must have had at least reasonable doubt about the appellants' guilt based on the strength of the following inferences from the evidence which suggest that the actions of Bethea and Bragg with respect to SITO were innocent: 32 1. Bethea's authorization of SITO, although not in accord with the practice which called for a request by the service member for SITO, did serve the service member's needs with respect to the moving of the member's goods, and thereby furthered the best interests of the member and the Government. 33 2. Bethea's failure to follow the practice of obtaining documentation of a request by the member reflected the fact that the regulations were not systematically enforced or followed, and this failure was the result of either Bethea's good faith effort to comply with the needs of the service members, or carelessness. 34 3. Bragg's endorsement of the loan for Bethea, although contrary to the conflict of interest regulations applicable to Bethea, did not result in a detriment to the government since the evidence does not establish that SITO was authorized unnecessarily for the benefit of Delcher. 35 4. The crooked deal statement in the note in Rodgers' file referred to the unusual nature of the service provided by the transportation office-i.e., ordering Rodgers' goods out of storage at his expense and into storage-in-transit at the government's expense retroactive to the date he requested-and did not refer to anything illegal. 36 The main thrust of the government's case was that SITO had been authorized by Bethea where the service member had not specifically requested SITO. The prosecution contended that this was contrary to Department of Defense regulations, specifically DoD 4500.34-R § 6006 and A.R. 55-71 § 6-3. 3 These regulations do not specifically require a member request for SITO, although A.R. 55-71 appears to contemplate such a request. The standard established by DoD 4500.34-R § 6006 is that SITO may be authorized when it is in the best interests of the member and the government. Although the testimony offered at trial regarding the meaning of these regulations was conflicting, there was testimony by three employees of the Transportation Office at Fort Benning that the normal practice at that office was to obtain a written request from a member before authorizing SITO. Bethea had developed Form 48 for this purpose. 37 However, the lack of documentation in the files of a member's request for SITO, even coupled with the testimony of members that they did not actually request SITO, does not establish that Bethea authorized SITO or caused SITO to be authorized without regard for the need for SITO as part of a scheme to defraud the United States. The failure to ensure that there was documentation in each file to reflect a member's request for SITO may have been contrary to the spirit of the regulations and the normal practice at the Fort Benning office, but such a failure is not in and of itself a criminal act. It is undisputed that each service member is entitled to 90 days of temporary storage in connection with a change of duty station. 4 Testimony of government witnesses indicated that there are several circumstances in which SITO may be authorized in the best interests of the member without a specific request for SITO by the service member. An example of such a circumstance is a door-to-door move, where the member requests not to have his goods offloaded from the truck, but to have them delivered directly to his new address on a specified date. In one instance, a general was provided this service and the Transportation Officer himself, Colonel Berry Henderson, specifically authorized Delcher to charge for storage-in-transit at origin while leaving the goods on its truck in the warehouse. In addition, SITO may be authorized when the service member does not have a destination address. This is especially true where there is no approved storage facility with available space in the general area to which the service member is moving. SITO may also be authorized to handle other needs or requests of service members, such as a concern that goods not go into storage-in-transit at destination (SITD) in which case there is a chance that the delivery of the member's goods would be delayed. 