U.S. v. West

• Decision Date: 04 April 1977
• Docket Number: 76-1411,Nos. 76-1410,s. 76-1410
• Citation: 549 F.2d 545
• Parties: UNITED STATES of America, Appellee, v. Frank R. WEST, Appellant. UNITED STATES of America, Appellee, v. AMERICAN BEEF PACKERS, INC., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 545

549 F.2d 545

UNITED STATES of America, Appellee, v. Frank R. WEST, Appellant.

UNITED STATES of America, Appellee, v. AMERICAN BEEF PACKERS, INC., Appellant.

Nos. 76-1410, 76-1411.

United States Court of Appeals,

Eighth Circuit.

Submitted Dec. 13, 1976.

Decided Feb. 10, 1977.

Certiorari Denied April 4, 1977.

See 97 S.Ct. 1601.

James P. Linn, Oklahoma City, Okl., for West.

Lyle E. Strom, Omaha, Neb., for ABP, Inc.; C. L. Robinson and Bruce H. Brodkey, Omaha, Neb., on brief.

Michael L. Schleich, Asst. U. S. Atty., Omaha, Neb., for appellee; Daniel E. Wherry, U. S. Atty., Omaha, Neb., on brief.

Before MATTHES, Senior Circuit Judge, and STEPHENSON and WEBSTER, Circuit Judges.

MATTHES, Senior Circuit Judge.

This prosecution is premised on a 105-count indictment filed on August 8, 1975, in the United States District Court for the District of Nebraska. The original named defendants were Frank R. West, Robert E. Lee, American Beef Packers, Inc. (ABP), and Beefland International, Inc. (BI). Forty-three counts of the indictment alleged that the defendants used or caused to be used the mails in furtherance of an alleged scheme or artifice to defraud, in violation of 18 U.S.C. § 1341; thirty-two counts charged the use of wire communications (telephone) to further the scheme, in violation of 18 U.S.C. § 1343; twenty-nine counts charged transportation of livestock in interstate commerce knowing the same to have been obtained through fraudulent means, in violation of 18 U.S.C. § 2314; and one count, No. 105, alleged that defendants West and Lee conspired with each other and with other named individuals to violate 18 U.S.C. §§ 1341, 1343 and 2314, all in violation of 18 U.S.C. § 371.

As is typical of prosecutions involving a scheme to defraud, and use of the mails, wire communications and interstate transportation of property in furtherance of the scheme, the indictment was complex; it alleged that the defendants, aided and abetted by each other, devised a scheme and artifice to fraudulently obtain cattle, hogs, money, and other items of value in excess of $20,000,000 ¹ from a large number of persons, firms, partnerships, cooperatives and corporations in different states.

Early in the case the district court granted defendants' waiver of a jury trial.

Following extensive discovery proceedings, the trial commenced before the Honorable Robert V. Denney on October 14, 1975 and continued with only necessary interruptions for fourteen days. Approximately sixty-four witnesses testified, sixty for the government and four for the defendants. In an effort to shorten the trial, the parties stipulated to the substance of the testimony of a number of government witnesses who were not called to testify. ²

At the close of the government's case, the court dismissed Counts 32, 33, 34, 35, 49, 51, 57, 58, 62, 63, 66 and 68 upon the government's motion because there was not sufficient evidence "adduced to sustain these particular counts." In response to motions of all of the defendants to dismiss all counts, the court then dismissed the indictment against defendant Lee because of insufficient evidence.

At the close of all the evidence, the court upon renewed motions of the remaining defendants dismissed all counts of the indictment against BI because "it is a wholly-owned subsidiary of American Beef Packers, Inc., and American Beef Packers, Inc. is the true defendant in this case." Tr., Vol. 25, at 2094. The court simultaneously dismissed the indictment as to West on Counts "1 through 15, inclusive, relating to the bounced checks and DTC's, and Counts 16 to 74, inclusive, relating to purchase of cattle, Counts 83 and 98, letters with bankruptcy order, Counts 102 to 104 relating to goods in warehouse, and Count 105, conspiracy . . ." because of insufficient evidence on these counts. Tr., Vol. 25, at 2094. The court dismissed the indictment as to ABP on "Counts 1 to 15 relating to bounced checks and DTC's . . . , Counts 16 to 40 and 48 to 70 on purchase of cattle . . . ; Counts 83 and 98, letters of bankruptcy order . . . , Counts 102 to 104 relating to goods in warehouse, and Count 105 as to conspiracy . . .". Tr., Vol. 25, at 2095.

