U.S. v. Mankarious

Decision Date07 August 1998
Docket NumberNos. 97-3028,97-3029,s. 97-3028
Citation151 F.3d 694
Parties-5583 UNITED STATES of America, Plaintiff-Appellee, v. Samy A. MANKARIOUS and Thomas K. Murphy, Defendants-Appellants.
CourtU.S. Court of Appeals — Seventh Circuit

Joseph R. Wall (argued), Thomas P. Schneider, Office of the United States Attorney, Milwaukee, WI, for Plaintiff-Appellee in No.97-3028.

Francis D. Schmitz (argued), Thomas P. Schneider, Office of the United States Attorney, Milwaukee, WI, for Plaintiff-Appellee in No.97-3029.

Thomas E. Brown (argued), Kathryn A. Keppel, Gimbel, Reilly, Guerin & Brown, Milwaukee, WI, for Defendant-Appellant Samy A. Mankarious.

Terry E. Mitchell (argued), Hartland, WI, for Defendant-Appellant Thomas K. Murphy.

Before CUMMINGS, ROVNER, and EVANS, Circuit Judges.

TERENCE T. EVANS, Circuit Judge.

In this case, Samy Mankarious and Thomas Murphy offer more than a dozen reasons for reversing their convictions for money laundering, wire fraud, and filing false tax returns. They do not skimp on the sentencing issues, either, arguing at least 11 grounds for recalculating their offense levels under the federal sentencing guidelines. Before considering this veritable plethora of issues, we set out the facts, which of course are viewed in the light most favorable to the jury's verdict.

In 1989 Mankarious and Murphy launched Delta Group, Inc., an aluminum smelting company based in Muskego, Wisconsin. Over the next several years, the two used Delta as the springboard for a variety of fraudulent schemes. At first it may sound like Mankarious and Murphy stole just from themselves, but that is not true. While the two men owned 59 percent of Delta, the remaining 41 percent belonged to WITECH, a venture capital operation run by Wisconsin Energy Corp., Wisconsin's largest utility. WITECH contributed $175,000 toward the construction of Delta's plant and, through an investment agreement, WITECH exercised significant control over fundamental business decisions at Delta. For instance, the utility closely controlled the salaries, profit shares, and benefits given to Mankarious and Murphy. Apparently the two men resented what they perceived to be low salaries. By 1992 they convinced WITECH to pay them a bonus and to lower the interest rate on a company loan. Seemingly, these concessions did not satisfy Mankarious and Murphy. The government suggests that their frustration served as a motive for their crimes. Perhaps yes, perhaps no. At any rate, we now get to the fraudulent activity that led to the indictment which led to the convictions of Murphy and Mankarious.

The first of the fraud schemes involved Ed Brown and the company he partially owned, UPEC & Associates. Brown testified for the government and provided many of the details of the following story. UPEC began its relationship with Delta in 1990 when it bid on and eventually built Delta's furnace. In the following years, Delta regularly hired UPEC. As the relationship between the two companies grew, so did the relationship between Mankarious, Murphy, and Brown. During the summer of 1990 Brown asked Mankarious and Murphy if they knew of any methods to withdraw money from a company. Murphy replied, "There's lots of ways. Stick around with us and we'll show you the reins." Mankarious then outlined a plan for Brown to bilk money out of Delta--of course, Brown would share a cut with the men from Delta.

Under this scheme UPEC performed work at Delta, with Brown submitting false invoices for each job. Mankarious and Murphy would cut checks to cover these invoices, sometimes making the checks out to a fictitious payee. Brown would endorse the checks and return them to Mankarious, who would cash them at a tavern called the Brat N Beer. At first Brown received half the proceeds, with Mankarious and Murphy splitting the other half. Later Mankarious convinced Brown to split the take evenly among the three men.

In the winter of 1990 the details of the scheme changed slightly. UPEC continued to perform work at Delta, but Brown began sending invoices to Delta from his father-in-law's Topper Manufacturing. Over the next several months Mankarious and Murphy cut eight checks to Topper totaling over $28,000. On many occasions Mankarious and Murphy co-signed the checks in front of Brown at Delta. At least once, however, Mankarious apparently took care of business alone, telling Brown not to inform Murphy. And from early 1991 until early 1992, without Brown's knowledge, Mankarious and Murphy signed five checks from Delta to Topper totaling over $23,000. Mankarious cashed these checks at the tavern. (These betrayals recall yet again that there is no honor among thieves.)

