Petition for Writ of Certiorari — McGregor v. United States

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IN THE 1

Supreme Court of the United States

October Term 1974

No... Am Se 4

JOHN D. McGREGOR AND

ROBERT FLETCHER,

Petitioners,

VS.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

For the Eighth Circuit

THOMSON, WYLDE,

NORDBY & FRIEDBERG

DOUGLAS W. THOMSON

JACK S. NORDBY

Suite 1530

55 East 5th Street

St. Paul, Minnesota 55101

(612) 227-0856

Counsel for Petitioners

224-7631 - Review Publishing Co., 287 E. 6th St., St. Paul, Minn. 55101 - 224-7631

INDEX

PAGE

Opinion Below 1

Jurisdiction 2

Question Presented 2

Constitutional Provisions Involved 2

Statutory Provision Involved 3

Rule Involved 4

Statement of the Case 5

Reasons for Granting the Writ

The decision below conflicts with the letter and spirit

of the venue provisions of the Constitution, and

of Rule 21(b), Federal Rules of Criminal Proce-

dure, as construed by this court 7

Conclusion 11

Appendix

Opinion of the Court of Appeals

for the Eighth Circuit A-1

CITATIONS

Constitution:

Article III, Section 2

Amendment VI

Cases: or

Platt v. Minnesota Mining & Manufacturing,

376 U.S. 240 (1964)

Travis v. United States, 364 U.S. 631 (1961)

United States v. Johnson, 323 U.S. 273 (1944)

United States v. Phillips, 423 F. 2d 1364

(8th Cir. 1970)

Statutes:

18 U.S.C. §1341

18 U.S.C. §3237

28 U.S.C. $1254(1)

Rule:

Rule 21(b), Federal Rules of Criminal

Procedure

PAGE

IN THE

Supreme Court of the United States

October Term 1974

No.

JOHN D. McGREGOR AND

ROBERT FLETCHER,

Petitioners,

vs.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

For the Eighth Circuit

The petitioners, John D. McGregor and Robert Fletcher,

respectfully pray that a writ of certiorari issue to review the

judgment and opinion of the United States Court of Appeals

for the Eighth Circuit entered in this proceeding on October 7,

1974.

OPINION BELOW

The opinion of the Court of Appeals, not yet reported, ap-

pears in the appendix hereto.

JURISDICTION

The judgment of the Court of Appeals was entered on Octo-

ber 7, 1974, and this Petition is filed within thirty days of this

date. This Court’s jurisdiction is invoked wider 28 U.S.C.

$1254(1).

QUESTION PRESENTED

Whether the venue requirements of Article III, Section 2

and the Sixth Amendment of the Constitution and the provi-

sions of Rule 21, Federal Rules of Criminal Procedure, were

violated by the refusal to transfer this mail fraud prosecution

from Minnesota to Louisiana where all of the acts attributed

to the petitioners occurred, where most of the witnesses were

located, and where all nexes of the alleged offense were found

except for the receipt of certain mail matter in Minnesota?

CONSTITUTIONAL PROVISIONS

INVOLVED

Article 3, Section 2, Paragraph 3.

The trial of all Crimes, except in Cases of Impeachmeni,

shall be by Jury; and such Trial shall be held in the State

where the said Crimes shall have been committed; but when

not committed within any State, the Trial shall be at such

Place or Places as the Congress may by Law have directed.

Amendment VI

In all criminal prosecutions, the accused shall enjoy the

right to a speedy and public trial, by an impartial jury of the

State and district wherein the crime shall have been com-

mitted, which district shall have been previously ascertained

3

by law, and to be informed of the nature and cause of the ac-

cusation; to be confronted with the witnesses against him;

to have compulsory process for obtaining witnesses in his fa-

vor, and to have the Assistance of Counsel for his defense.

STATUTORY PROVISION

INVOLVED

18 U.S.C. $3237. Offenses begun in one district and com-

pleted in another.

(a) Except as otherwise expressly provided by enactment

of Congress, any offense against the United States begun in

one district and completed in another, or committed in more

than one district, may be inquired of and prosecuted in any

district in which such offense was begun, continued, or com-

pleted.

Any offense involving the use of the mails, or transporta-

tion in interstate or foreign commerce, is a continuing offense

and, except as otherwise expressly provided by enactm_r*t af

Congress, may be inquired of and prosecuted in any district

from, through, or into which such commerce or mail matter

moves.

