U.S. v. Nelson

Citation988 F.2d 798
Decision Date12 April 1993
Docket Number92-1794,Nos. 92-1793,92-1945 and 92-2735,s. 92-1793
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Robert August NELSON, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Jeffrey Jon HEINEN, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. David Daniel HEINEN and Data Hardware, Inc., Defendants-Appellants. UNITED STATES of America, Plaintiff-Appellee, v. David D. HEINEN, Defendant-Appellant.
CourtU.S. Court of Appeals — Eighth Circuit

Philip Resnick and Ronald Meshbesher, Minneapolis, MN, for defendants-appellants.

Douglas Peterson, Asst. U.S. Atty., Minneapolis, MN, argued, for plaintiff-appellee.

Before JOHN R. GIBSON, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and WOLLMAN, Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

These appeals are from convictions arising from the switching of labels on valuable IBM computer parts called thermoconductor modules or TCMs. Robert August Nelson, Jeffrey Jon Heinen, David Daniel Heinen, and Data Hardware, Inc. appeal from convictions for conspiracy to defraud in violation of 18 U.S.C. § 371 (1988), aiding and abetting mail fraud in violation of 18 U.S.C.A. § 1341 (West Supp.1992) and 18 U.S.C. § 2 (1988), and aiding and abetting the interstate transportation of property taken by fraud in violation of 18 U.S.C. § 2314 (1988) and 18 U.S.C. § 2. For reversal, they argue that there was insufficient evidence to support their convictions, and that the district court made several evidentiary errors, erred in denying severance, and should have granted a mistrial based on remarks the government made in its closing argument. They also claim that their sentencing was unlawful because the district court failed to: correctly calculate the alleged losses involved; recognize a payment made before indictment; acknowledge acceptance of responsibility; and consider the relative roles in the offense or consider the propriety of a combined sentence. David Heinen also appeals from the district court's modification of sentence, changing a $250,000 fine payable as a condition of supervised release to payable immediately. We affirm the convictions and sentences, but conclude that the district court erred in modifying the payment terms of Heinen's fine.

A TCM is a six-inch black box that is the heart or brain of IBM's large mainframe computers. Although TCMs look alike from the outside, their capabilities (and accordingly, their price) vary depending on their microchip circuitry. Each TCM bears an aluminized label stamped with a ten-digit alphanumeric serial number, a seven-digit part number, and a four letter code. The serial numbers are unique and allow IBM to track individual TCMs.

IBM sells new TCMs for $50,000 to $140,000. In an effort to stand behind its products, IBM allows its customers to exchange failing TCMs for replacement TCMs on a "like-for-like" basis, that is, the same part number for the same part number. Under this program, a customer could return a failing TCM and receive a new one for $17,000. This program was a way for IBM customers to obtain replacement TCMs, not a way to obtain new TCMs. When a customer brought in a failing TCM for replacement, IBM required the customer to sign an exchange contract identifying the TCM by serial number and certifying that the purpose of the exchange was "to meet an immediate maintenance need."

The transactions giving rise to this case are essentially undisputed. Data Hardware's business consisted of storing, servicing, and refurbishing computers and computer-related equipment, primarily IBM's large mainframe computer systems. From July 15, 1988, through December 14, 1988, Data Hardware took advantage of IBM's exchange program by taking labels from its newer, more expensive TCMs, placing the labels on its older, lower-value TCMs, and exchanging the "switched label" TCMs for new TCMs. Under this procedure, Data Hardware received new TCMs for $17,000, instead of paying the usual $50,000 to $140,000 sales price. Data Hardware made seventeen "switched label" exchanges and obtained $2,035,000 worth of TCMs.

Data Hardware, David Heinen, its president and sole shareholder, Robert Nelson, its vice president, and Jeffrey Heinen, a computer technician who worked for Data Hardware, were convicted on seventeen counts of aiding and abetting mail fraud, ten counts of aiding and abetting the interstate transportation of goods taken by fraud, and one count of conspiracy to defraud. This appeal followed.

I.

Data Hardware 1 first argues that there was insufficient evidence to sustain the convictions because the government failed to prove: (1) criminal intent; (2) that the exchanges deprived IBM of anything of value; (3) that Data Hardware intended to use the mails as part of the alleged fraud; and (4) that the property was obtained by the alleged fraud.

In determining whether the evidence is sufficient to support the convictions, we evaluate the evidence in its entirety and in the light most favorable to the verdict. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942). In reviewing guilty verdicts, we give the government the benefit of all reasonable inferences from the evidence. United States v. Long, 952 F.2d 1520, 1524-25 (8th Cir.1991), cert. denied, --- U.S. ----, 113 S.Ct. 298, 121 L.Ed.2d 222 (1992).

