Convicted of wire fraud

United States 11th Circuit Court of Appeals Reports

UNITED STATES OF AMERICA v. EVANS, 05-10624 (11th Cir.
12-26-2006) UNITED STATES OF AMERICA, Plaintiff-Appellee v.
HUBERT GARLAND EVANS, Defendant-Appellant. No. 05-10624.
United States Court of Appeals, Eleventh Circuit. December
26, 2006.

Appeal from the United States District Court for the
Southern District of Florida; D.C. Docket No.
02-20451-CR-AJ.

Before PRYOR and FAY, Circuit Judges, and STEELE,[fn*]
District Judge.

[fn*] The Honorable William H. Steele, United States
District Court for the Southern District of Alabama,
sitting by designation.

STEELE, District Judge:

Appellant Evans was convicted of wire fraud under 18 U.S.C.
§ 1343, based on a May 22, 1997 telefax from the
victim to Evans. The sole issue presented is whether the
jury was entitled to find that Evans caused this telefax to
be sent “for the purpose of executing” the scheme within
the contemplation of Section 1343.[fn1] We conclude that the
jury was so entitled.

I. BACKGROUND

Evans was president of Jagar Limited, which imported
produce to the Bahamas for resale. Mark Mayrsohn was
president of Produce Direct, Inc. (“PDI”), which was
Jagar’s primary supplier of produce. In 1995, PDI acquired
credit insurance from the Export-Import Bank to address the
risk of non-payment by Jagar. In mid-1996, in conjunction
with its application to renew its policy, PDI requested a
financial report from Jagar. Jagar produced to PDI a
financial statement showing the company as profitable
through the fiscal year ending June 30, 1996, even though
an independent auditor’s report prepared in February 1997
reflected that Jagar suffered a net loss of almost
$1,000,000 during that fiscal year and described its
survival as in “substantial doubt.” The renewal policy was
issued effective September 1, 1996, with a term expiring May
1, 1997. Under the terms of the policy, PDI was required to
report to the insurer arrearages of over 120 days and to
make reasonable collection efforts before filing a claim.

Jagar regularly purchased $100,000 or more of produce a
week and, until early 1997, it paid PDI’s invoices within
30 days or a bit more. At that point, Jagar’s payments
became smaller, such that its outstanding balance swelled
to over $1,100,000 by late April. On April 25, Jagar
abruptly switched suppliers, but on May 2 and May 13 it
made payments to PDI totaling approximately $70,000.

On May 20, Mayrsohn telefaxed Evans a letter announcing his
imminent visit to the Bahamas and requesting a meeting to
discuss the companies’ present and future business
relations. Mayrsohn then called Jagar’s bookkeeper, Diane
Fletcher, and scheduled a meeting with Evans for May 26. On
May 22, Mayrsohn telefaxed to Fletcher the letter on which
conviction was based,[fn2] the body of which reads as
follows:

Just a short note to confirm our meeting together with
Mr. Evans on Monday at 2:30 p.m. at your offices.

For your review I’ve enclosed some preliminary
information, a report of the current receivables with the
aging from the invoice date. As discussed, we must stay
within 120 days for the Ex-Im Bank.

Your account is right now at that limit and we should be
receiving your payments now in order to keep up with the
schedule.

We hope that you are preparing something to send us for
this week and can continue to stay within the 120 day
Ex-Im requirement.

We look forward to a positive and successful meeting
together.

On May 23, Fletcher telefaxed a letter to Mayrsohn
confirming the Monday meeting and listing invoices that
needed to be reconciled between the parties. At the May 26
meeting in the Bahamas, Evans made clear that Jagar would
not give PDI any new business or write a check on the spot,
but he assured Mayrsohn that Jagar would promptly send
another check and would pay off its debt. On May 30, Jagar
sent PDI a check for $27,511.60, which paid in full the
three oldest invoices. On June 16, Jagar sent PDI a check
for $12,015.90, which paid in full the next oldest invoice.
These were the last payments Jagar made, leaving an unpaid
principal balance of almost $1,100,000.

