U.S. v. Mason

• Citation: 902 F.2d 1434
• Decision Date: 10 May 1990
• Docket Number: Nos. 88-5478,88-5481,s. 88-5478
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Crystal MASON, Edward Young, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1434

902 F.2d 1434

UNITED STATES of America, Plaintiff-Appellee, v. Crystal MASON, Edward Young, Defendants-Appellants.

Nos. 88-5478, 88-5481.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 1, 1989.

Decided May 10, 1990.

Roger S. Hanson, Santa Ana, Cal., for defendants-appellants.

Thomas C. Stahl, Asst. U.S. Atty., San Diego, Cal., for plaintiff-appellee.

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

Before HUG, CANBY and BOOCHEVER, Circuit Judges.

HUG, Circuit Judge:

Edward Young and his wife Crystal Mason were charged as principals and aiders and abettors in four counts of bank fraud in violation of 18 U.S.C. Secs. 1344(a)(2), 2 (1988) and also were charged with being principals and aiders and abettors in the use of interstate commerce in the aid of racketeering in violation of 18 U.S.C. Secs. 1952(a)(3) and 2 (1988). They were convicted on all counts.

Young and Mason ran two escort services in Philadelphia that involved prostitution. The gravamen of these offenses is that charges on credit cards for services were fraudulently factored through a third-party out of state. This third-party imprinted a fictitious business name and deposited the credit card slips with a bank, concealing the fact that the slips were actually for an out-of-state escort business. The major issue raised in defense at trial was that Young and Mason contended that they were operating their business during the times in question under the authorization of an FBI agent who was using them as informants. The primary issue on appeal is whether the jury was appropriately instructed upon this theory of defense. We find that Young and Mason proposed an appropriate instruction and objected to the instruction given relative to that defense and that the instructions as a whole were deficient in this regard. We also find that the application of the bank fraud statute here did not violate the Ex Post Facto Clause and that there was sufficient evidence of specific intent under the bank fraud statute introduced at trial. As we affirm in part, reverse in part, and remand for a new trial, we need not discuss other issues raised by Young and Mason in this appeal.

I. FACTS

This criminal action arose out of the ownership and involvement of Young and Mason in Tigress and Black Magic, two Philadelphia escort services, which actually involved prostitution. The escorts were provided with blank credit card sales slips and imprinting machines. The customers were informed that the business name on the statements would be "Pictures Are Forever" or that the business name would be discrete.

When escort services were transacted by credit card, the credit card slips were forwarded to Bruce Compton in California for As a merchant account holder, Compton obtained immediate credit for the amount of deposited credit card sales drafts he received from Tigress and Black Magic. Compton would then compensate these escort services for the credit card amount less a fifteen percent service fee. Bank policy at both federally insured institutions prohibited third-party processing and did not provide merchant accounts to escort agencies, massage parlors and other like businesses. The reason, according to bank management testimony, was the higher incidence of charge-backs and fraud typically linked to such accounts and the fact that banks did not want to be associated with these enterprises. At the time of application, Compton did not disclose to the banks that he would process credit card sales slips for out-call prostitution agencies. A Wells Fargo Bank vice president testified at trial that the institution lost at least $1,480 on the Pictures Are Forever account.

processing. The credit charges were listed under the company name "Pictures Are Forever," a purported photography business owned by Compton. Compton applied for and obtained a merchant account for "Pictures Are Forever" in San Diego, California, initially with Citizens Western Bank, in November 1982. In March of 1984, that bank closed the account because of the cost of handling the excessive number of customer disputes on the sales slips deposited with the account. Thereafter, on March 23, 1984 Compton applied for and obtained a merchant account with the Wells Fargo Bank in San Diego.

The bank fraud charges in this case involve the credit card charge slips which were given for services rendered by escorts at Tigress and Black Magic in March and June of 1985. They were forwarded to Compton who in turn deposited them in his merchant bank account at Wells Fargo Bank. During this same period, four checks were issued to Young and Mason, which were drawn on Compton's Wells Fargo Bank account in San Diego and deposited in the joint account of Young and Mason in Prudential Savings Association in Philadelphia, Pennsylvania. The forwarding of these checks forms the basis for the charges of the use of interstate commerce in the aid of racketeering.

