Petition for Writ of Certiorari — Lennon v. United States

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

JOSEPH R. LENNON,

Petitioner,

versus

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

OLNEY G. WALLIS

2813 West T. C. Jester

Houston, Texas 77018

(713) 956-1300

Counsel for Petitioner

March 1985

Alpha Law Brief Co., Inc—5606 Parkersburg—Houston, Texas 77036-—223-3003

QUESTION PRESENTED

When, in a criminal prosecution for interstate trans-

portation of a security taken by fraud, the actual inter-

state transportation is accomplished by an innocent agent,

that interstate transport must, at a minimum, have been

reasonably foreseeable by the accused for a violation of

18 U.S.C. section 2314, paragraph one, to occur.

SUBJECT INDEX

Page

QUESTION PRESENTED .........-.----+ee+seeeeeee 1

THE OPINION BELOW ............--sceeeccccecoee: 2

JURISDICTION .........-cecceecccccerccececeecceee 2

STATUTORY PROVISIONS INVOLVED ............-. 2

STATEMENT OF THE CASE ...........--- mnihomaas 3

REASONS FOR GRANTING THE WRIT .........--- 10

COREE | os oc vv cdi n tae bhai esc senses seans> 18

CERTIFICATE OF SERVICE ........--- cee eeeeeee: 18

APPENDIX A—Second Opinion of the Court of Appeals

Dated January 11, 1985 ...........--- A-1

APPENDIX B—Initial Opinion of the Court of Appeals

Dated October 31, 1984 ...........+--. B-1

Ili

LIST OF AUTHORITIES

CASES Page

Glasser v. United States, 315 U.S. 60 (1942) ............ 5

eB 14

mane O. Ua Son US. CAE CI9EZ) ...n 2. cc cnn ccnes: 11,12

Palsgraf v. Long Island R.R., 248 N.Y. 339, 162 N.E. 99

ec cnvveees 15

me a, Soe Wie, BOW CIOTT) ww cece cc ccc sees. 13

Ruthenburg v. U.S., 245 U.S. 480 (1918) .............. 13

U.S. v. Berlin, 472 F.2d 13 (9th Cir. 1973) ........... 11,13

a ie a ee COED cnc cuvecceess 14

U.S. v. Kelly, 569 F.2d 928 (Sth Cir. 1978), cert. denied,

ee a i deni ueks seb nedareereres 16,17

U.S. v. Kenofskey, 243 U.S. 440 (1917) ............... 13

U.S. v. Ludwig, 523 F.2d 705 (8th Cir. 1975), cert. denied,

SEO Was PEP TEPIO) ic vccccvcccnss 2 na ree 11, 16,17

U.S. v. Muni, 668 F.2d 87 (2nd Cir. 1981) ............ 15

U.S. v. Sheridan, 329 U.S. 379 (1946) ................ 12, 14,17

UNITED STATES STATUTES

a a nn bubukoasscncs's 16,17

UT ono cccsvavcce 1, 3, 8,9, 10, 11, 13

i as cc psu hho be6 dé sepesvvevvas 14

os, occ ccckbcctvebciceedenees 11

ee ss een ccceervervevedessces passim

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NO. _

IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

JOSEPH R. LENNON,

Petitioner,

versus

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Petitioner Joseph R. Lennon respectfully requests that

a writ of certiorari issue to review an opinion and judg-

ment of the United States Court of Appeals for the

Fifth Circuit, which reversed and remanded Petitioner’s

conviction of eight (8) counts of an indictment alleging

interstate transportation of certain check proceeds ob-

tained by fraud in violation of 18 U.S.C. section 2314

and 18 U.S.C. section 2(b).

THE OPINION BELOW.

The initial opinion of the Court of Appeals is not

reported and is reproduced as an Appendix to this peti-

tion at page B-1. Both Petitioner and the United States

of America filed timely petitions for rehearing, and the

original opinion of the Court of Appeals was withdrawn

and replaced by the opinion reproduced as an Appendix

to this petition at page A-1. This opinion is reported in

751 F.2d 737.

JURISDICTION

The opinion and judgment of the Court of Appeals

wore entered on January 11, 1985. Both the petitioner’s

and the United States of America’s petitions for rehear-

ing were overruled by the Court on January 11, 1985.

Petitioner invokes the Court’s certiorari jurisdiction

under 28 U.S.C. section 1254(1). Filing of this petition

was accomplished within sixty (60) days of the Court

of Appeals’ opinion, judgment, and order overruling the

petitions for rehearing and was therefore timely under

Rules 20.1 and 20.4 of this Court.

STATUTORY PROVISIONS INVOLVED

Title 18, United States Code, section 2314, provides

in relevant part as follows:

“Whoever transports in interstate or foreign com-

merce any goods, wares, merchandise, securities or

money of the value of $5,000 or more, knowing the

same to have been stolen, converted or taken by

fraud... .

“Shall be fined not more than $10,000 or im-

prisoned not more than ten years, or both.”

Title 18, United States Code, section 2, provides in

relevant part as follows:

“(b) Whoever willfully causes an act to be done

which if directly performed by him or another would

be an offense against the United States, is punish-

able as a principal.”

STATEMENT OF THE CASE

On January 27, 1983, a Federal grand jury in the

Southern District of Texas indicted Petitioner, Joseph R.

‘ Lennon, for eight (8) counts of willfully causing the

interstate transportation of certain check proceeds ob-

tained by fraud in violation of 18 U.S.C. seciion 2314

(paragraph 1) and 18 U.S.C. section 2(b). Lennon pled

not guilty and was convicted by a jury on all eight

counts in the United States District Court for the South-

ern District of Texas, Houston Division, the Honorable

Judge Carl O. Bue, Jr., presiding.’

Lennon timely appealed his conviction and sentence

to the United States Court of Appeals for the Fifth

Circuit. Several issues, including the subject of this Peti-

tion for a writ of certiorari, were raised in the appeal.

On October 31, 1984, the Fifth Circuit rejected Peti-

tioner’s position on the question here presented, but re-

versed and remanded the case for a new trial because

the Trial Court’s jury instruction erroneously permitted

the jury to convict without finding that the fraudulently-

1. Judge Bue sentenced Lennon on Count 1 to imprisonment for

four years and imposed a consecutive five-year period of probation

and a cumulative fine of $70,000 on the remaining counts.

obtained property transported in interstate commerce ex-

ceeded $5,000 in value.’

Both Lennon and the Government filed Petitions for

Rehearing. On January i1, i985, the Fifth Circuit with-

drew ari replaced its earlier opinion delivered on Oc-

tober 31, 1985. The new opinion, after reciting the appro-

priate paragraph of 18 U.S.C. section 2314, again re-

jected Petitioner’s position on the questior. here presented

and again reversed and remanded the case t's a new trial

on the grounds previously enunciated in the opinion of

October 31, 1985. Both Petitions for Rehearing were

overruled on that same date.

During 1971 Lennon was employed by Charter Inter-

national Oil Company, a Texas corporaticn, as the man-

ager for crude oil purchasing (Tr. 429). Charter Inter-

national Oil operated a refinery in Houston, and initially

Lennon’s primary function was to obtain crude oil for

the refinery (Tr. 428). In 1974, largely as a result of the

Arab oil embrago and the new Federal energy regulations,

Charter International became obliged to obtain crude

oil from spot market purchases (Tr. 746, 821). Milton

Jones, then President of Southwest Petrochem, Inc., a

Texas corporation, had found an available supply of crude

oil for resale to Charter International (Tr. 29). During

the late summer or early fall of 1974, Lennon on behalf

of Charter International, met with Jones and agreed to

purchase crude oil from Petrochem (Tr. 36). As a con-

2. In rejecting Petitioner's argument on the question here pre-

sented, the Fifth Circuit stated that Lennon was convicted under

paragraph 2 of 18 U.S.C. section 2314. In fact, Lennon was convicted

under paragraph 1 of 18 U.S.C. section 2314. This oversight was the

subject of Lennon’s Petition for Rehearing.

dition, Lennon requested that Petrochem pay him per-

sonally twenty cents per barrel. Jones agreed (Tr. 36).°

On this sale, Petrochem paid a twenty-cent-per-barrel

“commission” to H&L Enterprises, a general partnership

formed under Texas law between Lennon and his friend

and business associate, James Harrigan (Tr. 66). Charter

and Petrochem continued to do business and Petrochem

continued to pay “commissions” to H&L Enterprises until

1975 when, due to market conditions, the transactions

stopped.

