U.S. v. Toney

• Decision Date: 18 July 1979
• Docket Number: No. 77-5841,77-5841
• Citation: 598 F.2d 1349
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. James Finis TONEY, Jr., and John H. Stewart, Jr., Defendants-Appellants. Fifth Circuit
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1349

598 F.2d 1349

UNITED STATES of America, Plaintiff-Appellee, v. James Finis TONEY, Jr., and John H. Stewart, Jr. Defendants-Appellants.

No. 77-5841.

United States Court of Appeals,Fifth Circuit.

July 18, 1979.

Charles D. Read, Jr., Decatur, Ga., for defendants-appellants.

Hugh E. Mabe, III, Atty., Dept. of Justice, Fraud Sect., Washington, D. C., Thomas E. Morris, Asst. U. S. Atty., Jacksonville, Fla., for plaintiff-appellee.

Appeals from the United States District Court for the Middle District of Florida.

Before WISDOM, GODBOLD and TJOFLAT, Circuit Judges:

GODBOLD, Circuit Judge:

Appellants Toney and Stewart were charged with engaging in a scheme to defraud in connection with the sale of distributorships for a dehydrated food product. They were convicted by a jury of two counts of using the U.S. mails for the purpose of executing a scheme to defraud, in violation of 18 U.S.C. § 1341. ¹ Toney and Stewart raise four contentions of error. First, the two uses of the mails charged in the indictment, two letters sent to the appellants by the attorney for one of the victims of the distributorship scheme, could not have been uses in furtherance of the scheme to defraud, an essential element of a § 1341 violation. Second, they cannot be held responsible for these two letters because they did not cause the letters to be placed in the mail. Third, a jury instruction charging that only "one or more" of the government's allegations of fraudulent acts need be proved in order for the jury to infer that a fraudulent scheme had been established had the effect of reducing the government's burden of proof. Finally, the district court's failure to give their requested jury instructions dealing with credibility of witnesses and the necessary elements of mail fraud was prejudicial error. We find no reversible error and affirm the convictions.

Defendant Toney was the director of operations for Trans-World Marketing Corporation, and defendant Stewart hired and trained salesmen for Trans-World. Trans-World engaged in production of a dehydrated food chip called "Puffettes." This food product was marketed by the sale of distributorships that conferred the right to distribute Puffettes within specific areas.

Viewing the facts in the light most favorable to the government, Trans-World, as charged in the indictment, was the vehicle for a fraudulent scheme in which persons were persuaded to purchase Puffettes distributorships through the use of knowing misrepresentations about the potential profit to be made from the sale of Puffettes, the amount and quality of training a Trans-World distributor and his sales personnel would be provided, and the saleability of Puffettes. Further, as part of the scheme, Puffettes distributors were encouraged, by further misrepresentations about the likely volume of sales of the product, to build up unnecessary stockpiles of Puffettes. In addition, as part of the scheme, complaints and requests for refunds from purchasers of distributorships were evaded by using fraudulent techniques (such as using fictitious names when dealing with complaints), and Trans-World in response to complaints made misrepresentations designed to lull complaining investors into believing that Trans-World would fulfill the promises and representations it had made at the time of the distributors' initial investments.

Three elements together constitute a violation of the mail fraud statute, 18 U.S.C. § 1341: ² (1) The accused must be proved to have participated in a "scheme or artifice to defraud," See Pereira v. U. S., 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435, 444 (1954); U. S. v. Perkal, 530 F.2d 604, 605-06 (CA4) Cert. denied, 429 U.S. 821, 97 S.Ct. 70, 50 L.Ed.2d 82 (1976). (2) The defendant must "cause" a use of the mails, Id., (3) which use of the mails must be "for the purpose of executing the scheme." Kann v. U. S., 323 U.S. 88, 94, 65 S.Ct. 148, 151, 89 L.Ed. 88, 95 (1944); See U. S. v. Maze, 414 U.S. 395, 400, 94 S.Ct. 645, 648, 38 L.Ed.2d 603, 608 (1974); U. S. v. LaFerriere, 546 F.2d 182 (CA5, 1977).

Defendants do not question that the evidence was sufficient to permit the jury to infer the existence of a scheme to defraud, or that there was sufficient evidence to show their participation in the fraudulent scheme. They argue that the instructions given the jury did not fully and accurately inform jury members of the appropriate legal standards to be applied to the facts. Moreover, they contend that the two uses of the mails specified in the indictment could not have been in furtherance of the fraudulent scheme and that, in any event, the government failed to carry its burden of showing that they personally caused the two letters to be mailed.

I. Mailings in execution of a fraudulent scheme

Appellants urge that the two letters specified in the indictment ³ were not mailed for the purpose of executing the fraudulent scheme. For reasons not made clear in the record or briefs, the two letters selected to be specified in the indictment were not letters mailed by employees of Trans-World but letters mailed by an attorney for one of the dissatisfied Puffettes distributors. ⁴

Fred Carver, attorney for John Clubb, a Puffettes distributor, initiated a series of letters between Trans-World and himself, by mailing a letter dated May 16, 1972, to Trans-World. In this letter Carver charged that Trans-World had made fraudulent misrepresentations to Clubb, and he threatened legal action unless Trans-World agreed to repurchase Clubb's supply of Puffettes. Rice, the third Trans-World officer convicted of mail fraud in this case, ⁵ responded in a letter dated May 24, 1972, in which he asserted that Trans-World was ready and willing to assist Clubb in his efforts to sell Puffettes but that it was unable to do so because Clubb refused to communicate his difficulties to Trans-World. This letter concluded by requesting that Clubb "communicate with us and inform us of the marketing obstacles that he is encountering." Carver responded, in a letter dated June 1, and reiterated his demand that Trans-World repurchase Clubb's stock of Puffettes. He ended this letter by making this threat, "I do want some satisfaction in this matter and unless I can obtain same by an amicable settlement, we will proceed to court and see how you fare there." This letter, sent by Carver to Trans-World, was specified in Count 2 of the indictment as constituting a use of the mails in execution of the fraudulent scheme. Rice again replied for Trans-World, in a letter dated June 8, stating that it was not willing to repurchase Clubb's inventory and once more asking that Clubb correspond directly with them. This letter requested a reply directly from Carver: "Please let us hear from your firm (or your client) as to whether or not Mr. Clubb actually attempted to market our product."

Carver again responded in a letter dated June 16, and indicated that he was going to meet with Clubb to ascertain what efforts he had made to sell the product. In a letter of June 26, Rice replied to this letter and therein asked Carver to call Trans-World during his meeting with Clubb or to send Trans-World a summary of Carver's discussion with Clubb. Carver's reply to this letter, dated June 30, is specified in Count 1 of the indictment as a use of the mails in execution of the scheme to defraud. This letter merely restated Carver's original demand Trans-World must repurchase the Puffettes or else Carver would file suit on behalf of Clubb. In the final letter of this protracted exchange, dated July 6, Rice restated Trans-World's position in the dispute and reiterated his request that Clubb communicate to Trans-World the difficulties he faced in marketing Puffettes.

The prosecution had the burden of proving that the count letters were mailed "for the purpose of executing" the fraudulent scheme. Appellants rely on U. S. v. Maze, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974), and U. S. v. LaFerriere, 546 F.2d 182 (CA5, 1977), in arguing that as a matter of law the letters from attorney Carver to Trans-World could not have been uses of the mail in execution of the fraudulent scheme. In Maze the Supreme Court held that a use of the mails that does not have any effect on the success or failure of a fraudulent scheme is not a mailing for the purpose of executing the scheme under § 1341. There the fraudulent scheme was the use of stolen credit cards. The Court held that the mailings to the credit card company of sales invoices by the merchants who had accepted credit cards were not in execution of the defendant's fraudulent scheme because the defendant's scheme could have succeeded even if the merchants had never mailed the sales invoices. In fact, from the defendant's point of view, as the Court pointed out, it would have been better if the invoices had never been mailed because the mailings only served to alert the credit card company to the existence of the fraud. 414 U.S. at 401-03, 94 S.Ct. at 649-650, 38 L.Ed.2d at 608-10. LaFerriere is an application of Maze, holding that a letter sent from the attorney for a victim of a fraudulent scheme to the perpetrators of the fraud was not mailed in execution of the fraudulent scheme because the "only likely effect" of the specific letter in question was "to further detection of the fraud or to deter its continuation." 546 F.2d at 187.

Maze and LaFerriere do not mandate a reversal in this case. These cases do not stand for the legal principle that letters mailed by victims of a fraud to the defrauders cannot be mailings in execution of a fraud. Neither case purported to modify the well-established rule that mailings from the victims can be mailed in execution of the fraud. See, e. g., U. S. v. Hopkins,357 F.2d 14 (CA6), Cert. denied, 385 U.S. 858, 87 S.Ct. 107, 17 L.Ed.2d 84 (1966); Anderson v. U. S., 369 F.2d 11 (CA8, 1966), Cert. denied, 386 U.S. 976, 87 S.Ct. 1171, 18 L.Ed.2d 136 (1967). Instead, these cases...