United States v. Frey ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
12-13-1994
United States v. Frey
Precedential or Non-Precedential:
Docket 94-1594
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Recommended Citation
"United States v. Frey" (1994). 1994 Decisions. Paper 217.
http://digitalcommons.law.villanova.edu/thirdcircuit_1994/217
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NOS. 94-1594 and 94-1605
UNITED STATES OF AMERICA,
Appellee,
v.
FRED FREY AND ROBERT DEMAS,
Fred Frey, Appellant in No. 94-1594
Robert Demas, Appellant in No. 94
-1605
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Crim. No. 93-440-1 and 93-440-2
Submitted Under Third Circuit LAR 34.1(a)
December 2, 1994
Before: HUTCHINSON, NYGAARD and SEITZ, Circuit Judges.
Filed: December 13, l994
John Rogers Carroll, Esquire
Ellen C. Brotman, Esquire
Carroll & Carroll
400 Market Street, Suite 850
Philadelphia, PA 19106
Attorneys for Appellants
Michael R. Stiles
United States Attorney
Walter S. Batty, Jr.
Assistant United States Attorney
615 Chestnut Street, Room 1250
Philadelphia, PA 19106
Attorneys for Appellee
____________________
OPINION OF THE COURT
SEITZ, Circuit Judge.
Fred Frey and Robert Demas ("defendants") appeal their
sentences after convictions by a jury on four counts of wire
fraud under 18 U.S.C. § 1343 and two counts of mail fraud under
18 U.S.C. § 1341.
The fraud arose from a scheme by defendants to purport
to buy a non-existent boat. Defendants borrowed money to pay for
the boat, they insured it and then they reported it missing.
They planned to repay the loan with the insurance proceeds and
intended to profit by retaining the loan money. Thus, they had
proposed to make the insurance company the ultimate victim. The
scheme was discovered and defendants were found guilty and
sentenced. This appeal followed.
A. Defendants' Motion for Acquittal
The defendants first contend that because of the
insufficiency of the government's proof the district court erred
in denying their Rule 29 motion for acquittal on Counts 2, 4, 5,
and 7. These counts were based on telephone calls and mailings
between Anne Scarlata ("Scarlata") of Admiralty Documentation
Services and the defendants.
The elements required to support a conviction under the
mail fraud statute, 18 U.S.C. § 1341, are: 1) a scheme to
defraud;1 and 2) the use of the mails for the purpose of
executing, or attempting to execute, the scheme. See 18 U.S.C.
§ 1341 (1988 & Supp. III 1993); United States v. Copple, 24 F.3d
535, 544 (3d Cir.), cert. denied, (No. 94-5771), 1994 WL 466503
(Nov. 7, 1994); United States v. Ruuska, 883 F.2d 263, 264 (3d
Cir. 1989). The wire fraud statute, 18 U.S.C. § 1343, is
identical to the mail fraud statute except it speaks of
communications transmitted by wire. See 18 U.S.C. § 1343 (1988 &
Supp. III 1993); United States v. Zauber, 857 F.2d 137, 142 (3d
Cir. 1988), cert. denied, 489 U.S. 1066 (1989).2
As defendants correctly point out, not every use of the
mails or wires in connection with a scheme is punishable under
sections 1341 or 1343. This court has held, "To support a mail
fraud conviction, a mailing must further the scheme to defraud or
be incident to an essential part of that scheme." Ruuska, 883
F.2d at 264; see United States v. Otto, 742 F.2d 104, 108 (3d
Cir. 1984), cert. denied, 469 U.S. 1196 (1985).
In financing the boat, General Motors Acceptance
Corporation ("GMAC") had to secure a federal lien on the boat.
In order to secure the federal lien, GMAC contacted Admiralty
Documentation Services, operated by Scarlata, to perform a title
1
. Defendants admitted that they have engaged in a scheme to
defraud. See, e.g., Brief of Defendants at 7-8, United States v.
Frey and Demas (Nos. 94-1594 & 94-1605) (hereinafter "Defendants'
Br."); Appendix at 195A-96A, 398A, 403A.
2
. This court stated, "[T]he cases construing the mail fraud
statute are applicable to the wire fraud statute as well." United
States v. Tarnopol, 561 F.2d 466, 475 (3d Cir. 1977); see United
States v. Bentz, 21 F.3d 37, 40 (3d Cir. 1994).
search. In her efforts to properly search the boat's title,
Scarlata exchanged numerous telephone calls and letters with
defendants. These exchanges provided the mailings and wirings
requirements in four counts of the indictment.
Defendants argue that the exchanges with Scarlata were
not made in furtherance of the scheme to defraud because they 1)
were made after the scheme had come to fruition; and 2) served to
frustrate, not further, the scheme.
