Court Opinion

ID: 9465791
Source: CourtListenerOpinion
Date Created: 2023-08-05 00:55:49.372669+00
Date Added: 2024-06-11T17:39:22.029025
License: Public Domain

TUTTLE, Circuit Judge:
Meadows was a CETA1 employee who, through an administrative error, received duplicate paychecks and cashed them until the mistake was discovered. He was convicted of “obtain[ing] by fraud” the duplicate paychecks in violation of 18 U.S.C. § 665. Because the district court improperly charged the jury in its definition of fraud as applied to the facts of the case, we reverse and remand for a new trial. Other issues raised in this appeal which may arise on retrial are also considered.
I. FACTS.
Meadows was indicted on one count of violating 18 U.S.C. § 665.2 The relevant *986facts are these. Meadows had begun working as a CETA employee in January, 1975, when he was hired to train as an Industrial Waste Inspector for the Atlanta Department of Environment and Streets, Bureau of Pollution Control. A dispute arose as to the wage scale upon which Meadows was to be paid, and after a long series of discussions with various department heads and the mayor himself — in which Meadows alleged that he was being discriminated against — he was transferred to another CETA position with the Institute of the Black World in the Department of Community and Human Development. As a result of the previous salary grievances, it was agreed that Meadows’ pay scale would be raised at his new position with the Institute of the Black World. Although Meadows was transferred to Black World, he was told that he would continue to be paid at the lower scale and was to pick up his checks at the Bureau of Pollution Control in City Hall until he could be switched from one payroll to the other. A few weeks later, Meadows began to receive his paychecks at the increased salary scale directly from Black World and quit going to City Hall to pick up checks from the Bureau of Pollution Control.
On September 21, 1976 — just one week after Meadows had received his regular paycheck from Black World — he received a call from his CETA counselor, informing him that there was a paycheck for him at City Hall from the Department of Environment and Streets. Meadows picked up the check and cashed it. One month later, again while receiving his normal check from Black World, Meadows received another call from his counselor to pick up an Environment and Streets’ paycheck at City Hall. He also picked up this check and deposited it in his personal bank account. Thereafter, from October 4 to December 13, 1976, Meadows personally and on his own initiative went to City Hall each week after receiving his normal paycheck from Black World and claimed the additional check from the Department of Environment and Streets. The net amount of each additional check was exactly the same as he had been earning each week at the Bureau of Pollution Control.
In December, 1976, Meadows picked up a yearly bonus check from Black World. Since the check was roughly one-half of a full year’s bonus, Meadows complained to the Atlanta supervisor of CETA personnel records. He also picked up a full bonus check at City Hall from the Department of Environment and Streets.
When a financial analyst looked into Meadows’ complaint regarding his Black World bonus, it was discovered that Meadows had been receiving two paychecks as a result of an administrative error at the Inspection and Monitoring division of the Bureau of Pollution Control. The timekeeper had been instructed to continue reporting Meadows’ time even though he was no longer working there to insure that he remained on a CETA payroll until he was transferred to another CETA position. When Meadows was picked up on the payroll at Black World, no one informed the *987timekeeper at the Department of Environment and Streets to remove him from their payroll.
The record is clear that Meadows did nothing to cause this initial administrative error. He only began picking up the checks after he was called by his CETA counselor. Meadows readily admitted that he had picked up the extra checks and cashed or deposited them into his account, but stated that he had thought the first extra check was some sort of severance pay and then figured the other checks may have been a subtle way to compensate him for the discrimination he had complained of while working at the Bureau of Pollution Control. The prosecution introduced testimony to rebut this defense. Several CETA officials who met with Meadows after the discrepancy was discovered testified that he admitted to them that he was aware after the first additional check that the paychecks from his former position had been issued erroneously and that he knew the only checks he should have been receiving were those from Black World.
II. THE FRAUD INSTRUCTION.
During the course of the general charge, the trial court gave the following instruction to the jury:
I charge you that fraud is an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed which deceives and is intended to deceive another so that he can act upon it to his legal injury.

In determining whether or not the defendant, Mr. Meadows, in this case obtained CETA funds by fraud as charged in the indictment, the jury may consider acts and omissions as well as affirmative statements, because under the law fraud may result from state-merits of half-truths or the concealment of material facts.

