United States v. Neder , 136 F.3d 1459 ( 1998 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 92-2929
________________________
D. C. Docket No. 91-175-CR-J-16
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ELLIS E. NEDER, JR.,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(March 19, 1998)
Before TJOFLAT and HULL, Circuit Judges, and KRAVITCH, Senior Circuit Judge.
HULL, Circuit Judge:
Appellant Ellis E. Neder, Jr. appeals his convictions on various false statement,
fraud, conspiracy, and racketeering offenses. Neder contends that the district court
erred in failing to submit the issue of materiality to the jury with respect to his fraud
and false statement offenses.1 After review, we affirm.
I. FACTS
A. Neder’s Fraudulent Activities
Between 1984 and 1988, Neder engaged in fraudulent activities related to land
acquisition, land development, and construction projects. Through his schemes,
Neder fraudulently obtained over $30 million in loans from various lending
institutions. Neder deposited approximately $7 million in profits on these transactions
into his personal account. Testimony at trial revealed that none of the loans would
have been approved had the lending institutions been aware of the true nature of the
transactions. Neder later defaulted on these loans.
Neder also failed to report income of $1,372,360 in 1985 and $4,355,766 in
1986. Neder does not contest that he did not report this money as income or profits
from one of his schemes. Instead, Neder testified that he was advised that he was not
required to report this money as income.
1
Neder also asserts that (1) the counts in the indictment were multiplicious and
duplicitous, (2) the district court erred in denying his motion for change of venue
based on pre-trial publicity, (3) there was insufficient evidence to convict, (4) the
district court made erroneous evidentiary rulings, (5) the prosecutor suborned perjury
and engaged in a pattern of misconduct, (6) prosecutorial misconduct and various trial
errors combined to violate his due process rights, and (7) the government is precluded
from arguing that materiality is not an element of Neder’s false statement and fraud
offenses. After review, we conclude that these contentions are without merit.
2
B. The Court’s Jury Charge
Neder was indicted for mail fraud, wire fraud, bank fraud, tax fraud, and
making illegal false statements. The indictment contained materiality as an element
of many of these offenses. Neder and the government submitted proposed jury
instructions relating to the elements of the charged offenses. The district court’s final
jury charge included “materiality” as an element of the fraud and false statement
offenses. However, the district court instructed the jury that if it found beyond a
reasonable doubt that the alleged statements, representations, or promises were false,
it need not consider whether they were material because materiality was not an issue
for the jury to decide. The court entered its own findings regarding materiality outside
the presence of the jury. Neder timely objected to the court’s findings and its failure
to submit the issue of materiality to the jury.
II. DISCUSSION
We examine (a) whether materiality is an element of the false statement, wire
fraud, mail fraud, bank fraud, and tax fraud offenses;2 and (b) whether the district
court committed reversible error in not submitting the materiality issues to the jury.
2
Neder’s conspiracy and RICO convictions under 18 U.S.C. §§ 371 and 1962
were based on Neder’s violations of the false statement and fraud statutes. In
affirming Neder’s convictions under the false statement and fraud statutes, we affirm
Neder’s conspiracy and RICO convictions as well.
3
A. False Statements: 18 U.S.C. § 1014Two recent Supreme Court decisions begin our analysis. In United States v.
Gaudin, 515 U.S. 506 (1995), the Supreme Court assumed materiality to be an
element under 18 U.S.C. § 1001, which proscribes certain false statements, and held
that the issue of materiality under § 1001 is for the jury, not the judge, to decide. The
district judge in Gaudin erroneously failed to submit the materiality issue to the jury.
Id. at 523. We have since referred to this type of error as a Gaudin error. See, e.g.,
United States v. Fern, 117 F.3d 1298, 1307 (11th Cir. 1997).
Two years later in United States v. Wells, ___ U.S. ___, 117 S. Ct. 921 (1997),
the Supreme Court held that materiality is not an element of the false statement
offense in 18 U.S.C. § 1014. Thus, the Court concluded that the district court had not
erred in not submitting the question of materiality to the jury. Synthesizing Gaudin
and Wells, if materiality is not an element, failing to submit the issue to the jury is not
error; but if materiality is an element, a court errs in failing to submit the issue to the
jury.
