United States of America, Plaintiff-appellee, v. Richard Strothman, Defendant-appellant.united States of America, Plaintiff-appellee, v. Thomas Shehan, Defendant-appellant, 892 F.2d 1042 (4th Cir. 1989)

Appellants Strothman and Shehan were convicted in the United States District Court for the Northern District of West Virginia on six counts of wire fraud in violation of 18 U.S.C. § 1343 and on one count of embezzlement in violation of 18 U.S.C. § 664. The appellants appeal their convictions. We affirm.

The Ohio Valley Medical Center (hereinafter "the Center") is a hospital in Wheeling, West Virginia. It has a pension plan (hereinafter "the Plan") which covers its employees, both present and retired. In late 1983, the Plan had assets of roughly twenty million dollars, comprised mainly of stocks and bonds, and was in fact overfunded. Regarding the best course of action to take in view of this overfunding, over the course of two years of studying the options, the Center's administrators sought the advice of numerous professional consultants including the appellants.

Appellants Shehan and Strothman were insurance agents who owned Tri-Core Executive Services, which they characterized as an employee benefits consulting firm. The appellants advised the Center regarding a proposal under which the Plan would replace its stocks and bonds with annuities. Specifically, Shehan's supposed role in this endeavor was that he would solicit bids for the annuities from the insurance companies.

During the preliminary phases of their dealings, a proposal was prepared by Shehan and submitted to a member of the Center's administration. It recommended a specific but unnamed insurance company, and stated that the proposal was based on "the current annuity rates from Executive Life Insurance Company" (hereinafter "Executive Life"). The proposal also described how appellants' fees would be calculated. It specifically stated that "fees from our services are derived from a group commission schedule built into the pricing of the annuity," a statement which was later shown to be false.

Further negotiations between hospital administrators and appellants ensued. At one of these sessions on November 8, 1985, the appellants submitted to the administrators a document containing substantial falsehoods. It indicated that the appellants had contacted twenty-two carriers, when in fact testimony showed that the maximum number that could have been contacted was eleven. It identified three insurers as final contenders for the Plan's policy--Executive Life, Manufacturer's Life, and Massachusetts Mutual Life--and recommended Executive Life. It overstated the amount of the bid from Manufacturer's Life, which would have been the lowest of the final three bids if stated correctly. Manufacturer's Life would have provided appellants a commission of five percent, while the commission Executive Life provided was seven percent. (Testimony indicated that appellants regularly misled their clients in this way, simply because of the high commissions provided by Executive Life.)

In addition to the written statements which appellants presented at that meeting, there was a considerable amount of oral discussion. Appellant Shehan was asked specifically what the appellants' commissions and fees would be and replied that they would be four-tenths of one percent (.4%). Based on this assertion, calculations were made using the .4% figure and appellants' fees were estimated to be approximately $44,000. Shehan also explained at that meeting that there would be a ten percent "load," which he represented to be an administrative cost required by the insurance company. In fact, this ten percent charge was pure commission, seven percent of which was returned to the appellants as their "agent's" commission. This seven percent commission could have been negotiated downward had appellants attempted to do so.

The original decision was to use Executive Life exclusively. Later, however, concern arose about all the Plan's money being placed with one company, and the Plan's Pension Committee decided to use both Executive Life and Manufacturer's Life. Upon learning of this, appellant Strothman contacted Manufacturer's Life and arranged for the appellants' commission to be raised from five percent to seven percent. Thereafter, partial payment for the annuities was wired out of the Plan's bank account to Executive Life and to Manufacturer's Life.

Part of this documentation involved in the issuance of the Manufacturer's Life annuity was a form which required disclosure and approval by the purchaser of the agents' commissions. This form discloses that the appellants were to receive a commission of seven percent on the Manufacturer's Life annuity, and on this form appears the alleged signature of the Center's director of fiscal affairs, John Littlemeyer. However, the signature was a forgery. An expert witness, John Cawley, testified that the forgery appeared to be in appellant Strothman's handwriting.

