663 F.2d 843 (9th Cir. 1981), 80-1136, United States v. Rasheed

• Docket Number: 80-1136,80-1150.
• Date: 05 October 1981
• Citation: 663 F.2d 843
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Hakeem Abdul RASHEED, aka Clifford Jones, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Janice PHILLIPS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

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663 F.2d 843 (9th Cir. 1981)

UNITED STATES of America, Plaintiff-Appellee,

v.

Hakeem Abdul RASHEED, aka Clifford Jones, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee,

v.

Janice PHILLIPS, Defendant-Appellant.

Nos. 80-1136, 80-1150.

United States Court of Appeals, Ninth Circuit

October 5, 1981

Argued and Submitted April 13, 1981.

^[*]

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[Copyrighted Material Omitted]

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Herbert Harris, Jr., New York City, for Rasheed.

Daniel F. Cook, Asst. Federal Public Defender, San Jose, Cal., for Phillips.

Ed Luckel, Asst. U. S. Atty., San Francisco, Cal., for U.S.A.

Appeal from the United States District Court for the Northern District of California.

Before WALLACE and POOLE, Circuit Judges, and CORDOVA, ^[**] District Judge.

WALLACE, Circuit Judge:

Rasheed, the founder of a church, was indicted on six counts of mail fraud, 18 U.S.C. § 1341, one count of obstruction of justice, 18 U.S.C. § 1503, and one count of making a material false declaration to a grand jury, 18 U.S.C. § 1623. Phillips, his associate, was charged with five counts of aiding and abetting Rasheed in the conduct of his mail fraud scheme, two counts of obstruction of justice, and one count of making a material false declaration to a grand jury. They were tried together on all counts. The jury convicted Rasheed and Phillips on all the mail fraud counts. The jury also convicted Phillips, but acquitted Rasheed, on the obstruction of justice charges. The jury acquitted both on the false statement counts. Both raise several contentions on appeal, including charges that their First Amendment rights have been violated. We affirm the convictions.

I

In early 1977, Rasheed founded the Church of Hakeem. The Church was incorporated under California law, and received tax exempt status as a religious institution.

Rasheed preached about the importance of a positive self-image through belief in one's self. He taught that one could achieve one's desires by focusing and concentrating on those desires. The central tenet of the Church was the belief in "the God within you." One of the aspects of the Church's beliefs was the law of increase, or the law of cosmic abundance, which provided that if one gave freely one would receive returns greater than the initial gift.

Shortly after the Church was founded, Rasheed established the "Dare to be Rich" program. Rasheed preached that this program was consistent with the law of cosmic abundance. He taught that if one donated money to the Church, one would receive an "increase of God" of four times that amount within a particular period of time. The time period of the increase of God varied depending on the amount of the donation. Fourfold increases for donations of $1 to $249 were received in 70 days; increases for donations from $250 to $24,999 in 90 days; increases from $25,000 to $999,999

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in 9 months; and increases for donations of $1,000,000 or more in 3 years. These time periods were based on "psychic birth cycles," which Rasheed claimed had a basis in scripture. The cycles were supposed to coincide with levels of consciousness. The shortest cycle indicated that the donor had not transcended greed. Thus, donors were encouraged to give large amounts and to redonate their increases to the program to reach higher levels of consciousness.

Rasheed taught Church beliefs and about the "Dare to be Rich" program at frequent Church gatherings called "celebrations." Rasheed preached that members should spread the word regarding the Church and the "Dare to be Rich" program. There were also mailings to Church members that contained information about upcoming Church celebrations, and contained some of the teachings of the Church.

Donations to the "Dare to be Rich" program were made primarily at the Church celebrations themselves. Only Church ministers were permitted to participate in the program. To become a minister, one had to pay an enrollment fee to the Church. Once a minister, a person was entitled to make weekly donations to the "Dare to be Rich" program. At the end of an increase cycle, an "increase letter" stating the amount of the increase was prepared and given to the donor publicly at a celebration. If the minister was not present at the celebration, the letter would be mailed to him or her. The minister then made an appointment to consult with a Church counselor, at which time he or she could receive the increase completely in cash, or redonate all or part of it to the "Dare to be Rich" program. The counselors generally encouraged redonation.