In deciding in Wells that materiality is not an element under § 1014, the
Supreme Court focused on the language of § 1014, which states:
Whoever knowingly makes any false statement or report . . . for the
purpose of influencing in any way the action of . . . any institution the
accounts of which are insured by the Federal Deposit Insurance
4
Corporation . . . shall be fined not more than $1,000,000 or imprisoned
not more than 30 years, or both. . . .
18 U.S.C. § 1014. The Supreme Court emphasized that the text of § 1014 does not
mention materiality:
Nowhere does [§ 1014] further say that a material fact must be the
subject of the false statement or so much as mention materiality. To the
contrary, its terms cover “any” false statement that meets the other
requirements in the statute, and the term “false statement” carries no
general suggestion of influential significance . . . .
Wells, 117 S. Ct. at 927.
The Supreme Court also acknowledged the presumption that “Congress
incorporates the common-law meaning of the terms it uses if those ‘terms have
accumulated settled meaning under . . . the common law.’” Id. (quoting Nationwide
Mut. Ins. Co. v. Darden, 503 U.S. 318, 322 (1992)). However, the Supreme Court
concluded that the respondents had failed to make any showing that the term “false
statement” acquired any implication of materiality at common law. Id.Finally, the Supreme Court determined that the legislative history of § 1014
supported its natural reading. Id. at 928. Of particular significance was the fact that
“[w]hen Congress originally enacted § 1014 as part of its recodification of the federal
criminal code in 1948, it explicitly included materiality in other provisions involving
false representations.” Id. Moreover, “of the 13 provisions brought together by §
5
1014, 10 had previously contained no express materiality provision and received none
in the recodification, while 3 of the 13 had contained express materiality requirements
and lost them in the course of consolidation.” Id. The Court concluded that “[t]he
most likely inference in these circumstances is that Congress deliberately dropped the
term ‘materiality’ without intending materiality to be an element of § 1014.” Id.
In this case, Neder’s § 1014 conviction is controlled by Wells’s holding that
materiality is not an element under § 1014. Therefore, the district court did not
commit a Gaudin error in failing to submit the issue of materiality to the jury because
materiality is not an element of a § 1014 offense.3
B. Mail Fraud And Wire Fraud: 18 U.S.C. §§ 1341 And 1343
We now turn to whether materiality is an element under §§ 1341 and 1343. As
an initial matter, we examine the pre-Wells decisions of this court regarding the
elements of §§ 1341 (mail fraud) and 1343 (wire fraud). Our decisions list the
elements of these offenses without listing materiality as one of the elements. See
United States v. Pitt, 717 F.2d 1334, 1339-40 (11th Cir. 1983) (listing elements of wire
fraud without including materiality); United States v. Scott, 701 F.2d 1340, 1343 (11th
3
We recently relied on Wells in determining that materiality is not an element
under 15 U.S.C. § 645(a) in United States v. Condon, 132 F.3d 653, 656 (11th Cir.
1998), or 18 U.S.C. § 1010 in United States v. DeCastro, 113 F.3d 176, 179 (11th Cir.
1997).
6
Cir. 1983) (listing elements of mail fraud without including materiality). However,
no cases directly hold that materiality is not an element under §§ 1341 and 1343.
Therefore, in determining whether materiality is an element under §§ 1341 and
1343, we begin with the Supreme Court’s admonition to examine the statutes’
language. Section 1341 proscribes the act or acts of using the mails to execute “any
scheme or artifice to defraud, or for obtaining money or property by means of false
or fraudulent pretenses, representations, or promises . . . .” 18 U.S.C. § 1341; see also
United States v. Ethridge, 948 F.2d 1215, 1216 (11th Cir. 1991). The text of § 1343
is substantially similar to § 1341 and states as follows:
Whoever, having devised or intending to devise any scheme or artifice
to defraud, or for obtaining money or property by means of false or
fraudulent pretenses, representations, or promises, transmits or causes to
be transmitted by means of wire, radio, or television communication in
interstate or foreign commerce, any writings, signs, signals, pictures, or
sounds for the purpose of executing such scheme or artifice, shall be
fined or imprisoned . . . or both.
