UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 94-40560
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
MICHAEL BRYANT BRUMLEY,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Texas
(July 18, 1995)
Before WOOD1, JOLLY, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge,
Michael Brumley appeals his conviction at a bench trial on
three counts of wire fraud, three counts of money laundering and
one count of conspiracy to commit mail fraud and wire fraud.
Brumley does not appeal his conviction on two counts of making
false statements to a financial institution, but he appeals his
sentence. Finding that there was insufficient evidence to convict
Brumley of wire fraud, money laundering and conspiracy to commit
mail fraud and wire fraud, we REVERSE. Brumley's sentence of
1
Circuit Judge of the Seventh Circuit, sitting by
designation.
twenty-four months for two counts of making false statements to a
financial institution is AFFIRMED.
BACKGROUND
Brumley began working for the Texas Industrial Accident
Board (IAB) in July, 1976, as a pre-hearing examiner. In July 1988
he was promoted to the position of regional director for the
Houston area. As part of the state's new workers' compensation
law, the IAB was re-organized in 1990 as the Texas Workers'
Compensation Commission (TWCC) and Brumley was appointed the TWCC's
regional associate director (essentially the same position he had
held with the IAB). Beginning in 1982, Brumley solicited and
accepted approximately $40,000 in loans from local attorneys, which
he admitted was a violation of IAB ethical guidelines.
Between 1987 and 1992, Brumley also accepted over $86,000 in
"loans" via wire transfers from another local attorney, John Cely.
Although Cely understood that the money would never be repaid, he
continued to make loans to Brumley. Cely wired the money from the
Western Union office in Lufkin, Texas, to Brumley in Beaumont,
Texas.
The procedure for making the Western Union wire transfers
involved Cely, or one of his employees, filling out a form listing
the recipient and the amount of the transfer. Cely paid for the
wire transfer with checks payable to H.C. Walker, the Lufkin
Western Union franchisee. The Western Union agent then, through a
personal computer, dialled into Western Union's main computer in
Bridgeton, Missouri. The Western Union agent would write a unique
2
ten-digit number, which he obtained through the computer in
Missouri, on the back of the form he gave to Cely. This would
serve as the receipt. Brumley was then immediately able to pick up
the money.
After being notified that a money transfer was waiting for
him, Brumley would go to a Western Union office in Beaumont to pick
up the transfer. He would fill out a form identifying himself as
the recipient and the Beaumont Western Union agent would call the
Western Union computer in Bridgeton, Missouri, to verify the
information. Brumley was then given a check for the amount of the
transfer, which he would cash at either a bank or a grocery store.
In 1988, pursuant to a complaint from one of Cely's clients,
the IAB began an investigation into Cely's law practice. Brumley
on several occasions urged the IAB to reconsider its decision to
formally investigate Cely, and Brumley assisted Cely in altering
subpoenaed documents. Finally, Brumley aided Cely's efforts to
lease TWCC property in Lufkin. The lease, if it had been
consummated, would have violated ethical guidelines, as Cely
practiced before the TWCC. Nevertheless, Brumley directed that the
building specifications be faxed to Cely's office in the name of
one of Cely's clients, James Fredregill. A TWCC employee later
mailed the lease specifications to Fredregill. The property was
ultimately leased to a disinterested party.
Michael Brumley was indicted in November 1993 for conspiracy
to defraud the citizens of the state of Texas of the honest use of
his services via mail and wire communications (18 U.S.C. § 371),
3
wire fraud (18 U.S.C. §§ 1343, 1346), money laundering (18 U.S.C.
§ 1956) and making false statements to a financial institution (18
U.S.C. § 1014). At the conclusion of the bench trial, the district
court convicted Brumley on all nine counts in the indictment and
he was sentenced to forty-eight months in prison2. Brumley now
appeals.
WIRE FRAUD
The essential elements of wire fraud, 18 U.S.C. § 13433, are:
(1) a scheme to defraud and (2) the use of, or causing the use of,
interstate wire communications to execute the scheme. United
States v. Faulkner, 17 F.3d 745, 771 (5th Cir. 1994), cert. denied,
115 S. Ct. 786 (1995); United States v. Herron, 825 F.2d 50, 54
(5th Cir. 1987).4 In order to prove that a defendant has used, or
2
Brumley was sentenced to twenty-four months in prison for
each of the two counts of making false statements to a financial
institution, to be served concurrently. Brumley does not appeal
those convictions (they are the only ones we do not reverse).
