U.S. v. Reece

• Decision Date: 18 January 1980
• Docket Number: Nos. 78-1671 and 78-1672,s. 78-1671 and 78-1672
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. James Wilbur REECE and Richard W. Tomlinson, Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1259

614 F.2d 1259

UNITED STATES of America, Plaintiff-Appellee, v. James Wilbur REECE and Richard W. Tomlinson, Defendants-Appellants.

Nos. 78-1671 and 78-1672.

United States Court of Appeals, Tenth Circuit.

Argued Sept. 11, 1979.

Decided Jan. 18, 1980.

John Oliver Martin, Asst. U. S. Atty., Kansas City, Kan. (James P. Buchele, U. S. Atty., Topeka, Kan., and Terrance J. Wear, Sp. Asst. U. S. Atty., Washington, D. C., on brief), for plaintiff-appellee.

Gerald L. Goodell, Topeka, Kan. (Goodell, Stratton, Edmonds, Palmer & Wright, Topeka, Kan., on brief), for James Wilbur Reece, defendant-appellant.

Michael Lerner, Kansas City, Kan., for Richard W. Tomlinson, defendant-appellant, and adopted brief filed by defendant-appellant Reece.

Before SETH, Chief Judge, and McWILLIAMS and McKAY, Circuit Judges.

McWILLIAMS, Circuit Judge.

Reece and Tomlinson were convicted by a jury on ninety-one counts of mail fraud. 18 U.S.C. § 1341. The indictment charged the two defendants with using the mail in connection with a scheme to defraud their employer, Fleming Foods Company of: (1) its right to have its business conducted honestly; (2) its right to the loyal, disinterested and unbiased services of the two defendants who were employed as purchasing agents by Fleming Foods; and (3) its right to secret money and profits obtained by the defendants in the course of the performance of their official duties for Fleming Foods. Each count involved a different mailing. Perhaps the principal point raised on appeal concerns the sufficiency of the evidence to support the convictions. Counsel argues that the defendants' actions, which are not really in great dispute, simply do not come within the mail fraud statute.

Fleming Foods is a wholesale grocery business with headquarters in Topeka, Kansas. Reece and Tomlinson were both long-time employees of Fleming Foods in the meat purchasing department. Reece was director of meat procurement operations and worked out of Fleming's offices in Topeka. Tomlinson had overall responsibility for the selection of beef carcasses used in Fleming's operations, and performed his services out of Fleming's office in St. Joseph, Missouri.

Reece and Tomlinson devised a scheme to supplement the salary and bonuses which they received from Fleming by demanding, and receiving, so-called "brokerage fees" from certain packers who sold beef trimmings to Fleming. Tomlinson traveled to National Beef Packing Company at Liberal, Kansas, and to Missouri Beef Packers, Inc. at Rock Port, Missouri and spoke with sales representatives for each company. Tomlinson agreed to buy beef trimmings on behalf of Fleming if the two suppliers would, in return, agree to pay Tomlinson and Reece a so-called meat brokerage fee of $.15 per hundredweight on all beef trimmings purchased by Fleming. Pursuant to such understanding, beef trimmings were purchased by Tomlinson and Reece for and on behalf of Fleming from National Beef and Missouri Beef Packers, and Missouri Beef's successor, World Wide Meats. The brokerage fees were made payable to Midwest Selection Service, a partnership formed by Reece and Tomlinson. In connection with Midwest's "billings" to National Beef, Missouri Beef and World Wide Meats, the mails were used. Some $29,000 in brokerage fees were received by Reece and Tomlinson during the period of time from April 1971 through August 1973. None of these monies were turned over to Fleming Foods.

Reece and Tomlinson did not advise their employer, Fleming Foods, in advance of their actions. A long-time company policy precluded acceptance of any "gift" from any supplier. When defendants' actions were finally revealed, Fleming terminated their employment with the company.

As indicated, on appeal counsel argues that the indictment does not charge an offense which comes within the purview of the mail fraud statute, and that the evidence offered and received at trial does not show a violation of the statute. We do not agree with this line of argument.

A deprivation of an employee's loyal services by his participation in a kickback scheme has been held to amount to actual fraud under the mail fraud statute. United States v. Bryza, 522 F.2d 414 (7th Cir. 1975), cert. denied, 426 U.S. 912, 96 S.Ct. 2237, 48 L.Ed.2d 837 (1976) and United States v. George, 477 F.2d 508 (7th Cir.), cert. denied, 414 U.S. 827, 94 S.Ct. 49, 38 L.Ed.2d 61 (1973). Bryza involved a purchasing agent for International Harvester Company who accepted payments in return for orders placed in violation of company policy and without the company's knowledge. George involved a purchasing agent for Zenith Radio Corporation who received "kickbacks" from suppliers of Zenith. In a somewhat related factual setting, the Seventh Circuit in United States v. Isaacs, 493 F.2d 1124 (7th Cir.), cert. denied, 417 U.S. 976, 94 S.Ct. 3184, 41 L.Ed.2d 1146 (1974), held that the mail fraud statute was violated when the mails were used in furtherance of a bribery scheme which deprived the citizens of Illinois of the honest and faithful services of its then Governor.

In the instant case the indictment charged, inter alia, that the defendants used the mails to further a scheme to defraud Fleming of its right to the loyal, honest and disinterested services of its employees, Reece and Tomlinson. Under the rationale of Bryza, George and Isaacs, such is sufficient to charge an offense under the mail fraud statute. The evidence in support of such allegation is amply sufficient to support the jury's verdict. Contrary to counsel's suggestion that all was "above board," there is evidence that Reece and Tomlinson acted covertly in an effort to conceal their brokerage business from Fleming.

Additionally, the indictment also charged that a part of the scheme devised by the defendants involved an effort to defraud Fleming of money obtained by Reece and Tomlinson in the course of their performance of their official duties and at the expense of the company. Again, there is evidence to support the jury's verdict in this regard. Testimony was offered that the brokerage fee paid Reece and Tomlinson had an overall effect on price charged Fleming for the beef trimmings sold to it. Indeed, a representative of National Beef testified that he offered to "discount" the beef trimmings sold by it to Fleming by the amount of the brokerage fee paid Tomlinson, if the latter would forego his fee. Tomlinson declined this suggestion, stating that such would not adequately reflect "his performance."

In sum, the indictment charges a violation of the mail fraud statute, and the evidence supports the jury's verdict that the mail fraud statute was in fact violated by the two defendants.

Prior to trial defense counsel sought a ruling from the trial court that evidence pertaining to the relationship between the defendants and a meat broker named Gurrentz was inadmissible evidence. Apparently counsel was apprehensive that the Government in its case in chief would offer evidence concerning the relationship between the defendants and Gurrentz. The evidence presumably would show a series of transactions involving kickbacks to Reece and...