Mankarious cashed the checks at the Brat N Beer because of his close relationship with the owner, Ralph Adamczyk. Mankarious' checks were the largest that Adamczyk cashed, and Mankarious often would call just before bank closing time to make sure that Adamczyk had enough cash on hand. If the tavern owner was short, Mankarious would drive him to the bank to pick up enough cash to cover a given check. Both Adamczyk and Diana Coffey, a bartender at the Brat N Beer, testified that they never saw Ed Brown.

In mid-1991, UPEC & Associates dissolved and Brown took over a new company, UPEC, as the sole owner. The schemers concocted a new variation on their scam. Brown would inflate UPEC's invoices to Delta and then write Mankarious a kickback check. Apparently Mankarious shared this perk with Murphy. For instance, in one transaction UPEC overbilled Delta by $6,850. Delta paid the bill and Brown cut a $6,850 check to Delta. Mankarious objected and asked Brown to make the check out to one of UPEC's larger suppliers. Brown then wrote out a $6,850 check to I. Bahcall and gave it to Mankarious. On another occasion, UPEC submitted a bogus invoice for $21,500 after Mankarious demanded about that much from UPEC's comptroller, Tom Hansen. Brown told Hansen to do whatever Mankarious asked. Delta paid UPEC the $21,500 and Brown wrote a check for $10,500 to Sam's Trading (a fireworks business run by Mankarious) and another $10,500 check to Seasonal Merchandise (a fireworks business run by Murphy). UPEC seems to have submitted another bogus invoice for $26,000 paid to the two fireworks companies. Notably, throughout all these schemes Delta never took the early payment discount allowed by UPEC's invoices.

Sometimes UPEC would even bill Delta for work performed at either Mankarious' or Murphy's homes or for their businesses. For instance, Mankarious received a deck around his pool, a bay window, a paint job for his house, trailer hitches for his cars, kitchen cabinets and kitchen remodeling, roof repairs, and dollies for gun safes. Murphy received dollies and trailer hitches. Adding insult to injury, UPEC not only billed Delta for these projects but inflated the invoices as well. Thus Mankarious and Murphy reaped double benefits--the free work plus the kickback. On another occasion, UPEC paid Dave Kerr to install a furnace and an air conditioner at Murphy's house. UPEC then invoiced Delta for the bill. Following this tiny subplot, Mankarious and Murphy telephoned Hansen (UPEC's comptroller) and told him to destroy the paper trail because Murphy was nervous. Apparently not too nervous, though--2 months later Murphy told Kerr to install an air conditioner at his parent's home. Again, Kerr billed UPEC and UPEC billed Delta.

During the summer of 1992 Mankarious and Murphy met with Brown to cook up a plan to overbill Delta by $50,000. Brown sent the invoice, received payment, and made out the kickback check to Mankarious' brother-in-law. A few months later, however, Mankarious telephoned and explained that the IRS was snooping around. He returned the money and told Brown to use it as prepayment on future bills to Delta.

Throughout the UPEC invoice scheme Brown would hand-carry the questionable invoices to Delta. Delta would cut the checks while Brown waited. According to Mankarious and Murphy, UPEC would not send duplicate invoices in the mail. According to the government, UPEC routinely sent copies through the mail.

In addition to concocting the UPEC/Brown scheme, Mankarious and Murphy also fell in with Roger Green, who ran Metal Brokers International ("MBI") out of Cape Coral, Florida. MBI ran a complex fraudulent operation through which it bought aluminum ingot from various smelters under the pretense that either GE or Emerson Electric would purchase the metal. In reality, MBI sold the metal to other buyers but used a system of cleverly named bank accounts to make it appear that the big companies paid the bill. According to the government, Green ran a Ponzi scheme, making increasingly late payments for the aluminum. See Scholes v. Lehmann, 56 F.3d 750 (7th Cir.1995). Once the government caught up with Green, he testified against Mankarious and Murphy.

Delta began to sell metal through MBI innocently, but several late payments tipped off Mankarious, who began to investigate. He discovered that MBI was up to something and called Green. Green offered to pay him off, but Mankarious suggested that they should pursue "business opportunities" together. Green flew to Milwaukee, where he and Mankarious developed a plan. Under one part of the plan Delta received aluminum ingot through MBI at scrap prices and Green received money that he needed to keep his scam running. A Delta employee testified to the activity on Delta's loading dock--ingot arriving from Delta's competitor Met-Al (a victim of MBI), ingot piling up, ingot arriving on one truck and leaving minutes later on another.

In another part of the plan--here's where it gets really complicated--Delta shipped aluminum to MBI but billed Emerson. A cohort of Green's at Emerson intercepted the bills and sent them to MBI. Mankarious used the accounts receivable from Emerson to prop up Delta's line of credit at his bank. Delta used this line of...

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