U.S. v. Young

Decision Date01 May 1980
Docket NumberNo. 79-1573,79-1573
Citation618 F.2d 1281
Parties5 Fed. R. Evid. Serv. 996 UNITED STATES of America, Appellee, v. Harvey B. YOUNG, Jr., Appellant.
CourtU.S. Court of Appeals — Eighth Circuit

Lawrence J. Fleming, argued, Norman S. London, St. Louis, Mo., on brief, for appellant.

Kevin F. O'Malley, Asst. U. S. Atty., St. Louis, Mo., argued, Robert D. Kingsland, U. S. Atty. and Mitchell F. Stevens, St. Louis, Mo., on brief, for appellee.

Before STEPHENSON and McMILLIAN, Circuit Judges, and THOMAS *, Senior District Judge.

DANIEL HOLCOMBE THOMAS, District Judge.

Defendant appeals from a seven count indictment charging two counts of misapplication of bank funds in violation of Title 18, United States Code, Sections 2 and 656 and five counts of mail fraud in violation of Title 18, United States Code, Sections 2 and 1341. A trial by jury was commenced on May 25, 1979, before the Honorable John F. Nangle, District Judge, United States District Court, Eastern District of Missouri. Defendant was found guilty on all counts. We affirm the judgment of the District Court.

This case concerns alleged check-kiting activity between Harvey B. Young, Eddie C. Norman, William E. Lyman and Willie Scott during an eleven month period beginning in September 1973 and continuing through July 1974.

Norman plead guilty to mail fraud charges arising out of this kiting activity in December 1976. Lyman entered a plea of guilty thereafter. Scott was convicted by a jury of mail fraud centering on his check-kite in January 1977. Appellant, Young, was indicted in August 1978.

Because of the numerous interactions between those involved, a comprehensive review of what is a complex fact situation is necessary.

Appellant Young is a lifelong resident of Kirksville, Missouri, and President of the Bank of Kirksville, one of the lending institutions with which we are concerned.

Eddie C. Norman was the operator of the Schuyler County Sale Company, a successful cattle sale barn at which livestock was auctioned. Norman had known appellant for a period of some ten years and maintained both personal and business accounts with appellant's bank.

William E. Lyman was a commodities broker, who along with Norman and one Junior Liston, formed the Schuyler County Commodity Brokerage. The purpose of such brokerage was to act as a conduit through which appellant and others in Kirksville might play the commodities market.

Using Lyman as his broker, Norman became actively involved in the trading of futures contracts. Their initial success spawned interest by Barry Gushleff, a Kirksville osteopath and close friend of appellants, as well as appellant himself. Convinced by Norman, Gushleff and appellant that a brokerage business in northeast Missouri would be lucrative, Lyman moved from Marshalltown to Lancaster, Missouri, in the spring of 1973.

Shortly thereafter, Young, Gushleff and several professional men in Kirksville formed the Adair County Trading Club (ADCT) to pool their resources as they played the commodities market. Simultaneously, Norman, Lyman and one Junior Liston formed the Schuyler County Commodity Brokerage (SCCB). A contract was executed whereby SCCB was to handle the investments of ACTC in return for fifty percent of ACTC's profits or losses.

In the summer of 1973 Norman began experiencing serious cash flow problems. Norman approached appellant for a loan but was informed that loans were not available for such investments.

Subsequently, Young met with Norman and Lyman at the bank of Kirksville. During this meeting Young told Lyman that, "We've got to help Eddie every way we can." 1 It was then agreed that Norman and Lyman could generate a cash flow by kiting checks between Norman's accounts at the Bank of Kirksville and Lyman's accounts at the Schuyler County Bank in Lancaster, Missouri, and the Fidelity Savings Bank in Marshalltown, Iowa. 2

Prior to the Norman-Lyman-Young meeting, Norman had kited checks with several other associates. 3 One such associate was Junior Liston.

During the ensuing months, Young, Norman and Lyman maintained almost daily contact. 4