Crude oil sales between Petrochem and Charter Inter-

national resumed in late 1976 (Tr. 68). By this time

Dennis Van Mathew negotiated on behalf of Petrochem

and H. L. “Buddy” Mayes represented Charter Inter-

national (Tr. 351; 750). Although there is no evidence

of specific discussions between Lennon and Jones after

the 1974 meeting, Jones purportedly talked to Lennon

about the “commission” payments many times, and it was

Jones alone who decided whether a “commission” would

be paid and, if so, how much (Tr. 209).‘ Petrochem

again paid commissions to H&L and later to Harlen Trad-

ing Company, a Texas corporation with shares owned by

Lennon and Harrigan, in amounts varying from less than

ten cents to twenty cents per barrel (Tr. 75-97).

3. The evidence at trial concerning this meeting was hotly con-

tested. Mindful, however, of the standard of review under Glasser

v. United States, 315 U.S. 60 (1942), we will not belabor the Court

with the evidentiary dispute on this point.

4. In fact, the commissions paid to H&L and Harlen in the sub-

stantive counts of the indictment were ten cents per barrel or less

(Exhibits SP 34.1-4; SP 35.1-5; SP 36.1-6; SP 37.1-3; SP 39.1-3;

SP 40.1-3; SP 41.1-3; SP 43.1-5).

aati i il |

Each of the sales between Petrochem and Charter was

subject to regulations promulgated by the Federal Energy

Administration, later the Department of Energy. Thus,

if Charter resold the crude oil purchased from Petrochem,

Charter’s resale price could not exceed its own cost plus

its “margin” (that is, the profit that historically had been

earned on similar transactions).°

Petrochem was likewise subject to FEA regulation,

under which it could not pass on any “commission” pay-

ments in its sales price to Charter (Tr. 198-200).

During 1978, Charter International formed Charter

Crude Oil Company, a wholly-owned subsidiary (Tr. 43).

Upon its formation, Charter Crude assumed responsibility

for acquiring all of the crude oil for the refinery as well

as all crude oil purchased for resale (Tr. 430). Lennon,

Mayes. and the ‘rest of their department were transferred

to Charter Crude upon its formation, and Lennon was

appointed an executive vice-president.

These dealings were highly profitable for both Charter

and Petrochem. Charter paid Petrochem less for crude

oil than the price it was paying other suppliers (Tr. 753).

The eight sales alleged in the indictment occurred

during 1978 and 1979. On each occasion Petrochem hand

delivered its invoices from Petrochem’s Houston office to

Charter’s Houston office. Once Charter received the in-

5. Charter’s profit margin was calculated on a monthly account-

ing period, rather than on individual sales. Thus, during the latter

part of any given month, Charter might have been required by the

energy regulations to resell crude oil for less than its cost-plus-margin,

or even at a loss, in order to comply with federal law. The penalty

for non-compliance was a refund of the excess profits to the pur-

chaser. (Tr. 490; 630).

voice, the invoice was reviewed and approved by Lennon’s

department at Charter. Following approval, each invoice

was sent to the Accounting Department, located in a

separate building, which issued a check for payment (Tr.

713). Each of the eight checks was drawn on an cut-of-

state bank, a circumstance neither known, nor reasonably

foreseeable, to Lennon.’

When each check was prepared, Petrochem picked it

up at the Charter offices in Houston (Tr. 723), and hand

delivered each check for deposit to Petrochem’s Houston

bank (Tr. 498).

Upon receipt of each check by Petrochem’s bank, a

bank officer first called Charter’s bank to advise that the

check had been received for deposit and would be pre-

sented personally for payment. Each check was then

sent by special courier to Charter’s out-of-state bank

and presented for payment (Tr. 499).

After each check was accepted by Charter’s bank, the

funds were wire transferred to a correspondent bank in

Dallas, which bank in turn wired the funds to Petrochem’s

Houston bank. Once Petrochem’s bank received the funds,

Petrochem was notified that the funds were available

(Tr. 501). In the normal course of business, Charter’s

out-of-state banks returned the paid checks to the post

office box of Charter International or Charter Crude in

6. The government adopted the legal position both at trial and

on appeal that transporting in interstate commerce as used in para-

graph one of 18 U.S.C. section 2314 is the “lynchpin” of federal

jurisdiction and that knowledge or reasonable foreseeability of the

interstate transport is not required. Mayes, who worked in Charter’s

crude oil purchasing department longer than Lennon, and in fact,

replaced Lennon after his resignation, testified he did not know

whether the Charter checks were drawn on Texas or out-of-state

banks (Tr. 724).

Houston. The special handling of each check effected col-

lection in approximately the same time as would have

been required between two local Houston banks (Tr. 528).

On each of the eight sales, which were the subject of

the indictment, Petrochem issued a “commission” check

from its Houston bank payable to either H&L Enterprises

of Harlen Trading. Each of these checks was then hand

delivered to either Harrigan or Lennon in Houston (Tr.

83-93). Each “commission” check was in turn deposited in

a Houston bank account of either H&L Enterprises or

Harlen Trading (Exhibits SP 34.2; 35.2; 36.2; 39.2;

40.2; 41.2; 43.4).

Lennon resigned from Charter in June 1979 to work

for another company. Lennon never told Charter about

the payments to H&L Enterprises or Harlen Trading

(Tr. 943). After Lennon left Charter, the volume of

sales from Petrochem to Charter Crude increased (Tr.

21%).

All of the trial witnesses either were, or had been,

Houston residents.

Since Lennon did not personally transport the Charter

checks in interstate commerce, the case was submitted

to the jury ostensibly under the theory that he “willfully

caused” the Charter checks to be transported in interstate

commerce. 18 U.S.C. section 2(b) and section 2314,

paragraph 1. Over timely defense objection, the Trial

Court charged the jury:

“Now, in a prosecution under section 2314 of

Title 18 for transporting in interstate commerce

checks which have been taken by fraud, it is not

necessary that the defendant know or intend that

the checks would be transported in interstate com-

merce so long as he set in motion a series of events

which in the normal course resulted in such trans-

portation. Such a normal course of events occurs

whenever a check drawn on an out-of-state bank

travels across state lines in the process of collection

and arrives for payment at the bank on which it is

drawn.” (Tr. 1073-74).

On appeal Lennon contended inter alia, that, at a

minimum, sustaining his conviction should legally require

either knowledge or reasonable foreseeability of such inter-

state transportation. The Court of Appeals rejected that

contention. In the October 31, 1984, opinion the Court

concluded that since 18 U.S.C. section 2314, paragraph 2,’

contains a “causing” provision, the reference to section

2(b) was mere surplusage, and proof of knowledge or

reasonable foreseeability was not required. The Court

further rejected Petitioner’s argument that “cause” under

the mail fraud statute, 18 U.S.C. section 1341, requires

knowledge or reasonable foreseeability that the mails will

be used; likewise, so should “willfully causing” transport

in interstate commerce. The Court of Appeals concluded

the purpose of the mail fraud statute is to prevent the

use of the mails to facilitate schemes to defraud, while

the purpose of section 2314 is aimed at the evils of theft,

7. 18 U.S.C. section 2314, paragraph two, provides in pertinent

part as follows:

“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 prom-

ises, transports or causes to be transported, or induces any

person to travel in, or to be transported in, interstate commerce

in the execution or concealment of a scheme or artifice to de-

fraud that person of money or property having a value of $5,000

or more;

“Shall be fined not more than $10,000 or imprisoned not more

than ten years or both.

fraud and counterfeiting. Thus the word “cause” requires

knowledge or reasonable foreseeability only in the mail

fraud statute. (emphasis added)

Lennon’s Petition for Rehearing pointed out that he

was prosecuted under paragraph one, rather than para-

graph 2, of section 2314, which does not contain the

word “cause.”

