U.S. v. Brewer

• Decision Date: 23 September 1975
• Docket Number: No. 75--1105,75--1105
• Citation: 528 F.2d 492
• Parties: UNITED STATES of America, Appellee, v. Patricia BREWER, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 492

528 F.2d 492

UNITED STATES of America, Appellee, v. Patricia BREWER, Appellant.

No. 75--1105.

United States Court of Appeals Fourth Circuit.

Argued July 9, 1975.

Decided Sept. 23, 1975.

William H. Murdock, Durham, N.C. (Murdock, Jarvis, Johnson & LaBarre, Durham, N.C., on brief), for appellant.

Carl L. Tilghman, Asst. U.S. Atty. (Thomas P. McNamara, U.S. Atty. for the E.D.N.C., on brief), for appellee.

Before CRAVEN, BUTZNER, and FIELD, Circuit Judges.

BUTZNER, Circuit Judge:

Patricia Brewer, the operator of a cigarette mail order business, appeals a judgment convicting her of mail fraud in violation of 18 U.S.C. § 1341. ¹ The district court, 401 F.Supp. 1085, ruled that she had defrauded Florida of taxes by using the mails to sell cigarettes to Florida residents without reporting the transactions to state tax officials as required by the Jenkins Act, 15 U.S.C. § 375 et seq. ² In her assignments of error, Brewer contends that her conduct was not fraudulent, that her use of the mails was not for the purpose of executing a scheme to defraud, and that her only fault was failure to file the reports required by the Jenkins Act. We affirm the judgment.

An eight-count indictment, describing a separate transaction with a Florida resident in each count, alleged that Brewer devised a scheme to obtain money by defrauding Florida of sales and use taxes due on the purchase of cigarettes by Florida residents. It charged that she set up a business in North Carolina and, using the mail, solicited orders from and delivered cigarettes to Florida residents at a price substantially lower than the cost, including tax, of cigarettes sold in Florida. The indictment also alleged that she did not file her name and address with Florida tax officials or furnish them with copies of invoices because she did not want to lose her customers.

The district court heard the case on stipulated facts that established Brewer's use of the mails for her interstate sales. The proof showed that she sold the cigarettes for a stated amount without making any representation about taxes. She paid all North Carolina taxes, but the purchasers did not pay the Florida use taxes they owed. The parties also stipulated that Brewer was aware of the Jenkins Act but did not comply with it. The district court filed a written opinion finding her guilty of mail fraud. It fined her $1,000 and put her on probation for two years.

I

The essential elements of an offense under the mail fraud statute are '(1) a scheme to defraud, and (2) the mailing of a letter, etc., for the purpose of executing the scheme.' Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435 (1954). ³ The statute does not define a scheme to defraud, and it contains no restrictive language excluding any type of fraudulent conduct in which use of the mails plays an essential role. On the contrary, the plain language of the statute condemns any scheme to defraud in which the mails are employed, Parr v. United States, 363 U.S. 370, 389, 80 S.Ct. 1171, 4 L.Ed.2d 1277 (1960), including the evasion of sales and use taxes. United States v. Mirabile, 503 F.2d 1065, 1066 (8th Cir. 1974). It leaves 'the matter of what conduct may constitute such a scheme for determination under other laws.' Parr, 363 U.S. at 389, 80 S.Ct. at 1182.

The other laws on which the government relies are the Jenkins Act and the Florida cigarette tax statute. The Jenkins Act ⁴ requires the seller of cigarettes in interstate commerce to register with the tax officials of states where he advertises or into which he ships cigarettes and to furnish copies of invoices disclosing the purchasers' names and addresses. Violation is a misdemeanor. Florida imposes seventeen cents' tax on the sale or use of a pack of cigarettes. When cigarettes are shipped from outside the state, the recipient is responsible for paying the tax. ⁵

The district court's finding that Brewer's conduct constituted a scheme to defraud is supported by sufficient evidence to satisfy the familiar standards of appellate review. ⁶ Analyzing the facts, the district judge wrote:

'. . . In the cigarette mail order business, the scheme to defraud is ready-made because of the differences in the tax structure on cigarettes between the various states. The State of North Carolina has a very low cigarette tax rate and the State of Florida has a comparatively higher cigarette tax rate. Consequently, if Florida residents can purchase cigarettes in North Carolina without paying the Florida State cigarette tax on their purchases, they are able to obtain cigarettes at a substantial savings over the local price, thereby defeating the Florida State cigarette tax. Consequently, those in the cigarette business in North Carolina are able to offer cigarettes for sale at a much lower price than the local selling price in Florida.'

