U.S. v. Conover, s. 84-3431

• Decision Date: 16 May 1988
• Docket Number: Nos. 84-3431,84-3876,s. 84-3431
• Citation: 845 F.2d 266
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. William M. CONOVER and Anthony R. Tanner, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 266

845 F.2d 266

UNITED STATES of America, Plaintiff-Appellee, v. William M. CONOVER and Anthony R. Tanner, Defendants-Appellants.

Nos. 84-3431, 84-3876.

United States Court of Appeals Eleventh Circuit.

May 16, 1988.

John A. DeVault, III, Timothy J. Corrigan, Jacksonville, Fla., and David R. Best, Orlando, Fla., for defendants-appellants.

Terry Zitek, Asst. U.S. Atty., Tampa, Fla., for U.S.

Appeals from the United States District Court for the Middle District of Florida.

Before HILL and ANDERSON, Circuit Judge and GARZA ^*, Senior Circuit Judge.

GARZA, Senior Circuit Judge:

The Supreme Court has directed us to give further consideration to the felony convictions of William Conover and Anthony Tanner. In reviewing our opinion at 772 F.2d 765 (1985), the Court affirmed in part and remanded to us to determine whether the evidence presented at trial was sufficient to establish that Conover and Tanner conspired to cause Seminole to make misrepresentations to the REA. --- U.S. ----, 107 S.Ct. 2739, 2754, 97 L.Ed.2d 90 (1987). Because our review of the grand jury indictment, the Government's proof, and the jury instructions reveals that the jury could not have found Conover and Tanner guilty based on the Government's alternate theory of conspiracy alleged in Paragraph 14 of Count One, we reverse the 18 U.S.C. Sec. 371 convictions. Additionally, Conover's and Tanner's convictions for federal mail fraud under 18 U.S.C. Sec. 1341 must be reversed in light of the Court's opinion in McNally v. United States, --- U.S. ----, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987).

I. Proceedings

It has been nearly five years since Conover and Tanner were indicted. Their first trial ended with a hung jury and a mistrial. They were reindicted; the first count alleged a conspiracy to defraud the United States in violation of 18 U.S.C. Sec. 371, and the second through fifth counts alleged distinct acts of federal mail fraud in violation of 18 U.S.C. Sec. 1341. While Conover was found guilty on all counts, Tanner also was found guilty on all counts except the third count. We affirmed each of the convictions. 772 F.2d 765 (1985).

The Supreme Court granted certiorari at 479 U.S. ----, 107 S.Ct. 397, 93 L.Ed.2d 351 (1986). The Court concluded that the phrase "to defraud the United States, or any agency thereof" in Sec. 371 did not cover the status of Seminole Electric Cooperative, Inc. (Seminole). --- U.S. at ----, 107 S.Ct. at 2754. A conspiracy to defraud Seminole, a private corporation receiving financial assistance and minimal supervision from the United States Government is not itself a conspiracy "to defraud the United States." Id. However, the Court remanded the case because "the Government also charged petitioners with conspiring to manipulate Seminole in order to cause misrepresentations to be made to the REA [Rural Electrification Administration], an agency of the United States." Id. On remand, the Court has asked us to study the record to determine whether sufficient evidence exists to convict the defendants on the basis that they conspired

to cause Seminole to make misrepresentations to the REA.

II. Paragraph 14 and the Alternate Theory of Conspiracy

The question before us now is whether the conspiracy convictions can stand on the basis of the Government's alternate theory alleged in Paragraph 14 of Count One of the indictment. Paragraph 14 reads:

It was further a part of the conspiracy that the defendants would and did cause Seminole Electric to falsely state and represent to the Rural Electrification Administration that an REA-approved competitive bidding procedure had been followed in awarding the access road construction contracts.

The defendants have suggested that the convictions cannot stand because (1) there was no evidence to establish guilt on this theory, and (2) the jury was not instructed on this theory. The Government argues that the evidence shows that Conover and Tanner conspired to cause Seminole to make false representations to the REA regarding compliance with REA-approved bidding procedures on the fill and spreading contracts.

There is some evidence which indicates that Conover and Tanner caused Seminole to make misrepresentations to the REA concerning bidding procedures. For instance, an REA employee testified about REA's reliance on and approval of the contracts based on information submitted by Conover and Seminole. In addition, there is testimony that Conover and Seminole certified to the REA that the roads had been completed in accordance with the contracts, when in truth some of the fill materials did not meet specifications. It is evident that Conover and Tanner manipulated Seminole into making misrepresentations to the REA based on corrupt bidding procedures regarding both procurement processes.