On January 11, 1985, the Court of Appeals withdrew

its October 31, 1984, opinion. The Court again rejected

Lennon’s argument that “wiliful causation” requires knowl-

edge or reasonable foreseeability.

Citing paragraph 1 of section 2314, the correct para-

graph, the Court of Appeals then concluded that since

section 2314* contains a “causing” provision similar to

section 2(b), the reference to section 2(b) in the indict-

ment was surplusage and the government was not re-

quired to prove knowledge or reasonable foreseeability.

Lennon’s conviction was reversed and remanded on

other grounds.

REASONS FOR GRANTING THE WRIT

Certiorari should be granted because there is a con-

flict among Circuits. Interstate transportation by an in-

nocent agent of a security taken by fraud requires knowl-

edge or reasonable forseeability by the accused of that

interstate transport for a violation of 18 U.S.C. section

2314 to occur. Moreover, the absence of definitive

8. Section 2314 contains five separate paragraphs, each criminaliz-

ing certain conduct. Only paragraph one of section 2314 was involved

in this case, and paragraph one does not contain the word “cause.”

Inclusion of section 2(b) was essential to the prosecution’s theory.

standards defining when, or if, knowledge or reasonable

foreseeability of such transportation in interstate com-

metce is required presents a recurring problem appro-

priate for resolution in this case.

In U.S. v. Berlin, 472 F.2d 13 (9th Cir. 1973), a

Dyer Act prosecution,’ the Ninth Circuit determined

that selling a car known to be stolen followed by any

subsequent interstate transportation by an innocent pur-

chaser was not a violation of the Dyer Act. Although the

government contended that such interstate transportation

was reasonably foreseeable, the Court held:

“Since interstate automobile transportation is now

commonplace, this construction would seem to ren-

der every sale of a stolen car a federal offense. Sec-

tion 2(b) does, as appellants contend, have over-

tones of agency, and in our judgment, the willful

causation to which it refers must be purposeful rather

based simply on reasonable foreseeability.”

Contrary to the Berlin opinion, the Eighth Circuit in

U.S. v. Ludwig, 523 F.2d 705 (8th Cir. 1975), cert.

denied, 423 U.S. 1076 (1976), has determined that a

prosecution under section 2314, paragraph one, and

section 2(b), does not include the element of reasonable

foreseeability. In the Ludwig case, two stolen checks

drawn on a Missouri bank were deposited by a con-

federate of the thief in another Missouri bank. Unbe-

knownst to the accused, or his confederate, the depository

bank mailed the stolen checks in its collection process

9. This Court has recited the legislative history of the Dyer Act

(18 U.S.C. section 2312) and the National Stolen Property Act

(18 U.S.C. section 2314, paragraph 1) as authority for the interpreta-

tion of each statute. This Court has further stated that the purpose

of both statutes is the same. McElroy v. U.S., infra.

to a correspondent bank in Illinois. In affirming a con-

viction under paragraph one of section 2314, the Eighth

Circuit concluded that the government should not have

to prove that the interstate transport was in any way

reasonably foreseeable.

This Court has impliedly recognized the conflict

among Circuits regarding what proof is necessary to

sustain a conviction for interstate transportation, when

that interstate transportation is effected by an innocent

agent. In McElroy v. U.S., 455 U.S. 642 (1982) at p.

653, ftnt. 16, this Court noted:

“Some Circuits have even indicated that the statu-

tory phrase ‘interstate commerce’ is coextensive with

congressional authority under the commerce clause

”

This Court has never adopted that proposition, nor

should it do so now. Petitioner does not argue that

Congress lacked the authority to pass a statute of such

sweeping dimensions, but rather, that it has not done so

in section 2314.

This Court has also observed the congressional poli-

cies for a federal criminal statute, such as section 2314

and specifically the reasons for its passage. In U.S. v.

Sheridan, 329 U.S. 379 (1946), this Court noted that

congress contemplated coming to the aid of the states in

deterring and punishing criminals who utilize interstate

commerce to make a successful getaway. McElroy v.

U.S., supra, pointed out that federal authority might be

necessary to fully investigate the offense and compel wit-

nesses from other states to testify. None of those cir-

cumstances are present in this case. The witnesses and

documents were all local. The happenstance of Charter

banking out-of-state did not allow Petitioner to utilize

interstate commerce to make a getaway. None of the poli-

cies requiring federal intervention are present in this

case. Obviously, the lack of these circumstances, standing

alone, does not preclude proscription of our facts from

section 2314, paragraph one and section 2(b). Such

absence does, however, demonstrate the need for a

rational doctrine to restrict the application of section

2314. See, e.g., Rewis v. U.S., 401 U.S. 808 (1971),

(holding that the Travel Act, in conjunction with section

2(b), which prohibits willfully causing interstate travel

to promote an unlawful activity, requires more than a

showing of reasonable foreseeability by the manager of

a gambling facility that he will be patronized by out-of-

state customers).

As the Court further noted in the Rewis case, an ex-

pansive Travel Act would have been recognized by Con-

gress to over extend limited federal police resources.

18 U.S.C. section 2314, paragraph 1 and section 2(b),

as they apply to this case, provide:

“Whover (willfully causes to be transporied) in

interstate . . . commerce any .. . securities. . .

of the value of $5,000 or more, knowing the same

to have been . . . taken by fraud . . . (s)hall be

fined not more than $10,000 or imprisoned not more

than ten years, or both.”

Although U.S. v. Berlin, supra, required “willful cau-

sation” to be purposeful, the concept of causation has

been addressed on may occasions in interpreting the mail

and wire fraud statutes. U.S. v. Kenofskey, 243 USS.

440 (1917); Ruthenburg v. U.S., 245 U.S. 480 (1918);

and U.S. v. Giles, 300 U.S. 41 (1937). All dealt with

the concept of causation and have interpreted conduct

from which the use of the mails was reasonably foresee-

able to have “caused” the mails to be used as required in

the mail fraud statute (18 U.S.C. section 1341). Simi-

larly, in Kann v. U.S., 323 U.S. 88 (1944), this Court

again reiterated in the context of a federal mail fraud

prosecution that

“While there may be some question as to whether

the defendants may be said to have “caused” the

mailing of the checks, we think it a fair infer-

ence that these defendants who drew, or those

who cashed, the checks believed that the banks

which took them would mail them to the banks on

which they were drawn, and assuming the Peti-

tioner participated in the scheme, their knowledge

was his knowledge.”

The Court of Appeals’ opinion rejected the mail or wire

fraud case definitions of “causation” cited by Petitioner

and concluded that since the purpose of section 2314

was to prevent fraud and not to regulate interstate com-

merce, and since the purpose of the mail fraud statute

was to prevent use of the mails in furtherance of fraudu-

lent schemes, only that “cause” used in the mail fraud

statute requires the element of reasonable foreseeability.

Petitioner fails to appreciate how a different legislaiive

intent can change the meaning of the word “cause,” nor

does it follow that “willfully causing” requires a lesser

scienter than “causing.”

In U.S. v. Sheridan, supra, the defendant was charged

under section 2314 with transportation in interstate com-

merce of forged checks. Each of the checks, drawn on

a nonexistent Missouri bank account, was cashed or de-

posited in Michigan banks, who in turn sent the checks

to Missouri for acceptance. In concluding that Sheridan

caused the interstate trannsportation, this Court stated:

“Certainly he knew the checks would have to be

sent to the Missouri bank for collection. Given the

proven forgery and uttering, no other conclusion

would be possible. Necessarily, too, it would follow

he intended the paying bank to send the checks there

for that purpose. He knew they must cross state lines

to be presented. One who induces another to do

exactly what he intends, and does so by defrauding

him, hardly can be held not to cause what is done.”

... 329 US. at 391.

