Court Opinion

ID: 3031142
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:45:28.853646+00
Date Added: 2024-06-11T09:50:12.806475
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 02-2523
                                    ___________

United States of America,                *
                                         *
             Appellee,                   *
                                         * Appeal from the United States
      v.                                 * District Court for the
                                         * Eastern District of Arkansas.
H. G. Frost, Jr., also known as          *
Jack Frost,                              *
                                         *
             Appellant.                  *
                                    ___________

                              Submitted: January 14, 2003

                                   Filed: March 7, 2003
                                    ___________

Before WOLLMAN and MURPHY, Circuit Judges, and GRITZNER,1 District Judge.
                         ___________

WOLLMAN, Circuit Judge.

       After a trial by jury, H. G. Frost, Jr. was convicted on one count of mail fraud
in violation of 18 U.S.C. § 1341, two counts of wire fraud in violation of 18 U.S.C.
§ 1343, sixty-two counts of money laundering in violation of 18 U.S.C. § 1957, three
counts of filing a false tax return in violation of 26 U.S.C. § 7206(1), one count of
making a false declaration before a grand jury in violation of 18 U.S.C. § 1623, and

      1
      The Honorable James E. Gritzner, United States District Judge for the
Southern District of Iowa, sitting by designation.
one count of obstruction of justice in violation of 18 U.S.C. § 1503. On appeal from
the judgment entered by the district court,2 Frost contends that the evidence was
insufficient to support his convictions for mail fraud, one of the wire fraud counts,
and thirty-three of the money laundering counts associated with those two fraud
counts. We affirm.

                                         I.

       Frost was a certified public accountant who worked exclusively for Harvey
Jones, the Jones Investment Company, the Harvey and Bernice Jones Charitable Trust
(the Trust), and other entities created by the Joneses. The Trust had two trustees,
Frost and Bernice Jones, wife of Harvey Jones. After the death of Harvey Jones,
Frost continued to work for the Jones entities. He was paid for his work, including
all work performed on behalf of the Trust, by the Jones Investment Company.
Bernice Jones was also paid for her work on behalf of the Trust from the Jones
Investment Company. The Trust instrument contained only one reference to the
compensation of trustees: “After the donor’s death, the trustees may charge and
deduct reasonable compensation for the services rendered and the responsibilities
assumed.” On May 17, 1990, Frost stated to the Internal Revenue Service that the
trustees would not be paid from the Trust, and that if they ever were, the trustees
would consult with the trust departments of regional banks to determine reasonable
compensation.

      In November 1993, Frost began to withdraw money from the Trust without the
consent of Bernice Jones. Frost sent money from the Trust to Murco Oil for
investment in oil wells. All royalty payments from those wells were paid to Frost.
Frost wired money from the Trust to his personal account at Goldman Sachs, a New

      2
       The Honorable James M. Moody, United States District Judge for the Eastern
District of Arkansas.

                                        -2-
York investment firm. Some of these funds were applied to Frost’s personal stock
and bond investments. Frost also wrote checks to himself from the Trust checking
account, purportedly for “compensation.” Checks drawn on the Trust checking
account required the signatures of both trustees. Frost stipulated that he placed
Bernice Jones’s signature and initials on a number of invoices and checks. Frost
received through the mail checks and bank statements from the bank holding the
Trust account.

       From November 1993 to January 1997, the Jones Investment Company paid
Frost $1,110,708 for his services to the Jones entities, including the Trust. In
addition, Frost obtained $1,852,245.67 of Trust money for his personal use. Frost
contends that under Arkansas law he was permitted to withdraw reasonable
compensation from the Trust without Bernice Jones’s consent and that consequently
the evidence does not support the fraud conviction and related money laundering
charges arising from the $1,261,373 paid to him from the Trust by check. For the
same reason, he argues for reversal of the wire fraud conviction and associated money
laundering charges representing the $225,000 of the wire transfer to his Goldman
Sachs account that he recorded in the Trust’s books as fees.

                                         II.

       In considering a challenge to the sufficiency of the evidence, we review the
evidence in the light most favorable to the verdict and accept as established all
reasonable inferences supporting the verdict. United States v. Oleson, 310 F.3d 1085,
1088 (8th Cir. 2002). We review the district court’s legal determinations de novo,
and uphold the conviction if a reasonable jury could conclude that the defendant was
guilty beyond a reasonable doubt. Id.

      To establish a case of mail fraud, the prosecutor must show the
      defendant (1) voluntarily and intentionally devised or participated in a

                                         -3-
      scheme to obtain money or property by means of false representations
      or promises, (2) entered into the scheme with the intent to defraud, (3)
      knew it was reasonably foreseeable that the mails would be used, and (4)
      used the mails in furtherance of some essential step in the scheme.

United States v. Kelley, 152 F.3d 881, 887 (8th Cir. 1998). “The essential elements
of wire fraud are: (1) a scheme to defraud, (2) use of interstate wires incident to the
scheme, and (3) intent to cause harm.” United States v. Ross, 210 F.3d 916, 923 n.8
(8th Cir. 2000).

       The evidence presented to the jury, viewed in a light most favorable to the
verdict, proves a violation of the mail and wire fraud statutes. Frost devised a scheme
to defraud the Trust, he intended to defraud the Trust, and he used the mails and wires
to implement his scheme. This case does not represent a simple misunderstanding as
to how Frost was to be compensated for his services to the Trust. Frost’s practice was
to submit a quarterly invoice for all of the hours he worked for the various Jones
entities and to receive compensation for all work, including Trust work, from the
Jones Investment Company. Frost was so compensated during the relevant time
period. The evidence at trial indicated that Frost believed he needed Bernice Jones’s
consent prior to compensating himself from the Trust. Checks drawn on the Trust’s
checking account required the signatures of both Frost and Bernice Jones. Frost
forged Bernice Jones’s signatures on invoices and checks to make it appear that
Bernice Jones had authorized the payments.

      Frost does not attack the government’s proof on any of the statutory elements.
Instead, he argues that nothing in Arkansas law or the trust instrument requires the
consent of both trustees before one may be compensated by the trust for services
rendered to the trust. We do not agree that the government, having proved beyond
a reasonable doubt each element of the offense, must also prove a violation of
Arkansas law. See United States v. Williams, 545 F.2d 47, 50 (8th Cir. 1976) (per

                                         -4-
curiam). If Arkansas law did control this point, however, we would hold that Frost
was required to obtain the authorization of Bernice Jones before compensating
himself from the Trust account. See Dunklin v. Ramsay, 944 S.W.2d 76, 78 (Ark.
1997) (“[C]o-executors and co-trustees must act as an entity in matters pertaining to
the administration of the estate; any other rule would lead to confusion and chaos and
create unnecessary charges against estate funds.” (citation omitted)). Arkansas courts
frequently look to the Restatement as authoritative on the law of trusts. See, e.g.,
Wisener v. Burns, 44 S.W.3d 289, 292 (Ark. 2001) (“When reviewing trust cases in
Arkansas, we have followed the Restatement (Second) of Trusts.”); Peek v. Simmons
First Nat'l Bank, 832 S.W.2d 458, 461 (Ark. 1992). The Restatement (Second) of
Trusts § 383 provides: “If there are several trustees of a charitable trust, the powers
conferred upon them can properly be exercised by a majority of the trustees, unless
it is otherwise provided by the terms of the trust.” Like the district court, we interpret
the language of the trust instrument to permit the two trustees jointly to authorize
reasonable compensation, but not to permit one trustee to take compensation against
the will of the other.

      The judgment is affirmed.

      A true copy.

             Attest:

                 CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                           -5-