U.S. v. Daniel

• Citation: 329 F.3d 480
• Decision Date: 22 May 2003
• Docket Number: No. 01-4077.,01-4077.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Ralph M. DANIEL, Jr., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 480

329 F.3d 480

UNITED STATES of America, Plaintiff-Appellee, v. Ralph M. DANIEL, Jr., Defendant-Appellant.

No. 01-4077.

United States Court of Appeals, Sixth Circuit.

Argued: March 13, 2003.

Decided and Filed: May 22, 2003.

COPYRIGHT MATERIAL OMITTED

David A. Sierleja (briefed), United States Attorney, Matthew B. Kall (argued), United States Attorney, Cleveland, OH, for Plaintiff-Appellee.

Melissa W. Friedman (argued and briefed), Anthony F. Anderson (briefed), Roanoke, VA, for Defendant-Appellant.

Before CLAY and ROGERS, Circuit Judges; COFFMAN, District Judge.^*

OPINION

ROGERS, Circuit Judge.

A jury convicted Ralph M. Daniel, Jr. ("Daniel") of one count of wire fraud, in violation of 18 U.S.C. § 1343. Daniel now appeals, arguing that there was insufficient evidence of a "scheme" to defraud, or of his intent to defraud, or of a wire communication in furtherance of the scheme. Daniel also contends that the district court erred by refusing to instruct the jury that it should acquit him if it had a reasonable doubt regarding whether he had intended to repay the money. Finding no merit to his claims, we affirm.

Facts

The fraud for which Daniel was convicted consisted of unauthorized taking of company money to cover margin calls from his personal stock broker, and misrepresenting what he was doing to keep from being questioned. Daniel claims that he intended to pay the money back when, as he hoped, the price of his stock bounced back up, but that did not happen.

In 1997 Daniel was an owner and operator of Business Management Services, Inc. ("BMS"), a payroll services company located in Roanoke, Virginia. A business employing BMS would send BMS the lump sum amount owed to the business's employees, a few days before each "pay day." During the time between an employer's initial deposit and the employees' subsequent withdrawals, BMS would deposit the money in Client Account No. 10 ("Account No. 10") and invest the money in overnight investments—though only in investments that were secure and conservative, because it was important that the clients' money be available when it was time to pay it out.

In August of 1997, BMS was purchased by Century Business Services, Inc. ("CBIZ"), a holding company engaged in the business of acquiring accounting and payroll management corporations. BMS was renamed Century Payroll, Inc. ("Century"), Daniel was left in place to continue his former duties, and Century apparently kept using Account No. 10 as it had previously. In exchange for his ownership interest in Century, Daniel received 274,423 shares of CBIZ stock, worth approximately $2.7 million.

Daniel placed his CBIZ shares in a margin account with Davenport & Co. ("Davenport"), an investment firm. Under the terms of this account, Daniel could purchase additional stock or withdraw cash from Davenport on credit, using as collateral his equity in his existing investments managed by Davenport. When the value of Daniel's equity in his investments fell below a certain level — as would happen if the value of his stock declined — then Davenport would send him a "margin call," requiring him to repair his equity by either selling the stock or by paying cash into his account. Daniel kept his CBIZ stock and bought more CBIZ stock on margin.

Beginning in October of 1998 the value of CBIZ stock began to fall, and Davenport issued Daniel a margin call. Instead of selling his CBIZ stock, Daniel approached Century's controller, Robert St. Lawrence, and had him draw a check payable to Daniel for $199,750 from Account No. 10. The loan was listed on Century's Investment Worksheet as an investment from Account No. 10, and the accounts receivable column listed interest accrued on the loan. Though CBIZ headquarters could have found the loan amount listed in the financial statements submitted by Century, the latter's monthly and yearly statements would not ordinarily (and did not) specify with whom the money was invested. The monthly statements did list the interest accrued on the loan as income to Century, but Daniel's name was not listed, and only his initials — "RMD" — were placed next to the entry. St. Lawrence asked no questions about this loan; St. Lawrence had some personal acquaintance with Daniel's finances and knew that he was well-off, so he did not see the loan as contravening the policy of investing Account No. 10's funds conservatively.

Daniel proceeded to buy more CBIZ stock on margin, and as CBIZ stock declined steadily through 1998 and 1999, Davenport issued a series of margin calls. On March 16, 1999, Daniel approached Jennifer Duff, who had recently replaced St. Lawrence as Century's controller, and asked for a blank check from Account No. 10. Duff gave him a check without asking what it was for, and Daniel used it to deposit $300,000 into his Davenport account. Century's vice president, Geoff Duke, heard about the check from Duff, and inquired about it with Daniel. Daniel explained — falsely — that he had invested it as a corporate investment on Century's behalf.

