U.S. v. Stockheimer, s. 97-1939

• Decision Date: 28 September 1998
• Docket Number: 97-2018 and 97-2019,97-2017,Nos. 97-1939,s. 97-1939
• Citation: 157 F.3d 1082
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Thomas F. STOCKHEIMER, Leonard A. Peth, Harry Days and Mark Van Dyke, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1082

157 F.3d 1082

UNITED STATES of America, Plaintiff-Appellee, v. Thomas F. STOCKHEIMER, Leonard A. Peth, Harry Days and Mark Van Dyke, Defendants-Appellants.

Nos. 97-1939, 97-2017, 97-2018 and 97-2019.

United States Court of Appeals, Seventh Circuit.

Argued April 1, 1998.

Decided Sept. 28, 1998.

Mel S. Johnson (argued), Karine Moreno-Taxman, Office of the United States Attorney, Milwaukee, WI, for Plaintiff-Appellee.

Edward John Hunt, Milwaukee, WI, for Stockheimer.

Christopher Lowe (argued), Milwaukee, WI, for Peth.

Douglas M. Bihler (argued), Bihler & Kurhl, Milwaukee, WI, for Days.

Hans Peter Koesser (argued), Kenosha, WI, for Van Dyke.

Before CUDAHY, FLAUM and EVANS, Circuit Judges.

CUDAHY, Circuit Judge.

Word got around that an organization called Family Farm Preservation (FFP) had developed a novel method of debt management--the Certified Money Order (CMO). Inquiring minds learned that for a suggested donation of $500, FFP would provide a packet of blank CMOs, and some sample documents illustrating how to use them. FFP's CMOs were a little larger than ordinary currency and were in the form of figure 1, below. FFP typically included a numbered receipt for certified mail and a return receipt card with each packet of CMOs.

Figure 1

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

According to the instructions FFP provided, a debtor could legally discharge a debt by sending a creditor a CMO filled out for the amount owed. Debtors were told to send the CMO by certified mail, and to use the identifying number on the certified mail receipt as the identifying number on the top of the CMO. (FFP used and recommended the use of certified mail as a means of documenting CMO transactions.) The CMO indicated that it could be redeemed by sending it to an FFP post office box in Tigerton, Wisconsin. If a lender who received a CMO sent it on to Tigerton, FFP would send the lender a "Certified Bankers Check" (CBC), about the size of a CMO and resembling figure 2. If the creditor returned the Certified Banker's Check to Tigerton for redemption, it would be returned stamped "paid in full." As far as FFP was concerned, at that point the transaction had been consummated.

Figure 2

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Of course some creditors tried to avoid getting on the CMO merry-go-round in the first place by refusing to accept the CMO. FFP's packet included a cheeky form letter for this contingency. It began, "Thank you for surrendering the instrument, the Certified Money Order # __________, therefore discharging my debt pursuant to the Uniform Commercial Code 3.604 and 3.605." Other creditors stopped trying to play along at the point when they first received FFP's CBC. Creditors who refused to accept a CBC were likely to receive a rambling letter from FFP accusing them of fraud. In the end it did not matter what approach was taken: no creditor ever received anything of value by accepting a CMO. So it is not surprising that, while over the course of several years FFP provided CMOs to hundreds of debtors, none seems to have managed to use a CMO to discharge a debt.

The defendants were indicted for conspiracy to commit mail and bank fraud for their roles in FFP's foray into private banking. All of the defendants except Mark Van Dyke were also charged with specific counts of mail fraud in connection with sending or receiving correspondence pertaining to CMOs or CBCs. After a month-long jury trial of all the defendants, Thomas Stockheimer was convicted of conspiracy and 23 counts of mail fraud. He was sentenced to 15 years in prison. The jury convicted Leonard Peth of conspiracy and 22 counts of mail fraud. He received a prison sentence of 8 years and 1 month. Harry Days was acquitted of conspiracy, but he was convicted of two counts of mail fraud. Days was sentenced to 2 years and 4 months' imprisonment. Mark Van Dyke was convicted of conspiracy and received a prison sentence of 3 years, 10 months. A fifth defendant charged in the indictment, Thomas Ponchik, was tried along with the other defendants, but he was acquitted of the only count against him, conspiracy.

On appeal, all of the defendants challenge the adequacy of the government's evidence. They also assign error to the trial court's failure to instruct the jury that the defendants would be absolved if they had a good faith belief that they were acting within the law. Stockheimer and Peth appeal the court's denial of their motion to sever their cases from the other defendants. Stockheimer and Peth also appeal their sentences, on the grounds that the district court erred in determining the amount of the loss attributable to the fraud.

