U.S. v. Prows, 95-4163
| Decision Date | 30 June 1997 |
| Docket Number | No. 95-4163,95-4163 |
| Citation | 118 F.3d 686 |
| Parties | 97 CJ C.A.R. 1121 UNITED STATES of America, Plainiff-Appellant, v. Tracy PROWS, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Richard D. McKelvie, Assistant United States Attorney, Salt Lake City, UT (Scott M. Matheson, Jr., United States Attorney, Salt Lake City, UT, with him on the brief), for Plaintiff-Appellant.
Craig S. Cook, Salt Lake City, UT, for Defendant-Appellee.
Before TACHA, BALDOCK and EBEL, Circuit Judges.
Tracy Prows was convicted of mail fraud and wire fraud for his role in a scheme to obtain software from WordPerfect at discounted prices by misrepresenting the identity of the purchaser. After an unsuccessful appeal, 1 Prows collaterally attacked his conviction under 28 U.S.C. § 2255, claiming that he had received ineffective assistance of counsel. The district court agreed and vacated the judgment. However, the district court misconstrued what is required for a conviction under the mail fraud and wire fraud statutes, 18 U.S.C. §§ 1341, 1343, and as a result misapplied the prejudice prong of the Strickland test. Under a correct construction of those statutes, we find that Prows was not prejudiced by his counsel's performance. Therefore, we reverse.
Petitioner-Appellee Tracy Prows was the owner of Computerland of Ogden, a retail computer store in Utah. In mid-May of 1988 he was approached by James Baker who wanted to buy large quantities of WordPerfect software at a discount and resell them. Prows was an authorized WordPerfect dealer. He told Baker that discount prices were available when the software was purchased under a site license.
A site license is an agreement whereby WordPerfect sells a large number of programs at a discount to a buyer who agrees that the programs will be exclusively for its own use and will not be resold. The discounts available under a site license are substantial. For example, at a time when the lowest wholesale price available to a WordPerfect dealer was $198 per unit of software, the same programs could be purchased under a site license for $100 per unit. A dealer who refers a site license customer to WordPerfect receives a 20% commission on each unit sold under the license.
After speaking with Baker, Prows contacted a sales representative at WordPerfect and indicated that he had a customer, E.R.A. Realty, who was interested in obtaining a site license to purchase 5,000 units of software. At about the same time, Baker and another computer sales representative, Richard Hirsch, contacted buyers in the retail and wholesale trade, offering large blocks of WordPerfect for $145 a copy. One of the wholesalers contacted was Softsell Company in Englewood, California.
When Mark Wong, purchasing manager for Softsell, was approached, he became concerned that lower prices were available on the market than directly from WordPerfect. Wong contacted Clive Winn, a vice-president of WordPerfect, about the price discounting. Winn, in turn, began an internal investigation at WordPerfect. He initially suspected that a shipment of software had been stolen or that the merchandise was counterfeit. However, during the investigation, the E.R.A. Realty site license caught his attention because it was for the same quantity of software that had been offered to Softsell.
Winn, a former Federal Bureau of Investigation (FBI) agent, contacted local FBI agents and together they set up a sting. As a first step, they asked Softsell to increase its order to confirm that the source was the site license obtained by Prows. Wong contacted Baker and increased Softsell's order. Thereafter, WordPerfect received an order for 11,000 units to be purchased under the site license. The order indicated that the customer was National Insurance Services Company (NISC), rather than E.R.A. Realty. When a WordPerfect employee asked Prows who NISC was, Prows said that the company was an affiliate of E.R.A.
NISC was a fictitious entity created by Baker solely for the purpose of entering into the site license. Baker assumed the name of Tom Wohlschlaeger (the name of his deceased father-in-law) as the purchasing agent for NISC. He asked Colorado resident David Morrissey for help in furthering the scheme. Morrissey agreed to allow his Colorado phone number and address to be listed as the business phone number and address of NISC. He also agreed to answer the phone in a manner that would lead a caller to believe that he or she had reached the offices of NISC. When a call came in from WordPerfect for Tom Wohlschlaeger, Morrissey would take a message and forward it to Baker.
