Court Opinion

ID: 3019253
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:20:38.018912+00
Date Added: 2024-06-11T08:27:07.467441
License: Public Domain

United States Court of Appeals
                               for the eighth circuit
                                    ___________

                                       No. 96-2666
                                       ___________

          United States of America,         *
                                            *
              Appellee,                     *   Appeal from the United
States
                                            *   District Court for the
Western
              v.                            * District of Missouri.
                                            *
          James Hubert Cain, Jr.,           *
                                            *
              Appellant.                    *
                                       ___________

                                 Submitted:     January 13, 1997

                                      Filed:   August 1, 1997
                                       ___________

          Before LOKEN, BRIGHT, and MORRIS SHEPPARD ARNOLD, Circuit
Judges.
                                       ___________

          MORRIS SHEPPARD ARNOLD, Circuit Judge.

              After a five-day trial in 1996, a jury convicted James
Hubert
          Cain, Jr., of one count of conspiracy to commit mail fraud, two
          counts of mail fraud, and four counts of interstate transfer of
          money obtained by fraud. (For reasons that we cannot discern,
the
          judgment reflects convictions on one count of conspiracy to
commit
         mail fraud and on three counts each of mail fraud and
interstate
         transfer of money obtained by fraud. The indictment, the jury
         instructions, and the verdict forms, however, all show the
         configuration of charges that we listed above.) The trial
court
         sentenced Mr. Cain to 51 months in prison and to restitution of
         $508,096.61.
               Mr. Cain appeals his convictions, arguing that the
evidence
           was insufficient, that certain hearsay was improperly admitted
as
           coconspirator statements, and that the trial court erred in
           refusing to give a proffered jury instruction on "honest
opinions"
         and "mere puffing." Mr. Cain also appeals his sentence,
contending
         that the amount of restitution was determined incorrectly. We
         grant Mr. Cain's motion to file an untimely reply brief. We
affirm
         Mr. Cain's conviction but remand for the entry of a new
restitution
         order.

                                          I.
               The essence of the charges was that Mr. Cain conspired
with
           others to induce several people to invest in the company of
which
           he was president by knowingly misrepresenting to them, in
documents
           and in person, that their investments were guaranteed by an
escrow
           fund that would be used to buy government bonds.   In reality,
no
           money was ever placed in escrow for the purchase of bonds, and
no
         bonds were ever bought. The individual counts of the
indictment
         related to specific correspondence and money transfers executed
         during the relevant events. Mr. Cain characterizes his defense
in
         several different ways, but all of them amount to the basic
         assertions that he had no intent to defraud, that any of his
own
         representations alleged to be fraudulent were instead merely
         predictions, projections, and opinions about events to occur in
the
         future, and that he had no knowledge of the falsity of any
         representations made by others.

               Witnesses variously described Mr. Cain, who held the title
of
           president of the company as of mid-July, 1993, as the person
           "people would go to" "whenever there was a problem, when things
           became chaotic," the person who "was supposed to be basically
in
           charge of the day-to-day operations," and the person "to look
to
       ... for direction for the company, for control of the company."
       According to one witness, Mr. Cain described himself by saying,
"I
       run this operation ... if ... you need a decision made, I am
the
       boss."   Mr. Cain once directed another witness "to come to him
on
       any matters concerning the company ... or problems and things
like
       that."   As president,

                                       -2-
           Mr. Cain "had complete access to all of the books and records
of
           the company" and "controlled ... all distributions of funds."

                In July or August, 1993, according to the chief executive
           officer of the company, several individuals in the company
began to
           revise the written materials used in meetings with prospective
           investors. Among those documents was a summary sheet (so
           designated by the parties) stating that each investment "is"
           guaranteed "by the purchase and escrow deposit of government
           securities" (emphasis supplied). According to the chief
executive
         officer, Mr. Cain was among those who contributed to the
content of
         the summary sheet and had the entire summary sheet before him
when
         he did so. According to the chief executive officer, Mr. Cain
knew
         at that time that "there was no guaranty fund in place."

