U.S. v. Lennon, 83-2713

• Decision Date: 11 January 1985
• Docket Number: No. 83-2713,83-2713
• Citation: 751 F.2d 737
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Joseph R. LENNON, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 737

751 F.2d 737

UNITED STATES of America, Plaintiff-Appellee, v. Joseph R. LENNON, Defendant-Appellant.

No. 83-2713.

United States Court of Appeals Fifth Circuit.

Jan. 11, 1985.

Olney G. Wallis, Michael A. Maness, Houston, Tex., for defendant-appellant.

Daniel K. Hedges, U.S. Atty., James R. Gough, Asst. U.S. Atty., Houston, Tex., Stephen P. Learned, Atty., Crim. Division, Fraud Section, U.S. Dept. of Justice, Washington, D.C., for plaintiff-appellee.

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

Before RUBIN, REAVLEY and TATE, Circuit Judges.

REAVLEY, Circuit Judge:

The opinion delivered on October 31, 1984 is withdrawn and is replaced by the following.

Joseph Lennon was convicted by a jury of eight counts of causing the interstate transportation of certain check proceeds obtained by fraud in violation of 18 U.S.C. Secs. 2, 2314 (1982). We reverse and remand.

Lennon was employed by Charter International Oil Company and Charter Crude Oil Company, Texas corporations and subsidiaries of Charter Oil Company, Inc., a Florida corporation, to supply Charter's oil refinery in Houston approximately 70,000 barrels of crude oil per day. To meet part of this demand, Lennon agreed on behalf of Charter to purchase crude oil from Southwest Petrochem, Inc. in late summer or early fall of 1974. As a condition to making the contract, Lennon demanded that Petrochem pay him, personally, twenty cents for each barrel he purchased for Charter. Charter neither was apprised of nor consented to the kickback arrangement.

These dealings proved to be profitable to all parties for a number of years. Charter received a large portion of its needed crude oil at a cost a little below the average it was paying other suppliers. Petrochem had a steady buyer that accounted for the vast majority of its revenues. Pursuant to the kickback agreement, Lennon received from Petrochem numerous checks that totaled approximately $1,193,000. The last kickback payment was made in March 1979, and Lennon shortly thereafter resigned from Charter. After Lennon's departure from Charter, Petrochem continued to sell crude oil to Charter but never made any more kickback payments to Lennon or anyone at Charter.

Charter initiated each sale of crude oil by a prepayment to Petrochem. Charter's checks were drawn on various banks located in Florida, Massachusetts, and Illinois. Petrochem deposited the checks in a Houston bank, which sent the checks directly to the out-of-state bank for collection. Petrochem then used those funds to purchase the crude oil from its supplier and to pay Lennon the kickback.

Petrochem paid Lennon the kickbacks by checks made to H & L Enterprises, a general partnership formed under Texas law between Lennon and his friend and business associate James Harrigan; to Harlen Trading Company, Inc., a Texas corporation with shares owned by Lennon and Harrigan; and to LATCO, an assumed business name of Lennon. The kickback checks were all drawn upon and deposited in Texas banks.

Lennon presented evidence through the testimony of Harrigan that the moneys paid to H & L, Harlen, and LATCO were not kickbacks to Lennon. According to Harrigan's testimony, the money was paid to Harrigan through Harlen, H & L, and LATCO as a commission for his own services to Petrochem.

An additional factor to be considered is the regulation of the oil industry during the 1970's and early 1980's by the federal government. Under these regulations, the price of crude oil and certain refined oil products were regulated on a cost-plus margin basis. The margin was set on a unit basis but was averaged monthly with no carryover. In other words, a reseller of crude oil or a refiner of regulated products could charge purchasers only an amount equal to its cost, expenses, and a certain margin for profit. Although the profit might vary from barrel to barrel, the average margin during a given month could not exceed a certain amount. If the maximum average margin was not obtained in a particular month, the unrealized profit was lost and could not be recaptured by exceeding the set margin in the next month.

In this case all of Petrochem's crude oil sales were subject to the price regulations. Approximately sixty to seventy percent of each barrel of crude oil Charter purchased was refined into unregulated products. As to the crude oil it resold, Charter did not obtain the maximum profits allowed by the regulations during any month from May 1978 to March 1979, when the violations by Lennon affected Charter's profits.

The grand jury returned an indictment charging Lennon with eight counts of violating 18 U.S.C. Secs. 2, 2314 (1982). Specifically, the indictment charged Lennon with causing eight checks issued in 1978 and 1979 by Charter payable to Petrochem to be transported in interstate commerce and knowing that certain proceeds of the checks were taken by fraud. The indictment listed the eight checks by date, amount, check number, and place of origin, and it charged that Lennon's purpose was to obtain money in excess of $5,000. At trial, the United States presented evidence of the exact amount of the kickback included in each of the eight checks, which varied from a low of $12,234.50 to a high of $27,373.00.

