Court Opinion

ID: 3020850
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:23:38.092573+00
Date Added: 2024-06-11T11:47:25.226352
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT

                                     No. 97-3248

United States of America,                  *
                                           *
             Appellee,                     *
                                           * Appeal from the United States
             v.                            * District Court for the
                                           * District of South Dakota.
Lester A. Hawkey,                          *
                                           *
             Appellant.                    *

                             Submitted: March 10, 1998

                                 Filed: June 24, 1998

Before BEAM and HEANEY, Circuit Judges, and WATERS,1 District Judge.

HEANEY, Circuit Judge.

        Lester A. Hawkey, a sheriff in Minnehaha County, South Dakota, was charged
in a forty-one count indictment for misusing funds belonging to the Minnehaha Sheriff’s
Department (MSD) and the Minnehaha County Sheriff and Deputies Association

      1
        The Honorable H. Franklin Waters, United States District Judge for the Western
District of Arkansas, sitting by designation.
(MCSDA).2 A jury convicted Hawkey on all but two counts.3 On July 21, 1997, the
district court sentenced Hawkey to forty-one months of imprisonment.4 On appeal,
Hawkey challenges the sufficiency of the evidence supporting his convictions, the district
court’s implementation of the United States Sentencing Guidelines (Sentencing
Guidelines) and certain forfeitures. After a careful review of the record, we affirm as to
the sufficiency of the evidence and the district court’s implementation of the Sentencing
Guidelines. With respect to the forfeiture issue, however, we reverse and remand.

                                    I. Background

      In 1988, Hawkey, on behalf of the MSD and the MCSDA, entered into an
agreement with Wildwood Productions, a benefit concert promoter,5 to conduct annual
benefit concerts each April. The proceeds of the annual concerts were purportedly

         2
        Hawkey’s indictment included twenty-four counts of mail fraud in violation of
18 U.S.C. § 1341; eight counts of engaging in illegal monetary transactions with
criminally derived property in violation of 18 U.S.C. § 1957(a); two counts of false
income tax returns in violation of 26 U.S.C. § 7206(1); two counts of making false
statements to a credit union in violation of 18 U.S.C. § 1014; one count of making a
false statement in violation of 18 U.S.C. § 1001; three counts of misapplying local
governmental property in violation of 18 U.S.C. §§ 2 and 666; and one count seeking
forfeiture of property involved in the illegal monetary transactions pursuant to 18
U.S.C. § 982(a)(1).
         3
         Hawkey was acquitted on the two counts of making a false statement to a credit
union.
         4
        Hawkey received a sentence of forty-one months for all counts except the false
tax return counts, for which he received sentences of thirty-six months. Hawkey was
to serve all sentences concurrently.
         5
       Wildwood provides telemarketing operations, promotes ticket sales, solicits
donations, and promotes advertisement sales for charitable organizations.
                                            2
intended to aid local youth programs. Prompted by Hawkey’s representations,
Wildwood’s telemarketers solicited money from individuals and businesses in South
Dakota and neighboring states for the purchase of tickets, donations, and/or to purchase
advertising space in the concert program book. By United States mail, Wildwood sent
statements or invoices to individuals and businesses who agreed to purchase tickets,
advertise, or make donations. Individuals and businesses also sent their checks to either
the MSD or MCSDA via the United States mail.

       Wildwood’s contracts with the MSD and MCSDA called for the establishment
of two bank accounts. One account was to hold proceeds of ticket sales and the other
was to hold the proceeds of advertisement sales. Shortly after the 1991 concert, Hawkey
began using the concert accounts for a variety of personal and business expenses. While
making some contributions to youth programs and charities, Hawkey spent a significant
portion of the benefit concert proceeds for personal items. Hawkey also made deposits
of business and personal funds to the concert account to replace depleted funds.

