U.S. v. McClatchy

• Decision Date: 19 April 2001
• Docket Number: No. 00-60332,00-60332
• Citation: 249 F.3d 348
• Parties: (5th Cir. 2001) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. CHARLES H. MCCLATCHY, JR., Defendants-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

Page 348

249 F.3d 348 (5th Cir. 2001)

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. CHARLES H. MCCLATCHY, JR., Defendants-Appellant.

No. 00-60332

UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

April 19, 2001

[Copyrighted Material Omitted]

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

Before POLITZ, DeMOSS, and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:

Charles H. McClatchy, Jr. ("McClatchy") appeals his conviction and sentence for conversion of pledged crops, money laundering, engaging in a monetary transaction involving criminally derived property greater than $10,000 in value, and crop insurance fraud. For the following reasons, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

McClatchy was convicted in a jury trial on six counts of a seven count indictment involving conversion of pledged crops, money laundering, engaging in a monetary transaction involving criminally derived property greater than $10,000 in value, and crop insurance fraud.¹ The facts giving rise to his indictment and conviction are as follows.

McClatchy and his nephew, Charles B. McElmurray, III ("McElmurray"), were partners in 1994 in a farming partnership called the "McClatchy Planting Company" ("McClatchy Planting" or "the company"). McClatchy Planting planted, grew, and sold cotton and soybeans near Indianola in Sunflower County, Mississippi.

In the spring of 1994, the company applied for financing with the Farmers Home Administration ("FmHA") and received an emergency loan in the amount of $261,170 and a 1994 farm operating loan in the amount of $200,000. At that time, McClatchy and McElmurray executed a security agreement in which they pledged to the FmHA their 1994 crops as collateral for the operating and emergency loans. They also executed Form FmHA 1962-1, Agreement for the Use of Proceeds/Release of Chattel Security ("Form 1962-1"). Form 1962-1 outlined the intended use of all crop proceeds, and it also stated that both the borrower's and the FmHA's name must be listed on any checks, drafts, or money orders received by the borrower for the sale of collateral. The company also submitted a farm plan to the FmHA. The operating loan was due in full plus interest on January 1, 1995. The first of seven installments of the emergency loan was also due January 1st.

McClatchy Planting's loan application and its farm plan proposed to farm cotton and soybeans on 1616 acres of land. That land was being rented by the company from McClatchy, the estate of McClatchy's deceased mother, and R.M. McClatchy. The company's farm plan indicated that the expenses for rent totaled $86,960, and McClatchy initially asked that $77,460 be advanced from the loan proceeds for rent, leaving $9,500 to be paid out of crop sales after the harvest. The revised farm plan, on which the loans were based, provided $69,860 in advance rent to be paid immediately from the loan proceeds, leaving only $17,100 of rent that would be paid from crop proceeds after the harvest.

In July 1994, the FmHA agreed to a subordination with respect to a farm operating loan obtained by McClatchy from the Bank of Ruleville in the amount of $200,000. Under the subordination agreement, McClatchy was required to have the FmHA named as a payee on all checks received from the sale of crops on which the agency had a lien. McClatchy was also required to bring those proceeds checks to the agency's office to be recorded and released.

The government produced evidence that McClatchy converted soybean and cotton sales proceeds, laundered money, engaged in a financial transaction with criminally derived property greater than $10,000 in value, and committed crop insurance fraud. The following is a summary of that evidence.

Conversion of Cotton Sales Proceeds (Count 1)

From September 1994 to March 1995, McClatchy sold 823 bales of cotton and received 14 checks, totaling $336,590.20, from Nored Cotton Company ("Nored") in Greenwood. The FmHA was not listed as a payee on any of the checks. The Bank of Ruleville was listed as a payee but received only two of the cotton sales checks, totaling $94,422.29. Two of the cotton sales checks, totaling $18,000, were deposited by McClatchy into the checking account of Valley Supply Company ("Valley Supply"). Valley Supply is a straw company consisting primarily of a bank account and a post office box controlled by McClatchy. One check, for $12,998.50, was endorsed and paid to the mortgagee of McClatchy's farm land. The remaining checks were deposited by McClatchy in a McClatchy Planting bank account located in Greenwood, Mississippi. The FmHA, though not listed as a payee, endorsed and released only one cotton sales check in the amount of $72,156.79. McClatchy did not take the remaining 13 checks to the FmHA to be released.