(b) Notwithstanding subsection (a), where an offense

is described in section 7203 of the Internal Revenue Code of

1954, or where an offense involves use of the mails and is an

offense described in section 7201 or 7206(1), (2), or (5) of

such Code (whether or not the offense is also described in

another provision of law), and prosecution is begun in a

judicial district other than the judicial district in which the

defendant resides, he may upon motion filed in the district

in which the prosecution is begun, elect to be tried in the dis-

trict in which he was residing at the time the alleged offense

was committed: Provided, That the motion is filed within

twenty days after arraignment of the defendant upon indict-

ment or information. June 25, 1948, c. 645, 62 Stat. 826; Aug.

6, 1958, Pub.L. 85-595, 72 Stat. 512; Nov. 2, 1966, Pub.L. 89-

713, $2, 80 Stat. 1108.

RULE INVOLVED

Rule 21, Federal Rules of Criminal Procedure:

Transfer From the District for Trial

(a) For Prejudice in the District. The court upon motion

of the defendant shall transfer the proceeding as to him to

another district whether or not such district is specified in

the defendant’s motion if the court is satisfied that there ex-

ists in the district where the prosecution is pending so great

a prejudice against the defendant that he cannot obtain a fair

and impartial trial at any place fixed by law for holding court

in that district.

(b) Transfer in Other Cases. For the convenience of par-

ties and witnesses, and in the interest of justice, the court

motion of the defendant may transfer the proceeding as to him

or any one or more of the counts thereof to another district.

(c) Proceedings on Transfer. When a transfer is ordered

the clerk shall transmit to the clerk of the court to which the

proceeding is transferred all papers in the proceeding or dup-

licates thereof and any bail taken, and the prosecution shall

continue in that district.

STATEMENT CF THE CASE

Jurisdiction of the United States District Court was invoked

in this matter in the first instance by an indictment charging

these petitioners with twenty-six violations of 18 U.S.C.

$1341, mail fraud. A jury trial resulted in convictions upon

all counts, which were affirmed by the Court of Appeals for

the Eighth Circuit in an opinion filed Octover 7, 1974, for re-

view of which this petition prays.

In 1960 the petitioners established the Fountain Insurance

Agency (hereafter Fountain) in Baton Rouge, Louisiana, <el-

ling principally collision insurance on newly-purchased auto-

mobiles. R., Vol. III, 61-64. The Agency and their subagents,

such as automobile dealers, wrote policies for several compa-

nies including Northland Insurance Company of Minnesota

(hereafter Northland), whose agreement with them was nego-

tiated by one Emil Zelier as Northland’s “special representa-

tive.” R., II], 70. The agreement was a “retrospective” con-

tract, whereunder Fountain sent 100% of premiums to North-

land, which took 20‘. for itself and credited 80% to Foun-

tain’s account, from which Fourtain paid all claims on North-

land checks. R., 1, 24-28. Because Fountain also paid 20% of

premiums to its salesmen or subagents, and had other expen-

ses, a “cash flow” preblem developed. R., III, 66.

Petitioners conferred with other agents experiencing the

same problem, with Mr. Zeller, and with the office of the Lou-

isiana Insurance Commission. R., III, 79-80. Thereafter, hav-

ing first discussed the procedure with these persons and not

having been discouraged from doing so, they undertook to can-

cel certain policies with Northland, receiving pro-rata credits

for unearned premiums; at che same time, although in each

such case they sent to Northland a certificate indicating the

policy-holder and lien-holder (if any) had been sent a notice

of cancellation, no such notices were in fact sent to these per-

sons. R., II, 6-14. Instead Fountain treated these policies as

live policies and paid claims arising on them, and did not pass

the refunded premiums on to the policy-holders. R., III, 105.

Later many of the cancelled policies were reinsured with

Northland, at a lower rate, and under a slightly different

name; Fountain was entitled to set its own rates, and the name

alteration, petitioner McGregor testified, was to prevent their

computer from rejecting these renewed applications as it was

programmed to do with previously rejected applicants. R., III,

86-89. Petitioner McGregor testified that there had been no

intent to defraud, but only to improve Fountain’s cash-flow

by avoiding the debilitating pre-payment of (in effect) 120°:

of premiums. R., III, 73.

Before trial petitioners moved, pursuant to Rule 21(b), Fed.

eral Rules or Criminal Procedure, for transfer of the trial to

the Middle District of Louisiana where they resided and where

all the alleged acts (except for the receipt of the mail matter

in Minnesota) took place. The motion was denied. Of the wit-

nesses who testified at trial, sixteen resided in Louisiana (R.,

1, 64; Il, 2, 24, 41, 58, 75, 77, 82, 85; ITI, 2, 5, 8, 50, 54, 56, 59),

one in Oklahoma and only five in Minnesota. (R. I, 20, 53,

99; ILI, 11, 35). Petitioners asserted in their motion to trans-

fer a desire to call other witnesses from Louisiana, but at trial

did not.

