U.S. v. Elkins

• Decision Date: 29 September 1989
• Docket Number: No. 87-8708,87-8708
• Citation: 885 F.2d 775
• Parties: 28 Fed. R. Evid. Serv. 1469 UNITED STATES of America, Plaintiff-Appellee, v. Edward J. ELKINS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 775

885 F.2d 775

28 Fed. R. Evid. Serv. 1469

UNITED STATES of America, Plaintiff-Appellee, v. Edward J. ELKINS, Defendant-Appellant.

No. 87-8708.

United States Court of Appeals Eleventh Circuit.

Sept. 29, 1989.

Steven K. Frankel, New York City and P. Bruce Kirwan, Meals, Kirwan, Goger, Winter & Parks, Atlanta, Ga., for defendant-appellant.

William P. Gaffney, Asst. U.S. Atty., Atlanta, Ga. and Mervyn Hamburg, Dept. of Justice, Washington, D.C., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before RONEY, Chief Judge, JOHNSON, Circuit Judge, and MELTON ^*, District Judge.

JOHNSON, Circuit Judge:

This case arises on appeal from defendant's convictions of conspiracy in violation of 18 U.S.C.A. Sec. 371, and of engaging in or aiding and abetting illegal export activity in violation of the Export Administration Act, 50 U.S.C.A.App. Sec. 2410, the Arms Export Control Act, and the International Emergency Economic Powers Act, 50 U.S.C.A. Secs. 1702, 1705, 15 C.F.R. Secs. 374.1, 387, and 399, and 18 U.S.C.A. Sec. 2. We affirm.

I. FACTS

This prosecution arose out of an investigation into the 1985 shipment of two Lockheed L-100-30 aircraft to Libya. At the time, Libya was (and remains) subject to strict export controls. See 15 C.F.R. Sec. 376.16; see also Executive Order No. 12543, January 7, 1986, 51 Fed.Reg. 875 (prohibiting trade with Libya). Export licenses were required for the export of these two jets; because of government restrictions on trade with Libya, no export licenses would have been given to export these planes to Libya. Defendant and several other individuals, six of whom were also indicted as a result of this investigation, engaged in a complex set of transactions to purchase the planes for a West German company owned and operated by Libyans, and to route the planes through Bourdeaux, France, to the small African nation of Benin, and then to Libya.

The sequence of events leading to defendant's arrest is complicated. Defendant owned Armaflex, Inc., a southern California company which produced ceramic tiles for military use as armor. In 1984, defendant attempted to supply ceramic tiles to an English firm for ultimate transfer to Libya. The Libyan dealer was named Badir, and he was purportedly associated with a West German oil field production company. This deal was never consummated.

In the summer of 1984, Carl Lilly, who had worked with defendant in the ceramic tile negotiations, approached defendant on behalf of a customer ¹ who wanted to purchase one Lockheed C-130 aircraft, a military transport plane, for oil field work in Libya. Because this plane had potential military application, the sale had to be cleared by the State Department. The State Department responded to inquiries about the export of this aircraft to Libya by stating that the transaction would not be approved. Baskett, a military officer who became defendant's employee, informed defendant of this refusal. Defendant then suggested an alternative plan that involved leasing the aircraft by Armaflex on behalf of Badir's West German company, TOP, or its subsidiary, Contrust, and basing it in Greece or Malta. Because this arrangement involved a lease rather than a sale to a company for use in Libya, the Department of Commerce, rather than the Department of State, would have had to approve it. The Commerce Department rejected this alternative. At about this time, the Air Force reclassified the KC-130 ² to make it impossible for a private company to obtain one of the aircraft unless acting on behalf of or sponsored by an acceptable foreign government. Badir and Lilly attempted to obtain sponsorship first from Morocco and subsequently from Bolivia. The government of Bolivia did sponsor the purchase temporarily, but disavowed that sponsorship after its agent in the negotiations, General Rodriguez, unsuccessfully attempted to overthrow the government.