Defendants' argument that their scheme had come to
fruition when the loan was granted misconstrues the nature of the
indictment, which charged an overall scheme to defraud GMAC,
General Sales, Hampton Roads Documentation Services, Admiralty
Documentation Services, Guba and Associates, Hull and Company,
and Lloyds of London. See Appendix at 503A (the federal
indictment); see also United States v. Lane, 474 U.S. 438, 452
(1986). In fact, defendants have agreed with the government's
characterization of the scheme, see Defendants' Br. at 7-8, and
have stated that the Scarlata communications occurred during the
scheme. See id. at 17. The government charged one scheme, not a
series of schemes. At the time of the Scarlata communications,
the boat was not yet reported stolen or missing. Based on the
evidence presented, we conclude that a reasonable jury could
find that the scheme to defraud had not been concluded before the
Scarlata communications took place.
Defendants next argue that their communications with
Scarlata were routine business mailings and calls that
contributed to the eventual unravelling of the scheme and cannot
support a mail or wire fraud conviction.
This court has held that "the mere classification of a
letter as a ``routine business mailing' is [not] a defense to mail
fraud." United States v. Brown, 583 F.2d 659, 668 (3d Cir. 1978),
cert. denied, 440 U.S. 909 (1979). The mailing, or wiring, could
support a mail or wire fraud conviction "if the mailing is part
of executing the fraud, or closely related to the scheme . . .
even though the mailing was also related to a valid business
purpose." Id. As the United States Supreme Court has stated,
"[M]ailings [and wirings] which facilitate concealment of the
scheme are covered by the statute." Lane, 474 U.S. at 453
(internal quotations omitted) (footnote omitted). Defendants'
evaluation of the evidence lacks merit.
Defendants assert that the communications were not
"closely related to the scheme" because they tended to "unravel"
rather than further the scheme and thus were not probative of the
scheme. Generally, mailings or wirings that serve to put the
defrauded party on notice, or make the execution of the fraud
less likely, cannot support a conviction under the mail or wire
fraud statutes. See Otto, 742 F.2d at 109; Tarnopol, 561 F.2d at
473. The cases cited by defendants in support of their argument
that the Scarlata communications were not closely related to the
scheme, however, involved situations where the only effect of the
communications was to frustrate the scheme. See, e.g., United
States v. Maze, 414 U.S. 395 (1974); United States v. Kann, 323
U.S. 88 (1944). In this case, the communications were incident
to an essential part of defendants' scheme to defraud.
Furthermore, defendants needed the Scarlata
communications either to conceal the fraud or further their
scheme. See Appendix at 245A, 248A (Scarlata testimony regarding
defendants' cooperation). The evidence established that the
Scarlata communications were made in the course of securing a
federal lien. It is both common for a finance company to secure
a federal lien on a loan of this size and to have the boat
documented. See Appendix at 200A; see also id. at 200A-02A, 234A,
240A, 258A. In addition, a letter from GMAC to Scarlata was
introduced which listed Frey as a customer "required to have
Marine Documentation." Government's Appendix at 11a. In fact,
the documentation in this case was required by law. See id. at
213A, 258A.
At trial, Mr. Hamilton of GMAC testified that if GMAC
were unable to perfect a lien or verify title on the Frey/Demas
boat, then General Sales, the company defendants contacted to
arrange the financing through GMAC, would be asked to pay off the
boat loan. Id. at 260A. Here, the jury could have reasonably
concluded that defendants communicated with Scarlata in order to
either further their scheme or to facilitate the concealment of
the scheme. If the fraud had been uncovered, defendants' scheme
could have come to an abrupt halt. See Schmuck v. United States,
489 U.S. 705, 712 (1988). These communications were at least
incidental to the scheme.
Although the communications with Scarlata may have
hastened the uncovering of the fraud, this factor does not
necessarily preclude the conclusion that these communications
support the mail or wire fraud convictions. In Schmuck, the
United States Supreme Court stated:
We . . . reject . . . [the] contention that
mailings that someday may contribute to the
uncovering of a fraudulent scheme cannot
supply the mailing element of the mail fraud
offense. The relevant question at all times
is whether the mailing is part of the
execution of the scheme as conceived by the
perpetrator at the time, regardless of
whether the mailing later, through hindsight,
may prove to have been counterproductive and
return to haunt the perpetrator of the fraud.
Id. at 715.
Defendants argue that unlike the scheme in Schmuck, the
present scheme did not involve "an ongoing fraudulent venture."
Defendants' Reply Brief at 3, United States v. Frey and Demas
(Nos. 94-1594 & 94-1605). In the present case, as in Schmuck, to
successfully complete the fraudulent scheme, defendants had to
maintain the illusion of the existence of the fictitious boat (at
least until the insurance proceeds were paid). At the time of
the communications, the mailings and wirings were not routine,
post-fraud, or merely coincidental to the scheme, they were a
part of the execution of the scheme. We do not find defendants'
argument persuasive here.
Defendants next assert that the district court erred in
not granting their motion for acquittal on Counts 1 and 6 of the
indictment because the United States did not prove that the
communications supporting those counts were made for the purpose
of executing the scheme.
On July 11, 1989, Frey was contacted with an insurance
quote on the boat. Defendants contend that this communication
could not be "in furtherance of the scheme" because Frey provided
Guba with the incorrect Hull Identification Number (HIN). As Ms.