38 Although the government proved that, in many files, the service member did not specifically request SITO, it did not show that Bethea's authorizations of SITO did not further the interests of the service members in question and were therefore inappropriate. In view of this, there is insufficient evidence to show that the government was defrauded by the authorization of wholly inappropriate SITO. Likewise, there is no showing that Delcher received any unjust or fraudulent benefit from the authorization of SITO. 39 Moreover, the government failed to prove that Bethea and Bragg had the requisite specific intent to defraud the government. Although in some circumstances intent to defraud may be inferred from a pattern of conduct, see United States v. Perez, 489 F.2d 51, 73 (5th Cir. 1973), cert. denied, 417 U.S. 945, 94 S.Ct. 3067, 41 L.Ed.2d 664 (1974), the repetition of SITO authorizations without documentation of member requests may well reflect a general ambivalence to such practice on Bethea's part during his good faith (or careless) efforts to satisfy the needs of the members. There is no evidence that, had this policy been vigorously enforced, less SITO would have been authorized to Delcher; Bethea would have been required to have been more diligent in contacting service members and explaining to them why his authorization of SITO would serve their needs. Likewise, the sketchy evidence that Delcher received more SITO than other movers is suggestive of the fact that Bethea funnelled SITO's to Delcher, but this inference does not support the conclusion that the authorization of SITO's was an attempt to defraud the government without proof that SITO was authorized unnecessarily. 5 40 Likewise, evidence that Bethea obtained, contrary to Army conflict of interest regulations, Bragg's co-signature on a $6,000 loan from the Phenix City National Bank does not prove beyond a reasonable doubt a specific intent to defraud the government. Although this transaction may have violated a duty which Bethea owed to the government, such a breach of duty does not establish fraud under § 1341 absent some detriment to the government. See United States v. Ballard, 663 F.2d 534, 540 (5th Cir. 1981). Here, the evidence does not establish that SITO was authorized without regard to the needs of the member; therefore, the co-signature does not establish that a scheme occurred. 41 We find the government's contention that the security deed represents a second loan to Bethea to be unreasonable. This argument is based solely on the fact that at several places in the deed the amount of indebtedness of Bethea to Bragg is stated to be $7,000. However, the face of the recorded document indicates a change to reflect that the indebtedness is $6,000. The government produced no evidence of any separate loan to Bethea or payments on such a loan if one existed. Additionally, there is no evidence suggesting that the security deed was anything but an effort on Bragg's part to be secured against the possibility that Bethea would default on the loan-which action would be more indicative of an arms-length transaction than a fraudulent payoff. 42 The note contained in the file of Guy Rodgers which Bethea wrote to a fellow employee in the transportation office to the effect that a letter wouldn't be too wise in a crooked deal like this is the strongest evidence which could be construed to establish Bethea's intent to defraud. However, the evidence in that file indicates that the goods of Sgt. Rodgers, who had been hospitalized, were in nontemporary storage at his expense when, on December 7, 1971, he requested the transportation office to pick up his goods as soon as possible. SITO was authorized as of that date; however, Rodgers had listed on his application for shipment and/or storage that the goods were in storage at Lambert Moving & Storage, when in fact they were stored at Delcher. When this was established some time later, Bethea authorized SITO retroactively, thereby satisfying the request of the member that his goods be taken out of storage at his expense on December 7. His requested delivery date was January 14, 1972, a date far enough after the requested pick-up date to require storage. Bethea's actions, although not expressly permitted by the language of the regulations, benefited the member by allowing him to take advantage of the SITO to which he was entitled and to avoid the necessity for Rodgers to pay for the storage personally. Consistent with these facts, the language in the note may refer to the unusual nature of this file and the unorthodox authorization of SITO to save the service member storage expense; these facts do not indicate that the remark pertained to an effort by Bethea to authorize SITO for the benefit of Delcher. Sgt. Rodgers' testimony does not indicate that he did not request immediate transfer of his goods out of nontemporary storage; in fact, Rodgers was unable at trial to corroborate the destination to which his goods were sent. Delcher could have benefited from this transaction only to the extent that there is some differential in the rates applicable to nontemporary and temporary storage-an argument that the government did not make with respect to this file. 43 The government also argues that it was fraudulent for Delcher to charge for the handling component of SITO in cases where a service member's goods were stored on the moving truck, rather than in the warehouse. In cases where it was necessary to store goods on the truck when SITO was authorized by Bethea or his associates, there is no evidence that Bethea had any knowledge that this charge was made by Delcher. There is no showing that Bethea reviewed the files to see what charges were in fact made after SITO was authorized. 