United States v. Frey

• Court: Court of Appeals for the Third Circuit
• Decided: December 13, 1994
• Docket: 94-1594
• Status: Unknown

Opinion

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United States v. Frey Precedential or Non-Precedential: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

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1994

Recommended Citation "United States v. Frey" (1994). 1994 Decisions. Paper 217. http://digitalcommons.law.villanova.edu/thirdcircuit_1994/217

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 1994 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. 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. __________________________