628 F.2d 1167 (9th Cir. 1980), 79-1449, United States v. Bohonus
|Citation:||628 F.2d 1167|
|Party Name:||UNITED STATES of America, Plaintiff-Appellant, v. Jerry R. BOHONUS, Defendant-Appellee.|
|Case Date:||March 27, 1980|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Dale A. Danneman, Asst. U. S. Atty., Phoenix, Ariz., for the U. S.
David M. Ochoa, Asst. Federal Public Defender, Phoenix, Ariz., for Jerry Bohonus.
Appeal from the United States District Court for the District of Arizona.
Before TRASK, TANG and FERGUSON, Circuit Judges.
FERGUSON, Circuit Judge:
The government appeals the dismissal of an indictment against the defendant Jerry R. Bohonus on 12 counts of mail fraud in violation of 18 U.S.C. § 1341. 1
The district court dismissed the indictment on the ground that § 1341, as applied to the defendant, was unconstitutionally vague. The court also held that the indictment did not allege facts constituting a violation of the mail fraud statute because Congress did not intend that statute to reach employee disloyalty. We reverse and remand for further proceedings.
The pertinent facts as set forth in the indictment 2 are as follows:
The defendant was employed as an insurance manager by Amerco, a Nevada corporation. U-Haul International was and is a division of Amerco. The defendant was president and a member of the Board of Directors of four Amerco subsidiaries, all of which were insurance companies, and he was the insurance manager for Amerco and for U-Haul.
In January, 1971, Amerco entered into a contract with American Bankers Insurance Company of Florida (hereinafter "American Bankers"). American Bankers was to provide insurance coverage on a retention basis for lessees of U-Haul under what was denominated the "Safemove Program." Mr. Herbert Sieber, an insurance broker, negotiated the Safemove contract and was paid a commission pursuant to a Special Representative Agreement between American Bankers and himself for the insurance premiums paid as a result of the program. In or about March, 1972, Bohonus learned of the extent of the commissions paid to Sieber. Thereafter, the defendant pressured Sieber by threatening to cancel the Safemove Program unless Sieber paid him a share of the commissions Sieber was receiving from American Bankers.
Bohonus sent a letter to American Bankers dated June 5, 1972, cancelling the Safemove Program. Sieber contacted the defendant upon notice of the letter, and the defendant explained that the letter was a "bluff." Sieber then agreed to meet the defendant in Los Angeles to discuss a kickback plan. The two did meet in Los Angeles, and Sieber agreed to pay the defendant a portion of the commissions he was receiving from American Bankers. The defendant then sent a second letter to American Bankers, dated June 20, 1972, rescinding his cancellation of the Safemove Program. From June, 1972, to June, 1973, Sieber sent Bohonus portions of the commissions on the Safemove Program received from American Bankers.
In June, 1972, the defendant, on behalf of Amerco, sought an insurance company to handle liability insurance (a separate insurance program from the Safemove Program) for U-Haul. Sieber referred the defendant to Anthony Hepp, an insurance consultant, and Hepp arranged a contract between Amerco and the Old Republic Insurance Company. Hepp gave Sieber two-thirds of the commission Hepp received under this contract. Sieber in turn mailed the defendant one-half of these payments from April, 1973 to June, 1975.
Sieber mailed the payments relating to both insurance contracts to a post office box in Phoenix, Arizona. He made the checks payable to Inbroke, a corporation controlled by the defendant.
The defendant failed to disclose to Amerco both his receipt of these payments and his concomitant conflict of interest. He continued to represent to Amerco that he was a loyal and honest employee.
Bohonus was indicted on March 7, 1979 on 12 counts of mail fraud 3 for causing mail deliveries between August 28, 1974 and June 3, 1975. 4 The amounts of the payments range from $1,753.47 to $4,469.43. The indictment charges the defendant with knowingly causing these 12 deliveries for the purpose of executing a scheme which he devised and intended to devise to defraud Amerco of (1) its right to have its business conducted honestly; (2) its right to honest and loyal and disinterested services of its employee; and (3) its right to the secret profits obtained by its employee. 5
II. Employee Disloyalty Under § 1341.
The manifest purpose of the mail fraud statute is the protection of the post office from use in the execution of frauds. Durland v. United States, 161 U.S. 306, 314, 16 S.Ct. 508, 511, 40 L.Ed. 709 (1896) (interpreting a predecessor statute); United States v. States, 488 F.2d 761, 767 (8th Cir. 1973), cert. den., 417 U.S. 909, 94 S.Ct. 2605, 41 L.Ed.2d 212, cert. den. sub nom., United States v. McCoy, 417 U.S. 950, 94 S.Ct. 3078, 41 L.Ed.2d 671 (1974). The Supreme Court has long recognized that the parameters of "scheme or artifice to defraud" are not to be limited to common law concepts of fraud. Durland, supra, 161 U.S. at 312-13, 16 S.Ct. at 510-11. Several circuits have held that the statute is to be broadly construed in light of its purpose. See Gregory v. United States, 253 F.2d 104, 110 (5th Cir. 1958); United States v. McNieve, 536 F.2d 1245, 1247 (8th Cir. 1976). This court, however, has joined other circuits in holding that "section 1341 should be carefully and strictly construed in order to avoid extension beyond the limits intended by Congress." United States v. Kelem, 416 F.2d 346, 347 (9th Cir. 1969), cert. den., 397 U.S. 952, 90 S.Ct. 977, 25 L.Ed.2d 134 (1970), accord, United States v. Edwards, 458 F.2d 875, 880 (5th Cir.), cert. den. sub nom., 409 U.S. 891, 93 S.Ct. 118, 34 L.Ed.2d 148 (1972); United States v. Mandel, 591 F.2d 1347, 1357 (4th Cir. 1979), aff'd on other grounds, 602 F.2d 653 (4th Cir. 1979) (en banc).
The McNieve court aptly pointed out that these points of view are not "necessarily irreconcilable":
As Durland recognized, the "definition of fraud" in the mail fraud statute was intended by Congress to be broader than the definition of fraud recognized at common law. . . . However, courts should strictly construe § 1341 to assure that the statute is not extended beyond this congressional intent. The key inquiry is, therefore, to determine how far
Congress intended to extend § 1341, and then to strictly construe the statute to guarantee that a defendant is not convicted for committing acts which Congress did not intend to be punishable by § 1341.
United States v. McNieve, supra, 536 F.2d at 1247, n. 3.
The essential elements of mail fraud are (1) the formation of a scheme or artifice to defraud, and (2) use of the mails in furtherance of the scheme. Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435 (1954); United States v. Kaplan, 554 F.2d 958, 965 (9th Cir.), cert. den., 434 U.S. 956, 98 S.Ct. 483, 54 L.Ed.2d 315 (1977).
The fraudulent nature of the "scheme or artifice to defraud" is measured by a non-technical standard. United States v. Louderman, 576 F.2d 1383, 1389 (9th Cir.), cert. den., 439 U.S. 896, 99 S.Ct. 257, 58 L.Ed.2d 243 (1978); Gregory v. United States, supra, 253 F.2d at 109. Thus, schemes are condemned which are contrary to public policy 6 or which fail to measure up to the "reflection of moral uprightness, of fundamental honesty, fair play and right dealing in the general and business life of members of society." Gregory, supra, 253 F.2d at 109.
Courts have relied on this broad interpretation of "fraud" to hold numerous types of schemes violative of the mail fraud statute. These schemes can be...
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