U.S. v. Hurst, s. 90-6235

• Citation: 951 F.2d 1490
• Decision Date: 13 December 1991
• Docket Number: Nos. 90-6235,90-6448 and 90-6254,s. 90-6235
• Parties: 34 Fed. R. Evid. Serv. 931 UNITED STATES of America, Plaintiff-Appellee, v. Virginia HURST (90-6235); Sam T. Burnett (90-6448); and Eddie E. Shutt (90-6254), Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 1490

951 F.2d 1490

34 Fed. R. Evid. Serv. 931

UNITED STATES of America, Plaintiff-Appellee, v. Virginia HURST (90-6235); Sam T. Burnett (90-6448); and Eddie E. Shutt (90-6254), Defendants-Appellants.

Nos. 90-6235, 90-6448 and 90-6254.

United States Court of Appeals Sixth Circuit.

Argued Sept. 9, 1991.

Decided Dec. 13, 1991.

Joe B. Brown, U.S. Atty., Hal McDonough, Asst. U.S. Atty. (argued), Robert Washko, Asst. U.S. Atty. (briefed), Office of U.S. Atty., Nashville, Tenn., for U.S.

Robert W. Ritchie (argued), Ritchie, Fels & Dillard, Wayne A. Ritchie, II (briefed), Knoxville, Tenn., for Virginia Hurst.

Bob Lynch, Jr. (argued & briefed), Nashville, Tenn., for Sam Thomas Burnett.

Aaron Wyckoff (argued & briefed), Nashville, Tenn., for Eddie E. Shutt.

Before RYAN and NORRIS, Circuit Judges, and DUGGAN, District Judge. ^*

RYAN, Circuit Judge.

Defendants Virginia Hurst, Sam T. Burnett, and Eddie E. Shutt appeal their convictions for engaging in an illegal gambling business under the laws of the State of Tennessee, in violation of 18 U.S.C. § 1955, and conspiracy, 18 U.S.C. § 371. Burnett also appeals his conviction on seven counts of mail fraud, in violation of 18 U.S.C. § 1341.

I.

This case arises from the operation of an illegal commercial, "storefront" bingo hall. The indictment alleged that defendants Hurst, Burnett, and Shutt, along with government witness James V. Long, conspired to conduct an illegal gambling business in violation of the laws of the State of Tennessee by acquiring and controlling the charter of a 26 U.S.C. § 501(c) tax-exempt organization, fraudulently filing documents with the State of Tennessee in order to gain a bingo permit, and personally profiting from the operation of an ostensibly nonprofit, charitable bingo game. The charges specifically referred to the defendants' actions in conducting bingo games under the auspices of the Columbia Scholarship Fund, Inc. (CSF) between September 1986 and January 1987.

Bingo, because it is a form of gambling, is illegal in Tennessee. During the time periods relevant to this case, however, bingo operations conducted by certain tax-exempt religious or charitable organizations were exempted by statute from the gambling laws. The statute provided that state-licensed bingo games were to be regulated and supervised by the Charitable Solicitations Division of the Tennessee Secretary of State. This charitable bingo exemption was declared unconstitutional by the Tennessee Supreme Court in 1989, and thereafter repealed by the Tennessee Legislature.

Long, the government witness, was a neighbor and friend of W.D. (Donnie) Walker, the Tennessee Secretary of State's chief compliance officer in the Charitable Solicitations Division. Anticipating, correctly, that his friendship with Walker would prove beneficial, Long decided to form a loosely organized association of illegal storefront bingo operators and to serve as a lobbyist for the association. The scheme Long and the bingo operators used to avoid prosecution was to obtain the charter of a section 501(c) tax-exempt organization in order to operate the games under its auspices as a tax-exempt charitable or religious organization. Virginia Hurst operated several such bingo games in Knoxville, Tennessee, and was a member of Long's association, contributing dues as well as providing Long with money for the purpose of paying off Walker.

As part of his services, Long would, upon the request of a prospective illegal bingo operator, locate an inactive, nonprofit organization with section 501(c) tax-exempt status. With Long's assistance, false documents would be filed to reactivate the organization's charter for the ostensible purpose of obtaining a permit to conduct a state-licensed charitable bingo.

The origins of the CSF charter date back to 1975 when Shutt, along with six others, formed a nonprofit organization known as the Columbia Military Academy Alumni Association. Following the closing of the academy in 1979, the association held no meetings and filed no annual corporate reports with the Tennessee Secretary of State. In March 1983, the Secretary of State's Office revoked the Columbia Military Academy Alumni Association's charter due to its failure to file annual reports.

