U.S. v. O'Connor, 88-1712

• Decision Date: 18 May 1989
• Docket Number: No. 88-1712,88-1712
• Citation: 874 F.2d 483
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. James O'CONNOR, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 483

874 F.2d 483

UNITED STATES of America, Plaintiff-Appellee, v. James O'CONNOR, Defendant-Appellant.

No. 88-1712.

United States Court of Appeals Seventh Circuit.

Argued Nov. 28, 1988.

Decided May 18, 1989.

Dominic H. Frinzi, Milwaukee, Wis., for defendant-appellant.

Mel S. Johnson, Asst. U.S. Atty., Milwaukee, Wis., for plaintiff-appellee.

Before CUDAHY and MANION, Circuit Judges, and WILL, Senior District Judge. ^*

MANION, Circuit Judge.

Defendant-Appellant James A. O'Connor was indicted on nine counts (1-7, 9, and 11) of wire fraud in violation of 18 U.S.C. Sec. 1343, ¹ and on two additional counts (8 and 10) charging that he caused another person to travel in interstate commerce for the purpose of executing or concealing a scheme to defraud in violation of 18 U.S.C. Sec. 2314. ² A jury acquitted O'Connor on two counts (1 and 2), but convicted him on all others (3-11). The district court sentenced O'Connor to seven years imprisonment on Counts 3, 4, 6, 7, 9, 10, and 11 to be served concurrently, followed by five years probation on Counts 5 and 8. O'Connor appeals his convictions under both 18 U.S.C. Sec. 1343 (except as concerns Count 6) and 18 U.S.C. Sec. 2314. He also appeals his sentence. We affirm the convictions, but remand to the district court to correct a sentencing error.

I.

O'Connor was involved in two similar but separate fraudulent schemes, the facts of which are undisputed. During the spring of 1982, O'Connor was the president of Telephone House of Milwaukee, or Telephone House, Inc., a telephone retail company ("Telephone House"). In April 1982, O'Connor purchased used telephone equipment from the British Columbia Telephone Company ("BC Telephone") for $6,500, which he paid for in cash. In May 1982, O'Connor arranged for a second purchase from BC Telephone, paying the agreed-upon $9,500 purchase price with a $10,000 certified check. Later that month, O'Connor ordered an additional $65,000 worth of telephone equipment from BC Telephone. BC Telephone shipped the equipment on O'Connor's promise to send a check in payment for the goods. O'Connor received the shipment, but BC Telephone was never paid.

O'Connor sent BC Telephone two separate checks, each in the amount of $65,000 in June 1982. Both checks were drawn against Telephone House's checking account at the Bay View State Bank in Milwaukee. The first check was never presented for payment. The second check was presented, but was dishonored by the bank for insufficient funds.

Subsequently, O'Connor had several telephone conversations with BC Telephone representatives John Burden and Don Pearson regarding the dishonored check. The relevant calls were placed on September 17, September 28, and November 1, 1982. During the September 17 telephone call, O'Connor explained to Burden that the check had bounced because a fire in Telephone House's warehouse had left its assets "frozen." On September 28, O'Connor told Burden that Telephone House's lawyer had instructed its insurance company to pay a portion of the fire insurance proceeds directly to BC Telephone. However, neither O'Connor nor the lawyer ever sent such a letter to the insurance company. (Telephone House eventually collected $170,806.42 in insurance proceeds on the contents from the burned warehouse; however, BC Telephone received nothing.) On November 1, O'Connor promised Burden that the overdue payment would be made no later than November 15. No payment was received by November 15.

Throughout O'Connor's dealings with BC Telephone, Telephone House never had sufficient funds to pay for the equipment it had ordered and received. From March to September 1982, the highest daily balance in Telephone House's checking account was a mere $471.23. On June 21, 1982, when O'Connor wrote the $65,000 check that was later dishonored, Telephone House's checking account was already overdrawn by $1,300. In all, nearly 80 checks were written and dishonored on the Telephone House account from May through August 1982.

By 1984, O'Connor and Telephone House had established contact with TME, Inc., ("TME") and Demco, Inc., ("Demco") two Alabama businesses. TME was a marketing firm run by Ray Barter. Demco recycled old telephone housings and other types of plastic equipment. It was owned by Don McClain. Barter sold Demco's recycled plastic on a commission basis.

In May 1984, O'Connor traveled to Montgomery, Alabama, to purchase used plastic telephone housings worth approximately $6,000 from TME. O'Connor paid cash for the purchase. In September 1984, O'Connor ordered additional scrap telephones from TME and Demco. (Although the record does not indicate precisely when O'Connor received the scrap telephones, the parties agree that he received the telephones before making the calls which are the subject of the indictment.) O'Connor sent a series of checks drawn on an account at the Bay View State Bank for the September purchases. Ten checks in all were sent to cover the $106,750 purchase price. All ten checks were returned for insufficient funds.

