U.S. v. Murphy, 86-6025

• Decision Date: 07 March 1988
• Docket Number: No. 86-6025,86-6025
• Citation: 836 F.2d 248
• Parties: 24 Fed. R. Evid. Serv. 561 UNITED STATES of America, Plaintiff-Appellee, v. Ira Henderson MURPHY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 248

836 F.2d 248

24 Fed. R. Evid. Serv. 561

UNITED STATES of America, Plaintiff-Appellee, v. Ira Henderson MURPHY, Defendant-Appellant.

No. 86-6025.

United States Court of Appeals Sixth Circuit.

Argued Aug. 4, 1987.

Decided Jan. 4, 1988.

Rehearing Denied March 7, 1988.

Thomas E. Hansom (argued), Memphis, Debra L. Fessenden, for defendant-appellant.

W. Hickman Ewing, Jr. (argued), U.S. Atty., Memphis, Tony R. Arvin, Stephen C. Parker, for plaintiff-appellee.

Before KEITH, Circuit Judge; PECK, Senior Circuit Judge; and DOWD, District Judge. ^*

DOWD, District Judge.

Defendant-appellant Ira Henderson Murphy was convicted of eleven counts of mail fraud in violation of 18 U.S.C. Sec. 1341, one count of obstruction of justice in violation of 18 U.S.C. Sec. 1503, and one count of perjury before a federal grand jury in violation of 18 U.S.C. Sec. 1623. The defendant received a sentence of five years imprisonment for each of the thirteen counts to be served concurrently and was also fined $5,000 in connection with the conviction for obstruction of justice.

FACTUAL BACKGROUND

The defendant's convictions relate to his conduct in subverting the statutory scheme adopted by the Tennessee legislature in 1971 whereby non-profit organizations were allowed, upon application and issuance of a Certificate of Registration, to conduct bingo games for charitable purposes. The bingo licenses were processed by the Charitable Solicitation Division of Tennessee's Secretary of State Office. The defendant served in the Tennessee legislature and sponsored the legislation he subsequently manipulated by supervising the successful application of an inactive Masonic Lodge for a bingo license.

In 1982, the defendant, then a Judge of the Court of General Sessions in Memphis, Tennessee, engaged in a series of mailings to the Tennessee authorities designed to bring about the issuance of a bingo license for the H.D. Whalum Lodge No. 373. Pursuant to the state statutory scheme, the defendant provided documentation that the Lodge was tax exempt under Sec. 501(c)(3) of the Internal Revenue Code asserting that no member of the sponsoring organization would receive profits from the bingo game, that all members conducting the bingo games were members of the sponsoring organization and had been a member for one year. The information provided by the defendant was untrue.

The initial application bore the signature of "Charles Brooks" as the person signing the application on behalf of the Lodge. The defendant notarized the signature. Subsequent renewals for the Lodge were processed and filed and included names of members active in the Lodge, even though the Lodge continued to be an inactive organization. Renewal licenses were issued and eventually the defendant permitted Ronald Smith to use the Lodge license to operate a bingo game. While Smith operated the bingo game using the Lodge license, he paid the defendant $200 a week for the use of the license. Eventually, Postal Inspector Faulkner and Special Faulkner and Briscoe also questioned the defendant about his possible involvement in the operation of the Whalum Lodge bingo game and the defendant denied any misconduct. The agents then located and interviewed Brooks. He denied membership in the Whalum Lodge, and denied the authenticity of his purported signatures on the Whalum Lodge applications and reports to the state. Brooks also informed the agents that he had been contacted by the defendant who had solicited his cooperation in leading the investigators and the grand jury away from the defendant's personal involvement in the bingo operation. Brooks also indicated that he had been offered $7,000 by the defendant for his cooperation. Eventually, with Brooks' consent, his conversations with the defendant were taped. In those conversations the defendant sought Brooks' cooperation and promised the payment of the $7,000.

Agent Briscoe of the I.R.S. began an investigation of Ronald Smith as an operator of a bingo game in Memphis. Their interest focused, in part, on the Whalum Lodge bingo license. As a consequence, they attempted to locate Charles Brooks as he appeared to be the primary person involved in the Whalum Lodge application. Unable to locate Brooks, Faulkner and Briscoe sought the assistance of the defendant as his name appeared as the notary on the initial application.

Subsequently, the defendant appeared before the federal grand jury and after being informed that he was a subject of the investigation, denied any knowledge that signatures on documents submitted to the Tennessee authorities in support of the application for the bingo license for the Whalum Lodge were forgeries.

