U.S. v. Brumley
| Decision Date | 28 March 1996 |
| Docket Number | No. 94-40560,94-40560 |
| Citation | 79 F.3d 1430 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Michael Bryant BRUMLEY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
George Michael Jamail, Bernsen, Jamail, Hartley & Goodson, Beaumont, TX, for appellant.
Traci L. Kenner, Carol K. Johnson, L. Stuart Platt, Asst. U.S. Attys., Tyler, TX, Mike Bradford, U.S. Atty., Beaumont, TX, for appellee.
Appeal from the United States District Court for the Eastern District of Texas.
Before WOOD 1, JOLLY and DeMOSS, Circuit Judges.
Michael Brumley appeals his conviction at a bench trial on three counts of wire fraud, three counts of money laundering and one count of conspiracy to commit mail fraud and wire fraud. Brumley does not appeal his conviction on two counts of making false statements to a financial institution, but he appeals his sentence. The opinion in this case issued under date of July 18, 1995, is withdrawn. We pretermit resolution of the claim of evidentiary insufficiency by Brumley since we have concluded on rehearing that a more fundamental defect exists as to counts 1-7 of the conviction, i.e. the statutes in question (18 U.S.C. §§ 1343 and 1346) 2 do not proscribe the conduct described in these counts of the indictment. We affirm as to the two counts of making false statements to a financial institution 3 and vacate the judgment of conviction on the wire fraud, mail fraud, money laundering and conspiracy counts and remand for dismissal of the indictments as to these counts.
Brumley began working for the Texas Industrial Accident Board (IAB) in July, 1976, as a pre-hearing examiner. In July 1988 he was promoted to the position of regional director for the Houston area. As part of the state's new workers' compensation law, the IAB was re-organized in 1990 as the Texas Workers' Compensation Commission (TWCC) and Brumley was appointed the TWCC's regional associate director (essentially the same position he had held with the IAB). Beginning in 1982, Brumley solicited and accepted approximately $40,000 in loans from local attorneys, which he admitted was a violation of IAB ethical guidelines.
Between 1987 and 1992, Brumley also accepted over $86,000 in "loans" via wire transfers from another local attorney, John Cely. Although Cely understood that the money would never be repaid, he continued to make loans to Brumley. Cely wired the money from the Western Union office in Lufkin, Texas, to Brumley in Beaumont, Texas.
The procedure for making the Western Union wire transfers involved Cely, or one of his employees, filling out a form listing the recipient and the amount of the transfer. Cely paid for the wire transfer with checks payable to H.C. Walker, the Lufkin Western Union franchisee. The Western Union agent then, through a personal computer, dialled into Western Union's main computer in Bridgeton, Missouri. The Western Union agent would write a unique ten-digit number, which he obtained through the computer in Missouri, on the back of the form he gave to Cely. This would serve as the receipt. Brumley was then immediately able to pick up the money.
After being notified that a money transfer was waiting for him, Brumley would go to a Western Union office in Beaumont to pick up the transfer. He would fill out a form identifying himself as the recipient and the Beaumont Western Union agent would call the Western Union computer in Bridgeton, Missouri, to verify the information. Brumley was then given a check for the amount of the transfer, which he would cash at either a bank or a grocery store.
In 1988, pursuant to a complaint from one of Cely's clients, the IAB began an investigation into Cely's law practice. Brumley on several occasions urged the IAB to reconsider its decision to formally investigate Cely, and Brumley assisted Cely in altering subpoenaed documents. Finally, Brumley aided Cely's efforts to lease TWCC property in Lufkin. The lease, if it had been consummated, would have violated ethical guidelines, as Cely practiced before the TWCC. Nevertheless, Brumley directed that the building specifications be faxed to Cely's office in the name of one of Cely's clients, James Fredregill. A TWCC employee later mailed the lease specifications to Fredregill. The property was ultimately leased to a disinterested party.
