U.S. v. Hildebrand
| Decision Date | 28 July 1998 |
| Docket Number | Nos. 97-3021,97-3031,97-3024,97-3279 and 97-3280,97-3278,97-3023,97-3277,97-3026,s. 97-3021 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Scott E. HILDEBRAND, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant, v. Joan M. WEBB, Defendant-Appellant/Cross-Appellee. UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant, v. Larry A. WEBB, Defendant-Appellant/Cross-Appellee. UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant, v. David I. GARDEMANN, Defendant-Appellant/Cross-Appellee. UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant, v. Joseph A. MENTLICK, Jr., Defendant-Appellant/Cross-Appellee. UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant, v. Kenneth Lee KRAKLIO, Defendant-Appellant/Cross-Appellee. UNITED STATES of America, Plaintiff-Appellant, v. Allen K. ZURCHER, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Thomas John O'Flaherty, Swisher, IA, argued, for Scott E. Hildebrand.
Scott C. Peterson, Cedar Rapids, IA, argued, for Joan M. Webb.
David E. Mullin, Cedar Rapid, Iowa, argued, for Larry A. Webb.
Daniel O'Brien, Jackson, MI, argued, for David I. Gardemann.
Charles H. Nadler, Cedar Rapids, IA, argued, for Joseph A. Mentlick.
Gary K. Koos, Davenport, IA, argued, for Kenneth Lee Kraklio.
Alfredo Parrish, Des Moines, IA, for Allen K. Zurcher.
Robert Lee Teig, Cedar Rapids, IA, Rodger E. Overholser, Cedar Rapids, IA, argued, for U.S.
Before McMILLIAN and LOKEN, Circuit Judges, and BOGUE, * District Judge.
Scott Hildebrand, Joan Webb, Larry Webb, David Gardemann, Joseph Mentlick, Kenneth Kraklio, and Allen Zurcher were convicted of mail fraud, conspiracy to commit mail fraud, and conspiracy to launder money for their roles in an organization known as "We The People" that offered to file claims in a purported federal class action lawsuit for a fee of $300. Gardemann, Kraklio, and the Webbs appeal their convictions; Mentlick appeals his conviction and sentence; and Hildebrand appeals his sentence. The government appeals the sentences imposed on the Webbs, Gardemann, Mentlick, Kraklio, and Zurcher. We affirm.
Defendants' scheme grew out of a lawsuit filed in the United States District Court for the District of Colorado in which two families filed a pro se class action complaint alleging unlawful foreclosure of their farms in state court. We will refer to this lawsuit as the Baskerville case. Plaintiffs moved for appointment of Hildebrand as receiver for various Farm Credit Services affiliates, the Farmers Home Administration, and the National Banking Association. In early June 1993, Hildebrand filed a document declaring himself receiver and videotaped himself on the steps of the federal courthouse reading a press release announcing that the Federal Land Bank and its affiliates, the Farmers Home Administration, the National Banking Association, and the City of Fort Collins and County of Larimer, Colorado, had been placed in receivership by the Baskerville court. Hildebrand then organized "We The People." Through printed literature, videotaped presentations, and public meetings held in at least forty States, We The People represented that anyone who had ever borrowed money from a Federal Reserve Bank System entity, paid taxes or attorney's fees, been divorced, or had a death in the family was entitled to a substantial damage award in the Baskerville case. The catch was that claimants needed to pay We The People $300 to cover the administrative costs of filing claims. The group permitted impoverished claimants to file without paying the $300 fee on the condition that it receive twenty percent of any damage recovery. These were called "80/20" claims. We The People warned that claims would be paid on a first-come, first-serve basis; that no new claims could be filed once pay-outs began; and that citizens who did not file a claim would face criminal prosecution.
Defendants had varying roles in We The People. Hildebrand was the leader and promoter. His home in Greene, Iowa was the organization's headquarters. Mentlick was Hildebrand's right-hand man who proclaimed himself a receiver and appeared regularly with Hildebrand on promotional videos and at promotional meetings. Gardemann entered claims information into computers, was actively involved in promotional meetings, and had signature authority on three bank accounts used to deposit claims money. Kraklio and the Webbs were claims writers who solicited claims and collected administrative fees. Kraklio submitted at least six hundred claims to Hildebrand. The Webbs supervised forty claims writers operating in seven States. Claims writers were generally paid $50 per paid claim. Zurcher was the group's bookkeeper, a job he described as "overseeing the claims administration activity."