44 Based on the evidence as a whole, we conclude that there is not substantial evidence to support the theory that the authorizations of and charges for SITO were part of a scheme through which Bethea and Bragg defrauded the government. Although the conduct of Bragg and Bethea may be somewhat suspicious, their actions are consistent with innocent activity, and a reasonably-minded jury must have had at least a reasonable doubt about whether the SITO charges were part of a scheme to defraud and whether Bragg and Bethea had the specific intent to defraud the government through SITO charges. 45 There is no evidence that Bethea participated in any aspect of the alleged scheme to defraud other than the authorization of SITO. Since we hold that the evidence does not establish that the conduct of the appellees with respect to SITO was part of a scheme to defraud the government, Bethea's convictions on Counts III and IV must be reversed. 6 46 Although there is insufficient evidence to prove that Bragg's actions in charging SITO to the government were fraudulent, there is additional evidence that Bragg participated in a scheme to defraud the government by inflating weights used to calculate charges for nontemporary storage and by charging for accessorial and other services not provided. However, in the five mail fraud counts, Counts III-VII, mailings were alleged only with respect to five particular service members, and the files of these service members contain evidence relating only to SITO, but no evidence at all with respect to any inflation of weights or other improprieties. 47 It is well established that, in order to satisfy the statutory requirement that the mails must be used for the purpose of executing the scheme to defraud, the government must show that the thing mailed was an integral part of the execution of the scheme so that the use of the mails was in this way 'incident to an essential part of the scheme.'  United States v. Kent, 608 F.2d 542, 546 (5th Cir. 1979), quoting Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435 (1954). Accord, United States v. Rodgers, 624 F.2d 1303, 1309-10 (5th Cir. 1980), cert. denied, 450 U.S. 917, 101 S.Ct. 1360, 67 L.Ed.2d 342 (1981); United States v. Knight, 607 F.2d 1172, 1175 (5th Cir. 1979). Therefore, where the mailings which serve as the basis for mail fraud counts relate only to an activity, i.e., SITO here, which the government has not proved to be part of a scheme to defraud, the mailings are insufficient to support mail fraud convictions. In this case, because the mailings relate only to the SITO allegations, which the government was unable to link sufficiently to a scheme to defraud, and do not relate to any of the other alleged devices to defraud, the mailings could not have been incident to an essential part of the scheme. Therefore, Bragg's convictions on Counts III-VII must be reversed also. 48 We believe that it will be helpful to an understanding of our holding on the mail fraud issue to examine the files pertaining to the specific mailings alleged in Counts III-VII. Count III related to the file of Chief Warrant Officer James G. Baque. Baque's application for shipment and/or storage, Form 1299, indicates that he requested that his goods be picked up on February 25, 1975, and delivered March 3, 1975, a date within the seven-day transit period. The government bill of lading (GBL) states that this was to be a door-to-door move. The GBL indicates that the goods were delivered on February 28, 1975; Baque maintained at trial that he received the goods on February 26, 1975, the day after they were picked up by Delcher. Baque further testified that he did not request SITO. Delcher received payment for a 30-day block of SITO in connection with this shipment. 7 The authorization of SITO with respect to this file is consistent with innocent activity. Given the evidence that SITO may be authorized to facilitate a door-to-door move with a delivery date within the allowable transit period, 8 it is reasonable to conclude that the authorization of SITO in this case was necessary to serve the interest of the member and the government to obtain such a move. 49 The mailing in Count IV pertained to Captain Tony R. Merriweather. Captain Merriweather testified on direct examination that he did not specifically request SITO. On cross-examination, however, he stated that he had requested that his goods be left on the truck after being picked up so as to avoid possible storage-in-transit at destination, which might delay the delivery of his goods to his quarters. When asked if he had therefore requested storage, Merriweather testified that he had. (Record, vol. 13, p. 51). This file is indicative of cases where a request for storage is subsumed within the member's request for a door-to-door move. In such a case, the authorization of SITO would facilitate the member's request for a door-to-door move and would therefore be in the best interests of the member and the government. In these files, the lack of documentation of a specific request for SITO is understandable. Since what the member desires is a door-to-door move, and unless the transportation office informs the member that authorization of SITO is the manner by which he will obtain a door-to-door move, there is no reason to expect that the member would make a specific request for SITO. 9 This innocent explanation of the authorization of SITO in cases involving door-to-door moves must give a juror a reasonable doubt regarding the fraudulent nature of such SITO authorizations, and the mere lack of documentation in the files, although contrary to preferred practice at Fort Benning, does not dispel this doubt. 