                Marion Johnson testified that she attended a prospective
           investors' meeting in September, 1993, where Mr. Cain stated to
           her, with respect to investment in the company, that "yes ...
the
           principal ... is safe" (emphasis supplied). An advertising
           consultant testified that she attended the same meeting and
that
         the summary sheet was distributed at that meeting. The
advertising
         consultant's own notes from that meeting reflect that the
         "principal is protected by zero coupon bonds ... [and] [i]n
effect,
         the principal is guaranteed" (emphasis supplied). A tax
accountant
         testified that Mr. Cain "went through" the prospectus and the
         summary sheet "in great detail" with Ms. Johnson and
"[r]epeatedly"
         emphasized the escrow fund. That evening, Ms. Johnson signed
         releases for almost $250,000 in insurance and annuity proceeds,
to
         be transferred to the company.

                The chief financial officer of the company testified that
           after the meeting with Ms. Johnson, Mr. Cain and several others
           discussed how to use the money that they would receive from
           Ms. Johnson. The group decided, first, to pay outstanding
bills of
           approximately $90,000 and, second, to "establish[] and fund[]
...
      the guaranty fund."   Obviously, then, the escrow fund still did
not
      exist in September, 1993.   Nor "was there

                                       -3-
           any surprise expressed" by Mr. Cain during those post-meeting
           discussions, "that the account for the guaranty fund had not
           already been funded," according to the chief financial officer.
           The company paid the bills in question but did not establish
the
           escrow fund, even though the chief financial officer asked both
           Mr. Cain and the chief executive officer about it again. At
that
           time, the chief executive officer instructed the chief
financial
           officer "to wait"; Mr. Cain made no objection.

                Other meetings were held with prospective investors in the
           fall of 1993. Donald and Eva Jantz testified that they
attended
           one meeting where Mr. Cain was present and that they were given
a
           copy of the summary sheet.    They further testified that in
reliance
           on the summary sheet, they invested $10,000 in the company.
Robert
           Ross testified that he and his mother attended a meeting at
which
           Mr. Cain was present.   The summary sheet was distributed on
that
           day as well. At a subsequent meeting where Mr. Cain was also
           present, Mr. Ross's mother invested $10,000 in the company.
           Finally, Charles Heiman testified that he and his wife attended
one
           meeting where Mr. Cain was present. The summary sheet was also
           distributed at that meeting. Mr. and Mrs. Heiman invested
$10,000
           in the company on that day.

               The chief financial officer testified that after all of
these
           meetings, he asked Mr. Cain and the chief executive officer
"almost
           daily" about "whether or not the guaranty fund should have any
           money put into it." Mr. Cain always "pass[ed] the buck back"
to
           the chief executive officer, never directed that the escrow
fund be
           established, and in fact instructed the chief financial officer
"to
         spend money for other purposes." In spite of those
circumstances,
         the chief executive officer testified, Mr. Cain "represented to
the
         investors that there was a fund" and in fact "emphasized that
with
        ... the ... investors."

             We believe that the evidence is more than sufficient to
show
         that Mr. Cain colluded with others to induce several people to
         invest in the company of which he was president by
misrepresenting
         to them that their investments would be completely safe

                                        -4-
          because of the existence of an escrow fund that was used to buy
          government bonds, at times when he knew that no such escrow
fund or
          bonds existed.   See, e.g., Atkinson v. United States, 344 F.2d
97,
          99-100 (8th Cir. 1965), cert. denied, 382 U.S. 867 (1965), and
          Morris v. United States, 7 F.2d 785, 792-93 (8th Cir. 1925),
cert.
          denied, 270 U.S. 640 (1926); see also United States v. Kaplan,
554
F.2d 958, 963-64 (9th Cir. 1977) (per curiam), cert. denied,
434
U.S. 956 (1977), and United States v. Hartenfeld, 113 F.2d 359,
          361-62 (7th Cir. 1940), cert. denied, 311 U.S. 647 (1940). We
          turn, then, to Mr. Cain's other contentions.