(emphasis added).
.The appellant’s trial counsel made several objections to this charge, one of which we feel has merit. Although the court gave an adequate dictionary definition of fraud in the first paragraph quoted above, it poisoned the otherwise healthy charge when, in the second paragraph, it applied the law to these facts. By stating merely that “fraud may result from statements of half-truths or the concealment of material facts,” without more, the court understated the principle of law by failing to remind the jury of the intent required to convict. Pence v. United States, 316 U.S. 332, 338, 62 S.Ct. 1080, 86 L.Ed. 1510 (1942). Such an understatement on a specific and paramount issue, at this critical stage of the charge when the jury was instructed on how these elusive and ethereal principles should be applied to the facts of the particular case, created reversible error that could not be cured by the unexceptional abstract charge. Further, the error was exacerbated by the court’s repetition of the same language in two supplemental charges. After deliberating for approximately three hours, the jury sent a note to the trial court indicating that they wanted further instruction on the legal definition of fraud. The court repeated the above quoted instruction twice, the defense counsel renewed his objections, and after additional deliberation of only fifteen minutes, the jury returned its verdict of guilty. It is clear that the crux of the jury’s confusion was how the unfamiliar legal definition of fraud was to be applied to the unique facts of this case. The understatement created the possibility that the jury might have convicted Meadows for an innocent, unintentional omission of a material fact. Although there may be sufficient evidence to indicate that Meadows’ conduct in continuing to pick up the paychecks which he knew were mistakenly issued to him constituted fraud, the question is not whether guilt may be spelt out of a record, but whether guilt has been found by a jury according to the procedure and standards appropriate for criminal trials in *988the federal courts. Although we realize, of course, that all instructions must be considered as a whole, and not word-by-word or phrase-by-phrase, such a fundamental understatement as to the paramount issue at a critical stage of the instruction requires reversal.
III. FAILURE TO GRANT JUDGMENT OF ACQUITTAL.
Meadows contends that the trial court committed reversible error in failing to grant his motions for judgment of acquittal at the close of the government’s case and at the close of all evidence. The basis of his argument is that since he engaged in no “active fraud” in obtaining the extra paychecks, there was no reason for the court to have allowed the case to go to the jury on the charges of obtaining CETA funds by fraud. We disagree.
The appellant’s contentions misconstrue the nature of Meadows’ conduct and the law of fraud. Although he may have taken no action to initiate the issuance of the paychecks, his conduct in picking up checks for several months which he admittedly knew were erroneously issued was sufficient evidence of fraud to warrant submission of the case to the jury.
Although we generally consider fraud as a false representation or concealment of a material fact that should have been disclosed, when made with knowledge of its falsity and with intent to deceive another so that he can act upon it to his legal detriment, e. g., Pence v. United States, 316 U.S. 332, 338, 62 S.Ct. 1080, 86 L.Ed. 1510 (1942); United States v. Nill, 518 F.2d 793, 800 (5th Cir. 1975), this amorphous concept “is measured by a nontechnical standard. ‘It is a reflection of moral uprightness, of fundamental honesty, fair play and right dealing in the general and business life of members of society’, Gregory v. United States, 5 Cir., 1958, 253 F.2d 104, 109.” United States v. Bruce, 488 F.2d 1224, 1229 (5th Cir. 1973), cert. denied, 419 U.S. 825, 95 S.Ct. 41, 42 L.Ed.2d 48 (1974). It has been said that “the law does not define fraud, it needs no definition; it is as old as falsehood and as versable as human ingenuity.” Blachly v. United States, 380 F.2d 665, 671 (5th Cir. 1967), quoting Weiss v. United States, 122 F.2d 675, 681 (5th Cir.), cert. denied, 314 U.S. 687, 62 S.Ct. 300, 86 L.Ed. 550 (1941); see also Abbott v. United States, 239 F.2d 310, 314 (5th Cir. 1956).
We feel that under the broad prohibition of fraud intended by § 665 and the definition of fraud as embraced by the courts, it is possible that a jury could have inferred from the evidence in this case a knowing false representation or material omission by Meadows which facilitated his ability to continue picking up checks from his old job while receiving his normal compensation from his new job. The jury could have found from the evidence that Meadows impliedly but affirmatively misrepresented that he still worked at the Bureau of Pollution Control when he continued to claim the extra paychecks at City Hall for several months, and that the City relied on this misrepresentation by continuing to issue the duplicate checks. It would not be unreasonable for the jury to assume that if Meadows had left the checks unclaimed, the city would have realized the error and stopped issuing the checks. Alternatively, the jury could have found that, by failing to inform the proper city officials that he was no longer working at the Bureau of Pollution Control and was receiving paychecks from Black World, Meadows concealed a material fact, thus insuring that the city would continue to issue the paychecks and that he would continue to benefit from the city’s initial mistake. Although it is clear that Meadows made no false inducements to obtain the extra paychecks initially, his conduct in continuing to pick them up with knowledge of the obvious error came sufficiently within the broad sweep of 18 U.S.C. § 655 to go to the jury.
IV. RULE 408 — OFFER TO COMPROMISE.
Meadows contends that the trial court committed reversible error by admitting certain statements he made to a government official when he was confront*989ed with the fact of the overpayments, on the grounds that the statements were part of compromise negotiations and should have been excluded on the basis of Rule 408, Federal Rules of Evidence.3 We disagree.
These statements occurred in an interview between Meadows and a program analyst for the Labor Department named Goldsmith. Goldsmith had received a memorandum from Meadows’ CETA supervisor with Black World, which indicated that Meadows had complained because he had not received his full bonus check. Goldsmith reviewed the records and found that while Meadows’ Black World bonus check was deficient, Meadows had received a full bonus check from the Bureau of Pollution Control, and moreover, had been carried simultaneously on two departments’ payrolls for several months. Based on these discoveries, Goldsmith decided to hold Meadows’ checks and when Meadows came to Goldsmith’s office, he was confronted with the problem. When testifying for the government on direct examination, Goldsmith stated that Meadows’ immediate response was an admission that he knew after the first check that there was some sort of administrative error causing the duplicate checks to be issued, but declared that “if you were stupid enough or somebody else makes the mistake, I felt that I could benefit from it.” On cross-examination, the defense counsel brought out that Meadows subsequently agreed to a repayment schedule.
Although the government contends that Rule 11(b), Federal Rules of Criminal Procedure, rather than Rule 408, Federal Rules of Evidence, governs the issue since this is a criminal case, we assume the applicability of Rule 408 to govern the admission of related civil settlement negotiations in a criminal trial. F.R.Evid. 1101(b), see Ecklund v. United States, 159 F.2d 81 (6th Cir. 1947). We do not, however, find any violation of the rule. We do not feel that Meadows’ remark to Goldsmith that he knew the checks were issued by mistake was in any sense an offer to compromise a claim. The conversation occurred during an informal investigation of the situation; thus, there was no claim to compromise at the time the two first met. The prosecution merely made use of a direct admission with respect to Meadows’ intent, which is, of course, probative evidence of his state of mind. Although the testimony concerning the repayment schedule might otherwise have been barred by rule 408 as a settlement offer, this testimony was solicited by the defense counsel on cross-examination. We reject the appellant’s contention that he was “forced” to introduce this testimony of the repayment schedule; it appears to us to be a calculated, tactical defense decision.
V. SUPPLEMENTAL CHARGE.
As we stated earlier, the jury requested additional instructions on the definition of fraud during the course of its deliberations. In response, the court merely repeated the small portion of its original charge describing the law of fraud and its application to these facts. The supplemental instructions contained no reference to the burden or quantum of proof, presumption of innocence, or any other matter necessarily favorable to the defendant. The defense counsel objected and requested some additional balancing instruction, but the trial court refused. The jury returned its verdict of guilty within fifteen minutes. Since the case will have to be retried, it may be helpful to comment on the procedure followed.
*990It is well-established that in giving additional instructions to a jury; particularly in response to inquiries from the jury, a court must be especially careful not to give an unbalanced charge. Although the failure to give any jpresumption of innocence instruction does not mandate reversal in all criminal appeals, Kentucky v. Whorton,-U.S. -, 99 S.Ct. 2088, 60 L.Ed.2d 640 (1979), the particular significance of a supplemental charge when a jury has been unable to reach a decision on the basis of all it has heard up until that time demands an exacting sensitivity on the part of the trial court to give an accurate and balanced instruction. BoUenbach v. United States, 326 U.S. 607, 612, 66 S.Ct. 402, 90 L.Ed. 350 (1946); United States v. Carter, 491 F.2d 625, 633 (5th Cir. 1974). While in this case, we would hesitate to reverse the judgment for the failure to recharge with respect to the presumption of innocence and the burden of proof; on retrial, if the court chooses to give any additional charge and quite reasonably elects not to repeat the entire original charge, the court could simply remind the jury of the burden and quantum of proof and presumption of innocence, or state that all instructions must be considered as a whole, or take some appropriate steps to avoid the possibility of prejudice to the defendant. This procedure will provide a minimum of balance without any undue burden.
REVERSED AND REMANDED.