Conversion of Soybean Sales Proceeds (Count 2)

During the fall of 1994, McClatchy Planting sold 3630.12 net bushels of 1994 soybeans to Bunge Corporation ("Bunge") for $19,840.50. Bunge made the check payable to McClatchy Planting, the FmHA, and the Bank of Ruleville. McClatchy took the check to the FmHA, which endorsed and released it to the Bank of Ruleville. The check was applied to McClatchy's subordination loan at the Bank of Ruleville. On three other sales to Bunge of the 1994 soybeans, however, McClatchy had Bunge make out checks to Valley Supply. McClatchy deposited the Valley Supply checks, totaling $18,318.80. He later withdrew the proceeds and deposited them in McClatchy Planting's checking account. Neither the FmHA nor the Bank of Ruleville received any of the proceeds.

Money Laundering (Counts 3 and 4)

McClatchy deposited proceeds from soybean sales into the Valley Supply checking account and then issued checks on that account payable to McClatchy Planting and signed "W.H. Wilson." The funds were proceeds from part of the 1994 crop. The following checks from Bunge payable to Valley Supply were handled in this manner: (1) a check in the amount of $2008.54; (2) a check in the amount of $8,466.86; and (3) a check in the amount of $7,843.40. McClatchy then deposited two of those checks in McClatchy Planting's checking account at the Bank of Ruleville and one in Trustmark National Bank. W.H. Wilson, McClatchy's brother-in-law, testified that he never sold any soybeans, knew nothing about Valley Supply, and never signed any Valley Supply checks.

Engaging in Financial Transaction With Criminally Derived Property Greater Than $10,000 in Value (Count 5)

McClatchy carried out another scheme, similar to the money laundering scheme described above, with respect to a check from Nored for a cotton sale from the 1994 crop. However, the check, which was for $13,000, was not made payable to Valley Supply. Nevertheless, McClatchy deposited the check into the Valley Supply checking account. He subsequently withdrew $10,657 of that money with a check, signed "W.H. Wilson," payable to McClatchy Planting and deposited the check into McClatchy Planting's checking account at the Bank of Ruleville.

False Statements to a Federal Agency (Crop Insurance Fraud) (Count 7)

McClatchy obtained federal crop insurance for his 1994 cotton and soybean crops. The premium was $18,481. McClatchy reported to a crop insurance agent that McClatchy Planting had produced 5,149.6 bushels of soybeans in 1994. The insurance coverage was based on a guarantee of 8,230 bushels, and thus McClatchy received an indemnity, based on a loss of 3,030.4 bushels, for $18,174. The government introduced evidence that McClatchy's actual soybean production was 7,059.88 bushels, thus making his loss $6,904 instead of $18,174.

McClatchy and McElmurray were both indicted and pled not guilty. McElmurray was only charged with conversion of pledged crops while McClatchy was charged with conversion, money laundering, engaging in a financial transaction with criminally derived property greater than $10,000 in value, and crop insurance fraud. The case against them proceeded to trial, and after both sides rested, the defendants moved for a judgment of acquittal. The trial court granted McElmurray's motion but denied McClatchy's. After six hours of deliberations and notes were sent from the jury to the judge indicating that the jurors were having difficulty reaching a unanimous verdict, the judge gave the jury an Allen charge.² Nearly two hours later, the jury returned a partial verdict, finding McClatchy guilty on all but count six of the indictment, which was one of the charges involving false statements to a government agency. The trial court declared a mistrial as to that count.

The trial court sentenced McClatchy to 33 months of imprisonment on each of the counts on which he was convicted. The terms are to be served concurrently and followed by concurrent terms of three years of supervised release on each count. The court further ordered McClatchy to pay restitution to the FmHA in the amount of $282,752.21 and to the Risk Management Agency of the Federal Crop Insurance Corporation in the amount of $18,174. Finally, the court ordered McClatchy to pay a special assessment of $300. McClatchy now appeals his conviction and sentence.

DISCUSSION

I.Sufficiency of the Evidence

McClatchy argues that the jury's verdict and the judgment of conviction against him were against the overwhelming weight of the evidence and insufficient as a matter of law to establish guilt beyond a reasonable doubt. As he moved for a judgment of acquittal at the close of the government's case, the standard of review in assessing McClatchy's sufficiency of evidence challenge is "whether, considering all the evidence in the light most favorable to the verdict, a reasonable trier of fact could have found that the evidence established guilt beyond a reasonable doubt." United States v. Mendoza, 226 F.3d 340, 343 (5th Cir. 2000).

McClatchy claims that the "basic intent" of Form 1962-1 was to allow the farmer to sell crops in the regular course of...