I. THE INDICTMENT FAILS TO CHARGE MAIL FRAUD VIOLATIONS (18 U.S.C. SEC. 1341) IN LIGHT OF MCNALLY V. UNITED STATES.

We first address the issues relating to the convictions for mail fraud in light of the significant change in mail fraud prosecution occasioned by McNally v. United States, --- U.S. ----, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). ¹ Prior to McNally, numerous circuit court of appeals decisions ² interpreted the mail fraud statute broadly and affirmed convictions involving schemes to defraud governments (local, state and federal), employers, unions, and citizens, of what are now commonly referred to as "intangible rights." Although Sec. 1341 ³ reads in the disjunctive, McNally holds that Sec. 1341 must be read as limited in scope to the protection of property rights. In McNally, the Court compared the mail fraud statute with 18 U.S.C. Sec. 371, which proscribes a conspiracy to defraud the United States and which has been interpreted broadly in its application, ⁴ and declared

Section 371 is a statute aimed at protecting the Federal Government alone; however, the mail fraud statute, as we have indicated, had its origin in the desire to protect individual property rights, and any benefit which the Government derives from the statute must be limited to the Government's interest as property-holder.

McNally, --- U.S. at ----, n. 8, 107 S.Ct. at 2881 n. 8 (1987).

Recent decisions of the Fifth and Seventh Circuit, in the wake of McNally, underscore After determining that the mail fraud and wire fraud statutes required an identical analysis in terms of "intangible rights," the Herron court held that a money laundering scheme designed to prevent the filing of Currency Transaction Reports (CTR) ⁵ failed to satisfy the "money or property" requirement of McNally.

the proposition that a mail fraud prosecution is limited to allegations of fraud involving money or property. In United States v. Herron, 816 F.2d 1036, reconsidered and vacated in 825 F.2d 50 (5th Cir.1987) the court reconsidered sua sponte whether the facts alleged in the indictment constituted a cognizable violation of the wire fraud statute, 18 U.S.C. Sec. 1343, and answering the question in the negative withdrew its previous opinion finding that the indictment did allege an offense in light of McNally.

In United States v. Gimbel, 830 F.2d 621, 41 Cr.L. 2403 (7th Cir.1987), the defendant's conviction for mail fraud based on a scheme of depriving the Treasury Department of Currency Transaction Reports and of other "accurate and truthful information and data" was vacated upon the finding that the indictment did not state an offense because it did not charge that the scheme deprived the Treasury Department of money or property.

United States v. Fagan, 821 F.2d 1002 (5th Cir.1987) announced just six days after the McNally decision, affirmed a conviction for mail fraud where the underlying scheme involved the payment of a kickback by the defendant to an employee of a company who was renting boats for use of off-shore drilling operations from the defendant. In footnote six of that opinion, the court acknowledged the McNally decision and opined:

We believe that there is sufficient evidence that the scheme here was one to deprive Texoma of its property rights, viz: its control over its money, as it parted with its rental payments on the basis of a false premise; the economic value of possibly being able to rent the boats from Fagan for less, had it known he was willing to accept less; its right to the kickbacks Riley received from Fagan.

Fagan, 821 F.2d at 1011 n. 6.

The predicate for a mail fraud violation is a "scheme or artifice" to defraud. United States v. Rabinowitz, 327 F.2d 62, 76-77 (6th Cir.1964). Thus, we next consider whether the scheme and artifice alleged in the indictment as the predicate for the eleven counts of mail fraud described conduct which is now prohibited by 18 U.S.C. Sec. 1341 in the wake of the narrowing of the scope of that statute by McNally.

The lengthy indictment described the scheme and artifice as "to defraud the State of Tennessee of the right to issue certificates of registration to charitable organizations to conduct bingo games, based on complete, true and accurate information to be provided by those applying for said permits." ⁶

The defendant argues, in light of McNally, that no testimony was offered nor was any claim advanced that Tennessee was deprived of any money or property by the alleged fraudulent conduct of the defendant. Rather, the defendant argues the scheme charged in the indictment describes an intangible right, i.e., Tennessee's right to accurate information with respect to its The government disagrees with the defendant's characterization of the indictment in this case. In support of its claim that the defendant's mail fraud convictions survive the McNally limitation to schemes involving money or property, the government advances the argument that the certificate of registration (i.e., the bingo license) is a property right. Building on that contention, the government cites United States v. Schilling, 561 F.2d 659, 662 (6th Cir.1977) and United States v. Fischl, 797 F.2d 306, 311-12 (6th Cir.1986) for the proposition that the "right to object" is an ancillary property right, inseparable...