Data Hardware argues that the government failed to prove criminal intent. Data Hardware admits that it switched labels from old TCMs to obtain new TCMs for $17,000, but says that it made the exchanges to quickly obtain urgently needed parts. Data Hardware points out that IBM was the only manufacturer of TCMS, and that it experienced long delays in obtaining TCMs from IBM's marketing department. Data Hardware relies on the IBM exchange agreement which provided that the $17,000 exchange price was provisional pending inspection of the TCM and final billing, and says that it always intended to pay the full price for what it received.

There was ample evidence from which the jury could find criminal intent. Two former employees testified about conversations in which they heard Nelson talk about doing some "magic at IBM." One former employee overheard Nelson talk about "pulling the wool over IBM's eyes." There was also testimony that Jeffrey Heinen talked about doing "some magic at IBM." Data Hardware's "justification defense" is also refuted by evidence that there were other sources of TCMs. Testimony established that used TCMs were available on the open market, and TCMs could be taken from systems bought or leased. In addition, there was evidence that when Data Hardware made its last exchange on December 15, Data Hardware had four of the same type TCMs in its inventory, as well as 30 high-value TCMs. Evidence that Data Hardware sold one of the "switched label" TCMs to another company for that company's upgrade work contradicts Data Hardware's claim that it obtained TCMs to avoid penalty clauses in its dealings with upgrade customers.

The jury could have inferred criminal intent from the timing of the transactions. Data Hardware made its first exchange on July 15, 1988. Data Hardware then made a legitimate exchange on July 25. On August 17, IBM sent out the $17,000 invoice for the July 15 exchange, and following receipt of that invoice, Data Hardware made sixteen more "switched label" exchanges.

There was evidence from which the jury could infer that Data Hardware did not intend to pay the full sales price for the TCMs. Until Data Hardware was caught, Data Hardware made no effort to repay the difference between the full sales price and the $17,000 exchange contract price. There was testimony that IBM lab personnel and field engineers trusted labels, and an IBM engineer testified that Data Hardware's scheme would have worked except for a Data Hardware employee informing the FBI and IBM of the plan.

Testimony showed Data Hardware's attempts to conceal its plan. There was also testimony that Nelson told a Data Hardware employee repayment would be made only if IBM "find[s] out." Data Hardware also obtained TCMs from IBM for the exchange contract price by using a label from a high-value TCM carrying case. To keep IBM from learning that there were two TCMs with the same serial number, Data Hardware made sure that these TCMs went to customers outside the United States or to companies Data Hardware knew would not turn to IBM for maintenance work. In addition, Data Hardware made sure that one customer would not receive two TCMs with the same serial number. These efforts at concealment are powerful evidence of conscious wrongdoing. See United States v. Dial, 757 F.2d 163, 170 (7th Cir.1985), cert. denied, 474 U.S. 838, 106 S.Ct. 116, 88 L.Ed.2d 95 (1985).

Data Hardware contends that the government failed to prove that IBM was harmed or deprived of anything of value. Data Hardware says that IBM's "like-for-like" exchange policy is a red herring. It points out that the actual value of the returned TCMs was irrelevant because the exchange program required only that the returned TCM be the same type, not that it have any actual value. Data Hardware argues that IBM's true goal was to control the number of TCMs in the market, evidenced by the fact that no true monetary value was at stake in the exchanges.

These arguments ignore the IBM exchange contract which required Data Hardware to identify each TCM returned to IBM by serial number and to certify that "the purpose of this purchase is to meet an immediate maintenance need." Data Hardware does not dispute that it supplied false serial numbers on the exchange contracts. Further, Data Hardware obtained seventeen TCMs for $17,000 each, when their actual sales price ranged from $50,000 to $140,000. IBM was deprived of value. We also recognize that the government need not prove actual injury. "The crime of...

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    ...does not reach all frauds, only those "in which the use of the mails is a part of the execution of the fraud." United States v. Nelson, 988 F.2d 798, 804 (8th Cir.1993), cert. denied, ___ U.S. ___, 114 S.Ct. 302, 126 L.Ed.2d 250 (1993), quoting Schmuck v. United States, 489 U.S. 705, 710, 1......
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7 books & journal articles
  • Mail and wire fraud.
    • United States
    • American Criminal Law Review Vol. 46 No. 2, March 2009
    • 22 de março de 2009
    ...(7th Cir. 1993) ("[R]outine and innocent mailings can also supply an element of the offense of mall fraud."); United States v. Nelson, 988 F.2d 798,804 (8th Cir. 1993) ("[M]ailing may be routine or even sent for a legitimate business purpose so long as it assists in carrying out the fraud."......
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