In October 1984, Shutt, listing himself as president of the association, sought to reactivate the association for the purposes of obtaining a bingo permit. He filed amendments to the organization charter changing its name to the Columbia Scholarship Fund, Inc. and its address to his residence. In early 1985, Shutt sought Long's assistance in establishing a bingo hall in Columbia, Tennessee. Long felt that Columbia would not be a good spot for bingo and, having already spoken with Hurst about opening a bingo hall in the Crossville, Tennessee area, persuaded Shutt to set up the CSF bingo game there. It was agreed that Shutt would "lease" the CSF charter for $800-$1000 to Hurst and Long for the operation of the CSF-Crossville bingo game.

Also early in 1985, Burnett, who was serving as a Tennessee state legislator, approached Long to express an interest in becoming involved in bingo. Long informed Burnett that he intended to open a bingo hall in Crossville and had already located an operator to conduct the game. Burnett, an attorney, told Long that he was representing an individual from Florida who might be interested in investing in bingo. Hurst, Burnett, and Long later met and decided that Hurst would receive 40% of the profits for setting up and running the bingo hall, Burnett and his investor would provide half of the capital necessary and would receive 40% of the profits, and Long would provide the remaining half of the capital for a 20% return. Long testified that he agreed to the lesser percentage because he felt it advantageous to include state legislator Burnett.

Burnett thereafter contacted his "Florida" investor, Joseph Cappello, advising him of the amount of capital that would be necessary to become involved as a partner in the Crossville bingo hall. Joseph Cappello was in prison at the time and, therefore, instructed his wife, Caprita Cappello, to send the money to Burnett. Caprita Cappello, although with some hesitation, eventually issued a series of six checks to Burnett totalling $48,000. Each of these checks was the basis for one of the mail fraud counts against Burnett.

After some effort during January 1986, Hurst located a suitable building for the bingo hall in Crossville. Hurst signed the lease agreement for the building. By this time, Shutt had already filed articles of amendment to the CSF charter and changed the organization's address. In February 1986, Hurst induced her associate, Wilbur Lee Riggs, to open a bank account in Crossville in the name of CSF. Dorothy Varnell, another of Hurst's associates, listed herself as chief executive officer of CSF and filed an application with the state of Tennessee for a permit to conduct bingo under the auspices of the organization. Varnell testified at trial that she had never been a member of CSF, nor had she ever been a resident of Crossville, Tennessee, as the application stated. On instructions from Hurst and Long, Varnell also signed numerous applications which falsely stated that the individuals named therein were members of CSF so that they might also conduct bingo at the Crossville location.

Acting upon these falsified documents, the Tennessee Secretary of State's Office approved CSF's application on September 19, 1986 for a permit to conduct bingo. The defendants started conducting a bingo game in the name of CSF soon after receiving this permit. In the following months, the defendants and other co-conspirators prepared additional false statements certifying that workers in the CSF bingo game were members of the organization in good standing and had been members for a period of at least one year. The CSF bingo hall, however, was not as successful as hoped, and the operation was terminated in January 1987.

Meanwhile, Joseph Cappello was becoming anxious to reap the rewards of his investment in the CSF bingo operation. The six checks issued by Caprita Cappello had been received by Burnett and deposited into his attorney-at-law trust account, except for one check, # 9977, in the amount of $10,000. Check # 9977 was given by Burnett to Long who gave it in turn to Hurst. Hurst then instructed Riggs to deposit the check into the CSF bank account which Riggs had previously opened. Burnett also wrote a check from his trust account payable to CSF in the amount of $5,000. The rest of the Cappellos' money in the trust account was used by Burnett for his own personal expenses. As one example, the government presented evidence showing that Burnett used the Cappellos' money to pay his own real estate taxes.

When Joseph Cappello asked Burnett how things were going, Burnett assured him that everything was fine and, in November 1986, even provided Joseph Cappello with a bank signature card in order to open an account for the returns on his investment. The CSF bingo game was not profitable, however, and Burnett never opened any account for the Cappellos. Having failed to receive a satisfactory accounting from Burnett, Joseph Cappello sought the services of an attorney. The Cappellos' attorney attempted to meet with Burnett and requested several times that Burnett return the Cappellos' money. Burnett instead mailed false invoices to the Cappellos' attorney, seeking to conceal his use of approximately $33,000 of the Cappellos' money for his own personal expenses. The false invoices were provided to Burnett by Long, who also ran a bingo supply company, and reflected fictitious sales of various bingo supplies by Long's company to the CSF bingo game totalling $39,691.79. The mailing of the false invoices formed the basis of the final mail fraud count against Burnett.

II.

A.

"Violation of the Law of a State" under 18 U.S.C. § 1955

Congress enacted 18 U.S.C. § 1955 as...