964 F. 2d 365 - United States v. D Green

Appellant Douglas D. Green (Green) challenges his convictions for mail fraud, conspiracy to commit mail fraud and money laundering and the sentences imposed. For the following reasons, we AFFIRM Green's convictions and sentences.

"They say the gods themselves/ Are moved by gifts, and gold does more with men than words."1

Appellant Green was elected to the position of Commissioner of Insurance for the State of Louisiana in October of 1987. He took office in March of 1988. The facts of his election campaign and his conduct while in office bear witness to the unfortunately continuing truth of the words spoken by Euripides almost 2,500 years ago.

In the fall of 1986, John and Naaman Eicher (the Eichers), principals of Champion Insurance Company (Champion), became dissatisfied with the performance of the then Commissioner of Insurance of the State of Louisiana, Sherman Bernard (Bernard). In an effort to unseat Bernard and find favor in the office of the Commissioner, the Eichers handpicked Green, a former employee of John Eicher at Key Underwriters, to run for the post.2 The Eichers offered to match Green's then current income and to provide substantial funding for Green's campaign.3

Funding for Green's campaign arrived in the form of "loans" from William Hall (Hall) ($100,000), Harry Mey (Mey) ($25,000) and M.L.C. Services Inc. (MLC) ($25,000), a company owned by Carey Guidry.4 Testimony revealed each of the "loans" corresponded exactly to amounts "loaned" to Hall, Mey and M.L.C. (collectively the "intermediaries") by United Financial Services (United), a company owned by the Eichers. Notes for the "loans" were simultaneously created between the intermediaries and the Green campaign and the intermediaries and United. United informed the intermediaries that it would not seek repayment of the notes unless the Green campaign repaid the intermediaries. Although fundraisers were held on behalf of Green following his election, no payments of principal or interest were ever made to the intermediaries. At the same time, however, some of the money raised was used to hire private investigators utilized in an attempt to gather information for the purpose of firing Max Mosley, the Chief Insurance Examiner and a target of the Eichers. Green was entirely aware of these financing arrangements; he had been present at meetings during which these financing arrangements were planned.

In addition to the financing provided by the Eichers, Green was paid $2,000 per month to "run for office" and was provided with a fashion consultant. The Eichers also arranged for Green's brother to be his driver, the Eichers paying the salary, and arranged for Green's brother to live in an apartment paid for by the Eichers.

Upon Green's assumption of duties as Commissioner of Insurance, a backlog of unpaid claims began to build up at Champion and complaints at the Insurance Commission mounted. James Fernandez (Fernandez), a supervisor in the Department of Insurance, repeatedly raised the issue of Champion's problems with Green, asking Green to take action against Champion. Green's response to Fernandez' overtures was to remove Fernandez from the investigation of the claims involving Champion. Green personally assumed control and responsibility for the investigation together with his close friend Tom Bentley.5 Although intense pleas from Fernandez continued,6 Green did nothing about Champion's mounting problems. In spite of Green's nonaction, official inquiry forms ("lulling letters") were sent by the Department of Insurance to each of Champion's complainants indicating that the Department of Insurance was investigating their complaints. Champion claimants testified the lulling letters contributed to their decisions not to seek legal action against Champion.

In addition to the lulling letters, Green assisted the Eichers and Champion by interfering with an audit of Champion designed to remove the watchlisting of Champion by A.M. Best (Best), a national insurance rating company. Green appointed Malcolm Ward (Ward) to conduct the examination of Champion. When Ward attempted to expand the audit of Champion, Green intervened and limited it. Green guided the Department of Insurance in its urging of Best to withdraw the watchlisting of Champion. This action occurred via correspondence from the Department of Insurance drafted by Patti Eicher, John Eicher's wife.

Green's actions on behalf of the Eichers extended into other areas as well. He misled the Insurance Commissioner of Alabama, at the time conducting its own investigation of Champion, by indicating that Champion was in good condition despite knowledge of innumerable complaints against it. When Alabama insurance auditors sought to audit other companies controlled by the Eichers, Green, upon being informed by Naaman Eicher that one particular Eicher company, United Southern Underwriters, could not withstand auditing, prevented the auditing of that company.7 When Alabama eventually announced it would issue its own report of the examination as opposed to a joint report with Louisiana. The differences between the two reports was staggering, Louisiana reporting Champion to be solvent by $15 million and Alabama reporting it insolvent by $25 million.