The jury convicted Evans on three counts of wire fraud,
involving the May 22 telefax as well as subsequent
transmissions from Mayrsohn to Evans dated June 27 and July
3. The district court granted Evans’ motion for judgment of
acquittal with respect to the latter two letters but denied
the motion with respect to the May 22 telefax.

II. STANDARD OF REVIEW

“We review de novo the denial of a motion for judgment of
acquittal.” United States v. Hernandez, 433 F.3d 1328, 1332
(11th Cir. 2005). “When the motion raises a challenge to
the sufficiency of the evidence, we review the sufficiency
of the evidence de novo, drawing all reasonable inferences
in the government’s favor.” Id. (internal quotes omitted).
“To affirm the denial . . ., we need determine only that a
reasonable factfinder could conclude that the evidence
established the defendant’s guilt beyond a reasonable
doubt.” United States v. Perez, 443 F.3d 772, 774 (11th
Cir. 2006).

III. DISCUSSION

A transmission is “for the purpose of executing” the scheme
if it is “incident to an essential part of the scheme.”
Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358,
362-63, 98 L.Ed. 435 (1954). “Letters mailed after a scheme
has reached fruition cannot have been ‘for the purpose of
executing’ the scheme within the meaning of 18 U.S.C. s
1341.” United States v. Georgalis, 631 F.2d 1199, 1204 (5th
Cir. 1980).[fn3] This description of “fruition” as the
critical juncture derives from Kann v. United States, 323
U.S. 88, 65 S.Ct. 148, 89 L.Ed. 88 (1944), in which the
Court held that, because the scheme “had reached fruition”
before the transmissions at issue, “[i]t cannot be said
that the mailings in question were for the purpose of
executing the scheme, as the statute requires.” Id. at 94,
65 S.Ct. at 151. Supreme Court and Eleventh Circuit cases
have since repeatedly identified “fruition” of the scheme
as the point beyond which mail and wire transmissions
cannot be in furtherance of the scheme.[fn4] E.g., Schmuck
v. United States, 489 U.S. 705, 711-12, 109 S.Ct. 1443,
1448, 103 L.Ed.2d 734 (1989); United States v. Maze, 414
U.S. 395, 402, 94 S.Ct. 645, 649, 38 L.Ed.2d 603 (1974);
United States v. Adkinson, 158 F.3d 1147, 1163 (11th Cir.
1998) (“We have not hesitated to reverse mail fraud
convictions where the underlying scheme has reached
fruition prior to the mailing.”).

A scheme has “reached fruition” when it is “fully
consummated.” Henderson v. United States, 425 F.2d 134, 141
(5th Cir. 1970); accord United States v. Kent, 608 F.2d
542, 546 & n. 6 (5th Cir. 1979); see also Kann, 323 U.S. at
94, 65 S.Ct. at 151 (“The scheme in each case had reached
fruition [because] [t]he persons intended to receive the
money had received it irrevocably” and “[i]t was immaterial
to them, or to any consummation of the scheme, how the bank
which paid or credited the check would collect from the
drawee bank.”).

Evans describes the “true objective” of the scheme as
getting PDI to continue supplying produce on credit. That
objective, Evans continues, was fully accomplished by April
25, when Jagar stopped acquiring produce from PDI. Thus, he
concludes, the scheme had reached fruition by that date,
such that Mayrsohn’s telefax of May 22 could not have been
for the purpose of executing the scheme.[fn5]

