U.S. v. Goodman

• Decision Date: 19 March 1993
• Docket Number: No. 92-2491,92-2491
• Citation: 984 F.2d 235
• Parties: UNITED STATES of America, Appellee, v. Ellis B. GOODMAN, Appellant. UNITED STATES of America, Appellee, v. BEDFORD DIRECT MAIL SERVICES, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 235

984 F.2d 235

UNITED STATES of America, Appellee, v. Ellis B. GOODMAN, Appellant.

UNITED STATES of America, Appellee, v. BEDFORD DIRECT MAIL SERVICES, Appellant.

No. 92-2491.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 12, 1992.

Decided Jan. 15, 1993.

Rehearing Denied March 19, 1993.

James Wyrsch Kansas City, MO, argued (Michael P. Joyce, on the brief), for appellant.

Ellyn Grant, Omaha, NE, argued (Ronald D. Lahners, on the brief), for appellee.

Before FAGG, Circuit Judge, LAY, Senior Circuit Judge, and BOWMAN, Circuit Judge.

LAY, Senior Circuit Judge.

Ellis B. Goodman and Bedford Direct Mail Services, Inc. were convicted of ten counts of mail fraud in violation of 18 U.S.C. § 1341. On appeal, defendants contend that (1) the evidence was insufficient to support their conviction; (2) the district court erred in excluding certain evidence; (3) the district court erred in refusing to grant their motion for bill of particulars and in its jury instructions; and (4) a constructive amendment or variance occurred between the indictment and the proof at trial. Finding the evidence insufficient to prove a scheme to defraud under the mail fraud statute, 18 U.S.C. § 1341, we reverse and order the entry of judgments of acquittal.

I. BACKGROUND

Ellis B. Goodman (Goodman) was the owner and president of Bedford Direct Mail Services, Inc. (Bedford), a direct mail marketing company. In 1990, Goodman designed a Phone/Mail-A-Gram, which was sent to some 1.2 million people. On the front of the mailgram, in large block letters at the top, were the words "SPECIAL REPLY." On the top right side, the mailgram stated:

YOU ARE ELIGIBLE TO RECEIVE ONE OF THE FOLLOWING:

ONE GIFT

X TWO GIFTS

THREE GIFTS

On the left side, it read:

THIS PHONE/MAIL-A-GRAM IS A CONFIRMATION OF THE FOLLOWING MESSAGE /STOP/

CONGRATULATIONS: YOU ARE DEFINITELY TO RECEIVE ONE OR MORE OF THE GIFTS LISTED BELOW /STOP/

* * GIFT(S): (1) $5,000 CASH / (2) $2,500.00 CASH / (3) $1,000.00 DISCOUNT SHOPPING SPREE.

The * * before the word "Gift(s)" referenced a note on the bottom right to "SEE REVERSE SIDE FOR DETAILS."

On the reverse side of the mailgram was a paragraph in block print, explaining the odds of receiving each gift: for $5,000, 1 in 300,000; for $2,500, 5 in 300,000; and for the discount shopping spree coupons, 1 in 1. Below these odds, the mailgram indicated that the coupons could be used only toward the purchase of merchandise out of a catalog.

The mailgram stated that the offer would expire 48 hours from receipt and told the recipients to call immediately "to see which gift(s) you receive." It listed a "900" telephone number ¹ and indicated that such a call would cost $3.98 plus 97 cents per minute, with a minimum three minute charge. ² The mailgram also contained information on how to obtain "12 WEEK delivery" by returning the mailgram by mail to Bedford.

Of the 1.2 million mailgrams sent, 41,725 people called in response, and 35,239 discount shopping spree coupons were sent out. These discount coupons pertained to a promotion called the "Shopping Spree." Recipients of the coupons could use them to purchase one of fourteen items contained in the catalog, items ranging from bracelets and chef's knives to a mink coat. After applying the coupon to the total price, the price of these items still exceeded Bedford's cost in obtaining the items. However, an expert witness for defendants concluded that the mark-ups were "very fair, even on the low side." Some 230 orders were placed from the Spree catalogs.

Some recipients of the mailgram mistakenly believed that they had already won two gifts--both the discount coupons as well as a cash prize. Defendants received 914 complaint letters, many protesting the fact that they did not receive this second gift. In response, the defendants sent a letter which explained that "[e]ach participant definitely receives one item, but they are always 'eligible' for two." The letter also explained how recipients of a second gift were selected. Each mailgram contained an identification number. Certain identification numbers had been preselected as the winning numbers. Thus, if one of the persons with a winning identification number happened to respond to the mailgram, that person was notified that he or she had won a cash prize. One $2,500 cash gift was in fact given away.

