U. S. v. Hartsel

• Decision Date: 21 September 1999
• Docket Number: No. 98-3639,98-3639
• Citation: 199 F.3d 812
• Parties: (6th Cir. 1999) United States of America, Plaintiff-Appellee, v. Norman C. Hartsel, Defendant-Appellant. Submitted:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 812

199 F.3d 812 (6th Cir. 1999)

United States of America, Plaintiff-Appellee, v. Norman C. Hartsel, Defendant-Appellant.

No. 98-3639

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Submitted: September 21, 1999

Decided and Filed: December 16, 1999

[Copyrighted Material Omitted]

Fritz Byers, Toledo, Ohio, N. Stevens Newcomer, Toledo, Ohio, for Appellant.

Stephen G. Sozio, OFFICE OF THE U.S. ATTORNEY, Cleveland, Ohio, for Appellee.

Appeal from the United States District Court for the Northern District of Ohio at Toledo, No. 97-00717--John W. Potter, District Judge.

Before: BOGGS and DAUGHTREY, Circuit Judges; McKINLEY, ^* District Judge.

OPINION

McKINLEY, District Judge.

The Defendant, Norman Hartsel, was convicted in the United States District Court for the Northern District of Ohio of mail fraud, 28 U.S.C. §1341, and aiding and abetting the embezzlement of funds of a labor organization, 29 U.S.C. §501(c). On appeal, Hartsel asserts that the district court erred in finding the receipt of mailed bank statements constituted a use of the mails under the mail fraud statute, and in concluding the embezzled funds were the funds of a labor organization. Hartsel also contends that the district court erred in denying his motion for recusal. Because we find that the receipt of the bank statements failed to satisfy the use of the mail requirement under the facts of this case, we must reverse the mail fraud conviction. However, in all other respects, we affirm the decision of the District Court.

Facts

United Auto Workers Local 12 (Local 12) represents Chrysler Corporation employees at Chrysler's Toledo, Ohio plant. Ronald Conrad (Conrad) served as the chairman of Local 12. Local 12 established a charitable fund in its constitution known as the Jeep Corporation, UAW Local 12 Employee's Charity Fund (Jeep Charity Fund). The employees represented by Local 12 contribute to this charity by authorizing deductions directly from their payroll checks. The Jeep Charity Fund qualified for tax-exempt status under 26 U.S.C. § 501(c)(3) of the Internal Revenue Code. While the union officers did not participate in preparing or signing the annual reports, tax returns or other required filings, the union completely controlled disbursements to the charities of its choice. Conrad authorized and signed most of the checks from the fund. Local 12 kept records of the fund's activity at its offices.

The Defendant, Norman Hartsel, was a practicing attorney in Perrysburg, Ohio. In his legal practice, Hartsel represented Dannie Johnson (Johnson), who owned a local Jeep dealership. Johnson sat on the boards of several local charities, but he became disenchanted with this position. Johnson asked Hartsel to establish a charity which he could direct and control. Thereafter, Hartsel established Stamp Out Hunger of Northwest Ohio (SOH) in January of 1992.

Conrad was approached by Johnson seeking a contribution for SOH from the Jeep Charity Fund. In April of 1992, SOH received the first of a series of checks from the Jeep Charity Fund. This check was dated April 7, 1992, in the amount of $10,000. Hartsel used these funds to establish a bank account at Mid-American Bank in the name of SOH. He was the only authorized signatory on the account. Furthermore, Hartsel directed the bank to mail all monthly statements, including the canceled checks, and any other information relative to the account to the address of his law firm. Hartsel received these statements and filed them at his law offices. The FBI discovered the statements there during its search of his business.

After the deposit of this first check, the money quickly changed hands. Hartsel wrote checks to his law firm for $2,138.50 on April 17 and $3500 on April 24. On April 22, he wrote another check to TB3 Properties (TB3) for $4004. ¹ Additionally, the government traced a September 21 payment from SOH to Hartsel's law firm to this initial deposit. In June of 1992, the Jeep Charity Fund issued another check for $4500. Harstel then wrote a check in this amount to TB3. In November and December of 1992, SOH received checks from the Jeep Charity Fund for $2000 and $500 respectively. Again, this money was paid out to TB3. In February of 1993, the Jeep Charity Fund provided a final check in the amount of $10,000. Of this amount, $7000 went to Hartsel's law firm and $2000 to TB3. Once this money was deposited into his various accounts, Hartsel used it to pay debts of his law firm or withdrew it for his personal use. Hartsel loaned some of this money to Johnson as a personal loan. Hartsel claims no knowledge that Johnson returned the money to Conrad as a kickback.

