U.S. v. Faust

Decision Date28 June 1988
Docket NumberNo. 87-1166,87-1166
Citation850 F.2d 575
Parties26 Fed. R. Evid. Serv. 571 UNITED STATES of America, Plaintiff-Appellee, v. Thomas J. FAUST, Defendant-Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

Doron Weinberg, Larson & Weinberg, San Francisco, Cal., for defendant-appellant.

Rodolfo M. Orhales, Asst. U.S. Atty., Crim. Div., San Francisco, Cal., for plaintiff-appellee.

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

Before GOODWIN, FARRIS and NELSON, Circuit Judges.

GOODWIN, Circuit Judge:

Thomas Faust appeals his convictions under 18 U.S.C. Secs. 495 and 641 (1982) for forgery and embezzlement.

On October 8, 1980, the federal government entered into a security agreement with Tractug Associates in accordance with the Federal Ship Mortgage Insurance Program, Title XI, Merchant Marine Act of 1936. Under this agreement, the Maritime Administration (MARAD), which is a division within the United States Department of Transportation, guaranteed approximately $25 million in bonds and notes, thus enabling Tractug Associates to obtain financing for the construction of eight tugboats. Thomas Faust organized and was the general partner of Tractug Associates.

Section 2.07 of the security agreement addressed the issue of insurance and possible damage to any of the eight tugboats. The government required that the vessels be insured, with any loss over $100,000 payable to the Secretary of Transportation for distribution "by himself to himself and Tractug Associates." An endorsement subsequently required that losses exceeding $50,000 would be payable jointly to the Secretary of Transportation and Tractug Associates. A copy of the endorsement, signed by Faust, was forwarded by the broker, Fred S. James, to the underwriter, Marine Office of America Corporation (MOAC) on October 6, 1982.

On January 20, 1983, one of the insured vessels, the ZP Chandon, was damaged in an accident off Mobile, Alabama. The damaged tug was taken to Bender Shipbuilding and Repair Company. The vessel had sustained approximately $400,000 damage to its bow strut and propulsion unit (z-peller). To repair the damaged propulsion unit, Faust had parts removed from a partially completed vessel which was also being constructed with Title XI money at Valley Shipbuilding. The parts were transferred from Valley Shipbuilding (one of several companies organized by Faust) and were sent to Bender for installation on the ZP Chandon.

After the ZP Chandon was repaired, Bender refused to release the vessel until it received payment for its work. Faust asked Bender to release the vessel in exchange for an initial payment of $125,000, the balance of the charges to be agreed upon at a later date. This proposal called for MOAC to issue a check for $100,000 and for Faust to add the $25,000 balance which represented the deductible under the insurance policy. Faust and Bender agreed without the knowledge or approval of MARAD. Based upon this understanding and on the representations by Faust, Bender released custody of the ZP Chandon to Faust.

In March 1983, MOAC issued a draft in the amount of $100,000 payable jointly to Faustug Marine Corporation (one of Faust's entities) and to the Secretary of Transportation. The draft was sent to Faust for Faustug to add the $25,000 deductible and then to forward both amounts to Bender. Contrary to the agreement, Faust kept the $100,000 without advising MOAC or Bender. Faust contends, however, that he contacted MARAD and received what he believed to be an oral authorization to endorse the check from Gerald Neuman, the Associate Administrator for Maritime Aids. Faust endorsed the draft by signing his name, his company name and "Secretary of Transportation" followed by his initials "T.F." After Faust deposited the check, Faustug's controller, Thomas Bower, warned Faust that the endorsement was illegal and improper.

Faust contends that he was owed more than $300,000 by the insurance company at the time the $100,000 check was issued--$170,000 to be retained by him and $150,000 to go to Bender. Bender did not receive any of the proceeds of the check. Eventually, however, Bender repossessed the ZP Chandon, and MOAC issued new drafts totaling $149,922 payable to Bender.

In addition, MOAC issued a draft on August 19, 1983, in the amount of $31,469.60, payable to Faustug Marine Corporation and the Secretary of Transportation. Faust again signed both endorsements. This time, however, he did not place his initials next to his signature of "Secretary of Transportation." He deposited the draft into a Faustug operations bank account.

Finally, Faust received a third insurance draft in the amount of $28,348.62, dated September 2, 1983, which also required the endorsement of the Secretary of Transportation. He endorsed it as he had endorsed the second check. This time, Faust was initially unsuccessful in depositing the draft. A bank teller refused to accept the draft for deposit from Faust and directed him to a bank officer. Despite Faust's attempt to explain that the money was due him, the officer told Faust that the draft had been improperly endorsed and would not be accepted. The officer then placed a telephone call to MARAD. He was told by Harry Haskins from MARAD's ship-financing division that the draft was improperly endorsed and should not be accepted. The draft was then returned to Faust. A day later, on September 15, 1983, the same draft was deposited by Faust at another bank.

These events resulted in several civil law suits among MARAD, MOAC, Faust personally and through his various companies, and two commercial banks. Since then, Faustug Marine Corporation and the related businesses have either been dissolved, abandoned, or declared bankrupt. The tug from which Faust removed the parts placed on the ZP Chandon remains scrapped because Faust never replaced the z-peller. The z-peller had a value between $74,000 and $238,000. Faust asserts that the government received an insurance settlement check in the amount of $74,000 after Faust defaulted. After the default, MARAD sustained a $22 million loss when compelled to comply with its security obligations.

