United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS May 18, 2004
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
_____________________ Clerk
No. 03-10559
_____________________
UNITED STATES OF AMERICA,
Plaintiff - Appellant,
versus
FREDRIC WAYNE STRONG,
Defendant - Appellee.
__________________________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
_________________________________________________________________
Before JOLLY, JONES and BARKSDALE, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
Fredric Wayne Strong was convicted by a jury of mail fraud in
connection with his fraudulent acquisition and sale of automobiles,
but the district court entered a judgment of acquittal. The
government appeals, seeking to reinstate the conviction. There is
no question but that the government established both a fraudulent
scheme, and the use of the mails. The question in this appeal,
however, is whether the mailings -- fraudulent applications for
certified copies of original titles, “CCOs,” mailed by the local
Texas Department of Transportation, “TDOT,” to the TDOT
headquarters in Austin -- are sufficiently related to the
fraudulent scheme itself to prove a violation of the mail fraud
statute, 18 U.S.C. § 1341. We find the evidence insufficient to
establish that the mailings were sufficiently related to the
success of the scheme, and thus affirm the district court’s
judgment of acquittal.
I
Strong, a former Dallas police officer, and his brother, a
former used car dealer, were involved in a fraudulent scheme known
as “punching titles.” The brothers “purchased” cars at automobile
auctions using buyers’ drafts that they never intended to honor.
This ploy allowed them to take immediate physical possession of the
cars while the original titles remained with the auctioneers while
the drafts cleared.
After obtaining the cars, Strong would travel to the
Carrollton branch of the TDOT and, in full police uniform, apply
for CCOs using forged lienholder and/or automobile owner
signatures. After obtaining the CCOs, the Strongs would use them
in selling the cars to innocent purchasers.
Ten days after the Strongs took possession of a car, the
unpaid draft would return to the auction houses. The auction
houses then would futilely attempt to reclaim the cars. The
Strongs’ scheme thus resulted in substantial losses to the auction
houses, as well as clouding the titles of the bona fide purchasers.
TDOT policies provide that upon request of a patron, local
TDOT branches may issue CCOs on the spot. (Each time Strong
2
applied for a CCO, the Carrollton branch office issued it
immediately.) In the course of processing CCO requests, local TDOT
branch offices routinely mail CCO applications to the TDOT
headquarters in Austin where the documents are microfilmed for
record-keeping purposes. After being microfilmed, the original
applications are destroyed.
On September 25, 2002, the Strongs were indicted on eight
counts of mail fraud. Although his brother pled guilty, Fredric
Strong opted to go to trial. The jury found Strong guilty of three
counts of mail fraud under 18 U.S.C. § 1341. Consistent with his
motions for judgment of acquittal during trial, Strong then moved
for a judgment of acquittal under FED. R. CRIM. P. 29, which the
district court granted on May 1, 2003.
In entering the judgment of acquittal, the district court held
that the use of the mails (namely the mailing of the CCO
applications from Carrollton to Austin) was not sufficiently
related to the fraud scheme because each fraudulent act was
complete when Strong obtained the CCOs from the local TDOT office,
the mailings did not assist Strong in covering up the fraud, and
the evidence did not establish that Strong could have reasonably
foreseen the mailings. The government contends, however, that the
evidence is sufficient to uphold the convictions and that the jury
verdict should be reinstated.
3
II
We review a district court's grant of a motion for judgment of
acquittal de novo. United States v. Deville, 278 F.3d 500, 505
(5th Cir. 2002). In reviewing such a determination, we apply the
same standard as the district court. Id. Here, we must determine
whether, viewing the evidence in the light most favorable to the
government, “a reasonable-minded jury could find the admissible
evidence sufficient to support the jury's verdict of guilty.” U.S.
v. Maner, 611 F.2d 107, 108 (5th Cir. 1980). This Court has
repeatedly emphasized that “all reasonable inferences and
credibility choices must be made in favor of the jury verdict."
Deville, 278 F.3d at 505 (internal quotation marks and citations
omitted).
To prove that a defendant engaged in mail fraud under 18
U.S.C. § 1341, the government must show: “(1) a scheme to defraud;
(2) use of the mails to execute that scheme; and (3) the specific
intent to defraud.” United States v. Bieganowski, 313 F.3d 264,
275 (5th Cir. 2002).1 The parties do not dispute the existence of
1
Section 1341 provides, in relevant part:
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 . . . for the purpose of executing
such scheme or artifice or attempting to do so
. . . knowingly causes to be delivered by mail
according to the direction thereon, or at the
place at which it is directed to be delivered
by the person to whom it is addressed, any
4
a scheme to defraud, nor do they dispute Strong’s specific intent
to defraud. The only question before this Court, then, is whether
the evidence presented at trial, viewed in the light most favorable
to the jury verdict, was sufficient for a reasonable jury to find
that the second requirement of the mail fraud statute -- that the
mailings were used to execute the fraudulent scheme -- was
satisfied.
