United States v. Hevener ( 2006 )

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
12-18-2006
USA v. Hevener
Precedential or Non-Precedential: Non-Precedential
Docket No. 05-2794
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 05-2794
____________
UNITED STATES OF AMERICA
v.
JOHN HEVENER, JR.,
Appellant
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 04-cr-00298)
District Judge: Honorable Eduardo C. Robreno
____________
Submitted Under Third Circuit LAR 34.1(a)
December 13, 2006
Before: FISHER, CHAGARES and GREENBERG, Circuit Judges.
(Filed: December 18, 2006)
____________
OPINION OF THE COURT
____________
FISHER, Circuit Judge.
John Hevener, Jr. was charged in a two-count indictment for mail fraud in
violation of 18 U.S.C. § 1341. Following a jury trial, he was convicted on both counts,
sentenced to 33 months in prison and ordered to pay $634,394.50 in restitution. He now
appeals his conviction. For the reasons below, we will affirm his conviction.
I.
Because we write only for the parties, we will forgo a lengthy recitation of the
legal and factual background to this case. Hevener, in addition to being involved in
several overseas business ventures, was the creator of a Ponzi1 scheme in which he
solicited investments from his accounting clients, claiming they were high-yield, low-risk
investments, and then disbursed a majority of the investment money to himself or
corporations he controlled.
Beginning in 1990, Hevener encouraged his clients to invest money in various
business entities of which Hevener claimed to be a part. In 1990, based on Hevener’s
representations that such investments were virtually “risk free,” Edward Ream made two
investments, one for $14,000 and one for $24,000, in United Equity & Leasing
Corporation (“United Equity”), a company that was controlled entirely by Hevener. The
$24,000 loan was repaid with interest in 1992.
1
A “Ponzi scheme” is “[a] fraudulent investment scheme in which money
contributed by later investors generates artificially high dividends for the original
investors, whose example attracts even larger investments.” Black’s Law Dictionary
1180 (7th ed.1999). The result of most Ponzi schemes is collapse, leaving numerous
investors with significant losses. Official Comm. of Unsecured Creditors v. R.F. Lafferty
& Co., Inc., 267 F.3d 340, 343-44 (3d Cir. 2001).
2
In 1992, Hevener convinced Gregory Stauffer and his wife to invest $110,000 by
purchasing shares of United Equity stock. As with Ream, Hevener represented that the
investment was very safe. Hevener also encouraged other clients, including the
Haldemans and the Sheetzes, to invest more than $350,000 in United Equity, a
corporation called “Fujibanc” – which Hevener claimed was a working bank – and
various other entities. Fujibanc was not, in fact, a banking entity at all, but a company
that Hevener was using to process payments from United Equity to a venture in Latvia.
While Hevener sent some of the money his clients invested to the actual investment, he
distributed much of it to other companies owned by him and his son.
In 1994, Ream began asking questions about the $14,000 loan he had made to
Hevener in 1990. In response, Hevener moved money he had received from the
Haldemans into a United Equity account and repaid Ream’s loan with between $6,000
and $7,000 of interest. Based on what he believed was a successful return on his
investment, Ream loaned Hevener an additional $40,000 in 1995 and 1996. During the
entirety of this period, Hevener sent his investors the requisite tax forms for interest
earnings and paid these so-called “interest earnings” out of the investors’ original capital.
In 1999, after receiving what he believed to be an inaccurate statement of his
interest earnings, Ream asked Hevener to return the $40,000 loan. After delaying for
several months, Hevener sent a letter to Ream informing him that United Equity had
suffered unexpected losses “to the point where a Chapter 7 bankruptcy is now being
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considered.” The letter further stated that United Equity had been serving as a holding
company for overseas projects that “have completely collapsed without any possibility of
recovery,” and that Ream’s “loan to United Equity & Leasing Corporation is now
classified as non-performing.”