. Comprehensive Employment and Training Act of 1973. Under the CETA program, the United States Department of Labor grants money to individual cities to fund projects providing job education and experience.

. 18 U.S.C. § 665 provides:
(a) Whoever, being an officer, director, agent, or employee of, or connected in any capacity with, any agency receiving financial assistance under the Comprehensive Employment and Training Act of 1973 embezzles, willfully misapplies, steals, or obtains by fraud any of the moneys, funds, assets, or *986property which are the subject of a grant or contract of assistance pursuant to this Act shall be fined not more than $10,000 or imprisoned for not more than two years, or both; but if the amount so embezzled, misapplied, stolen, or obtained by fraud does not exceed $100, he shall be fined not more than $1,000, or imprisoned not more than one year, or both.
The indictment alleged that the appellant “did embezzle, misapply, steal and obtain by fraud” the money he received from CETA. However, the district court concluded as a matter of law that the appellant’s actions could not constitute embezzlement, stealing, or misapplying; and therefore instructed the jury only on the issue of fraud. While larceny may have been a more appropriate theory upon which to present the case to the jury, see, e. g., Thaggard v. United States, 354 F.2d 735 (5th Cir. 1965); United States v. Rogers, 289 F.2d 433 (4th Cir. 1961); R. Perkins, Criminal Law at 254 (2d ed. 1969); the court’s holding was not appealed by the government and thus we are powerless to review it. See generally United States v. Posner, 408 F.Supp. 1145 (D.Md.1976), aff'd per curiam, 551 F.2d 310 (4th Cir. 1977), cert. denied, 434 U.S. 837, 98 S.Ct. 127, 54 L.Ed.2d 99 (1977); Sapp v. State, 157 Fla. 605, 26 So.2d 646 (1946); Territory v. Lee, 29 Hawaii 30 (1926); Wolfstein v. People, 6 Hun 121 (N.Y. 1875).

. Rule 408 provides:
Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations. This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negativing a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.