Court Opinion

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Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

12-18-2006

USA v. Hevener
Precedential or Non-Precedential: Non-Precedential

Docket No. 05-2794

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                                                                 NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ____________

                                      No. 05-2794
                                     ____________

                           UNITED STATES OF AMERICA

                                              v.

                                 JOHN HEVENER, JR.,

                                           Appellant
                                     ____________

                    On Appeal from the United States District Court
                        for the Eastern District of Pennsylvania
                                (D.C. No. 04-cr-00298)
                    District Judge: Honorable Eduardo C. Robreno
                                     ____________

                      Submitted Under Third Circuit LAR 34.1(a)
                                 December 13, 2006

          Before: FISHER, CHAGARES and GREENBERG, Circuit Judges.

                               (Filed: December 18, 2006)
                                      ____________

                              OPINION OF THE COURT
                                   ____________

FISHER, Circuit Judge.

      John Hevener, Jr. was charged in a two-count indictment for mail fraud in

violation of 18 U.S.C. § 1341. Following a jury trial, he was convicted on both counts,
sentenced to 33 months in prison and ordered to pay $634,394.50 in restitution. He now

appeals his conviction. For the reasons below, we will affirm his conviction.

                                            I.

      Because we write only for the parties, we will forgo a lengthy recitation of the

legal and factual background to this case. Hevener, in addition to being involved in

several overseas business ventures, was the creator of a Ponzi1 scheme in which he

solicited investments from his accounting clients, claiming they were high-yield, low-risk

investments, and then disbursed a majority of the investment money to himself or

corporations he controlled.

      Beginning in 1990, Hevener encouraged his clients to invest money in various

business entities of which Hevener claimed to be a part. In 1990, based on Hevener’s

representations that such investments were virtually “risk free,” Edward Ream made two

investments, one for $14,000 and one for $24,000, in United Equity & Leasing

Corporation (“United Equity”), a company that was controlled entirely by Hevener. The

$24,000 loan was repaid with interest in 1992.

      1
        A “Ponzi scheme” is “[a] fraudulent investment scheme in which money
contributed by later investors generates artificially high dividends for the original
investors, whose example attracts even larger investments.” Black’s Law Dictionary
1180 (7th ed.1999). The result of most Ponzi schemes is collapse, leaving numerous
investors with significant losses. Official Comm. of Unsecured Creditors v. R.F. Lafferty
& Co., Inc., 267 F.3d 340, 343-44 (3d Cir. 2001).

                                            2
       In 1992, Hevener convinced Gregory Stauffer and his wife to invest $110,000 by

purchasing shares of United Equity stock. As with Ream, Hevener represented that the

investment was very safe. Hevener also encouraged other clients, including the

Haldemans and the Sheetzes, to invest more than $350,000 in United Equity, a

corporation called “Fujibanc” – which Hevener claimed was a working bank – and

various other entities. Fujibanc was not, in fact, a banking entity at all, but a company

that Hevener was using to process payments from United Equity to a venture in Latvia.

While Hevener sent some of the money his clients invested to the actual investment, he

distributed much of it to other companies owned by him and his son.

       In 1994, Ream began asking questions about the $14,000 loan he had made to

Hevener in 1990. In response, Hevener moved money he had received from the

Haldemans into a United Equity account and repaid Ream’s loan with between $6,000

and $7,000 of interest. Based on what he believed was a successful return on his

investment, Ream loaned Hevener an additional $40,000 in 1995 and 1996. During the

entirety of this period, Hevener sent his investors the requisite tax forms for interest

earnings and paid these so-called “interest earnings” out of the investors’ original capital.

       In 1999, after receiving what he believed to be an inaccurate statement of his

interest earnings, Ream asked Hevener to return the $40,000 loan. After delaying for

several months, Hevener sent a letter to Ream informing him that United Equity had

suffered unexpected losses “to the point where a Chapter 7 bankruptcy is now being

                                              3
considered.” The letter further stated that United Equity had been serving as a holding

company for overseas projects that “have completely collapsed without any possibility of

recovery,” and that Ream’s “loan to United Equity & Leasing Corporation is now

classified as non-performing.”

