U.S. v. Taylor, 85-1364

• Citation: 789 F.2d 618
• Decision Date: 28 April 1986
• Docket Number: No. 85-1364,85-1364
• Parties: UNITED STATES of America, Appellee, v. Robert J. TAYLOR, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 618

789 F.2d 618

UNITED STATES of America, Appellee, v. Robert J. TAYLOR, Appellant.

No. 85-1364.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 12, 1986.

Decided April 28, 1986.

Douglas L. Phillips, Sioux City, Iowa, for appellant.

Richard L. Murphy, Asst. U.S. Atty., Sioux City, Iowa, for appellee.

Before LAY, Chief Judge, ROSS and WOLLMAN, Circuit Judges.

LAY, Chief Judge.

Robert Taylor was charged and convicted of six counts of mail fraud in violation of 18 U.S.C. Sec. 1341 ¹ and one count of conspiracy to commit mail fraud in violation of 18 U.S.C. Sec. 371. On appeal, he contends that the evidence was insufficient to convict him on any count. We agree; we vacate the judgment of conviction.

The facts developed at trial are undisputed. Taylor was a life insurance agent in Spencer, Iowa. In the fall of 1982, Taylor, along with several partners, participated in the development of a gold mining venture in Arizona. One of the partners in the scheme was Ron Olson of RRO Enterprises in Portland, Oregon. In September, 1982, a $60,000 mineral rights payment came due, and Taylor's help was sought in meeting the payment. Taylor was assured that Olson would soon receive a loan from an outside lender, and that Taylor would be reimbursed from the loan if Taylor would put up the money immediately. Based on these assurances, Taylor wrote Olson a check for $60,000 on Taylor's Spenco Credit Union account (Spenco) in Spencer. Taylor admitted that he knew there were insufficient funds in the account to cover the check. The Spenco check was dated October 29, 1982 and made payable to RRO Enterprises. Olson deposited the check in an account with the Canadian Imperial Bank in Portland, Oregon.

On November 10, the check was received by Spenco for payment, having been cleared through Norwest Bank in Des Moines and electronically transmitted to Spenco. A Spenco bank officer then discovered that there were insufficient funds in Taylor's account to cover the check. Taylor was called for an explanation, and he assured the bank that he would be right in with a deposit. He arrived at the bank soon thereafter with another check for $60,000 drawn on the Dakota County Bank from an account Taylor had with that bank. The Dakota County Bank check was also drawn on insufficient funds. Taylor admits he knew of the insufficiency, but still hoped the $60,000 payment promised him would arrive to cover the check.

Spenco, not knowing there existed insufficient funds to cover the check, deposited Taylor's Dakota County Bank check into Spenco's own account at the United Central Bank. Taylor then convinced his fiancee (later wife) Connie Wasmund to write him a $60,000 check on her account at the United Central Bank. He deposited this check in the Dakota County Bank to temporarily cover the check he had just written to Spenco.

In the meantime, the Dakota County Bank had informed Spenco that Taylor's Dakota County check was going to be returned. Spenco also received notice in the mail from United Central Bank that Spenco's account with them was being charged $60,000 because of insufficient funds in Taylor's Dakota County account. Spenco mailed its own notice of insufficient funds to Taylor; similar notices were mailed to Taylor and Wasmund regarding Wasmund's $60,000 check. At this point Taylor again admitted to Spenco that he had been floating checks, but continued to assure the credit union that the $60,000 was forthcoming.

Taylor thereafter wrote another worthless $60,000 check to Wasmund on his account at the Stewardship Bank of Oregon. Wasmund deposited it immediately in her United Central Bank account. The Stewardship check was later returned to Wasmund by United Central. In January, 1983, Spenco mailed a "Notice Prior to Prosecution for Theft (Bad Check)" to Taylor, and put the $60,000 paid over to Olson on a loan basis with a mortgage on Taylor's home as security. Taylor was unable to repay the loan and the mortgage proved worthless. Finally, in August of 1983, Spenco mailed an insurance claim for $60,000 to its bonding company to recover the loss.

Taylor was subsequently indicted for six counts of mail fraud and one count of conspiracy to commit mail fraud. A jury convicted Taylor on all counts. The district court ² sentenced Taylor to one year in prison, with five years probation, and ordered restitution of the $60,000. The issues presented on appeal are (1) whether the scheme to defraud Spenco of $60,000 came to rest at the time that Taylor's check to Olson was honored by payment of $60,000 to Olson; and (2) whether there exists sufficient evidence of the "mailing" requirements under section 1341 which distinguish this offense from other frauds punishable by state law. See Kann v. United States, 323 U.S. 88, 95, 65 S.Ct. 148, 151, 89 L.Ed. 88 (1944). For the following reasons, we conclude that the evidence was insufficient and reverse Taylor's conviction on all counts.

