Opinion ID: 765684
Heading Depth: 1
Heading Rank: 1

Heading: Background and Sufficiency of the Evidence

Text: 3 Beginning in the late 1980s, Riley and Coon created four companies to sell surplus lines insurance and provide insurance related services --Meadowlark Insurance Company, Commercial Indemnity Assurance Company, M& M Management Company, and Magnolia Acceptance Corporation, a premium finance company. These companies were collectively the alleged RICO enterprise. Riley effectively ran the enterprise. Coon controlled financial affairs, usually as company president. After regulators ran the insurance companies out of several States, Riley and Coon settled them in Missouri. 4 The trial focused on defendants' insurance activities in the early 1990s. Marketing surplus lines insurance in California, Riley and Coon collected premiums and then used the funds for other purposes, leaving numerous unpaid insurance claims and forcing corporate victims into insolvency. The government charged Riley and Coon with fraud together with bribery and obstruction offenses that constituted a pattern of racketeering activities. Defendants maintained that state insurance regulators were biased against them because they sold surplus lines, unregulated types of insurance usually provided by off-shore companies to insure high risks that licensed domestic insurers avoid. The jury found the government's charges valid beyond a reasonable doubt. We first discuss defendants' challenges to the sufficiency of the evidence, viewing that evidence in the light most favorable to the verdict and upholding a count of conviction if a reasonable jury could have found defendant guilty beyond a reasonable doubt. See United States v. Johnson, 56 F.3d 947, 956 (8th Cir. 1995). 5 A. The WBA Fraud. In April 1991, Commercial Acceptance Insurance Company ( CAIC) agreed that Meadowlark would sell surplus lines liability insurance under CAIC's name, with Meadowlark insuring the risks but paying 7% of the premiums to CAIC. Though CAIC's principals explained it was not licensed to sell health insurance, Riley and Coon as authorized agents of CAIC signed a contract to provide health insurance to members of the Western Businessmen's Association ( WBA). Between August and November 1991, WBA members paid over $1,000,000 in health care premiums that were deposited into a M& M Management Corp. Trust Account at the TransPacific Bank in Alameda, California. Coon transferred $649,000 out of this account, and defendants then used those funds for unrelated expenses, including bribes, personal investments, and the purchase of an insurance company. In October, CAIC learned that its name was being used to underwrite health insurance and withdrew Meadowlark's authority. In December, Riley and Coon transferred the claims files from California to Kansas City. Insureds were told that claims would not be paid in full because all premiums had not been paid. 6 For this scheme, the jury convicted Riley and Coon of two counts of knowingly transporting in interstate commerce property stolen, converted or taken by fraud. 18 U.S.C. § 2314. Each count focused on one transfer of funds from the TransPacific account. Riley and Coon argue the government failed to prove they stole or converted these funds because the account functioned as a simple business checking account in which they were the only authorized signatories. Defendants presented evidence that insurance companies pay claims from general operating assets, rather than holding collected premiums in trust for that purpose, and they argued there was no legal restriction on their use of monies in the TransPacific account. Leaving aside the fact that M& M signed a contract promising that all [WBA] premiums collected shall be deposited promptly in a fiduciary bank account in the name of Insurer at TransPacific Bank, defendants' argument ignores the government's proof they violated § 2314 because the funds in the TransPacific account were initially taken by fraud. 2 Even if M& M owned the funds in the account, title is not a defense if the funds were procured by fraud. See Gay v. United States, 408 F.2d 923, 926-27 (8th Cir.), cert. denied, 396 U.S. 823 (1969). Witnesses from the other parties to these transactions testified that defendants represented they were authorized to write health insurance on behalf of CAIC, knowing CAIC was not licensed to write health insurance. Riley and Coon agreed to set up a trust fund with the premiums to pay WBA members' health care claims, and then used over $649,000 of premium payments for other purposes, implementing their scheme with the two wire transfers charged in these counts. This evidence was sufficient to convict Riley and Coon of violating § 2314. 