This doctrine of foreseeability is perhaps best enunci-

ated in the civil tort doctrine of proximate cause enunci-

ated by Justice Benjamine Cardoza in Palsgraf vy. Long

Island R.R., 248 N.Y. 339, 162 N.E. 99 (1928). The

criminal concept of causation, and the rationale of knowl-

edge or reasonable foreseeability has been well articulated

in U.S. v. Muni, 668 F.2d 87, 89-90 (2nd Cir. 1981):

“When a person is to be held civilly or ctiminally

responsible for causing an act, a mechanical chain of

events test, applying ‘but for’ reason would unduly

expand the scope of consequences for which he

would be responsible. Both the criminal and the civil

law have circumscribed the range of consequences

by considering an act to have been caused not simply

when it was a physical consequence of the person’s

conduct but when, in addition, the actor either knew

the consequences would occur or its occurrence was

reasonably foreseeable. By invoking an objective

test of reasonable foreseeability, the law avoids both

a premium on ignorance and a vast range of liability

for remote and unlikely physical consequences.”

(footnotes omitted)

As is readily apparent from the Trial Court’s charge in

this case, a simple “but for” test was applied to the inter-

state element of Petitioner’s charge. Paradoxically, will-

fully causing transportation in interstate commerce under

this “but for” reasoning imposes criminal liability without

knowledge or reasonable foreseeability of the interstate

transport. The civil tort concept of duty requires reason-

able foreseeability before imposing civil liability. It follows

that we may impose a dollar judgment against a defend-

ant only after finding that the injury imposed by his

conduct was reasonably foreseeable. We may, however,

extract years of his life under federal criminal liability

if a simple “but for” test is met.

U.S. v. Ludwig, supra, imposes criminal liability under

a mechanical “but for” test and should be overruled.

As an additional grounds for rejecting the argument of

Petitioner’s that a prosecution such as this one should

minimally require reasonable foreseeability of the inter-

state transport, the Court of Appeals relied on U.S. v.

Kelly, 569 F.2d 928, 934 (Sth Cir. 1978), cert. denied,

439 U.S. 829 (1978). Kelly was, in fact, a prosecution

for interstate transport under section 2(a).*°

In the Kelly case, Kelly’s confederates, unknown to

him, transported stolen property across state lines. The

Fifth Circuit rejected Kelly’s argument that interstate

transportation under such circumstances required knowl-

edge or reasonable foreseeability by the accused. Such a

rule has deep roots in the common law, and is to be dis-

tinguished from Petitioner’s case, where the interstate

10. 18 U.S.C. section 2(a) provides: “Whoever commits an offense

against the United States or aids, abets, counsels, commands, induces

or procures its commission, is punishable as a principal.”

transport was accomplished by an innocent agent. In the

Kelly case, the interstate transport was accomplished by

a member of the criminal enterprise. The common law

felony murder rule is exemplary of a section 2(a)

violation.

Article 2314 hangs precariously ciose to the abyss of

becoming a general criminal statute proscribing stealing,

converting, or taking by fraud any goods, wares, merchan-

dise, securities or money having a value of $5,000

or more.

The practical effect of failing to require at least reason-

able foreseeability in cases where the interstate transport

is accomplished by an innocent agent, coupled with this

Court’s interpretation of interstate commerce as encom-

passing more than travel across state lines, as enunciated

in U.S. v. Sheridan, supra, abrogates the element of trans-

porting in interstate or foreign commerce from section

2314. This clearly was not the intent of Congress. This

Court is respectfully requested to reject the reasoning in

U.S. v. Ludwig, supra, and provide a minimal standard

of reasonable foreseeability when the transport in inter-

state commerce is accomplished by an innocent agent.

This case was a case of first impression for the Fifth

Circuit regarding the question presented; although not

recognized as such. In view of the conflict among Circuits,

and further in view of the extension of the National Stolen

Property Act far beyond the application intended by Con-

gress, it is requested that the decision below should be

reviewed by this Court.

CONCLUSION

For all of the foregoing reasons, Petitioner, Joseph R.

Lennon, respectfully suggests that his Petition for the Writ

of Certiorari should be granted.

2813 West T. C. Jester

Houston, Texas 77018

(713) 956-1300

Counsel for Pe....oner

CERTIFICATE OF SERVICE

I hereby certify that a copy of the foregoing Petition

for Writ of Certiorari has been served upon the Solicitor

General, Department of Justice, Washington, D.C. —-

in accordance with Rule 28, Title 28, U.S.C.A. e

having been mailed, first class doe

of March, 1985.

LNEY LIS

A-l

APPENDIX A

IN THE UNITED STATES COURT OF APPEALS

FOF THE FIFTH CIRCUIT

No. 83-2713

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

JOSEPH R. LENNON,

Defendant-Appellant.

Appeal from the United States District Court

for the Southern District of Texas

(January 11, 1985)

Before RUBIN, REAVLEY and TATE, Circuit Judges.

REAVLEY, Circuit Judge:

The opinion delivered on October 31, 1984 is with-

drawn and is replaced by the following.

Joseph Lennon was convicted by a jury of eight counts

of causing the interstate transportation of certain check

A-2

proceeds obtained by fraud in violation of 1% U.S.C.

§§ 2, 2314 (1982). We reverse and remand.

Lennon was employed by Charter International Oil

Company and Charter Crude Oil Company, Texas cor-

porations and subsidiaries of Charter Oil Company, Inc.,

a Florida corporation, to supply Charter’s oil refinery in

Houston approximately 70,000 barrels of crude oil per

day. To meet part of this demand, Lennon agreed on

behalf of Charter to purchase crude oil from Southwest

Petrochem, Inc. in late summer or early fall of 1974.

As a condition to making the contract, Lennon demanded

that Petrochem pay him, personally, twenty cents for each

barrel he purchased for Charter. Charter neither was

apprised of nor consented to the kickback arrangement.

These dealings proved to be profitable to all par-ies

for a number of years. Charier received a large portion

of its needed crude oil at a cost below the average t was

paying other suppliers. Petrochem had a steady buyer

that accounted for the vast majority of its revenues.

Pursuant to the kickback agreement, Lennon received

from Petrochem numerous checks that totaled approxi-

mately $1,193,000. The last kickback payment was made

in March 1979, and Lennon shortly thereafter resigned

from Charter. After Lennon’s departure from Charter,

Petrochem continued to sell crude oil to Charter but

never made any more kickback payments to Lennon or

anyone at Charter.

Charter initiated each sale of crude oil by a prepay-

rent to Petrochem. Charter’s checks were drawn on

various banks located in Florida, Massachusetts, and

Illinois. Petrochem deposited the checks in a Houston

bank, which sent the checks directly to the out-of-state

A-3

bank for collection. Petrochem then used those funds to

purchase the crude oil from its supplier and to pay Lennon

the kickback.

Petrochem paid Lennon the kickbacks by checks made

to H & L Enterprises, a general partnership formed under

Texas law between Lennon and his friend and business

associate James Harrigan; to Harlen Trading Company,

Inc., a Texas corporation with shares owned by Lennon

and Harrigan; and to LATCO, an assumed business name

of Lennon. The kickback checks were all drawn upon

and deposited in Texas banks.

Lennon presented evidence through the testimony of

Harrigan that the moneys paid to H & L, Harlen, and

LATCO were not kickbacks to Lennon. According to

Harrigan’s testimony, the money was paid to Harrigan

through Harlen, H & L, and LATCO as a commission

for his own services to Petrochem.

An additional factor to be considered is the regulation

of the oil industry during the 1970’s and early 1980's

by the federal government. Under these regulations, the

price of crude oil aud certain refined oil products were

regulated on a cost-plus margin basis. The margin was

set on a unit basis but was averaged monthly with no

carryover. In other words, a reseller of crude oil or a

refiner of regulated products could charge purchasers

only an amount equal to its cost, expenses, and a certain

margin for profit. Although the profit might vary from

barrel to barrel, the average margin during a given

month could not exceed a certain amount. If the maximum

average margin was not obtained in a particular month,

the unrealized profit was lost and could not be recaptured

by exceeding the set margin in the next month.

A-4

In this case all of Petrochem’s crude oil sales were

subject to the price regulations. Approximately sixty to

seventy percent of each barrel of crude oil Charter pur-

chased was refined into unregulated products. As to the

crude oil it resold, Charter did not obtain the maximum

profits allowed by the regulations during any month from

May 1978 to March 1979, when the violations by Lennon

affected Charter’s profits.