Green personally licensed the Capital Insurance Company (Capital), a Communion company owned by the Eichers. The licensing permitted Capital to write multiple lines of insurance in Louisiana despite the fact that Capital could not sell insurance where it was originally licensed and thus failed to fulfill the requirements of Louisiana law. The $15 million solvency of Champion shown by the Louisiana report was due in part to a reinsurance contract Champion had with Capital. Under this contract, Capital supposedly accepted retroactive responsibility for certain claims against Champion. Testimony revealed, however, that if actually effectuated, this contract would require Capital to pay out $1.21 for every dollar of premium it received. Appellant was aware of the Eichers' plan to permit Champion to fail and to begin to write insurance in Louisiana through Capital.

In his first point of error, Green contends the evidence was insufficient to permit the jury to convict him. In a challenge to the sufficiency of the evidence, this court must view the evidence, and all reasonable inferences to be drawn therefrom, in the light most favorable to the verdict. United States v. Triplett, 922 F.2d 1174, 1177 (5th Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2245, 114 L.Ed.2d 486 (1991). The question on appeal is whether a rational jury could have found the defendant guilty beyond a reasonable doubt and not every reasonable hypothesis of innocence need be excluded. Id. All credibility choices should be made in favor of the verdict. United States v. Montemayor, 703 F.2d 109, 115 (5th Cir.), cert. denied, 464 U.S. 822, 104 S.Ct. 89, 78 L.Ed.2d 97 (1983).

Green's argument regarding his conviction on the mail fraud counts is two-fold. First, he contends that because the lulling letters, sent to induce complaining Champion claimants into inaction, were sent by staff at the Department of Insurance and not by Green himself, there can be no reasonable conclusion other than Green did not have the specific intent to defraud required for conviction. Related to this, he points to evidence that the letters were sent as a matter of course and had similarly been sent by the previous Insurance Commissioner's administration. Secondly, Green contends the letters tended to expose the fraudulent scheme to keep Champion in business despite its troubled times and that thus the letters cannot, as a matter of law, constitute mail fraud.

To prove a case of mail fraud, the government must show that Green engaged in a scheme to defraud and used the mails to further this scheme. United States v. Church, 888 F.2d 20, 23 (5th Cir.1989). A defendant need not actually be involved in the mailings directly; it is sufficient to show that "an individual does an act with the knowledge that the use of the mails will follow in the ordinary course of business." United States v. Shaid, 730 F.2d 225, 229 (5th Cir.), cert. denied, 469 U.S. 844, 105 S.Ct. 151, 83 L.Ed.2d 89 (1984). Nothing more is needed to show the defendant "caused" the mails to be used. Id. The evidence clearly established that Green knew the lulling letters would be sent out by his office. Thus, Green's argument that others did the actual mailing of the lulling letters and that he therefore does not have the requisite intent is without merit.

As to the evidence that the same types of letters had been sent by the previous administration, the Supreme Court has held that even routine letters, innocent in themselves, may form the basis of a mail fraud conviction. Schmuck v. United States, 489 U.S. 705, 109 S.Ct. 1443, 1448-49, 103 L.Ed.2d 734 (1989). The Court in Schmuck specifically rejected an argument virtually identical to the one put forth by Green. We need look no further in rejecting this aspect of Green's appeal.

As to the argument that the letters tended to expose Green's wrongdoing and thus cannot form the basis of mail fraud, Schmuck is again directly on point. As the Court observed:

We also reject Schmuck's 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.

Schmuck, 109 S.Ct. at 1449-50.

There was testimony at trial that Green 1) participated in the scheme, 2) knew of its existence, 3) knew of the troubles Champion was experiencing and, 4) knew that his actions would lead to the mailing of the "routine" lulling letters. Viewing the evidence in the light most favorable to the prosecution, a rational jury could have found Green engaged in an illegal scheme and used the mails to further that scheme.2. Money Laundering

The indictment upon which Green went to trial charged him with violation of 18 U.S.C. § 1956(a)(1)(B)(i). This section reads in relevant part:

(a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity--

(B) knowing that the transaction is involved in whole or in part--

(i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity ...

