United States v. Thomas H. Kerr and Darwyn C. Fuller

778 F.2d 690, 19 Fed. R. Serv. 1406, 1985 U.S. App. LEXIS 25435

• Court: Court of Appeals for the Eleventh Circuit
• Decided: December 19, 1985
• Docket: 84-8790
• Status: Published

Opinions

HILL, Circuit Judge:

This is an appeal from a prosecution for conspiracy to commit mail fraud and for mail fraud. The government sought to prove at trial that the appellants, Thomas H. Kerr and Darwyn C. Fuller, obtained insurance on the the contents of a pharmacy and an affiliated business selling stereo equipment, intentionally set fire to the premises in which these businesses were housed, and attempted to collect insurance on the business by placing three separate proof of loss statements in the mails. The appellants raise three categories of issues on appeal: (1) whether testimony admitted at trial to prove motive for arson was so prejudicial that it should have been excluded under Rules 403 and 404(b), Federal Rules of Evidence; (2) whether there was insufficient evidence of mail fraud and conspiracy to commit mail fraud; and (3) whether the trial court erred in refusing an evidentiary hearing on the appellants’ motion for a new trial grounded on an alleged misrepresentation by one of the jurors at voir dire.

FACTS

Appellant Kerr is a registered pharmacist in Georgia. In 1977 Kerr purchased the ongoing pharmaceutical business of Landers Pharmacy in Rome, Georgia.¹ In 1981 Kerr rented space in a building adjoining the pharmacy and began operating a business selling stereo equipment, the Stereo Den. Shortly thereafter, Kerr entered into partnership with Darwyn Fuller. Under the terms of the agreement, Fuller was to manage the Stereo Den in return for a percentage of the profits of that business.

In 1977 Kerr purchased a $200,000 insurance policy from the Hartford Insurance Company. The policy covered the contents of the pharmacy from loss due to fire or burglary, and contained professional liability coverage as well. The payees on the loss portion of the policy were Bud Landers, the former owner of Landers Pharmacy, and the Allied Capital Corporation, a creditor of Landers Pharmacy. Also in 1977, Bud Landers purchased a $125,000 insurance policy from Hartford that covered the building in which the pharmacy was located.

Landers Pharmacy was burglarized on February 2, 1981, October 14, 1981, and November 28, 1981. After the third burglary, Hartford canceled Kerr’s $200,000 policy. Cancellation occurred in December, 1981. Kerr thereafter obtained a separate $125,000 insurance policy from Hartford that covered Landers Pharmacy in the event of fire loss and also contained professional liability coverage. The partnership of Kerr and Fuller obtained a $100,000 insurance policy from the Waco Insurance Company that covered the Stereo Den from fire loss.

Testimony at trial established that on January 19, 1982 Kerr and Fuller closed the Landers Pharmacy and the Stereo Den at its usual closing time of approximately 7:00 p.m. Melonie Jackson, a cashier, and William Fricks, an assistant pharmacist, left the building with Kerr at approximately 7:00 p.m. Fuller, explaining that he thought he saw a light left on in the Stereo Den, remained in the building. At approximately 7:10 p.m. Billy Rampley, walked outside his home which was situated near Landers Pharmacy and heard a burglar alarm sounding from the pharmacy premises. Smelling smoke, he discovered that the pharmacy was on fire. After directing his wife to call the fire department, Mr. Rampley went back to the pharmacy and waited outside for the fire department.

At approximately 7:10 p.m. David Cargle was driving past the Landers Pharmacy. He heard the burglar alarm go off, drove on about a quarter of a mile, smelled smoke and turned back. Returning to the pharmacy, Mr. Cargle saw smoke and flames coming out of the Stereo Den window. Mr. Cargle, too, called the fire department from a mobile phone in his pickup truck. Thereafter, he drove around to the front of the building, got out of the truck and kicked down the door to the Stereo Den in an attempt to salvage some of the merchandise. Smoke billowed out of the door and he closed it quickly.