Thereafter, the court filed an exhaustive opinion, United States v. West, 407 F.Supp. 1148 (D.Neb.1976), and entered two judgments, one finding West guilty as to Counts 75 through 81, 84 through 97, 100 and 101, and not guilty as to Count 82. In the other judgment the court found ABP guilty as to Counts 43 through 46 (relating to purchase of Chapman cattle, discussed infra ), 71 through 81, 84 through 97, and 99 through 101, and not guilty as to Counts 41 and 42, 47 and 82. The court dismissed all of the remaining counts, including all counts relating to the purchase of livestock from all feeders and producers except Chapman. The court sentenced West to two years imprisonment on each count with the sentences to run concurrently, and assessed a fine of $1,000 on each count. West was also directed to pay one-half of the costs of prosecution. However, the court suspended execution of the sentence of imprisonment and placed West on probation for a period of two years.

ABP was fined $100 on each count and directed to pay one-half of the costs of prosecution.

West and ABP, represented by different counsel, filed notices of appeal, filed briefs in this court, and presented separate arguments.

I

The district court's detailed findings of fact obviate the necessity of another full description of the various and sundry activities and machinations of appellants which ultimately resulted in the virtual termination of ABP's principal source of financial aid and led to appellants' encounter with the law. A brief summary of the facts is necessary, however, for a full understanding of the principal issue presented by this appeal: whether the evidence was sufficient to warrant the finding that appellants devised a scheme or artifice to defraud their creditors, particularly GECC.

The indictment alleged that the scheme to defraud had its inception "from on or about the first day of June, 1974." A considerable part of the indictment delineated the participation by appellants, as well as the two dismissed defendant, in setting up the financing arrangement between ABP and GECC. The history of ABP's financing arrangements, particularly as it related to GECC, is explored at length by the district court, 407 F.Supp. at 1149-50. ABP's large-scale operations required a substantial amount of capital. A credit agreement between ABP and GECC, which enabled ABP to acquire virtually all of its working capital from GECC, was entered into on June 28, 1972. 407 F.Supp. at 1149. Under this agreement, GECC extended a $41,000,000 revolving line of credit secured by accounts receivable of ABP, and a $13,000,000 long-term loan secured by other property such as deeds of trust or mortgages on real estate. As ABP's business expanded, it was troubled by a lack of funds to operate on a sound fiscal basis, particularly a lack of sufficient funds to pay for the large quantities of livestock purchased daily by ABP from cattle dealers. This led to the diversion of funds due ABP from the lock boxes controlled by GECC, described in the district court's opinion, 407 F.Supp. at 1149-51. Checks due from ABP's customers customarily sent to GECC via the lock boxes were, at the specific directions of ABP's key officers in charge of the finance department, forwarded directly to ABP, which, in turn, used the funds in its operations. Funds wrongfully diverted amounted to approximately $6,000,000 on occasions between June 1974 and December 13, 1974, the date when GECC learned of the diversions. The events that ensued after December 13 are reviewed in the district court's opinion, 407 F.Supp. at 1152-57. As found by the court and as shown by the record, ABP filed a Chapter XI bankruptcy petition on January 7, 1975. ³

In assessing the sufficiency of the evidence, we view the evidence in the light most favorable to the government, and afford the government the benefit of all reasonable inferences to be drawn from the evidence. See Glasser v. United States, 315 U.S. 60 at 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942); United States v. Pilla, 550 F.2d 1085 (8th Cir., 1977); United States v. Whiting, 538 F.2d 220, 223 (8th Cir. 1976); United States v. Swanson, 509 F.2d 1205 (8th Cir. 1975). Factual findings of the district court relating to matters other than the ultimate question of guilt must stand unless such findings are clearly erroneous. See Campbell v. United States, 373 U.S. 487, 493, 83 S.Ct. 1356, 10 L.Ed.2d 501 (1963); Kilcrease v. United States, 457 F.2d 1328, 1331 (8th Cir. 1972). We conclude from our study of the voluminous record that the evidence was clearly sufficient.

A

Claim that there was no proof of intent to defraud

Appellants first challenge the sufficiency of the evidence to establish intent to defraud. Appellants concede that accounts receivable were in fact diverted. They argue, however, that the diversions were not accomplished as the result of a scheme or artifice to defraud within the meaning of 18 U.S.C. §§ 1341 and 1343, but rather that at most they constituted a breach of contract which would possibly subject appellants to civil liability.

With respect to the question of whether there was the requisite intent to establish criminal responsibility, Judge Denney concluded This case . . . goes far beyond willful breach of contract for which ABP could be liable for punitive damages. It is the intentional, deliberate, and planned concealment of the breach of contract that justifies the imposition of criminal sanctions. United States v. George, 477 F.2d 508 (7 Cir. 1973); Epstein v. United States, 174 F.2d 754 (6 Cir. 1949). Epstein, supra, is highly instructive as it distinguishes "active" as opposed to "constructive" fraud, and calls for the imposition of criminal sanctions only in cases of active fraud.

"Actual fraud has been...