The Stauffers had similarly begun inquiring after their investment when Gregory
Stauffer lost his job. By 1999, Hevener informed them that their entire investment had
been lost. After Stauffer sent Hevener a letter requesting that he repay the investment or
risk litigation, Hevener sent Stauffer a letter postmarked from Washington, D.C. claiming
that Stauffer would be hearing from Hevener’s Washington, D.C. attorney. No attorney
ever contacted the Stauffers.
The letter to Ream regarding the non-performance of his loan and the letter to the
Stauffers regarding Hevener’s attorney formed the basis of Hevener’s indictment.
II.
The District Court had jurisdiction under 18 U.S.C. § 3231. We have jurisdiction
over Hevener’s appeal by virtue of 28 U.S.C. § 1291.
Hevener styled his claim as challenging the sufficiency of the indictment, which
we review de novo. United States v. Al-Ame, 434 F.3d 614, 616 (3d Cir. 2006) (citing
United States v. Hedaithy, 392 F.3d 580, 590 n.10 (3d Cir. 2004)). However, a review of
his brief suggests that what he is really claiming is that the government presented
insufficient evidence that the two mailings were “in furtherance” of a scheme to defraud.
4
We review challenges to sufficiency of the evidence under a particularly deferential
standard, viewing evidence in the light most favorable to the government and overturning
a conviction only where no reasonable trier of fact could find the elements of the crime
beyond a reasonable doubt. United States v. Dent, 149 F.3d 180, 187 (3d Cir. 1998).
However, because the two underlying mailings were legally sufficient to form the basis of
an indictment and because there was ample evidence on which a jury could base a guilty
verdict, it is not necessary to determine which theory Hevener is asserting. Al-Ame, 434
F.3d at 616.
III.
On appeal, Hevener claims that the letters he sent to Ream and Stauffer could not
be seen as letters in “furtherance of” a scheme to defraud. In order to prove mail fraud
under 18 U.S.C. § 1341, the government must prove that the defendant had a scheme to
defraud and that the mailings charged in the indictment were made “for the purpose of
executing such scheme.” 18 U.S.C. § 1341; Parr v. United States, 363 U.S. 370, 385
(1960). The mail fraud statute does not reach every mailing that is the byproduct of a
scheme to defraud. Rather, a mailing must be “sufficiently closely related” to a
defendant’s scheme. United States v. Cross, 128 F.3d 145, 150 (3d Cir. 1997). A mailing
is sufficiently related to a scheme to defraud where it “further[s] the scheme to defraud or
[is] incident to an essential part of that scheme.” United States v. Ruuska, 883 F.2d 262,
264 (3d Cir. 1989). While mailings made after the object of a scheme has been
5
accomplished may not be “sufficiently closely related to the scheme to support a mail
fraud conviction,” id., “mailings ‘designed to lull [fraud] victims into a false sense of
security, postpone their ultimate complaint to the authorities, and therefore make the
apprehension of the defendants less likely than if no mailings had taken place’ have been
found to constitute actionable mail fraud.” Tabas v. Tabas, 47 F.3d 1280, 1295 n.18 (3d
Cir. 1995) (quoting Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1416 n.3 (3d
Cir. 1991)).
For example, in Ruuska, we found that two letters were sent in order to lull victims
after the completion of a fraudulent investment scheme. The defendant in Ruuska sent
two identical letters to the victims of his investment scheme which stated that there were
possible problems with the financial aspects of the investments, that lawsuits had been
filed causing a delay and that the defendant would keep the victims apprised. 883 F.2d at
264. On appeal, the defendant claimed that these letters were insufficient to further his
scheme because he was not seeking to create a false sense of security and, even if he was,
the victims could no longer be “lulled” because they were aware of the nature of the
scheme. Id. at 264-65. We disagreed, finding that the letters were sufficient to “support
an inference by the jury that they ‘were mailed by the defendants to the victims for the
purpose of lulling them by assurances that the promised services would be performed.’”