The grand jury returned an indictment charging Lennon

with eight counts of violating 18 U.S.C. §$2, 2314

(1982). Specifically, the indictment charged Lennon with

causing eight checks issued in 1978 and 1979 by Charter

payable to Petrochem to be transported in interstate

commerce and knowing that certain proceeds of the

checks were taken by fraud. The indictment listed the

eight checks by date, amount, check number, and place

of origin, and it charged that Lennon’s purpose was to

obtain money in excess of $5,000. At trial, the United

States presented evidence of the exact amount of the

kickback included in each of the eight checks, which

varied from a low of $12,234.50 to a high of $27,373.00.

The issues on appeal are: one, whether the applicable

statutory provisions, 18 U.S.C. §§ 2(b), 2314 (1982),

require knowledge or reasonable foreseeability that money

obtained by fraud will be transported in interstate com-

merce; two, whether the trial court improperly instructed

the jury on “causing” under section 2314; three, whether

the trial court improperly instructed the jury on fraud

under section 2314; four, whether there was sufficient

evidence to support a finding of fraud; five, whether,

for section 2314 to apply, all the property transported

in interstate commerce must have been obtained by fraud;

six, whether the indictment was defective for failing to

A-5

allege that certain proceeds exceeded $5,000 as required

by section 2314; and seven, whether the trial court’s jury

instruction on the elements of section 2314 was improper.

1. Knowledge or Reasonable Foreseeability

Section 2314, the so-called National Stolen Property

Act under which Lennon was convicted, provides in part:

Whoever transports in interstate or foreign com-

merce any goods, wares, merchandise, securities or

money, of the value of $5,000 or more, knowing

the same to have been stolen, converted or taken

by fraud...

Shall be fined not more than $10,000 or imprison-

ed not more than ten years, or both.

18 U.S.C. § 2314 (1982). Numerous circuits have held

that section 2714 does not require knowledge or reason-

able foreseeability of interstate transport of the money

obtained by fraud. United States v. Strauss, 443 F.2d

986, 988 (1st Cir.), cert. denied, 404 U.S. 851, 92 S.Ct.

87, 30 L.Ed.2d 90 (1971); United States v. Mingoia,

424 F.2d 710, 713 (2d Cir. 1970); United States v.

White, 451 F.2d 559 (6th Cir. 1971); United States v.

Ludwig, 523 F.2d 705, 706-08 (8th Cir. 1975), cert.

denied, 423 U.S. 1076, 96 S.Ct. 861, 47 L.Ed.2d 86

(1976); United States v. Masters, 456 F.2d 1060, 1061

(9th Cir. 1972). Furthermore, this circuit has held that

knowledge or reasonable foreseeability of interstate trans-

port is not required to convict under another paragraph

of section 2314, which contains similar interstate trans-

port wording as the paragraph under which Lennon was

convicted. United States v. Kelly, 569 F.2d 928, 934

A-6

(Sth Cir.), cert. denied, 439 U.S. 829, 99 S.Ct. 105,

58 L.Ed.2d 123 (1978). Lennon has cited no new au-

thority or reason that has not previously been considered

and rejected why this court should not follow other cir-

cuits and Kelly.

Lennon argues further that knowledge or reasonable

foreseeability of interstate transport is required when

the indictment and charge include, as here, the substance

of 18 U.S.C. §2(b) (1982). Section 2(b) provides:

Whoever willfully causes an act to be done which

if directly performed by ‘zim or another would be

an offense against the United States, is punishable

as a principal.

Section 2(b) applies generally to all federal criminal

statutes and prohibits one from causing another to do

any act that would be illegal if one did it personally.

See, e.g., United States v. Gleason, 616 F.2d 2, 20 (2d

Cir. 1979), cert. denied, 444 U.S. 1082, 100 S.Ct. 1037,

62 L.Ed.2d 767 (1980). Section 2314, however, also

contains a “causing” provision similar to section 2(b)

which specifically prohibits one from causing another to

transport money obtained by fraud in interstate commerce.

See, e.g., United States v. Ludwig, 523 F.2d 705, 706

& n.2 (8th Cir. 1975), cert. denied, 423 U.S. 1076, 96

S.Ct. 861, 47 L.Ed.2d 86 (1976). Although we do not

accept the government’s contention that the “causing”

under section 2(b) reaches activity not within the “caus-

ing” of section 2314, neither do we agree with Lennon’s

contention that by reference to section 2(b) in the in-

dictment, the government shouldered a burden of proving

knowledge or reasonable foreseeability of interstate trans-

port. If there is a difference, it has no bearing on this

A-7

case and the reference to “causing” in section 2(b) is

mere surplusage to be ignored. See United States v. Lyons,

706 F.2d 321, 324 & n.1 (D.C. Cir. 1983).

A final basis for Lennon’s argument is that “cause”

under the mail fraud statute, 18 U.S.C. § 1341 (1982),

requires knowledge or reasonable foreseeability that the

mails will be used in commission of the fraud, and that

therefore “cause” under section 2314 should as well.

Lennon overlooks, however, the different purposes under-

lying the statutes. “[S]ection 2314 is aimed at the evils

of theft, fraud, and counterfeiting and not at the regu-

lation of interstate transportation. Suppression of move-

ment of the fruits of theft and fraud is only the means to

the end of suppressing theft and fraud themselves.”

United States v. Roselli, 432 F.2d 879, 891 (9th Cir.

1970), cert. denied, 401 U.S. 924, 91 S.Ct. 883, 27

L.Ed.2d 828 (1971). On the other hand, the purpose

of the mail fraud statute is to prevent the use of the mails

to facilitate schemes to defraud. Parr v. United States,

363 U.S. 370, 389, 80 S.Ct. 1171, 1182, 4 L.Ed.2d

1277 (1960). Because interstate commerce is a means

to an end for section 2314 and prohibiting unlawful use

of the mails is the end of the mail fraud statute, it is

perfectly reasonable that only the mail fraud statute re-

quires knowledge or reasonable foreseeability.

2. Jury Instruction on Causing

Lennon contends that the trial court committed revers-

ible error by instructing the jury:

Now, in a prosecution under Section 2314 of

Title 18 for transporting in interstate commerce

checks which have been taken by fraud, it is not

necessary that the defendant know or intend that the

A-8

checks would be transported in interstate commerce

so long as he set in motion a series of events which

in the normal course resulted in such transportation.

Such a normal course of events occurs whenever a

check drawn on an out-of-state bank travels across .

state lines in the process of collection and arrives for

payment at the bank on which it is drawn.

Lennon first urges that the instruction was incorrect be-

cause it directed a verdict on the element of causing the

checks to be transported in interstate commerce. For ex-

ample, in United States v. Johnson, 718 F.2d 1317 (Sth

Cir. 1983), the court held that the trial court erred by

instructing the jury that a particular document was a

security, an essential element of the crime. In this case,

however, the challenged instruction never addressed the

checks at issue. Rather, the trial correctly explained to

the jury the meaning of “cause” in section 2314 as

announced in Pereira v. United States, 347 U.S. 1, 8-10,

74 S.Ct. 358, 363, 98 L.Ed. 435 (1954).’

3. Jury Instructions on Fraud

Lennon argues that the jury instructions regarding fraud

were incorrect. The trial court charged:

In order to find that the checks listed in the indict-

ment were “taken by fraud” within the meaning of

the statute you must find that the defendant know-

ingly and willfully and with specific intent partici-

pated in a scheme to defraud his employer, Charter.

1. Assuming that the instruction was a correct statement of the

law, Lennon next argues the instruction was improper because it

failed to require the jury to find that Lennon knew or reasonably

foresaw that the money obtained by fraud would be transported in

interstate commerce. This argument, however, has already been

rejected.

A-9

You can find this to be the case only if you find:

(1) that the defendant benefited in his own right

from business transactions that he caused his em-

ployer to engage in;

(2) that the defendant had a duty to disclose

material information to his employer;

(3) that the defendant failed to disclose this in-

formation to his employer; and

(4) that the defendant’s failure to disclose this

information to his employer caused some detri-

ment to his employer to the extent that, had it

been known, the information would have likely

caused the employer to alter its business practice.

Information is “material” whenever an employee

has reason to believe the information would lead a

reasonable employer to change its business conduct.

