U.S. v. Shepherd, No. 74--1176

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: Before DYER, MORGAN and GEE; DYER
• Citation: 511 F.2d 119
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. William Donald SHEPHERD and Barbara Shepherd, formerly known as BarbaraRichard, Defendants-Appellants.
• Decision Date: 14 April 1975
• Docket Number: No. 74--1176

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511 F.2d 119 UNITED STATES of America, Plaintiff-Appellee,
v.
William Donald SHEPHERD and Barbara Shepherd, formerly known
as BarbaraRichard, Defendants-Appellants. No. 74--1176. United States Court of Appeals,
Fifth Circuit. April 14, 1975.
Rehearing and Rehearing En Banc
Denied May 23, 1975.

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Stuart Nelkin, Houston, Tex., for defendants-appellants.

Anthony J. P. Farris, U.S. Atty., Edward B. McDonough, Jr., Alvin A. Horne, James R. Gough, Asst. U.S. Attys., Houston, Tex., for plaintiff-appellee.

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

Before DYER, MORGAN and GEE, Circuit Judges.

DYER, Circuit Judge:

Donald Shepherd was convicted on fifteen counts of mail fraud in violation of 18 U.S.C.A. § 1341. His wife, Barbara Shepherd, was convicted of aiding and abetting the mail fraud. Both were convicted of an additional count of transporting a fraudulently obtained security in interstate commerce in violation of 18 U.S.C.A. § 2314. Their primary assertions of error are twofold. They urge reversal of the mail fraud convictions on the ground that the use of the mails was not 'for the purpose of executing the fraudulent scheme' as required by the mail fraud statute. They also contend that the violation of their Sixth Amendment right to a speedy trial requires reversal of the convictions under both statutes. We disagree and affirm.

The fraudulent scheme involved 'check kiting,' by which Shepherd, who was financially overextended, was able to obtain 'forced credit.' This was accomplished by having various persons write checks drawn on closed accounts or accounts containing insufficient funds payable in most instances to Houston Aircraft Brokers, Inc. (HAB), a corporation owned and controlled by Shepherd. ¹ These checks were deposited in The Southern State Bank of South Houston, Texas, to the account of HAB, which obtained immediate credit for these deposits. ²

When the worthless checks were dishonored and charged back, Shepherd covered the resulting deficit by deposits of additional worthless checks. The size of the overdrafts and deposits accelerated until The Southern State Bank ultimately realized a net loss of more than $600,000.

JURISDICTION

Shepherd caused the mails to be used by the payor banks to transmit the various worthless checks to the drawee banks in the check collection process. The Shepherds do not dispute this but argue that since the use of the mails was

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only an incidental result of the fraudulent scheme it was not within the mail fraud statute. The government, on the other hand, urges that the use of the mails was an integral part of the fraudulent scheme, and thus within the jurisdictional ambit of the district court. We agree.

The Shepherds rely on United States v. Maze, 1974, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603; Parr v. United States, 1960, 363 U.S. 370, 80 S.Ct. 1171, 4 L.Ed.2d 1277; and Kann v. United States, 1944, 323 U.S. 88, 65 S.Ct. 148, 89 L.Ed. 88, to support the attack on their convictions. Maze set out a two-pronged test to determine the existence of jurisdiction. A fraudulent scheme will constitute a federal crime if the defendant 'causes' the mails to be used, and the mailings are 'sufficiently closely related' to the scheme. Id. 414 U.S. at 399, 94 S.Ct. 645, 38 L.Ed.2d 603.

The first prong of this test is clearly satisfied here. As the Court pointed out in Pereira v. United States, 1954, 347 U.S. 1, 9, 74 S.Ct. 358, 98 L.Ed. 435, and recognized in Maze, it is not necessary that the defendant himself place the matter into a mail depository, only that he have a reasonable basis to foresee that the mails will be used. It is apparent that the Shepherds knew that the mails would be used in the check collection process.

Our task, therefore, is to determine whether the mailings in this case are 'sufficiently closely related' to the fraudulent scheme. To satisfy this test the mailing must be 'for the purpose of executing the scheme,' Kann, supra, 323 U.S. at 94, 65 S.Ct. at 151; but '(i)t is not necessary that the scheme contemplate the use of the mails as an essential element.' Pereira, supra, 347 U.S. at 8, 74 S.Ct. at 362. What is crucial is that the mailing be 'incident to an essential part of the scheme.' Id.

Both Maze and Parr involved the fraudulent use of credit cards. The government asserted that the mailing of invoices subsequent to fraudulent purchases was sufficient to invoke jurisdiction under the mail fraud statute. The Supreme Court rejected the government's position since the fraud had been completed upon the use of the credit cards, when the goods and services had been irrevocably received and the fraudulent scheme had thus reached fruition by the time the mails were used. The mails were not utilized to further the scheme.

Similar to Maze and Parr, but closer factually to the case at hand is Kann which involved the cashing of fraudulent checks rather than the fraudulent use of credit cards. In Kann, corporate officers set up a dummy corporation to divert profits from the corporation for which they acted in order to pay themselves additional compensation without rendering services. The officers had the dummy corporation issue checks in their names and cashed the checks. The use of the mails was in the check collection process. The mailings were held to be insufficient to establish jurisdiction. The Court stressed the fact that the scheme had reached fruition upon the cashing of the checks, since the 'persons intended to receive the money had received it irrevocably,' and therefore 'the subsequent banking transactions between the banks concerned were merely incidental and collateral to the scheme and not a part of it.' Id., 323 U.S. at 94, 95, 65 S.Ct. at 151.

In this case Shepherd did not intend to irrevocably receive the money he fraudulently obtained. The purpose of the scheme was to obtain, for a significant period of time, 'forced credit,' which he ultimately might repay. The scheme had not reached fruition, but was ongoing.

It was deemed significant in Kann that '(i)t was immaterial to (defendants), or to any consummation of the scheme, how the bank which paid or credited the check would collect from the drawee bank.' Id., 323 U.S. at 94, 65 S.Ct. at 151. Shepherd's scheme, on the other hand, uniquely depended upon the check collection process. It was the delay that enabled Shepherd to receive the

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forced credit, and it was the use of the mails that caused the delay.

Kann carefully distinguished its particular fact situation from the factual situation sub judice 'where the use of the mails is a means of concealment so that further frauds which are part of the scheme may be perpetrated.' Id., 323 U.S. at 94--95, 65 S.Ct. at 151. ³ We have recently...