U.S. v. Hammond

Decision Date16 July 1979
Docket NumberNo. 78-5179,78-5179
Citation598 F.2d 1008
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Larry HAMMOND, a/k/a Larry Hoover, Defendant-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Morton Berger, Spring Valley, N. Y., for defendant-appellant.

Charles O. Farrar, Jr., Asst. U. S. Atty., Miami, Fla., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before WISDOM, GOLDBERG and VANCE, Circuit Judges.

GOLDBERG, Circuit Judge:

The defendant-appellant was convicted in federal district court of wire fraud and securities fraud in violation of 18 U.S.C. § 1343, 15 U.S.C. §§ 78j(b) and 78 ff, and 17 C.F.R. 24.10b-5. On appeal he raises several arguments challenging his convictions. For the reasons stated below, we conclude that the judgment of the district court should be reversed.

The defendant's convictions resulted from his participation in a scheme to defraud a brokerage house. An FBI undercover agent named Peisner played a part in the scheme. The defendant believed Peisner was a person who had good credit but was about to declare bankruptcy. Under the scheme, Peisner was to order his brokerage house to purchase for him on credit 150,000 shares of stock in I & I, Inc. The defendant allegedly controlled this stock. Although the stock was traded at $3 per share, it was actually worthless. The scheme was to work as follows: After the brokerage house purchased the stock, Peisner would renege on his agreement and declare bankruptcy. The money from the stock purchase would find its way to the defendant, the defendant would pay Peisner $25,000 for his efforts, and the brokerage house would be left with the worthless stock. The deal, however, was not completed. Peisner informed the Securities and Exchange Commission, and it suspended trading in the stock. The defendant was indicted for his activities in connection with the scheme, and on the basis of his participation, the jury found him guilty of wire fraud and securities fraud.

I.

The defendant's first argument on appeal concerns his convictions under the federal wire fraud statute. (" § 1343"). That statute provides:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined not more than $1,000 or imprisoned not more than five years, or both.

18 U.S.C. § 1343. In this case, the wire fraud convictions were based on telephone calls between the defendant and agent Peisner in which they discussed the plans for defrauding the brokerage house.

The defendant argues that the trial court lacked subject matter jurisdiction for the two wire fraud convictions. He claims that the jurisdictional element of § 1343 cannot be met when that element is supplied, as it was in this case, solely by contacts between the defendant and government agents. There are two steps to the defendant's argument. First, he claims that the requisite interstate or foreign communication must be "in furtherance of" the defendant's scheme to defraud. And, second, he argues that a communication cannot be "in furtherance of" the scheme to defraud if it is made to a government agent who secretly intends to frustrate the scheme. In other words, the defendant would interpret § 1343 as requiring an interstate or foreign communication which actually furthers the scheme to defraud.

The defendant's interpretation of § 1343 is incorrect. Section 1343 does not provide that the interstate or foreign communication must be "in furtherance of" the scheme to defraud. It only provides that the communication must be made "for the purpose of executing such scheme." 18 U.S.C. § 1343. And one can certainly make a communication for the purpose of executing a scheme, even when that communication does not actually further the scheme. In fact, our recent decision in United States v. Patterson, 528 F.2d 1037 (5th Cir. 1976), establishes that § 1343 only requires that the defendant transmit or cause to transmit an interstate or foreign communication, Intending that the communication will help further the scheme. There is no requirement that the communication Actually further the scheme.

In Patterson the defendant's scheme was to defraud the phone company by selling electronic devices called "blue boxes." When a blue box is attached to the phone one can make long distance calls without being charged by the phone company. To demonstrate how the device worked, the defendant dialed the long distance operators in several cities. The defendant was unaware when he made this demonstration that his potential customer was a telephone security agent. The court held that these calls fell within § 1343. Although the calls did not actually defraud the phone company, since they were not toll calls, they were made "for the purpose of executing" the fraudulent scheme because they were made to demonstrate the blue box to a potential customer. It did not matter that this potential customer was someone who secretly intended to frustrate the scheme. Id.

When the defendant in this case talked on the phone with agent Peisner, the defendant was unaware that Peisner was an FBI agent. He thought of Peisner as his accomplice in the scheme, and in these phone calls, the defendant explained to Peisner exactly what he was supposed to do. Clearly, then, the defendant made these phone calls Intending that they would help execute the scheme to defraud the brokerage house. As Patterson shows, this is sufficient to bring the calls within § 1343.

II.

The defendant's second argument concerns his entrapment defense. Under the law of entrapment, once the defendant shows some evidence that the government induced him to commit the offense, the burden is on the government to prove beyond a reasonable doubt that the defendant was predisposed to commit the offense. United States v. Benavidez, 558 F.2d 308, 310 (5th Cir. 1977) United States v. Timberlake, 559 F.2d 1375, 1379 (5th Cir. 1977). In this way the government proves that the defendant was not entrapped.

In this case the defendant presented evidence of government inducement. A stipulation containing the testimony of two absent defense witnesses was read to the jury. It indicated that the government thought up the scheme to defraud the brokerage house. According to these witnesses, government agents were going to "push" the scheme on the defendant. The witnesses claimed that the defendant was "unwilling to do the deal that way." The government agents were going to set the defendant up to get even with him " because of a prior deal." 1 With the introduction of this evidence, the burden was on the government to prove beyond a reasonable doubt that the defendant was predisposed to commit the offenses.

This, the defendant claims, the government did not do. The jury, however, thought otherwise. And, after examining the record, we find that there was evidence from which a jury could conclude beyond a reasonable doubt that the defendant was predisposed to commit the offenses.

There was evidence that the defendant controlled the I & I stock and that the stock, although traded at $3 per share, was actually worthless. The evidence also showed that prior to his dealings with agent Peisner, the defendant had tried to get various individuals to purchase the stock without telling them that he controlled the stock or that it was worthless. Instead, the defendant told these individuals that he knew the stock was going to rise in value. He gave different explanations for this expected rise in value. He told these individuals that he wanted to buy the stock himself but that he did not then have the cash. He asked the prospective purchasers to buy the stock and hold it so that he could later purchase it from them. All the prospective purchasers rejected the deal.

From this evidence the jury could have concluded that before meeting agent Peisner the defendant was planning to defraud Someone by causing him to purchase the worthless stock. Moreover, according to agent Peisner, it was the defendant's idea, not the government's to defraud the brokerage house. Peisner testified that he arranged to meet the defendant, posing as a person with good credit but who was about to declare bankruptcy, because he had learned that the defendant was looking for just such a person to perpetrate a fraud against a brokerage house. From all this evidence, a jury could conclude beyond a reasonable doubt that the defendant was predisposed to commit the offense.

III.

Finally, the defendant argues that the trial court should have dismissed the case because the government intimidated his witnesses. 2 He claims that the government's intimidation of two important defense witnesses caused them to refuse to testify.

One of these witnesses, Mr. Parsons, had already testified and been cross-examined when the court called a recess. During this recess, FBI agent Peisner approached Parsons. Peisner told Parsons that he knew about the "situation in Colorado." Parsons had been indicted in a state matter in Colorado and had agreed to go there to work with the FBI in an assistance capacity. Peisner told Parsons that if he "continued on," he would have "nothing but trouble" in Colorado. The next morning both Parsons and the other defense witness, who had not yet given any testimony, were subpoenaed to appear before a grand jury for further investigation of the I & I stock.

After these events, Parsons refused to give further testimony and the other defense witness refused to testify at all. The parties informed the court about what had transpired. Parsons told the judge that he feared that if he testified,...

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