This instruction was based on United States v. Ballard,

663 F.2d 534 (Sth Cir. 1981). Although Ballard was a

mail fraud prosecution, the instruction was not limited to

the particular means of the fraud or directed to the peculi-

arity of a particular crime. The instruction was correct.

4. Sufficiency of Evidence on Fraud

Lennon argues that there was no evidence to establish

that Charter was defrauded as required by section 2314.

The government presented evidence from which the jury

could have concluded that Lennon defrauded Charter of

money. First, Lennon extracted ten to twenty cents per

barrel from Petrochem that could, and should, have bene-

fited Charter by decreasing the cost of the crude oil.

Second, lower costs would have increased profits. Third,

the price control regulations would not have prevented

A-10

this increase in its profits, because most of Charter’s

refined products were not regulated and, on the regulated

products, Charter was never able to obtain the monthly

average maximum per barrel profit.

Lennon next argues that there was no evidence of

fraud, because the goverument never presented evidence

that Charter suffered detriment in the amount of $5,000

or more for each count. Section 2314, however, requires

proof only that the property taken by fraud and trans-

ported in interstate commerce have a value of $5,000 or

more, 18 U.S.C. § 2314 (1982); United States v. Free-

man, 619 F.2d 1112, 1118 (Sth Cir. 1980), cert. denied,

450 U.S. 910, 101 S.Ct. 1348, 67 L.Ed.2d 334 (1981),

and that the defrauded party suffer some tangible detri-

ment of value, United States v. Smith, 686 F.2d 234,

239-40 (Sth Cir. 1982). Section 2314 does not require

the defrauded party to suffer detriment in the amount of

$5,000 or more.* The government carried its burden by

presenting evidence from which the jury could have found

that Charter did suffer some indeterminate detriment for

each kickback check and that the kickback payments to

Lennon exceeded $5,000.

5. Transportation of the Fraudulently Obtained Property

Another issue raised by this case is whether section

2314 requires that all the property transported in inter-

state commerce be taken by fraud or merely that, of the

2. Ordinarily, the amount of the detriment suffered by the de-

frauded party will in fact be equal to the value of the transported

property. Here, however, because it is impossible to prove what

Charter would have done had it known of the kickback scheme, the

amount of Charter’s detriment is not necessarily the amount of the

kickback transported in interstate commerce.

A-11

transported property, at least $5,000 be obtained by

fraud.

Here, the government presented evidence establishing

that sums in the millions of dollars were transported in

interstate commerce only part of which was obtained by

fraud. For section 2314 to apply, property transported

in interstate commerce having a value of $5,000 must

have been obtained by fraud; this does not mean that all

the property transported in interstate commerce have

been obtained by fraud. See 18 U.S.C. § 2314 (1982);

United States v. Freeman, 619 F.2d 1112, 1118 (Sth

Cir. 1980), cert. denied, 450 U.S. 910, 101 S.Ct. 1348,

67 L.Ed.2d 334 (1981). Therefore, the government met

its burden.

6. Defective Indictment

Lennon urges that the indictment was defective, be-

cause it alleged that “certain proceeds” were taken by

fraud and did not allege that the proceeds exceeded

$5,000 as required by section 2314. An indictment is

sufficient if “it, first, contains the elements of the offense

charged and fairly informs a defendant of the charge

against which he must defend, and, second, enables him

to plead an acquittal or conviction in bar of future prose-

cutions for the same offense.” Hamling v. United States,

418 U.S. 87, 117, 94 S.Ct. 2887, 2907, 41 L.Ed.2d 590

(1974). Furthermore, an indictment’s validity is ascer-

tained from a reading of it as a whole and is determined

by practical, not technical considerations. United States

v. Willis, 583 F.2d 203, 207 (Sth Cir. 1978).

Here, the indictment is sufficient under the above stand-

ard. First, each count of the indictment alleges that

A-12

Lennon’s purpose was to defraud Charter of money in

excess of $5,000 and that “certain proceeds” were taken

by fraud. If read as a whole and in a practical manner,

the indictment alleged all the elements of the crime and

fairly apprised Lennon of the charge against him.

7. Jury Instruction on Elements of Section 2314

The jury instruction on the elements of section 2314

stated:

Therefore, there are three essential elements which

must be proved beyond a reasonable doubt in order

to establish the offense proscribed by the law as

applicable to this case:

First: that the defendant willfully transported or

caused to be transported, in interstate commerce,

checks as described in the indictment;

Second: that such checks had a value in excess

of $5,000; and

Third: that at the time of the transportation the

defendant knew the checks were obtained or taken

by fraud.

Lennon contends that the indictment materially differed

from the trial court’s instructions to the jury and that the

instructions permitted the jury to convict upon findings

shy of what section 2314 requires. Because we agree

with Lennon on the latter contention, we need not discuss

the former one.

Lennon objected to the instruction on the elements of

section 2314 at trial, arguing that the instruction given

would allow the jury to ‘convict if it found merely that

the checks from Charter to Petrochem exceeded $5,000.

A-13

Lennon specifically requested that the jury instructions

include words to the effect that the portion of such checks

taken by fraud must have exceeded $5,000. The govern-

ment disagreed and insisted that the instruction was cor-

rect. According to the government, the whole check from

Charter to Petrochem was obtained by fraud, because

embedded in those checks were kickbacks obtained by

fraud. Furthermore, the government argued that there

was no problem with the instruction tactually, because

all of the kickbacks exceeded $5,000. We disagree with

the government.

Under the above instruction, the jury could have con-

victed Lennon by finding that the checks from Charter to

Petrochem exceeded $5,000 and that any part of the

checks was obtained by fraud. This is significant because

of the defendant’s evidence that Harrigan arranged the

payments and that lesser amounts, if any, were taken by

Lennon. The jury could have found that the checks from

Charter to Petrochem exceeded $5,000, that most of the

moneys that the government characterized as kickbacks

were actually proper commissions paid to Harrigan, and

that some amount out of each larger check, possibly less

than $5,000, was obtained by fraud.

Section 2314 clearly requires that the fraudulently ob-

tained property transported in interstate commerce exceed

$5,000. 18 U.S.C. § 2319 (1982); United States v. Free-

man, 619 F.2d 1112, 1118 (Sth Cir. 1980), cert. denied,

450 U.S. 910, 101 S.Ct. 1348, 67 L.Ed.2d 334 (1981).

The jury instruction erroneously permitted the jury to find

that Lennon violated section 2314 by causing fraudulently

obtained property having a value of less than $5,000.

A-14

Lennon’s conviction is REVERSED. The cause is re-

manded. The petitions for rehearing are overruled. Man-

date shall issue forthwith.

B-1

APPENDIX B

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 83-2713

UNITED STATES OF AMERICA,

Plaintiff- Appellee,

versus

JOSEPH R. LENNON,

Defendant-Appellant.

Appeal from the United States District Court

for the Southern District of Texas

(October 31, 1984}

Before RUBIN, REAVLEY and TATE, Circuit Judges.

REAVLEY, Circuit Judge:

Joseph Lennon was convicted by a jury of eight counts

of causing the interstate transportation of certain check

proceeds obtained by fraud in violation of 18 U.S.C.

§§ 2, 2314 (1982). We reverse and remand.

B-2

Lennon was employed by Charter International Oil

Company and Charter Crude Oil Company, Texas cor-

porations and subsidiaries of Charter Oil Company, Inc.,

a Florida corporation, to supply Charter’s oil refinery in

Houston approximately 70,000 barrels of crude oil per day.

To meet part of this demand, Lennon agreed on behalf of

Charter to purchase crude oil from Southwest Petrochem,

Inc., in late summer or early fall of 1974. As a condition

to making the contract, Lennon demanded that Petro-

chem pay him, personally, twenty cents for each barrel

he purchased for Charter. Charter neither was apprised

of nor consented to the kickback arrangement.

These dealings proved to be profitable to all parties for

a number of years. Charter received a large portion of its

needed crude oil at a cost a little below the average it

was paying other suppliers. Petrochem had a steady buyer

that accounted for the vast majority of its revenues. Pur-

suant to the kickback agreement, Lennon received from

Petrochem numerous checks that totaled approximately

$1,193,000. The last kickback payment was made in

March 1979, and Lennon shortly thereafter resigned

from Charter. After Lennon’s departure from Charicr,

Petrochem continued to sell crude oil to Charter but never

made any more kickback payments to Lennon or anyone

at Charter.

