U.S. v. Kreimer

• Decision Date: 02 January 1980
• Docket Number: No. 78-5171,78-5171
• Citation: 609 F.2d 126
• Parties: 5 Fed. R. Evid. Serv. 355 UNITED STATES of America, Plaintiff-Appellee, v. Stanley F. KREIMER, Charles Lamar Lewis and Harry L. Walsh, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 126

609 F.2d 126

5 Fed. R. Evid. Serv. 355

UNITED STATES of America, Plaintiff-Appellee, v. Stanley F. KREIMER, Charles Lamar Lewis and Harry L. Walsh Defendants-Appellants.

No. 78-5171.

United States Court of Appeals Fifth Circuit.

Jan. 2, 1980.

Edward T. M. Garland, John R. Martin, Atlanta, Ga., for Kreimer.

Paul L. Hanes, Atlanta, Ga., for Lewis.

Frank J. Shannon, III, Atlanta, Ga., for Walsh.

William L. Harper, U. S. Atty., Atlanta, Ga., Mervyn Hamburg, Atty., App. Section, Crim. Div., U. S. Dept. of Justice, Washington, D. C., for plaintiff-appellee.

Appeals from the United States District Court for the Northern District of Georgia.

Before GODBOLD, GEE and RUBIN, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

The mail fraud statute, 18 U.S.C. § 1341, condemns any scheme to defraud in which the mails are used. United States v. Frick, 5 Cir. 1979, 588 F.2d 531, 536; United States v. Melvin, 5 Cir. 1977, 544 F.2d 767, 773, Cert. denied 430 U.S. 910, 97 S.Ct. 1184, 51 L.Ed.2d 587. The statute does not forbid merely the use of the mails to perpetrate an act made criminal by state or federal law; it reaches any plan, consummated by the use of the mails, in which artifice or deceit is employed to obtain something of value with the intention of depriving the owner of his property. The scheme is to be measured by a non-technical standard; the measure of fraud is its departure from moral uprightness, fundamental honesty, fair play and candid dealings in the general life of members of society. United States v. Bruce, 5 Cir. 1973, 488 F.2d 1224, 1229, Cert. denied, 1974, 419 U.S. 825, 95 S.Ct. 41, 42 L.Ed.2d 48. However, the statute does not reject all business practices that do not fulfill expectations, nor does it taint every breach of a business contract. Its condemnation of a "scheme or artifice to defraud" implicates only plans calculated to deceive. The government must prove not only that there was fraudulent activity but also that the defendant had a " conscious knowing intent to defraud," United States v. Kyle, 2 Cir. 1958,257 F.2d 559, 564, Cert. denied, 1959, 358 U.S. 927, 79 S.Ct. 312, 3 L.Ed.2d 301.

We here consider whether the evidence offered against persons who were accused of violating the statute sufficed to prove beyond reasonable doubt that they consciously exploited such a dishonest device or whether, as they contend, there was a reasonable basis to conclude that the evidence showed merely that the defendants engaged in an ingenious business venture that failed. Having examined more than 3000 pages of record and read 146 pages of briefs, and having assessed all of this against the 29-page indictment, we conclude that there was sufficient evidence to support the jury's conclusion that all three of the defendants had joined in a subtle plan calculated to deceive and to injure the firms with which they were doing business, that no reversible error was committed in the trial and that their convictions should be affirmed.

I.

Considered most favorably to the government, as it must now be, Glasser v. United States, 1942, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680, the lengthy record warrants this bare outline of facts. Kreimer and Walsh were insurance agents, whose agency had been authorized by Interstate Fire Insurance Company to issue financial guaranty bonds obligating Interstate for some portion of the risk underwritten. These bonds were commitments that, if the principal did not repay a loan to a lender, the surety on the bond would pay it. The premium on each bond was to be 2% Of the face amount of the bond and it was to be divided with Interstate on an agreed ratio.

Unknown to Interstate, Kreimer and Walsh received substantial additional fees for writing a number of bonds and neither divulged their fees nor shared them with Interstate; the fees were disguised by making checks payable to another company owned by them. In three instances, loans were nominally made in the names of co-defendants and loan guaranty bonds were executed to secure the loan's payment, but the loan proceeds were actually, and surreptitiously, received by Kreimer and Walsh. ¹

On a number of occasions, the borrowers misrepresented to the initial lender the actual purpose of the loans either with the assistance of Lewis and Kreimer or Walsh, or with the knowledge of Kreimer or Walsh, or both. These loans would not have been made had the true purpose of each been divulged, nor would Interstate have been willing to underwrite financial guaranty bonds for them. Kreimer and Walsh were limited to bonds having a face amount of $300,000; several times they wrote two bonds to cover what was in reality a single loan, each bond for less than $300,000, but totalling more than that sum, in order to avoid the maximum limit.

