U.S. v. Yarnell

• Citation: 129 F.3d 1127
• Decision Date: 13 November 1997
• Docket Number: No. 96-3029,96-3029
• Parties: 97 CJ C.A.R. 2817 UNITED STATES of America, Plaintiff-Appellee, v. Van Ray YARNELL, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1127

129 F.3d 1127

97 CJ C.A.R. 2817

UNITED STATES of America, Plaintiff-Appellee, v. Van Ray YARNELL, Defendant-Appellant.

No. 96-3029.

United States Court of Appeals Tenth Circuit.

Nov. 13, 1997.

Scott C. Gyllenborg, Norton, Hubbard, Ruzicka & Kreamer, Olathe, KS, argued the cause, for appellant.

Robert S. Streepy, Assistant United States Attorney, Kansas City, KS, argued the cause, for appellee. Jackie N. Williams, United States Attorney, Kansas City, KS, assisted on the brief.

Before EBEL, LOGAN, and KELLY, Circuit Judges.

EBEL, Circuit Judge.

Defendant-Appellant Van Ray Yarnell, through his wholly-owned company Five Star Towing, recruited drivers to drive tow trucks. The drivers were required to pay Five Star Towing about $4,000 each as down payments on their tow truck leases. Thirty-six recruited drivers paid their money to Five Star Towing, but received neither tow trucks nor refunds. Five Star Towing then went bankrupt. A jury convicted Yarnell of two counts of mail fraud, although it acquitted him on five other counts.

At sentencing, the district court enhanced Yarnell's sentence based on the total losses to forty drivers who paid down payments to Five Star Towing, even though Yarnell had been acquitted of defrauding some of these drivers and had not been charged with defrauding most of the rest. The district court also enhanced Yarnell's sentence because Yarnell was the leader of a criminal activity in which five or more people were involved.

Yarnell now appeals both his conviction and his sentence. We affirm.

BACKGROUND

This is an appeal from a judgment of criminal conviction entered pursuant to a jury verdict. Thus, the following statement of facts presents all disputed evidence, and all reasonable inferences to be drawn from the evidence, in the light most favorable to the government. See United States v. Meacham, 115 F.3d 1488, 1495 (10th Cir.1997).

In June or July 1990, defendant-appellant Van Ray Yarnell started Five Star Towing, an automobile towing company located in the Kansas City, Kansas area. Yarnell appointed himself president of Five Star Towing, and appointed his partner John Dawes vice-president. Soon, Yarnell and Dawes began recruiting tow-truck drivers to work in Kansas City and in Denver. Five Star Towing towed its first cars in Kansas City on October 16, 1990.

Drivers for Five Star Towing were required to lease their own trucks. To facilitate this process, Five Star Towing would help the drivers secure lease financing. Usually, a driver would have to make a down payment of about $4,000 to obtain lease financing. The driver would generally tender this down payment to Five Star Towing, which would assume the responsibility to forward the money to a leasing company and arrange for the delivery of the tow-truck to the driver. ¹ Some drivers were told that by leasing a truck and paying this downpayment to Five Star Towing, they were also purchasing their own Five Star Towing franchise. At least fifty-five drivers paid money to Five Star Towing. Thirty-six of these drivers never received a truck or restitution. No driver ever received a franchise.

From the beginning, Five Star Towing suffered financial difficulties. In late 1990, Five Star Towing mailed checks for its first set of tow truck lease payments to its primary leasing company, Bush & Cook. The checks bounced. Five Star Towing had withheld revenues from its drivers' gross receipts to make these lease payments. Because of the bounced checks to Bush & Cook, some trucks were never delivered to drivers who had made their down payments to Five Star Towing, and some trucks were repossessed.

In December 1990, Five Star Towing entered into an agreement with Leaseline, another truck leasing company, through which fourteen Five Star Towing drivers received tow trucks. Although the first payment due to Leaseline was paid in full, subsequent checks to Leaseline bounced. Five Star Towing's relationship with Leaseline was therefore terminated in March 1991, and the trucks were then repossessed by Leaseline.

In January 1991, Yarnell made a $5,000 or $10,000 down payment towards the purchase of a $600,000 home located on a golf course in Deer Creek, an exclusive suburban Kansas City neighborhood. He agreed to make mortgage payments of $5,000 per month to the owner, and moved into the house in late January. ² Subsequently, a few payments on the house were made out of Five Star Towing's payroll account. At the same time, however, paychecks to Five Star Towing's employees began to bounce. Including both his salary and the payments on the Deer Creek house, Yarnell drew a total of about $35,000 in personal expenses from the Five Star Towing payroll account during the company's seven-month existence.