18 U.S.C. § 1343.
Sections 1341 and 1343 are similar to § 1014 in several respects. Foremost, §§
1341 and 1343 do not contain the word “material.” Further, § 1341 was enacted as
part of the recodification of the federal criminal code in 1948, and § 1343 was
patterned after § 1341. Based on these factors considered in Wells, we conclude that
7
materiality is not an element of fraud offenses in §§ 1341 and 1343.4 As discussed
below, we reach the same conclusion regarding § 1344.
C. Bank Fraud: 18 U.S.C. § 1344In United States v. Goldsmith, 109 F.3d 714 (11th Cir. 1997), this court lists
materiality as an element under § 1344. Id. at 715. However, Goldsmith and the cases
on which it relies do not directly address whether materiality is an element under §
1344.5 For example, after listing materiality as an element under one part of § 1344,
the Goldsmith panel did not mention the word “material” in the remainder of its
opinion because materiality was not in issue. Although decided after Wells,
Goldsmith does not re-examine the issue of materiality in light of Wells. Instead,
Goldsmith follows this court’s pre-Wells decisions which also have not been re-
4
In United States v. Cochran, 109 F.3d 660 (10th Cir. 1997), the Tenth Circuit
acknowledged that § 1343 supports two theories of liability: (1) a scheme or artifice
to defraud; or (2) a scheme to obtain money by false pretenses, representations, or
promises. Id. at 664. The court found that “materiality is not an independent element
of a wire fraud prosecution,” but held nonetheless that “there is a materiality aspect
to the determination whether the acts of an accused give rise to a scheme to defraud.”
Cochran, 109 F.3d at 667 n.3. We agree with the Tenth Circuit that materiality is not
an independent element under § 1343. We find unpersuasive, however, the reasons
supporting the Tenth Circuit’s conclusion that materiality is an aspect of a scheme to
defraud.
5
See United States v. Falcone, 934 F.2d 1528, 1545 (11th Cir.), vacated, 939
F.2d 1455 (11th Cir. 1991), modified in part and reinstated in part, 960 F.2d 988 (11th
Cir. 1992) (en banc); United States v. Swearingen, 858 F.2d 1555, 1556 (11th Cir.
1988).
8
examined in light of Wells.
In addition, in its discussion of the relevant issues, the Goldsmith panel
acknowledged that § 1344 has two parts, namely § 1344(a)(1) and (a)(2),6 and that if
an indictment charged a defendant under both parts, the trial court could submit the
case to the jury so long as the evidence at trial was sufficient to convict under either
part. 109 F.3d at 716. The Goldsmith panel listed the elements under subsections
(a)(1) and (a)(2) but ultimately affirmed the defendant’s conviction under §
1344(a)(1), the subsection under which it did not list materiality as an element.7 Thus,
the Goldsmith panel’s listing materiality as an element under § 1344(a)(2) was not
necessary to the panel’s holding and was, consequently, dicta. As a result, we are not
bound by Goldsmith on whether materiality is an element under § 1344, and we
follow Wells in addressing this question.8
6
In 1989, § 1344 was amended such that the former subsection (a) became the
entire section. Thus, what Goldsmith referred to as subsections 1344(a)(1) & (a)(2)
are now subsections 1344(1) & (2).
7
The defendant in Goldsmith was indicted under both subsections (a)(1) and
(a)(2). Because the evidence supported the defendant’s conviction under subsection
(a)(1), the court did not reach whether the defendant violated subsection (a)(2). See
Goldsmith, 109 F.3d at 716 (“where the indictment and instructions to the jury charge
both clauses of the statute, as was done in this case, the defendant’s conviction may
be sustained under either clause.”) (citation omitted).
8
To the extent any of our pre-Wells decisions held that materiality is an element
under § 1344, we disavow those holdings based on the Supreme Court’s intervening
decision in Wells.