To the extent Evans assumes that a scheme to defraud
necessarily reaches “fruition” when the defendant receives
the “fruit” of his fraud, he is mistaken. “[I]t is a
well-established principle of mail fraud law that use of
the mails after the money is obtained may nevertheless be
‘for the purpose of executing’ the fraud.” United States v.
Ashdown, 509 F.2d 793, 799 (5th Cir. 1975). “If the scheme
continues, mailings made after receipt of the money can
clearly support conviction.” United States v. Knight, 607
F.2d 1172, 1175 (5th Cir. 1979). “This is another way of
saying that the scheme may embrace more than just
fraudulent acquisition of money or documents.” United
States v. Kent, 608 F.2d 542, 546 (5th Cir. 1979). For
example, a “two pronged” scheme may include both “writing
checks on closed accounts to obtain goods and services
without paying for them” and “working to retain those goods
as long as possible by convincing merchants and banks that
the . . . checks were actually legitimate.” United States
v. Lee, 427 F.3d 881, 888 (11th Cir. 2005).

More specifically, “[p]recedent is clear that letters
designed to conceal a fraud, by lulling a victim into
inaction, constitute a continuation of the original scheme
to defraud.” Georgalis, 631 F.2d at 1204. That is, when the
scheme includes not only obtaining the benefit of the fraud
but also delaying detection of the fraud by lulling the
victim after the benefit has been obtained, the scheme is
not fully consummated, and does not reach fruition, until
the lulling portion of the scheme concludes. The Government
concedes that Evans had received the full benefit of his
fraud as of April 25. The issue is whether Mayrsohn’s May
22 telefax falls within this lulling doctrine.

The doctrine traces its roots to United States v. Sampson,
371 U.S. 75, 83 S.Ct. 173, 9 L.Ed.2d 136 (1962):

[T]he indictment in this case alleged that the
defendants’ scheme contemplated from the start the
commission of fraudulent activities which were to be and
actually were carried out both before and after the money
was obtained from the victims [and] specifically alleged
that [certain documents] were mailed by the defendants to
the victims for the purpose of lulling them by
assurances that the promised services would be performed.
We cannot hold that such a deliberate and planned use of
the United States mails by defendants engaged in a
nationwide, fraudulent scheme in pursuance of a previously
formulated plan could not . . . be found . . . to be ‘for
the purpose of executing’ a scheme within the meaning of
the mail fraud statute.

Id. at 80-81, 83 S.Ct. at 176. The mailings at issue in
Sampson, which were sent by the defendants to multiple
victims after the defendants “had obtained all the money
they expected to get from that victim,” id. at 79, 83 S.Ct.
at 175, “were designed to lull the victims into a false
sense of security, postpone their ultimate complaint to the
authorities, and therefore make the apprehension of the
defendants less likely than if no mailings had taken
place.” Maze, 414 U.S. at 403, 94 S.Ct. at 650. Such
transmissions fall within the lulling doctrine. E.g.,
United States v. Lane, 474 U.S. 438, 452, 106 S.Ct. 725,
733, 88 L.Ed.2d 814 (1986); United States v. Hewes, 729
F.2d 1302, 1321 (11th Cir. 1984); United States v. Toney
(“Toney I”), 598 F.2d 1349, 1353 (5th Cir. 1979). Evans
offers a number of reasons why the lulling doctrine should
not apply here, but none is convincing.

First, Evans argues that the superseding indictment did not
charge that his scheme included lulling PDI into inaction
after Jagar finished receiving produce on credit. This
argument was not asserted in Evans’ initial brief, and
“[a]rguments raised for the first time in a reply brief are
not properly before a reviewing court.” Herring v.
Secretary, Department of Corrections, 397 F.3d 1338, 1342
(11th Cir. 2005) (internal quotes omitted). At any rate,
the superseding indictment charged that, as part of the
scheme or artifice to defraud, “[t]o lull PDI and the Ex-Im
Bank and prevent them from detecting Jagar’s true financial
condition and the falsity of Jagar’s submitted financial
statements, on repeated occasions [Evans] falsely
represented and caused to be falsely represented to PDI
that Jagar was in good financial condition, and that Jagar
had the financial ability to pay its escalating outstanding
balance to PDI.” Evans concedes that these allegations
“essentially asserted that the May 22nd fax was a ‘lulling’
letter.”

