U.S. v. Shyres

• Decision Date: 14 March 1990
• Docket Number: Nos. 89-1039,s. 89-1039
• Citation: 898 F.2d 647
• Parties: UNITED STATES of America, Appellee, v. Mark L. SHYRES, Appellant. UNITED STATES of America, Appellee, v. Joseph E. MARTINO, Appellant. UNITED STATES of America, Appellee, v. Michael A. ORLOFF, Appellant. to 89-1041.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 647

898 F.2d 647

UNITED STATES of America, Appellee, v. Mark L. SHYRES, Appellant.

UNITED STATES of America, Appellee, v. Joseph E. MARTINO, Appellant.

UNITED STATES of America, Appellee, v. Michael A. ORLOFF, Appellant.

Nos. 89-1039 to 89-1041.

United States Court of Appeals,

Eighth Circuit.

Submitted Nov. 13, 1989.

Decided March 14, 1990.

Dean A. Strang, Milwaukee, Wis., Raymond Gruender, and Michael A. Gross, St. Louis, Mo., for appellant.

Kathianne Crane, St. Louis, Mo., for appellee.

Before JOHN R. GIBSON, Circuit Judge, BRIGHT, Senior Circuit Judge, and FAGG, Circuit Judge.

BRIGHT, Senior Circuit Judge.

I. INTRODUCTION

Joseph E. Martino, Michael A. Orloff and Mark L. Shyres (appellants) appeal their joint conviction on one count of mail fraud, 18 U.S.C. Sec. 1341 (1988), and one count of conspiring to impede the Internal Revenue Service, 18 U.S.C. Sec. 371 (1988). Martino and Orloff each appeal a conviction on one count of willfully making and subscribing false income tax returns. 26 U.S.C Sec. 7206(1) (1982). Shyres appeals convictions on two counts of tax evasion. 26 U.S.C. Sec. 7201 (1982). Appellants' convictions arose out of a scheme by which Martino and Orloff as high level employees of Anheuser-Busch, Inc. directed Anheuser-Busch sales promotion work to the Bingham Group, a company owned by Shyres, in return for kickbacks of money and property. We affirm the convictions but remand to the district court ¹ for appropriate compliance with technical procedures relating to sentencing required by Fed.R.Crim.P. 32(c)(3)(D).

These appellants allege the following errors on appeal: (1) insufficient evidence and incorrect jury instructions on the mail fraud count; (2) impermissible variance from the mail fraud charges set forth in the indictment; (3) incorrect response to the jury's request for clarification; (4) denial of fifth amendment confrontation rights; (5) various evidentiary rulings; (6) denial of appellants' proffered "theory of defense" instruction; (7) insufficient evidence to support Shyres' tax evasion conviction; and (8) failure in sentencing to comply with Fed.R.Crim.P. 32(c)(3)(D). Except for the failure to comply with the sentencing procedure, we reject these contentions.

II. BACKGROUND

At the time of the conduct at issue here, Joseph E. Martino and Michael A. Orloff served as vice presidents of Anheuser-Busch, Inc. (Anheuser-Busch) and were authorized to place and authorize payment for sales promotion work. Both men previously had contracted out Anheuser-Busch sales promotion work to the Bingham Group (Bingham), a sales promotion company in the St. Louis area.

In the spring of 1981, Bingham owner Mark Shyres approached Martino and Orloff with an offer of kickbacks in return for greater amounts of sales promotion business from Anheuser-Busch. The three conspirators (Shyres, Martino and Orloff) agreed that Martino and Orloff would receive half the profits realized by Bingham on any Anheuser-Busch work directed to Bingham and that an advertising company owned by unindicted coconspirator Marvin Cotlar, the Hanley Partnership (Hanley), would perform the actual work. Accordingly, from the spring of 1981 to the summer of 1983 Martino and Orloff repeatedly placed Anheuser-Busch business with Bingham in return for kickbacks in the form of money, property and expenditures for recreation and travel.

Martino and Orloff never disclosed the kickback arrangement to their superiors at Anheuser-Busch, even though Anheuser-Busch's business ethics manual directed employees to avoid conflict of interest situations. In fact, both Martino and Orloff, in response to an annual inquiry by Anheuser-Busch, indicated that they had not engaged in any conflicts of interest.

Furthermore, neither Martino nor Orloff reported the kickbacks as income on their tax returns. Shyres also failed to report as income expenses for personal matters paid by Bingham.

Appellants' illegal activities came to light after an internal investigation at Anheuser-Busch. The Government subsequently charged appellants jointly with twelve counts of mail fraud and one count of conspiring to impede the Internal Revenue Service. In addition, the Government charged Martino and Orloff with two counts each of willfully making and subscribing false tax returns. The Government further charged Shyres with two counts of tax evasion.