                           II. Sufficiency of the Evidence

       Hawkey challenges the sufficiency of the evidence used to support his conviction
on all counts. In reviewing the sufficiency of the evidence supporting a criminal
conviction, "we look at the evidence in the light most favorable to the verdict and accept
as established all reasonable inferences supporting the verdict.” United States v. Black
Cloud, 101 F.3d 1258, 1263 (8th Cir. 1996). We reverse the conviction only if no
reasonable jury could have found Hawkey guilty beyond a reasonable doubt. See United
States v. Blumeyer, 114 F.3d 758, 765 (8th Cir. 1997) (citation omitted). The evidence
supporting Hawkey’s criminal conviction "need not exclude every reasonable hypothesis
of innocence, but simply be sufficient to convince the jury beyond a reasonable doubt
that the defendant is guilty." United States v. McGuire, 45 F.3d 1177, 1186 (8th Cir.
1995) (citation omitted). We can neither weigh the evidence nor

                                            3
assess the credibility of the witnesses. See Burks v. United States, 437 U.S. 1, 16-17
(1978). “This standard is a strict one, and a jury verdict should not be overturned
lightly.” United States v. Sykes, 977 F.2d 1242, 1247 (8th Cir. 1992) (citation omitted).
Applying this standard to the record before us, we conclude that ample evidence
supports Hawkey’s conviction on each count.

A. Mail Fraud

       In Hawkey’s challenge to the sufficiency of the evidence used to support his
twenty-four count conviction for mail fraud, he argues that no one suffered any property
loss and that there was no scheme or intent to defraud. Title 18 U.S.C. § 1341 prohibits
the use of the mails to execute “any scheme or artifice to defraud, or for obtaining money
or property by means of false or fraudulent pretenses, representations, or promises.” 18
U.S.C. § 1341. Accordingly, to obtain a conviction for mail fraud under § 1341, the
government must prove “(1) the existence of a scheme to defraud, and (2) the use of the
mails . . . for purposes of executing the scheme.” United States v. Manzer, 69 F.3d 222,
226 (8th Cir. 1995). The scheme “need not be fraudulent on its face but must involve
some sort of fraudulent misrepresentations or omissions reasonably calculated to deceive
persons of ordinary prudence and comprehension.” United States v. Coyle, 63 F.3d
1239, 1243 (3d Cir. 1995) (citation and internal quotation marks omitted). The term
“property” extends to intangible property rights. United States v. Shyres, 898 F.2d 647,
651 (8th Cir. 1990).6

        Hawkey argues that, because the businesses received their advertisements and
ticket purchasers were able to attend the concerts, they were not deprived of money or

      6
         For example, § 1346 clearly states under the chapter covering mail fraud, which
includes § 1341, that “the term ‘scheme or artifice to defraud’ includes a scheme or
artifice to deprive another of the intangible right of honest services.” 18 U.S.C. § 1346.
Also, the “deprivation of the right to control spending can serve as the basis for a mail
fraud conviction.” Shyres, 898 F.2d at 652.
                                             4
property because they received what they paid for. We disagree. The record reveals
that Hawkey solicited, or caused to be solicited, funds that were intended for charitable
organizations; and, while some money was in fact paid to the charitable organizations,
Hawkey converted most of the money for his own personal use. The businesses and
concert-goers who responded to Hawkey’s solicitations did not intend to merely
purchase a ticket or advertising; they intended part of their payment as a contribution to
a charitable organization.

       Hawkey alternatively argues that there is insufficient evidence of a scheme to
defraud because he did not control the telemarketer’s solicitations, and the telemarketers
did not represent to consumers that all of the concert proceeds would go to charity.
Likewise, this argument is unavailing. A reasonable jury could have found that Hawkey
intentionally engaged in a scheme by which money intended and solicited for charitable
purposes was diverted from its designated charitable purpose to his personal benefit
through false representations. The record reflects that the concerts were designed to
raise money for charitable purposes; Hawkey knowingly diverted these funds for his
personal benefit; and Hawkey failed to inform Wildwood, his accountant, the
contributors, and the benefactors that he removed the funds for his personal benefit.
Consequently, the jury permissibly concluded that there was a scheme in which Hawkey
knowingly participated.

