U.S. v. Ellzey

• Citation: 874 F.2d 324
• Decision Date: 24 April 1989
• Docket Number: 88-3470,Nos. 88-3459,s. 88-3459
• Parties: 27 Fed. R. Evid. Serv. 1233 UNITED STATES of America, Plaintiff-Appellee, v. Jacob T. ELLZEY (88-3459) and Paul W. Cochran (88-3470), Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 324

874 F.2d 324

27 Fed. R. Evid. Serv. 1233

UNITED STATES of America, Plaintiff-Appellee, v. Jacob T. ELLZEY (88-3459) and Paul W. Cochran (88-3470) Defendants-Appellants.

Nos. 88-3459, 88-3470.

United States Court of Appeals Sixth Circuit.

Argued Feb. 23, 1989.

Decided April 24, 1989.

Dale E. Williams, Asst. U.S. Atty. (argued), Office of the U.S. Atty., Columbus, Ohio, for the U.S., plaintiff-appellee.

Thomas M. Tyack (argued), Columbus, Ohio, for Jacob Timothy Ellzey, defendant-appellant.

Neil W. Rosenberg (argued), Columbus, Ohio, for Paul W. Cochran, defendant-appellant.

Before KEITH, JONES and GUY, Circuit Judges.

RALPH B. GUY, Jr., Circuit Judge.

In this consolidated appeal Paul W. Cochran and Jacob T. Ellzey challenge their convictions for conspiracy, 18 U.S.C. Sec. 371; mail fraud, 18 U.S.C. Sec. 1341 and Sec. 2; wire fraud, 18 U.S.C. Sec. 1343 and Sec. 2; and interstate transportation of securities obtained by fraud, 18 U.S.C. Sec. 2314 and Sec. 2. The issues raised by both parties on appeal concern (1) the sufficiency of the evidence to sustain their convictions and (2) the improper admission of evidence. Ellzey also challenges as reversible error the court's failure to record side-bar conferences at trial in violation of 28 U.S.C. Sec. 753. For the reasons that follow, we affirm both defendants' convictions.

On December 3, 1987, Cochran and Ellzey were indicted on fifteen and thirteen counts respectively of conspiracy, mail fraud, wire fraud, and interstate transportation of securities obtained by fraud. These charges stemmed from the defendants' alleged operation from October 1983 through December 1985 of an advance fee scheme designed to defraud farmers who were seeking loans to fend off foreclosure on their farms. ¹

Paul Cochran was a farmer in Morrow County, Ohio, from 1969 until 1983, when he lost his farm due to foreclosure. In October 1983, Cochran established an Ohio business called "D.C. Financial Services, Inc." (D.C.). Beginning in 1984, D.C. advertisements in various farm magazines including "The Prairie Farmer," "The Ohio Farmer," and "Farm Futures," solicited farmers seeking refinancing loans to contact D.C. for assistance.

D.C. received numerous phone inquiries in response to the advertisements. Cochran generally responded to the inquiries. Typically, after a cursory review of a prospective borrower's financial status, Cochran arranged a personal meeting at the prospective borrower's farm and represented himself to be successful in securing refinancing loans for farmers. At that time, pursuant to contracts executed by himself and the farmer, Cochran collected advance fees for his loan preparation work. The contract also provided for a percentage of the loan (percentage fee) to be paid to Cochran provided he secured financing for the farmers. Although the contract originally provided that this percentage fee was not due until the loan money was placed in an escrow account on behalf of the borrower, Cochran subsequently had the borrowers sign amendments rendering the percentage fee due upon the farmer's receipt of a loan commitment letter that approved the farmer's loan application and indicated that the loan funds were forthcoming. In some instances, Cochran promised to refund advance percentage fees plus interest if the borrower's loan failed to close.

In the meantime, Jacob Ellzey, in November 1983, established an Ohio business called "J.T.E. Financial Enterprises" (J.T.E.). Although Ellzey claims that J.T.E. was totally separate and independent from D.C., the government contends that J.T.E. purportedly was established to obtain loans for D.C.'s clients. Ellzey operated J.T.E. from his apartment residence in Columbus, Ohio, and, like Cochran, represented himself to be successful in securing refinancing loans for farmers.

The government's evidence revealed that shortly after farmers paid advance fees to Cochran, Cochran contacted Ellzey, who prepared loan commitment letters indicating approval by J.T.E. of the farmers' loan applications. Cochran subsequently delivered these letters to the farmers at which time he collected his percentage fees, which he shared with Ellzey. In some instances the advance percentage fee was wired directly by the farmers to Cochran's bank. When the loan funds were not provided when promised, both Cochran and Ellzey sent "lulling letters" to anxious borrowers indicating that their loan closings were forthcoming.