At the outset of the program, Rasheed represented, through Church literature and through his aides at the Church, that the increases of God were from profits that the Church made on investments. The Church, according to Rasheed, chose not to keep these profits, but to distribute them to its active ministers. Subsequently, Rasheed downplayed the source of the funds. References to investments disappeared, and potential donors who questioned the source of the money were told they could not yet donate to the program because they lacked sufficient faith. Further, Rasheed never indicated that increase payments were coming solely from the donations of other members.

Rasheed was apparently very careful not to create the impression that a donation to the "Dare to be Rich" program created a legal obligation on the part of the Church to pay the increases of God. He instructed his aides never to tell potential donors that the Church was making any promise or guarantee of payment. He also instructed them not to use words like "security" or "stock." Nonetheless, many of his aides testified that Rasheed never indicated that there was any doubt that a donor would receive his increase.

Phillips became a minister of the Church in April 1978. In June 1978, she became a full-time employee of the Church, with the title of "Enlightenment Coordinator." Subsequently, she was appointed to the Church's Board of Directors. Phillips' responsibilities at the Church included oversight of the financial operations of the Church. She had control over the Church's bookkeeping, and set up ledger books that kept track of the cash flow of the "Dare to be Rich" program. She was also involved in the oversight of the program itself, in that she advised ministers on the operations of the program and told them what to tell potential donors.

Throughout 1978, the Church prospered. The Church purchased many expensive items, including a $900,000 yacht, and a $100,000 Rolls-Royce automobile. In January 1979, the "Dare to be Rich" program ceased to operate. The Internal Revenue Service seized the assets of the Church, which was the reason the Church gave for the stoppage of payments of increases of God. The increases never resumed. A grand jury began to investigate the activities of the Church in late 1978, and continued into 1979, when the indictments forming the basis of this case were handed down.

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The essence of the mail fraud charges against Rasheed and Phillips is that the "Dare to be Rich" program was a fraud. The government alleged, and the defendants have never denied, that there were never investments that provided the source of increase of God funds. The government alleged, rather, that the "Dare to be Rich" program was based on pyramid planning, by which increases paid to early donors were paid from the funds provided by subsequent donors. The obstruction of justice and perjury counts involve events surrounding the grand jury investigation of the "Dare to be Rich" program. We shall discuss the facts surrounding those counts when we address the legal issues.

II

Rasheed and Phillips contend that the free exercise clause of the First Amendment bars their convictions for mail fraud. The premise of their argument is that the "Dare to be Rich" program is a religious tenet of the Church of Hakeem, and that the First Amendment prevents the government from proving the falsity of a religious tenet. United States v. Ballard, 322 U.S. 78, 86-87, 64 S.Ct. 882, 886, 88 L.Ed. 1148 (1944). They conclude that the government may not assert the falsity of the "Dare to be Rich" program, and that the government's mail fraud case must therefore fail.

Rasheed and Phillips are correct that the First Amendment protects absolutely the freedom of belief. Cantwell v. Connecticut, 310 U.S. 296, 303, 60 S.Ct. 900, 903, 84 L.Ed. 1213 (1940). The government is foreclosed from interference with one's faith. The First Amendment protects all religious beliefs, no matter how preposterous they may seem to the majority of the population. United States v. Ballard, supra, 322 U.S. at 87, 64 S.Ct. at 886. What one does with one's faith, however, may not necessarily enjoy the same absolute protection. The First Amendment protects religiously grounded conduct, but such conduct is subject, in some situations, to the police power of the government. Wisconsin v. Yoder, 406 U.S. 205, 220, 92 S.Ct. 1526, 1535, 32 L.Ed.2d 15 (1972); Cantwell v. Connecticut, supra, 310 U.S. at 303-04, 60 S.Ct. at 903. Therefore, inquiry into the conduct of Rasheed and Phillips in the operation of the "Dare to be Rich" program is not absolutely barred by the First Amendment. Recognizing this, Rasheed and Phillips still contend that the government's case necessarily requires inquiry into the truth or falsity of the doctrine underlying the "Dare to be Rich" program, and is therefore improper.

The nature of the Church of Hakeem, and its teachings as a whole, are not issues in this case. The government has conceded that the Church is a bona fide religious organization. Rather, the government contends that Rasheed and Phillips engaged in conduct based on knowingly false representations to induce others to donate money to the Church through the "Dare to be Rich" program. So analyzed, the issue in this case becomes whether Rasheed and Phillips held...