Stanley, from Guba and Associates, testified, a HIN is not even
required to provide an insurance quote. See Appendix at 113A.
The boat had many other distinguishing features, see, e.g., id.
at 93A, and the number would eventually be used for
identification. However, the evidence at trial could reasonably
support the conclusion that Guba and defendants were discussing
the same boat. The GMAC finance application required defendants
to maintain insurance on the boat. See Government's Appendix at
9a; Appendix at 401A; 477A. We conclude that a reasonable trier
of fact could find that the July 11, 1989 call was a step in
defendants' scheme to defraud by securing insurance as required
under the finance contract and to repay the loan.
Also, defendants argue that the January 18, 1990 call
to Guba and Associates could not be "in furtherance of the
scheme" because they had failed to comply with a warranty in the
insurance contract, which required defendants to store the boat
in an enclosed facility. Thus, defendants argue that "[t]he
scheme had no chance from the outset because there was no
coverage for the selected fictional location." Defendants' Br. at
18.
It is apparent that defendants' argument goes to the
ultimate success of the fraud. This court has stated that the
success of the scheme is not relevant in a mail or wire fraud
conviction; it is sufficient that the defendant had the intent to
defraud. See Zauber, 857 F.2d at 142; see also Copple, 24 F.3d at
544-45. In the present case, defendants' failure to comply with
the contract warranty may have resulted in a denial of coverage.
But, what is relevant is defendants' intent to defraud. By
convicting defendants, the jury implicitly concluded that
defendants possessed the requisite intent to defraud. On January
18, 1990, the scheme was still alive, and a reasonable juror
could have found that the report to the insurance company was a
planned step in the scheme. As defendants admitted, they had to
collect the insurance proceeds so as not to have to personally
repay the loan.
Defendants also argue that GMAC was not at risk of loss
because the loan was a full recourse loan, with General Sales
guaranteeing the GMAC loan, and because the GMAC loan was to be
satisfied with the loan proceeds. See Defendants' Br. at 17.
The government charged that the insurance company, not GMAC,
would suffer a loss of money. A reasonable trier of fact could
have concluded that the calls to and from Guba and Associates
were in furtherance of defendants' scheme to ultimately cause the
insurance company monetary loss.
We conclude that the district court did not err in
denying defendants' motion for acquittal.
B. Defendants' Proposed Jury Instruction
Defendants argue that the district court erred in
refusing to give proposed Jury Instructions numbers 10, 11, 12,
and 16, which allegedly stated defendants' theories of defense.
As the Supreme Court stated, "[A] defendant is entitled
to an instruction as to any recognized defense for which there
exists evidence sufficient for a reasonable jury to find in his
favor." Matthews v. United States, 485 U.S. 58, 63 (1988); see
United States v. Paolello, 951 F.2d 537, 539 (3d Cir. 1991).
Proposed Jury Instruction 11 focused on defendants'
allegation that GMAC would not suffer any loss. As explained
above, the government did not charge that GMAC was the ultimate
victim. See Appendix at 503A. Therefore, defendants' claim that
GMAC was not at a risk of loss would not provide a defense to the
charges.
Defendants' proposed Jury Instructions 10 and 12
focused on defendants' allegation that the insurance policy would
not provide coverage for the claimed loss. Defendants requested
that the jury be instructed that the government had the burden of
proving that the policy would in fact cover their loss.
Defendants' asked the district court, and now this
court, to effectively add an element to the mail and wire fraud
statutes. As explained, these arguments go to the success of the
scheme, which is not an element of the statutes. See Copple, 24
F.3d at 544-45; Zauber, 857 F.2d at 142. The indictment did not
charge the ultimate success of the plot, but rather the scheme to
defraud. As explained above, the communications relating to
proposed instructions 10 and 12 were essential steps in the plot.
Therefore, neither proposed instruction 10 nor 12 would provide a
recognized defense to defendants' convictions.
Finally, defendants' proposed Jury Instruction 16
referred specifically to the different HINs. Defendants asked
the district court to instruct the jury that the government had
the burden of proving that the telephone call alleged in Count 1
of the federal indictment was in furtherance of the scheme to
obtain coverage on HIN WELP 5148H889. As explained at trial, the
HIN was not important to the July 11, 1989 phone call. The call
was an essential part of defendants' efforts to obtain insurance
proceeds to pay the fraudulently obtained loan. The government
was only required to prove that the call was in furtherance of
their scheme to defraud. Again, the ultimate success of the
scheme is irrelevant.
As this court explained, even if the evidence supports
defendants' theories of defense, the court will examine the
district court's instructions as a whole to determine whether
they adequately presented these theories of defense to the jury.
See Paolello, 951 F.2d at 539. In this case, the district court
charged the jury that the government had the burden of proving
that all the communications were made in furtherance of the
charged scheme. See Appendix at 438A. The trial testimony and
exhibits advised the jury of the facts surrounding Counts 1 and
6. Even if defendants were correct as to the existence of their
theories of defense, the court's charge adequately addressed
them.
The district court committed no error by declining to
give these requested instructions.
The judgments of the district court will be affirmed.
__________________________