9
Applying Wells to § 1344, we first observe that the word “material” does not
appear in the statute. The version of 18 U.S.C. § 1344 in effect when Neder was
indicted states in pertinent part:
(a) Whoever knowingly executes, or attempts to execute, a scheme or
artifice—
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities,
or other property owned by, or under the custody or control of, a
financial institution, by means of false or fraudulent pretenses,
representations, or promises shall be fined not more than $10,000
or imprisoned not more than five years, or both.
18 U.S.C. § 1344 (1988). Section 1344 was not enacted during the recodification of
the federal criminal code in 1948, but its language, like § 1343, is substantially
identical to and was patterned after § 1341. These factors, as we stated regarding §§
1341 and 1343, persuade us that materiality is not an element under § 1344.
D. Use Of The Term “False Representation”
Before addressing Neder’s tax fraud convictions, we do note that § 1014
criminalizes false statements, while §§ 1341, 1343, and 1344 proscribe “false or
fraudulent pretenses, representations, or promises,” and that on that basis the Ninth
Circuit has held, after Wells, that materiality is an element under § 1344. See, e.g.,
United States v. Nash, 115 F.3d 1431, 1436 (9th Cir. 1997), cert. denied, ___ S. Ct.
___, 66 U.S.L.W. 3474 (U.S. Feb. 23, 1998) (No. 97-1108). We disagree with the
10
Ninth Circuit’s analysis that since the term “representation” included “some notion
of materiality at common law,” this indicates that Congress intended for materiality
to be an element of the bank fraud statute. See id. This ignores that Congress now
has employed the terms “material representation” and “material misrepresentation”
in other statutes.9 The fact that Congress uses the term “material” in conjunction with
“representation” or “misrepresentation” in some statutes but not in others rebuts any
presumption that Congress now intends to make materiality an element under a statute
whenever it employs the term “representation” in that statute.
We are also unpersuaded by the Ninth Circuit’s rationale that § 1344 targets
fraud and, therefore, necessarily includes materiality as an element of bank fraud.
This approach is inconsistent with Wells, which disfavors inferring a materiality
requirement where the statutory language does not expressly include one. See Wells,
117 S. Ct. at 927; Nash, 115 F.3d at 1436.
E. Tax Fraud: 26 U.S.C. § 7206(1)
Finally, we address whether materiality is an element under 26 U.S.C. §
9All of the following statutes use either the term “material representation” or
“material misrepresentation”: 8 U.S.C. § 1324c(f); 11 U.S.C. § 505(b); 12 U.S.C. §
1715r; 15 U.S.C. § 78u-4(g)(10)(A)(i)(I); 15 U.S.C. § 158; 15 U.S.C. § 1647(b)(1);
15 U.S.C. § 8817(f); 25 U.S.C. § 88; 25 U.S.C. § 1494; 38 U.S.C. § 3721; 39 U.S.C.
§ 3005(d); 42 U.S.C. § 5919(f); 42 U.S.C. § 6881(d); 42 U.S.C. § 8835(g); 45 U.S.C.
§ 664(b); 45 U.S.C. § 720(d); 45 U.S.C. § 756(a); 48 U.S.C. § 832(b); 48 U.S.C. §
1574b(d).
11
7206(1). The relevant language of § 7206(1) refers to “every material matter,”as
follows:
Any person who—
(1) Declaration under penalties of perjury.—Willfully makes and
subscribes any return, statement, or other document, which contains or
is verified by written declaration that it is made under the penalties of
perjury, and which he does not believe to be true and correct as to every
material matter . . .
shall be guilty of an felony and, upon conviction thereof, shall be fined
not more than $100,000 . . . or imprisoned not more than 3 years, or both
....
26 U.S.C. § 7206(1) (emphasis supplied). The government does not dispute that
materiality is an element under § 7206(1) but contends that the materiality question
is purely a question of law and appropriately was decided by the court.