Using his word processor, Baker created a purchase order on NISC letterhead, authorizing the purchase of 11,000 units of WordPerfect software. After receiving the order, WordPerfect mailed a site license to Prows. Baker signed the license as Tom Wohlschlaeger, purchasing agent for NISC. The license was then returned to WordPerfect.
On June 17, 1988, WordPerfect made a partial delivery of software to Prows at a loading dock in Ogden, Utah. Baker and Prows met the shipment. Winn and FBI agent John Nelson also were at the loading dock, posing as representatives of a trucking company that was to transfer the shipment to Softsell. Prows instructed Nelson and Winn that WordPerfect could not know about the reshipment to Softsell.
As payment for the software, Winn gave Prows a check for $870,000, purportedly from Softsell. The check, which had been manufactured by the FBI, was made out to Computerland. After Prows accepted the check, several more FBI agents appeared. Prows and Baker were subsequently questioned by the FBI.
A Grand Jury returned an indictment against Baker, Prows, and Morrissey, charging mail fraud, wire fraud, and aiding and abetting, pursuant to 18 U.S.C. §§ 1341, 1343, and 2. Baker pled guilty to all counts of the indictment and agreed to testify against Prows and Morrissey at the trial.
The government's theory at trial was that Prows knew of the scheme to defraud and that he intended by his actions to further the scheme. The case was supported by the testimony of numerous witnesses, and in some cases, by Prows' own testimony. Prows, on the other hand, maintained that he believed that NISC was a real company, although he admitted that he knew that some of the computer software ordered under the site license would be sold to companies other than NISC. He also testified that he did not intend to defraud WordPerfect and that "sideways deals" were common in the computer industry.
Baker's testimony supported the government's theory that he and Prows planned the scheme together. Baker testified that Prows knew all of the following: that Richard Hirsch was soliciting buyers for the computers; that Baker was paying someone $10,000 to answer a phone in Denver as if it were the office of an insurance company; and that Baker had signed the NISC purchase order. Baker testified that it was Prows who arranged with WordPerfect to ship the goods to Computerland so that they could be reshipped to other buyers. He also testified that the profits from the venture, including profits from the resale of the computers and the commission from the site license, were to be divided between himself and Prows.
FBI agent John Nelson testified that during questioning Prows admitted: that he had realized that NISC was a nonexistent company and that Wohlschlaeger was not a real person; that Baker had made phone calls from Prows' office to find buyers for the software; that profits from the scheme were to be split three ways among Baker, Prows, and Hirsch. Nelson also testified that at the loading dock, when he handed Prows the check purportedly from Softsell, Prows said that WordPerfect could not know anything about the sale. He said that Prows' reaction to receiving the check was to remark that it was too large.
WordPerfect Vice President Winn testified that he had told Prows that he had spoken to Tom Wohlschlaeger who had confirmed the NISC order, and that Prows then requested that WordPerfect ship the software to Computerland for delivery to NISC's insurance agents around the country. Like Agent Nelson, Winn testified that Prows commented that the check from Softsell was in the wrong amount and that WordPerfect could not know anything about the check.
Karen Fossum-Zumkowski, a marketing assistant at WordPerfect, testified that Prows contacted her about arranging a site license under which E.R.A. Realty would purchase 5,000 units of WordPerfect software. She said that Prows arranged for the software to be sent to Computerland for redistribution to E.R.A. Zumkowski testified that she told Prows that she could not ship the product to Computerland without authorization on company letterhead from the customer. The next day she received a purchase order on NISC letterhead for 11,000 units, authorizing delivery to Computerland. Zumkowski telephoned Prows to ask about the increase in the number of units and the change in buyer from E.R.A. to NISC. She said that Prows told her that NISC was an affiliate of E.R.A. Realty. According to Zumkowski, Prows urged her to send the site license agreement immediately because the customer would be vacationing in Utah and would be available to sign it. Zumkowski mailed the license to Prows by overnight mail. It was returned to WordPerfect by Prows' sister, signed by Tom Wohlschlaeger for NISC.
Prows testified in his own defense that his role in the transaction was simply to send WordPerfect a site license referral for NISC, which he believed was a real company because it was represented as such to him by Baker. He testified that he relied on WordPerfect to do a background check on NISC because the site license ultimately was between NISC and WordPerfect. He admitted knowing that Richard Hirsch was arranging to sell part of the...
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