U.S. v. Goss

• Citation: 650 F.2d 1336
• Decision Date: 06 July 1981
• Docket Number: No. 80-1285,80-1285
• Parties: 8 Fed. R. Evid. Serv. 1292 UNITED STATES of America, Plaintiff-Appellee, v. Charles GOSS and George C. Benson, Defendants-Appellants. . Unit A
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1336

650 F.2d 1336

8 Fed. R. Evid. Serv. 1292

UNITED STATES of America, Plaintiff-Appellee, v. Charles GOSS and George C. Benson, Defendants-Appellants.

No. 80-1285.

United States Court of Appeals, Fifth Circuit.

Unit A

July 6, 1981.

Robert Glass, New Orleans, La., Charles Brandt, Lafayette, La., for defendant-appellant Goss.

Robert McBride, Lafayette, La., for defendant-appellant Benson.

Anna E. Stool, Asst. U. S. Atty., Houston, Tex., Richard Sauber, Washington, D.C., for plaintiff-appellee.

Appeals from the United States District Court for the Southern District of Texas.

Before RUBIN and GARZA, Circuit Judges, and SUTTLE ^*, District Judge.

ALVIN B. RUBIN, Circuit Judge:

George C. Benson, a former employee of Western Crude Oil, Inc., and Charles Goss, who was part owner of Ball Marketing Enterprise, were indicted on twenty-four separate counts of mail fraud, 18 U.S.C. § 1341, and one count of conspiracy to commit mail fraud, 18 U.S.C. § 371. Convicted on all twenty-five counts, ¹ each appeals his conviction on a number of grounds. The major attack is on the sufficiency of the evidence, and we conclude that there was adequate basis in the record for the verdict. Because, however, we find that the trial judge erroneously refused to give the substance of one jury instruction requested by the defendants and, over the defendants' objection, gave an inadequate jury charge regarding another issue, we reverse the judgment of conviction and remand for a new trial. We also address other issues that will likely arise in the context of the new trial in this case.

I. FACTS

George Benson was an employee of Western in charge of crude oil purchasing in south Louisiana. Charles Goss was a buyer and reseller of crude oil. In December, 1974, Benson attempted to obtain crude oil for Western from Goss's company, Ball Marketing. Goss had once sold petroleum to Western but had become dissatisfied with that arrangement and, therefore, had previously terminated his business dealings with that company. However, after his discussion with Benson, Goss agreed to resume his dealings with Western. Thereafter, Ball Marketing began to sell to Western a petroleum product that was identified as crude oil.

The price of crude oil was then controlled and the supply was less than the demand. There were, therefore, more buyers in the market who were ready and willing to purchase crude oil than the sellers could satisfy with the available supply. Nevertheless, Goss began to mail checks drawn on Ball Marketing's account to Benson beginning in February, 1975, and continuing until February 1976. During this period Goss paid Benson $58,445.32 with sixteen separate checks. Other sums were paid to Benson not listed in specific counts in the indictment making the total payments to him through October, 1976, approximately $162,000.

Beginning in May, 1975, and continuing until December, 1975, Goss mailed eight invoices from Louisiana to Western's office in Texas, billing Western for a product described as crude oil. The product actually delivered was not crude oil but consisted mainly of the residuum left after crude oil had been processed in a fractionation unit at Egan, Louisiana. Goss's employees transported this residuum by truck to a storage tank where it was mixed with either diesel fuel or kerosene to give it the appearance of crude oil, and then delivered it to Western. The residuum could be picked up at the Egan facility, mixed with the diesel fuel or kerosene and delivered to Western in the course of one day. Goss purchased the residuum at $6.20 a barrel and resold the mix to Western for prices ranging from $12.25 to $13.45 per barrel. About 29,000 barrels of this mixture were sold as crude oil.

If crude oil is processed by fractionation, it will yield a number of petroleum products, some of greater value and some of lesser. It will, for example, yield gasoline, naphtha, kerosene and diesel fuel. The portion not drawn off in the form of one of these more valuable products is residuum, the part with the highest specific gravity, the least A.P.I. (American Petroleum Institute) gravity and the highest boiling point. If, however, a mixture of residuum and diesel fuel or a mixture of residuum and kerosene is processed, a fractionation unit simply breaks the mixture down into its original components. It separates the residuum from the diesel fuel or kerosene and yields the same amounts of each of the two products that were put into the mixture originally. No gasoline, naphtha or other higher priced products will be obtained. While the specific gravity and composition of the residuum left from the fractionation process varies depending on the kind and quality of the crude oil or condensate originally processed, running the residuum again through the fractionation procedure results in nothing but residuum. Residuum can be broken down into different products using a catalytic converter, a more expensive process, but, even when this is done, the yield of higher priced petroleum products is less than the yield would be from unprocessed crude.