KIRKSVILLE-SCHUYLER COUNTY KITE

Within a short period after their September meeting, Norman and Lyman began kiting checks. Norman drew checks against his account at the Bank of Kirksville while Lyman did likewise at the Schuyler County Bank in Lancaster, Missouri. On the first day of this kite in September of 1973, the opening balance of Lyman's account at the Schuyler County Bank was $224.25 and Norman's livestock account was overdrawn in the amount of $92,875.13. 5 This overdraft was immediately brought to Young's attention by FDIC personnel then examining his bank. However, on September 11, 1973, three Lyman checks, totalling approximately $95,000.00 were deposited in the Eddie Norman livestock account. The following day, September 12, 1973, two Norman checks totalling approximately $77,000.00 were deposited in Lyman's account at the Schuyler County Bank. 6 This exchange lasted but a short time before being discovered by Leo Funk, President of the Schuyler County Bank. Funk terminated the kite and personally took the Norman checks to the Bank of Kirksville for payment. Funk met with cashier Ben Graves at Kirksville whose review of Norman's account showed insufficient funds to honor the checks held by Funk. Graves informed Young of the situation and was thereafter directed by Young to issue a cashier's check to Funk in the amount of $125,219.50. 7

Young was charged in Count I of the indictment with misapplying $68,843.77. Such an amount represents the difference between what Norman had in his account and the amount of the kited Norman checks presented by Funk and honored by Young.

KIRKSVILLE-MARSHALLTOWN KITE

The Kirksville-Marshalltown kite began at approximately the same time as the exchange at the Schuyler County Bank, but continued through November 1973. The parties involved were once again Norman and Lyman.

In order to clear Lyman's checks deposited in Norman's account, the Bank of Kirksville would mail the checks to the Continental Illinois National Bank and Trust, its Federal Reserve correspondent bank in Chicago. On October 2, 1973, the Bank of Kirksville processed Lyman's checks in such manner by placing them in the United States mail. 8 Such actions constituted violations of mail fraud as charged in Count III of the original indictment.

As this kite approached its conclusion, Norman withdrew approximately $250,000.00 of his equity from the commodity market and also obtained, with Young's assistance, a loan of $200,000.00 from the National Stockyards Bank. These funds were deposited in Norman's account at the Bank of Kirksville and allowed the kite to end without a financial loss to either bank.

KIRKSVILLE-GREEN CITY KITE

Lyman and Gushleff began a check-kite in January 1974. 9 Lyman used his account at the Bank of Kirksville while Gushleff employed a corporate account at the Farmers Bank of Green City, Missouri. This kite progressed through February and March of 1974.

Toward the end of this kite, Lyman and Gushleff began disputing who owed the other money. William Reed witnessed one such argument in Gushleff's office and thereafter informed Young of such a kite. 10

A short time later Young met with Lyman and Gushleff at the Bank of Kirksville to settle their differences. Lyman was informed that he owed Gushleff approximately $18,000.00 as a result of the kite. When Lyman stated that he could not produce the needed funds, he was told by Young to sign a note for the difference. 11

Alerted to Gushleff's account by its overdraft activity, the president of the Green City Bank, William Carr, suspected a kite and began returning Gushleff's checks, thereby terminating the exchange.

KIRKSVILLE-WAPELLO-WEAVER-FORT MADISON KITES

In March 1974, Norman remained in debt to the Bank of Kirksville. At this time Young and Norman agreed to resume a check-kite. Norman selected Willie Scott, an Iowa livestock dealer, as the second party to the kite. Such kite progressed between Norman's accounts at the Kirksville Bank and Scott's accounts at the State Bank of Wapello, in Wapello, Iowa, and the Farmers Savings Bank in Weaver, Iowa. 12

The Kirksville and Wapello kite lasted briefly before A. T. Wollenhaupt, an official at the Wapello bank, compared Scott's checks against his deposits and discovered the irregularities.

The final kites between Norman's accounts at appellant's bank and Scott's accounts at Weaver and the Lee County Savings Bank in Fort Madison, Iowa, lasted from March through July of 1974.

Kirksville cashier Graves determined that Norman and Scott were kiting checks, and in June of 1974, reported this to Young. 13

Young informed Norman that Graves was angry about the kite and that Norman should cover-up the exchange in some way. 14

The mailings of Scott checks by the Bank of Kirksville to the Continental Illinois National Bank on June 24, July 6, July 10, and July 15, 1974, comprise the mail fraud charges in Counts IV through VII of the indictment.

Young's honoring the kited checks on July 12, 1974, originated the misapplication charge in Count VIII of the indictment.

COVER-UP

Within a short time subsequent to the termination of the kites, Young and Norman met at the Bank of Kirksville. Young assured Norman that Young could straighten out any difficulties that may have arisen and that Norman should in no manner mention Young's involvement therein. 15

During the early stages of the investigation Young repeatedly assured Norman that Young would afford his family sufficient care and maintenance should Norman go to jail. Young continued to insist that his name not be mentioned as a participant. 16

After Norman's indictment, Young refused to speak to Norman. Thereafter, Norman attempted to reach Young via Young's associate, Gushleff. Norman then threatened to...

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