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United States v. Joyce

decided: May 9, 1974.


Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 71 CR 567 RICHARD W. MCLAREN, Judge.

Swygert, Chief Judge Hastings, Senior Circuit Judge, and Cummings, Circuit Judge. Swygert, Chief Judge, (dissenting in part).

Author: Cummings

CUMMINGS, Circuit Judge.

A 15-count mail fraud indictment was returned against defendants Joyce, Sherre, Wallace and Robert L. Ostrander. Ostrander pled guilty to count 14, but this count was dismissed as to the other three defendants. Joyce was convicted under counts 1, 8, 9, 10, 11, 13 and 15; Sherre was convicted under counts 9, 10, 11 and 13, and Wallace was convicted under count 5.*fn1 The only prison terms imposed were on Joyce, who received a one-year sentence on count 1, and on Wallace, who received a one-year sentence on count 5. Fines and probationary terms were imposed upon Joyce and Sherre under the other counts. This appeal involves the validity of convictions under eight counts (counts 1, 5, 8, 9, 10, 11, 13 and 15) of the 15-count indictment.

Count 1, the lead count of the indictment, charged that the four defendants (including Ostrander) devised a scheme to defraud firms engaged in the business of placing insurance risks, denominated in the indictment as "insurance brokers and agents," certain state departments of insurance, denominated in the indictment as "state insurance agencies," and persons who were induced to purchase insurance policies from Global Surplus and Excess Limited (Global), a company organized in the Bahamas.

According to the lengthy allegations contained in count 1, defendants caused Trust No. 15385, an Illinois land trust, to be entered into between Global and the Cosmopolitan National Bank of Chicago. Thereafter, defendants represented that the trust was established to protect the United States and Canadian policyholders of Global. They also entered into an agreement giving Sherre a power of attorney to direct the trust. They conveyed certain Illinois real estate into the trust and represented that it was an asset of Global for the benefit of its policyholders. They had the Cosmopolitan National Bank circulate copies of the trust agreement to insurance brokers and agents and state insurance agencies to induce them to place and permit the placing of insurance risks with Global. They prepared letters of appraisal for the trust real estate assigning an excess value thereto, and they caused the letters of appraisal to be circulated to insurance brokers and agents and state insurance agencies in order to induce them to use and permit use of Global. They also omitted to advise the insurance brokers and agents and state insurance agencies that some of the trust real estate was heavily mortgaged. They formed an Illinois corporation known as Global Surplus and Excess Limited of Illinois and represented that it was a holding company for the trust real estate. They were charged with making the following false representations in financial statements of Global:

1. The stock of Global Surplus and Excess Limited of Illinois was an asset of Global and had a value of $770,000.

2. Four vacant lots owned by Global in Kenosha County, Wisconsin, had a value of $60,000.

3. 41,250 shares of stock in Howard Savings and Loan Association of Chicago were owned by Global and had a value of $175,000.

4. 1,000 shares of stock in Wor-Wid Construction Company were acquired by Global in 1966 and had a value of $200,000.

5. Fifty shares of stock in Everlast Development Company of Illinois were acquired by Global in 1966 and were worth $150,000.

The grand jury also charged that defendants circulated these false financial statements of Global to insurance brokers and agents and to state insurance agencies. Defendants allegedly converted funds deposited in the checking accounts of various banks that had been deposited for the protection of Global policyholders.

Each of the subsequent counts repeated these general allegations by reference. All fifteen counts alleged a different mailing in violation of 18 U.S.C. § 1341, the mail fraud statute.*fn2

Various pre-trial motions of defendants were denied by the district court before the commencement of the jury trial. After a few trial days, the Government moved to dismiss count 2 as to all defendants and count 15 as to defendant Wallace, and the trial judge acceded. The jury found Joyce guilty on all counts (except the dismissed count 2). It found Sherre guilty on counts 7 through 15, and Wallace guilty on counts 5, 6 and 8. The district court granted Joyce's post-trial motions for acquittal as to counts 3 through 7 and 12 and 14. The court also granted Sherre's motion for acquittal on counts 7, 8, 12 and 14, and Wallace's motion for acquittal on counts 6 and 8. As noted above, Joyce is appealing his conviction on counts 1, 8, 9, 10, 11, 13 and 15; Sherre is appealing on counts 9, 10, 11, 13 and 15; and Wallace on count 5.