7 B. The IAC Fraud. The third fraud count concerned a separate scheme in which the predecessor to Meadowlark, which was not qualified to sell surplus lines insurance in California, undertook to provide malpractice insurance for members of the International Association Coalition ( IAC), a group of podiatrists formed in California. The agreement provided that M& M Management would deposit thirty percent of the premiums into a segregated trust account for the payment of claims losses and loss adjustment expenses only. Disbursements from the account required two signatures, Coon as representative of M& M, and Dr. Wener for IAC. Riley moved the account and removed the IAC signature requirement. Coon then made interstate transfers of $201,000 out of the trust account for non-related uses. The jury convicted Riley and Coon of violating § 2314 by making interstate transfers of $50,000 out of the trust account for IAC premiums. Defendants argue the evidence was insufficient for this conviction because IAC's interest in the premiums reverted to defendants' enterprise when IAC failed to pay all premiums owing. However, as the district court noted in denying their motion for judgment of acquittal, the two-signature requirement was an incident of IAC's ownership interest in the account. In addition, Dr. Wener testified that the insurer was only entitled to trust funds remaining after all claims were paid, and a claims reviewer testified that over $140,000 in loss reserves were outstanding at the time of the transfers. This was sufficient evidence that the transfers of these funds violated § 2314. 8 B. The Missouri Bribery Scheme. Riley and Coon were each convicted of four substantive violations of the Travel Act, and of conspiring to violate that Act, for making four interstate transfers totaling $290,000 with intent to bribe the Missouri Commissioner of Insurance. 3 It is undisputed defendants made four transfers totaling $290,000 to bank accounts in Jefferson City. Riley and Coon argue the government failed to connect these payments to a bribery scheme. 9 Meadowlark applied to the Missouri Department of Insurance for a license to sell surplus lines insurance. In December 1990, an examiner opined that its financial condition was inadequate. Robert Weller, a business associate of Kansas City attorney Kevin Hare, testified that in April 1991, Hare and Raymond Sermon hired Weller to make scripted telephone calls. Beginning in May, Weller met with Hare and Sermon four times to receive telephone calls from Riley. Each time, Hare would receive a call from Riley and turn the phone over to Weller, who posed as the Missouri Commissioner of Insurance and worked off a script prepared by Hare and Sermon. In the first conversation, Weller discussed the possibility of getting [Riley] licensed to write insurance in Missouri. In the three subsequent conversations, Weller as Commissioner said he could get the application through and demanded that Riley pay specific amounts of money. After the last conversation, Weller accompanied Hare and Sermon to a bank in Jefferson City where they received money and paid Weller his fee. Hare and Sermon kept the money transferred by Riley and Coon, and the Missouri Insurance Department eventually denied Meadowlark's license application. Weller received a total of $11,000 from Hare for helping swindle Riley and Coon out of the money. Weller ultimately pleaded guilty to tax fraud, and Hare was convicted of fraud for his role in the scheme. See United States v. Hare, 49 F.3d 447 (8th Cir.), cert. denied, 516 U.S. 879 (1995). Riley testified that in March 1991, he accepted Hare's offer to help with the Meadowlark licensing process. According to Riley, Hare then used his substantial political connections to help Meadowlark obtain a license, and Riley had Coon make four transfers totaling $290,000 to bank accounts in Jefferson City specified by Hare. 10 On appeal, Riley argues there was insufficient evidence that the first transfer of $60,000 was made with intent to facilitate bribery. Coon argues the evidence against her was insufficient as to all four transfers. Both claim the government failed to prove any acts in furtherance of the attempted bribery after the wire transfers, as 18 U.S.C. § 1952(a)(3)(A) requires. We disagree. Viewing the evidence in the light most favorable to the verdict, a reasonable jury could find that defendants made each transfer with the requisite intent to further a scheme to bribe the Commissioner. Weller testified to four phone