Charter initiated each sale of crude oil by a prepayment

to Petrochem. Charter’s checks were drawn on various

banks located in Florida, Massachusetts, and Illinois.

Petrochem deposited the checks in a Houston bank, which

sent the checks directly to the out-of-state bank for collec-

tion. Petrochem then used those funds to purchase the

crude oil from its supplier and to pay Lennon the kick-

back.

—-_——=|®

——s

ae, me

B-3

Petrochem paid Lennon the kickbacks by checks made

to H & L Enterprises, a general partnership formed under

Texas law between Lennon and his friend and business

associate James Har-igan; to Harlen Trading Company,

Inc., a Texas corporation with shares owned by Lennon

and Harrigan; and to LATCO, an assumed business name

of Lennon. The kickback checks were all drawn upon

and deposited in Texas banks.

Lennon presented evidence through the testimony of

Harrigan that the moneys paid to H & L, Harlen, and

LATCO were not kickbacks to Lennon. According to

Harrigan’s testimony, the money was paid to Harrigan

through Harlen, H & L, and LATCO as a commission for

his own services to Petrochem.

An additional factor to be considered is the regulation

of the oil industry during the 1970’s and early 1980's by

the federal government. Under these regulations, the price

of crude oil and certain refined oil products were regu-

lated on a cost-plus margin basis. The margin was set on

a unit basis but was averaged monthly with no carryover.

In other words, a reseller of crude oil or a refiner of re-

gulated products could charge purchasers only an amount

equal to its cost, expenses, and a certain margin for profit.

Although the profit might vary from barrel to barrel, the

average margin during a given month could not exceed a

certain amount. If the maximum average margin was not

obtained in a particular month, the unrealized profit was

lost and could not be recaptured by exceeding the set

margin in the next month.

In this case all of Petrochem’s crude oil sales were

subject to the price regulations. Approximately sixty to

seventy percent of each barrel of crude oil Charter pur-

B-4

chased was refined into unregulated products. As to the

crude oil it resold, Charter did not obtain the maximum

profits allowed by the regulations during any month from

May 1978 to March 1979, when the violations by Lennon

affected Charter’s profits.

The grand jury returned an indictment charging Len-

non with eight counts of violating 18 U.S.C. §§ 2, 2314

(1982). Specifically, the indictment charged Lennon with

causing eight checks issued in 1978 and 1979 by Charter

payable to Petrochem to be transported in interstate com-

merce and knowing that certain proceeds of the checks

were taken by fraud. The indictment listed the eight

checks by date, amount, check number, and place of

origin, and it charged that Lennon’s purpose was to

obtain money in excess of $5,000. At trial, the United

States presented evidence of the exact amount of the

kickback included in each of the eight checks, which

varied from a low of $12,234.50 to a high of $27,373.00.

The issues on appeal are: one, whether the applicable

statutory provisions, 18 U.S.C. §§ 2(b), 2314 (1982),

require knowledge or reasonable foreseeability that money

obtained by fraud will be transported in interstate com-

merce; two, whether the trial court improperly instructed

the jury on “causing” under section 2314; three, whether

the trial court improperly instructed the jury on fraud

under section 2314; four, whether there was sufficient

evidence to support a finding of fraud; five, whether, for

section 2314 to apply, all the property transported in

interstate commerce must have been obtained by fraud;

six, whether the indictment was defective for failing to

allege that certain proceeds exceeded $5,000 as required

by section 2314; and seven, whether the trial court’s jury

instruction on the elements of section 2314 was improper.

B-5

1. Knowledge or Reasonable Foreseeability

Section 2314, the so-called National Stolen Property

Act under which Lennon was convicted, provides in 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, transports or

causes to be transported, or induces any person to

travel in, or to be transported in interstate commerce

in the execution or concealment of a scheme or

artifice to defraud that person of money or property

having a value of $5,000 or more...

Shall be fined not more than $10,000 or imprison-

ed not more than ten years, or both.

18 U.S.C. § 2314 (1982). This court has held that sec-

tion 2314 does not require knowledge or reasonable fore-

seeability of interstate transport of the money obtained

by fraud. United States v. Kelly, 569 F.2d 928, 934

(Sth Cir.), cert. denied, 439 U.S. 829, 99 S.Ct. 105,

58 L.Ed.2d 123 (1978). Lennon has cited no new au-

thority or reason why Kelly should be overruled that has

not previously been considered and rejected.

Lennon argues further that knowledge or reasonable

foreseeability of interstate transport is required when the

indictment and charge include, as here, the substance of

18 U.S.C. § 2(b) (1982). Section 2(b) provides:

Whoever willfully causes an act to be done which

if directly performed by him or another would be an

offense against the United States, is punishable as a

principal.

B-6

Section 2(b) applies generally to all federal criminal

statutes and prohibits cne from causing another to do

any act that would be illegal if one did it personally. See,

e.g., United States v. Gleason, 616 F.2d 2, 20 (2d Cir.

1979), cert. denied, 444 U.S. 1082, 100 S.Ct. 1037, 62

L.Ed.2d 767 (1980). Section 2314, however, also con-

tains a “causing” provision similar to section 2(b) which

specifically prohibits one from causing another to trans-

port money obtained by fraud in interstate commerce.

See, e.g., United States v. Ludwig, 523 F.2d 705, 706

(8th Cir. 1975), cert. denied, 423 U.S. 1076, 96 S.Ct.

861, 47 L.Ed.2d 86 (1976). Although we do not accept

the government’s contention that the “causing” under

section 2(b) reaches activity not within the “causing” of

section 2314, neither do we agree with Lennon’s conten-

tion that by reference to section 2(b) in the indictment,

the government shouldered a burden of proving knowledge

or reasonable foreseeability of interstate transport. If there

is a difference, it has no bearing on this case and the

reference to “causing” in section 2(b) is mere surplusage

to be ignored. See United States v. Lyons, 706 F.2d 321,

324 & n.1 (D.C. Cir. 1983).

A final basis for Lennon’s argument is that “cause”

under the mail fraud statute, 18 U.S.C. § 2341 (1982),

requires knowledge or reasonable foreseeability that the

mails will be used in commission of the fraud, and that

therefore, “cause” under section 2314 should as well.

Lennon overlooks, however, the different purposes under-

lying the statutes. “[S]Jection 2314 is aimed at the evils

of theft, fraud, and counterfeiting and not at the regula-

tion of interstate transportation. Suppression of movement

of the fruits of theft and fraud is only the means to the

end of suppressing theft and fraud themselves.” United

B-7

States v. Roselli, 432 F.2d 879, 891 (9th Cir. 1970),

cert. denied, 401 U.S. 924, 91 S.Ct. 924, 27 L.Ed.2d

828 (1971). On the other hand, the purpose of the mail

fraud statute is to prevent the use of the mails to facilitate

schemes to defraud. Parr v. United States, 363 U.S. 370,

389, 80 S.Ct. 1171, 1182, 4 L.Ed.2d 1277 (1969). Be-

Cause interstate commerce is a means to an end for sec-

tion 2314 and prohibiting unlawful use of the mails is the

end of the mail fraud statute, it is perfectly reasonable

that only the mail fraud statute requires knowledge or

reasonable foreseeability.

2. Jury Instruction on Causing

Lennon contends that the trial court committed revers-

ible error by instructing the jury that:

Now, in a prosecution under Section 2314 of Title

18 for transporting in interstate commerce checks

which have been taken by fraud, it is not necessary

that the defendant know or intend that the checks

would be transported in interstate commerce so long

as he set in motion a series of events which in the

normal course resulted in such transportation. Such

a normal course of events occurs whenever a check

drawn on an out-of-state bank travels across state

lines in the process of collection and arrives for pay-

ment at the bank on which it is drawn.

Lennon first urges that the instruction was incorrect be-

cause the instruction directed a verdict on the element of

causing the checks to be transported in interstate com-

merce. For example, in United States v. Johnson, 718

F.2d 1317 (5th Cir. 1983), the court held that the trial

court erred by instructing the jury that a particular docu-

ment was a security, an essential element of the crime.

