Court Opinion

ID: 9422017
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:00:54.258811+00
Date Added: 2024-06-11T17:22:33.455380
License: Public Domain

Mr. Justice Frankfurter,
whom Mr. Justice Harlan and Mr. Justice Stewart join,
dissenting.
The petitioners, nine individuals and two banks, were indicted for violations of, and conspiracy to violate, the Mail Fraud Act, 18 U. S. C. § 1341. All were convicted on the conspiracy count, and all but two, who were exonerated on all of the substantive counts, were convicted of eight or more of the nineteen specific mailings charged.
Together these petitioners controlled a public body created under Texas law, the Benavides Independent School District (hereinafter called the District), which administered the public schools within its geographical confines, and dominated the bank serving as depository of the District, designated as such pursuant to statute. Vernon’s Tex. Rev. Civ. Stat. Arts. 2763, 2763a. Through their control of the District’s fiscal affairs they looted it of at least $200,000 between 1949 and 1953.
The District was vested by Texas law with a limited taxing power, Vernon’s Tex. Rev. Civ. Stat. Art. 2784e, and the annual collection of taxes was the primary source of revenue for maintaining its public schools. The District, and therefore these petitioners exercising the powers of the District, assessed and collected an ad valorem property tax which was by law to be devoted exclusively to the maintenance of the public schools. They were empowered to fix the rate of taxation according to projected needs, whether for expenditures or reserves. Vernon’s Tex. Rev. Civ. Stat. Arts. 2784e, 2827. Apart from their *395duty to.confine the tax to school purposes, petitioners’ discretionary power to fix the rate was unlimited, except that a maximum rate was fixed by statute. Vernon’s Tex. Rev. Civ. Stat. Art. 2784e. In 1951, petitioners raised the tax rate to the statutory maximum, and thereafter taxed at that rate. Pursuant to a scheme devised in 1949, they regularly spent less than the amount collected on the schools, created no reserves, and appropriated a portion of the proceeds to their own uses. When their domination of the District ceased in 1954, school expenditures sharply rose, while tax collections remained substantially unchanged.
Conduct or transactions fall under the Mail Fraud Act if it be established that there existed “any scheme or artifice to defraud” and that the mails were used “for the purpose of executing such scheme or artifice or attempting so to do.” Of the nineteen substantive violations charged in this indictment, sixteen were mailings in connection with the tax collection process carried out by petitioners. As to those counts this case presents the question whether the Act is violated by a public officer vested by law with a discretionary power to levy taxes for the purpose of providing funds estimated to meet projected expenditures for a statutorily defined public need for the satisfaction of which the power is entrusted to him, who exercises that power over several years to collect through the mails sums which could as a matter of law be so expended, but a portion of which he at all times, throughout successive years of fixing the tax rate and utilizing the proceeds, actually intends to and does appropriate to his own uses.
Petitioners urge that because the amounts they collected each year were credited to the taxpayers on the District’s books, and were not in excess of what they might, had they lawfully applied the proceeds, have expended for school maintenance, the collections were in effect lawful and did not constitute a fraudulent scheme *396in the collection of the taxes, so that there was no wrongdoing, nothing illicit, till they misapplied the innocently collected funds. Their case is that it must therefore be concluded that the mailings, which occurred in the course of the exercise of the District’s lawful taxing power, were not for the purpose of “executing” their scheme within the meaning of the Act, regardless of the fact that it was established beyond peradventure that their abuse of the District’s powers was a seamless fraudulent scheme, conceived and executed as such with every element of the enterprise interdependent with every other.