Second, Evans argues that the lulling doctrine applies only
if the defendant continues to perpetrate similar frauds, as
in a Ponzi scheme. This is a common scenario, because the
lulling of earlier victims facilitates the defrauding of
later victims,[fn6] but the doctrine applies equally when,
as here, there is but a single victim, as to whom the
defendant has received the full benefit of the fraud before
the lulling communication. See Lane, 474 U.S. at 441,
452-53, 106 S.Ct. at 727-28, 733-34 (applying the lulling
doctrine to a scheme to defraud one insurer in connection
with one insured loss); see also Henderson, 425 F.2d at 141
(identifying delay in detection in order to perpetrate
additional frauds, and delay in detection by lulling the
victim, as separate bases for finding a mailing to be in
execution of the scheme). Nor can we divine any reason why
a doctrine that applies to attempts to “postpone [victims’]
ultimate complaint to the authorities, and therefore make
the apprehension of the defendants less likely” should be
triggered when the defendants’ reason for desiring to avoid
apprehension is to perpetrate future frauds but not when
their motivation is to escape the legal consequences of
their past frauds.[fn7]

Evans next argues that the lulling doctrine applies to a
transmission from a victim only if the transmission was
preceded by a lulling communication from the
defendant.[fn8] This Court need not resolve whether the
doctrine is so restricted, because there were
communications attributable to Evans prior to May 22 that a
properly functioning jury could have found to be lulling.
First, the checks dated May 2 and May 13 made it appear as
though Jagar would honor its obligation to pay off its
debt. Second, Evans’ agreement (through Fletcher) to meet
with Mayrsohn made it appear as though Jagar was willing to
negotiate a resolution of the parties’ differences. See
Toney I, 598 F.2d at 1354 (“So long as [the victim] thought
there was a possibility that matters could be settled
through direct negotiations with [the defendant], he was
less likely to report the fraudulent scheme.”).

Evans notes that he agreed to meet with Mayrsohn on short
notice, which he argues is incompatible with a lulling
purpose. The jury was authorized to find otherwise,
especially since a refusal to meet might have fueled
Mayrsohn’s suspicions, while meeting with him allowed Evans
the opportunity to more persuasively lull PDI into further
delay. Moreover, the jury was entitled to view the
agreement to meet, and the partial payments sent in early
May, in light of Evans’ conduct in the days after May 22,
which the jury could easily find to be lulling: his May 23
telefax (through Fletcher) identifying particular invoices
requiring reconciliation before they could be paid, and his
promise at the May 26 meeting to pay off Jagar’s debt, both
of which falsely signaled that Jagar would uphold its
obligations.

Evans also complains that Mayrsohn, by his May 20 telefax
requesting a meeting, initiated the string of
communications between them. Whatever the result would have
been had Evans remained silent, he did not do so, and his
situation is thus no different than that of the defendants
in Toney I, who did not initiate the correspondence but who
(through their company) replied and who were found liable
based on subsequent letters from the victim’s attorney. 598
F.2d at 1352, 1354.

Evans next argues that the May 22 telefax lulled no one but
instead advanced the discovery of his fraud. As to the
former point, the success of the lulling effort is
immaterial. Hewes, 729 F.2d at 1321 (“[T]he failure of the
letters actually to lull all of Rekcus’s creditors does not
relieve the appellants of criminal liability [because]
[s]uccess of the fraudulent scheme is not an element of a
Section 1341 offense.”); Toney I, 598 F.2d at 1354 n. 8
(“Regardless of whether the content of the two letters [by
the victim’s attorney] had the effect of lulling anyone, .
. . the jury could reasonably find that the participants in
the fraudulent scheme intended that [the attorney’s]
writing and mailing of the count letters would at least
delay further complaints.”).