A
The Supreme Court has held that for a mailing to be part of
the execution of a fraudulent scheme, “the use of the mails need
not be an essential element of the scheme.” Schmuck v. United
States, 489 U.S. 705, 710 (1989) (quoting Pereira v. United States,
347 U.S. 1, 8 (1954)). “It is sufficient for the mailing to be
‘incident to an essential part of the scheme’ or ‘a step in [the]
plot.’” Id. at 710-11 (citations omitted). In order to discern
the precise meaning and appropriate application of these words to
our case, we must study the Supreme Court’s seminal mail fraud
opinion further.
In Schmuck, the defendant was a used car dealer who bought
cars, rolled back their odometers, and then resold them to other
dealers at a higher price. Id. at 711. After Schmuck had thus
such matter or thing, shall be fined not more
than $1,000 or imprisoned not more than five
years, or both.
18 U.S.C. § 1341.
5
sold the cars and had fraudulently obtained his money, the dealers
who had bought the cars then resold them to innocent purchasers and
mailed the title applications to the state motor vehicles agency on
behalf of the new owners. This exercise transferred title from the
dealer to the owner, who then used the title to acquire a tag. Id.
The Court held that a rational jury could have found that the
success of Schmuck’s scheme turned on his continued good relations
with the local dealers, who were his regular customers, and those
good relations depended in part on the successful passage of title
from those dealers to their customers. Id. at 711-12. As a
result, the mailing of the title applications was an incident of a
“scheme which did not reach fruition until the retail dealers
resold the cars and effected the transfer of title,” id. at 712,
because only then did Schmuck’s customers, the car dealers, have
customers satisfied with Schmuck’s cars. That is to say, the
Schmuck mailings, while not directly contributing to the “duping of
either the retail dealers or the customers,” were nonetheless
“incidental to an essential part of the scheme.” Id. (citing
United States v. Shyrock, 537 F.3d 207, 208-09 (5th Cir. 1979)
(holding that a local motor vehicle department’s mailing of title
applications to state headquarters furthered a dealer’s odometer-
tampering scheme)).
In upholding the convictions, the Schmuck Court was faced with
the formidable task of distinguishing three earlier cases in which
the Court found that the mailing element of the mail fraud statute
6
could not be satisfied once the actual scheme was completed. In
Kann, the Supreme Court held that the mailing of fraudulently
cashed checks between two banks did not meet the “incident to an
essential part of the scheme” test because the fraud was complete
when the defendants obtained the cash from the first bank. Kann v.
United States, 323 U.S. 88, 94-95 (1944). The Court noted that
because the defendants had already fraudulently obtained the money,
“[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.” Id. at 94. In Maze and Parr, the defendants
engaged in unauthorized use of a government credit card and were
charged with mail fraud based on the subsequent mailing of the
invoices to the credit card holder by the credit card company.
United States v. Maze, 414 U.S. 395 (1974); Parr v. United States,
7
363 U.S. 370 (1960).2 In both of these cases, the Supreme Court
held that the mailing element could not be met because the scheme
was complete when the defendants received the goods and services
they obtained at the time they used the fraudulent credit cards.
Thus, the subsequent mailings were immaterial to the success of the
fraudulent scheme. Parr, 363 U.S. at 393; Maze, 414 U.S. at 402.
The Schmuck Court did not overrule these cases. It
distinguished Kann, Parr, and Maze by noting that the mailings in
these three earlier cases “involved little more than post-fraud
accounting among the potential victims of the various schemes,” and
that “the long-term success of the fraud did not turn on which of
the potential victims bore the ultimate loss.” Schmuck, 489 U.S.
at 714. By contrast, Schmuck’s ensuring that title was properly
transferred was important to the ongoing success of his fraudulent
odometer-tampering scheme and thus the mailing of the title
applications satisfied the statutory requirement. Id.
2
In Parr, the Court also dealt with a second fraudulent scheme
relating to the misappropriation of tax revenue, where the
government brought mail fraud charges based on the mailing of tax
statements, checks, and receipts. 363 U.S. at 390. The Court held
that the mailing element could not be met because the mailings were
“made under the imperative command of duty imposed by state law.”
