Opinion ID: 779007
Heading Depth: 3
Heading Rank: 1

Heading: The mail fraud charges

Text: 23 Caldwell challenges the mail fraud counts in his indictment on two grounds: (1) the counts are duplicitous, and (2) the indictment insufficiently alleges the elements of the offense. Duplicity of a count and the sufficiency of an indictment are both issues of law that this court reviews de novo. United States v. Sharpe, 193 F.3d 852, 865-66 (5th Cir.1999) (duplicity); United States v. Alford, 999 F.2d 818, 823 (5th Cir.1993) (sufficiency of the indictment). 24 A duplicitous indictment is one that alleges two or more distinct and separate offenses in a single count. United States v. Morrow, 177 F.3d 272, 296 (5th Cir.1999). Accordingly, in determining whether an indictment is duplicitous, the inquiry is whether [the indictment] can be read to charge only one violation in each count. Sharpe, 193 F.3d at 866. 25 Caldwell's indictment alleges that he intentionally devised and carried out a scheme: 26 (1) to defraud the taxpayers and officials of the State of Mississippi, the Board of Directors for [Magnolia Venture], and others to obtain money and property by means of false and fraudulent representations, pretenses and promises, and (2) [to] depriv[e] [Magnolia Venture] of its intangible right of honest services by breaching his fiduciary duty owned to [Magnolia Venture] as [its] Chairman of the Board of Directors and Chief Executive Officers. 27 After detailing Caldwell's alleged conduct in devising this scheme, the indictment alleges that Caldwell knowingly mailed certain letters via the U.S. Postal Service for the purpose of executing the scheme to obtain money and to deprive of honest services, each [letter] constituting a separate count. Relying on United States v. Curry, 681 F.2d 406 (5th Cir.1982), Caldwell argues that the mail fraud counts are duplicitous because each count alleges more than one scheme, i.e., each count alleges both (1) a scheme to defraud Mississippi officials and taxpayers and the board of Magnolia Venture to obtain money by false and fraudulent representations and (2) a scheme to deprive Magnolia Venture of the right to honest services. We agree with the government that Caldwell's indictment alleges only one scheme with two objects. However, even if each mail fraud count did allege multiple schemes, it does not follow, as Caldwell argues, that the counts would be duplicitous. While Caldwell is correct that this court described the indictment at issue in Curry as alleging two separate and distinct fraudulent schemes, 681 F.2d at 411, we did not hold that each separate scheme constitutes a separate mail fraud offense. Instead, we explicitly recognized that [u]nder the mail fraud statute, each mailing is a separate violation. Id. at 409 n. 5 (emphasis added); see also United States v. St. Gelais, 952 F.2d 90, 97 (5th Cir.1992) (It is not the scheme to defraud but the use of the mails or wires that constitutes mail or wire fraud.). 28 In United States v. Harvard, 103 F.3d 412 (5th Cir.1997), we rejected essentially the same duplicity argument as Caldwell's in reviewing a bank fraud count alleging that the defendant had devised a scheme to defraud and to obtain monies by false representation. Id. at 420. We reasoned that these two allegations were alternative ways in which [the] offense c[ould] be committed, not allegations of multiple violations of § 1344. Id. ; cf. Sanabria v. United States, 437 U.S. 54, 66 n. 20, 98 S.Ct. 2170, 57 L.Ed.2d 43 (1978) (A single offense should normally be charged in one count rather than several, even if different means of committing the offense are alleged.) (citing FED. R.CRIM. P. 7(c)(1)). 29 Accordingly, where a mail fraud count alleges only one instance of use of the mail in furtherance of multiple schemes (or a single scheme with multiple objects), the jury can find the defendant guilty of only one mail fraud offense on that count — regardless whether the jury finds that the defendant devised one or all of the alleged schemes associated with that particular use of the mail. Each mail fraud count in Caldwell's indictment contains only one allegation of use of the mail. Thus, none of the counts is duplicitous. 