As to the latter, while a transmission from a victim may
not be in furtherance of the scheme if its “only likely
effect would be to further detection of the fraud,” United
States v. LaFerriere, 546 F.2d 182, 187 (5th Cir. 1977),
that principle has been applied by this Court only when the
victim recognizes the likelihood of fraud and threatens to
sound the alarm if not swiftly satisfied.[fn9] Here, the
May 22 telefax did not demand immediate satisfaction but
simply reminded Evans that PDI would have to report
arrearages over 120 days and expressed the “hope” that
Jagar would send sufficient funds to stay inside that
boundary. Nor did PDI’s apparent intent to comply with its
insurer’s reporting requirement communicate a threat to
involve the authorities in ferreting out a fraud,
especially one which neither the telefax nor the evidence
at trial indicates Mayrsohn then suspected. Evans’ related
suggestion that the telefax helped fulfill PDI’s obligation
to make reasonable collection efforts before seeking
insurance benefits and thus “inch[ed] [PDI] closer to the
date upon which it could make a claim,” at best illustrates
the unhelpful truism that, with each passing day, a fraud
comes closer to exposure as the remaining potential delay in
its discovery declines.

Finally, Evans argues that, in order to support conviction,
his scheme as originally hatched in 1996 must have included
receiving communications such as the May 22 telefax. For
this he relies on Sampson, in which the Court noted that
the “scheme contemplated from the start” the use of lulling
communications to persuade investors that the promised
services would be performed. 371 U.S. at 80, 83 S.Ct. at
176. Assuming without deciding that the intention to lull
must be part of the scheme from its inception, the
intention to lull in any particular manner need not be. On
the contrary, “[a]s the execution of the scheme . . .
proceeds, new ways may be adopted or invented to effectuate
the original design,” since “[m]ere details may be changed
and the scheme remain the same.” Weiss v. United States,
122 F.2d 675, 680 (5th Cir. 1941). Evans does not challenge
the superseding indictment’s allegation that the scheme
originally included lulling by means of affirmative
misrepresentations of Jagar’s financial health. It is thus
irrelevant whether the scheme also originally included
lulling by other means.

Undeterred, Evans maintains that his scheme never included
receiving communications from the victim. The jury,
however, was entitled to find otherwise. As discussed
above, by sending two teasing checks and agreeing to meet
and discuss the parties’ business relations, Evans appeared
to engage in lulling activity, especially when viewed
through the prism of his post-May 22 behavior. The very
purpose of lulling activity is to keep the victim dealing
with the defendant rather than with the authorities, and
the agreement to meet on May 26 was a clear indication that
PDI should continue to deal with Evans. Mayrsohn’s May 22
telefax confirming the meeting and preparing for it did
precisely that and was thus part and parcel of the scheme
to delay detection of the fraud by lulling PDI into
believing that the parties’ difficulties would be worked
out. To borrow from Toney I, “[i]f, as the jury could find,
[Evans’] motive in inviting [PDI] to continue the
correspondence was to lull [PDI] into deferring any
complaint to the authorities, then [Mayrsohn’s] responses
were an integral part of [Evans’] fraudulent scheme.” 598
F.2d at 1354. The May 22 telefax was, in short, “incident
to an essential [lulling] part of the scheme.” Pereira, 347
U.S. at 8, 74 S.Ct. at 362-63.

IV. CONCLUSION

The jury’s determination that Evans caused the May 22
telefax to be sent “for the purpose of executing” his
scheme is consistent with governing law and is supported by
sufficient evidence. The trial court thus properly denied
Evans’ motion for judgment of acquittal.

AFFIRMED.

[fn1] Section 1343 provides, in pertinent part, that
“[w]hoever, having devised . . . 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 . . . communication in interstate or foreign commerce,
any writings . . . for the purpose of executing such scheme
or artifice,” shall be punished as set forth therein.

