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United States v. Chappell

decided: January 14, 1983.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
ROBERT S. CHAPPELL, DEFENDANT-APPELLANT



Appeal from the United States District Court for the Southern District of Indiana. No. IP 79-50-CR -- William E. Steckler, Judge.

Cummings, Chief Judge, Wood, Circuit Judge, and Marovitz,*fn* Senior District Judge.

Author: Marovitz

MAROVITZ, Senior District Judge.

Appellant, Robert S. Chappell, appeals a two count conviction for mail fraud, 18 U.S.C. ยง 1341.*fn1 Chappell allegedly devised and carried out a scheme to defraud investors in his company, General Oil, Inc., by making certain specific misrepresentations concerning the use of the funds invested and potential returns. Count I of the indictment set forth the alleged scheme to defraud which was then incorporated by reference into each of the remaining ten counts.*fn2 Each count pertained to a different investor and each count alleged a specific mailing.

A jury convicted Chappell on Count 10 which concerned a letter from Chappell addressed to Gene and Lloyd Sellers, and on Count 11 which concerned a letter from Chappell to Andrew Hasenour. Both letters were dated April 14, 1977. On appeal, Chappell contends: 1) that insufficient evidence was presented at the trial to convict him of the crime of mail fraud; and 2) that the trial judge erred in admitting into evidence certain documents purporting to be the books and records of Chappell's corporation, and in permitting the District Attorney to read to the jury portions of a transcript of an interview with a deceased former employee of the corporation. After a full review of the record, we find Chappell's arguments to be without merit and therefore affirm his conviction.

Facts

In March 1975, Chappell formed General Oil, Inc., under the laws of the State of Indiana. Shortly thereafter, he purchased the oil and gas rights to a 150 acre tract of land located in Warren County, Pennsylvania from Maurice Dickey. There were regularly producing oil wells located all around the tract of land and it was regarded as a likely location for the production of oil. Chappell then filed a Schedule D offering with the Securities and Exchange Commission (the "SEC") concerning the first oil well to be drilled. Basically, a Schedule D is a question and answer form intended to provide information to potential investors in regard to the project. After the SEC approved the Schedule D, Chappell began to sell interests in the future oil wells. Each investor received a copy of the Schedule D and signed a copy of the Operating Agreement, which is the agreement between General Oil and each individual investor. Under the terms of the Schedule D and the Operating Agreement, investors bought only an investment in the oil wells, and did not become a shareholder in General Oil or entitled to any of the profits of the corporation.

The tract of land was large enough for thirty wells and investors were told that thirty wells would be drilled. Only ten wells were ever drilled. Nine of the wells produced oil, but only in very small quantities.

In March 1976, the SEC began an investigation of General Oil and Chappell, and eventually insisted that a separate Schedule D be filed for each well drilled. The SEC later began a civil action in the Southern District of Indiana, and in July 1976 Chappell and General Oil agreed to the entry of a consent decree whereby no new investors would be sought for the project.

There is no question that corporate funds were used to purchase commercial real estate in Indiana for the purpose of opening a business to sell fine art. Chappell also transferred to General Oil a motel located in Little Rock, Arkansas which he had purchased prior to starting the corporation. The motel was carried on the books and records of the corporation and corporate funds were expended on it. Chappell also wrote checks on the corporate checking account for personal and family expenses including support payments to his wife. The books and records of General Oil apparently accurately reflected these expenditures which were charged to Chappell personally.

In April 1977, the SEC renewed its investigation of Chappell. On April 21, 1977, representatives of the SEC took Chappell's testimony, and at that time he indicated that certain books and records of the corporation were in the possession of Anthony Ricci, who was located in Florida.

On May 2, 1977 representatives of the SEC's Florida office took testimony from Ricci. They also received the books and records of the corporation that were in his possession. At Chappell's trial, these books and records were received into evidence, over objection, as Government Exhibits 16A-K. Portions of Ricci's testimony as given to the SEC were read to the jury, but the transcript itself (Government Exhibit 16L) was not admitted as evidence. Ricci had died over a year before trial.

Sufficiency of the Evidence

Chappell first contends that the evidence pertaining to the counts on which he was acquitted may not form the basis for inferences against him on Counts 10 and 11. He claims that the convictions on Counts 10 and 11 must stand or fall on their own weight and that there was insufficient evidence presented on those counts to support a conviction. Basically, Chappell claims that the mailings alleged in Counts 1 through 9 covered a time span up to and including April 12, 1977, and that his acquittal on those counts shows that the jury felt that there was no scheme to defraud up to that period in time. Therefore, Chappell argues that it is logically inconsistent for the jury to convict him on Counts 10 and 11 since the mailings alleged in those counts ...


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