In 1981, the Federal Bureau of Investigation, Philadelphia division, authorized Young to continue engaging in the prostitution business that he operated so that Young could act as an informant in an investigation concerning Philadelphia area organized crime. ¹ In particular, the FBI as well as other federal and state agencies were investigating organized crime figure Joseph Altimari for extortion from Young and his business. Young was assigned the code name "The Preacher." FBI Special Agent Paul Allen became Young's primary contact. As part of the investigation, Young wore a wire communication and also allowed his telephone conversations to be taped in order to record his discussions with Altimari and his associates. Twenty-one conversations were recorded. The investigating agencies decided it would be best for the State of New Jersey to prosecute Altimari and others. Young testified before the state grand jury and ultimately at the state trial in February, 1984. As a result of Young's testimony and other evidence, Altimari and others were convicted and sentenced to prison.

The Government contended that this authorization and Young's paid informant status were effectively terminated by the Philadelphia division in early 1984, after the state trial in which Young testified and Altimari was convicted. However, agent Allen testified that "Mr. Young was never specifically told that his authorization for criminal activity ended." Instead, Allen stated that since the trial was concluded and Young had relocated "he was no longer considered an active [FBI] informant." After the state trial, Young was told to enter the witness protection program, but declined. Young and Mason left Philadelphia for Ft. Worth, Texas and subsequently Denver, Colorado. During this period they maintained occasional contact with Allen. Young would pass on criminal activity information Allen testified he had never heard of Compton until Young called him on August 8, 1985. On the next day, Allen relayed this information concerning Compton to the San Diego Police Department, which told Allen it had an investigative interest in the matter. Allen then asked Young and Mason to "try to discover as much information as they could" for Allen to pass it on to San Diego. Allen testified he served as the middleman of the information at this time in order to protect Young's identity. Allen told Young and Mason this information was needed to prosecute Compton. Young and Mason had about seven or eight telephone calls with Allen, which provided statements concerning Compton, who was later convicted. In late 1986, Young and Mason became part of the investigation. On August 11, 1987, Young and Mason were secretly indicted, but were not arrested until February, 1988.

he considered significant. In Ft. Worth and Denver, Young also made similar contacts with local FBI agents. Allen and Young were friendly and exchanged Christmas cards. In Allen's December 19, 1985 Christmas card, sent to Young's mother's home, and which was introduced at trial, he thanked Young for a gift he received.

II. EX POST FACTO

Young and Mason first contend that the federal bank fraud statute, 18 U.S.C. Sec. 1344(a)(2), as applied to them violates the Ex Post Facto Clause, U.S. Const. art. I, Sec. 9, cl. 3. This argument presents an issue of first impression within our circuit. As we recently noted, "two critical elements must be present for a criminal or penal law to be ex post facto: it must be retrospective, that is, it must apply to events occurring before its enactment, and it must disadvantage the offender affected by it." Watson v. Estelle, 886 F.2d 1093, 1094 (9th Cir.1989) (quoting Weaver v. Graham, 450 U.S. 24, 29, 101 S.Ct. 960, 964, 67 L.Ed.2d 17 (1981)). The parties contest the presence of the first element. A challenge under the Ex Post Facto Clause is reviewed de novo. Wallace v. Christensen, 802 F.2d 1539, 1552 (9th Cir.1986) (en banc) (citing United States v. McConney, 728 F.2d 1195, 1200-01 (9th Cir.), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984)).

The bank fraud statute became effective October 12, 1984. See Continuing Appropriations, 1985--Comprehensive Crime Control Act of 1984, Pub.L. No. 98-473, Title II, Sec. 1108(a), 98 Stat. 2147 (codified at 18 U.S.C. Sec. 1344 (Supp. V 1987)). Compton submitted his applications for merchant accounts to Citizen's Western Bank on November 8, 1982 and to Wells Fargo Bank on March 23, 1984. The Government alleged in the Superseding Indictment, Counts I-IV, and presented evidence at trial that Young and Mason executed the bank fraud scheme on March 14, 21, 29, and June 14, 1985.

The parties characterize the alleged bank fraud conduct subject to the statute differently. Young and Mason argue that the prohibited conduct occurred during the fraudulent bank application, which undisputably preceded the effective date of the statute. The Government contends that the conduct charged was the execution...