Speaking of a prosecution for mail fraud, Mr. Justice Holmes aptly observed: 'Intent may make an otherwise innocent act criminal, if it is a step in a plot.' Badders v. United States, 240 U.S. 391, 394, 36 S.Ct. 367, 368, 60 L.Ed. 706 (1916). Although using the mails for the interstate sale of cigarettes or other lawful merchandise is in itself an innocent act, it becomes fraudulent when the seller couples it with an intent to transact business in a way that enables his customers to escape taxes by dealing with him. Then it becomes, as the legislative history of the Jenkins Act notes, a form of tax evasion. ⁷ There is no doubt that Brewer intended to sell cigarettes, free of Florida taxes, to Florida residents. She offered no evidence that she could buy cigarettes at a lower wholesale price than Florida retailers, yet the success of her venture depended on her underselling Florida competitors whose price necessarily included the Florida tax. Her willful decision not to comply with the Jenkins Act furnishes additional evidence of her intent to ship cigarettes from North Carolina to Florida, knowing that Florida could not readily detect the sales and collect the taxes that were owed by her customers.

It is immaterial that Brewer made no misrepresentations to either Florida residents or tax officials, for it is no defense that the papers sent through the mail are innocent in themselves if they are part of a scheme to defraud. Parr v. United States, 363 U.S. 370, 390, 80 S.Ct. 1171, 4 L.Ed.2d 1277 (1960). Nor is it a defense that she herself owed no tax. It is enough that she knowingly devised a scheme that would enable Florida residents to obtain cigarettes without declaring them for taxation. One who consciously aids another in defrauding a government of taxes is a participant in the illicit enterprise. Cf. United States v. Johnson, 319 U.S. 503, 515, 63 S.Ct. 1233, 87 L.Ed. 1546 (1943).

We conclude, therefore, that both the facts and the law warrant the district court's ruling that Brewer devised a scheme to defraud. This establishes the first element of the offense of mail fraud.

II

Brewer asserts that the government also failed to prove the second element of the offense, use of the mails for the purpose of executing the scheme to defraud. She acknowledges that she used the mails to advertise, furnish order forms, receive orders and payments, and ship cigarettes. But she contends that her only wrongdoing, failure to file reports with the Florida tax officials, did not involve the use of the mails. Brewer relies on United States v. Maze, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974); Parr v. United States, 363 U.S. 370, 80 S.Ct. 1171, 4 L.Ed.2d 1277 (1960); and Kann v. United States, 323 U.S. 88, 65 S.Ct. 148, 89 L.Ed. 88 (1944), to support her argument that the mails were not used for the purpose of executing her scheme. But in each of these cases, the mails were used after completion of the fraud and did not affect the success of the scheme. ⁸

Here, in contrast, using the mails was an integral part of the scheme to defraud, since it was the only means of communication between Brewer and her customers. Referring to this aspect of the case, the district judge wrote:

'. . . The obvious and easiest way to conclude these transactions was, and is, by use of the United States mails. Thus, in this manner, cigarettes are being purchased in North Carolina, transported to Florida through the United States mails and consumed in the State of Florida by Florida residents in such a manner as to make it practically impossible for the taxing authority of the State of Florida to collect the appropriate cigarette taxes legally due and owing to Florida.'

It is of no consequence that Brewer's use of the mails did not involve sending a letter to the state tax officials, for the victim need not be the recipient of the material that is mailed. Pereira v. United States, 347 U.S. 1, 74 S.Ct. 358, 98 L.Ed. 435 (1954); United States v. International Term Papers, Inc., 477 F.2d 1277, 1279 (1st Cir. 1973) (dictum). When, as here, the mails play a significant part in a defendant's fraudulent conduct, it is apparent that they are used for the purpose of executing the scheme within the meaning of § 1341. United States v. Sampson, 371 U.S. 75, 83 S.Ct. 173, 9 L.Ed.2d 136 (1962); United States v. Green, 494 F.2d 820, 826 (5th Cir. 1974). We hold, therefore, that the evidence was sufficient to prove the second element of the offense.

III

Finally, we consider Brewer's argument that at most she could only be convicted of a misdemeanor under the Jenkins Act. She contends that before the passage of this Act her conduct would not have violated any law and certainly not the mail fraud statute. Relying on the reference to the use of the mails in the legislative history of the Act, she seeks to demonstrate congressional intention to make the Act the exclusive federal statute governing the interstate sale of cigarettes by mail.

The plain language of the Jenkins Act, its legislative history, and judicial precedent refute this argument. The Act does not mention...