7

REASONS FOR GRANTING THE WRIT

THE DECISION BELOW CONFLICTS WITH THE LETTER

AND SPIRIT OF THE VENUE PROVISIONS OF THE

CONSTITUTION, AND OF RULE 21(b), FEDERAL RULES

OF CRIMINAL PROCEDURE, AS CONSTRUED BY THIS

COURT.

The Constitution provides twice, as to federal and state

crimes, that the trial of cii:minal cases shall be in the State

where the crime was “committed.” Art. III, Sec. 2; Amend-

ment VI. Congress undertook to gloss cr re-define the Con-

stitutional notion of where a crime is “committed” in enact-

ing 18 U.S.C. $3237(a), which provides, inter alia, that an of-

fense involving the mails may be prosecuted in any district

“from, through, or into which” the culpable mail matter

moves.

It is clear that in this age of inexpensive and rapid mail ser-

vice, a single such offense could readily be “committed” in vir-

tually every judicial district of the nation within a single day.

This fact of modern life, together with the increasig preva-

lence of mail fraud prosecutions, threatens to render the venue

provisions of the Constitution meaningless except in the most

fictitious sense. The Congress may have contemplated such

a result in $3237(a), but the Framers in their genius may also

have foreseen and proscribed it. Without asserting that $3237

(a) is necessarily unconstitutional per se, petitioners respect-

fully submit that this prosecution exemplifies the erosion of

the Constitutional notion of venue which that section has

facilitated in the lower courts and which requires this Court’s

renewed scrutiny.

lronically Rule 21(b), designed for the benefit of the defen-

dant who finds himself charged in a remote jurisdiction, is

now treated as a discretionary instrument of largesse in a case

8

such as this involving multiple venue problems, as the decision

below reflects.

This Court in Travis v. United States, 364 U.S. 631, 634

(1961), recently reaffirmed that ‘questions of venue are more

than matters of mere procedure” but rather “raise deep issues

of public policy.”” There it was held that a prosecution for fil-

ing a false affidavit could be venued only at the place of filing

the affidavit, not at the place of its mailing, at least in the ab-

sence of a specific provision to the contrary. Earlier, in United

States v. Johnson, 323 U.S. 273 (1944), it had been held, again

in the absence of explicit contrary legislation, that a violation

of the Federal Denture Act could be prosecuted only in the Dis-

trict of sending. Mr. Justice Frankfurter’s dictum (at 323

U.S. p. 274-275) seems to envision a rather plenary power in

Congress to alter this by specific legislation, such, perhaps,

as $3237.

But, assuming this is true and correct, petitioners suggest

that the Constitutional venue provisions nevertheless repre-

sent a barrier to unlimited Congressional or Judicial expan-

sion and redefinition, a barrier which is frequently crossed

in mail fraud cases, and was crossed in the present prosecu-

tion.

Since 18 U.S.C. §3237(a) purports to place venue in any dis-

trict that mail matter touches upon, Rule 21(b) has now come

to be treated as a source of purely discretionary relief from

inconvenience or a denial of ‘‘the interest of justice” in cases

where the Court is persuaded that transfer is proper. The

Courts of Appeals, in turn, decline to disturb a refusal to

transfer without a showing by the accused that ‘‘some substan-

tial right has actually been affected,” as the Court of Appeals

suid in affirming these petitioners’ convictions. And see

United States v. Phillips, 433 F.2d 1364 (8th Cir. 1970).

9

The terrible irony of this is that the ostensibly clear Con-

stitutional command of Art. III $2 and the Sixth Amend-

ment that an accused shall be tried where his crime was “‘com-

mitted” has, by mere legislative and judicial redefinition in

cases involving the mails, lost its natural, reasonable and in-

tended meaning, and lost its inherent potency, while the bur-

den has shifted to the accused to show the prejudice of trial

in a remote jurisdiction; Rule 21 (b) has, in effect, sup-

planted the Constitutional provisions.

In Plott v. Minnesota Mining & Manufacturing, 376 U.S.

