United States v. Theodore J. S. Caldwell

544 F.2d 691, 1976 U.S. App. LEXIS 7531

• Court: Court of Appeals for the Fourth Circuit
• Decided: August 17, 1976
• Docket: 75-2149
• Status: Published

Opinions

WINTER, Circuit Judge:

Theodore J. S. Caldwell, Chairman of the Board of Directors of the First Huntington National Bank of Huntington, West Virginia (bank), was convicted on each count of a twelve-count indictment, and he appeals. Together with John H. Kelly, State Treasurer of West Virginia, Joseph F. Rykoskey, Assistant State Treasurer of West Virginia, and Coleman Trainor (as to whom the government subsequently dismissed the indictment), defendant was indicted on four counts of mail fraud in violation of 18 U.S.C. § 1341 (Counts One-Four) and eight counts of misapplication of bank funds in violation of 18 U.S.C. §§ 656 and 2 (Counts Five-Twelve). The theory of the prosecution was that the several codefendants used the mails to perpetrate a scheme to bribe Kelly and Rykoskey (who were alleged to be clothed with authority, under state law, to designate state depositories and to determine the amounts of state funds to be deposited in each) to prefer the bank in the deposit of state funds in non-interest-bearing accounts, and misapplied bank funds in payment of these bribes.¹

Defendant’s attack on the validity of his convictions is limited to the contentions that (a) each count of the indictment is legally insufficient to charge him with an offense against the United States, (b) the evidence adduced against him was legally insufficient to show either the existence of a scheme or artifice to defraud or that the use of the mails constituted an essential step in the execution of the scheme, and (c) the evidence adduced against him was legally insufficient to show a willful misapplication of bank funds with specific intent to injure or defraud the bank. We find merit in none of these contentions and we affirm.

I.

Before discussing defendant’s specific contentions, we state the basic proof which the government adduced.

Viewed in the light most favorable to the government, the evidence showed that, pursuant to a practice which began as early as 1961 or 1962, the State Treasurer and the Assistant State Treasurer of West Virginia would attend the West Virginia Bankers Association meetings at the Greenbrier, White Sulphur Springs, West Virginia, a luxury resort hotel, at the invitation of the chairman of the board of the bank and at the bank’s expense. Defendant became chairman in 1968, and from then until 1973 he invited Kelly and Rykoskey and their wives to attend the meetings, and he caused their expenses to be paid out of the funds of the bank. No limitation was placed on the duration of the stay nor the expenses that could be incurred.

Under state law, but subject to certain restrictions, Kelly had the authority and duty to deposit all funds of the State of West Virginia in financial institutions of his selection and to decide whether these funds would be deposited in interest-bearing or non-interest-bearing accounts. Rykoskey handled day-to-day deposits.

During the Christmas seasons of 1971, 1972 and 1973, defendant visited Kelly and Rykoskey at their offices and gave each a dozen golf balls and cash in varying amounts from $400 to $500. Defendant also gave Kelly a political contribution of $3,000 in 1972. The making of this contribution is not a subject of prosecution and, indeed, it is not suggested that the making of it was in itself illegal.

Kelly and Rykoskey testified that as a result of the payment of their expenses at the Greenbrier and the other gifts, they favored the bank with large deposits in non-interest-bearing accounts. Kelly specifically stated that he favored the bank in daily decisions as to where to deposit funds and that he kept the deposits at this bank at a high level. Additionally, he would receive and honor defendant’s telephone requests, which were usually made in late December of each year, to make additional deposits to better the bank’s year-end financial reports.

The records of the bank showed that the Greenbrier expenses of Kelly and Rykoskey for a number of years, including 1970-73, were paid by the bank from its funds; and there was testimony that checks in payment were mailed to the Greenbrier in the normal course of business. The bank’s records showed that West Virginia maintained a general and a welfare account at the bank. The balance in the general account was normally maintained at several million dollars. In December, 1973, total deposits to this account exceeded $11,000,000; a deposit of over $2,600,000 and a deposit of over $3,000,000 were made on December 19 and 28, respectively. The overall balance in the account was reflected in the bank’s financial statement as of December 31, 1973.

II.

Defendant’s attack on the legal sufficiency of each count of the indictment is divided into two parts — an attack on Counts One-Four and an attack on Counts Five-Twelve. Counts One-Four are identical except as to dates and years. Count One is appended as an appendix to this opinion.

Similarly, Counts Five-Eleven are identical except as to dates, years and amounts. Count Five is set forth in the appendix of this opinion. Although defendant includes Count Twelve in his attack on the legal sufficiency of the counts founded upon 18 U.S.C. §§ 656 and 2, it is somewhat different from Counts Five-Eleven, and it, too, is set forth in the appendix.

Defendant raised no question of the legal sufficiency of any count prior to trial; nor did he seek particulars. Only after the jury’s verdict of guilty on each count did he move in arrest of judgment, asserting legal insufficiency. The district court denied that motion.