Brumley does, however, challenge his sentence.
3
18 U.S.C. § 1343 provides:
Whoever, having devised or intending to devise 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, radio, or
television communication in interstate or foreign commerce, any
writings, signs, signals, pictures, or sounds for the purpose of
executing such scheme or artifice, shall be fined not more than
$1,000 or imprisoned not more than five years, or both. (emphasis
added).
4
The mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C.
§ 1343, statutes are nearly identical, with the main difference
being whether the fraud involves the mails or interstate wires.
Because the wire fraud statute was patterned after the mail fraud
statute, the two are in pari materia, that is, they are to be read
together. Therefore, cases construing the mail fraud statute are
applicable to wire fraud. United States v. Donahue, 539 F.2d 1131,
1135 (8th Cir. 1976); United States v. Louderman, 576 F.2d 1383,
4
caused the use of, interstate wire communications, the government
must show that the defendant knew, or that it was foreseeable to
him that, an interstate wire communication would result. "Where
one does an act with the knowledge that the use of the [interstate
wires] will follow in the ordinary course of business, or where
such use can reasonably be foreseen, even though not actually
intended, then he `causes' the mails to be used." Pereira v.
United States, 347 U.S. 1, 8-9 (1954).
In order for a wire fraud conviction to stand, then, it must
be foreseeable to the defendant that his actions will result in an
interstate wire communication. When a defendant in one state calls
someone whom he knows is in another state, an interstate wire
communication is clearly foreseeable. However, when the individual
does not personally communicate, but instead causes another to
communicate via interstate wires, foreseeability is not always so
readily apparent. In such a case, therefore, the government must
show that it was foreseeable to the defendant that his actions
would cause an interstate wire communication. United States v.
Maze, 414 U.S. 395, 399 (1974); Pereira v. United States, 347 U.S.
1, 8-9 (1954).5
1387 n.3 (9th Cir. 1978); United States v. Computer Sciences Corp.,
689 F.2d 1181, 1188 n. 14 (4th Cir. 1982); United States v. Lemire,
720 F.2d 1327, 1334 n. 6 (D.C. Cir. 1983), cert. denied, 467 U.S.
1226 (1984); United States v. Fermin Castillo, 829 F.2d 1194, 1198
(1st Cir. 1987).
5
Two other circuits have held that the foreseeability of the
interstate nature of the wire communication is irrelevant (at least
where the defendant actually makes the communication). United
States v. Bryant, 766 F.2d 370, 375 (8th Cir. 1985), cert. denied,
474 U.S. 1054 (1986); United States v. Blassingame, 427 F.2d 329,
5
On appeal, Brumley argues that the evidence was insufficient
to convict him of wire fraud, as there was insufficient evidence
that he caused the interstate wire communication.6 We agree. In
a bench trial, the standard of review is a substantial evidence
test. United States v. Cardenas, 9 F.3d 1139, 1156 (5th Cir.
1993), cert. denied, 114 S. Ct. 2150 (1994).
[I]n reviewing the findings of guilt by a trial court in a
non-jury trial, the standard of review of the appellate court
"is to determine whether such findings are supported by any
substantial evidence. It is not our function to make
credibility choices or to pass upon the weight of the
evidence. The test is whether the evidence is sufficient to
justify the trial judge, as trier of the facts, in concluding
beyond a reasonable doubt that the defendant was guilty."
Cardenas, 9 F.3d at 1156 (quoting United States v. Jennings, 726
F.2d 189, 190 (5th Cir. 1984)).
Neither Brumley nor Cely7 actually communicated with each
331 (2d Cir. 1970), cert denied, 402 U.S. 945 (1971). However,
these cases are contrary to our existing precedent, which requires
foreseeability. United States v. Duncan, 919 F.2d 981, 991 (5th
Cir. 1990), cert. denied, 500 U.S. 9263 (1991); United States v.