                                         II.
               The trial court made a finding pursuant to United States
v.
         Bell, 573 F.2d 1040, 1043-44 (8th Cir. 1978), that a conspiracy
         existed, that Mr. Cain was a member of that conspiracy, that
         certain statements were made by other conspirators during the
         course of the conspiracy and in furtherance of it, and,
therefore,
         that those statements were admissible under Fed. R. Ev.
         801(d)(2)(E). On appeal, Mr. Cain first argues that no
conspiracy
         existed. We reject that contention in light of our discussion
on
         the sufficiency of the evidence.

              In the alternative, Mr. Cain asserts that certain
statements
         admitted under Fed. R. Ev. 801(d)(2)(E) were in fact not
         coconspirator statements within the meaning of the rule. Mr.
Cain
         does not specify the exact statements to which he objects. The
         gist of his argument seems to be, however, that any statements
made
         after November, 1993, could not have been coconspirator
statements,
         since by that time the conspirators (for our purposes, Mr.
Cain,
         the chief executive officer, and the chief financial officer)
were
         antagonistic to one another.

               We have carefully read the transcript of the trial.   There
are
          very few "statements" within the meaning of the rules dealing
with
        hearsay, see especially Fed. R. Ev. 801(a)(1), 801(c), 802,
805,
        806, and we believe their admission to be harmless error, if
error
        at all.   See, e.g., United States v. Smith, 550 F.2d 277, 282
(5th

                                        -5-
          Cir. 1977), cert. denied, 434 U.S. 841 (1977).   We therefore
reject
          Mr. Cain's assertions on this issue.

              Mr. Cain also contends that the trial court improperly
refused
          to give a jury instruction on "honest opinions" and "mere
puffing."
          In the first place, such an instruction was inapplicable to the
          misrepresentation with respect to the present existence of an
          escrow fund. In the second place, however, we note that the
trial
         court did give jury instructions requiring proof of
"affirmative
         representations or omissions" and allowing the jury to accept a
         defense of "good faith," "opinion[s] honestly held," and
"honest
         mistake[s] in judgment."

               In our view, the jury instructions (including the verdict
          director, to which Mr. Cain also objects), taken as a whole,
fairly
          and adequately contained the applicable law, see, e.g., United
          States v. Casas, 999 F.2d 1225, 1230 (8th Cir. 1993), cert.
denied,
          510 U.S. 1078 (1994), and covered the essence of Mr. Cain's
          proffered instruction, see, e.g., United States v. Bettelyoun,
16
F.3d 850, 853 (8th Cir. 1994). We therefore reject Mr. Cain's
          contentions on this issue as well.

                                         III.
               At the sentencing hearing, the trial court found that the
          conspiracy, "as alleged in the indictment," existed from
December,
          1992, to December, 1993, and that Mr. Cain, "even though he was
a
          late comer[]," was "responsible for all of the money obtained
          during the conspiracy." That amount, and thus the appropriate
          restitution, the trial court found, was $508,096.61. That
total
          was the sum of $298,851.61 for the stock transactions at issue
          during the trial, $55,200.00 for stock sales not at issue
during
         the trial but made by the chief executive officer and the chief
         financial officer (both of whom pleaded guilty as
conspirators),
         and $154,045.00 for stock sales between March and December,
1993,
         made by a commissioned stockbroker.
-6-
               On appeal, Mr. Cain argues that the evidence failed to
show
           that he knew about the $55,200.00 in other stock sales or about
the
           $154,045.00 in stock sales made by the commissioned stockbroker
           (who was acting, according to Mr. Cain, at the direction of the
           chief executive officer and the chief financial officer). In
the
           alternative, Mr. Cain asserts that since he did not join the
           company until mid-July, 1993, he should not be held responsible
for
           any stock sales before that time.

