U.S. v. Knight, 79-5192

• Decision Date: 07 December 1979
• Docket Number: No. 79-5192,79-5192
• Citation: 607 F.2d 1172
• Parties: 5 Fed. R. Evid. Serv. 351 UNITED STATES of America, Plaintiff-Appellee, v. James Terrell KNIGHT and A. C. Brown, a/k/a Cadillac, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1172

607 F.2d 1172

5 Fed. R. Evid. Serv. 351

UNITED STATES of America, Plaintiff-Appellee, v. James Terrell KNIGHT and A. C. Brown, a/k/a Cadillac Defendants-Appellants.

No. 79-5192.

United States Court of Appeals Fifth Circuit.

Dec. 7, 1979.

Rehearing Denied Jan. 4, 1980.

Tommy Day Wilcox, Macon, Ga., for James Terrell Knight.

Denmark Groover, Jr., Macon, Ga., for A. C. Brown.

D. L. Rampey, Jr., U. S. Atty., William G. Boyd, Asst. U. S. Atty., Joseph M. Lawless, Atty., Public Integrity Section, Dept. of Justice, Macon, Ga., for plaintiff-appellee.

Appeals from the United States District Court for the Middle District of Georgia.

Before GODBOLD, RONEY and FRANK M. JOHNSON, Jr., Circuit Judges.

FRANK M. JOHNSON, Jr., Circuit Judge:

A jury of the United States District Court for the Middle District of Georgia convicted both A. C. Brown and James Terrell Knight of nine counts of mail fraud. Brown and Knight appeal the convictions. We affirm.

I. FACTS

Preston Leon Bridges served as comptroller of Bassett Furniture Industries of Georgia (Bassett) in the early 1970's. In 1971, Bridges met Leonard Wesley Horton through their common interest in gambling and a close relationship developed. A twenty percent pay cut in 1971 and a notable lack of success in the practice of his avocation put Bridges in financial straits. Bridges and Horton discussed their financial problems and devised a scheme through which Bridges would embezzle Bassett funds.

The duties of Bridges as comptroller of Bassett included, among others, issuing checks to pay Bassett's suppliers. As a part of the scheme Bridges wrote checks payable to legitimate Bassett suppliers (Evans Products and Rex Plastics) based on duplicate invoices of supplies Bassett had already received and paid for. The result was that Bassett paid twice for those supplies. Contrary to the practice generally employed in writing legitimate checks, however, the address of the payee of each bogus check was not typed on its face. After Bridges issued the checks, he turned them over to Horton whose role was to pass the checks on to people who would set up dummy bank accounts in the names of the legitimate suppliers and then negotiate the checks through these accounts. Bridges was to receive forty percent of the proceeds of the operation, Horton ten percent, and the remaining fifty percent was to go to the person or persons who converted the checks into cash.

Horton contacted Brown, whom he had known for nearly twenty years, to arrange to have the checks cashed. Bridges photocopied the backs of legitimate cancelled Bassett checks made out to the two suppliers and furnished the copies to Horton. Horton in turn gave them to Brown who had rubber stamps made to duplicate the endorsements of Evans Products and Rex Plastics.

In March of 1973, after Brown came into the operation, an account at an Atlanta bank was opened in the name of Carlton Lee Evans, d/b/a Evans Products Company. The address given to the bank to which monthly statements were mailed was 1180 Springdale Road in Atlanta. In April, 1974, a second account in the same Atlanta bank was opened in the name of Carlton Lee Evans, d/b/a Rex Plastics, and the bank was given the same Springdale Road address. ¹ The bank also mailed the Rex Plastics account statements to the Springdale Road address.

Between March, 1973, and October, 1974, Horton obtained from Bridges thirty two bogus checks. Horton, in turn, passed them on to Brown. The checks were deposited in the two accounts in the Atlanta bank and, after the checks cleared seven or eight days later, withdrawals from the accounts were made and the proceeds divided. Bassett's home bank mailed the cancelled checks back to the company as part of its regular bank statement.

II. MAIL FRAUD

In order to prove a violation of the federal mail fraud statute, 18 U.S.C. § 1341, ² it is necessary to show the presence together of three elements: (1) defendants' participation in a "scheme or artifice to defraud," United States v. Toney, 598 F.2d 1349, 1351 (5th Cir. 1979); See Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 98 L.Ed. 435 (1954); United States v. Perkal, 530 F.2d 604, 605-06 (4th Cir.), Cert. denied, 429 U.S. 821, 97 S.Ct. 70, 50 L.Ed.2d 82 (1976); (2) use of the mails "caused" by someone associated with the scheme, Pereira v. United States, supra, 347 U.S. at 8, 74 S.Ct. 358; United States v. Toney, supra, 598 F.2d at 1351; United States v. Perkal, supra, 530 F.2d at 606; and (3) use of the mails "for the purpose of executing the scheme." Kann v. United States, 323 U.S. 88, 94, 65 S.Ct. 148, 151, 89 L.Ed. 88 (1944); United States v. Toney, supra, 598 F.2d at 1351.