Id. at 391. In Schmuck, it further clarified its Parr holding by
noting that although the mailings in both cases were compelled by
law -- tax laws in Parr and car registration procedure in Schmuck
-- the Parr mailings would have taken place “regardless of the
defendant’s fraudulent scheme,” as contrasted with Schmuck, where
the mailings were “derivative of Schmuck’s scheme to sell
‘doctored’ cars and would not have occurred but for that scheme.”
Schmuck, 489 U.S. at 713 n.7.
8
Synthesizing the Supreme Court’s holding in Schmuck with these
other precedents -- which the Court accepted -- and in breaking
down Schmuck’s rationale, it is clear that the Court’s statement
that a mailing need merely be “incident to an essential part of the
scheme” to satisfy the mail fraud statute, id. at 711 (quoting
Pereira, 347 U.S. at 8), is cabined by the materiality of the
mailing, as well as its timing: A tangential mailing occurring
after the success of a fraud scheme is complete would never
qualify, even if the mailing is “incidental” to a part of the
scheme.
In this appeal, the government argues that the Kann-Maze line
of cases is distinguishable for reasons similar to those noted in
Schmuck; namely, that the fraudulent scheme hatched by Strong had
not come to fruition prior to the mailings. Strong responds that
the mailings occurred after the fraud was complete; once the CCO
was obtained, the subsequent mailing to Austin was a mere formality
and totally immaterial to the success of Strong’s fraudulent
scheme. Resolving this dispute turns on an analysis of the fraud
scheme in the light of the evidence presented: Was it an “ongoing
fraudulent venture” that relied on third parties’ continuing
confidence and good will after each incident of fraud, or was it a
series of one-shot operations in which the scheme was successfully
complete with the receipt of a CCO and the sale of the car?
B
9
In Schmuck, the Court found an ongoing fraudulent scheme based
on evidence that over 150 cars had been tampered with, the
defendants’ 12 separate jury convictions, and the defendants’ 15-
year relationship with the car dealers that were the unwitting
participants in the scheme. Schmuck, 489 U.S. at 711-12. Here,
the fraud was of a much smaller scale than in Schmuck -- the jury
convicted Strong of three fraudulent transactions over the course
of seven months -- although this fact alone does not conclusively
demonstrate the absence of a broad scheme to defraud. See, e.g.,
United States v. Vontsteen, 872 F.2d 626, 627-29 (5th Cir. 1989)
(finding a broad scheme to defraud where the conduct at issue took
place over less than a year).
Importantly, and as noted by the district court, the mailings
here are not directly related to the passage of title as they were
in Schmuck; full unclouded title never passed, and Strong obtained
CCOs and sold them to new owners irrespective of any internal TDOT
procedures. Yet the mailings were not as unrelated to the
fraudulent scheme as were the intra-bank mailings in Kann and the
credit card invoices mailed after the fraudulent activity in Parr
and Maze. See, e.g., Schmuck, 489 U.S. at 1450 (referring to the
mailings in the Kann-Maze line of cases as “little more than post-
fraud accounting”). As a result, this case falls in the
interstices between Schmuck and the Kann-Maze line of cases: The
scheme was ongoing, yet each act of fraud was discrete.
10
The question, then, is whether the mailings themselves somehow
contributed to the successful continuation of the scheme -- and, if
so, whether they were so intended by Strong. See Schmuck, 489 U.S.
at 711-12 (“The relevant question at all times is whether the
mailing is part of the execution of the scheme as conceived by the
perpetrator.”) (emphasis added); see also United States v. Shively,
927 F.2d 804, 814 (5th Cir. 1991) (“The relevant inquiry is whether
the mailings were ‘sufficiently closely related’ to the fraudulent
scheme to bring it within the scope of § 1341.”) (quoting Maze, 414
U.S. at 399).
C
Thus, to sustain Strong’s conviction, the government must
present evidence that shows a link between the fraudulent activity
and the mailings at issue which demonstrates that the mailings
either “advanced or were integral to the fraud.” Vontsteen, 872
F.2d at 629. In support of its position that the mailing of the
CCO applications was integral to the continuation of the fraudulent
activity, the government essentially argues that Strong applied for
the CCOs for two reasons: to accomplish the fraud by selling a
“titled” car, and to lend authenticity to the fraudulent title by
having the CCO application appear in TDOT’s microfilmed records.
According to the government, this latter motive makes the
mailing of the CCO applications “incident to” an essential part of
the fraud because the victims of the fraud (automobile purchasers)
11
would be “lulled” into a false sense of security by the “air of
regularity” of the presence of a complete title record in Austin.3
The mailing of the applications was thus incident to an official
imprimatur of legitimacy to the CCO and delayed the discovery of
the fraud by the innocent purchasers, thereby allowing the scheme
to continue uninterrupted. The government argues that testimony
regarding the storage of the title records in Austin could have led
the jury to surmise that Strong wanted the title records in Austin
to appear complete, such that a diligent bona fide purchaser
investigating a car’s title would not detect the scheme.