                The chief financial officer of the company testified that
           money began "coming in" from stock sales in early March, 1993.
           Those sales, he stated, were made by him, the chief executive
           officer, and the commissioned stockbroker. The chief executive
           officer testified that he first met Mr. Cain "sometime in
March or
           April," 1993, and talked with him over "two or three months"
"about
           ... becoming involved in the company."   During that time,
according
           to the chief executive officer, Mr. Cain "had total access to
the
           office" and "the company books and records."
                Also during that time, the chief executive officer stated,
he
           discussed with Mr. Cain in "great detail" the sales that the
           commissioned stockbroker was making, since the chief executive
           officer considered the commissioned stockbroker "a major pain
in my
         side." Mr. Cain told the chief executive officer that "he was
         going to be [a] hatchet man" and "fix" the situation with the
         commissioned stockbroker, who was allegedly being paid
exorbitant
         commissions. The chief executive officer also testified that
he
         discussed with Mr. Cain "the issues with the bond fund,"
presumably
         that one did not exist, despite misrepresentations to the
contrary
         in the original summary sheet, which was used during meetings
with
         prospective investors.
              The company actually hired Mr. Cain in mid-July, 1993.
         According to the chief financial officer, after Mr. Cain was
hired,
         he "made himself very familiar with the financial status of the
         company in terms of ... cash flow, ... liabilities, [and] ...
       sources of income." He did so by going through "the books and
       records of the company." Mr. Cain especially "wanted to know
on a
       daily basis what the cash balance[s] in the

                                      -7-
           various checking accounts were."   Mr. Cain also knew, after
that
           time, according to the chief financial officer, about the
           commissioned stockbroker's sales, because on "one occasion ...
           there was a rather heated telephone exchange ... between [the
           commissioned stockbroker] and [another company officer], and
           Mr. Bert Cain was present. And following that altercation
there
           was discussion between myself and [the other officer and Mr.
Cain]
           relating to the specific circumstances relating to [the
           commissioned stockbroker]."
                Under the federal sentencing guidelines, the relevant
conduct,
           and hence base offense level, for a participant in a conspiracy
is
           determined by reference to "all acts and omissions committed,
           aided, abetted, ... or willfully caused by the defendant ...
[and]
           all reasonably foreseeable acts and omissions of others in
           furtherance of the jointly undertaken criminal activity." See
           U.S.S.G. § 1B1.3(a)(1)(A), § 1B1.3(a)(1)(B). "A defendant's
           relevant conduct does not include the conduct of members of a
           conspiracy prior to the defendant's joining the conspiracy,
even if
         the defendant knows of that conduct." See U.S.S.G. § 1B1.3,
         application note 2, ¶ 8.
              We have no difficulty concluding, from the evidence
recounted,
         that when Mr. Cain was hired in mid-July, 1993, he knew of the
         stock sales made by the chief executive officer, the chief
         financial officer, and the commissioned stockbroker. From that
         knowledge, it is reasonable to conclude as well that future
stock
         sales by those three people were foreseeable to Mr. Cain. Nor
is
         it irrational to believe that Mr. Cain knew in mid-July, 1993,
of
         the original summary sheet's misrepresentation that an escrow
fund
         existed and also knew that, in fact, no such fund did exist.
From
         that knowledge, we may infer that as of mid-July, 1993, Mr.
Cain
         agreed, at least tacitly, to the use of that summary sheet in
         future stock sales, whether made by himself or the other three
         persons in question.

               We do not see any evidence in the record before us,
however,
         that justifies the conclusion that Mr. Cain joined the
conspiracy
         during the months between March and

                                        -8-
         July, 1993.   Specifically, we cannot extract from the record
before
         us, except by resort to raw speculation, the conclusion that
         Mr. Cain agreed, before he was hired, to the use of the summary
         sheet in future stock sales. We reverse, therefore, the
         attribution to Mr. Cain of any stock sales before mid-July,
1993.
          Accordingly, we vacate the restitution order in this case and
         remand for additional proceedings.

                                        IV.
              For the reasons stated, we affirm Mr. Cain's conviction
but
         remand his case for further proceedings consistent with this
         opinion.

              A true copy.

                   Attest:

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