The issues on appeal are: one, whether the applicable statutory provisions, 18 U.S.C. Secs. 2(b), 2314 (1982), require knowledge or reasonable foreseeability that money obtained by fraud will be transported in interstate commerce; two, whether the trial court improperly instructed the jury on "causing" under section 2314; three, whether the trial court improperly instructed the jury on fraud under section 2314; four, whether there was sufficient evidence to support a finding of fraud; five, whether, for section 2314 to apply, all the property transported in interstate commerce must have been obtained by fraud; six, whether the indictment was defective for failing to allege that certain proceeds exceeded $5,000 as required by section 2314; and seven, whether the trial court's jury instruction on the elements of section 2314 was improper.

1. Knowledge or Reasonable Foreseeability

Section 2314, the so-called National Stolen Property Act under which Lennon was convicted, provides in part:

Whoever transports in interstate or foreign commerce any goods, wares, merchandise, securities or money, of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud ...

* * *

Shall be fined not more than $10,000 or imprisoned not more than ten years, or both.

18 U.S.C. Sec. 2314 (1982). Numerous circuits have held that section 2314 does not require knowledge or reasonable foreseeability of interstate transport of the money obtained by fraud. United States v. Strauss, 443 F.2d 986, 988 (1st Cir.), cert. denied, 404 U.S. 851, 92 S.Ct. 87, 30 L.Ed.2d 90 (1971); United States v. Mingoia, 424 F.2d 710, 713 (2d Cir.1970); United States v. White, 451 F.2d 559 (6th Cir.1971); United States v. Ludwig, 523 F.2d 705, 706-08 (8th Cir.1975), cert. denied, 423 U.S. 1076, 96 S.Ct. 861, 47 L.Ed.2d 86 (1976); United States v. Masters, 456 F.2d 1060, 1061 (9th Cir.1972). Furthermore, this circuit has held that knowledge or reasonable foreseeability of interstate transport is not required to convict under another paragraph of section 2314, which contains similar interstate transport wording as the paragraph under which Lennon was convicted. United States v. Kelly, 569 F.2d 928, 934 (5th Cir.), cert. denied, 439 U.S. 829, 99 S.Ct. 105, 58 L.Ed.2d 123 (1978). Lennon has cited no new authority or reason that has not previously been considered and rejected why this court should not follow other circuits and Kelly.

Lennon argues further that knowledge or reasonable foreseeability of interstate transport is required when the indictment and charge include, as here, the substance of 18 U.S.C. Sec. 2(b) (1982). Section 2(b) provides:

Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.

Section 2(b) applies generally to all federal criminal statutes and prohibits one from causing another to do any act that would be illegal if one did it personally. See, e.g., United States v. Gleason, 616 F.2d 2, 20 (2d Cir.1979), cert. denied, 444 U.S. 1082, 100 S.Ct. 1037, 62 L.Ed.2d 767 (1980). Section 2314, however, also contains a "causing" provision similar to section 2(b) which specifically prohibits one from causing another to transport money obtained by fraud in interstate commerce. See, e.g., United States v. Ludwig, 523 F.2d 705, 706 & n. 2 (8th Cir.1975), cert. denied, 423 U.S. 1076, 96 S.Ct. 861, 47 L.Ed.2d 86 (1976). Although we do not accept the government's contention that the "causing" under section 2(b) reaches activity not within the "causing" of section 2314, neither do we agree with Lennon's contention that by reference to section 2(b) in the indictment, the government shouldered a burden of proving knowledge or reasonable foreseeability of interstate transport. If there is a difference, it has no bearing on this case and the reference to "causing" in section 2(b) is mere surplusage to be ignored. See United States v. Lyons, 706 F.2d 321, 324 & n. 1 (D.C.Cir.1983).

A final basis for Lennon's argument is that "cause" under the mail fraud statute, 18 U.S.C. Sec. 1341 (1982), requires knowledge or reasonable foreseeability that the mails will be used in commission of the fraud, and that therefore "cause" under section 2314 should as well. Lennon overlooks, however, the different purposes underlying the statutes. "[S]ection 2314 is aimed at the evils of theft, fraud, and counterfeiting and not at the regulation of interstate transportation. Suppression of movement of the fruits of theft and fraud is only the means to the end of suppressing theft and fraud themselves." United States v. Roselli, 432 F.2d 879, 891 (...