240, 243-244 (1964), this Court set forth the following criteria

to guide application of Rule 21(b):

(1) Location of a corporate defen-iant: (In the present

case, Fountain Agency (a defendant at trial) and the indi-

vidual petitioners were located in Baton Rouge, Louisiana. )

(2) Location of possible witnesses: (Here sixteen Louisi-

ana witnesses testified, only five from Minnesota, and peti-

tioners alleged at the time of the motion to transfer that they

had other potential witnesses in Louisiana.)

(3) Location of events likely to be in issue: (in this case

every action of the accused and every event in issue took place

in Louisiana except for the receipt of certain mail matter in

Minnesota. )

(4) Location of documents and records likely to be in-

volved: (Here the documentary evidence was not voluminous;

some Government exhibits were from Minnesota; but all of

the petitioners’ records were in Louisiana, and many of them

were involved in litigation in Louisiana at the time of trial.

R., 1, 52; II, 34; ITI, 92)

(5) Disruption of defendant's business unless the case is

transferred: (Petitioners were no longer in the insurance

10

business, but their employment was neturally disrupted more

by a Minnesota trial than if they had been tried in Louisiana.)

(6) Expense to the parties: (This is reflected in the num-

ber of Louisiana witnesses and location of documents above.)

(7) Location of counsel: (Petitioners’ Louisiana counsel

did not try the case in Minnesota but retained Minnesota coun-

sel, another additional expense and inconvenience.)

(8) Relative accessibility of the place of trial: (We have

noted that Louisiana was more readily accessible both to peti-

tioners and to a large majority of the witnesses.)

(9) The docket condition in each district: (The record von-

tains no information upon this question.)

(10) <Any other special elements which might affect the

transfer: (The involvement of petitioners’ records in other

Louisiana litigation would apply here, as well, as would the

location of their sub-offices in Mississippi, Alabama, and

Florida. )

Since all of the applicable criteria were satisfied in this case

by at least a strong preponderance in favor of transfer, and

yet transfer was denied and the denial affirmed, it is apparent

that the Constitutional venue commands have been reduced

to impotency, unavailing against the prosecutor’s mere arbi-

trary choice of venue in any offense involving the mails.

Petitioners respectfully submit that this Court should re-

examine the Constitutional venue provisions, and reaffirm

their predominance over conflicting and debilitating provi-

sions such a 18 U.S.C. $3237 and Rule 21.

11

CONCLUSION

For these reasons, a writ of certiorari shou!d issue to review

the judgment and opinion of the Eighth Circuit.

Dated: October 51, 1974.

Respectfully submitted,

DOUGLAS W. THOMSON

THOMSON, WYLDE,

NORDBY & FRIEDBERG

Suite 1530

55 East 5th Street

St. Paul, Minnesota 55101

(612) 227-0856

Counsel for Petitioners

A-3

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 74-1347

UNITED STATES OF AMERICA,

Appellee,

v.

JOHN D. McGREGOR, ROBERT FLETCHER and

FOUNTAIN AGENCY, INC., a Louisiana Corporation,

Appellants.

Submitted: September 11, 1974

Filed: October 7, 1974

Appeal from the United States District Court,

District of Minnesota, Third Division

Before LAY, ROSS and WEBSTER, Circuit Judges.

ROSS, Circuit Judge.

John D. McGregor, Robert Fletcher, and Fountain Agency,

Inc. were each charged in a twenty-six count indictment with

the use of the mail for the purpose of executing a scheme to

defraud in violation of 18 U.S.C. § 1341. Specifically, the in-

dictment alleged that the defendants, acting as agents for

Northland Insurance Co., caused notification of insurance

policy cancellations to be sent to Northland for the purpose

of obtaining premium refunds from Northland. However, the

defendants’ customers, whose policies were cancelled, were

never informed of the cancellation. From a verdict finding

them guilty of all twenty-six counts, McGregor, Fletcher and

QE ret ccc es

A-4

Fountain appeal contending that the court erred in denying

their motion for transfer to another district and that the evi-

dence was insufficient to establish that they acted with intent

to defraud.

During the relevant time period, Fountain Agency, Inc., an

insurance agency incorporated in Louisiana, was primarily

involved in selling automobile collision insurance, generally

on vehicles newly purchased by high risk drivers. The policies

were often written by the auto dealer himself acting as Foun-

tain’s subagent and financed together with the purchase price

of the auto through finance companies such as General Motors

Acceptance Corporation. Fountain, itself, was not the insurer,

but merely the agent for several insurance companies, chief

among which was Northland Insurance Co., a licensed insur-

ance company in Minnesota.