In July of 1999, Daniel withdrew $200,000 from his Davenport account and deposited it with Century, as repayment of his initial $199,750 loan. This payment covered only $250 of the accrued interest, and Duff sent him an email asking when he would repay the rest of the interest. In response, Daniel's email said this would be "no problem. I will give you that at a later date when I pay off the other." Daniel Trial Exhibit No. 14.

On September 27, 1999, Daniel had Controller Duff write a check to him for $259,000, from Account No. 10. He explained to Duff that he was having Century invest with Davenport in such an odd manner — writing a check out to him and then writing a check to Davenport from his personal account, rather than simply having Century send a check to Davenport — because due to his personal relationship with his broker at Davenport he could get a better interest rate. This was false, but Duff trusted Daniel and was content with this explanation.

Century Vice-President Duke, however, was not satisfied. Duke had been under the impression that Century was investing directly with Davenport, and had been waiting in vain for Davenport to send Century the regular financial statements. After the September 27 check was issued, he asked Daniel about the status of these investments, and Daniel gave him the same better-interest-rate explanation he had given to Duff. Duke, skeptical, sent Daniel an email the next day observing that though it was fine to invest Century's Account No. 10 money with Davenport if it was safe, it was not permissible to put this client money to personal use. According to Duke, Daniel "was upset with my E-mail," because "he felt like I was accusing him of doing something wrong." Joint Appendix ("J.A.") at 281-82. In subsequent conversations, Daniel admitted that he had invested the money in CBIZ stock for personal purposes, but gave Duke the (at that time untrue) explanation that he was an "insider" and could not sell the stock.

When Duke asked Daniel if he had permission to take out these loans, Daniel told Duke that the people at CBIZ headquarters "didn't want to know the details," but they had authorized him "to do whatever he needed to do to keep sound selling the company stock," J.A. at 283 — apparently meaning that he should do whatever was necessary to meet his margin calls and keep Davenport from selling his CBIZ stock. Duke, persisting, asked what CBIZ's CFO, Charles Hamm, would say about it if Duke called him; Daniel replied, "[Y]ou do what you want to do, but they said they didn't want to know the details." J.A. at 283. Though dissatisfied, Duke let matters rest there and agreed with Daniel's request not to tell anyone else about the loans, but Duke did succeed in getting Daniel to sign a $570,000 promissory note for the amounts owing at that time.

Duke's inquiry did not end the withdrawals, however. As the value of CBIZ's stock continued to fall (Daniel continuing to purchase CBIZ stock nevertheless), Daniel had Controller Duff issue him eight more checks from Account No. 10, as follows: $100,000 on October 25, 1999; $50,000 on November 1, 1999; $300,000 on December 1, 1999; $260,000 on December 22, 1999; $150,000 on January 4, 2000; $200,000 on January 7, 2000; $200,000 on January 27, 2000; and $1,520,000 on February 1, 2000. Daniel signed promissory notes for each, though none of these notes was forwarded to CBIZ headquarters. Daniel repaid $350,000 of the money on December 13, 1999, but this (along with his payments made the previous summer) was all he ever repaid.

With regard to the final check mentioned above, for $1.5 million, Daniel made a point of finding out when Duke would be leaving, and it was during Duke's absence that Daniel had Duff write this check — the largest of all. When Duke nevertheless learned of the withdrawal and confronted Daniel, Duke was rebuffed and, in Duke's words, Daniel "got a little bit upset and said that he didn't have to ask my permission to do a damned thing." J.A. at 288.

In March of 2000, Duke — concerned that $3 million missing from Account No. 10 might cause clients' paychecks to bounce — asked Daniel to return the money. (As of April 2000, Century's net equity was $1.5 million.) Daniel told Duke he did not have the money. A few days later, as Century's management discussed the implementation of its new computerized accounting system, Daniel told Duke to put all of Century's books on the system, except Account No. 10 — thereby preventing the loans drawn against that account from being available for CBIZ's perusal, as they would have been if that account had been on the system.

As a result of these events Duke confronted Daniel on April 24, 2000, asking for written proof that CBIZ had authorized Daniel's withdrawals. Daniel offered to put up collateral for the loans, and agreed to have CBIZ send written authorization. Daniel called CBIZ CFO Hamm the same day. Hamm...