       The Stauffers had similarly begun inquiring after their investment when Gregory

Stauffer lost his job. By 1999, Hevener informed them that their entire investment had

been lost. After Stauffer sent Hevener a letter requesting that he repay the investment or

risk litigation, Hevener sent Stauffer a letter postmarked from Washington, D.C. claiming

that Stauffer would be hearing from Hevener’s Washington, D.C. attorney. No attorney

ever contacted the Stauffers.

       The letter to Ream regarding the non-performance of his loan and the letter to the

Stauffers regarding Hevener’s attorney formed the basis of Hevener’s indictment.

                                             II.

       The District Court had jurisdiction under 18 U.S.C. § 3231. We have jurisdiction

over Hevener’s appeal by virtue of 28 U.S.C. § 1291.

       Hevener styled his claim as challenging the sufficiency of the indictment, which

we review de novo. United States v. Al-Ame, 434 F.3d 614, 616 (3d Cir. 2006) (citing

United States v. Hedaithy, 392 F.3d 580, 590 n.10 (3d Cir. 2004)). However, a review of

his brief suggests that what he is really claiming is that the government presented

insufficient evidence that the two mailings were “in furtherance” of a scheme to defraud.

                                             4
We review challenges to sufficiency of the evidence under a particularly deferential

standard, viewing evidence in the light most favorable to the government and overturning

a conviction only where no reasonable trier of fact could find the elements of the crime

beyond a reasonable doubt. United States v. Dent, 149 F.3d 180, 187 (3d Cir. 1998).

However, because the two underlying mailings were legally sufficient to form the basis of

an indictment and because there was ample evidence on which a jury could base a guilty

verdict, it is not necessary to determine which theory Hevener is asserting. Al-Ame, 434
F.3d at 616.

                                            III.

       On appeal, Hevener claims that the letters he sent to Ream and Stauffer could not

be seen as letters in “furtherance of” a scheme to defraud. In order to prove mail fraud

under 18 U.S.C. § 1341, the government must prove that the defendant had a scheme to

defraud and that the mailings charged in the indictment were made “for the purpose of

executing such scheme.” 18 U.S.C. § 1341; Parr v. United States, 363 U.S. 370, 385

(1960). The mail fraud statute does not reach every mailing that is the byproduct of a

scheme to defraud. Rather, a mailing must be “sufficiently closely related” to a

defendant’s scheme. United States v. Cross, 128 F.3d 145, 150 (3d Cir. 1997). A mailing

is sufficiently related to a scheme to defraud where it “further[s] the scheme to defraud or

[is] incident to an essential part of that scheme.” United States v. Ruuska, 883 F.2d 262,

264 (3d Cir. 1989). While mailings made after the object of a scheme has been

                                             5
accomplished may not be “sufficiently closely related to the scheme to support a mail

fraud conviction,” id., “mailings ‘designed to lull [fraud] 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’ have been

found to constitute actionable mail fraud.” Tabas v. Tabas, 47 F.3d 1280, 1295 n.18 (3d

Cir. 1995) (quoting Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1416 n.3 (3d

Cir. 1991)).

       For example, in Ruuska, we found that two letters were sent in order to lull victims

after the completion of a fraudulent investment scheme. The defendant in Ruuska sent

two identical letters to the victims of his investment scheme which stated that there were

possible problems with the financial aspects of the investments, that lawsuits had been

filed causing a delay and that the defendant would keep the victims apprised. 883 F.2d at

264. On appeal, the defendant claimed that these letters were insufficient to further his

scheme because he was not seeking to create a false sense of security and, even if he was,

the victims could no longer be “lulled” because they were aware of the nature of the

scheme. Id. at 264-65. We disagreed, finding that the letters were sufficient to “support

an inference by the jury that they ‘were mailed by the defendants to the victims for the

purpose of lulling them by assurances that the promised services would be performed.’”