Id. at 265 (quoting United States v. Sampson, 371 U.S. 75, 81 (1962)).
6
While the two mailings charged against Hevener were arguably sent after Hevener
had successfully defrauded his accounting clients into investing, they qualify as mailings
undertaken with the purpose of lulling the victims and preventing apprehension by the
authorities. As the government stated in its brief, the charged letters created a cloak of
legitimacy for Hevener’s criminal actions, thereby preventing earlier detection and
apprehension by the authorities. The letter Hevener sent to Ream suggested that his
money was lost unexpectedly through a bad investment, instead of stating what actually
happened to Ream’s money – it was the casualty of a collapsed Ponzi scheme. While
Hevener’s contention that he did not give Ream a false sense of security by claiming that
his money was safe is correct,2 the mailing need not give that kind of security. Hevener’s
mailing aimed to blind Ream to the true nature of the scheme that caused his loss, thereby
holding an official investigation at bay. United States v. Lebovitz, 669 F.2d 894, 896 (3d
Cir. 1982) (quoting United States v. Maze, 414 U.S. 395, 403 (1974)) (where mailings
postpone a victim’s complaint to the authorities, those mailings are made “for the purpose
of executing” the scheme to defraud).
2
Even if the letter to Ream was literally true – which the evidence viewed in the
light most favorable to the government suggests it is not – the letter’s purpose was to
further Hevener’s fraudulent scheme. Therefore, it may still form the basis for the
indictment. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1413-14 (3d Cir. 1991)
(citing Schmuck v. United States, 489 U.S. 705, 715 (1989)) (“The mailing need not
contain any misrepresentations. Rather ‘innocent mailings – ones that contain no false
information – may supply the mailing element.’”).
7
Similarly, the letter Hevener sent to the Stauffers was intended to prevent them
from discovering the true nature of the Ponzi scheme and to stall them in their efforts to
pursue litigation against Hevener. The letter falsely informed the Stauffers that
Hevener’s attorney would be contacting them and provided a new address at which they
could contact him. The inclusion of a new address and reference to his attorney
suggested that the loss was legitimate and that Hevener was interested in discussing the
legal implications of the lost investment. Hevener responded to the Stauffers’ legal
concerns and delayed the filing of a lawsuit while the Stauffers waited to hear from his
attorney. In short, Hevener forestalled the filing of a complaint. Lebovitz, 669 F.2d at
896.
The facts of this case are easily distinguishable from those in United States v. Otto,
742 F.2d 104 (3d Cir. 1984). In Otto, one count of the defendant’s mail fraud conviction
was overturned. The charged mailing was a letter from a victim of the defendant’s
fraudulent scheme threatening to sue the defendant. Because the letter was not “directly
or impliedly” invited by the defendant, the letter could not be in furtherance of the
defendant’s scheme. Id. at 109. “Its purpose was not to continue a relationship between
the parties or arrange for a compromise.” Id. Rather, “its ‘only likely effect would be to
further detection of the fraud or deter its continuation.’” Id. (quoting United States v.
LaFerriere, 546 F.2d 182, 187 (5th Cir. 1977)). We concluded that the demand letter
from the victim was very different than a letter from the defendant arranging a settlement,
8
as the latter would further the fraudulent scheme by avoiding a confrontation with the
victim. Id. Hevener’s letter to the Stauffers is comparable to the settlement offer as it
sought to further his relationship with the Stauffers through legal discussions between
their attorneys and was aimed at preventing the filing of a legal claim. Because the letter
aimed to prevent the detection of his fraudulent scheme, it is a sufficient basis for a mail
fraud indictment and conviction.
In short, both letters authored by Hevener furthered his fraudulent scheme by
suggesting to Hevener’s investors that their money had been legitimately lost. Such an
indication has the effect of forestalling legal action by those victims and preventing
official investigation into the underlying fraudulent scheme.
For the reasons set forth above, we will affirm the District Court’s denial of the
Rule 29 motion and Hevener’s conviction.
9