       Hawkey contends that there was insufficient evidence to prove that he intended
to defraud citizens responding to his solicitations. The jury was instructed that “to act
with intent to defraud means to act knowingly and with the intent to deceive someone
for the purpose of causing some financial loss . . . to another or bringing about some
financial gain to oneself or another to the detriment of a third party.” The jury found that
Hawkey possessed the required intent to obtain personal gain from his
misrepresentations and found him guilty of mail fraud. We conclude that this finding is
supported by the record.

                                             5
B. Unlawful Monetary Transactions

       Hawkey challenges the sufficiency of evidence supporting his conviction on eight
counts of unlawful monetary transactions under 18 U.S.C. § 1957. Section 1957
“prohibits anyone from knowingly engaging ‘in a monetary transaction in criminally
derived property that is of a value greater than $10,000 and is derived from specified
unlawful activity.’” United States v. Hare, 49 F.3d 447, 451 (8th Cir. 1995) (quoting 18
U.S.C. § 1957(a)). We believe that Hare correctly states the law and note that, in order
to obtain a conviction under § 1957, the government is not required to prove that
Hawkey “knew that the offense from which the criminally derived property was derived
was specified unlawful activity.” 18 U.S.C. § 1957(c). Section 1956(c)(7)(A) defines
“specified unlawful activity” for the purposes of § 1957 as an offense listed in 18 U.S.C.
§ 1961(1), which includes mail fraud. 18 U.S.C. § 1956(c)(7)(A). See 18 U.S.C. §
1961(1)(B). See also § 1957(f)(3) (adopting the definition of “specified unlawful
activity” provided in § 1956). After a careful review of the record and in light of our
discussion of Hawkey’s mail fraud conviction, we conclude that a reasonable jury could
have found that Hawkey knowingly engaged in a monetary transaction in criminally
derived property that was of a value greater than $10,000 and was derived from
specified unlawful activity.

C. Misappropriating Local Government Property

       Hawkey challenges three counts of misappropriating local government property
in violation of 18 U.S.C. §§ 27 and 666. To obtain a conviction under § 666, the

      7
       Section 2 reads:

      Principals
      (a) Whoever commits an offense against the United States or aids, abets,
      counsels, commands, induces or procures its commission, is punishable
      as a principal.
                                            6
government must prove that Hawkey (1) was an agent of Minnehaha County at the time
of the offense; (2) embezzled, stole, obtained by fraud, willingly converted, or
intentionally misapplied Minnehaha County property worth at least $5,000; and (3) the
offense occurred during the time in which Minnehaha County received in excess of
$10,000 in any one year from a qualified federal program. See United States v.
Valentine, 63 F.3d 459, 462 (6th Cir. 1995).

      As sheriff, Hawkey was an agent of Minnehaha County. The record indicates that
since October 1977, Hawkey owned and operated a for-profit inmate food service
business.8 During 1991 and 1992, Hawkey purchased federal surplus food with checks
drawn on the benefit concert accounts and sold it to the Minnehaha County Jail for his
personal profit. In January and September 1992, Hawkey purchased a 1991 Chevrolet
Caprice and a 1990 Chevrolet Lumina van for his personal use with at least $27,450 of
misappropriated county funds. Between January 1992 and May 1994, Hawkey charged
prisoners in the custody of the Minnehaha County Sheriff’s Department a fee for
urinalysis testing, illegally keeping the fees for his personal use. Hawkey does not
contest that Minnehaha County received in excess of $10,000 in any relevant year from
a qualified federal program. We conclude that, under these facts, a reasonable jury could
have found Hawkey guilty of misappropriating government funds.

      (b) Whoever willfully causes an act to be done which if directly
      performed by him or another would be an offense against the United
      States, is punishable as a principal.