The government identified 6,832 claims filed with We The People claims writers between Spring 1993 and October 1994. About two-thirds were fully paid claims, evidence that the group collected at least $1.3 million in administrative fees. No claims were submitted to the Baskerville court, which denied class certification and the motion to appoint receivers in June 1993 and dismissed the case with prejudice in November 1993. See Baskerville v. Federal Land Bank, 25 F.3d 1055 (10th Cir.1994).
Defendants were indicted in September 1995. At trial, the central issue was whether each defendant participated in the scheme with intent to defraud. Without disputing their roles in the scheme, defendants argued they did not know the truth about the Baskerville case, did not profit from their activities, and participated because of strongly held political views. They emphasized the 80/20 claims, the organization's meticulous records, and the steps taken to ensure that claims forms were properly filled out. Two defendants were acquitted at the close of the government's case. A mistrial was declared as to Scott Hildebrand when his attorney became ill; he was tried separately and found guilty of all charges in June 1997. The remaining defendants were found guilty of all charges at the end of the first trial in December 1996.
On appeal, Mentlick, Kraklio, and the Webbs argue the evidence was insufficient to support their convictions. We view the evidence in the light most favorable to the verdict, giving the government the benefit of all reasonable inferences and reversing only if no reasonable jury could have found every element of the offense beyond a reasonable doubt. See United States v. Berndt, 86 F.3d 803, 809 (8th Cir.1996).
A. Mail Fraud. These defendants argue the evidence does not support an inference of criminal intent to commit, or to conspire to commit mail fraud. We disagree. To sustain a conviction for mail fraud under 18 U.S.C. § 1341, the evidence must establish that a defendant knowingly participated in a plan or scheme to defraud in which it was reasonably foreseeable the mails would be used. To prove a conspiracy to commit mail fraud under 18 U.S.C. § 371, the evidence must establish that a defendant intentionally joined a conspiracy to commit mail fraud, knowing the purpose of the conspiracy. See United States v. Earles, 955 F.2d 1175, 1177-78 (8th Cir.1992). The victims paid $300 to an organization that had no intent to file claims on their behalf. Thus, overall the scheme was manifestly fraudulent. As to these defendants, there was substantial evidence that they had access to newspaper articles, Baskerville court documents, a state court injunction, and explicit warnings from state authorities which alerted them, or should have alerted them, to the essentially fraudulent nature of the scheme. Accordingly, a jury could reasonably infer that Mentlick, Kraklio, Joan Webb, and Larry Webb carried out promotional activities, claims filing, and the collection of $300 fees after acquiring the requisite criminal intent. "One who knowingly participates in an ongoing mail fraud devised by another is guilty of mail fraud." Earles, 955 F.2d at 1177.
The Webbs and Kraklio complain that they directly participated in only a few of the forty-one substantive mail fraud counts. But each participant in a scheme to defraud is responsible for his partners' use of the mails in furtherance of that scheme. See Pinkerton v. United States, 328 U.S. 640, 647, 66 S.Ct. 1180, 90 L.Ed. 1489 (1946); United States v. Nance, 502 F.2d 615, 619 (8th Cir.1974), cert. denied, 420 U.S. 926, 95 S.Ct. 1123, 43 L.Ed.2d 396 (1975). These defendants also argue that many of the substantive counts involved innocent transactions, and that the counts based upon 80/20 claims involved mailings that did not defraud anyone. However, there was evidence that a number of the 80/20 claims were later converted to paid claims, and further evidence that the 80/20 claims procedure was necessary to the scheme because We The People warned that anyone who did not file a claim could be prosecuted. Facially innocent mailings intended to further a scheme to defraud violate § 1341. See Schmuck v. United States, 489 U.S. 705, 715, 109 S.Ct. 1443, 103 L.Ed.2d 734 (1989); United States v. Pemberton, 121 F.3d 1157, 1170-71 (8th Cir.1997) cert. denied, --- U.S. ----, 118 S.Ct. 1046, 140 L.Ed.2d 111 (1998).
B. Money Laundering. Mentlick, Kraklio, and the Webbs argue the government failed to prove they conspired to launder money in violation of 18 U.S.C. § 1956(h). To prove a conspiracy to launder money, the government must establish that a defendant knowingly joined a conspiracy to launder money and an overt act in furtherance of that conspiracy. See United States v. Conley, 37 F.3d 970, 976-77 (3d Cir.1994). In Count 43, the government charged a conspiracy to violate two distinct money laundering statutes, 18...
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