U.S. v. Westbo

• Decision Date: 28 June 1978
• Docket Number: No. 77-1368,77-1368
• Citation: 576 F.2d 285
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. J. Robert WESTBO, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 285

576 F.2d 285

UNITED STATES of America, Plaintiff-Appellee, v. J. Robert WESTBO, Defendant-Appellant.

No. 77-1368.

United States Court of Appeals Tenth Circuit.

Argued and Submitted April 19, 1978.

Decided May 11, 1978.

Rehearing Denied June 28, 1978.

Arthur H. Bosworth, II, Bosworth & Slivka, Denver, Colo., for appellant.

Richard N. Stuckey, Asst. U. S. Atty., Denver, Colo. (Joseph Dolan, U. S. Atty., Denver, Colo., on the brief), for appellee.

Before SETH, Chief Judge, and HOLLOWAY and McKAY, Circuit Judges.

McKAY, Circuit Judge.

Defendant J. Robert Westbo was indicted on two counts of mail fraud (18 U.S.C. § 1341) and two counts of wire fraud (18 U.S.C. § 1343). He was acquitted of the mail fraud counts but was convicted of the two wire fraud counts after a jury trial. Defendant does not challenge the sufficiency of the evidence on appeal. He contends, however, that he failed to receive a fair trial because (1) the jury heard prejudicial evidence relating to an uncharged crime, and (2) the trial court refused to give the "good faith" instruction requested by defendant.

As president of three mortgage and management companies located in Bellevue, Washington, defendant was contacted by the Bankers Union Life Insurance Company (BULIC) of Denver, Colorado, in the fall of 1975. Defendant agreed to act as a broker for BULIC in finding a purchaser for a block of more than 100 mortgages held by BULIC. For his brokerage services he was to receive a commission of 1% of the $2.4 million sales price asked by BULIC. Defendant received from BULIC a $45,000 advance deposit which was to be refunded when the sale was completed.

BULIC was in poor financial condition at the time it contacted defendant, and had been under the direct supervision of the Colorado State Insurance Commissioner (Commissioner) since January 1975. BULIC needed to "book" the sale of these mortgages before the end of 1975 in order to achieve an acceptable surplus asset level and thereby escape the direct supervision of the Commissioner. Defendant was told to sell the mortgages before December 31, 1975.

During November and December 1975, defendant attempted to broker the block of mortgages and succeeded in obtaining a commitment to purchase from Missouri Savings and Loan for $2.4 million. Further negotiations on the sale aborted in late December 1975. When BULIC learned that the sale likely would not be completed in 1975, the president of BULIC pressed defendant to purchase the mortgages personally through one of his companies, Trans-Pacific Mortgage. Consequently, on December 29, 1975, defendant sent BULIC a formal letter of commitment to purchase the mortgages for $2.4 million. This letter guaranteed to BULIC that Trans-Pacific Mortgage would purchase the loans. On the basis of this commitment letter, BULIC represented to the Commissioner and BULIC's shareholders that the mortgages had been sold as of December 31, 1975.

It is questionable whether Trans-Pacific Mortgage could have generated the financing necessary to carry out its commitment. Defendant knew at the time he made the commitment, however, that Columbia Savings and Loan (Columbia) was in a financial position to purchase the entire block of mortgages, and was interested in doing so. Thus, it appears defendant made the personal commitment demanded by BULIC, knowing there was a reasonably good prospect of quickly selling the mortgages to Columbia.

Immediately after making the commitment, defendant began negotiations with Columbia which ultimately resulted in a completed sale for.$2.7 million. The mortgage notes and deeds of trust were assigned directly from BULIC to Columbia, title never passing to defendant. The purchase price was wired from Columbia's bank to defendant's bank on January 12, 1976, pursuant to instructions from BULIC. On the same day, defendant wired BULIC's asking price of $2.4 million to its bank, representing a profit to BULIC of $380,000 exactly what it expected to gain from the sale.

Defendant has admitted he kept the difference of about $331,000 and did not account to BULIC for the $45,000 advance deposit. Defendant subsequently sent BULIC a false closing statement and attempted to justify his retention of the full $331,000. When later confronted by BULIC, defendant admitted he had wrongfully retained the $45,000 deposit. He also admitted having wrongfully deducted and retained from the.$2.7 million sales price a $60,000 investor's fee, which was never actually charged by Columbia, a $70,445 fictitious servicing fee, and a $127,000 fee for advance mortgage insurance premiums which he never remitted. Without claiming any legal right to these fees, defendant later paid to BULIC the $45,000 and $60,000 amounts and admitted his liability to BULIC for another $163,000.