Michael Brumley was indicted in November 1993 for conspiracy to defraud the citizens of the state of Texas of the honest use of his services via mail and wire communications (18 U.S.C. § 371), wire fraud (18 U.S.C. §§ 1343, 1346), money laundering (18 U.S.C. § 1956) and making false statements to a financial institution (18 U.S.C. § 1014). Both before and during his bench trial Brumley moved to dismiss counts 1-7 of the indictment on grounds that (1) such counts "constitute an unwarranted and impermissible federal intrusion into affairs of the Texas Industrial Accident Board;" (2) the Tenth Amendment to the United States Constitution "reserves all rights to the State not specifically entrusted to the Federal Government;" and (3) that prosecution of Brumley under these counts "would violate his right of equal protection of law under the 14th Amendment" and would violate "the 7th Amendment prohibiting the infliction of cruel and unusual punishment" in that any culpable conduct under state law would only be a misdemeanor while such conduct would be punishable as a felony under the United States statutes. The trial judge overruled such motions and convicted Brumley on all nine counts in the indictment and he was sentenced to 48 months in prison. Brumley now appeals.
We must start with a thorough understanding of the Supreme Court's landmark decision in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). This case involved the prosecution of a former public official of Kentucky and a private individual for alleged violation of the federal mail fraud statute, 18 U.S.C. § 1341. The principal theory of the prosecution in McNally, which was accepted by the courts below, was that the defendants' participation in a self-dealing patronage scheme defrauded the citizens and government of Kentucky of certain "intangible rights," such as the right to have the commonwealth affairs conducted honestly. The jury convicted defendants and the Court of Appeals affirmed the convictions, relying upon a line of decision from the Courts of Appeals holding that the mail fraud statute proscribe schemes to defraud citizens of their intangible rights to honest and impartial government. The Supreme Court granted certiorari and reversed. The most illuminating language of the majority opinion is that found at page 360 of 483 U.S., and the top of page 2882 of 107 S.Ct. which reads:
Rather than construe the statute [mail fraud, § 1341] in a manner that leaves its outer boundaries ambiguous and involves the Federal Government in setting standards of disclosure and good government for local and state officials, we read § 1341 as limited in scope to the protection of property rights. If Congress desires to go further, it must speak more clearly than it has. (emphasis added)
This seven to two majority opinion overturned the theories upon which a large number of prior circuit court decisions had been based. Justice Stevens' dissent identifies in detail the prior circuit court cases and categorizes them in separate footnotes as follows Footnote 1, page 362-63, 107 S.Ct. page 2883
State and federal officials convicted of defrauding citizens of their right to the honest services of their governmental officials;
Footnote 2, page 363, 107 S.Ct. page 2883
Elected officials and campaign workers convicted of mail fraud for using the mail to falsify votes, thus defrauding the citizenry of its right to an honest election;
Footnote 3, page 363-64, 107 S.Ct. page 2883-84
In the private sector, agents with clear fiduciary duty to their employers or unions, found guilty of defrauding by accepting kick backs or selling confidential information; and
Footnote 4, page 364, 107 S.Ct. page 2884
In the private sector, defendants convicted for defrauding individuals of their rights to privacy and other non-monetary rights.
The key language from McNally quoted above clearly states that the majority overruled the body of case law referred to in Justice Stevens' footnotes for two reasons:
1. The majority did not want to construe the statute as involving the federal government in setting standards of disclosure and good government for local and state officials. This is a healthy recognition of the realities of our federal system and pulls the rug out from under the conceptual analysis used by the circuit courts in deciding the cases in footnotes 1 and 2 of the dissent; and
2. The majority did not want to construe the mail fraud statute in a manner that would create ambiguity in its outer limits, so it said the statute would apply only to the "protection of property rights," thereby pulling the rug out from under the category of cases described in footnotes 3 and 4.
Both the majority opinion and the dissent in McNally indicate that Congress might change the Court's construction; but the majority made it absolutely clear that Congress "must speak more clearly than it has" if it desired to make such changes.
Shortly after its decision in McNally, the Supreme Court decided Carpenter v. United States, 484 U.S. 19, 108 S.Ct. 316, 98 L.Ed.2d 275 (1987). In Carpenter, a unanimous Supreme Court described their holding in McNally as follows:
We held in McNally that the mail fraud statute does not reach "schemes to defraud citizens of their intangible rights to honest and impartial government" and that the statute is "limited in scope to the protection of property rights."
Id. at 25, 108 S.Ct. at 320 (internal citations omitted).
In Carpenter the Supreme Court found that the property rights, though intangible (i.e. right of...
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