Lewis negotiated one contract with an independent company, secured by a performance bond (not a financial guaranty bond) issued on behalf of Interstate Fire by Kreimer and Walsh, under circumstances that indicated little likelihood of performance; Kreimer later renewed the bond at a time when performance was even less likely, in patent violation of his duty to the bonding company. This circumstance, together with others not only supported the charges against Kreimer and Walsh but also buttressed other evidence that there had been a tripartite plan involving Lewis as well as Kreimer and Walsh. Lewis introduced other persons to Kreimer and Walsh, and assisted in obtaining loans secured by financial guaranty bonds that Lewis, as well as Kreimer and Walsh, knew were not in fact to be used for the purposes announced to the lender. These borrowers paid concealed fees, aside from the premiums, to companies owned by Kreimer and Walsh. Lewis also assisted an ostensible borrower in obtaining a loan from another lender, again secured by a financial guaranty bond, a substantial part of the proceeds of which went to a company controlled by Kreimer and Walsh. The evidence warranted the conclusion that, to provide Kreimer and Walsh with funding to purchase the outstanding stock of an insurance company (Mt. Vernon), Lewis joined in a plan with Kreimer and Walsh to obtain loans totalling $625,000 in the names of other borrowers, obtain financial guarantee bonds on these loans, and divert the proceeds to the use of Kreimer and Walsh.

Kreimer and Walsh's insurance company was required to furnish Interstate Fire with a list describing each bond issued that month. The list, called a bordereaux in the insurance industry, failed on occasion to show bonds in which Walsh and Lewis or Kreimer had an interest; it did not list a bond issued in excess of the $300,000 limit; and it showed as separate entries two bonds written for a single loan having a total over $300,000, the maximum limit authorized by Interstate Fire. On inquiry by Interstate Fire, Kreimer said that part of the loan secured by the two bonds had been satisfied when, in fact, the total was still due. One bond was listed as $325,000; when inquiry about this was made, a representative of Kreimer and Walsh's company said that $25,000 had been reinsured by another company. This was untrue.

About 2000 bonds were issued during the period, but only fourteen were issued in connection with the transactions that served as bases for the criminal charges. Interstate Fire terminated the agreement with Kreimer and Walsh seven months after it began. Substantial losses were thereafter suffered on the bonds that had been written.

Kreimer and Walsh were indicted on twelve counts. Some were dismissed by the government, some by the court, and on some they were acquitted. They were each convicted on six counts. Lewis was indicted on ten counts; he was acquitted on two and convicted on four.

Kreimer and Walsh's convictions were: four counts of mail fraud; one count of transporting securities obtained by fraud in interstate commerce; and one count of conspiracy to commit those offenses. Lewis was also convicted on the conspiracy charge, on two of the mail fraud counts and on one interstate transportation count. A general sentence was imposed on Kreimer and Walsh of four years imprisonment on all counts, but their prison sentence was suspended and they were placed on probation for five years. The court dealt with Lewis more severely; he was sentenced to four years.

Because the sentence of each of the three defendants runs concurrently, each has been sentenced to less than the statutory maximum allowable for any single count on which he was convicted. The government asserts in its brief and the defendants do not challenge, that we need not here review all of the evidence on each count if there was enough on any single count. United States v. Webb, 5 Cir. 1972, 463 F.2d 1324, 1327, Cert. denied 409 U.S. 986, 93 S.Ct. 338, 34 L.Ed.2d 251. We have concluded that the defendants will not suffer adverse consequences from unreviewed convictions; therefore, it is unnecessary to weigh the evidence on each count separately. ²

II.

Congress has not undertaken to catalog the infinite variety of the myriad schemes to defraud that might be concocted by the fertile minds of those bent on despoiling others by cunning. It has branded criminal any use of the mails knowingly and intentionally to achieve a fraudulent end. Kreimer, Walsh and Lewis may have engaged, indeed, likely did engage in hundreds of lawful transactions. The question is not how many times they obeyed the law but whether or not on the occasions charged they violated it.

There was evidence enough, we are satisfied, without ponderously examining each scrap, to warrant the jury's conclusion that all three engaged in a conspiracy to defraud, that it involved more than a dozen transactions entailing substantial sums, and that it was a witting and crafty scheme, not a lawful business plan that through misadventure went awry. We are further satisfied that there was sufficient evidence to warrant belief beyond reasonable doubt...