U.S. v. Buchanan
| Decision Date | 10 January 1977 |
| Docket Number | No. 75-3749,75-3749 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. James C. BUCHANAN, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Roland E. Dahlin, II, Federal Public Defender, William W. Burge, Asst. Federal Public Defender, Mike DeGeurin, Juan E. Gavito, Asst. Federal Public Defenders, Houston, Tex., for defendant-appellant.
Edward B. McDonough, Jr., U. S. Atty., Mary L. Sinderson, George A. Kelt, Jr., Asst. U. S. Attys., Houston, Tex., John Patrick Smith, Asst. U. S. Atty., Brownsville, Tex., James R. Gough, Asst. U. S. Atty., Houston, Tex., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before JONES, WISDOM and GODBOLD, Circuit Judges.
Defendant James C. Buchanan appeals from a jury conviction on seven counts of violating the federal mail fraud statute. 18 U.S.C. § 1341. 1 The district court sentenced Buchanan to three years on each count, the terms to run concurrently.
Buchanan's "scheme" involved the creation of Union Postal Systems, Inc., a franchise arrangement whereby interested parties each paid him $1,000 for the opportunity to deliver second, third, and fourth class mail under the Union banner. In return, the franchisees were promised 30% of all revenues resulting from their deliveries, the offering of certain "training and indoctrination courses," and other benefits. The indictment charged Buchanan and his corporate enterprises with making the following knowingly false representations accompanying the solicitations:
(1) That investors and franchisees could earn great profits, and approximately a 500 percent profit on their investment within a year, and that franchisees would have net earnings of approximately $100.00 a week, within one month after purchase.
(2) That circulars and advertisements for deliveries would be available for delivery within 30 to 45 days.
(3) That similar delivery concerns had phenomenal success in "other" cities with franchises and deliveries.
(4) That this delivery firm was "unique" from similar concerns.
(5) That franchises would be repurchased with a 25 percent deduction at any time the franchisee desired, so that there was no way for the franchisee to lose money on his purchase of a franchise.
(6) That the defendants had invested $50,000.00 of their own money in the Union Postal Systems, Inc., and that the initial capital of the concern was $49,000.00.
(7) That the defendants had accepted orders from advertisers for deliveries totaling $40,000.00.
(8) That the defendant company was in good business condition and having good earnings. That the defendants orally and by means of lulling letters reassured those to be defrauded that their investment was secure and that the franchise and route future would be highly successful. The defendant firm furnished statements showing a stockholder equity of between $25,000.00 and $28,000.00.
(9) That the defendant firm had purchased and paid for three panel trucks to be used in the business.
(10) That the defendants had saved all franchise fees from investors and placed them in a separate bank account, so that there could be no loss to the franchisees.
(11) That purchasers of franchises or routes would be provided training and indoctrination courses, sales manuals, and training in merchandising procedures.
(12) That statements and bills of account, such as from doctors and retail store purchases, would be delivered. 2
Buchanan asserts three bases for reversal of the decision below. The first concerns the prosecutor's reading from a transcript of a tape during his final argument. This tape had not been introduced into evidence, but was instead an amplified version of the tape introduced as the government's Exhibit 12. Buchanan's attorney did not object to this action at trial, and we cannot hold that it resulted in plain error. Second, Buchanan claims that the evidence was insufficient to prove the existence of a scheme to defraud. We also find this contention to be without merit. 3
Buchanan's third claim, that his use of the mails was not adequate to sustain a conviction under § 1341, merits a more extended discussion. Of the seven counts upon which Buchanan was convicted, the first three related to the sale of franchises through ads placed in three newspapers. The last four concerned the sale of Union stock to franchisees after they had already purchased their delivery routes. We consider first the use of the mails requirement under the newspaper counts.
Buchanan depended primarily upon advertisements in three local newspapers for soliciting Union franchisees. Each of these papers depended to some extent upon the mails for its circulation:
Newspaper Total Paid Circulation Mail Subscriptions
------------------ ------------------------- ------------------
(Avg. as of Oct. 1, 1974)
Harlingen Valley
Morning Star 20,412 691
Brownsville Herald 13,221 259
McAllen Monitor 18,803 245 4
4. Government Exhibits 3-5; cf. R. 25, 33, 39
Buchanan asserts, however, that none of the government's witnesses who purchased franchises after reading the newspaper ads actually received their newspapers through the mails. 5 This fact, coupled with the fact that the number of mailed newspapers was relatively small, forms the basis of his claim that § 1341 cannot reach the activities charged in the first three counts.
The question here raised, in statutory terms, is whether Buchanan's use of the mails to deliver his ads through the newspapers was "for the purpose of executing (his) scheme or artifice or attempting so to do." We hold that it was. This case parallels Atkinson v. U. S., 344 F.2d 97, 99 (C.A.8), cert. denied, 382 U.S. 867, 86 S.Ct. 141, 15 L.Ed.2d 106 (1965):
It is stipulated that the advertisements soliciting the victims were published in the Kansas City Star on the dates charged. In most instances, a reply to a box number at the Star was solicited. Responses by victims were followed up by phone calls from Atkinson arranging appointments. At least 7,000 copies of each issue of the Star were distributed by mail. The use of the mail in furthering the scheme is established. This is not seriously questioned except for the contention that it does not apply here because all victims who testified received their newspaper by carrier. Such fact is not disputed. The contention is without merit. It is sufficient that the use of the mail was caused by defendants in furtherance of the fraudulent scheme. See Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 98 L.Ed. 435; United States v. Sorce, 4 Cir., 308 F.2d 299, 301; Dranow v. United States, 8 Cir., 307 F.2d 545, 557.
We agree with the holding in Atkinson. 6 Buchanan has misapprehended the requirements of the statute. He used the mails in order to disseminate his solicitation. He was thereby "attempting . . . to (execute)" his scheme. His use of the mails need not be an essential element of the scheme but only "incident to an essential part," Pereira v. U. S., 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435, 444 (1954); U. S. v. Crockett, 534 F.2d 589, 593 (C.A.5, 1976). Hence, whether the use of the mails was effective in producing franchisees is irrelevant. The "gist of the offense" is "the insertion of the matter intended to effect the scheme to defraud in the mail." U. S. v. Anderson, 466 F.2d 1360, 1361 (C.A.8, 1972). Thus the statute requires not a "but for" relationship but only that the defendant use the mails in "furtherance" of the fraud, as Atkinson holds.
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