Following an FBI investigation, Hartsel was indicted for mail fraud and aiding and abetting the embezzlement of union funds. Conrad was also indicted for embezzlement from union funds and plead guilty. Hartsel waived his right to a jury trial and chose to represent himself despite lacking prior experience in the area of criminal law. Johnson testified at trial that he paid Conrad a kickback and that Hartsel knew of the scheme. Following the bench trial, the District Court found Hartsel guilty of both crimes. The District Court then denied the Defendant's Motion for Judgment of Acquittal and the Defendant's Motion for a New Trial. Hartsel received a sentence of 15 months for each offense, to be served concurrently, two years of supervised release, a fine, restitution, and a special penalty assessment. Hartsel appealed the denial of his post-verdict motion for judgment of acquittal or a new trial.

Standard of Review

Decisions denying a motion for judgment of acquittal are reviewed de novo to determine the sufficiency of the evidence. Drawing all inferences and credibility determinations in light most favorable to the prosecution and in support of the verdict, the Court must consider whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319 (1979); United States v. Lee, 991 F.2d 343, 347 (6th Cir. 1993); United States v. Gibson, 896 F.2d 206, 209 (6th Cir. 1990). The Court reviews decisions denying motions for a new trial and motions to recuse under the abuse of discretion standard. Anchor v. O'Toole, 94 F.3d 1014, 1021 (6th Cir. 1996); Barclays/American Bus. Credit, Inc. v. Adams (In re Adams), 31 F.3d 389, 396 (6th Cir. 1994), cert. denied, 513 U.S. 1111(1995).

Discussion

I. Mail Fraud

The Federal Mail Fraud Statute, 18 U.S.C. § 1341, makes it a criminal offense to use the mails for the "purpose of executing" any scheme to defraud or other fraudulent activity². To prove a claim under this statute, the government must show proof of the following three elements: (1) devising or intending to devise a scheme to defraud (or to perform specified fraudulent acts); (2) involving a use of the mails; and (3) for the purpose of executing the scheme or attempting to do so. United States v. Frost, 125 F.3d 346, 354 (6th Cir. 1997), cert. denied, 119 S.Ct. 40, 41 (1998). In Schmuck v. United States, 489 U.S. 705 (1989), the Court explained that the mail fraud statute was not designed "to reach all frauds, but only those limited instances in which the use of the mails is a part of the execution of the fraud, leaving all other cases to be dealt with by appropriate state law." Id. at 710 (quoting Kann v. United States, 323 U.S. 88 (1944)). "The relevant question at all times is whether the mailing is part of the execution of the scheme as conceived by the perpetrator at the time." Id. at 715. The mailing need not be an essential element of the scheme to defraud; it is sufficient if the use of the mail is "incident to an essential part of the scheme, or a step in the plot." Id. at 711 (internal quotations and citations omitted); United States v. Montgomery, 980 F.2d 388, 393 (6th Cir. 1992). However, the use of the mail must be in furtherance of the scheme to defraud. United States v. Brown, 147 F.3d 477, 483 (6th Cir.), cert. denied, 119 S.Ct. 270 (1998). This Court has explained that "the mailings need not be essential to the scheme, but must be sufficiently closely related to [the] scheme. In other words, for a mailing to be in furtherance of a scheme, the scheme's completion or the prevention of its detection must have depended in some way on the charged mailing." United States v. Henson, 848 F.2d 1374, 1378 (6th Cir. 1988), cert. denied, 488 U.S. 1005 (1989) (internal quotations and citations omitted); accord Frost, 125 F.3d at 358.

The District Court found SOH's bank account was an essential part of the scheme to defraud, and that the mailing of the bank statements was incident to maintaining that account, and thus, in furtherance of the Defendant's scheme. Additionally, the District Court held the statements permitted the Defendant to monitor the account and to withdraw the balance. Hartsel contends that the bank statements were not used in furtherance of the scheme to defraud. ³ He maintains that the evidence shows only that the bank statements were received, opened, and filed. Hartsel argues in this appeal that the government must actually prove that he used the statements, and not simply leave it for speculation that the statements could have been used in some way to further the scheme.

Several circuits have faced similar issues related to the mailing requirement of the mail fraud statute and the receipt of bank statements incident to a bank account used to further the scheme. United States v. Lack, 129 F.3d 403 (7th Cir. 1997); United States v. Reed, 47 F.3d 288 (8th Cir. 1995); United States v. Walker, 915 F.2d 1463 (10th Cir. 1990); United States v. Knight, 607 F.2d 1172 (5th Cir. 1979). In each of these cases, the courts required more than mere receipt of mailed bank statements incident to an essential bank account to establish the mailing requirement under the mail fraud statute. In each case, there was sufficient evidence...