50 In Count V, the mailing alleged was with respect to the file of Mr. John Purnell. Mr. Purnell did not specify the destination when he applied for shipment of his goods. His goods were picked up on July 8, 1975, and placed into storage-in-transit. Sometime around July 13, Purnell informed the transportation office by phone of the location of his home, and the goods were taken out of storage on the 13th. (Record, vol. 13, p. 9). Apparently, the goods were delivered on July 19. Neither the file nor the testimony of Purnell indicates where the goods were in the interim. There is no documentation in the file of Mr. Purnell's call requesting delivery. This file is an example of situations where SITO was authorized where no destination address was given by the service member. Although Colonel Henderson testified that SITD, not SITO, should be authorized whenever possible to avoid potential duplication of charges, (Record, vol. 17, p. 42), both Carolyn Coker and Pat Porter testified that SITO would be proper when the member did not specify an address or have available accommodations at destination, at least when there was a request for SITO. (Record, vol. 16, pp. 130, 221). While we may agree with the Colonel that authorization of SITD in this case may be preferable to avoid duplication of storage, it appears that the understanding of his CTAs and their practice was otherwise. In this type of case, we believe that there must be a reasonable doubt regarding the fraudulent nature of the authorization of SITO. The failure to obtain a documented request for SITO in such a case where there exists an underlying basis for authorizing SITO does not alter that conclusion. 51 The mailing alleged in Count VI relates to Captain William Boone, who had requested a door-to-door move, so that his goods would not be offloaded. (Record, vol. 13, pp. 58, 61). He later found his quarters to be unacceptable, so that when his goods were sent to Fort Gordon, they could not be delivered. The goods went into SITD there. Id. p. 63. Based on the foregoing discussion, the authorization of SITO in such a case does not appear to give rise to an inference of fraud, but seems quite reasonable. 52 In the mailing alleged under Count VII, Sgt. D. S. Leak requested that his goods be moved from Standing Rock, Alabama, to San Antonio, Texas. At the time he made his application for storage, Mr. Leak was in Alaska. Mr. Leak did not have a specific destination address, and he testified that he had anticipated that his goods would have to go into storage at destination. (Record, vol. 12, pp. 128, 129). His file does not, however, contain a request for SITD. Leak's application was sent from Alaska to Fort Benning, and there is some evidence of delay in the making of the arrangements for the packing and picking up of his goods, as the Form 1299 indicates that Delcher received only one day's notice before the goods were to be picked up. The testimony of Pat Porter indicates that the transportation office at times would offer SITO to carriers as a means to obtain desired service in unusual cases, (see Record, vol. 16, pp. 223, 226), and this file appears to present such an unusual case. Although this approach may well be contrary to the spirit of the regulations, the mere fact that Bethea utilized it in some circumstances does not indicate fraudulent behavior when other members of the same office did so as well, in apparent good faith. 10 53 In summary, we believe that a reasonable jury must have had a reasonable doubt with respect to the proof that Bethea and Bragg had knowingly participated in a scheme to defraud the United States through charges for SITO. Despite the testimony that the general practice at Fort Benning was to obtain a service member's request for SITO before it would be authorized, we do not believe that the absence of documentation of member requests for SITO, even accompanied with testimony from members that they made no such request, establishes proof of a scheme to defraud. Viewed as a whole and in the light most favorable to the government, the evidence of guilt is not substantial. We conclude that the jury must have entertained a reasonable doubt, and therefore we reverse the convictions of both Bethea and Bragg on mail fraud counts.