I. Severance

Stockheimer and Peth argue that their trial should have been conducted separately from Ponchik's. Ponchik did not testify, but a postal inspector testified that Ponchik told him that there was "an inner circle of persons that were members of [FFP]" and that Ponchik "said that he was a part of this inner circle of five persons at the time." Tr. 1642-43. The postal inspector also testified that Ponchik described plans by FFP to establish satellite offices "to contain records of Family Farm Preservation and documents [so] that they could continue with the business of Family Farm Preservation in the event that another [government] search occurred at the offices in Tigerton." Tr. 1644. The defendants maintain that "Ponchik[']s [ ] reference to an 'inner circle' necessarily implies a criminal conspiracy by all the defendants on trial.... Moreover, Ponchik's alleged statements about the establishment of satellite offices to avoid the authorities necessarily implied that members of the inner circle had a conscious guilt about the CMO operation." Joint Reply Br. of Defs.-Appellants 9-10. (Evidently between the Defendants' principal brief and their reply brief, Van Dyke and Days adopted Stockheimer's and Peth's severance argument.) According to the defendants, under Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968), the admission of Ponchik's statements violated their Sixth Amendment right "to be confronted with the witnesses against" them. We assume that the jury immediately concluded that (a) the other defendants--at least Stockheimer and Peth--belonged to the inner circle that Ponchik allegedly described, and (b) the other defendants participated in the plans for satellite offices. Nevertheless, Ponchik's statements do not "facially incriminate" these defendants. United States v. Brooks, 125 F.3d 484, 501 (7th Cir.1997). If Ponchik's statements incriminate the other defendants at all, they would only do so in conjunction with other evidence introduced at the trial. Therefore the district court did not abuse its discretion by trying the defendants together. See Gray v. Maryland, --- U.S. ----, ----, 118 S.Ct. 1151, 1157, 140 L.Ed.2d 294 (1998); see also Brooks, 125 F.3d at 501-02.

The defendants also complain about another government witness's reference to an alias Peth used, "Pethahiah," but they make no attempt to explain why this particular reference was prejudicial, see United States v. Lopez, 6 F.3d 1281, 1285 (7th Cir.1993), or even relevant. And in their reply brief, they complain about testimony that they did not mention in their principal brief. So they waived both these points, see United States v. Cusimano, 148 F.3d 824, 828 n. 2 (7th Cir.1998); United States v. Bauer, 129 F.3d 962, 969 (7th Cir.1997), which in any event concern statements that are not facially incriminating.

II. Sufficiency of the evidence

The defendants argue that their conduct did not constitute mail fraud because their claims about the utility of CMOs were so preposterous that no reasonable person would have acted on them. Cf. United States v. Brown, 79 F.3d 1550, 1557 (11th Cir.1996). (The defendants only make this argument with respect to the mail fraud statute, not bank fraud.) The argument is foreclosed by United States v. Coffman, 94 F.3d 330, 333-35 (7th Cir.1996). The defendants do not ask us to revisit Coffman. Instead, they suggest that Coffman was about jury instructions while their beef is with the sufficiency of the evidence. The defendants just misread Coffman, however. They base their argument on a passage in Coffman that apparently refers to jury instructions. See id. at 334 ("The ... purpose [of the 'reasonable person' language] .... is to guide the jury ...."). But only the sufficiency of the evidence--not jury instructions--was at stake and Coffman's holding on that point is squarely against them: a scheme that a sophisticated person would recognize as incredible is not beyond the reach of the mail fraud statute. See id. at 334-35.

Harry Days also makes a separate argument that the government presented too little evidence. We only consider whether a rational jury could have found each of the elements of the crime were proven beyond a reasonable doubt. See United States v. Peters, 153 F.3d 445, 459-60 (7th Cir.1998). The elements of mail fraud are: (1) a scheme to defraud, (2) use of the mails to advance the fraud, and (3) the defendant's participation with intent to defraud. See United States v. Carlino, 143 F.3d 340, 343 (7th Cir.1998). Although Days does not explain which elements of the crime the government failed to prove, there is overwhelming evidence of a scheme to defraud and use of the mails. So we assume that Days is challenging intent.

The government introduced evidence of a CMO signed by Days, made out to a telephone company for $1,633. There is also a letter from the telephone company to FFP seeking to redeem the CMO and stating that the CMO was for the installation of a telephone system. And there is testimony from an FBI agent that Days told the agent of his previous unsuccessful attempts to use CMOs:

Witness. November of '93 he sent a CMO to pay off his mortgage and then January of '94 he learned that the bank did not...