U.S. v. Lott, 84-5023

• Decision Date: 25 March 1985
• Docket Number: No. 84-5023,84-5023
• Citation: 751 F.2d 717
• Parties: UNITED STATES of America, Appellee, v. Harold R. LOTT, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 717

751 F.2d 717

UNITED STATES of America, Appellee, v.Harold R. LOTT, Appellant.

No. 84-5023.

United States Court of Appeals Fourth Circuit.

Argued Dec. 7, 1984.

Decided Jan. 10, 1985.

Certiorari Denied March 25, 1985.

See 105 S.Ct. 1852.

Paul E. Tinkler, Charleston, S.C.(Wallace & Wallace, Charleston, S.C., on brief), for appellant.

Marvin J. Caughman, Asst. U.S. Atty., Columbia, S.C.(Henry Dargan McMaster, U.S. Atty., Columbia, S.C., on brief), for appellee.

Before RUSSELL and HALL, Circuit Judges, and DUPREE, Senior District Judge of the Eastern District of North Carolina, Sitting by Designation.

DUPREE, District Judge:

AppellantHarold R. Lott was indicted on August 3, 1983 on two counts of converting cotton crops subject to Farmers Home Administration (FHA) liens in violation of 18 U.S.C. Sec. 658.Lott was found guilty following a three-day jury trial and his motions for acquittal and a new trial were denied.Alleging numerous grounds for reversal of his conviction, Lott appeals.We affirm.

Lott's problems began when he suffered substantial losses from his farming operations in Barnwell County, South Carolina, following a drought in 1977.Because he was unable to obtain adequate financing for his 1978 crop from private lenders, Lott began borrowing money from the FHA.All FHA loans were secured by liens on Lott's crops.

Lower South Carolina experienced another drought in 1978 and Lott lost even more money from farming and investments on the commodity futures market.As a result, he failed to make any payments on his 1978 loan from the FHA.Although Lott again received funds from the FHA in 1979, he was required to place the money in an account supervised by the agency and to deliver all proceeds from the sale of his crops to the FHA.Lott complied with these requirements for all crops except his cotton and cottonseed.

On February 18, 1980, Lott contacted a friend, Alfred W. Flynn, the owner of Flynn Cotton Company in Williston, South Carolina, and requested a $50,000 advance on 337 bales of cotton stored at Flynn's warehouse.Flynn agreed to the advance and pledged Lott's warehouse receipts to a bank as collateral for a loan the proceeds of which went to Lott.It is uncontroverted that Lott failed to report this advance to the FHA and did not thereafter remit any of the advance to the agency.

In early March of 1980, Bill Stanley, a district supervisor for the FHA, learned during a telephone conversation with Flynn that Lott had obtained the advance on his cotton crop.Stanley later wrote Flynn a letter instructing him to make "all checks for proceeds [from the sale of the cotton] jointly with the Farmers Home Administration."¹

Flynn eventually sold Lott's cotton crop for $104,150.06.Despite Stanley's directions that all proceeds should be remitted to the FHA by check naming both Lott and the FHA as payees, Flynn used $51,387.63 to pay off the principal and interest on the loan he had obtained for Lott's advance.Flynn paid the remaining $52,762.43 by check dated May 9, 1980 to Lott and the FHA as co-payees.Thus, the $50,000 advanced by Flynn to Lott was never paid to the FHA either by Flynn or Lott.

Lott also sold 110 tons of cottonseed in May of 1980 for which he received $12,050.96.He deposited the proceeds from the sale in his farm account on May 9, 1980 but made no attempt to remit the funds to the FHA.This brought the total amount of funds diverted from the cotton and cottonseed sales to $62,050.96.

The Department of Agriculture eventually conducted a criminal investigation into Lott's activities and discovered that he had used the converted funds to pay unsecured creditors, to start another farming operation with his sons, and for personal living expenses.After conferring with counsel, Lott agreed to cooperate with investigators and explained that he had used the $50,000 advance from Flynn to pay unsecured creditors because "he expected to get hit with about twenty judgments from various ... creditors ... and he knew ... someone would come up short, and that he preferred that someone to be Farmers Home Administration rather than [the unsecured] creditors."He had used the $12,050.96 from the cottonseed sale because "he had sold everything which he owned and had been left with nothing and ... felt that he was entitled to that $12,000."These admissions apparently proved very damaging, for the jury convicted Lott of intentionally converting proceeds from the sale of both the cotton and the cottonseed crops.

Lott initially argues that the trial judge should have acquitted him on Count 1 of the indictment which charged him with conversion of his 1979 cotton crop in violation of 18 U.S.C. Sec. 658.This statute imposes criminal penalties on anyone who, with intent to defraud, "knowingly conceals, removes, disposes, or converts to his own use ... any property mortgaged or pledged to ... the Farmers' Home Administration...."Lott contends that when he received the $50,000 advance from Flynn it was not proceeds from the sale of his cotton crop but only a loan.He claims that the FHA acquiesced in the advance by not requesting that he forfeit the money before the cotton was sold.Because the $50,000 was actually a loan and the FHA implicitly agreed to let him keep the funds, Lott asserts that he could not have been found guilty of conversion and the district court should have acquitted him on Count 1.

A similar argument was rejected by the Eleventh Circuit in United States v. Mitchell, 666 F.2d 1385, 1388(11th Cir.), cert. denied, 457 U.S. 1124, 102 S.Ct. 2943, 73 L.Ed.2d 1340(1982).In that casethe court held that an advance received on crops subjected to an FHA lien constituted proceeds and fell within the provisions of 18 U.S.C. Sec. 658.Although Lott attempted to distinguish this case on its facts, we think that Mitchell is persuasive and that the trial judge correctly concluded that the $50,000 advance was a conversion within the meaning of 18 U.S.C. Sec. 658.Moreover, even if the FHA did lead Lott to believe that it knew of the advance and implicitly acquiesced in his retaining the funds, this in no way absolved him of the crime of conversion.SeeUnited States v. Weissman, 434 F.2d 175, 179(8th Cir.), cert. denied, ...