Toney, 598 F.2d 1349, 1355 (5th Cir. 1979), cert. denied, 444 U.S.
1033 (1980); R.A.G.S. Couture, Inc. v. Hyatt, 774 F.2d 1350, 1354
(5th Cir. 1985); Snyder, 505 F.2d at 601; United States v.
Shryock, 537 F.2d 207, 209 (5th Cir. 1976), cert. denied, 429 U.S.
1100 (1977).
6
Brumley preserved error on his insufficiency of the evidence
claims; he moved for a directed verdict at the close of the
government's case, which was also the close of evidence. United
States v. Pierre, 958 F.2d 1304, 1310 (5th Cir. 1992) (en banc).
7
The indictment charged that the conspiracy was between
Brumley and Cely although Cely was an unindicted co-conspirator.
6
other via interstate wires. The only interstate wire
communications in the record were those made by the Western Union
agents in Lufkin, Texas and Beaumont, Texas to the Western Union
computer in Missouri. In order to determine whether Brumley or
Cely caused an interstate wire communication, the issue is whether
it was foreseeable to them that their actions would cause the
Western Union agents' interstate wire communications.
At trial, and on appeal, the government mistakenly believed
that foreseeability and knowledge of the interstate nature of the
wire communication were not elements of wire fraud8. Therefore,
the government did not seek to put on evidence showing
foreseeability. In fact, when Brumley's attorney attempted to
question Western Union's representative about foreseeability, the
government objected, arguing that the foreseeability of interstate
communications was not an element of the offense and therefore not
relevant.
Even though the government did not consider knowledge or
foreseeability to be matters it needed to prove at trial, we have
examined the record to determine whether, nevertheless, there was
sufficient evidence to allow the trial judge to determine that it
was foreseeable to Brumley or Cely that their actions would cause
If one conspirator makes a wire communication to execute a scheme,
then all conspirators are liable for wire fraud. United States v.
Toney, 598 F.2d 1349, 1355 (5th Cir. 1979). Therefore, in
determining knowledge and foreseeability relative to Brumley, we
must also consider whether the interstate wire communication by
Western Union was foreseeable to Cely.
8
We note that the government cites only Second and Eighth
Circuit cases and ignores all of our foreseeability precedent.
7
the Western Union agents' interstate wire communications. The only
evidence in the record that could even inferentially show knowledge
or foreseeability is: (1) Western Union is an international
company with many agents throughout the United States and (2) the
form Cely used in Lufkin, Texas, to initiate the sending of the
money to Brumley listed, on the back, a Western Union corporate
address in New Jersey.
Cely testified as a government witness. Nowhere in his
testimony does Cely say, or imply, that he knew, or that it was
foreseeable to him, that his actions could result in an interstate
wire communication.
The only evidence that even attempted to address the
foreseeability of interstate communications points to a lack of
foreseeability. When asked on cross-examination by Brumley's
attorney whether a wire transfer customer would be aware of Western
Union's interstate computer system, the Western Union
representative responded, "I can't answer that."
These facts, taken together, do not constitute notice that a
wire transfer of money from Lufkin, Texas, to Beaumont, Texas, will
involve an interstate wire communication. There is not sufficient
evidence in this record upon which a trier of fact could find
beyond a reasonable doubt that it was foreseeable to Brumley or
Cely that their actions would cause the Western Union agents to
make interstate wire communications. Because use of interstate
wire communications is an essential element of the offense, Herron,
825 F.2d at 54; Faulkner, 17 F.3d at 741, the evidence at trial was
8
insufficient for the court to find Brumley guilty of wire fraud.
CONSPIRACY TO COMMIT MAIL FRAUD AND WIRE FRAUD
Brumley was convicted of one count of conspiracy to commit
mail fraud and wire fraud. Brumley argues on appeal that the
evidence was insufficient to convict him. We agree.
The essential elements of conspiracy to commit mail fraud and
wire fraud, 18 U.S.C. § 371, are: (1) an agreement between two or
more persons; (2) to commit interstate mail fraud or wire fraud;
and (3) an overt act committed by one of the conspirators in
furtherance of the conspiracy. United States v. Hatch, 926 F.2d
387, 393 (5th Cir.), cert. denied, 500 U.S. 943 (1991); United
States v. Massey, 827 F.2d 995, 1001 (5th Cir. 1987); and United
States v. Gordon, 780 F.2d 1165, 1170 (5th Cir. 1986).