Based on Gaudin, a majority of circuits addressing the question have held that
the question of materiality under § 7206(1) is for the jury, not the judge. See United
States v. Uchimura, 125 F.3d 1282, 1286 (9th Cir. 1997); United States v. McGuire,
99 F.3d 671, 672 (5th Cir. 1996) (en banc), cert. denied, 117 S. Ct. 2407 (1997);
United States v. DiRico, 78 F.3d 732, 736 (1st Cir. 1996); United States v.
DeDomenico, 78 F.3d 294, 303 (7th Cir.), cert. denied, 117 S. Ct. 507 (1996). But see
United States v. Klausner, 80 F.3d 55, 60-61 (2d Cir. 1996). We now join the First,
Fifth, Seventh, and Ninth Circuits in holding that the question of materiality under §
12
7206(1) is for the jury. The district court thus erred in not submitting the element of
materiality to the jury regarding Neder’s § 7206(1) offenses.
F. The District Court’s Gaudin Error Was Harmless
In this circuit, Gaudin errors do not require automatic reversal but are subject
to harmless error analysis. United States v. Fern, 117 F.3d 1298, 1307 (11th Cir.
1997).10 Thus, the government must show that Neder was not prejudiced by the
district court’s Gaudin error. Id. (citing United States v. Olano, 507 U.S. 725, 734-35
(1993)). The government has met that burden by showing that materiality was not in
dispute regarding Neder’s tax fraud offense.
Under § 7206(1), a “material matter” is any information necessary to a
determination of a taxpayer’s income tax liability. See Uchimura, 125 F.3d at 1285;
United States v. Aramony, 88 F.3d 1369, 1384 (4th Cir. 1996), cert. denied, 117 S. Ct.
1842 (1997); Klausner, 80 F.3d at 60; see also United States v. Gaines, 690 F.2d 849,
10
Accord Bilzerian v. United States, 127 F.3d 237, 242 (2d Cir. 1997); United
States v. Knapp, 120 F.3d 928, 932 (9th Cir.), cert. denied, 118 S. Ct. 417 (1997);
Waldemer v. United States, 106 F.3d 729, 732 (7th Cir. 1997); United States v.
Raether, 82 F.3d 192, 194 (8th Cir. 1996). But see United States v. DeFries, 129 F.3d
1293, 1311-12 & n.13 (D.C. Cir. 1997) (Gaudin error was, per se, a reversible error);
United States v. David, 83 F.3d 638, 647 (4th Cir. 1996) (Gaudin error requires
automatic reversal); United States v. DiRico, 78 F.3d 732, 737-38 (1st Cir. 1996)
(Gaudin error constitutes a “structural error” requiring automatic reversal); United
States v. Pettigrew, 77 F.3d 1500, 1511 (5th Cir. 1996) (harmless error analysis does
not apply to Gaudin error).
13
858 & n.16 (11th Cir. 1982) (stating that in a prosecution under § 7206(1), “the
amounts of the misstatements were legally irrelevant . . . .”); United States v. Holland,
880 F.2d 1091, 1096 (9th Cir. 1989) (stating that “any failure to report income is
material.”). Neder’s § 7206(1) convictions were based on his failing to report
$1,372,360 in income in 1985 and $4,355,766 in income in 1986. An accurate
reflection of income is critical to determining a taxpayer’s income tax liability.
Indeed, Neder did not contest the materiality of his failing to report this income either
through testimony or evidence presented during the trial, or during closing argument.
Neder did not even contest that he failed to report the money. Neder’s defense on the
§ 7206(1) offenses related solely to his intent—specifically, that he had relied on the
advice of his attorney and accountant that he was not required to report the money as
income.
Because materiality was not in dispute with respect to Neder’s tax fraud
offense, the district court’s Gaudin error “did not contribute to the verdict obtained.”
Yates v. Evatt, 500 U.S. 391, 403 (1991) (quoting Chapman v. California, 386 U.S.
18, 24 (1967)). Therefore, the district court’s error was harmless.
III. CONCLUSION
The district court committed no reversible errors, and Neder’s convictions are
thus
14
AFFIRMED.
15