Faust was charged with three counts of uttering checks with forged endorsements in violation of 18 U.S.C. Sec. 495 and with three counts of embezzling the proceeds of the checks in violation of 18 U.S.C. Sec. 641. Faust was found guilty of the three Sec. 495 counts and of one Sec. 641 count (Count 2, involving the check for $100,000), and was acquitted of the other two Sec. 641 counts. The court denied Faust's motions for acquittal under Fed.R.Crim.P. 29, made several times during and after trial.

I. SUFFICIENCY OF THE EVIDENCE

Faust challenges the sufficiency of the evidence on all counts. When reviewing a jury's verdict, this court reviews the evidence in the light most favorable to the government and draws all reasonable inferences supporting the conviction. United States v. Vincent, 758 F.2d 379, 380 (9th Cir.), cert. denied, 474 U.S. 838, 106 S.Ct. 116, 88 L.Ed.2d 95 (1985).

A. Section 641 (embezzlement). 1

Faust contends that there was insufficient evidence to convict him of embezzlement. He argues that the government failed to prove that the United States suffered a property loss. See United States v. Long, 706 F.2d 1044, 1048 (9th Cir.1983). Faust argues that he was owed money from the insurance company at the time he cashed the checks. This is immaterial. He further claims that the parties entitled to the money eventually received all that was due them. This is untrue, as well as immaterial. In effect, Faust contends that because some funds eventually may have been delivered to the entity entitled to them, he committed no crime in shortstopping delivery by way of his bank account and spending the money.

Our cases have noted that in order to uphold a conviction under Sec. 641, the government must have "title to, possession of, or control over" the funds involved. United States v. Johnson, 596 F.2d 842, 846 (9th Cir.1979). See Long, 706 F.2d at 1048. The government clearly had an ownership interest in the proceeds of each check described in the indictment. The Secretary of Transportation was a copayee of the check. By the terms of the security agreement with Faust, the proceeds of the check were payable to the Secretary for distribution by the Secretary to the Secretary and Tractug. The $50,000 payee clause specified that the insurance policy had been issued to Faust and the United States. See J. Appleman & J. Appleman, 5A Insurance Law and Practice Sec. 3331 at 122 (1970) (the person to whom a policy is issued and in whose name it stands is usually considered its legal owner). These facts prove that the proceeds of the check were a "thing of value" of the government within the meaning of Sec. 641.

Furthermore, this court has also looked to the amount of control the government has retained over funds when seeking to determine whether the funds are government funds within the purview of Sec. 641. See United States v. Von Stephens, 774 F.2d 1411, 1413 (9th Cir.1985); Long, 706 F.2d at 1049-50; Johnson, 596 F.2d at 844-47. Here the government had substantial control over both the tugboats that were being built with Title XI funds and the insurance loss payments. The financing, construction, and operation of the tugboats was governed by the security agreement between Faust and the government. This document addressed numerous issues in detail. Furthermore, 46 C.F.R. Part 298 codified the restrictions imposed on Faust which were intended to protect the government's interest. See, e.g., 46 C.F.R. Sec. 298.40 (1987) (governing defaults, remedies and reporting requirements of ship operator); 46 C.F.R. Sec. 298.41(b) (1987) (authorizing Secretary of Transportation to seize and foreclose vessels in event of default). The government also maintained tight control over the insurance....

To continue reading

Request your trial
66 cases
  • US v. Frega
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • June 8, 1999
    .......         The instruction carefully set forth the distinction that Frega requested be drawn. See United States v. Faust, 850 F.2d 575, 583 (9th Cir.1988) (defendant not entitled to any particular form of instruction so long as instructions that are given fairly and adequately cover theory of defense). Next, the court's refusal to give Frega's proposed instruction as it pertained to gifts to members of the judges' ......
  • People v. Nunez, 91SC576
    • United States
    • Supreme Court of Colorado
    • November 9, 1992
    ...499 U.S. 978, 111 S.Ct. 1628, 113 L.Ed.2d 724 (1991); United States v. Webster, 769 F.2d 487, 490 (8th Cir.1985); United States v. Faust, 850 F.2d 575, 583 (9th Cir.1988); United States v. Scafe, 822 F.2d 928, 932 (10th Cir.1987); United States v. Finestone, 816 F.2d 583, 588 (11th Cir.), c......
  • U.S. v. Rostenkowski
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 18, 1995
    ...did not authorize the disbursement of cash from the Official Expenses Allowance in exchange for those vouchers. Cf. United States v. Faust, 850 F.2d 575, 580 (9th Cir.1988) (affirming conviction for embezzlement under Sec. 641 where defendant, although ultimately entitled to the funds, "int......
  • People v. Johnson
    • United States
    • California Court of Appeals
    • January 16, 2013
    ...control over ” the funds at issue. (See U.S. v. Kranovich (9th Cir.2005) 401 F.3d 1107, 1113, italics added; U.S. v. Faust (9th Cir.1988) 850 F.2d 575, 579;U.S. v. Long (9th Cir.1983) 706 F.2d 1044, 1049;U.S. v. Hughes (9th Cir.1980) 626 F.2d 619, 622, overruled on other grounds in U.S. v. ......
  • Request a trial to view additional results
1 books & journal articles
  • Evidence at the electronic frontier: introducing e-mail at trial in commercial litigation.
    • United States
    • Rutgers Computer & Technology Law Journal Vol. 29 No. 2, June 2003
    • June 22, 2003
    ...written by him at the very time and under circumstances precluding a suspicion of misrepresentation"). (311.) United States v. Faust, 850 F.2d 575, 586 (9th Cir. (312.) United States v. Perry, No. 98-1237, 1998 U.S. App. LEXIS 32511, at *10 (2d Cir. Dec. 23, 1998). (313.) See United States.......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT