U.S. v. Walters

• Citation: 87 F.3d 663
• Decision Date: 26 June 1996
• Docket Number: No. 94-30616,94-30616
• Parties: UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. David R. WALTERS, Defendant-Appellant-Cross-Appellee, and M.W. Hart aka Webb Hart, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 663

87 F.3d 663

UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. David R. WALTERS, Defendant-Appellant-Cross-Appellee and M.W. Hart aka Webb Hart, Defendant-Appellant.

No. 94-30616.

United States Court of Appeals Fifth Circuit.

June 26, 1996.

Rehearing Denied July 29, 1996.

Herbert V. Larson, Jr., New Orleans, Michael S. Fawer, Dallas, TX, for Walters.

G. Brice Jones, Slidell, LA, Gary Schwabe, Asst. Federal Public Defender, John P. Mulvehill, Federal Public Defender, New Orleans, LA, for Hart.

Richard W. Westling, Peter G. Strasser and Fred P. Harper, Jr., Gaven T. Kammer, Asst. U.S. Attys., Eddie J. Jordan, Jr., U.S. Atty., New Orleans, LA, for U.S.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before JOLLY, JONES and BENAVIDES, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

David R. Walters and M.W. "Webb" Hart were convicted after a joint trial for mail fraud, money laundering and conspiracy. The prosecution charged, and the jury found, that Walters and Hart concocted an elaborate scheme to conceal the nature and source of payments made to Hart, a member of the governing body of St. Tammany Parish (the "Parish"), by the Parish's insurance company. Walters was employed by the insurance company. The government charged that the purpose of the Hart-Walters scheme was to defraud the Parish of money, i.e., the fees secretly paid to Hart. On appeal, the defendants contend that sufficient evidence does not support their convictions because the Parish was not defrauded of any property inasmuch as the Parish received precisely the insurance coverage that it bargained for at precisely the price it agreed to pay. They further argue on appeal that there was no intent to deceive because the insurance company's invoice disclosed "administrative charges" in the precise amount paid to Hart. They also argue that the district court abused it discretion by denying their motions for severance. The government cross-appeals Walters' sentence, contesting the district court's decision to depart downwardly from the Sentencing Guidelines. We find no merit in any of these challenges, and therefore affirm the convictions and sentences.

I

The Parish of St. Tammany, Louisiana is governed by a police jury (the "Police Jury"). In 1987, the Parish was seeking a comprehensive insurance policy. Aware of the Parish's needs and hoping to garner a "birddog fee" of 10% of the insurance premium charged, Hart, an insurance agent and owner of Hart Risk Consultants, Inc., contacted Walters, a salaried employee of Arthur J. Gallagher & Co. ("Gallagher"). Walters agreed to submit a bid on the Parish's insurance. At an October 7, 1987 meeting of the finance committee of the Police Jury, at which Hart was present, Walters presented the Gallagher package to the committee. Gallagher's bid consisted of a single sheet summarizing the total cost of the package, $322,000. It included a separate line-item charge for "administrative charges" in the amount of $31,500. No one ever questioned these charges. As presented, Gallagher's insurance package would cost the Parish approximately $400,000 per year less than it paid in 1986. The committee voted to accept the package.

In November, the Parish purchased the insurance program proposed by Gallagher. Pursuant to Gallagher's policy against sharing commissions and a November 12, 1987 letter of understanding between Gallagher and Hart, Hart was to invoice separately for his fees. In connection with its purchase, however, the Parish received a single invoice from Hart Risk Consultants, Inc. Apparently, Gallagher issued an invoice in the Parish's name that reflected all costs except the $31,500 "administrative fee" included in the bid, and forwarded it to Hart. Hart retyped the figures onto his own invoice, added an "administrative fee" expense of $31,500, and then delivered the consolidated invoice to the Parish. At trial, Hart confirmed that he neither negotiated his fee with the Parish nor disclosed the fact that he was receiving the fee to anyone in the Parish--he simply added the line item for "administrative fee" to the invoice he prepared, increased Gallagher's invoice price by the same amount to equal the bid price, and forwarded the invoice to the Parish. The Parish paid Hart the full amount of the invoice, from which Hart deducted his fee. Hart paid the remaining funds to Gallagher.

Between the time of Gallagher's proposal in October and the Parish's acceptance in November, Hart was elected as a member of the Police Jury--a fact of singular importance in this case. After he took office, Hart received the following sums from Gallagher: April of 1988--$866.47; December of 1988--$32,500; November of 1989--$32,500; December of 1990--$32,500. The government contended at trial that these fees were directly tied to the insurance coverage that Gallagher sold the Parish in those years. In contrast to its 1987 policy, the Parish received invoices directly from Gallagher for the policies issued in 1988 through 1991. Gallagher's invoices during 1988 through 1990 included a separate line-item for "administrative fees" or "consulting fees" of $32,500, an amount equal to the fees paid to Hart in 1988 through 1990. In addition, Gallagher's invoice for 1991 included an "administrative fee" of $34,125, an increase corresponding to the increased fee Hart requested of Gallagher. Gallagher's check stubs variously denominated the payments as a "Brokerage Fee," a "Consulting Fee" and "St. Tammany Police Parish." The notations Hart made in his own bank book list the deposits as being for work done for the Ouachita Parish. Ouachita Parish personnel, however, testified that they had never met Hart.

At trial, Kathi Williams, Gallagher's technical assistant for the Parish account during 1987, testified that Walters told her that Gallagher "could not show St. Tammany Parish Police Jury on [the checks to Hart] because Webb [Hart] was the police juror ..." Kim Clark, a branch accountant for Gallagher, similarly testified that Craig Van der Voort, ¹ Gallagher's Area President, instructed her to "put Ouachita Parish on [Hart's] check" because as a police juror for the Parish, Hart "wasn't supposed to have anything to do [with] the insurance." Believing that Hart had no involvement with the Ouachita Parish account, Clark refused to make this entry in Gallagher's books and instead listed "Brokerage Fee" on the check stub. Finally, in response to an inquiry in 1989 from Terrence J. Hand, a member of the Police Jury, a Gallagher receptionist stated that Hart was the agent for the Parish account--a comment that apparently initiated the investigation that led to these convictions.

While serving on the Police Jury, Hart stated to reporters that he received no compensation for the insurance Gallagher sold to the Parish, and was not doing business with the Parish because "that would be wrong." Hart made substantially the same representations to a staff investigator for the Louisiana Commission on Ethics for Public Employees and for the Board of Ethics for Elected Officials.

Walters consistently told the same story. In a 1989 letter to Grey Sexton, head of the Board of Ethics for Elected Officials for the State of Louisiana, Walters stated that Hart was not an agent for Gallagher and that when Hart placed a piece of business through Gallagher, Hart remitted the "entire premium for the policy to Gallagher and collected his consulting fee separately." Walters reiterated this account of Gallagher's relationship with Hart to the staff investigator for the Board of Ethics for Elected Officials. When asked by Hand, a Police Jury member, whether Hart acted as the agent for the Parish's account as Gallagher's receptionist had indicated, Walters stated that Hart had nothing to do with the Parish account.

A crucial piece of evidence introduced by the government was an affidavit regarding conflicts of interest that the Parish forwarded to Gallagher on or before December 11, 1990, two days before Gallagher forwarded its last payment to Hart. Walters signed the affidavit on December 18, 1990, five days after Gallagher paid Hart. The affidavit stated that "[n]o part of [Gallagher's] contract price was paid or will be paid to any person ... for soliciting the contract," other than payment to employees of Gallagher in the regular course of their duties.

According to Allen Cartier, the Parish's chief of staff between 1986 and 1988 and a member of the Police Jury Finance Committee, and the Parish's manager at the time of trial, the members of the Police Jury never questioned the line-item expense on Gallagher's invoices for administrative fees. Terrence Hand similarly testified that "no member of the finance committee has ever ... questioned a component of the cost of the package." Hand, however, also testified that "[i]f Webb Hart was getting anything with that policy, we would have never approved it."

Walters and Hart were subsequently charged in a fourteen-count indictment with conspiracy to commit mail fraud and launder money, see 18 U.S.C. § 371; mail fraud, see 18 U.S.C. § 1341; and money laundering, see 18 U.S.C. §§ 1956(a)(1)(B)(i), 1957. ² At trial, the district court denied the defendants' motions for severance.

The government contended at trial that Hart, Walters and Van Der Voort conspired to conceal and disguise the fact that the Parish was being billed for services that could not have been rendered by Hart because he was a police juror, and that Hart was the recipient of those fraudulently obtained funds. ³ In his defense, Hart presented evidence that the fees he received from Gallagher from 1988 through 1990 represented fees due him for countersigning other insurance policies sold by Gallagher in Louisiana, including policies sold to Ouachita Parish.

Walters testified in his defense that Gallagher continued to pay the fee to Hart because Hart represented to Van der...