However, we are mindful that just before the re-trial the Government dismissed Count Six which charged the defendants with essentially the same conduct as charged in Paragraph 14. We also have learned that the jury was not instructed covering Paragraph 14 of the Sec. 371 conspiracy count. The Government's alternate theory of the substantive count that Conover and Tanner conspired to induce Seminole to make misrepresentations to the REA clearly must be rejected because (1) the Government dismissed Count Six, a nearly identical charge before the re-trial, thus showing its lack of proof or lack of foresight on this point, (2) the Government in fact failed to offer sufficient evidence on the alternate theory at trial, and (3) the Government even failed to receive or request a jury instruction on the alternate theory of conspiracy. Without sufficient evidence, without any showing that the Government proceeded on the alternate theory of conspiracy, and without an instruction to the jury on the alternate theory, the jury could not have based its verdict on that charge and thus the Sec. 371 conspiracy convictions must be reversed. See Screws v. United States, 325 U.S. 91, 107, 65 S.Ct. 1031, 1038, 89 L.Ed. 1495 (1945).

III. McNally and the Mail Fraud Convictions

The Supreme Court also has asked us to consider the defendants' contention that the evidence did not establish a scheme to defraud Seminole under the federal mail fraud statute, 18 U.S.C. Sec. 1341. In our earlier opinion we decided to pretermit discussion on this issue. We affirmed the mail fraud convictions on the basis that the evidence established the use of the mails in connection with the Sec. 371 violation alleged in Count One. 772 F.2d at 771-72. But the Court has told us that this basis must fail.

Conover and Tanner recommend that we need not consider whether the evidence established a scheme to defraud Seminole because the Court's recent McNally opinion protects them from being convicted of the offense of mail fraud. In McNally v. United States, the Court held that "[t]he mail fraud statute clearly protects property rights, but does not refer to the intangible right of the citizenry to good government."

--- U.S. ----, 107 S.Ct. at 2879. After a study of the statute's legislative history the Court ruled that Sec. 1341 was not promulgated to protect intangible rights to honesty and fair dealing.

The indictment against Conover and Tanner failed to charge that Seminole was defrauded of money or property. The relevant portion of the indictment states:

COUNT TWO

1. Beginning in or about January, 1980, and continuing to in or about January, 1982, at Tampa and Crystal River, in the Middle District of Florida and elsewhere,

WILLIAM M. CONOVER

and

ANTHONY R. TANNER,

defendants herein, knowingly devised and intended to devise a scheme and artifice to defraud:

(a) the United States by impeding, impairing, obstructing and defeating the lawful function of the Rural Electrification Administration in its administration and enforcement of its guaranteed loan program; and

(b) Seminole Electric Cooperative, Inc., of its right to have its process and procedures for the procurement of materials, equipment and services run honestly and free from deceit, corruption and fraud, and of its right to the honest and faithful services of its employees.

Although Seminole has been defrauded of "its right to the honest and faithful services of its employees," McNally teaches that this may not be sufficient to sustain a federal mail fraud conviction. In this novel approach the Court has thinned most circuits' broad readings of the mail fraud statute.

The Government alleged in McNally that a public official's kickback scheme to defraud involved political influence over governmental insurance business to the petitioners' insurance companies. --- U.S. ----, 107 S.Ct. at 2877. The Court recognized that Sec. 1341 was not intended to protect the intangible right of the citizenry to have public officials perform their duties honorably. Further, the Court found nothing in the jury charge to allow the jury to find that the public was deprived of money or property. Id. at ----, 107 S.Ct. at 2882. The Court observed:

[T]here was no charge and the jury was not required to find that the Commonwealth itself was defrauded of any money or property. It was not charged that in the absence of the alleged scheme the Commonwealth would have paid a lower premium or secured better insurance.... Although the Government now relies in part on the assertion that the petitioners obtained property by means of false representations ... there was nothing in the jury charge that required such a finding. We hold, therefore, that the jury instruction on the substantive mail fraud count permitted a conviction for conduct not within the reach of Sec. 1341.

Id. The Court noticed that under existing law the jury could find that the petitioners had breached a fiduciary duty of failing to disclose their conflict of interest, thereby depriving the public of its right to a fair and honest government. The Court ultimately decided to vacate the McNally convictions because the right to honest...