U.S. v. Becker

• Citation: 569 F.2d 951
• Decision Date: 20 March 1978
• Docket Number: No. 76-4484,76-4484
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Troy BECKER, James Cockrell, Kyle G. Bretz and James McCollom, Defendants- Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 951

569 F.2d 951

UNITED STATES of America, Plaintiff-Appellee, v. Troy BECKER, James Cockrell, Kyle G. Bretz and James McCollom, Defendants- Appellants.

No. 76-4484.

United States Court of Appeals Fifth Circuit.

March 20, 1978.

Edith L. James (court appointed), Dallas, Tex., for Cockrell.

Donald C. McCleary, John T. Kipp (court appointed), Dallas, Tex., for Bretz.

Robert L. Crider, Waggoner Carr, Austin, Tex., for McCollom.

Malcolm L. Edwards, Charles K. Wiggins, Seattle, Wash., for Becker.

Kenneth J. Mighell, U. S. Atty., Fort Worth, Tex., Judith A. Shepherd, Jay Ethington, Richard H. Stephens, Asst. U. S. Attys., Dallas, Tex., for plaintiff-appellee.

Appeals from the United States District Court for the Northern District of Texas.

Before TUTTLE, COLEMAN and RONEY, Circuit Judges.

TUTTLE, Circuit Judge:

The four appellants, Bretz, McCollom, Becker, and Cockrell, were convicted in the United States District Court for the Northern District of Texas of conspiracy to defraud in violation of 18 U.S.C. § 371 and fifteen substantive offenses committed in furtherance of the conspiracy, consisting of mail fraud, wire fraud, and interstate transportation of checks taken by fraud, in violation of 18 U.S.C. §§ 1341, 1343, and 2314. The appellants were four of eight persons named as co-conspirators in the government's indictment. One of the alleged co-conspirators, McCord, pleaded guilty to conspiracy and two counts of mail fraud and became the government's principal witness. One other person, Dunkle, was tried with the appellants but died after the trial. Two others were not apprehended in time for the trial. ¹ On appeal all four appellants challenge the sufficiency of the evidence to support the jury verdict and the denial of their motions for severance. Three of the appellants argue that the government's evidence showed three conspiracies, if any, rather than the one alleged, thus creating a fatal variance between the indictment and the proof. Having carefully considered these and the several other points raised by the appellants, we affirm their convictions on all counts.

In a challenge to the sufficiency of the evidence to support a jury verdict, we are required to view the evidence in the light most favorable to the government, making all reasonable inferences and credibility choices which will uphold the verdict. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942). It is in this light that we proceed to sketch the facts upon which this appeal is based before addressing the issues raised by the appellants.

The fraudulent scheme which led to the convictions centered around a low-grade graphitic schist ore located in the vicinity of Llano, Texas. Over a period of time the appellants induced investments of large amounts of money by representing to potential investors that the ore contained enormous quantities of gold and silver which were capable of low-cost extraction in commercial quantities by means of various secret processes. The investments took many forms, including silver options, refining contracts, loan advance fees, and outright loans. It was the government's contention, substantiated by evidence at trial, that the ore was of little value, that no commercially feasible extraction process existed, and that the conspirators knowingly duped the investors for purposes of their own financial gain. A key element in the government's proof of the value of the ore was testimony relating to a 1970 SEC investigation of Llano ore. Tests performed at that time by the Bureau of Mines and private laboratories on samples of Llano ore revealed that the ore contained barely a trace of precious metals. Other testimony indicated that a very good mine would yield perhaps 40 ounces of silver per ton, while the appellants were claiming returns of many hundreds and even thousands of ounces of silver per ton as well as large quantities of gold.

The alleged members of the alleged conspiracy functioned in different capacities, according to the government, but all strived for the common goal of mutual enrichment. Cockrell and Becker (plus deceased co-defendant Dunkle) were involved in the "scientific" aspects of the scheme. They produced assays or reports which showed large concentrations of gold and silver in the ore and also worked on developing processes for silver extraction. Their assays, as well as other high assays from other sources, were shown to potential investors and were key elements in the investors' decision to part with their money. The actual fund-raising efforts were directed by Bretz, McCord, and McCollom. The complex maneuverings by which these men sought to lure outside investors spanned much of 1974 and 1975, although overt acts allegedly performed in furtherance of the conspiracy preceded that.