A. Mail Fraud Counts (One-Four).

Defendant argues that Counts One to Four set forth “a grossly divagative and shadowy charge of an illusively asserted ‘scheme or artifice,’ alleged to have been entered into or begun about January 1, 1966, and ending about January 1, 1975, without mention or reference to date, time, place, act or suggestion of act by defendant in implementation or consummation thereof.” The counts are further criticized for failing to allege a connection between the scheme and the mailings. Overall, it is asserted that these counts are so vague that defendant was “required to joust with a shadow in his undertaking to defend” himself against the indictment returned against him.

We disagree. We think that these counts are legally sufficient. Rule 7(c)(1), F.R.Cr.P., requires that an indictment “shall be a plain, concise and definite written statement of the essential facts constituting the offense charged.” Under this rule, an indictment is sufficient if it provides the defendant with sufficient facts intelligently to plan his defense. 8 Moore’s Federal Practice $ 7.04; 1 Wright Federal Practice and Procedure § 125 (1969). In alleging a scheme or artifice to defraud, as well as in alleging the connection between the scheme and the mailings, the indictment here satisfied this requirement. The scheme alleged was (a) to bribe Kelly and Rykoskey to put funds in defendant’s bank in non-interest-bearing accounts in violation of their statutory duty to act dispassionately in the performance of their duties, the bribes being, in part, the payment of the costs of certain living and vacation expenses of the codefendants and their wives, (b) to misappropriate bank funds to be paid for the personal use and benefit of the codefendants, and (c) for the codefendants to accept funds in violation of law. The mails were allegedly used to make payment of such expenses and to transmit the misappropriated funds.

Unlike the indictment in United States v. Curtis, 506 F.2d 985 (10 Cir. 1974), on which defendant relies, much more was pleaded than the statutory language of § 1341. To the end of alleging the crime charged, Counts One-Four meticulously and with particularity set forth defendants’ positions, the applicable West Virginia statutes, the nature of the scheme to defraud, the actions taken by each defendant to carry out the scheme and the specific use of the mails, including the date and addressee of each mailing, in furtherance of the scheme.

The indictment in the instant case is like the indictments which were upheld in United States v. Isaacs, 493 F.2d 1124 (7 Cir.), cert. denied, 417 U.S. 976, 94 S.Ct. 3183, 41 L.Ed.2d 1146 (1974), and United States v. Faser, 303 F.Supp. 380 (E.D.La.1969). Its theory falls within the rationale of Sushan v. United States, 117 F.2d 110 (5 Cir.), cert. denied, 313 U.S. 574, 61 S.Ct. 1085, 85 L.Ed. 1531 (1941). Moreover, to the extent that defendant may have considered that he was not fairly apprised of the charges against him, he could have sought a bill of particulars under Rule 7(f), F.R.Cr.P. Having failed to do so, he is largely foreclosed from the present attack by the rule recognized in United States v. Chinn, 5 F.R.D. 226 (S.D.W.Va.), aff’d 157 F.2d 1013 (4 Cir. 1946), that an indictment is to be construed more liberally after judgment than before, so that if the indictment contains allegations which clearly express what was meant to be charged although not technically in the language of the statute, any technical deficiency was cured by the conviction and judgment.

B. Misapplication Counts (Five-Twelve)

With respect to these counts, defendant’s argument is that they are fatally defective, first, in failing to identify the funds allegedly misapplied. Defendant recognizes that the language of these counts is “said funds,” but he asserts that “said” must mean funds identified in that count and not funds identified in any other count, and since there is no other identification in the count itself, the count is defective. Defendant argues that a second defect is contained in the phrase “cause same in the amount of . .” He asks, “Cause what? In what connection? With what result? In what direction, involving whom?”²

We agree with the government that the phrase “said funds” is a valid and permissible incorporation by reference of the allegations concerning the “monies, funds and credits of the First Huntington National Bank” set forth in H 12(b) of Count One, and realleged, by reference, in Counts Two-Four. Incorporation by reference is permissible, Blitz v. United States, 153 U.S. 308, 317, 14 S.Ct. 924, 38 L.Ed. 725 (1894); United States v. Bryant, 430 F.2d 237, 239 (8 Cir. 1970), and we think that the word “said” is the functional equivalent of “hereinbefore set forth,” upheld as a valid incorporation by reference in Nichols v. United States, 48 F.2d 46 (5 Cir. 1931). See also United States v. Bagdasian, 291 F.2d 163 (4 Cir.), cert. denied.

Although we agree that the use of the phrase “cause same,” as alleged in Counts Five-Eleven, does not result in a model of written clarity, we nevertheless do not deem these counts legally insufficient. If the challenged phrase is omitted, defendant and others are accused of injuring and defrauding the bank by knowingly and willfully embezzling, abstracting, purloining and misapplying the bank’s monies, funds and credits in stated sums, and of aiding and abetting one another in this unlawful endeavor. Since defendant is identified as Chairman of the Board of the bank and the misapplied funds as those belonging to the bank, one reading the indictment would hardly suppose that defendant did every act himself, but rather that he instructed his subordinates to do some acts necessary to the misappropriation without fully informing them as to the ultimate purpose of their actions. The phrase “cause same” may therefore be appropriately read to charge simply that defendant, not only as a principal and an aider and abetter, did the illegal acts himself, but also that he caused certain of them to be done by others.