In 1991, Yarnell (personally and through his subordinates) sought to raise capital for Five Star Towing by holding recruiting presentations in other cities, including Atlanta, Phoenix, and St. Louis. At these presentations, additional drivers were recruited. Most of these drivers paid about $4000 each to Five Star Towing for down payments on their tow trucks, although one driver claimed to have paid $10,000, and another claimed to have paid $15,000 to Five Star Towing. ³

Some drivers recruited in Atlanta, Phoenix, and St. Louis were offered the opportunity to purchase a Five Star Towing "franchise." Some of these drivers were presented with a written "franchising agreement" or a circular represented to be a franchise agreement which disclosed that "[t]he proceeds from the original franchise fee are in part profit to Five Star Towing and are deposited into the general working capital fund of Five Star Towing and will be used in part to pay some ... costs and expenses of Five Star Towing." No driver ever actually received a Five Star Towing franchise in exchange for any "original franchise fee" paid to Five Star Towing.

After remitting their down payments to Five Star Towing, many drivers recruited in Atlanta, Phoenix, and St. Louis received letters falsely telling them that trucks had been ordered for them. No driver recruited in Atlanta or Phoenix ever received a truck. Only a few drivers located in St. Louis ever received trucks.

In March 1991, Five Star Towing's Vice President John Dawes left the company. In May, 1991, all of Five Star Towing's drivers quit en masse. At that time, several of the drivers, with the assistance of Five Star Towing's bookkeeper Shelly Haeberle, entered Yarnell's office and emptied it out, removing all of the books, records, furniture, and other items to a storage facility.

In March 1995, Yarnell and John Dawes were indicted by a federal grand jury on seven counts stemming from the activities of Five Star Towing. The indictment did not (and the government does not) contend that Five Star Towing was started with fraudulent intent. Rather, the government's theory was that Five Star Towing was started as a legitimate towing business, but that after it developed financial problems, it defrauded drivers and other investors by telling them that their money would be used for specific purposes such as making down payments on trucks or obtaining a franchise, while actually intending to use the money for other purposes including payroll, operating expenses, and repaying loans, as well as Yarnell's and Dawes's personal expenses.

Dawes pled guilty to one of the counts of mail fraud (Count 3), and agreed to testify against Yarnell. Yarnell proceeded to trial, over which the district court exercised jurisdiction pursuant to 18 U.S.C. § 3231 (1994). In October, 1995, after deliberating for three days, and after initially informing the trial judge that they were unable to reach a verdict on some of the counts, a jury acquitted Yarnell on five counts in the seven-count indictment, and convicted him of two counts (Counts 2 and 3) alleging violations of 18 U.S.C.A. § 1341 (West Supp.1997) (mail fraud).

Specifically, the jury convicted Yarnell of using the mail to defraud Charlie Parsons and Donald Voss out of $3500 and $4000, respectively. Charlie Parsons was an elderly driver recruited in Atlanta who, in February 1991, tendered a $3500 down payment to Five Star Towing for a truck lease, but never received the truck. At trial, Yarnell admitted that he considered Parsons too old to drive a Five Star Towing truck, although he did not know how old Parsons was when he sent in his money. Donald Voss was a driver recruited in St. Louis who, in January 1991, tendered a $4000 down payment to Five Star Towing for a truck lease and franchise rights, but never received either the truck or the franchise. ⁴ Both Parsons and Voss tendered their down payments to Five Star Towing by sending checks to Five Star Towing through the U.S. Mail. Although the jury convicted Yarnell of using the mails to defraud Parsons and Voss out of a total of $7500, it acquitted Yarnell of all the other charges against him.

After denying Yarnell's Motion For Judgment of Acquittal or New Trial, the district court sentenced Yarnell to 30 months in prison on each of the two counts, sentences to run concurrently. ⁵ In computing this sentence, the court enhanced Yarnell's sentence for all of the conduct alleged in Yarnell's indictment, including the conduct for which Yarnell was acquitted by the jury. The court also enhanced Yarnell's sentence significantly for conduct not alleged in Yarnell's indictment. Finally, the court enhanced Yarnell's sentence for being the leader of a criminal enterprise consisting of five or more persons. ⁶ The 1994 edition of the U.S. Sentencing Guidelines Manual was used to compute Yarnell's sentence.

Yarnell now appeals. He claims that: (1) the evidence was insufficient to support his conviction; (2) a mistrial should have been declared when the jury informed the judge that it was deadlocked on some of the counts; and (3) the sentencing enhancers applied by the district court were erroneous. We exercise appellate...