For some time prior to 1973, the Llano ore was excavated by Graphilter Corporation for use in water filters. Graphilter had the ore assayed in 1970 and continued to sell the pulverized rock for about $35 per ton. In September 1972 Bretz purchased 800 tons of Graphilter "fines," the fine grey rock dust which was a by-product of Graphilter's production. The fines, which were unsuitable for Graphilter's purposes, usually sold for about $2 per ton. That same year Bretz also helped organize Texas Western Mining, Milling & Processing Corporation to process Llano ore. Bretz and McCord met in 1972, and McCord became a director of Texas Western. In December 1973 McCord, who at that time was also a practicing attorney, ² negotiated on behalf of Texas Western for the $75,000 purchase of Graphilter's assets, which consisted of two mineral leases and a rock-crushing plant. Subsequently, Bretz obtained another lease in the Llano area, and McCord formed his own corporation, Tex-A-Chief, which owned 100,000 tons of Llano ore.

Once the ore was in their control, Bretz, who also did business as Kyle Bretz Enterprises, employed Dunkle and various others to assay the ore and to work toward developing a commercially feasible process. Meanwhile McCord employed Cockrell as a consultant for Tex-A-Chief on processing, mining, and building a plant for Llano ore. Bretz and McCord were also working simultaneously on the purchase of various plants at which extraction and refining could occur. Bretz had an option to purchase the J & J Smelting & Refining Corporation in Hesperia, California, where Dunkle had worked. McCord set up a plant in Waxahachie, Texas, and installed Cockrell there to work on the Llano ore and to extract silver from X-ray film. McCord also consulted with Dunkle about building his own plant, and Bretz apparently intended also to use Becker's facilities. However, Bretz did not follow through on the purchase of J & J McCord eventually lost the Waxahachie plant because of his failure to pay the rent; and none of the other plants ever materialized.

The evidence shows that Bretz and McCord began their money-raising efforts in early 1974. Seeking financial backing for the purchase of processing plants and the development of commercial extraction processes, McCord approached his friend McCollom, whose membership in a commodities exchange group provided him with contacts which McCord hoped would prove useful. On behalf of himself and Bretz, McCord offered certain deals by which McCollom's associates in Executive Exchange could purportedly reap quick profits by purchasing refining options. Although McCollom was able to find some purchasers, these early efforts were largely unsuccessful, and McCord and Bretz continued to consult with McCollom in hopes of finding larger sums of money. At this same time McCollom, who did business as Shoreline Holding Company and Gourmet Chef, was seeking funding to obtain the international distribution rights to a newly invented freon cooling container called Chill-Can. McCollom agreed that, if his Shoreline Holding Company was successful in obtaining a $5 million underwriting for Chill-Can, Shoreline would lend Tex-A-Chief $1 million to enable it to build and operate a refinery and smelter near Llano. Written contracts were executed on behalf of Shoreline, Tex-A-Chief, and Texas Western, providing for the assignment of Texas Western's mining rights in 10 million tons of ore to Tex-A-Chief and the purchase of 18,750 tons of ore by Shoreline. Tex-A-Chief was to begin processing the ore by September 1974 and to share the smelter returns with the other two companies. The ore was represented to have a minimum value of $800 per ton in precious metals. Tex-A-Chief's agreement with Shoreline fell through in June 1974, however, when Shoreline's underwriting efforts failed. During the course of these early dealings, McCollom lent Bretz $3,700 in exchange for Texas Western ore.

Around June 1974 McCollom suggested the use of silver options as a means of raising money for Tex-A-Chief. Because McCollom had been enjoined from the sale of securities and feared that the sale of silver options might violate the injunction, he and McCord agreed that Commonwealth Commodities, a newly organized Arizona intrastate securities dealer run by Thomas and Merkatz, would have the exclusive right to sell Tex-A-Chief options and to set the price charged to the customer. Whatever the purchase price, Commonwealth would pay Tex-A-Chief $1,500 for every option sold. Tex-A-Chief, in turn, would pay $500 per option to Gourmet Chef for the use of its Telex and Reuters machines, for processing the options, and for mailing the option certificates. Wire transfers of money from Commonwealth to Tex-A-Chief gave rise to three of the substantive counts. In enlisting the services of Commonwealth, McCord and McCollom displayed a number of documents to Merkatz and Thomas. Merkatz testified that he relied upon the representations contained in these documents in deciding to participate in the option sales and in making representations to his sales personnel. The documents included a copy of the...