In exchange for a plea of guilty to one count of conspiring to impede the Internal Revenue Service, Marvin Cotlar testified at trial as appellants' coconspirator and as a person who had been party to the transactions at issue. ² Terrence Peterson, Hanley's chief financial officer, testified for the prosecution under a grant of immunity.

The trial judge dismissed two of the mail fraud counts before submitting the case to the jury. The jury convicted all appellants of mail fraud on count one and acquitted them on the remaining nine counts of mail fraud. In addition, the jury convicted all three appellants on one count of conspiring to impede the Internal Revenue Service, convicted Martino and Orloff on one count each of willfully making and subscribing false tax returns and convicted Shyres on both counts of tax evasion.

The district court sentenced Martino and Orloff to concurrent three year sentences for each conviction and sentenced Shyres to concurrent three and one-half year sentences for each conviction. Appellants timely appealed. We relate additional relevant facts in the discussion of the issues.

III. DISCUSSION

A. Mail Fraud Issues

1. Property Deprivation

To sustain a mail fraud conviction, the Government needed to prove that appellants used the mails or caused the use of the mails for the purpose of carrying out a scheme to defraud. United States v. Leyden, 842 F.2d 1026, 1028 (8th Cir.1988). The Government established that Martino and Orloff had obtained unauthorized kickbacks by having Shyres (through Bingham) submit invoices to Anheuser-Busch for work that at least in part had not been performed. With respect to count one (the only mail fraud count resulting in conviction), the Government demonstrated that appellants caused Anheuser-Busch to send a check through the mails in furtherance of the scheme to defraud.

Appellants challenge their mail fraud convictions, contending that the Government failed to introduce any evidence of property deprivation as required by McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), and that the jury instructions permitted the convictions without any proof of property deprivation. In support of these arguments, appellants cite a number of post-McNally cases. E.g., United States v. Slay, 858 F.2d 1310 (8th Cir.1988); United States v. Zauber, 857 F.2d 137 (3rd Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct. 1340, 103 L.Ed.2d 810 (1989); United States v. Shelton, 848 F.2d 1485 (10th Cir.1988); United States v. Ochs, 842 F.2d 515 (1st Cir.1988).

The federal mail fraud statute, 18 U.S.C. Sec. 1341, makes it a crime to use the mails, inter alia, for the purpose of executing or attempting to execute "any scheme or artifice to defraud...." In McNally, the Supreme Court held that the mail fraud statute applies only to schemes that defraud or attempt to defraud the victim of money or property and not to schemes that defraud the victim of purely intangible rights, such as the victim's right to have its affairs conducted honestly. After McNally, the courts of appeals have discussed property deprivation in a variety of factual settings, resulting in a somewhat confusing web of caselaw. Compare United States v. Richerson, 833 F.2d 1147 (5th Cir.1987) and United States v. Fagan, 821 F.2d 1002 (5th Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 697, 98 L.Ed.2d 649 (1988) with Shelton, 848 F.2d at 1485 and United States v. Covino, 837 F.2d 65 (2d Cir.1988).

We deem it unnecessary to analyze these apparently conflicting opinions inasmuch as Congress has already changed the holding of McNally by statute. 18 U.S.C. Sec. 1346 (1988). ³ Nevertheless, we determine that the relevant cases support appellants' convictions, see, e.g., Ranke v. United States, 873 F.2d 1033, 1038-40 (7th Cir.1989); United States v. Kerkman, 866 F.2d 877, 879-81 (6th Cir.), cert. denied, --- U.S. ----, 110 S.Ct. 95, 107 L.Ed.2d 59 (1989), and that the cases cited by appellants in support of reversal concern only the intangible rights theory of McNally. E.g., Slay, 858 F.2d at 1313 (deprivation "of the conscientious, loyal, faithful, disinterested and unbiased services and actions of a member of the Board of Aldermen"); Zauber, 857 F.2d at 143 (deprivation of "honest, faithful prudent and diligent services by its employees"); Shelton, 848 F.2d at 1488 (10th Cir.1988) (deprivation of "the right to have county business conducted free from corruption and undue influence").

Our review of the record discloses that the trial court properly instructed the jury and that the evidence supports the convictions. We comment initially on the jury instructions.

The trial court instructed that to convict the appellants of mail fraud the jury must find beyond a reasonable doubt that appellants "knowingly, voluntarily and intentionally devised or participated in a scheme to defraud Anheuser-Busch out of money, property, or property rights...." Trial Transcript XX, at 116 (Instruction No. 13). This portion of the jury charge unquestionably satisfies the requirements for conviction referred to in McNally.

The trial court additionally instructed the jury:

The term "property rights" as used in the mail fraud statute includes intangible as well as tangible property. Intangible property rights include any valuable right considered as a source of wealth, and include the right to exercise control over how one's money is spent.

Joint Appendix 213 (Instruction No. 14A). Appellants contend that this instruction permitted convictions without any proof that appellants deprived...