It was at this time the fire department arrived. Mr. Carl Green, Deputy Chief, Rome fire department, received a call that the Landers Pharmacy was on fire at approximately 7:13 p.m., January 19, 1982. Mr. Green arrived at the scene of the fire at 7:19 p.m., entered the building at the northern end of the Stereo Den where it joined Landers Pharmacy, and observed severe burning in the Stereo Den and in the pharmacy. Fire was moving from the Stereo Den into the pharmacy by force through adjoining doors between the two businesses. Mr. Green remained at the pharmacy most of the ensuing night directly firefighting teams. During the course of this activity he observed two low burns within the building. One low burn was at the Stereo Den side of the doorway adjoining the pharmacy. The second low burn was in the back of the Stereo Den. Mr. Green pointed these burning patterns out to George Lanier, the fire marshal of the Rome fire department.

It was Mr. Lanier’s duty to determine the cause of the fire. After observing the course of the fire and, later, investigating the scene, Mr. Lanier determined that the fire was not accidental. Burning patterns in the rooms, including charring under appliances in the Stereo Den indicating the presence of flammable liquids seeping over the floor, led Mr. Lanier to suspect arson.

He also examined other possible causes for the fire including heaters, electrical wiring in the walls, and a possible short circuit from the fuse box on the premises. There was no indication of a malfunction in any of these units. Additionally, there was no evidence of forced entry into the pharmacy. In fact, the back door to the pharmacy was secured from within. There was no fire in the basement and no forced entry into the basement. Finally, it was significant that the fire was discovered not more than eleven minutes after the vacation of the premises by Kerr and, later, Fuller. Considering the advanced burning that was present when the firefighters arrived on the scene approximately ten minutes after the fire was discovered, and that this development had occurred over a course of approximately fifteen minutes from the time Kerr and Fuller left, it was Mr. Lanier’s opinion that the fire had been intentionally set.

Evidence was also had from a Mr. Malcom Martin, an electrical engineer. Mr. Martin testified that he had examined the electrical systems within the buildings and conclusively ruled out electrical short circuiting as a cause of the fire.

Finally, testimony was taken from Mr. Lloyd Erwin, a forensic chemist with the Bureau of Alcohol, Tobacco and Firearms. Mr. Erwin examined samples of debris taken from locations where there were low burn patterns in the buildings. His examination revealed the presence in those samples of flammable liquids, medium range distillants including paint thinners.

Following the fire, Kerr and Fuller attempted to collect on two insurance policies held on their businesses. Both Kerr and Fuller submitted through the United States mails three sworn notarized statements in proof of loss arising from the fire.

The defendants were named in an eight count indictment charging them with violations of 18 U.S.C. §§ 371, 1341, and 1342. The defendants were arraigned on July 16, 1984 and entered pleas of not guilty to all charges. The case was tried in August, 1984. At the conclusion of the trial the jury returned verdicts of guilty as to all counts. Defendant Kerr was sentenced to three years on counts I, II, III, IV, V, VI, VII, and VIII with the sentence imposed as to each count to run concurrently. Defendant Fuller was sentenced to eighteen months on counts I, and II, the sentences to run concurrently. On count III, IV, V, VI, VII and VIII, the defendant was sentenced to two years concurrent, that sentence to run consecutively with the sentence imposed on counts I and II. The sentence on counts III, IV, V, VI, VII, and VIII was suspended with the defendant being placed on probation for a period of three years, the same to commence on his release from the sentence served on counts I and II.

Prior to sentencing, the appellants moved for a new trial or an evidentiary hearing, or, alternatively, for judgment of acquittal notwithstanding the verdicts. The trial judge denied these motions. On October 1, 1984, the defendants filed a motion for reconsideration and this motion, too, was denied. A notice of appeal was filed from the judgment of the district court.

ISSUES ON APPEAL

The appellants raise three claims on appeal: (1) that the trial court erroneously allowed testimony going to the motive and the intent of the defendants, the probative value of which was outweighed by its prejudicial effect; (2) that there was insufficient evidence to support the convictions; and (3) that the trial court erred in refusing an evidentiary hearing on defendants’ motion for a new trial made on the basis of an alleged misrepresentation by one of the jurors on voir dire.

In our view, the evidence is clearly sufficient to support the jury’s verdict on the issues of mail fraud and conspiracy to commit mail fraud. Likewise, we do not find error in the district court’s refusal to grant an evidentiary hearing on the basis of an alleged juror misrepresentation during voir dire.

The circumstances of the alleged misrepresentation are these. On voir dire, the venire was asked the following questions:

Do any of you now or have you in the past ever been employed by any agency of the federal government, including your immediate family?

