U.S. v. Young

• Decision Date: 05 November 1991
• Docket Number: 90-1619,Nos. 90-1581,s. 90-1581
• Citation: 955 F.2d 99
• Parties: UNITED STATES, Appellee, v. Howard W. YOUNG, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 99

955 F.2d 99

UNITED STATES, Appellee, v. Howard W. YOUNG, Defendant, Appellant.

Nos. 90-1581, 90-1619.

United States Court of Appeals First Circuit.

Heard Nov. 5, 1991.

Decided Jan. 28, 1992.

Janis M. Berry (by appointment of the court), with whom Ivan B. Knauer and Ropes & Gray, Boston, Mass., were on brief for defendant, appellant.

Cerise Lim-Epstein, Asst. U.S. Atty., with whom Wayne A. Budd, U.S. Atty., Boston, Mass., was on brief for appellee.

Before BREYER, Chief Judge, COFFIN, Senior Circuit Judge, and CYR, Circuit Judge.

BREYER, Chief Judge.

Howard Young, a lawyer, administered Veterans' Administration funds as a guardian for a disabled World War II veteran. See 38 U.S.C. § 5502. A jury, finding that Young wrongly used the veteran's money for his own purposes, convicted him of embezzlement and mail fraud. 38 U.S.C. § 3501; 18 U.S.C. § 1341. The district court imposed a twelve month prison sentence. Young appeals his convictions and the sentence. We affirm both.

I The Facts

The evidence permitted the jury to take the underlying facts as follows:

1. On July 1, 1970, the Bristol County Probate Court appointed Young (an attorney and former judge) guardian for a veteran receiving benefits from the Veterans' Administration (VA).

2. Young normally kept the veteran's money invested in safe securities, such as certificates of deposit, held by Merrill Lynch in a guardianship account. By the end of 1985, the veteran's fund amounted to more than $250,000.

3. In August 1985 Young filed a personal bankruptcy petition.

4. Between June 1986 and June 1987 Young withdrew about $250,000 from the Merrill Lynch guardianship account. Young deposited most of this money in the bank account of Tomar Farms, a company that invested in racehorses. Young's daughter owned Tomar Farms, and Young was the company's president, treasurer, clerk, and sole director. In return for this money, Tomar Farms (through Howard Young, its president) signed promissory notes, to Howard Young as guardian, paying 12% interest, payable upon maturity two years later. Tomar Farms also signed a "security agreement" pledging to the guardian, as security, a horse called "Supreme Roman" and all other subsequently acquired "livestock." Tomar Land, another company that Young operated and his daughter owned, gave the guardian a second (unrecorded) mortgage on a farm in Kentucky, which mortgage (perhaps through inadvertent misstatement) said that it was security for money advanced "by Tomar [Farms] to Guardian," rather than the other way around.

5. In 1986 Tomar Farms bought the horse Supreme Roman for $175,000, payable over time. It also invested $28,000 in a racehorse investment partnership called the "No I Won't Stable." By the end of 1987, however, Tomar Farms' stable investments had proved unprofitable: its horse, Supreme Roman, was repossessed (for Tomar Farms failed to keep up payments), and Tomar Land had sold its Kentucky farm.

6. In 1987 the VA noticed that Young had not filed his guardianship accounting information for 1986. It sent him a series of letters, followed by telephone calls, and eventually obtained a court order requiring him to file the account by January 1988. In March 1988, he filed accounting information for both 1986 and 1987, but he left blank the sections where, in prior accounts, he had listed the Merrill Lynch securities. He also left blank the space for his signature. In April 1988, he supplemented his 1986 and 1987 filings, listing as primary assets "mortgage secured note[s] receivable." In the April cover letter, he said that, because of declining interest rates, he had

decided to transfer the long range certificates of deposit to a two year program of real estate and bloodstock investment [in a company that] ... has among its owners certain members of my family who have expertise in these areas. This new investment is in the form of notes payable on September 15, 1988 and secured by mortgages.

In further correspondence with the VA, Young described the virtues of the "bloodstock" business, explained that he ran the relevant corporations (but held no ownership interest), and added that Supreme Roman, the Kentucky farm, and the investment in the No I Won't Stable (which would, he wrote, "provide total proceeds of something in excess of $10,000,000") secured the loans. On June 27, 1988, he wrote the VA that he was "enclosing" the "real estate mortgage and Security Agreement that is the formal collateral for the series of six (6) notes which represent the money invested."

7. Tomar Farms did not pay back the loans, nor did it pay interest, and, in October 1988, the Probate Court appointed a new guardian for the veteran's estate, which (though the jury did not learn this) was reimbursed for the loss by a bonding company.