Knight and Brown concede the existence of a scheme to defraud. Indeed, it would be unrealistic to argue otherwise; Bassett lost more than one half million dollars because of the scheme. Similarly, defendants concede the use of the mails. They dispute, however, that the evidence sufficiently linked them to the enterprise and that the mails were used "for the purpose of executing (the) scheme." We consider first the question of the nexus necessary between the mails and a scheme to defraud.

A. According to Knight and Brown, we must reverse their convictions because use of the mails was not an "integral" part of the plan to defraud Bassett. Defendants, however, apply the wrong standard. "(T)he statute requires not a 'but for' relationship (between the mailing and execution of the scheme) but only that the defendant use the mails in 'furtherance' of the fraud . . . ." United States v. Buchanan, 544 F.2d 1322, 1325 (5th Cir.), Cert. denied, 432 U.S. 907, 97 S.Ct. 2953, 53 L.Ed.2d 1080 (1977). It is well settled that use of the mails will support a mail fraud conviction if it is "incident to an essential part of the scheme." Pereira v. United States, supra, 347 U.S. at 8, 74 S.Ct. at 363; United States v. Shryock, 537 F.2d 207, 209 (5th Cir. 1976), Cert. denied, 429 U.S. 1100, 97 S.Ct. 1123, 51 L.Ed.2d 549 (1977); United States v. Shepherd, 511 F.2d 119, 122 (5th Cir. 1975). The mail must be used " 'In employing the scheme however incidental the mailings may be.' " United States v. Ashdown, 509 F.2d 793, 799 (5th Cir.), Cert. denied, 423 U.S. 829, 96 S.Ct. 48, 46 L.Ed.2d 47 (1975), Quoting United States v. Schaefer, 299 F.2d 625, 630 (7th Cir. 1962) (emphasis in Schaefer ).

Defendants' convictions were based on the mailed bank statements for the two accounts in the Atlanta bank and on the cancelled checks mailed back to Bassett. Those mailings support the "use of the mails" element in these mail fraud convictions. Knight and Brown rely heavily on Kann v. United States, supra, 323 U.S. at 94, 65 S.Ct. 148 and United States v. Maze, 414 U.S. 395, 402, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974), for the proposition that once money is obtained, any subsequent mailings cannot justify conviction. Many times we have affirmed convictions based on mailings made after victims had been relieved of their money. See, e. g., United States v. Toney, 605 F.2d 200, 205 (5th Cir. 1979); United States v. Zweig, 562 F.2d 962, 964-65 (5th Cir. 1977); United States v. Ashdown, supra, 509 F.2d at 799. Kann and Maze hold merely that under the facts of those cases the fraudulent schemes had ended before the mailings occurred. If the scheme continues, mailings made after receipt of the money can clearly support conviction. United States v. Ashdown, supra, 509 F.2d at 799. In the present case the scheme had not "reached fruition" within the meaning of Kann and Maze each time a bogus check was cashed. The enterprise continued for well over a year and defendants cashed over thirty of the checks.

The mailings at issue here, since they resulted from attempts to ensure "prevention of (the scheme's) detection," United States v. LaFerriere, 546 F.2d 182, 187 (5th Cir. 1977), fall within the scope of § 1341. In opening the two Atlanta accounts, a mailing address was of assistance in establishing an appearance of legitimacy. Similarly, when Bassett's Georgia office received the cancelled bogus checks, Bridges typed on them the addresses of the legitimate companies in order to conceal the existence of the scheme from Bassett's auditors. Nevertheless, Knight and Brown argue that, since the action turned out not to be a factor preventing eventual discovery of the scheme, it was not "necessary" to further the scheme and therefore not "for the purpose of executing" the fraud. The argument is meritless. It once again ignores that a mailing need merely be "incidental" to the plan. Further, it would be entirely illogical if action to conceal fraud is required to be successful in order to satisfy the statute. Success of the scheme to defraud is not necessary under § 1341. United States v. Schaffer, 599 F.2d 678, 680 (5th Cir. 1979); See United States v. Green, 494 F.2d 820, 822, n.4 (5th Cir.), Cert. denied, 419 U.S. 1004, 95 S.Ct. 325, 42 L.Ed.2d 280 (1974). Neither can success be a factor in determining whether activity is "for the purpose of executing" a scheme to defraud.

B. Defendants also argue that the evidence was insufficient to prove their participation in the plan to defraud Bassett. Under such circumstances we view the evidence and all reasonable inferences drawn from the evidence in the light most favorable to the government. Hamling v. United States, 418 U.S. 87, 124, 94 S.Ct. 2887, 41 L.Ed.2d 590 (1974); Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942); United States v. Summers, 598 F.2d 450, 452 (5th Cir. 1979). Applying the standard, it is clear that there was adequate evidence to link defendants to the fraud. The evidence against Brown was overwhelming. In addition to the devastating testimony of Horton, Brown's fingerprints were taken from a bogus check and two of the deposit slips for the Atlanta bank accounts.

The evidence also reflected Knight's involvement in the enterprise. Horton observed...