Do any of you have any members of your immediate family who are law enforcement officers who work in any capacity with the federal government, with the Alcohol Tobacco and Firearms Department, which is the agency that’s handling this case, or the F.B.I., the Georgia Bureau of Investigation, or any law enforcement agencies to where you or your children or any members of your immediate family are affiliated with any law enforcement agency?

Do any of you know personally or socially or in any capacity any person who works for the Alcohol Tobacco and Firearms Department, which is an agency of the federal government that’s assisting in the prosecution of this case?

... Do any members of the jury or any members of their immediate family work for a fire department?

Trial transcript at 27-28. One juror, Mrs. Shelby Ray, did not respond to these questions. After the jury rendered the verdict in this case it was discovered that Mrs. Ray is married to a former law enforcement officer of Bartow County, Georgia. Having discovered this information, the appellants moved for an evidentiary hearing to determine whether Mrs. Rays’ affiliation with law enforcement entitled them to a new trial under McDonough Power Equipment, Inc. v. Greenwood, 464 U.S. 548, 104 S.Ct. 845, 78 L.Ed.2d 663 (1984).² The district court denied this motion. United States v. Kerr, No. 84-16R (N.D.Ga. Sept. 26, 1984). We believe that denial was correct.

McDonough involved an absence of response to a question clearly and directly posed. We have a different case here. The lawyers in this case did not ask a question about the jury venire’s relation to former law enforcement officers. While the parties in this or any other case are of course entitled to an impartial jury and to an honest and straightforward response from potential jurors on voir dire in order to obtain such a jury, we cannot put upon the jury the duty to respond to questions not posed. Had the lawyers wished to know about relations to former law enforcement officers they should have asked. They did not. We affirm the district court’s denial of an evidentiary hearing on this issue.

This leaves for our review merely the question of abuse of discretion by the district court in admitting motive and intent testimony alleged to be unduly prejudicial under Rule 403 and Rulé 404(b), Federal Rules of Evidence.

THE DISTRICT COURT’S EXERCISE OF DISCRETION IN THE ADMISSION OF CHALLENGED TESTIMONY

The appellants contend that the trial court abused its discretion in the admission of documentary and testimonial evidence proposed by the government to show motive and intent for arson. The basis for this claim is the prejudicial effect of the challenged evidence. The appellants argue that this prejudicial effect substantially outweighed any probative value contained in the evidence itself.

The specific evidence challenged includes the individual tax returns of Kerr for the years 1980 and 1981, and the Stereo Den’s partnership tax returns for those same years. Under the standards set out in subsequent discussion of other testimony in this case, we find the admission of this evidence unobjectional. Certainly the government was entitled to prove that a motive to commit arson arose from losses sustained in the operation of the appellants’ businesses. The tax returns were lawfully obtained. They were competent evidence of these losses. Clearly the district court did not abuse discretion in allowing them into evidence.

The gravamen of the appellants’ claims, however, concerns admitted evidence about Kerr’s practices as a pharmacist. The testimony at issue came from two sources, Dr. Gary Kaufmann, a neurosurgeon, and Mr. Walter Matthews, an attorney affiliated with an insurer of a customer of Kerr, Mr. Donald Byerly.

Dr. Kaufmann testified that in October, 1980 he prescribed drugs for his patient Byerly, and that these prescriptions were filled by Kerr at Landers Pharmacy. The prescribed drugs included several Schedule II narcotics. Byerly was going to Florida for the winter so Dr. Kaufmann wrote prescriptions with three refills, an amount of drugs sufficient to provide for Byerly’s needs while out of the state. These prescriptions were filled at Landers Pharmacy. All prescriptions and their refills were provided at one time. Later, unknown to Kaufmann, Byerly called Kerr and informed him that he would be in Florida longer than anticipated. Byerly then asked Kerr to “get an o.k. from Dr. Kaufmann and send [me] another three months supply of medication.” Kerr called Kaufmann’s office and talked to Doris Franco, Kaufmann’s office manager, who orally approved the dispensing of an additional three months’ supply of medication for Byerly. Kaufmann was not contacted and did not authorize this prescription. Kerr sent the medicine to Byerly.