II

The Meaning of "Embezzlement"

The jury convicted Young of violating 38 U.S.C. § 3501(a) (current version at 38 U.S.C. § 6101(a)), which makes it a crime for

a guardian ... having charge and custody in a fiduciary capacity of money ... paid under any of the laws administered by the Veterans' Administration ... [to] embezzle or in any manner misappropriate any such money....

Young says that the evidence does not permit the jury to find him guilty of violating this statute because he did not "embezzle" any money. The district court, he adds, did not understand what "embezzlement" means; it therefore wrongly permitted the jury to convict him on the basis of evidence insufficient to show that he did more than make a poor investment decision.

We disagree. The crime of embezzlement has long had a clear meaning. In the eighteenth century, English courts held that only those who took money, not those to whom money was lawfully entrusted, could commit common law larceny. Rex v. Bazeley, 2 Leach 835, 168 Eng.Rep. 517 (1799); see also Rex v. Waite, 1 Leach 28, 168 Eng.Rep. 117 (1743). Consequently, Parliament enacted the first embezzlement statute, designed to prohibit, say, bank tellers or guardians from converting the (lawfully obtained ) money of others to their own use. See Bazeley, 168 Eng.Rep. at 523-24 (discussing statute, 39 Geo. III, c. 85); see generally 3 Charles E. Torcia, Wharton's Criminal Law § 395, at 398-402 (1980). More than one hundred years ago, the Supreme Court referred to embezzlement's "settled technical meaning," United States v. Northway, 120 U.S. 327, 334, 7 S.Ct. 580, 584, 30 L.Ed. 664 (1887), recently described as "the fraudulent conversion of the property of another by one who is already in lawful possession of it." 2 Wayne R. LaFave & Austin W. Scott, Jr., Substantive Criminal Law § 8.6, at 368 (1986) (numerals omitted).

The notion of "fraudulent conversion," at the heart of embezzlement, may sound obscure, but, in fact, it is not. It essentially refers to, say, a bank teller, trustee, or guardian using money entrusted to him by another person for his own purposes or benefit and in a way that he knows the "entruster" did not intend or authorize. Thus, one basic source says that the

word "conversion" within the meaning of embezzlement statutes is a fraudulent appropriation of a thing to one's own use and beneficial enjoyment, or an unauthorized assumption and exercise of dominion or right of ownership over it in defiance of, or exclusion of, the owner's rights.

29A C.J.S. Embezzlement § 11(a), at 26 (1965) (footnotes omitted). Another says that "fraudulent conversion" is

fraudulently withholding, converting, or applying [property that is lawfully in one's possession] to or for one's own use and benefit, or to [the] use and benefit of any person other than the one to whom the money or property belongs.

Black's Law Dictionary 662 (6th ed. 1990). And cases offer such statements as

The gist of [embezzlement] is the appropriation to the defendant's own use of property delivered to him for a specified purpose other than his own enjoyment of it.

People v. Parker, 235 Cal.App.2d 100, 44 Cal.Rptr. 909, 914 (3d Dist.1965) (citing cases). An embezzler, like a thief or a swindler, may commit the crime in any of a myriad of different ways. See People v. Swanson, 174 Cal.App.2d 453, 344 P.2d 832, 836 (3d Dist.1959) (" 'There is no settled mode by which this appropriation must take place, and it may occur in any one of the numberless methods which may suggest itself to the particular individual. The mode of embezzlement is simply [a] matter of evidence.' ") (quoting Leonard v. State, 7 Tex.App. 417, 444 (1879)). But, in each instance, the embezzler will have acted for his own purposes and contrary to authorization. He will have "fraudulently converted" property entrusted to him by another.

The record here provides more than enough evidence to permit the jury to find embezzlement. The jury could conclude that Young was in financial trouble, that the Tomar companies that his daughter owned were in financial trouble, and that Young wanted to find money for those firms, to help his family, and thereby to help himself. The jury could also conclude that his use of the guardianship money for this purpose was not authorized, and was contrary to the intent of the "entruster," because (1) the investment was unusually risky, and (2) the investment created an obvious conflict between, on the one hand, his desires as a parent and duties as a corporate officer (to obtain ready financing for the companies), and, on the other, his obligations as a guardian (to invest soundly for the benefit of the veteran). See Johnson v. Witkowski, 30 Mass.App.Ct. 697, 573 N.E.2d 513, 519, review denied, 411 Mass. 1104, 581 N.E.2d 481 (1991); Whitney v. Whitney, 317 Mass. 253, 57 N.E.2d 913, 916 (1944) (" 'The law frowns upon any act on the part of a fiduciary which places interest in antagonism to duty, or tends to that result.' ") (quoting North Carolina R.R. Co. v. Wilson, 81 N.C. 223, 230 (1879)); George G. Bogert & George T. Bogert, The Law of Trusts and Trustees § 543(J), at 308-09 (1978); 90 C.J.S....