Id. at 265 (quoting United States v. Sampson, 371 U.S. 75, 81 (1962)).

                                              6
       While the two mailings charged against Hevener were arguably sent after Hevener

had successfully defrauded his accounting clients into investing, they qualify as mailings

undertaken with the purpose of lulling the victims and preventing apprehension by the

authorities. As the government stated in its brief, the charged letters created a cloak of

legitimacy for Hevener’s criminal actions, thereby preventing earlier detection and

apprehension by the authorities. The letter Hevener sent to Ream suggested that his

money was lost unexpectedly through a bad investment, instead of stating what actually

happened to Ream’s money – it was the casualty of a collapsed Ponzi scheme. While

Hevener’s contention that he did not give Ream a false sense of security by claiming that

his money was safe is correct,2 the mailing need not give that kind of security. Hevener’s

mailing aimed to blind Ream to the true nature of the scheme that caused his loss, thereby

holding an official investigation at bay. United States v. Lebovitz, 669 F.2d 894, 896 (3d

Cir. 1982) (quoting United States v. Maze, 414 U.S. 395, 403 (1974)) (where mailings

postpone a victim’s complaint to the authorities, those mailings are made “for the purpose

of executing” the scheme to defraud).

       2
        Even if the letter to Ream was literally true – which the evidence viewed in the
light most favorable to the government suggests it is not – the letter’s purpose was to
further Hevener’s fraudulent scheme. Therefore, it may still form the basis for the
indictment. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1413-14 (3d Cir. 1991)
(citing Schmuck v. United States, 489 U.S. 705, 715 (1989)) (“The mailing need not
contain any misrepresentations. Rather ‘innocent mailings – ones that contain no false
information – may supply the mailing element.’”).

                                              7
       Similarly, the letter Hevener sent to the Stauffers was intended to prevent them

from discovering the true nature of the Ponzi scheme and to stall them in their efforts to

pursue litigation against Hevener. The letter falsely informed the Stauffers that

Hevener’s attorney would be contacting them and provided a new address at which they

could contact him. The inclusion of a new address and reference to his attorney

suggested that the loss was legitimate and that Hevener was interested in discussing the

legal implications of the lost investment. Hevener responded to the Stauffers’ legal

concerns and delayed the filing of a lawsuit while the Stauffers waited to hear from his

attorney. In short, Hevener forestalled the filing of a complaint. Lebovitz, 669 F.2d at

896.

       The facts of this case are easily distinguishable from those in United States v. Otto,

742 F.2d 104 (3d Cir. 1984). In Otto, one count of the defendant’s mail fraud conviction

was overturned. The charged mailing was a letter from a victim of the defendant’s

fraudulent scheme threatening to sue the defendant. Because the letter was not “directly

or impliedly” invited by the defendant, the letter could not be in furtherance of the

defendant’s scheme. Id. at 109. “Its purpose was not to continue a relationship between

the parties or arrange for a compromise.” Id. Rather, “its ‘only likely effect would be to

further detection of the fraud or deter its continuation.’” Id. (quoting United States v.

LaFerriere, 546 F.2d 182, 187 (5th Cir. 1977)). We concluded that the demand letter

from the victim was very different than a letter from the defendant arranging a settlement,

                                              8
as the latter would further the fraudulent scheme by avoiding a confrontation with the

victim. Id. Hevener’s letter to the Stauffers is comparable to the settlement offer as it

sought to further his relationship with the Stauffers through legal discussions between

their attorneys and was aimed at preventing the filing of a legal claim. Because the letter

aimed to prevent the detection of his fraudulent scheme, it is a sufficient basis for a mail

fraud indictment and conviction.

       In short, both letters authored by Hevener furthered his fraudulent scheme by

suggesting to Hevener’s investors that their money had been legitimately lost. Such an

indication has the effect of forestalling legal action by those victims and preventing

official investigation into the underlying fraudulent scheme.

       For the reasons set forth above, we will affirm the District Court’s denial of the

Rule 29 motion and Hevener’s conviction.

                                              9