In its indictment, the government charged Goodman and Bedford with a scheme to defraud, whereby they--

induced people to call a "900" number and incur telephone charges in the belief that they would thereby receive money and things of value when in truth and fact what they received was simply an opportunity to purchase one of fourteen items, the stated value of which was far in excess of their wholesale cost to Goodman and [Bedford], and for which they would be required to pay an amount that easily covered the cost to [Bedford] plus a profit.

Following a jury trial, Goodman and Bedford were convicted on ten counts of mail fraud.

II. DISCUSSION

Goodman and Bedford contend that the evidence was insufficient to show that they committed mail fraud and, therefore, the district court erred in denying their motions for judgment of acquittal. In reviewing challenges to the sufficiency of the evidence, we must view the evidence in the light most favorable to the government and sustain the verdict if it is supported by substantial evidence. United States v. Coronel-Quintana, 752 F.2d 1284, 1292 (8th Cir.), cert. denied, 474 U.S. 819, 106 S.Ct. 66, 88 L.Ed.2d 54 (1985).

To establish mail fraud, the government must prove the existence of a plan or scheme to defraud, that it was foreseeable that the scheme would cause the mails to be used, and that the use of the mails was for the purpose of carrying out the fraudulent scheme. Atlas Pile Driving Co. v. DiCon Fin. Co., 886 F.2d 986, 991 (8th Cir.1989). At issue in this case is the first requirement--the existence of a scheme to defraud. We have stated that the "word 'scheme' connotes some degree of planning by the perpetrator, and thus it must be proved that a defendant acted with an intent to defraud." DeMier v. United States, 616 F.2d 366, 369 (8th Cir.1980). In United States v. Brien, 617 F.2d 299, 307 (1st Cir.), cert. denied, 446 U.S. 919, 100 S.Ct. 1854, 64 L.Ed.2d 273 (1980), the court observed that "[t]he essence of a scheme is a plan to deceive persons as to the substantial identity of the things they are to receive in exchange." A scheme to defraud need not be fraudulent on its face, but "must involve some sort of fraudulent misrepresentations or omissions reasonably calculated to deceive persons of ordinary prudence and comprehension." Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1415 (3d Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2839, 115 L.Ed.2d 1007 (1991). These cases reflect the governing law applied by courts of appeals in defining a mail fraud scheme.

After reviewing the record, we must agree with defendants that the evidence, even when viewed in the light most favorable to the government, does not support a showing of a scheme to defraud. The mailgram contains statements which are literally true. The recipient is told to call a "900" number, but is advised that the call will result in a telephone charge at a specified rate. The recipient is further advised that he or she may respond by mail. Although the mailgram refers to "two" gifts, it clearly states that the recipient is merely "eligible" to receive two gifts and that "you are definitely to receive one or more of the gifts listed below" (emphasis added). Moreover, the reader is directed to "See Reverse Side for Details," where the odds for winning the cash prizes are clearly indicated. Finally, the recipient is told that the discount coupons may be used only toward the purchase of merchandise out of defendants' catalog.

The government argues that the mailgram contains false statements. It contends that the word "gift" in connection with the discount shopping coupons is a false statement because the coupons have no inherent value. This argument suggests that coupons are not a gift unless the recipient views the coupon as valuable, by desiring to purchase the specified item. We disagree. Few coupons are redeemable for cash. Rather, the holder must purchase the specified item to receive the benefit of the coupon. Nonetheless, courts and legislatures have recognized that coupons have value. See, e.g., Coldwell Banker Residential Real Estate Servs., Inc. v. Clayton, 105 Ill.2d 389, 86 Ill.Dec. 322, 324-25, 475 N.E.2d 536, 538-39 (1985) (upon closing of house sale, Coldwell gave coupon booklet to home buyers, whereby buyer could purchase merchandise from Sears at discounted price; practice violated Ill.Rev.Stat. ch. 111, p 5732(e)(20), which prohibits "[u]sing prizes, money, free gifts or other valuable consideration" in the solicitation of customers); Coldwell Banker Residential Real Estate Servs., Inc. v. Missouri Real Estate Comm'n, 712 S.W.2d 666, 667 (Mo.1986) (en banc) (same coupon booklet scheme described above was within Missouri Real Estate Commission's regulation on conditional inducements, which forbids using "prizes, money, gifts or other valuable consideration" as inducements to secure customers); Miss.Code Ann. § 31-7-23 (stating that "[a]ny rebates, refunds, coupons, merit points, gratuities or any article of value" given to an agency from a vendor inure to the benefit of the agency).

In addition, the government asserts that labelling the discount coupons as gifts is false because, even with the coupons, the recipient still paid more for the catalog items than defendants paid for those items wholesale. This argument confuses the issue of whether the coupons were gifts with the separate question of whether the catalog items were gifts. Clearly, the catalog items were not gifts, ³ because the coupon-holder had to pay for the items. However, the mailgram did not purport to give...