30 Caldwell also mounts several challenges to the sufficiency of the mail fraud charges in his indictment. First, he contends that the indictment insufficiently alleges mail fraud because Magnolia Venture is a private corporation, and private corporations cannot be deprived of the right to honest services for purposes of mail fraud. In support of this position, Caldwell relies on McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), a pre-§ 1346 case in which the Supreme Court held that § 1341 was limited in scope to the protection of property rights, and thus reversed the defendants' mail fraud convictions based on a scheme to deprive the citizens and government of Kentucky of honest services. Id. at 352, 360-61, 107 S.Ct. 2875. The McNally Court reasoned that [i]f Congress desires to go further, it must speak more clearly than it has. Id. at 360, 107 S.Ct. 2875. As this court recognized in United States v. Brumley, 116 F.3d 728 (5th Cir.1997) (en banc), Congress accepted the Court's invitation [in McNally ] by enacting § 1346, id. at 732, which makes explicit that the term `scheme or artifice to defraud' [in § 1341] includes a scheme or artifice to deprive another of the intangible right of honest services, 18 U.S.C. § 1346. 31 According to Caldwell, because § 1346 does not explicitly indicate that it applies to private corruption, the McNally Court's requirement that Congress make its intentions unequivocal indicates that § 1346 should not be construed as reaching private corruption. This court has concluded otherwise. In United States v. Gray, 96 F.3d 769 (5th Cir.1996), a post-§ 1346 decision, we affirmed a conviction of honest services mail fraud based on conduct undertaken in the private sphere. Id. at 774-75. Accordingly, Caldwell's contention that § 1346 does not extend to private corruption lacks merit. 32 Caldwell further contends that, even assuming § 1346 applies to cases involving private-employer victims, the indictment is nevertheless deficient because it fails to allege all the essential elements of the honest services form of mail fraud. Specifically, Caldwell maintains that under this court's decision in Brumley, a violation of state law is an essential element of honest services mail fraud that must be alleged in the indictment. Thus, Caldwell argues, the allegation in his indictment that he deprived Magnolia Venture of the right to honest services by breaching fiduciary duties that he owed to Magnolia Venture as chairman of its board and CEO is not sufficient because the indictment does not allege a state-law source of these fiduciary duties. 33 The essential elements of mail fraud that must be alleged in the indictment are (1) having devised or intending to devise a scheme to defraud (or to perform specified fraudulent acts), and (2) use of the mail for the purpose of executing, or attempting to execute, the scheme (or specified fraudulent acts). Carter, 530 U.S. at 261, 120 S.Ct. 2159 (internal quotations and citation omitted); see also, e.g., United States v. Reyes, 239 F.3d 722, 735 (5th Cir.2001). 8 Caldwell's indictment clearly alleges that he deprived Magnolia Venture of its right to his honest services, one of the types of scheme that satisfies the first element of mail fraud. The government correctly points out that the Brumley court did not hold that the state-law source of the right to honest services must be alleged in the indictment. Rather, this court held that, properly interpreted, honest services are services owed to an employer under state law and, thus, that the government must prove that the defendant deprived the employer of such services. See Brumley, 116 F.3d at 734. 34 Caldwell also claims that the charges based on deprivation of honest services are insufficient because the indictment fails to allege that the breach of the fiduciary duty was `material'. This court has held that a violation of the [fiduciary] duty to disclose [can] only result in criminal mail fraud where the information withheld from the employer [i]s material, Gray, 96 F.3d at 774 (quoting United States v. Ballard, 680 F.2d 352, 353 (5th Cir.1982 Unit B)), and that materiality must be alleged in an indictment charging mail fraud, see United States v. Richards, 204 F.3d 177, 192-93 (5th Cir. 2000). However, [i]f the facts alleged in the indictment warrant an inference [of] material[ity], the indictment is not fatally insufficient for its failure to allege materiality in haec verba.  Id. at 192 (quoting United States v. McGough, 510 F.2d 598, 602 (5th Cir.1975)) (first alteration in original). 35 Caldwell's indictment alleged sufficient facts to warrant an inference that the information that he failed to disclose was material. The indictment alleges several instances of Caldwell's failure to disclose information to the board of Magnolia Venture, including the failure to disclose (1) his promise to Billy Clements that he could withdraw part of his $5,000,000 investment in the Magnolia Fund to satisfy [his] tax liability in 1996, (2) his payment to himself of $225,000 drawn from the Magnolia Fund, (3) his solicitation and receipt of $38,730.96 from Pat Gilliand for a substantial investment in a number of securities [purchased] through [Gilliand] for and on behalf of [Magnolia Venture], and (4) his direction to Crawford to pay Caldwell a certain percentage of Magnolia Venture's profits each month. The indictment also alleges that, in urging the board to approve the contract with CSG, Caldwell falsely represented that he shared ownership of CSG with Lee Gilliand, that the DECD approved of the relationship between Caldwell and CSG, and that CSG was the only firm licensed to perform the services necessary for Magnolia Venture to carry out its mission. Finally, the indictment alleges that Caldwell falsely represented in CSG's bills to Magnolia Venture that CSG had incurred $14,000 in expenses that it did not in fact incur. This information that the indictment alleges Caldwell failed to disclose or misrepresented — involving significant sums of money and important business decisions — clearly warrants an inference of materiality. 