In February of 1981, the Pennsylvania National Insurance Company, Byerly’s Workmen’s Compensation carrier, contacted Kaufmann and asked him whether he had prescribed the medicine given to Byerly in January 1981 and whether the charges for these medications were “abnormally high.” At the trial of this case, the district court had instructed Kaufmann to make no reference to the amount charged for the drugs. Kaufmann nevertheless stated that it was his opinion the charges were indeed abnormally high, that the dispensing of the drugs in January, 1981 was not authorized by Kaufmann, and that this conduct appeared to be highly irregular and unethical. Finally, Kaufmann testified that the only other time he had seen this type of dispensing of drugs was when a drug-abusing individual and a pharmacist colluded in the illegal dispensation of narcotics.

After Kaufmann’s testimony, the district court issued a limiting instruction stating to the jury that Kaufmann’s testimony was admissible only for the purpose of showing the motive of Kerr in this case.

Additionally, the government introduced testimony of Mr. Walter Matthews, an attorney for the Pennsylvania National Insurance Company, and testimony of James Cope, an Agent of the Georgia Drug and Narcotics Agency. Mr. Matthews wrote Kerr in December of 1981 in connection with Byerly’s Workmen’s Compensation claim. Matthews asked Kerr in this letter to “clarify some drug bills” that had been submitted as a part of Byerly’s Workmen’s Compensation claim. On January 18, 1982, the day before the fire, Kerr called Matthews and informed him that he did not have, or that he could not find, copies of the prescriptions because the prescriptions had been filled 12 to 15 months earlier.

Agent Cope audited Landers Pharmacy on October 7, 1981, comparing invoices of drugs purchased with records of drugs dispensed through prescriptions. The audit revealed shortages and overages in fifteen Schedule II drugs. On November 10, 1981, Agent Cope advised Kerr that Kerr would be scheduled for a hearing before the State Pharmacy Board and that, if Kerr would agree to turn in this license for six months, the Board would probably dispose of his case. Kerr stated he could not bear the financial burden of hiring another pharmacist, a necessity if the business were to continue in operation without Kerr’s license.

The substance of Kaufmann’s testimony, taken together with the testimony of Matthews and Cope, was thus that there were irregularities in Kerr’s practices as a pharmacist and that these irregularities were about to seriously affect Kerr’s ability to continue in business. The imminent collapse of the business, the government argues, was proper proof of motive to commit arson. The appellants urge that this evidence raised the implication of narcotics trafficking. They claim this implication was so prejudicial that it outweighed the probative value of the evidence giving rise to it, making that evidence inadmissible.

In United States v. Beechum, 582 F.2d 898 (5th Cir.1978) (en banc), cert. denied, 440 U.S. 920, 99 S.Ct. 1244, 59 L.Ed.2d 472 (1979), our predecessor court articulated the standard to be used in determining the admissibility of evidence of acts extrinsic to the indictment under Federal Rules of Evidence 403 and 404(b). Under the Beechum standard, a two-pronged test for admissibility is used. The court must first determine whether the proffered testimony is relevant to an issue other than the defendant’s character. If such relevancy is established, it must then determine whether the probative value of the evidence is substantially outweighed by prejudice arising from it, and whether the proffered evidence is otherwise admissible under Rule 403. Beechum, 582 F.2d at 911. See also United States v. Pepe, 747 F.2d 632, 670 (11th Cir.1984).

This case was a prosecution for mail fraud and conspiracy to commit mail fraud; the predicate crime was arson. In offering Dr. Kaufmann’s testimony, the government attempted to show that, some fifteen months prior to the counts giving rise to this case, Kerr engaged in irregular practices in the dispensing of drugs. Thus, the evidence offered was clearly of acts extrinsic to the indictment. Additionally, the government offered Walter Matthews’ testimony, which was generally to the effect that inquiries about the earlier dispensing irregularities were being made, to show that the irregularities in drug dispensing were about to be discovered. Thus, this evidence, too, was of circumstances extrinsic to the indictment. It is nevertheless our view that, taken together, these lines of testimony were relevant to the issue of motive and intent to burn the business because, under Rule 401, the testimony tended to show a reason to destroy the records of the pharmacy. Finally, Agent Cope’s testimony, while clearly of acts extrinsic to those charged, was certainly relevant to the likelihood of the collapse of the business. Collapse of the business was motive for arson. This testimony, too, was relevant.