There is no question but that the evidence overwhelmingly
establishes that Strong was engaged in a broad scheme to defraud,
and that a number of mailings were made over at least a seven-month
period. Yet the government has presented little evidence linking
the mailings to Strong’s fraudulent scheme such that the mailings
3
The Supreme Court has held that certain mailings sent after
the defendants have obtained the fraudulently sought funds or
services may fall within the ambit of the mail fraud statute. See
United States v. Sampson, 371 U.S. 75 (1962) (holding that mailing
element was satisfied where the defendants sent letters to fraud
victims in an attempt to convince them that the promised services
would be performed even though mailings were sent after victims’
money had been obtained). Subsequent mailings that are “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,” fall within the ambit
of the mail fraud statute. See United States v. Lane, 474 U.S.
438, 451-52 (1986); see also United States v. Helms, 897 F.2d 1293,
1297 (5th Cir. 1990) (holding that subsequent mailings “which are
designed to lull the victim into a false sense of security,
postpone inquiries or complaints, or make the transaction less
suspect are mailings in furtherance of the scheme”).
12
can be said to have a “lulling” effect or that Strong intended this
mailing as part of his scheme. The cases considering “lulling”
generally evaluate the lulling effect of the mailings on the
victims of the fraud. Sampson, 371 U.S. at 80-81 (letters from
defendants to victim investors suggesting promised services would
be rendered); Lane, 474 U.S. at 452-53 (false proof of loss forms
mailed by defendants to victim insurance company); Helms, 879 F.2d
at 1296-97 (letter from defendants to victim investors regarding
potential of investment to fulfill false promises); Shively, 927
F.2d at 814-15 (letter from defendants to victim financing company
attempting to delay detection of fraudulent scheme).
Of all this Court’s precedent, the most apt is the case on
which the district court relied, United States v. Evans, 148 F.3d
477 (5th Cir. 1998). In Evans, a parole officer was charged with
mail fraud in submitting false travel vouchers that, after being
processed by her supervisor, were mailed to Austin for record-
keeping. Evans, 148 F.3d at 483. This Court found the mailing
requirement was not satisfied because the fraud was complete each
time the supervisor approved the vouchers. Id. The regularity of
the mailings, viewed in one light, could have been seen as
intending to ratify the voucher reimbursement so as to allow the
broader fraud to continue unabated, but that inference alone does
not implicate § 1341.
13
The mailings at issue here, as in Evans, do not qualify as
“lulling” letters because the record contains no evidence that they
do lull the victims of the fraud, the auction dealers and innocent
purchasers.4 Indeed, the mailings, by introducing a secondary
chain of title into state records, are more likely to alert an
investigator to the fraud than to somehow delay its detection.
Though the relevant question “is whether the mailing is part of the
[fraud scheme] as conceived by the perpetrator . . . regardless of
whether the mailing later may prove to be counterproductive,”
Schmuck, 489 U.S. at 715, it is counterintuitive to conclude that
a defendant who knew enough about TDOT procedures to envision an
inter-office mailing as part of his fraud would not realize the
fraud-revealing implication of such a mailing on title records.
In sum, drawing all inferences from the facts in the record in
favor of the verdict, the government has presented insufficient
evidence such that a jury could reasonably link the mailing of CCO
applications to the success of Strong’s “title punching” fraud
4
The TDOT, whom the government contends is also a victim, is
simply too far removed to be considered as a target of the Strongs’
scheme.
14
scheme.5 Accordingly, the district court did not err in setting
aside the jury verdict of conviction.
III
For the foregoing reasons, which are essentially an
elaboration of the district court’s rationale, the judgment of the
district court is
AFFIRMED.
5
In addition to establishing a connection between the mailings
and the fraud, the government must show that Strong committed “an
act with knowledge that the use of the mails will follow in the
course of business, or where such use can reasonably be foreseen.”
United States v. Reyes, 239 F.3d 732, 736 (5th Cir. 2001) (quoting
Pereira v. United States, 347 U.S. 1, 8-9 (1954)). That is, as
Strong did not himself do the mailing, a lawful conviction requires
evidence that he at least foresaw it. While we are doubtful that
the government provided sufficient evidence of foreseeability, we
need not reach this issue because of the insufficiency of the
evidence linking the mailings to the fraud.
15
United States v. Strong
Court: Court of Appeals for the Fifth Circuit
Date filed: 2004-05-18
Citations: 371 F.3d 225
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