[fn2] The indictment was not returned until May 21, 2002.
Thus, all earlier communications (including transmission of
the false financial statement) fell outside the statute of
limitations and could not form the basis of prosecution.
See 18 U.S.C. § 3282(a).

[fn3] The mail fraud statute, like its wire fraud
counterpart, applies to transmissions “for the purpose of
executing such scheme or artifice.” 18 U.S.C. §
1341. Because “[t]he ‘scheme or artifice to defraud’ and
‘for the purpose of executing’ language in the mail and wire
fraud statutes are construed identically,” United States v.
Hasson, 333 F.3d 1264, 1271 n. 7 (11th Cir. 2003), we
borrow freely from cases construing Section 1341.

[fn4] This Court sometimes uses the phrase “in furtherance
of the scheme” in lieu of the quoted statutory language.
E.g., Hasson, 333 F.3d at 1270; United States v. Italiano,
837 F.2d 1480, 1482 (11th Cir. 1988). The two phrases carry
the same meaning.

[fn5] Evans suggests in the alternative that the scheme
reached fruition when the renewal policy was issued in
September 1996, apparently on the theory that, with the
policy in place, PDI could have no hesitation about
supplying endless produce on credit. Evans’ premise is
facially implausible, since the policy covered only 90% of
the first $600,000 in losses, while Jagar’s debt reached
$1.1 million. At any rate, the superseding indictment
charged, and Evans concedes, that the purpose of the fraud
included actually obtaining produce on credit, not simply
increasing the probability of doing so. Thus, the scheme
could not have reached fruition before April 25.

[fn6] See, e.g., United States v. Brewer, 807 F.2d 895, 898
(11th Cir. 1987) (applying the lulling doctrine where the
scheme “was designed so that the investors’ early demands
for repayment were delayed for a sufficient time to allow
[the defendant] to repay them by using monies which were
received as more and more victims later contributed”);
Georgalis, 631 F.2d at 1204 (applying the lulling doctrine
where the defendant continued to solicit further funds from
investors); United States v. Toney (“Toney II”), 605 F.2d
200, 206-07 (5th Cir. 1979) (applying the lulling doctrine
where, during the period the complaining victim was lulled,
additional investors were acquired); Toney I, 598 F.2d at
1353 & n. 6 (applying the lulling doctrine where “[a]n
integral part of the scheme was reassuring past purchasers
in order that future purchasers could be persuaded to buy .
. . distributorships,” “thereby prolonging the life of the
fraudulent scheme”); see also Kann, 323 U.S. at 94-95, 65
S.Ct. at 151 (recognizing that a mailing after the
defendant has received the fruit of his fraud may be for
the purpose of executing the scheme “where the use of the
mails is a means of concealment so that further frauds which
are part of the scheme may be perpetrated”).

[fn7] Evans suggests that his argument is supported by
Henderson, which noted that “one common element in the
‘lulling’ cases is that the lulling devices comprised a
fundamental part of the basic scheme and its desired
continued perpetration.” 425 F.2d at 143. The Henderson
Court did not hold that the lulling doctrine applies only
when the defendant sought “continued perpetration” of the
fraud, and any dearth of cases applying the doctrine when
the scheme involves a single victim of a completed fraud
vanished with Lane.

[fn8] Evans does not, and could not successfully, assert
that a communication from a victim can never fall within
the lulling doctrine. See Brewer, 807 F.2d at 897-98
(applying the lulling doctrine to demand letters from
victims); Toney I, 598 F.2d at 1353-54 (applying the
lulling doctrine to letters from a victim’s attorney).

[fn9] In LaFerriere, the victim “strongly suspected that he
was a victim of fraud,” and his attorney’s letter
“demand[ed]” satisfaction “within five days of receipt of
this letter,” failing which the victim would make an
“immediate complaint” to the state insurance commission and
also “press both civil and criminal action.” 546 F.2d at 185
n. 3, 186.