"'Conspiracy to commit a particular substantive offense cannot
exist without at least the degree of criminal intent necessary for
the substantive offense.'" Massey, 827 F.2d at 1001 (quoting
Ingram v. United States, 360 U.S. 672, 678 (1959)).
Specific intent to use interstate wires is not required for
wire fraud; interstate wire communication need only be foreseeable.
Likewise, for mail fraud, the use of the mails need only be
foreseeable. The government's burden, therefore, is to demonstrate
beyond a reasonable doubt that Brumley agreed to engage in a scheme
to defraud in which the use of the mail and interstate wire
communications was at least foreseeable. Massey, 827 F.2d at 1002.
For the reasons previously stated, the evidence at trial was
insufficient to prove that the use of interstate wire
9
communications was foreseeable. Therefore, the evidence was
insufficient to prove Brumley intended to commit wire fraud, an
essential element of conspiracy to commit wire fraud.
The evidence in the record is insufficient to show that
Brumley and Cely conspired to commit mail fraud. The only
testimony at trial concerning mailings was that of Alvin Little, an
employee of the TWCC. Little testified that Brumley mentioned to
him that Fredregill, a client of Cely9, was interested in bidding
for the TWCC lease in Lufkin, Texas. Later, when the lease
specifications came out, Little mailed Fredregill a copy. This
evidence is insufficient to allow a rational finder of fact to
determine beyond a reasonable doubt that it was foreseeable to
Brumley that the mails would be used to execute a scheme. See
United States v. Walters, 997 F.2d 1219, 1223 (7th Cir. 1993).
Because the evidence was insufficient to prove that Brumley
intended to commit mail fraud or wire fraud, we reverse his
conviction for conspiracy to commit mail fraud and wire fraud.
MONEY LAUNDERING
Brumley appeals his money laundering convictions on
sufficiency of the evidence grounds, arguing that the evidence was
insufficient to establish the underlying specified unlawful
activity of wire fraud. We agree.
The money laundering statute, 18 U.S.C. § 1956, requires a
financial transaction involving the proceeds of a specified
unlawful activity. "Specified unlawful activity" is defined in 18
9
Little did not know that Fredregill was Cely's client.
10
U.S.C. § 1956(c)(7)(A) to include any racketeering offense listed
in 18 U.S.C. § 1961(1). One of the racketeering offenses
identified in 18 U.S.C. § 1961(1) is wire fraud, 18 U.S.C. § 1343.
Brumley's three money laundering convictions were based on the
specified unlawful activity of wire fraud. The wire frauds alleged
in the money laundering counts are the same as those in the wire
fraud counts. Therefore, for the reasons previously stated, the
money laundering convictions are reversed because of insufficient
evidence.
SENTENCING
Brumley raises two issues related to sentencing. However,
these issues do not concern the false statements to a financial
institution counts; they only concern the wire fraud, money
laundering and conspiracy to commit mail fraud and wire fraud
counts. As those counts have been reversed, we need not consider
Brumley's sentencing issues. Therefore, Brumley's sentence of
twenty-four months for two counts of making false statements to a
financial institution is affirmed.
CONCLUSION
The evidence at trial was insufficient to prove that it was
foreseeable to Brumley that his actions in receiving the Western
Union wire transfer would cause an interstate wire communication.
Because the defendant's use of interstate wire communications is an
essential element of the offense of wire fraud, the evidence was
insufficient to prove Brumley committed wire fraud. The evidence
was likewise insufficient to prove Brumley conspired to commit wire
11
fraud. Brumley's money laundering convictions were based on the
underlying specified unlawful activity of wire fraud. Because the
evidence was insufficient to convict Brumley of the underlying wire
fraud, it was also insufficient to convict him of money laundering.
For the foregoing reasons, Brumley's convictions for wire
fraud, money laundering and conspiracy to commit wire fraud are
REVERSED. Brumley's sentence of twenty-four months for the two
counts of making false statements to a financial institution is
AFFIRMED.
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