calls; Riley and Coon made four payments. Weller specifically demanded bribes in the last three calls, and bribes were paid; the jury could deduce that the payment made after the first call was also made with intent to bribe. There was also sufficient evidence that Coon knowingly aided and abetted the bribery scheme -- she transferred the money to the Jefferson City accounts, and she later made damaging admissions in a taped meeting with Riley and a former employee and government witness named James Wining. Finally, there was sufficient evidence of acts in furtherance of the bribery scheme after the transfers. There were phone calls from Coon's residence to Hare's hotel room in Jefferson City after the transfers. Riley met with Hare in October 1992 in an effort to recover the money. And a year after the transfers, Hare cooperated with the government and taped conversations in which Riley said he would never tell anyone about their deal, reassured Hare that the authorities would not bother Weller, and advised Hare how to report the money for tax purposes. Efforts to hide involvement in a bribery scheme constitute thereafter acts under the statute. See United States v. Admon, 940 F.2d 1121, 1125 (8th Cir. 1991). 11 D. The Obstruction of Justice. James Wining was a Meadowlark employee who helped incorporate Meadowlark in the Dominican Republic and helped Coon prepare unreliable financials for an affiliated insurer. On March 17, 1992, Wining quit Meadowlark, pleaded guilty to fraud charges, and began cooperating with the on-going investigation of Riley and Coon. Between March and November 1992, Riley made bi-weekly payments to Wining totaling about $25,000. M& M reimbursed Riley, and Coon had an IRS Form 1099 prepared for Wining. Wining taped conversations with Riley in which they discussed the FBI investigation. Wining testified that the payments from Riley were to keep his mouth shut. Riley and Coon were convicted of violating 18 U.S.C. § 1510 (obstruction of Justice) for paying Wining to withhold information from federal investigators. 12 On appeal, Coon challenges the sufficiency of the evidence to convict her of this charge, arguing that Riley made the payments and there is no evidence Wining ever spoke to her about a federal investigation. However, Coon was present at a tape-recorded meeting when Wining and Riley discussed Wining's cooperation. She was financially responsible for M& M, which reimbursed Riley for the payments and prepared a Form 1099 for Wining. Viewing the evidence in the light most favorable to the verdict, a reasonable jury could find that Coon knew Riley was paying Wining to prevent harmful disclosures to federal investigators, and that she aided and abetted the offense by causing M& M to cover up the true nature of the payments. 13 E. The RICO Conviction. To convict defendants of a RICO violation, the government must prove they participated in the conduct of an enterprise through a pattern of racketeering activity. See 18 U.S.C. § 1962(c); United States v. Bennett, 44 F.3d 1364, 1374 (8th Cir.), cert. denied, 515 U.S. 1123 (1995). Riley and Coon argue the government failed to prove the predicate racketeering activities. Four of the seven alleged predicate acts were the separately charged fraud, Travel Act, and obstruction of Justice offenses we have already discussed. There was sufficient evidence to convict Riley and Coon of those separate offenses. That is sufficient evidence they engaged in a pattern of racketeering activity supporting their RICO convictions. See United States v. Cardall, 885 F.2d 656, 682 (10th Cir. 1989). 4 14 F. Denial of New Trial for Newly Discovered Evidence. Riley and Coon moved for a new trial, alleging that newly discovered bank records show that payments totaling $674,102 were made to WBA claimants from M& M's Kansas City account in 1992. The district court denied the motion because this evidence would not have affected the outcome of the WBA fraud conviction and was cumulative to other trial evidence. We agree. Whether defendants decided after collecting the WBA premiums to honor part of their obligations to insureds does not weaken the government's proof that the premiums were initially taken by fraud. Moreover, the alleged new evidence was cumulative because Riley testified at trial that he paid over $1,000,000 to satisfy WBA claims. The district court may grant a new trial if the interest of Justice so require. Fed. R. Crim. P. 33. There was no clear abuse of the court's discretion when it denied defendants' motion for new trial. See United States v. Castillo, 171 F.3d 1163, 1167 (8th Cir. 1999) (standard of review).