As a result of this and other business ventures, defendant's three companies were later placed under the direction of a trustee in bankruptcy who has controlled these companies during this trial. The electronic transfers of.$2.7 million from Columbia's Denver bank to defendant's Seattle bank and of $2.4 million back to BULIC's Denver bank constituted the thin wire on which federal jurisdiction is based.

FAILURE TO GIVE DEFENDANT'S PROFFERED GOOD FAITH INSTRUCTION

Defendant claims he was entitled to a "good faith" instruction even if the jury found him to be acting as an agent, if they found that he thought and believed he became a principal upon the sending of his December 29, 1975 letter of commitment to BULIC. Even a cursory reading of defendant's proffered instruction shows that his argument on appeal goes far beyond the language of the instruction he claims was erroneously omitted. The rejected instruction stated:

You are further instructed that good faith on the part of a defendant is a defense to a charge of mail and wire fraud, that is, if a defendant did not act with knowledge of falsity and with intent to defraud, then you must find him not guilty. You are further instructed however, that no matter how firmly the defendant may believe in the plan, his belief will not justify baseless, false, or reckless representations or promises knowingly and willfully made. (emphasis added).

Record, vol. 1, at 20. The instruction does not define good faith in terms of what defendant thought or believed; contrariwise, the instruction explicitly provides that no amount of subjective belief in his plan would "justify baseless, false, or reckless representations or promises knowingly and willfully made." Rather than considering what defendant could or should have offered as an instruction, our review will therefore be limited to an examination of the actual instruction omitted.

Good faith is a defense to charges of mail or wire fraud. United States v. Beitscher, 467 F.2d 269, 273 (10th Cir. 1972); Beck v. United States, 305 F.2d 595, 599 (10th Cir.), cert. denied 371 U.S. 890, 83 S.Ct. 186, 9 L.Ed.2d 123 (1962). We recognize that "defendant's theory of the case should be presented so long as it states the law accurately and does not appear confusing to the jury." United States v. Hall, 536 F.2d 313, 330 (10th Cir.), cert. denied, 429 U.S. 919, 97 S.Ct. 313, 50 L.Ed.2d 285 (1976), and cases cited. Thus, a defendant is entitled to an instruction covering good faith in mail and wire fraud cases where the evidence supports it. Sparrow v. United States, 402 F.2d 826, 828 (10th Cir. 1968).

The sufficiency of instructions is not determined by giving or failing to give particular instructions, but rather by viewing all of the instructions as a whole. United States v. Pepe, 501 F.2d 1142, 1144 (10th Cir. 1974); United States v. Beitscher, 467 F.2d at 273; Beck v. United States, 305 F.2d at 599. Moreover, it is well established that "even when charging the jury as to the defendant's theory of the case, the exact language offered by the defendant need not be followed." United States v. Hall, 536 F.2d at 330; see Elbel v. United States, 364 F.2d 127, 134 (10th Cir. 1966), cert. denied, 385 U.S. 1014, 87 S.Ct. 726, 17 L.Ed.2d 550 (1967).

Applying the above rules to the facts of this case, we hold that the instructions given were sufficient and comprehensive. They correctly stated the law with respect to defendant's state of mind, which is an essential element of the offense charged. We note that good faith is the obverse of bad motive or intent to defraud. Indeed, some courts have treated issues of good faith and intent to defraud as synonymous. E. g., United States v. Foshee, 569 F.2d 401, 404 n. 3, 405 (5th Cir. 1978). It is clear in this case that the trial court's actual instructions on specific intent and principal-agent adequately covered the same concepts embodied in defendant's particular proffered instruction.

The rejected instruction explained that "good faith" means "a defendant did not act with knowledge of falsity and with intent to defraud." The instruction actually given explained that "intent to defraud" means "to act willfully and with specific intent to cheat or deceive." The court in turn instructed that

(a)n act is done willfully if it is done voluntarily and intentionally and with some specific intent to do something which the law forbids, that is to say with bad purpose either to disobey or disregard the law, and to act knowingly is to act voluntarily and intentionally and not as a result of mistake or inadvertence or accident or other innocent reason. (emphasis added).

Record, vol. 5, at 94. The court also emphasized that "specific intent must be proved before there can be a conviction," and explained that "(a) person who knowingly does an act which the law forbids intending with bad purpose either to disobey or disregard the law, may be found to act with specific intent." Id. at 94-95.

The above instructions on intent to defraud were immediately followed with principal-agent instructions. With these instructions, read together with the next preceding instructions on intent...