18 U.S.C. § 2.
      8
        The South Dakota Federal Property Agency in Huron, South Dakota administers
a donation program by distributing surplus federal property to eligible donees within
South Dakota. Upon dispersal to an eligible donee, the donee must certify that it is a
public agency or a nonprofit, educational or public institution or organization and that
the property is being acquired for the intended official purpose and is not being
acquired for any other use or purpose or for sale or other distribution.
                                            7
D. False Income Tax Returns

       Hawkey challenges the sufficiency of the evidence supporting his conviction of
two counts of making false income tax returns in violation of 26 U.S.C. § 7206 (1).
Hawkey argues that he lacked the necessary criminal intent for tax fraud because he
believed the money he withdrew from the benefit concert accounts were loans rather
than unreported income. The jury was instructed to consider Hawkey’s belief that
unreported income was not income under the law. As noted above, Hawkey did not
disclose to Wildwood, his accountant, the contributors, and the benefactors the fact that
he withdrew money from the concert accounts and converted them to his personal use.
The fact that he made no record of the funds and was under no formal obligation to repay
them provides sufficient evidence to support the jury’s conclusion that these funds were
unreported income and Hawkey was therefore guilty of making false income tax returns.

E. False Statements

      Hawkey challenges the sufficiency of the evidence used to support his conviction
for false statements under 18 U.S.C. § 1001.9 The record indicates that Hawkey owned

      9
       Section 1001 reads in relevant part:

      [W]hoever, in any matter within the jurisdiction of the executive,
      legislative, or judicial branch of the Government of the United States,
      knowingly and willfully--
      (1) falsifies, conceals, or covers up by any trick, scheme, or device a
      material fact;
      (2) makes any materially false, fictitious, or fraudulent statement or
      representation; or
      (3) makes or uses any false writing or document knowing the same to
      contain any materially false, fictitious, or fraudulent statement or entry;
      shall be fined under this title or imprisoned not more than 5 years, or both.
                                            8
and operated a for-profit food service for inmates at the Minnehaha County Jail.
Hawkey ordered county sheriffs to use county vehicles to purchase federal surplus food
supplies with county checks. Only a nonprofit organization is eligible to participate in
the federal surplus food program. By Hawkey’s use of this program in a profit-making
venture, a reasonable jury could have found that Hawkey knowingly deceived the federal
surplus food program. Consequently, sufficient evidence supports his conviction for
making a false statement.

                              III. Sentencing Guidelines

        Hawkey next raises three challenges to the district court’s application of the
Sentencing Guidelines. Our review of whether the district court properly applied the
Sentencing Guidelines is de novo. United States v. Engelhorn, 122 F.3d 508, 510 (8th
Cir. 1997). “We review findings of fact for clear error and give due deference to the
district court’s application of the Guidelines to the facts.” United States v. Post, 25 F.3d
599, 600 (8th Cir. 1994) (citation omitted).

A. Two-Level Enhancement for Abusing Position

       Hawkey challenges the district court’s imposition of a two-level enhancement for
abusing his position of trust as a sheriff under U.S.S.G. § 3B1.3. Hawkey’s argument
that he did not use his position as sheriff to conceal his activity is unpersuasive because
§ 3B1.3 is not limited to concealment. Section 3B1.3 provides that if Hawkey abused
his position of public trust “in a manner that significantly facilitated the commission or
concealment of the offense, [the Guidelines mandate an increase of] 2 levels.” U.S.S.G.
§ 3B1.3 (emphasis added). After carefully reviewing the record, we conclude that
substantial evidence supports the conclusion that Hawkey abused his position as sheriff
in a manner that significantly facilitated the commission

18 U.S.C. § 1001(a).
                                             9
of the offense. Consequently, the district court did not commit clear error by imposing
a two-level enhancement.

B. Double Counting

       Hawkey argues that his two-level enhancement under U.S.S.G. § 2S1.2(b)(1)(B)
constitutes double counting and attempts to distinguish this case from United States v.
Hare. Again, Hawkey’s argument fails. As noted above, knowledge that the property
at issue was derived from a specified unlawful activity is not a required element under
§ 1957. Under § 2S1.2(b)(1)(B), a two-level enhancement is warranted when “the
defendant knew that the funds were not merely criminally derived, but were in fact the
proceeds of a specified unlawful activity.” U.S.S.G. § 2S1.2, comment. (backg’d.). We
conclude that this case is governed by Hare; and “because this specific offense
characteristic enhancement applies to conduct that is not an element of the offense, it
does not amount to impermissible double counting.” Hare, 49 F.3d at 452.

