U.S. v. Schilling, 77-5025

• Decision Date: 02 September 1977
• Docket Number: No. 77-5025,77-5025
• Citation: 561 F.2d 659
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. Billy Ray SCHILLING, Arthur W. Anderson, and Hunter Lane, Jr., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 659

561 F.2d 659

UNITED STATES of America, Plaintiff-Appellant, v. Billy Ray SCHILLING, Arthur W. Anderson, and Hunter Lane Jr., Defendants-Appellees.

No. 77-5025.

United States Court of Appeals Sixth Circuit.

Argued June 13, 1977.

Decided Sept. 2, 1977.

Thomas F. Turley, Jr., U. S. Atty., Glen G. Reid, Jr., Memphis, Tenn., for plaintiff-appellant.

Warner Hodges, Memphis, Tenn., for Schilling.

Charles L. Sullivan, Clarksdale, Miss., for Anderson.

James M. Manire, Memphis, Tenn., for Lane.

Before WEICK and EDWARDS, Circuit Judges and CECIL, Senior Circuit Judge.

CECIL, Senior Circuit Judge.

The government appeals from an order of the United States District Court for the Western District of Tennessee, Western Division, dismissing an indictment, the first six counts of which charged all defendants with use of the mails to effectuate a fraudulent scheme in violation of Sections 1341 and 2 of 18 U.S.C. Counts seven and eight charged defendants Lane and Anderson with willfully endeavoring to obstruct an F.B.I. investigation relating to a violation of Section 1510 of 18 U.S.C. The government does not appeal the dismissal of these two counts.

We give herein, a statement of the essential facts as summarized from the indictment by the District Judge:

"It is alleged that in January, 1973, defendant Anderson, in behalf of himself and defendants Lane and Schilling (and two others not named or indicted), contracted through defendant Lane as Trustee to purchase a fifty-three acre tract for $185,298.00, each person to make a down payment of $9,500, with a note, secured by mortgage, to be given for the balance. The trade was closed in April, 1973. Thereafter defendants sought to sell the property to the Chickasaw Basin Authority and that, in less than a year, the Authority contracted to purchase the land for $614,231.53.

"In order to consumate the sale, it was necessary for the Shelby County Quarterly Court (a legislative body) to approve it and appropriate the purchase money. Defendant Schilling is a member of the Quarterly Court.

"In January, 1974, the Quarterly Court approved the purchase and appropriated and authorized disbursement of the purchase money; but thereafter the Quarterly Court learned that defendant Schilling would receive one-fifth of the net proceeds with the result that, in February, 1974, it rescinded its approval.

"Later in February, 1974, to persuade the Quarterly Court to approve the purchase, defendant Schilling, with knowledge of defendants Lane and Anderson, 'purportedly transferred his ownership interest in the land to (defendant Anderson) for $1.00 and other unspecified consideration as a means to falsely represent that (defendant Schilling) would not share in the proceeds * * *' At that time defendant Schilling announced in a meeting of the Quarterly Court that 'he had divested himself of all interest in the land * * *' to induce the false impression that he would not receive any profit or participate in the division of the proceeds. Defendant Schilling's statement in the meeting of the Quarterly Court, quoted verbatim in the indictment, may be summarized as follows:

"At the time he participated in the purchase, defendant Schilling and his associates did not know that the Corps of Engineers would determine that this land should be acquired for a flood control project. Schilling further stated that he did not vote on the original approval of the appropriation by the Quarterly Court and that he had been advised by the County Attorney and his own attorney that it was sufficient if he recused himself from voting on any matter affecting this property. Schilling further stated that, nevertheless, some of his fellow members of the Quarterly Court expressed concern about appropriating money for the purchase of land in which Schilling had an interest and that he agreed that an appearance of impropriety should be avoided. Therefore, Schilling said, 'I have decided to divest myself of one-fifth interest in the 53 acre tract by conveying my interest to one of my partners.' Schilling further said that there had been no improper influence on the Authority to induce it to purchase the land, that the contract price had been arrived at under the usual procedures and that the Authority, though concerned about the rapid appreciation of land values in the area, was convinced that this land was fairly valued.

"It is further alleged in the indictment that in April, 1974, to spread the false impression that defendant Schilling would not share in the proceeds, the defendants wrote a letter to the Chairman of the Authority stating that defendant Schilling had divested himself of all ownership interest and threatened to sue if the land was not purchased.

"It is further alleged that, following the aforesaid letter, the Quarterly Court, having been advised that defendant Schilling '* * * would not be sharing in the proceeds * * *' again voted to approve the appropriation for the purchase and that, upon the closing, defendant Anderson received two-fifths of the net proceeds of the sale as his share and that defendant Anderson then delivered $87,384.24 to the defendant Schilling representing one-fifth of the net proceeds."

The District Judge dismissed counts one through six for the reason " * * * on a fair interpretation of the indictment, there is no fraud alleged, or, if fraud is alleged, it is at the most only constructive and was not active fraud."

He supports this conclusion with the following statements:

"The indictment does not allege that defendant Schilling did not convey his interest in this land prior to making the representation alleged in the indictment."

"The indictment does not allege that the price for which the land was being sold to the Authority was greater than its fair market value at that time." * * * "Thus the indictment does not allege and it is not contended by the government that the defendants intended to inflict or did inflict financial harm on the taxpayers."

"After all, defendant Schilling's interest in this land was a very valuable asset, which was known by the Quarterly Court. If the representation could not fairly be construed to mean that defendant Schilling had given his interest away, then it was obvious that he had some agreement with defendant Anderson to pay him something in some way for his interest."

The issue thus presented is whether the facts as alleged in the indictment constitute a crime under Section 1341, the mail fraud statute.

Section 1341, so far as pertinent reads as follows:

"Whoever, having devised or intending to...