Fountain had negotiated a retrospective contract with

Northland, under the terms of which Fountain earned 80%

of the premium and Northland earned 20%. The total premi-

um, however, was forwarded to Northland; the 80% was

credited to Fountain’s account at Northland and used as a

fund out of which all claims by Fountain’s insureds were paid.

After claims adjustment, if the losses did not exceed the

agent’s earned premium pool, Northland would refund a pro

rata amount of earned premium to Fountain.

These retrospective contracts added to cash flow problems

already suffered by Fountain. Not only did Fountain experi-

ence a need for revenues to pay operating expenses but it also

negotiated collateral contracts with subagents who sold poli-

cies under which the subagent, usually the automobile dealer,

could retain 20% of the face value of the insurance premium

as a commission for the sale of the insurance policy. Fountain

thus committed 120% of the premium at the outset.

A-5

After it was realized that expanding its business under

‘retrospective contracts did nothing to remedy the cash flow

problems, McGregor consulted with other insurance agencies

who were also experiencing the same difficulties with retro-

spective contracts. After consulting with these other agencies

and with an employec of the Louisiana Insurance Commission,

McGregor determined to undertake a program of cancelling

policies without notifying or forwarding refunds to the in-

sured.

Under the plan, notices of cancellation were prepared on

arbitrarily selected policies, the originals of which notices

were sent to Northland. Copies were prepared for the pol-

icvyholder and lienholder, tut were not sent. Rather, they

mailed other documents to ihe policyholder and the lienholder

by registered mail. Certificates of mailing were obtained for

these mailings and sent to No.thland with the original of the

notice of cancellation as fa’se proof that notices of cancella-

tion had been sent to the policyholder and the lienholder.

Northland then refunded to Fountain the prorated unearned

portion of the premium on the cancelled policy. In effect, these

policies were cancelled to the insurer, but not to the policy-

holders or lienholders who could still hold Northland primarily

liable on the policy since they never received notices of cancel-

lation.

During the periods of cancellation, Fountain paid claims

against the cancelled policies out of the refunded premiums.

As the cash flow situation improved, Fountain began to re-

write the previously cancelled ::.licies with Northland. Names

of the policyholders on the reissued policies were changed

slightly so that, as McGregor testified, the computer would

not reject the policy application. None of the cancelled premi-

ums were ever refunded to the policyholders, Fountain em-

A-6

ployees were under instructions to conceal records of these

cancellations from Northland representatives. Northland was

never reimbursed for its pro rata loss of its 20% premium nor

for its potential liability under the policy during the period

of cancellation. When delays began to develop in Fountain’s

ability to pay claims against the cancelled policies and com-

plaints were directed to Northland, the plan came to light.

Motion for Transfer. .

The Constitution provides that “The Trial of all Crimes

. Shall be held in the State where the said Crimes shall

have been Committed.” U.S. CONST. art. III, § 2. The sixth

amendment carries a like command. However, FED. R. CRIM.

P. 21(b) permits a transfer:

For the convenience of parties and witnesses, and in the

interest of justice, the court upon motion of the defendant

may transfer the proceeding as to him or any one or more

of the counts thereof to another district.

This Court has held that the grant of transfer under that rule

is a matter of the discretion of the district judge. United

States v. Phillips, 433 F.2d 1364 (8th Cir. 1970), cert. denied,

401 U.S. 917 (1971). In reviewing the district court’s exercise

of discretion in these matters, we are guided by the enumera-

tion of factors which were considered in Platt v. Minnesota

Mining & Manufacturing Co., 376 U.S, 240, 243-244 (1964):

(1) location of corporate defendant; (2) location of pos-

sible witnesses; (3) location of events likely to be in issue;

(4) location of documents and records likely to be in-

volved; (5) disruption of \iefendant’s business unless the

case is transferred; (6) expense to the parties; (7) loca-

tion of counsel; (8) relative accessivility of piace of trial;

(9) docket condition of each district or division involved;

A-7

and (10) any other special elements which might affect

the transfer.

Concerning those factors, the Supreme Court stated that the

main office or “home” of the defendant has no independent

significance in determining whether transfer to that district

would be “in the interest of justice,” although it may be con-

sidered with reference to such factors as the convenience of

records, officers, personnel and counsel. /d.at 245-246.

18 U.S.C. $ 3237(a) provides in part:

Any offense involving the use of the mails... is a

continuing offer.se and, except as otherwise expressly pro-

vided by enactment of Congress, may be inquired of and

prosecuted in any district from, through, or into which

such . . . mail matter moves.