II. SUFFICIENCY OF THE EVIDENCE

Because the defendants have assailed the sufficiency of the evidence to support their conviction and because the former jeopardy issue might otherwise arise in the new trial that must ensue, we address the evidence-adequacy claims made by the defendants in this appeal despite the necessary reversal of their convictions on other grounds. ²

To establish a mail fraud violation, the government must prove the existence of a scheme to defraud that involved use of the mails for the purpose of executing the scheme. United States v. Zicree, 605 F.2d 1381, 1384 (5th Cir. 1979), cert. denied sub nom., 445 U.S. 966, 100 S.Ct. 1656, 64 L.Ed.2d 242 (1980). The evidence must demonstrate the defendant's specific intent to commit fraud. United States v. Freeman, 619 F.2d 1112, 1117 (5th Cir. 1980), cert. denied, --- U.S. ----, 101 S.Ct. 1348, 67 L.Ed.2d 334 (1981); United States v. Kent, 608 F.2d 542, 545 n.3 (5th Cir. 1979), cert. denied sub nom., 446 U.S. 936, 100 S.Ct. 2153-54, 64 L.Ed.2d 788 (1980). Goss and Benson challenge the sufficiency of the proof of a scheme to defraud, their specific intent to commit fraud and use of the mails to transmit the checks and invoices listed in the indictment.

The evidence adduced at the spirited trial, which lasted for three and a half weeks including occasional recesses for other judicial business, was susceptible of differing interpretations. Viewed most favorably to the government, as it must now be because of the jury verdict, ³ Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680, 704 (1942), the evidence supports the jury's inferences that Benson and Goss engaged in a fraudulent scheme with specific intent to defraud Western.

The contracts entered into by Benson and Goss required Ball Marketing to deliver "crude oil and/or condensate" to Western. Goss falsely certified on sales invoices that crude oil was delivered to Western when, in fact, the product delivered was a mixture of residuum and other refined products. Once this mixture had been thus combined with a large volume of crude oil, the deficiency in quality passed unnoticed by Western and its subsequent customers. Benson admitted that he was aware that Goss was selling Western a mixture instead of unprocessed crude oil.

The chairman of Western's board of directors testified that it was his understanding that Western was buying crude oil, that the product Western purchased from Ball Marketing was recertified by it as crude oil on the strength of Goss's earlier certification, and that he would not have sold a mixture of residuum and kerosene as crude oil.

During a period of almost two years, Ball Marketing paid Benson, the Western employee who arranged its purchases from Ball Marketing, a total of approximately $160,000. Benson received an annual salary from Western of $50,000, which included bonuses and fringe benefits. Thus, the payments from Goss to Benson substantially exceeded Benson's total salary and benefits from his employer. The checks drawn to Benson on Ball Marketing's account were mailed to Benson's home address and not to Western's office. His acceptance of any compensation from a supplier or customer of Western was contrary to company policy and his supervisors were unaware that he was, in fact, receiving these payments.

Therefore, there was sufficient circumstantial evidence to support the jury's conclusion that Goss and Benson engaged in a scheme to defraud Western and that each acted with the requisite specific intent to defraud. For Benson's participation in the scheme, Goss paid him kickbacks or bribes by means of the checks mailed to Benson's home, disguising these payments as commissions.

There was, of course, contrary evidence regarding the nature and purpose of the payments. Based on this evidence, the defendants argued to the jury and to this court that the payments to Benson were commissions unrelated to the residuum mixture sales. There was also evidence that the value of the "reconstituted" product was equal to that of crude oil and that it is considered a proper practice in the petroleum industry to sell a blend of products if it is adequately described. Goss and Benson contend that, given this contrary testimony, there was insufficient evidence that they intentionally engaged in a scheme to defraud Western.

The jury was entitled to, and apparently did, view this defense testimony skeptically. While the jury might consider it reasonable that Goss, a seller whose product buyers were eagerly seeking, wanted to receive some benefit in addition to the controlled price, i. e., Benson's consulting services, they might wonder why the seller would insist not only on paying for advice but would compute the payments so generously. The jury might also properly view with some disbelief Benson's claim that he accepted approximately...