9 36 Finally, Caldwell argues that his indictment is insufficient because it did not provide the factual specificity necessary to give him adequate notice of the mail fraud charges against him. Specifically, Caldwell objects to the indictment's failure to specify which action[s], including the alleged mailings, furthered which scheme. Federal Rule of Criminal Procedure 7(c) requires that [t]he indictment or the information shall be a plain, concise and definite written statement of the essential facts constituting the offense charged. FED.R.CRIM.P. 7(c). In applying this rule, this court has noted that [p]ractical, not technical, considerations govern the validity of an indictment, and the test of the validity of an indictment is `not whether the indictment could have been framed in a more satisfactory manner, but whether it conforms to minimal constitutional standards.' United States v. Chaney, 964 F.2d 437, 446 (5th Cir.1992) (quoting United States v. Webb, 747 F.2d 278, 284 (5th Cir.1984)). In addition to containing all the elements of the charged offense, a constitutionally sufficient indictment fairly informs the defendant of the charge that he or she faces and is precise enough to preclude the risk that the defendant may be prosecuted for the same offense in the future. Alford, 999 F.2d at 823. 37 As noted above, the first paragraph of the mail fraud counts alleges that Caldwell devised a scheme (1) to defraud Mississippi taxpayers and officials and Magnolia Venture's board by means of false or fraudulent representations to obtain money, and (2) to deprive Magnolia Venture of its right to honest services. This initial paragraph largely tracks the language of §§ 1341 and 1346. The subsequent paragraphs describe specific acts alleged to be part of the scheme and artifice to defraud. More specifically, these paragraphs set out (1) the misrepresentations (both affirmative and by omission) allegedly made by Caldwell, (2) the monetary transactions (including specific amounts) and agreements that he allegedly effected through the use of his authority as CEO of Magnolia Venture and as sole owner of CSG, and (3) the dates on which these acts allegedly took place. 38 We are unpersuaded by Caldwell's conclusory assertion that the indictment was rendered constitutionally insufficient by its failure to match each alleged act with either the scheme to defraud the Mississippi taxpayers and officials and Magnolia Venture's board by false or fraudulent representations to obtain money or the scheme to deprive Magnolia Venture of its right to honest services. The considerable level of detail used in the indictment to describe the various acts constituting the scheme on which the government based the mail fraud counts provided Caldwell with adequate notice of the facts and circumstances on which the mail fraud charges were based and precluded the risk of prosecution for the same offenses in the future. 10 39 Similarly, because the indictment contains detailed allegations of the acts underlying the charges, Caldwell was adequately apprised of how the government understood the mailings to further the scheme. Two of the mail fraud counts on which Caldwell was convicted are based on letters to two members of Magnolia Venture's board notifying them of the special board meeting that Caldwell called to present his employment contract and the CSG contract to the board for approval. The allegations regarding Caldwell's misrepresentations at this special board meeting are sufficient to provide Caldwell with notice of how these mailings furthered the alleged scheme. The third count of mail fraud is based on Caldwell's letter to Liza Looser urging her to grant him a bonus of $75,000 for his performance as CEO. The indictment specifically referenced this letter, noting that therein Caldwell touted his success in securing a $5,000,000 investment. In addition, the indictment detailed Caldwell's dealings with Billy Clements that resulted in this investment. Thus, Caldwell was also fairly informed of the connection between this third mailing and the alleged scheme.