By way of illustration of how the alleged scheme operated, Donald and Blanche Kurtz of Illinois sought to refinance their farm loan and responded to a D.C. advertisement in September 1984. Cochran visited their farm a few weeks later to discuss arrangements for a $1,400,000 loan. He collected an advance fee of $3,500. ² He returned in October 1984 to deliver a J.T.E. commitment letter approving their loan application. At that time he collected a $28,000 percentage fee, which he deposited in D.C.'s Ohio bank account. Three thousand dollars of the percentage fee was forwarded to Ellzey. The Kurtzes never received a loan or a refund of the percentage fee. They did, however, receive several letters from Cochran and Ellzey anticipating an imininent closing for the loan. Eventually, the Kurtzes were advised that they would be dropped from the loan program and that they would not receive a refund. They ultimately lost their family farm.

Although the government contended that Cochran and Ellzey never intended to obtain the loans promised to the farmers, both Cochran and Ellzey reportedly relied on an Illinois money broker, Richard L. Jones, who allegedly agreed to supply the funds for the loans in return for a profit. According to an alleged July 1984 agreement between Ellzey and Jones, Ellzey became authorized to broker approximately $15 million for Jones. Jones agreed to make the funds available to prospective borrowers within 120 days. Ellzey conveyed this information to Cochran who verified it with Jones by phone. Cochran also claims to have investigated Jones with Illinois banks and the Illinois attorney general's office to satisfy himself of Jones's legitimacy as a lender. Unbeknown to Cochran, Jones was then under state investigation for fraud. Cochran then submitted various loan applications to Ellzey who, in turn, issued the previously mentioned letters from J.T.E. Although Ellzey apparently was unaware of the original or amended percentage fee agreement between Cochran and borrowers, he did acknowledge receipt of "customary co-broker fees" from Cochran. Richard Jones never did provide the funds to support Cochran's and Ellzey's loan commitments. Jones died in 1986.

When they became aware that no loan funds were forthcoming, Cochran and Ellzey declined to refund any of the farmers' advance fees. ³ Two farmers testified that, in response to their pleas for Ellzey to obtain their loan money, Ellzey advised them to forget about him (Ellzey), that the farmers' advance money was spent, and that Ellzey wanted nothing further to do with them. As a consequence of their dealing with Cochran and Ellzey, several farmers lost their farms, one suffered a stroke and his wife suffered a heart attack.

Following their convictions by a jury on all counts, both Cochran and Ellzey appeal.

I.

We first consider the defendants' claims that their convictions are not supported by sufficient evidence on either the conspiracy or substantive counts of the indictment. To that end, Cochran denies that the record discloses any intent to defraud farmers who paid him advance or percentage fees for legitimate work. He claims that once the loan commitments were in place his work was complete, notwithstanding the absence of actual loan funds. Cochran also denies conspiring with Ellzey to defraud anyone. He claims that his only bond with Ellzey was their shared belief in the legitimacy of Jones as a lender. Similarly, Ellzey testified that there was no conspiracy to defraud, that his business was independent from Cochran's, and that his involvement with Cochran and Cochran's clients was limited to a relatively small number of transactions based on a legitimate belief that Jones would fund the loans submitted by Cochran to Ellzey on what was essentially a co-brokerage basis. Moreover, Ellzey contends that since he was unaware of the percentage fee amendment, he could not have participated in a conspiracy to defraud. Ellzey also contends that the notion that he was an aider or abettor is erroneous given that his involvement in any of the substantive charges is limited to having issued commitment letters based on a legitimate belief that funds would be forthcoming from Jones.

In a criminal case the standard of review for claims of insufficient evidence is "whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979). Moreover, circumstantial evidence alone is sufficient to sustain a conviction and such evidence need not "remove every reasonable hypothesis except that of guilt." United States v. Stone, 748 F.2d 361, 363 (6th Cir.1984). We have clearly indicated that we "will reverse a judgment for insufficiency of evidence only if th[e] judgment is not supported by substantial and competent evidence upon the record as a whole, and that this rule applies whether the evidence is direct or wholly circumstantial." Id. at 363.

With respect to the conspiracy charge, we have recognized that the government need not prove a formal agreement to establish the existence of a conspiracy to violate federal law and that a tacit or mutual understanding among the parties will suffice. United States v. Bavers, 787 F.2d 1022, 1026 (6th Cir.1985). Moreover, "[a] conspiracy may be inferred from circumstantial evidence that can reasonably be interpreted as...