Insofar as the defense rests on the lawfulness of the isolated act of mailing as a claim of immunity from the Mail Fraud statute, it is without substance. It has long been established that under this Act “[i]ntent may make an otherwise innocent act criminal, if it is a step in a plot.” Badders v. United States, 240 U. S. 391, 394. In fact the heart of petitioners’ effort to escape their conviction is the claim that the skulduggeries of which the jury found them guilty do not fall within the scope of the Mail Fraud statute because in sending out the tax bills they were the neutral vehicles of legal compulsion, although at the time that they sent them out, and having full governmental control of the process of controlling revenue and expending it, they had predetermined that the proceeds were not to be fully applied to school purposes but were in part to be diverted into their private pockets. It bespeaks an audacious lack of humor to suggest that the law anywhere under any circumstances requires tax collectors who send out tax bills, and who also have complete control over the returns, to send out bills to an amount which they predeterminedly design to put in part to personal uses. That is certainly not the law of Texas in any event. While it may be assumed that, since the maintenance of the schools was the duty of the District, petitioners were obligated to collect some amount of ad valorem tax for *397that purpose, it is undisputed that how much was to be expended, and therefore how much was to be collected, was determined not by Texas law but by the discretion, the voluntary act, of petitioners themselves. No Texas statute required them to collect what they intended to spend to keep the schools running, plus an amount which they intended to misappropriate,1 and that is precisely what the proof established and the jury found that they did.
Petitioners’ claim raises the further question whether, even if the mailings were not immune in themselves, they were too remote from the purpose of the fraudulently designed scheme to be deemed in “execution” of it. Whether a mailing which occurs in discernible relation to a scheme to defraud is an execution of it is a question of the degree of proximity of the mailing to the scheme. The statute was enacted “with the purpose of protecting the public against all such intentional efforts to despoil, and to prevent the post office from being used to carry them into effect . . . .” Durland v. United States, 161 U. S. 306, 314. Whether the post office was so used must be the Court’s central inquiry. If the use of the mails occurred not as a step in but only after the consummation of the scheme, the fraud is the exclusive concern of the States. Kann v. United States, 323 U. S. 88. The adequate degree of relationship between a mailing which occurs during the life of a scheme and the scheme is of course not a matter susceptible of geometric determination. In United States v. Young, 232 U. S. 155, we said that it is not neces*398sary that the scheme contemplate the use of the mails as an essential element, and in Pereira v. United States, 347 U. S. 1, 8, we found a mailing to be in execution of a scheme because it was “incident to an essential part” of it. The determining question is whether the mailing was designed materially to aid the consummation of the scheme, as, for example, in Pereira v. United States, supra, by the obtaining of its proceeds through the innocent collection of defendant’s fraudulently obtained check by his bank.
For the purposes of the statute, the significance of the relationship between scheme and mailing depends on the interconnection of the parts in a particular scheme. Ordinarily, once the fraud is proved its scope is not a matter of dispute. But when, as here, the fraud involves the abuse of a position of public trust, closer analysis is required. Petitioners seek to denude their scheme of its range and pervasiveness. They construct an artifact whereby their fraudulent scheme was, as it were, intramural, unrelated to taxpayers to whom they sent the tax bills, and so the mails, the ingenuous argument runs, were not used in the fraud because the wrongdoing only arose after the mails had fulfilled their function by bringing the returns. The wrong is thus nicely pigeonholed as embezzlement, without any prior scheme.
The fraudulent, episodic, petty-cash peculations of a clerk at a regulatory agency are frauds upon that agency, and although taxpayers generally are injured by the fraud and in that sense are the ultimate objects of it, the mailings by which the tax proceeds are collected which constitute the vast government funds out of which the agency’s funds are taken, are, as a matter of practical good sense by which law determines such issues of causation, see Gully v. First National Bank, 299 U. S. 109, 117-118, too remote from the scheme to be deemed in execution of it. But to analogize petitioners’ scheme to a conven*399tional case of peculation by an employee, whether public or private, is to disregard the facts of this case.
The petitioners themselves controlled the entire conduct of the District’s fiscal affairs, and their own decision, limited only by a statutory ceiling, determined the amount of the tax that would be collected. Petitioners’ exercise of their power to fix the amount of the tax, an exercise which ultimately assured to themselves an excess of funds over their intended expenditures or reserves for school purposes, was necessarily central to their scheme. Such control obliterates the line they seek to draw between themselves and the entity it was their duty to serve. By demanding and collecting what they intended to misappropriate they made the process of collection an inseparable element of their scheme.