At O'Connor's request, Barter came to Milwaukee on September 25 and 26 to discuss Telephone House's difficulty in making payment. On September 30, O'Connor invited Barter to return to Milwaukee, saying that he expected to receive funds sufficient to cover his debts within one to two days. Both Barter and McClain traveled to Milwaukee on October 1. Once they arrived, O'Connor stated that he expected the funds shortly, and gave Barter and McClain three checks in the amounts of $52,000, $37,750, and $17,000.

The three checks bounced. In a subsequent telephone call, O'Connor again persuaded Barter to come to Milwaukee in the hope of arranging a settlement. O'Connor explained to Barter that he planned to mortgage the Telephone House building, and that by the time Barter arrived in Milwaukee, there would be sufficient funds to pay Barter. Barter made one or two additional trips to Milwaukee at O'Connor's invitation. During these visits, he received three more checks, all of which were returned for insufficient funds. As with BC Telephone, there was no hope that Telephone House would ever pay TME. From June through December 1984, Telephone House's checking account balance never exceeded $667.25. At one point, the account was overdrawn by some $89,758.05.

BC Telephone, TME, and Demco did not take any legal steps to recover their losses until well past the telephone calls and trips described in the indictment. BC Telephone finally brought a civil action against O'Connor and Telephone House in 1983. BC Telephone and TME (together with another company not relevant here) forced Telephone House into involuntary bankruptcy in December 1984.

Counts 3-5 of the indictment charged that O'Connor's September 17, September 28, and November 1, 1982 telephone calls with BC Telephone violated 18 U.S.C. Sec. 1343. Counts 7 and 9 alleged that O'Connor's September 30, 1984 and October 17, 1984 calls to Barter, where he invited Barter to Milwaukee, violated 18 U.S.C. Sec. 1343. Counts 8 and 10 charged that O'Connor induced Barter to travel to Milwaukee to execute or conceal his fraudulent scheme in violation of 18 U.S.C. Sec. 2314. Finally, Count 11 alleged that a November 1984 telephone call by O'Connor to Barter violated 18 U.S.C. Sec. 1343.

On appeal, O'Connor argues that all of the acts charged in the indictment occurred after the respective schemes to defraud had reached fruition. As a result, he asserts, they were not in furtherance of the schemes. He thus seeks the reversal of his convictions under 18 U.S.C. Sec. 1343 and 18 U.S.C. Sec. 2314. O'Connor also challenges his convictions under 18 U.S.C. Sec. 2314 on the grounds that Barter, the individual who was induced to travel, was not a "victim" of any fraudulent scheme, and that corporations, such as TME, are not "persons" within the meaning of Sec. 2314. Finally, O'Connor appeals the length of his sentence, claiming it exceeds the statutory maximum.

II.

A. Wire Fraud

The telephone calls charged in the indictment occurred after O'Connor had received the merchandise from BC Telephone and TME. Even so, they were intended to further the schemes by lulling his victims (BC Telephone and TME) into not acting. O'Connor disagrees, arguing that because he had already received the merchandise by the time the calls were made, the calls could not have been in furtherance of the scheme. In other words, O'Connor says the scheme was complete upon his receipt of the merchandise, thus, by definition, any calls placed after that time could not have furthered the already completed scheme. His argument is without merit.

Both the Supreme Court and this circuit have squarely rejected O'Connor's position, recognizing that calls made after the time that goods have been fraudulently obtained can nevertheless further the fraudulent scheme by making detection or apprehension less likely. United States v. Lane, 474 U.S. 438, 451-52, 106 S.Ct. 725, 733, 88 L.Ed.2d 814 (1986); United States v. Sampson, 371 U.S. 75, 81, 83 S.Ct. 173, 176, 9 L.Ed.2d 136 (1962); United States v. Eckhardt, 843 F.2d 989, 994 (7th Cir.) cert. denied, --- U.S. ----, 109 S.Ct. 106, 102 L.Ed.2d 81 (1988); United States v. Shelton, 669 F.2d 446, 458 (7th Cir.) cert. denied, sub nom. Bledsoe v. United States, 456 U.S. 934, 102 S.Ct. 1989, 72 L.Ed.2d 454 (1982); United States v. Ledesma, 632 F.2d 670, 677-78 n. 11 (7th Cir.) cert. denied, 449 U.S. 998, 101 S.Ct. 539, 66 L.Ed.2d 296 (1980); United States v. Rauhoff, 525 F.2d 1170, 1176 (7th Cir.1975); United States v. Riedel, 126 F.2d 81, 83 (7th Cir.1942). This is the so-called "lulling" theory. As this court explained some time ago:

[a] scheme to defraud may well include later efforts to avoid detection of the fraud. A fraudulent scheme would hardly be undertaken, save for profit to the plotters. Avoidance of detection and prevention of recovery of money lost by the victims are within, and often a material part of,...