       Alternatively, Hawkey argues that the record does not support the conclusion that
he “knew that the funds were the proceeds of any other specified unlawful activity.”
U.S.S.G. § 2S1.2(b)(1)(B). We do not agree. As discussed above, Hawkey had
knowledge of how the proceeds were derived and he had control over how they were
spent. Because Hawkey clearly knew that he was using the funds for purposes other
than those for which they were intended, we conclude that the district court did not err
in applying the two-level upward adjustment.

C. Acceptance of Responsibility

      Hawkey alleges that the district court erred by failing to give him a two-level
reduction for acceptance of responsibility. The Sentencing Guidelines provide for
reducing a defendant’s offense level by two “[i]f the defendant clearly demonstrates a
recognition and affirmative acceptance of personal responsibility for his criminal

                                          10
conduct.” U.S.S.G. § 3E1.1(a). “We give great deference to the district court ‘when
reviewing its evaluation of a defendant’s acceptance of responsibility, and will disturb
the district court’s decision only if it is without foundation.’” United States v. Edgar, 971
F.2d 89, 92 (8th Cir. 1992) (quoting United States v. Russell, 913 F.2d 1288, 1295 (8th
Cir. 1990)). Hawkey has yet to acknowledge that he wrongfully appropriated the
charity’s funds. On appeal, he continues to characterize the misappropriated funds as
a loan. As such, we cannot say that the district court’s decision to disallow the reduction
is without foundation, and therefore affirm.

                                        IV. Forfeiture

       Hawkey claims the district court erred by applying 18 U.S.C. § 982(a)(1) in
ordering the forfeiture of $140,450.08,10 the corpus of his ill-gotten gains (corpus), and
a motor home.11 Specifically, Hawkey argues that because this is “fundamentally a mail
fraud case,” the district court erred by failing to apply § 982(a)(2)12 as the

       10
        For the purpose of this appeal, we assume that $140,450.08 accurately
represents the total funds that Hawkey misappropriated.
       11
        On April 14, 1995, Hawkey purchased a 1992 Chevrolet conversion van with
a cashier’s check drawn from the “Community Service Program” account in the amount
of $14,600.00. On July 5, 1995, Hawkey traded the van along with his own personal
check in the amount of $18,675.00 for a 1995 Dodge 2500 Club Cab pickup truck. On
February 28, 1996, the pickup was sold for $28,250.00 to pay off a $27,014.00,
January 24, 1996 loan made to Hawkey and others. On January 17, 1996, Hawkey
wrote a personal check for $27,040.00 to purchase a 1992 Fleetwood 35 Bounder
Motor Home.
       12
            Section 982 (a) (2) reads in relevant part:

       The court, in imposing sentence on a person convicted of a violation of,
       or a conspiracy to violate . . . section . . . 1341, . . . of this title, affecting
       a financial institution . . . shall order that the person forfeit to the United
       States any property constituting, or derived from, proceeds the person
       obtained directly or indirectly, as the result of such violation.
                                               11
appropriate forfeiture statute and by failing to adjust the funds subject to forfeiture by
(1) the amount that Hawkey returned to the concert accounts; (2) the purchase price of
the motor home; and (3) the increased value to the motor home.

       Section 982 (a) (1) reads, in relevant part: “The court, in imposing sentence on a
person convicted of [violating] section . . . 1957 . . ., shall order that the person forfeit
to the United States any property, real or personal, involved in such offense, or any
property traceable to such property.” 18 U.S.C. § 982(a)(1). The district court found
that the entire corpus and the motor home were “involved in” or “traceable to” the
unlawful monetary transaction and, thus, ordered their forfeiture under § 982 (a) (1).
Because Hawkey was convicted of violating 18 U.S.C. § 1957(a), the district court
correctly determined that the plain language of 982(a)(1) indicates its applicability to this
case. Although the district court correctly identified § 982(a)(1) as the applicable
forfeiture statute, we conclude that the district court misapplied the provision.