At this point, defendant adopted the recommendation of an employee, Franklin, and suggested to Lilly that the customer, Corcoran, substitute the L-100-30 model for the KC-130, because the L-100-30 model did not need foreign sponsorship and because the Department of Commerce rather than State would review the transaction. Badir requested information about the L-100-30 aircraft, which defendant provided. Shortly after this communication, Badir inquired into modification kits for the L-100-30 to allow air-to-air refueling. Lilly discussed the modification with defendant. Defendant suggested a company in England, Flight Refueling Systems, that had modification kits available. After it became clear that the British company could not meet Badir's demands, defendant contacted a California company, Aero Union, about modification kits. Defendant did not disclose consideration or discussion of this modification to Lockheed, and defendant ordered Baskett to refrain from discussing it. ³

Defendant originally negotiated with Lockheed as representative of Contrust, the West German oil exploration subsidiary controlled by Badir. Lockheed preferred to sell the aircraft to Armaflex, Inc., rather than to Contrust. Defendant created a second California corporation, AFI International, to represent Contrust in the negotiations. In negotiations with Lockheed, defendant maintained that the airplane was destined for the West African country of Benin. When Lockheed learned of Badir's involvement, however, Lockheed cancelled a March 1, 1985, negotiating session. Defendant quickly assured Lockheed that Badir represented a legitimate West German concern, and that he was a Libyan expatriate antagonistic to the Libyan government. The interruption in the negotiations arising from Lockheed's enlightenment about Badir's involvement was brief, and negotiations between defendant and Lockheed resumed. Defendant continued to assert that Badir had no connection with the Libyan government. At no time did defendant notify Lockheed that the plane was to be modified with mid-air refueling capability.

Defendant and Lockheed reached an agreement on the sale of two L-100-30 planes and parts. Defendant mailed the contract to Lilly in West Germany; Lilly traveled to Tripoli to deliver the contract to Badir and Badi, Badir's superior. While in Tripoli, Lilly also met with Abid Al-Jawwad, the banker for the transaction. While Lilly was traveling, defendant and Lockheed representatives executed the contract for the sale of the two L-100-30 airplanes to AFI. Defendant's net profit on the deal exceeded $7 million. The contract provided, among other things, that AFI had the sole responsibility to obtain a valid export license.

Lockheed officials accompanied defendant to the Department of Commerce to obtain an export license for the airplanes. Department of Commerce officials realized that Contrust, the West Germany company receiving the planes, was owned by Libyans. Defendant explained that the planes were destined for Benin. At no time did defendant mention the planned refueling modification.

The Department of Commerce approved the export license on April 18, 1985. Lockheed delivered the aircraft within a month to Benin. The planes were never seen again in Benin. One of the airplanes was found at an airport in Cairo, Egypt, on March 7, 1987. The plane's radio signal and operations manual indicated that the plane had been used by the Libyan Arab Air Force.

Defendant was convicted on one count of conspiracy in violation of 18 U.S.C.A. Sec. 371, and one count of violating export restrictions in violation of 50 U.S.C.A. App. Sec. 2410, 50 U.S.C.A. Sec. 1705, and 18 U.S.C.A. Sec. 2. Defendant received a five-year sentence on count one. Defendant received a consecutive ten-year sentence on count two and a $6,600,000 fine. A $50 per count special assessment was also imposed. Defendant appeals.

II. DISCUSSION

A. The Effect of McNally

The jury returned a verdict of guilty on Count One of the indictment which charged defendant with conspiracy to commit four substantive offenses against the United States. ⁴ Conspiracy to commit an offense against the United States violates 18 U.S.C.A. Sec. 371, which provides:

If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined not more than $10,000 or imprisoned not more than five years, or both.

(emphasis added). This statute is written in the disjunctive. A violation occurs if the defendant conspires to commit one or more substantive offenses against the United States, or if the defendant conspires to defraud the government in any manner or for any purpose.

Defendant was charged with conspiring to commit, among other things, the substantive offense of wire fraud against the United States. See 18 U.S.C.A. Sec. 1343. That statute prohibits the use of wire transmission services in furtherance of any scheme or artifice to defraud. The object of the scheme alleged was to defraud the United States of the right to implement its foreign policy free from stealth, false statement, and fraud.

Three weeks after defendant's conviction, the Supreme Court decided McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). In McNally, the Supreme Court held that 18 U.S.C.A. Sec. 1341, the mail fraud statute, ⁵ applies only to schemes to defraud others of property rights. The Court held that a scheme to defraud citizens of their interest in fair and effective government does not violate section 1341. Id. 107 S.Ct. at 2879. Thus, the wire and mail fraud statutes are limited to schemes to deprive others of property rights, although the object of the scheme to defraud may be intangible property rights. See Carpenter v. United States, 108 S.Ct. 316 (1987).

McNally applies retroactively. See Griffith v. Kentucky...