The Supreme Court and other circuits have accordingly held

that the government may elect to bring the prosecution in the

district where the letter was mailed or where it was delivered.

Salinger v. Loisel, 265 U.S. 224, 233-234 (1924); Benson v.

Henkel, 198 U.S. 1, 15 (1905) ; United States v. Sorce, 308 F.2d

299, 300 (4th Cir. 1962), cert. denied, 377 U.S. 957 (1964);

Kreuter v. United States, 218 F.2d 532, 534 (5th Cir.), cert.

denied, 349 U.S. 932 (1955); Holdsworth v. United States, 179

F.2d 933, 936 (1st Cir. 1950); Kaufman v. United States, 163

F.2d 404, 411 (6th Cir. 1947), cert. denied, 333 U.S. 857

(1948); Gates v. United States, 122 F.2d 571, 577 (10th Cir.),

cert, denied, 314 U.S. 698 (1941); Johnson v. United States,

59 F.2d 42, 45 (9th Cir.), cert. denied, 287 U.S. 631 (1932).

Venue for this crime, then, properly existed in Minnesota, the

location of the addressee of the fraudulent mail. To determine

whether the appellants were entitled to a transfer from the

district for trial, the factors announced in Platt come into

A-8

play. Here the party defrauded was an insurance company

based in Minnesota. The chief government witness was the

vice president of Northland. Other Northland witnesses and

the postal inspectors involved were from Minnesota. Most of

the documents entered into evidence during the trial came

from Northland’s office. These factors buttress the triai

court’s denial of the motion for transfer. The appellants have

tailed to demonstrate, as required by United States v. Phillips,

supra, 433 F.2d at 1368, that some substantial right has actual-

ly been affected. The motion was properly denied.

Sufficiency of Evidence.

We have recently reiterated the essential elements of a viola-

tion of 18 U.S.C. § 1341:

(1) a scheme conceived by appellant for the purpose of

defrauding . . . by means of false pretenses, representa-

tions or promises, and (2) use of the United States mails

in furtherance of the scheme.” “Scheme” to defraud with-

in the purview of this section involves some connotation

of planning and pattern. Thus, intent to defraud is an es-

sential element. It may be inferred by all the facts and

circumstances surrounding a transaction. [Additionally]

. . . to bring the scheme within the ambit of the mail

fraud statute, the mails must be used for the purpuse of

executing the scheme, must be employed before the

scheme reaches fruition, yet, need not be contemplated

as an essential element of the scheme.

United States v. Nance, No 74-1047 (8th Cir., Aug. 20, 1974).

The appellants concede that there is no doubt here that the

mails were in fact employed and that this use of the mails was

aun integral part of the activity which the government alleged

to be fraudulent. They do, however, contend that the first

A-9

requisite was not met on this record. They maintain that be-

cause McGregor consulted the Louisiana Insurance Commis-

sion, because he received advice from other agencies under-

going similar difficulties, and because Fountain paid all claims

against the cancelled policies during the periods of cancella-

tion, they did not have the requisite intent to defraud.

In reviewing the sufficiency of the evidence, we note that

the verdict must be sustained if there is substantial evidence,

taking the view most favorable to the government to support

it. Glasser v. United States, 315 U.S. 60, 80 (1942). United

States v. Madden, 482 F.2d 850, 851 (8th Cir. 1973). The dis-

trict court made clear in its instructions to the jury that

specific intent to defraud was essential to a finding of guilt.

Given the proper instructions of the district court and the

scope of review, we find that there was sufficient evidence

of covert conduct which could permit the jury to determine

that the appellants acted with the requis*‘e intent to deceive

both Northland and the policyholders. Policyholders were

never informed of the cancellation. Office personnel were in-

structed to conceal the cancellation practice from Northland

representatives. At the outset the substitution of other docu-

ments for the cancellation notices was effectuated by

McGregor in the privacy of a closed office without informing

office personnel of the procedure. Northland was never reim-

bursed for its potential risk during the period of cancellation.

Names were altered on reissued policies so that a computer

would not detect the prior cancellations. Fountain, while pay-

ing claims against cancelled policies acted as an insurance

company, an enterprise for which it was not licensed and could

not meet capitalization requirements. Given this evidence, re-

solved in the light most favorable to the verdict, it is clear that

A-i0

the jury, as properly instructed, found that the appellants had

specific intent to defraud.

For the reasons hereinbefore expressed, the judgment of

conviction is affirmed.

A true copy.

Attest:

CLERK U. S. COURT

OF APPEALS

EIGHTH CIRCUIT