U.S. v. Knippenberg

• Decision Date: 30 December 1974
• Docket Number: No. 73-2031,73-2031
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Earl KNIPPENBERG, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1056

502 F.2d 1056

UNITED STATES of America, Plaintiff-Appellee, v. Earl KNIPPENBERG, Defendant-Appellant.

No. 73-2031.

United States Court of Appeals, Seventh Circuit.

Argued March 1, 1974.

Decided Aug. 15, 1974, Rehearing Denied Dec. 30, 1974.

Sherman C. Magidson, Chicago, Ill., for defendant-appellant.

James R. Thompson, U.S. Atty., Ann C. Tighe, Asst. U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Before FAIRCHILD, CUMMINGS and PELL, Circuit Judges.

FAIRCHILD, Circuit Judge.

Earl Knippenberg appeals from a judgment upon conviction of seven counts of mail fraud, 18 U.S.C. 1341, and of one count of transporting stolen securities in interstate commerce. 18 U.S.C. 2314.

Defendant's principal argument is that the evidence was insufficient to establish guilt. We agree with him as to the seven mail fraud counts, but disagree as to the eighth, transportation count.

1. The seven mail fraud counts.

The indictment charged in the first seven counts that Jack R. Walsh, George Witchek, and defendant Knippenberg devised a scheme to defraud, and that in order to execute the scheme, they caused matter to be mailed on six occasions in July, 1972, and on August 3, 1972. Walsh pleaded guilty, and was a witness at Knippenberg's trial. Witcheck was a fugitive.

David Valente owned parcels of real estate near Bethlehem, Pennsylvania. The scheme, according to the indictment, was that Walsh would falsely represent to Valente, the Northampton National Bank, Easton, Pennsylvania, and others, that Walsh was a vice president of Seay & Thomas Inc., a well known Chicago company and that Seay & Thomas would provide mortgage financing on Valente properties in the amount of $1,000,000; that defendants would induce Northampton Bank to provide interim financing; that defendants would induce Northampton Bank on August 18, 1972 to issue four cashier's checks, totalling $25,200, payable to creditors of Valente, and falsely represent they would deliver these checks to Valente's attorney, O'Hare, for delivery to the payees, but that defendants would transport these checks to Chicago, provide forged endorsements, and convert the proceeds; ¹ that defendants would induce Northampton Bank to issue a cashier's check August 18 for $2,500 to Knippenberg; that defendants would falsely represent to Northampton Bank that Seay & Thomas would deposit funds in an account in the bank, out of which the bank would be reimbursed the $27,700.

There was ample evidence tending to show that Walsh, a resident of Chicago, went to Pennsylvania, and devised and carried out a scheme as alleged; that although the mailings which were the subject of the first seven counts were accomplished by others, presumably innocent of the fraud, the mailings were reasonably foreseeable in the ordinary course of business in execution of the scheme; that Knippenberg who had had business associations with Walsh in Chicago, went to Pennsylvania; performed ostensibly legitimate tasks in connection with the Valente project; was with Walsh and those being duped by Walsh on one or more occasions as early as July 7; and that as early as about two weeks before August 18 he joined in misrepresentations which advanced the scheme or at least stayed silent while Walsh made representations which Knippenberg must have known were false. The problem is that all the mailings which form the substantive offenses in the first seven counts occurred in July or on August 3. Only the last date even approximates the time when the evidence tends to show Knippenberg's first participation in conduct furthering the scheme with knowledge that fraud was involved. Was the evidence consistent with Knippenberg being a dupe, like Teeman, until about August 4, or would it suffice to prove that Knippenberg was a knowing participant in the fraud from July 7 on?

Valente owned a number of valuable, but heavily encumbered parcels of real estate. He had retained Attorney O'Hare, and was a customer of Northampton Bank. In spring, 1972, Walsh falsely told Valente Walsh was associated with Seay & Thomas. He obtained the apparently innocent assistance of Louis Teeman who was actually an employee of Seay & Thomas and by his presence on several occasions and interest in the development of Valente's properties unwittingly lent some color to Walsh's claim.

When Walsh contacted Knippenberg in June about the Valente project, Knippenberg had been operating a small construction business, apparently in financial difficulty. He had worked for Walsh before on seemingly legitimate projects and testified that he accepted Walsh's offer of work on a construction job in Pennsylvania. Knippenberg was present, as was Teeman, on July 7 at the Northampton Bank, with Walsh and Sechler, the bank vice president. There was testimony that Knippenberg was doing some preliminary tasks in preparation for construction work on Valente's properties, and no proof that his efforts in the early weeks were not genuine. On or after July 27, Walsh introduced Knippenberg to O'Hare as one who was in the area to work on the Valente project. There is testimony that Walsh said that Knippenberg and another were 'the people who will be working from the extra office that you gave us on the Valente project on behalf of World Wide Builders and Seay & Thomas.' Since Knippenberg ordinarily did business under the name of World Wide Builders, and another person was also referred to, his failure to protest that he had no connection with Seay & Thomas could not establish beyond a reasonable doubt that he was a knowledgeable participant in the fraud as early as July 27.

The testimony which described the earliest activity on the part of Knippenberg which could be found beyond a reasonable doubt to be fraudulent was that about two weeks before August 18, Sechler, Walsh, and Knippenberg had a conversation during which Walsh said that World Wide Builders had a standing relationship with Seay & Thomas and often worked for that firm. The statement was false and known to Knippenberg to be so, yet he did not correct it. Up to this time Knippenberg's conduct, like Teeman's, may as well, from the evidence, have been legitimately as fraudulently motivated. Exactly two weeks before August 18 would have been August 4, one day after the last mailing, charged in Count 7. This and other testimony to be referred to in discussing count 8, form an adequate basis for a finding that by approximately August 4, Knippenberg joined Walsh in a conspiracy to carry out the scheme described in the indictment, but that proof is not a sufficient predicate for a finding that he caused the mailings on earlier dates.

Although joining a conspiracy subjects the late joiner to some of the consequences of earlier activity by others in furtherance of the conspiracy, and conspiracy principles apply to a multimember mail fraud scheme, whether or not conspiracy has been formally charged, ² it is our opinion that an individual 'cannot be held criminally liable for substantive offenses committed by members of the conspiracy before that individual had joined or after he had withdrawn from the conspiracy . . ..' ³ In the context of use of the mails in execution of a scheme to defraud, it has been said that 'The crime consists in the posting of the letters . . ., and if the defendant was not in the scheme when the letters were posted he was not a principal or an accessory to the crime then committed.' Van Riper v. United States, 13 F.2d 961, 967 (2d Cir., 1926). Language tending to support the opposite conclusion in Bogy v. United States, 96 F.2d 734, 741 (6th Cir., 1938), cert. denied, 305 U.S. 608, 59 S.Ct. 68, 83 L.Ed. 387, does not appear to have been followed. Cf., from the same circuit, Blue v. United States, 138 F.2d 351, 362 (6th Cir., 1943), cert. denied 322 U.S. 736, 64 S.Ct. 1046, 88 L.Ed. 1570 citing and applying Van Riper.

In our opinion, conviction of Knippenberg on the first seven counts cannot be sustained on the theory that he ratified earlier activity by joining the conspiracy, nor is there evidence capable of supporting a finding, beyond a reasonable doubt, that he knowingly participated in the scheme before the times of mailing. There is no suggestion that additional proof would be available for a new trial.

2. The transportation count.

Count 8 charged that Walsh, Witchek and Knippenberg...