In order to prove a violation of section 1341, the government must prove beyond a reasonable doubt that the defendant devised an intentionally fraudulent scheme, that the defendant sent or caused to be sent some article through the mails, and that the use of the mails was for the purpose of executing the scheme. United States v. Freitag, 768 F.2d 240, 242-43 (8th Cir.1985); see United States v. Lane, --- U.S. ----, 106 S.Ct. 725, 733, 88 L.Ed.2d 814 (1986); United States v. Maze, 414 U.S. 395, 399-400, 94 S.Ct. 645, 648-49, 38 L.Ed.2d 603 (1974). Crucial to a conviction for mail fraud is a showing the mailings are "incident to an essential part of the scheme," although it is "not necessary that the scheme contemplate the use of the mails as an essential element." Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435 (1954); see also Maze, 414 U.S. at 399, 94 S.Ct. at 648; United States v. Cooper, 596 F.2d 327, 329 (8th Cir.1979). Thus, as a general proposition, use of the mails after a scheme reaches fruition will not constitute grounds for a conviction. See Maze, 414 U.S. at 402, 94 S.Ct. at 649-50, Kann, 323 U.S. at 94, 65 S.Ct. at 150-51. However, it is also settled that

[m]ailings occurring after receipt of the goods obtained by fraud are within the statute if they "were designed to lull the victims into a false sense of security, postpone their ultimate complaint to the authorities, and therefore make the apprehension of the defendants less likely than if no mailings had taken place."

Lane, 106 U.S. at 733, quoting Maze, 414 U.S. at 403, 94 S.Ct. at 650; see also United States v. Sampson, 371 U.S. 75, 78, 83 S.Ct. 173, 9 L.Ed.2d 136 (1962). The central inquiry in this case is whether a sufficient relationship between an "essential part of the scheme" and the mailings existed.

It is apparent that the essence of the scheme was accomplished when Taylor induced Spenco to honor the initial worthless $60,000 check to Olson. This view of the facts is supported by the similar conclusions reached by the Supreme Court in Kann and Maze. In Kann, corporate officers and directors were charged with having set up a dummy corporation through which to divert profits of their own corporation for their own use. Part of this scheme included fraudulently obtaining checks payable to themselves, which were cashed or deposited at a bank and then mailed for collection to the drawee bank. The Court held that the fraud was complete when the defendants cashed the checks:

The scheme in each case had reached fruition. The persons intended to receive the money had received it irrevocably. It was immaterial to them, or to any consummation of the scheme, how the bank which paid or credited the check would collect from the drawee bank. It cannot be said that the mailings in question were for the purpose of executing the scheme, as the statute requires.

Kann, 323 U.S. at 94, 65 S.Ct. at 151 (footnote omitted).

Similarly, in Maze, the defendant used a credit card he had stolen from his roommate to buy food and lodging at several motels. The Court held that this conduct amounted to several independent serial frauds, each fraud completed each time the defendant checked out of a motel where he had used the card. The Court reached this conclusion despite the fact the defendant arguably profited from the delay caused by the process of collecting on the motels' invoices to continue his "vacation." The Court rejected the government's argument that this delay was sufficiently related to the mailing of the invoices to support the defendant's conviction:

There was undoubtedly delay in transmitting invoices to the Louisville bank, as there is in the physical transmission of any business correspondence between cities separated by large distances. Mail service as a means of transmitting such correspondence from one city to another is designed to overcome the effect of the distance which separates the places. But it is the distance, and not the mail service, which causes the time lag in the physical transmission of such correspondence.

Maze, 414 U.S. at 403, 94 S.Ct. at 680 (footnotes omitted).

Just as the defendant in Maze completed a fraud each time he checked out of his motel rooms, and the defendants in Kann completed their frauds each time they successfully deposited a fraudulent check, Taylor had achieved his objective at the point he obtained the $60,000 for Olson's use. This case of course differs from Kann in that Taylor proceeded to write several additional bad checks to cover his initial default. However, Taylor was not engaged in a traditional check kiting operation, ordinarily deemed to persist so long as the "float" continues. See, e.g., Freitag, 768 F.2d at 243-44; United States v. Scott, 554 F.2d 866, 867 (8th Cir.1977); United States v. Gross, 416 F.2d 1205, 1212 (8th Cir.1969). In the ordinary check kite, the fraudulent scheme consists of a continuous fraud on multiple banks whereby a check float creates the appearance of large credit...