Defendants rather half-heartedly contend that the scheme was not proven because there is no showing that the misstatements of assets were made with intent to defraud rather than negligently. The magnitude of the misrepresentations is alone sufficient to support the jury's finding that they were not made negligently. Additional evidence of scienter is summarized infra at pp. 21-22 in the discussion of Sherre's separate contention that he was simply Global's attorney and was never aware of the fraud being perpetrated by his clients.

Defendants next contend that the evidence failed to sustain the charge concerning the individual mailings. In the interests of an orderly presentation, we will take up the counts assailed in numerical sequence.

Count 1

Joyce is the only defendant convicted under this count, which charged that Joyce and his co-defendants caused a letter to be mailed to Joyce from the Industrial Valley Bank & Trust Company.*fn3 The letter was addressed to Joyce by W. Kenneth Clark of that bank and agreed to send Joyce duplicate statements of Global's account with the bank commencing with the May 1966 statement. The Government has argued that the letter furthered the scheme because it was essential for Joyce to keep track of the balance in the account so that he and other defendants could withdraw funds from the account for their own use, although they represented that it was to be a reserve to pay losses. Since this district court found that Joyce had drawn a $2,359.65 check on the account payable to American Express, it concluded that "a reasonable mind could thus have fairly found beyond a reasonable doubt that the count letter was incident to an essential element of the conversion scheme -- knowledge of the balance in the acount."*fn4 We agree that the trier of fact could have drawn the inference that the American Express check was not drawn to pay a policyholder's claim. Whether the check paid for business or personal expenses is of no moment -- either use is inconsistent with maintenance of the account as a loss reserve for policyholders.*fn5

Conceding this arguendo, Joyce argues that he only requested a bank statement, and that the mailing charged was not a bank statement, but an unexpected acknowledgment of his request -- a mere courtesy letter. He argues that he did not cause the mailing of the courtesy letter, and that the courtesy letter could not have furthered the scheme. However, the letter was more than a mere acknowledgment; it also informed Joyce that there would be a $1 per month fee for the service he requested. It was foreseeable that there would be a charge, and that the bank would not impose the charge without an explanation. Joyce could thus foresee that his request would cause the mailing of a letter advising him of the fee, and this is sufficient. "One 'causes' the mails to be used where he 'does an act with knowledge that the use of mails will follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not actually intended * * *. '" United States v. Maze, 414 U.S. 395, 94 S. Ct. 645, 38 L. Ed. 2d 603, quoting from Pereira v. United States, 347 U.S. 1, 9, 98 L. Ed. 435, 74 S. Ct. 358. The count letter also furthered the scheme since it was impossible for Joyce to obtain the needed bank statements without causing the mailing of the count letter.

As to the proof of mailing of this count letter, witness Clark testified that he dictated the letter and that his secretary's practice was to send out all dictated letters (other than interoffice correspondence) by mail. Testimony as to office practice is sufficient proof of mailing. United States v. Shavin, 287 F.2d 647, 652 (7th Cir. 1961); United States v. Silvern, 494 F.2d 355, reheard en banc on other grounds, 484 F.2d 879 (7th Cir. 1973); United States v. Flaxman, 495 F.2d 344 (7th Cir. 1974). While the evidence in those cases was somewhat stronger than here, we hold that Clark's testimony was sufficient proof of mailing. Even weaker proof of mailing was held sufficient on some counts in King v. United States, 25 F.2d 242, 244 (6th Cir. 1928).

Joyce also contends that venue has not been established despite the showing that the usual procedure was to mail such a letter from Pennsylvania to the recipient at the address shown on the letter, here 7019 West Higgins Avenue, Chicago, Illinois 60656. In the normal course of the mails, we presume that a letter is sent to the address shown, so that venue was adequately established. Cf. Grannis v. Ordean, 234 U.S. 385, 397-398, 58 L. Ed. 1363, 34 S. Ct. 779; Henderson v. Carbondale Coal & Coke Co., 140 U.S. 25, 37, 35 L. Ed. 332, 11 S. Ct. 691; Marston v. Bigelow, 22 N.E. 71, 73, 150 Mass. 45 (1889). In any case, the district court properly held that Joyce waived his objection of proof of venue by failing to make it after the Government rested or in his motion for acquittal at the close of all the evidence. 1 Wright Federal Practice and Procedure, Criminal § 306 at 600-601 (1969).