The petitioners’ control of the District and therefore of its tax rate, similarly disposes of their contentions that one or another element of a technical fraud upon the taxpayers of the District is absent. The suggestion that in the collection of taxes there was no representation by petitioners to the taxpayers of the District might be pertinent were the system a self-executing tax structure under which the time for, and amount of, the payment due and the payee to whom it is to be made are designated by statute, so that the tax collector, serving as an automatic conduit, does nothing to cause collection of the tax. These collectors, however, were the prime actors in the structure. They not only billed the taxpayers but also fixed the rate of the tax itself. For that reason it cannot be said that the taxpayers paid their taxes solely under compulsion of Texas law, and not at all in reliance upon the implied false representation of petitioners that the amounts assessed were collected to meet projected expenditures. The taxpayers necessarily depended upon petitioners’ setting of the rate for knowledge of what amount was to be paid. Each taxpayer who testified revealed *400that he awaited his bill before making payment. The fact, much relied on by petitioners, that an available Texas procedure for challenging the tax was not invoked, establishes not, as is argued, the legality of the tax, but the reliance of taxpayers on petitioners’ implied representations in the collection of it.
The intention of petitioners to have their bills paid is beyond dispute. But they urge an absence of detriment to the taxpayers who did rely since their payments were ordinarily credited to them on the District’s books. The claim is frivolous. Whether they are viewed as having overpaid for school services, or having been deprived of services for which they paid, the detriment to the taxpayers is self-evident. It is in part for this reason that petitioners’ attempted analogy between this case and the case of a doctor’s secretary who sends out just bills but intends to steal from the proceeds is to urge that a mountain is a molehill. Even if the secretary, rather than her principal, is regarded as making the representation to patients that they may pay her, they are not injured by so doing, and they are not defrauded. The result would be very different, as petitioners concede, if the bills so sent out were padded by her. Here inescapably the bills were padded by the predetermined increase, which, though within technical legal limits, was for fraudulent ends.
Although this analysis appropriately disposes of this case it goes beyond the requirements of the statute. While the Mail Fraud Act is directed against the utilization of the mails in carrying out a fraudulent scheme, the penal prohibition of the use of the mails for a fraud does not turn on the niceties of the common-law offense of obtaining money or goods under false pretenses, see Durland v. United States, 161 U. S. 306, 312-313. The statute sought to forbid the use of the mails as a vehicle for a fraudulent *401enterprise in the ordinary sense of a fraud — a dishonest and cheating enterprise. It is significant that the Act was amended in 1909 by adding to the outlawry of a “scheme or artifice to defraud” the expanding condemnation, “obtaining money or property by means of false or fraudulent pretenses, representations, or promises.” 35 Stat. 1130. While of course penal criminal statutes must not be extended beyond the fair meaning of English words, they must not be artificially and unreasonably contracted to avoid bringing a new situation within their scope which plainly falls within it in light of “the evil sought to be remedied.” Durland v. United States, supra, at 313. The lay, commonsensical way of interpreting condemnation of aspects of fraud in federal penal legislation is illustrated by the settled doctrine that the prohibition against defrauding the United States in 18 U. S. C. § 371 extends far beyond the common-law conception of fraud in that financial or property loss is not an ingredient of the offense. Haas v. Henkel, 216 U. S. 462, 480; see also United States v. Plyler, 222 U. S. 15. If the fraudulent enterprise of which this record reeks is not a scheme essentially to defraud the taxpayers who constitute the District rather than a disembodied, abstract entity called the District, English words have lost their meaning.
Petitioners finally urge as to these counts that their convictions cannot be sustained because, even if the facts were sufficient to sustain a conviction, the indictment did not allege, the proof did not show, the conduct of the trial and the summations to the jury did not reveal, and the charge to the jury did not present, such a case either as to fact or law. It is apparent however that every aspect of this prosecution was focused on the Government’s basic assertion that because petitioners controlled the District’s affairs, continuously schemed to and did misappropriate funds while continuing to collect falsely *402represented revenues from taxpayers by mail, the use of the mails to collect taxes was in execution of a scheme to defraud the District and its taxpayers.