The proceeds involved in Green's case are allegedly proceeds of an illegal campaign bribery scheme. Louisiana law provides:

Bribery of a candidate is the giving, promising or offering to give, directly or indirectly, a campaign contribution to a candidate, political committee, or other person, or the accepting, soliciting, offering to accept, directly or indirectly, a campaign contribution, by a candidate, political committee or other person with the intention that the candidate will provide or influence another to provide the contributor or another person ... anything of apparent present or prospective value.

La.Rev.Stat.Ann. § 18:1469(A) (West Supp.1992). Loans are specifically excluded from the definition of "contribution" in the Louisiana Election Code. Id. at § 18:1483(6)(c)(iv).

Green contends the fact that the $150,000 "loaned" by Hall, Mey and MLC came in the form of a loan excludes the transactions involved from the Louisiana campaign bribery statute. Because no bribery occurred as a matter of law, there could have been no unlawful proceeds necessary for the money laundering counts.

In State v. Brand, 520 So.2d 114 (La.1988), the defendant turned over confidential public records in a sting operation and she was charged with violating Louisiana's public bribery statute. 520 So.2d at 114-15. The defendant alleged that the $100 she received for the records was a loan. Id. at 116. In rejecting the defendant's defense of a "loan", the Louisiana Supreme Court noted that the jury was free to disregard the defendant's version of the events based upon evidence of, inter alia, a damning recording of the defendant at the time of the delivery of the money and the fact that no indication of repayment existed between the time of the loan and the defendant's arrest. Id.

If Brand reasonably stands for any proposition, it is that when the making of a loan is asserted as a defense to bribery, the defense can be shown to be false. There is ample evidence upon which the jury could have concluded, as it apparently did, that the "loans" involved in this case were sham loans intended to be bribes.

The testimony of Naaman Eicher revealed that, long before any loans were contemplated, Eicher had indicated he would do "whatever it took to fund [Green's] campaign." The Eichers were the principals of United, the financial institution making the loans to the intermediaries. Moreover, there was testimony that the loans from United would not have to be paid back unless the campaign paid back the contributors first. Indeed, Green himself testified that despite the fact that money had been gained by the campaign subsequent to the loans, no attempt was ever made to repay the loans. Plainly, the jury could reasonably have determined that the loans were sham loans and thus that the campaign bribery statute had been violated. Thus violated, the jury could have determined the proceeds were illegal and that the making of the loans through the intermediaries, third parties, was done knowing that the transaction was designed in whole or in part to conceal the source, ownership, or control of the proceeds. Green's argument regarding his conviction for money laundering is without merit.

Green's contention that the transfer of the proceeds by the Eichers through United to the intermediaries somehow caused the proceeds to lose their illegal character. He cites to the case of United States v. Dove, 629 F.2d 325 (4th Cir.1980) for the proposition that the transfer of illegal money to an innocent person renders the funds legal. Dove involved the transfer of a stolen automobile to undercover police agents. Id. at 326. The defendants took possession from the agents and were charged with transportation of stolen goods in interstate commerce. Id. The court reversed on the ground that the agents held the automobile for the true owner. Id. at 329. The principle in Dove, that stolen goods recaptured by the police lose their status as stolen, is inapplicable to the present facts. There simply are no law enforcement agents involved in the transactions through which the Eichers channelled money to Green in order to buy his influence. Moreover, our reasoning regarding the ability of the jury to consider the entire transactions as sham loans casts doubt on whether the proceeds were, in fact, ever validly "transferred" into the possession of the intermediaries. The more applicable principle of law is that cited by the government, namely that one who has the requisite mental state to defraud but who uses another to commit his acts is nevertheless guilty of the offense. See 18 U.S.C.A. § 2 (West 1969) (statutory basis of law of principals). Green's contentions as to this point must be rejected.

Green finally contends there is insufficient evidence he "conducted" the transactions as alleged in the indictment. As the government points out, Green was tried as a direct principal and also under a theory that he aided and abetted the money laundering scheme. Green participated in negotiations of the financing of the his campaign. Moreover, there was testimony from one of the intermediaries, Hall, that Green personally dealt with him when Hall made the transactions involved. A reasonable jury could have found beyond a reasonable doubt that Green conducted the transactions involved.