Count 5

Wallace is the only defendant presently convicted under count 5. That count charged defendants with the December 21, 1966, mailing of a letter to International Excess Agency, Inc. in Cleveland, Ohio. The letter was from Burton Sherre to Mr. Paterson of the International Excess Agency. It stated that Wallace, Joyce and Ostrander had agreed that some of the cost of Sherre's legal services should come from Global funds held by Paterson's office. This request was refused by Paterson because the Ohio Department of Insurance had asked him to keep all Global funds in escrow. With Wallace's and Joyce's consent, Sherre was attempting to obtain for himself funds that were segregated for the benefit of policyholders' claims in Ohio. The letter thus falls within the conversion scheme alleged.

At the time this letter was sent, Wallace was still active in Global's affairs. As a member of a mail fraud scheme, Wallace was responsible for any letter which any other member of the scheme caused to be mailed in execution of the scheme. Pritchard v. United States, 386 F.2d 760, 764 (8th Cir. 1967), certiorari denied sub nom. Borchelt v. United States, 390 U.S. 1004, 20 L. Ed. 2d 104, 88 S. Ct. 1247; Babson v. United States, 330 F.2d 662, 665 (9th Cir. 1964), certiorari denied, 377 U.S. 993, 12 L. Ed. 2d 1045, 84 S. Ct. 1920; Sherwood v. United States, 300 F.2d 603, 605 (5th Cir. 1962), certiorari denied, 371 U.S. 838, 9 L. Ed. 2d 74, 83 S. Ct. 65; Blue v. United States, 138 F.2d 351, 358 (6th Cir. 1943), cert. denied, 322 U.S. 736, 64 S. Ct. 1046, 88 L. Ed. 1570; Tincher v. United States, 11 F.2d 18, 21 (4th Cir. 1926), certiorari denied, 271 U.S. 664, 70 L. Ed. 1139, 46 S. Ct. 475; Silkworth v. United States, 10 F.2d 711, 717 (2d Cir. 1926), certiorari denied, 271 U.S. 664, 70 L. Ed. 1139, 46 S. Ct. 475; cf. Kann v. United States, 323 U.S. 88, 93, 89 L. Ed. 88, 65 S. Ct. 148. In its memorandum opinion of August 10, 1973, the district court stated that it had erroneously granted Joyce's motion for acquittal on count 5 since the Government had not drawn its attention to the language in the count 5 letter stating that Joyce had also agreed to Sherre's request. But under the rule just stated, each schemer was responsible for Sherre's acts in furtherance of the common scheme, whether or not he knew of or agreed to the specific mailing. We have been directed to no 7th Circuit cases applying this rule in the absence of a separate count charging conspiracy; somewhat surprisingly, the issue appears not to have arisen in this Court. But we have upheld the admissibility of hearsay declarations by persons shown to be coconspirators in cases where conspiracy was not charged. United States v. Jones, 438 F.2d 461, 466 (7th Cir. 1971); United States v. Blue, 432 F.2d 1191, 1194 (7th Cir. 1970), certiorari denied, 401 U.S. 921, 27 L. Ed. 2d 824, 91 S. Ct. 909; United States v. Bernard, 287 F.2d 715, 719-721 (7th Cir. 1961), certiorari denied, 366 U.S. 961, 6 L. Ed. 2d 1253, 81 S. Ct. 1921. We therefore have no hesitation in joining at least six other circuits in applying conspiracy principles to a multi-member mail fraud scheme. The nature of the group activity is the same whether or not a conspiracy is charged.

Count 8

Joyce is the only defendant whose conviction was left standing under count 8. This count charged that Joyce and the other defendants caused International Excess Agency of Cleveland, Ohio, to mail Joyce a copy of its letter of February 16, 1967, to Carl Brown in St. Louis, Missouri, enclosing a copy of Joyce's false statement of assets, so that Brown could secure approval for Global to do business in Missouri. This of course furthered the scheme. Perhaps recognizing that the sending of a copy of this letter to Joyce helped him keep track of who had been told what in the scheme of misrepresentations, his brief merely states that it is "inconceivable that a carbon copy of a letter to an alleged schemer could in any way have furthered the scheme charged." We find it quite conceivable.

Joyce is somewhat more persuasive in this contention that proof of mailing of this count letter was lacking. The Government concedes that the proof of mailing as to count 8 is "possibly the most circumstantial." The trial court granted Sherre's and Wallace's post-trial motions for acquittal on count 8, stating "the government merely proved the mailing of a letter from Cleveland to St. Louis, Missouri, which bore the notation 'cc: Mr. Thomas Joyce. ' This is not a sufficient basis for a reasonable inference that a copy was mailed to Joyce." We disagree, for the witness Paterson testified that the notation meant a carbon copy was directed to Joyce, and that the customary procedure was to place such a copy in a separate pile of mail ...

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