UNITED STATES v. BUCHANAN

Rehearing and Rehearing En Banc Denied February 14, 1977.

GODBOLD, Circuit Judge:

Defendant James C. Buchanan appeals from a jury conviction on seven counts of violating the federal mail fraud statute. 18 U.S.C. § 1341.1 The district court sentenced Buchanan to three years on each count, the terms to run concurrently.

Buchanan's "scheme" involved the creation of Union Postal Systems, Inc., a franchise arrangement whereby interested parties each paid him $1,000 for the opportunity to deliver second, third, and fourth class mail under the Union banner. In return, the franchisees were promised 30% of all revenues resulting from their deliveries, the offering of certain "training and indoctrination courses," and other benefits. The indictment charged Buchanan and his corporate enterprises with making the following knowingly false representations accompanying the solicitations:

Buchanan asserts three bases for reversal of the decision below. The first concerns the prosecutor's reading from a transcript of a tape during his final argument. This tape had not been introduced into evidence, but was instead an amplified version of the tape introduced as the government's Exhibit 12. Buchanan's attorney did not object to this action at trial, and we cannot hold that it resulted in plain error. Second, Buchanan claims that the evidence was insufficient to prove the existence of a scheme to defraud. We also find this contention to be without merit.3

Buchanan's third claim, that his use of the mails was not adequate to sustain a conviction under § 1341, merits a more extended discussion. Of the seven counts upon which Buchanan was convicted, the first three related to the sale of franchises through ads placed in three newspapers. The last four concerned the sale of Union stock to franchisees after they had already purchased their delivery routes. We consider first the use of the mails requirement under the newspaper counts.

Buchanan depended primarily upon advertisements in three local newspapers for soliciting Union franchisees. Each of these papers depended to some extent upon the mails for its circulation:

   Newspaper             Total Paid Circulation   Mail Subscriptions
                        (Avg. as of Oct. 1, 1974)
   Harlingen Valley
    Morning Star                20,412                   691
   Brownsville Herald           13,221                   259
   McAllen Monitor              18,803                   2454

Buchanan asserts, however, that none of the government's witnesses who purchased franchises after reading the newspaper ads actually received their newspapers through the mails.5 This fact, coupled with the fact that the number of mailed newspapers was relatively small, forms the basis of his claim that § 1341 cannot reach the activities charged in the first three counts.

The question here raised, in statutory terms, is whether Buchanan's use of the mails to deliver his ads through the newspapers was "for the purpose of executing [his] scheme or artifice or attempting so to do." We hold that it was. This case parallels Atkinson v. U. S., 344 F.2d 97, 99 (C.A.8), cert. denied, 382 U.S. 867, 86 S.Ct. 141, 15 L.Ed.2d 106 (1965):

We agree with the holding in Atkinson.6 Buchanan has misapprehended the requirements of the statute. He used the mails in order to disseminate his solicitation. He was thereby "attempting . . . to [execute]" his scheme. His use of the mails need not be an essential element of the scheme but only "incident to an essential part," Pereira v. U. S., 347 U.S. 1, 8, 74 S.Ct. 358, 362, 98 L.Ed. 435, 444 (1954); U. S. v. Crockett, 534 F.2d 589, 593 (C.A.5, 1976). Hence, whether the use of the mails was effective in producing franchisees is irrelevant. The "gist of the offense" is "the insertion of the matter intended to effect the scheme to defraud in the mail." U. S. v. Anderson, 466 F.2d 1360, 1361 (C.A.8, 1972). Thus the statute requires not a "but for" relationship but only that the defendant use the mails in "furtherance" of the fraud, as Atkinson holds.

U. S. v. Maze, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974), involving the use of stolen credit cards, does not dictate reversal here. Maze concerned the quite different problem of "whether [the] mailings were sufficiently closely related to respondent's scheme." Id. at 399, 94 S.Ct. at 648, 38 L.Ed.2d at 608. See also U. S. v. Constant, 501 F.2d 1284 (C.A.5, 1974), cert. denied, 420 U.S. 910, 95 S.Ct. 830, 42 L.Ed.2d 840 (1975). Here, the problem is not the nexus between the mails and the fraud but rather the significance of a small number of mailings clearly made to attract franchisees.

As we have noted, Buchanan received concurrent sentences. Because we have upheld his conviction on the newspaper counts, we need not reach the validity of the convictions based upon mailings to franchisees after they had purchased delivery routes in order to sell them stock in the company. U. S. v. Easterly, 444 F.2d 1236, 1240 (C.A.5, 1971).

Buchanan's conviction is AFFIRMED.

JONES, Circuit Judge, dissenting:

The indictment charged the appellant with mail fraud. The scheme called for the sale by appellant's corporation of franchises.

On the question as to whether the newspapers carrying the advertisements of the franchises were "significant" the majority finds that this case parallels the Eighth Circuit case of Atkinson v. U. S., 344 F.2d 97. In Atkinson there were over 7,000 of the newspapers mailed. Here there were 1195. In Atkinson the sales were primarily promoted by newspaper advertising, although it does not appear that those who were defrauded received their newspapers through the mail. Here the fraudulent sales were promoted primarily by personal solicitation. It does not appear that any of those who were defrauded ever saw the advertising in a newspaper that was in the mail. In this case 97.2 per cent of the newspapers were delivered by carrier and only 2.8 per cent were mailed. This is insignificant; it is de minimis. Atkinson stands alone and is not binding on this Court.

The "lulling letters", so called, were sent in an effort to sell stock to those who had theretofore purchased franchises. The scheme to sell franchises was at an end. Here, and it needs repetition, the fraudulent scheme alleged was for the sale of franchises, not stock. For a valid conviction the mailing must be in furtherance of the scheme.

I think the convictions should be reversed with directions to enter a judgment of acquittal. There is ample evidence of fraud but mail fraud, in my opinion, is too short a peg on which to hang a conviction.