B-8

In this case, however, the challenged instruction never

addressed the checks at issue. Rather, the trial correctly

explained to the jury the meaning of “cause” in sec-

tion 2314 as announced in Pereira v. United States, 347

U.S. 1, 8-10, 74 S.Ct. 358, 363, 98 L.Ed.2d 435 (1954).*

3. Jury Instructions on Fraud

Lennon argues that the jury instructions regarding fraud

were incorrect. The trial court charged:

In order to find that the checks listed in the in-

dictment were “taken by fraud” within the meaning

of the statute you must find that the defendant know-

ingly and willfully and with specific intent partici-

pated in a scheme to defraud his employer, Charter.

You can find this to be the case only if you find:

(1) that the defendant benefited in his own right

from business transactions that he caused his em-

ployer to engage in;

(2) that the defendant had a duty to disclose

material information to his employer;

(3) that the defendant failed to disclose this in-

formation to his employer; and

(4) that the defendant’s failure to disclose this

information to his employer caused some detri-

ment to his employer to the extent that, had it

been known, the information would have likely

caused the employer to alter its business practice.

1. Assuming that the instruction was a correct statement of the

law, Lennon next argues the instruction was improper because it

failed wo require the jury to find that Lennon knew or reasonably

foresaw that the money obtained by fraud would be transported in

interstate commerce. This argument, however, has already been

rejected.

B-9

Information is “material” whenever an employee

has reason to believe the information would lead a

reasonable employer to change its business conduct.

This instruction was based on United States v. Ballard,

663 F.2d 534 (Sth Cir. 1981). Although Ballard was a

mail fraud prosecution, the instruction was not limited

to the particular means of the fraud or directed to the

peculiarity of a particular crime. The instruction was

correct.

4. Sufficiency of Evidence on Fraud

Lennon argues that there was no evidence to establish

that Charter was defrauded as required by section 2314.

The government presented evidence from which the jury

could have concluded that Lennon defrauded Charter of

money. First, Lennon extracted ten to twenty cents per

barrel from Petrochem that could, and should, have bene-

fited Charter by decreasing the cost of the crude oil.

Second, lower costs would have increased profits. Third,

the price control regulations would not have prevented

this increase in its profits, because most of Charter’s

refined products were not regulated and, on the regulated

products, Charter was never able to obtain the monthly

average maximum per barrel profit.

Lennon next argues that there was no evidence of

fraud, because the government never nresented evidence

that Charter suffered deiriment in the amount of $5,000

or more for each count. Section 2314, however, requires

proof only that the property taken by fraud and trans-

ported in interstate commerce have a value of $5,000 or

more, 18 U.S.C. § 2314 (1982); United States v. Free-

man, 619 F.2d 1112, 1118 (5th Cir. 1980), cert. denied,

B-10

450 U.S. 910, 101 S.Ct. 1348, 67 L.Ed.2d 334 (1981),

and that the defrauded party suffer some tangible detri-

ment of value, United States v. Smith, 686 F.2d 234,

239-40 (Sth Cir. 1982). Section 2314 does not require

the defrauded party to suffer detriment in the amount of

$5,000 or more.? The government carried its burden by

presenting evidence from which the jury could have found

that Charter did suffer some indeterminate detriment for

each kickback check and that the kickback payments to

Lennon exceeded $5,000.

5. Transportation of the Fraudulently Obtained Property

Another issue raised by this case is whether section

2314 requires that all the property transported in inter-

state commerce be taken by fraud or merely that, of the

transported property, at least $5,000 be obtained by fraud.

Here, the government presented evidence establishing

that sums in the millions of dollars were transported in

interstate commerce only part of which was obtained by

fraud. For section 2314 to apply, property transported

in interstate commerce having a value of $5,000 must

have been obtained by fraud; this does not mean that all

the property transported in interstate commerce have

been obtained by fraud. See 18 U.S.C. § 2314 (1982);

United States v. Freeman, 619 F.2d 1112, 1118 (5th

Cir. 1980), cert. denied, 450 U.S. 910, 101 S.Ct. 1348,

67 L.Ed.2d 334 (1981). Therefore, the government met

its burden.

2. Ordinarily, the amount of the detriment suffered by the de-

frauded party will in fact be equal to the value of the transported

property. Here, however, because it is impossible to prove what

Charter would have done had it known of the kickback scheme,

the amount of Charter’s detriment is not necessarily the amount of

the kickback transported in interstate commerce.

EI ie ta oD ed NRE) PI he AT ae ta Se

Se a)

B-11

6. Defective Indictment

Lennon urges that the indictment was defective, be-

cause it alleged that “certain proceeds” were taken by

fraud and did not allege that the proceeds exceeded

$5,000 as required by section 2314. An indictment is

sufficient if “it, first, contains the elements of the offense

charged and fairly informs a defendant of the charge

against which he must defend, and, second, enables him

to plead an acquittal or conviction in bar of future prose-

cutions for the same offense.” Hamling v. United States,

418 U.S. 87, 117, 94 S.Ct. 2887, 2907, 41 L.Ed.2d 590

(1974). Furthermore, an indictment’s validity is ascer-

tained from a reading of it as a whole and is determined

by practical, not technical, considerations. United States

v. Willis, 583 F.2d 203, 207 (Sth Cir. 1978).

Here, the indictment is sufficient under the above

standard. First, each count of the indictment alleges that

Lennon’s purpose was to defraud Charter of money in

excess of $5,000 and that “certain proceeds” were taken

by fraud. If read as a whole and in a practical manner,

the indictment alleged all the elements of the crime and

fairly apprised Lennon of the charge against him.

7. Jury Instruction on Elements of Section 2314

The jury instruction on the elements of section 2314

stated:

Therefore, there are three essential elements which

must be proved beyond a reasonable doubt in order

to establish the offense proscribed by the law as

applicable to this case:

First: that the defendant willfully transported or

caused to be transported, in interstate commerce,

checks as described in the indictment;

B-12

Second: that such checks had a value in excess

of $5,000; and

Third: that at the time of the transportation the

defendant knew the checks were obtained or taken

by fraud.

Lennon contends that the indictment materially differed

from the trial court’s instructions to the jury and that the

instructions permitted the jury to convict upon findings

shy of what section 2314 requires. Because we agree

with Lennon on the latter contention, we need not dis-

cuss the former one.

Lennon objected to the instruction on the elements of

section 2314 at trial, arguing that the instruction given

would allow the jury to convict if it found merely that

the checks from Charter to Petrochem exceeded $5,000.

Lennon specifically requested that the jury instructions

include words to the effect that the portion of such checks

taken by fraud must have exceeded $5,000. The govern-

ment disagreed and insisted that the instruction was cor-

rect. According to the government, the whole check from

Charter to Petrochem was otained by fraud, because

embedded in those checks were kickbacks obtained by

fraud. Furthermore, the government argued that there

was no problem with the instruction factually, because

all of the kickbacks exceeded $5,000. We disagree with

the government.

Under the above instruction, the jury could have con-

victed Lennon by finding that the checks from Charter

to Pctrochem exceeded $5,000 and that any part of the

checks was obtained by fraud. This is significant because

of the defendant’s evidence that Harrigan arranged the

payments and that lesser amounts, if any, were taken

B-13

by Lennon. The jury could have found that the checks

from Charter to Petrochem exceeded $5,000, that most

of the moneys that the government characterized as

kickbacks were actually proper commissions paid to

Harrigan, and that some amount out of each larger check,

possibly less than $5,000, was obtained by fraud.

Section 2314 clearly requires that the fraudulently

obtained property transported in interstate commerce

exceed $5,000. 18 U.S.C. § 2319 (1982); United States

v. Freeman, 619 F.2d 1112, 1118 (Sth Cir. 1980),

cert. denied, 450 U.S. 910, 101 S.Ct. 1348, 67 L.Ed.2d

334 (1981). The jury instruction erroneously permitted

the jury to find that Lennon viclated section 2314 by

causing fraudulently obtained property having a value

of less than $5,000.

Lennon’s conviction is REVERSED and REMANDED.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.