        Property “‘involved in’ an offense ‘include[s] the money or other property being
laundered (the corpus), any commissions or fees paid to the launderer, and any property
used to facilitate the laundering offense.’” United States v. Bornfield, No. 97-2169, 1998
WL 239265 at *11 (10th Cir. May 13, 1998) (quoting United States v. Tencer, 107 F.3d
1120, 1134 (5th Cir. 1997)). “Facilitation [of a laundering offense] occurs when the
property makes the prohibited conduct ‘less difficult or more or less free from
obstruction or hindrance.’” Tencer, 107 F.3d at 1134 (quoting United States v. Schifferli,
895 F.2d 987, 990 (4th Cir. 1990)). For example, if Hawkey used a personal computer
to facilitate the unlawful monetary transactions, the personal computer would constitute
“property used to facilitate the laundering offense” and would be forfeitable.

18 U.S.C. § 982 (a) (2).
                                             12
       Property “‘traceable to’ means property where the acquisition is attributable to the
money laundering scheme rather than from money obtained from untainted sources.”
Bornfield, 1998 WL 239265 at *12 (citations omitted). “In other words, proof that the
proceeds of the money laundering transaction enabled the defendant to acquire the
property is sufficient to warrant forfeiture as property ‘traceable to’ the offense.”
Bornfield, 1998 WL 239265 at *12. For example, if Hawkey misappropriated $10,000
and used $5,000 of those funds to purchase a motorcycle, the motorcycle is “traceable
to” the unlawful monetary transaction and is, therefore, subject to forfeiture.

       Hawkey contends, and the government concedes, that he returned some of the
wrongfully misappropriated funds to the concert accounts. Certainly if Hawkey
misappropriated funds and used them to make a profit, the original funds and any profits
are subject to forfeiture. Based on the above discussion, the original funds are “involved
in” and any profit is “traceable to” the unlawful monetary transaction. We find no
support in the statute, however, for the proposition that a defendant should not be
credited with returning misappropriated funds.

        The following discussion illustrates the proper application of § 982(a)(1). If, for
example, Hawkey misappropriated $10,000 and purchased stock that appreciated in
value to $30,000 at the time of forfeiture, Hawkey would be required to forfeit the stock.
He would not, however, be required to forfeit an additional $10,000 because the entire
corpus, here $10,000, would have already been converted into the stock. Also, if
Hawkey misappropriated $10,000 and returned $5,000 prior to the forfeiture order, he
would only be required to forfeit the remaining $5,000 of the corpus. Furthermore, in
the event that Hawkey misappropriated $10,000 and purchased stock which had
depreciated in value to $5,000 at the time of forfeiture, he would be required to forfeit
$10,000--certainly the victim of the misappropriation should not bear the burden of his
choice of investment. We conclude that while Hawkey must forfeit the entire corpus of
his ill-gotten gains, the total funds subject to forfeiture must reflect any funds

                                            13
returned prior to the forfeiture order or expended to procure property forfeited under §
982(a)(1)’s “traceable to” provision.13

       Finally, Hawkey contends that the district court erred by failing to adjust the total
funds subject to forfeiture by the value he added to the motor home. Our discussion
above leads us to conclude that the district court correctly ordered that the motor home
be forfeited without regard to any increased value that Hawkey may have added.
Irrespective of whether the increased value to the converted property is the result of wise
investment, personal effort by Hawkey, or by adding Hawkey’s personal untainted funds,
because the converted property is traceable to the unlawful monetary transaction, we
conclude that the property is subject to forfeiture under the statute.

                                            V.

       For the foregoing reasons, we affirm the district court as to the sufficiency of the
evidence supporting Hawkey’s convictions and the district court’s implementation of the
United States Sentencing Guidelines. With respect to the forfeiture issue, however, we
direct the district court to hold a hearing and determine the appropriate forfeiture
consistent with this opinion.

      A true copy.

             Attest.

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

      13
         As noted above, any instrumentalities that facilitated the misappropriation
would also be forfeitable and, as the Bornfield court noted, there may be instances in
which it is appropriate to order the forfeiture of an account that represents commingled
tainted and untainted funds. See Bornfield, 1998 WL 239265 at *11.
                                            14