Certainly Counts Five-Twelve are susceptible of the reading we give them; and if given that reading, they are legally sufficient. Each identifies the relevant date, the principals involved in the illegal act, and the amount of money involved. Any question about their sufficiency could have been raised before trial; and if more details were needed to plan a defense, defendant could have sought particulars. Under Chinn, his failure to do either defeats his postconviction attack on their legal sufficiency.

III.

We have no doubt that the evidence was legally sufficient to show both the existence of a scheme or artifice to defraud and the use of the mails as an essential step in the execution of the scheme. Defendant’s argument that the evidence was legally insufficient to show a scheme or artifice to defraud is that he did not initiate the practices complained of; rather it had been the longstanding practice for whoever was chairman of the bank to issue expense-paid invitations to attend the Annual West Virginia Bankers’ Association Meeting at the Greenbrier to whoever held the offices of state treasurer and assistant treasurer respectively; and no one ever thought it was wrong. That is, of course, no defense. Even if the law has been violated many times with impunity, that does not render a subsequent violation legal.

Here, the proof showed that defendant used bank funds to provide expense-free junkets for Kelly and Rykoskey, and the circumstances were such that both the providing and the acceptance of the same were in violation of state law. Kelly and Rykoskey both pleaded guilty and testified that the receipt of these favors influenced them in their exercise of the authority vested in them under state law. Indeed, the proof showed that defendant solicited favors from Kelly and Rykoskey and the favors were granted by Kelly and Rykoskey as a quid pro quo for what they had enjoyed. It is at once obvious that the fair and impartial execution of the laws of West Virginia was denied her citizens and the rights of the bank and its owners to a proper stewardship of the bank’s funds defeated.

Nor do we have doubt concerning the sufficiency of the proof to show that the mailings were integral parts of the scheme. Kelly and Rykoskey did what they did in part because of the favors extended to them and their wives at the Greenbrier. Payment to the Greenbrier for the services and accommodations it provided was essential to the scheme, and defendant elected to make payment by mail. It matters not, as defendant argues, that payment could have been accomplished in some other manner— defendant suggests by dog sled — or that the bank routinely employed the mails for its countless other routine transactions. The use of the mails need not in and of itself be fraudulent to constitute an offense under the statute. Nor is it a good defense that the materials mailed were innocent in themselves if they are part of a scheme to defraud. Parr v. United States, 363 U.S. 370, 390, 80 S.Ct. 1171, 4 L.Ed.2d 1277 (1960); United States v. Vanderpool, 528 F.2d 1205 (4 Cir. 1975); United States v. Brewer, 528 F.2d 492 (4 Cir. 1975). All that is needed is proof that the mails played a significant part in execution of the scheme. That fact was established.

IV.

With regard to his conviction on the misapplication counts, defendant correctly asserts that an essential element of proof for willful violation of 18 U.S.C. § 656 is the intent of the accused to injure or defraud the bank. He contends that such proof is precisely to the contrary because it shows that the bank was benefitted by the sums expended on Kelly and Rykoskey. Thus, he argues that the only proper inference which may be drawn is that defendant’s intent throughout was to accomplish that laudable objective for the bank.

We reject this argument. The defendant’s wrongdoing was complete at the time when he made illegal payments in accommodations and services to Kelly and Rykoskey and their wives; at that point, defendant had misapplied bank funds by using the money for an illegal purpose. Such misapplication injured the bank, and as such gave rise to the inference that the defendant had the requisite intent. United States v. Schmidt, 471 F.2d 385 (3 Cir. 1972); Golden v. United States, 318 F.2d 357 (1 Cir. 1963); Mulloney v. United States, 79 F.2d 566 (1 Cir.), cert. denied, 296 U.S. 658, 56 S.Ct. 383, 80 L.Ed. 468 (1935).

The fact that the defendant had as his ultimate goal the unlawful preferment of the bank by Kelly and Rykoskey is irrelevant. Uniformly it is held that the promise or hope of a better life to come for the bank does not render lawful that which was unlawful. United States v. Acree, 466 F.2d 1114 (10 Cir. 1972), cert. denied, 410 U.S. 913, 93 S.Ct. 962, 35 L.Ed.2d 278 (1973); Golden v. United States, supra; Mulloney v. United States, supra; Galbreath v. United States, 257 F. 648 (6 Cir. 1918). Nor is it essential to a conviction that the proof show an intent permanently to deprive the bank of its property. United States v. Scheper, 520 F.2d 1355 (4 Cir. 1975); Golden v. United States, supra; Rakes v. United States, 169 F.2d 739 (4 Cir.), cert. denied, 335 U.S. 826, 69 S.Ct. 51, 93 L.Ed. 380 (1948).

Because we find no error, the judgments are

AFFIRMED.

1 . Kelly and Rykoskey pleaded guilty to a single charge of mail fraud contained in the indictment naming defendant, and to various charges in other pending indictments. They testified against defendant at his trial.

2 . Defendant overlooks that the phrase “cause same, etc.” does not appear in Count Twelve. It was employed only in Counts Five-Eleven.