The more difficult question is whether this evidence gave rise to prejudice substantially outweighing its probative value on the issue of intent and motive. We recognize that testimony concerning irregularity in the dispensing of Schedule II narcotic drugs may be inflammatory. Similarly, we note that at least part of this evidence concerned acts remote in time to the incidents in question in this case. However, as is often true with evidence tending to show motive and intent, prejudice arises for the same reason as probativeness. The graver the consequences of an act, hence the greater the prejudice coming from its revelation, the more likely it would be that a defendant would wish to conceal that act by, for example, destroying the evidence in a fire. Additionally, while it is true that the events testified to by Dr. Kaufmann were remote in time from the events at issue in this case, other testimony established the immediacy of those events by showing an imminent likelihood of discovery through the incidental means of a workmen’s compensation insurer’s routine inquiry, or a hearing before the Georgia Pharmacy Board. Viewing these strains of evidence together, we see the government attempting to show that Kerr had engaged in acts which a person in his position would wish to conceal and that this concealment, heretofore successful, came into peril at a time immediately preceeding the fire. Probativeness and prejudice were closely intertwined.

In weighing probativeness and prejudice we approach the issue with deference to the sound discretion of the trial judge. See United States v. McMahon, 592 F.2d 871, 873 (5th Cir.), cert. denied, 442 U.S. 921, 99 S.Ct. 2847, 61 L.Ed.2d 289 (1979). We note that the district court instructed the jury at length that the testimony of Dr. Kaufmann was to be considered only on the issue of motive.³ As thus limited, we do not find that the prejudicial effect of this testimony substantially outweighed its probative value so as to make its admission an abuse of discretion. Likewise, we uphold the district court’s judgment that the testimony of Matthews and Cope was more probative than prejudicial. We therefore affirm the decision of the district court on this point.

SUMMARY

For the reasons foregoing, the judgment of the district court is AFFIRMED.

1 . Kerr merely purchased the business interest; he did not purchase the building in which the pharmacy was located.

2 . McDonough was a suit for damages sustained by a user of a power mower. During voir dire the prospective jurors were asked whether any of them or any members of their family had ever sustained severe injury. A juror not responding to this question was subsequently found to have had a son injured by an apparently defective product, a tire which exploded. In evaluating the effect of this nonresponse to the trial proceeding the court stated:

We hold that to obtain a new trial in such a situation, a party must first demonstrate that a juror failed to answer honestly a material question on voir dire, and then further show that a correct response would have provided a valid basis for a challenge for cause. The motives for concealing information may vary, but only those reasons that affect a juror’s impartiality can truly be said to affect the fairness of the trial. McDonough, 464 U.S. at 556, 104 S.Ct. at 850.

Finding the lack of response did not affect impartiality, the Court held no unfairness was demonstrated and denied a new trial.

3 . The court’s instruction was as follows:

Now, ladies and gentlemen of the jury, in the testimony just given by Dr. Kaufmann, he commented about a matter of ethics. I instruct you that ethics is not in issue in this case. The court overruled an objection to the doctor’s opinion about ethics. I overrule that objection because I admitted the testimony of the doctor with reference to what he said about ethics for the purpose of your understanding the doctor's testimony and the position of that witness in this case.

However, I instruct you that you are not concerned with any any ethics in connection with any defendant in this case. Also, let me caution you explicitly again that this is not a case in which any defendant is charged with any drug violation and you are not in any way concerned with any issue in this case as to drugs, except as it may relate to motive, if it does, with reference to the charges that are made in the indictment in this case.

No defendant in this case is charged with a drug violation and you may not consider any evidence as charging a drug violation. Any evidence admitted as from this physician and any other witness with reference to any testimony concerning drugs is admissible only for the purpose of going to motive with reference to the matters charged in the indictment, if it does show any motive or attempt to show any motive in connection with the charges made in this case.

Also, the court sustained an objection to the physician testifying as to the amount of any bill. He testified or started to testify with reference to his concern about bills. You’re not in any way concerned and it is irrelevant and immaterial to the issues in this case as to any concern he might have had with reference to any bills that he may have seen or alluded to with reference to charges made for any medications. That is entirely irrelevant and immaterial to the issues in this case. The court rules that it confuses the issues and is immaterial to the true issues in the case to in any way be concerned with the testimony having to do with bills.

So the court cautions you as to those particular matters: ethics, bills, drugs. Any testimony as to bills is completely inadmissible and is excluded; any testimony as to this witness's opinion as to ethics is admitted only for the purpose of explaining his conduct, the witness’s conduct, if it does, and as it may impact upon his testimony; and any evidence having to do with drugs is admissible only for the very limited purpose of going to motive, if it does.

Trial transcript at 621-23.