Count 40 of the indictment charged Green with conspiracy to commit mail fraud. Green, in his brief on appeal, refers to his conspiracy conviction in one sentence and fails to provide any analysis whatsoever on the issue. Failure to prosecute an issue on appeal constitutes waiver of the issue. United States v. Fagan, 821 F.2d 1002, 1015 n. 9 (5th Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 697, 98 L.Ed.2d 649 (1988); United States v. Johnson, 718 F.2d 1317, 1325 n. 23 (5th Cir.1983) (en banc ). Green has waived any error as to his conviction for conspiracy. Even were we to conclude Green had properly raised the issue, our analysis of the sufficiency of the evidence as to Green's participation in the object offense requires affirmance. As indicated, evidence demonstrated Green's agreement with the Eichers to assist them with their efforts to gain control of the Louisiana insurance industry. Moreover, even were Green not a direct participant in the object offense, we would affirm because there is sufficient evidence to find him a coconspirator. See Pinkerton v. United States, 328 U.S. 640, 647-48, 66 S.Ct. 1180, 1184, 90 L.Ed. 1489 (1946). Greens contention, if it can be deemed such, that the evidence is insufficient to find him guilty of conspiracy, is totally unavailing.

4. Denial of Motions for Acquittal and New Trial

As with Green's conviction for conspiracy, he has failed to brief the issue of the district court's refusal to grant his motions to acquit and for new trial. He has thus waived these matters for appellate review. See Fagan, supra; Johnson, supra; see also, United States v. Lindell, 881 F.2d 1313, 1325 (5th Cir.1989), cert. denied, 496 U.S. 926, 110 S.Ct. 2621, 110 L.Ed.2d 642 (1990) (citing F.R.App.P. 28(a)(4)). Even assuming, arguendo, he had briefed these issues, our analysis of the sufficiency of the evidence sustaining the jury's verdict as to his convictions would preclude us from ruling in his favor on these matters. See United States v. Gorel, 622 F.2d 100, 106 (5th Cir.1979), cert. denied, 445 U.S. 943, 100 S.Ct. 1340, 63 L.Ed.2d 777 (1980) (court reviewing denial of motion for new trial views evidence in light most favorable to verdict and verdict entitled to all reasonable inferences drawn therefrom); United States v. Varkonyi, 611 F.2d 84, 85 (5th Cir.), cert. denied, 446 U.S. 945, 100 S.Ct. 2173, 64 L.Ed.2d 801 (1980) (district court must determine, in ruling on motion for judgment of acquittal, whether evidence is sufficient to find defendant guilty beyond reasonable doubt).

Green alleges the district court erred by admitting evidence that certain financial institutions were involved in interstate commerce. His argument is essentially that the indictment was jurisdictionally deficient because it failed to allege that the financial transactions upon which the money laundering counts were based affected interstate commerce. 18 U.S.C. § 1956(c)(4) requires that the government show that the financial transaction upon which the money laundering count is based involved a financial institution engaged in interstate commerce. Green objected to the admission of testimony by two government witnesses to the effect that the two banks named in the indictment were involved in interstate commerce. He now contends the testimony constituted a material variance from the allegations contained in the indictment.

In a superseding indictment, the grand jury charged:

C. On or about the dates listed below, in the Eastern District of Louisiana, DOUG GREEN, with the intent to promote the carrying on of the bribery of a candidate in violation of LSA-RS 18:1469, did conduct and attempt to conduct financial transactions, that is the receipt of funds from checks of intermediaries drawn on accounts at banks located in the Eastern District of Louisiana, knowing the funds he was to receive were the proceeds of an act of bribery of a candidate and that the transactions were designed to conceal that the source of the proceeds of these bribery funds were the Eichers and their companies:

COUNT    DATE     AMOUNT   CHECK #
 37     8/24/87  $100,000  No. 346
                           Hibernia National Bank
                           Jefferson Parish
 38    10/6/87   $ 25,000  No. 1425
                           South Louisiana Bank
 39    10/7/87   $ 25,000  No. 1730
                           South Louisiana Bank
                           Houma, La.