The indictment in every substantive count expressly alleged “a scheme and artifice to defraud the BISD, persons obligated by the laws of the State of Texas to pay taxes to the BISD (hereinafter called taxpayers), the State of Texas, and ... to obtain the money and property of the BISD and the taxpayers for themselves . . . The primary devices allegedly undertaken to effectuate the scheme were the obtaining and maintaining of control of the District and its depository bank, and the collection of taxes by mail from District taxpayers during the period of the scheme.
The Government’s proof established a design of petitioners to obtain control of the political and fiscal mechanism of the District, and that, having obtained control and being the dominus of the District, they sent out tax bills of the returns from which, year after year, they took a portion for themselves. The proof thus established a continuing course of conduct constituting, by the very nature of the systematic continuity of the practice, a conscious scheme to utilize their powers of government, of which setting the tax rate was one, for fraudulent purposes, in the execution of which the mails of the United States were a necessary instrument. Objections to government evidence offered on the substantive counts as to events before 1951 were overruled on the well-settled ground that the offers were admissible to show the continuing scheme to acquire, maintain and abuse control of the District.
In its summation the Government repeatedly characterized the scheme which it had sought to prove as one to employ petitioners’ comprehensive control to max*403imize District revenues with a view to stealing funds,2 and the charge adequately placed the issues of the indictment and trial before the jury.
■ The remaining three substantive counts of the indictment charged that as part of the same scheme to control and defraud the District the petitioners used the District’s charge account to obtain gasoline for their personal use, which acts resulted in the use of the mails by the vendor to present the appropriate bills to the District. The mailings of two such bills and of one payment by the District were charged as separate offenses. Two matters are to be noted. First, it is suggested that there was no misrepresentation by the petitioners, because only the correct bill of the vendor was sent to the District. No reason appears however why a bill which the jury could have found petitioners knowingly caused to be sent to the District constitutes less of a representation by them that the gasoline consumed was used for the District’s purposes than a voucher directly submitted by them for reimbursement for cash purchases.
*404Second, it is urged that, under the rationale of Kann v. United States, 323 U. S. 88, the mailings, even if caused by petitioners, were not in execution of a scheme to defraud because the scheme was consummated once they received the gasoline. Kann v. United States found an appropriate instance of such a limitation; but it also expressly excepted from the force of the rule situations in which the subsequent mailing has the function of affording “concealment so that further frauds which are part of the scheme may be perpetrated,” supra, at 94-95. Here the jury might properly have found that consumption of gasoline for private purposes was but one device of petitioners for turning their control of the District to their personal advantage, and that the continuing presentation and payment of the bills, and not merely the receipt of the gasoline, was the purpose of the scheme.
Petitioners raise no substantial objections to the conspiracy convictions that are not disposed of by what has already been said. The petitioners’ other attacks against the verdict require no more discussion than given below. 265 F. 2d 894.
I would affirm the judgments.

 See Madeley v. Trustees, 130 S. W. 2d 929, 932 (Tex. Civ. App.), and Kluckman v. Trustees, 113 S. W. 2d 301, 303 (Tex. Civ. App.), both stating that an action will lie to enjoin the collection of taxes on the ground of the Trustees’ fraud; and Stephens v. Dodds, 243 S. W. 710 (Tex. Civ. App.), suggesting that a referendum conferring on the Trustees the power to tax may be void if the tax is not for the statutory purpose.

 “A continuing scheme year after year, send out the tax notice, rake in the harvest through the mails, and then milk it by several methods as outlined.” “[T]his was a continuing scheme to defraud. This was not a scheme which these defendants thought up T will take one check and convert it to my own use/ but it went on, ’48, '49, ’50, ’51, ’52, ’53, in order to draw out more fraudulent checks, more money from the depository banks they had to replenish the supply.” "It is the • Government’s theory of this case that these defendants took over a mail-order business. . . . The defendants knew that; they had to know it.” “What is the function of the School District ? The function of the School District is to provide for the public education, the free education of the students, all the children who live in their district. . . . The trustees are someone in whom confidence . . . trust and reliance are placed by the taxpayers . . . . ■ What was the school district used for in this instance? ... it was used as a personal vehicle for the fraudulent designs and purposes of these defendants.”