Payment of the appellants' commissions by the insurance companies was attempted to be stopped when it was learned that the commissions exceeded four-tenths of one percent. Before this could be effected, however, over $700,000 in commissions had already been paid, only about $160,000 of which has been recovered by the Plan. The Plan therefore has still not recovered over $500,000 in excess commissions.

Appellants Strothman and Shehan were indicted in the United States District Court for the Northern District of West Virginia. Counts one through three of the indictment charged appellants with mail fraud in violation of 18 U.S.C. § 1341; counts four through nine charged them with wire fraud in violation of 18 U.S.C. § 1343; count ten charged them with embezzlement in violation of 18 U.S.C. § 664. Regarding the mail fraud counts, count three was dismissed prior to trial upon the motion of the appellee, and the appellants were acquitted on counts one and two. Regarding the wire fraud counts, the appellants were convicted on counts four through nine. They were also convicted on the embezzlement count, count ten. The appellants have filed this appeal of their convictions.¹ 

The appellants argue that their convictions should be overturned because the convictions were improperly based on a theory of loss of intangible rights. We are not persuaded.

Appellants were indicted for violations of 18 U.S.C. § 1343 which states 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....

(Emphasis added.)

Until recently, courts have interpreted the second clause of the statute independently of the first clause. Such a reading allows defendants to be convicted of schemes to defraud their victims of intangible rights, in addition to money and property. In 1987, however, this interpretation was changed by the Supreme Court in McNally v. United States, 483 U.S. 350, 107 S. Ct. 2875, 2879, 2882, 97 L. Ed. 2d 292 (1987). McNally held that 18 U.S.C. § 1341 (mail fraud) did not encompass violations of citizens' rights to good government or violations of fiduciary duties but rather was limited to deprivations of money and property. Thus the disjunctive "or" in the statute has been judicially construed as a conjunctive "and." The mail fraud statute contains identical language to the wire fraud statute; thus we will apply McNally 's holding to the case at bar.

Other language in McNally has been interpreted as imposing a duty on the trial court to charge the jury with and require the jury to find that the scheme defrauded or intended to defraud someone of money or property. See United States v. Mandel, 862 F.2d 1067, 1072 (4th Cir. 1988); accord United States v. Shelton, 848 F.2d 1485, 1495 (10th Cir. 1988); United States v. Lance, 848 F.2d 1497, 1501 (10th Cir. 1988).

In this case, there is no question that the indictment charged that the victim had been deprived of money or property. The indictment states in relevant part:

... devised and intended to devise a scheme and artifice to defraud and to obtain money and property from the OHIO VALLEY MEDICAL CENTER employee pension plan....

(Emphasis added.)

Appellants now argue that the issue as presented to the jury allowed conviction where the appellants breached only a fiduciary duty that they owed to the hospital administrators. This claim is based on an instruction that reads "... first, the defendant willfully and knowingly devised a scheme or artifice to defraud or for obtaining money or property ..." (emphasis added).

In Mandel, supra, at 1073, we held that in a case where the jury considers alternate theories of liability, if either theory is improper, the conviction cannot stand. The only exception to this rule occurs when we are able to determine "with a high degree of probability" that the jury did not rely on the legally incorrect theory. Id.

We believe in this case there was such a sufficiently high degree of probability and that the convictions should be affirmed.

This case, unlike McNally and its progeny, did not proceed on alternate theories of money/property loss and loss of intangible rights. The indictment solely alleged a monetary/property loss. Further, we do not accept appellants' contention that the trial judge rejected the monetary loss theory because we find it to be unsupported by the record. The appellants' conviction on count ten (embezzlement) lends strong support to the conclusion that the jury convicted appellants on a loss of money or property rights.

Additionally, we note that appellants did not object to the allegedly improper jury instruction in the manner required by Federal Rule of Criminal Procedure 30 (see Part IV, infra, for detailed discussion). Moreover, the trial judge specifically admonished the jury to adhere to the charges as presented in the indictment, saying

I caution you, members of the jury, that you are here to determine whether the Government has proved or failed to prove the guilt of the accused from the evidence in this case. The defendants are not on trial for any act or conduct or offense not alleged in the indictment.

(Joint Appendix at 325.)

We find no plain error existed and that there was no violation of fundamental fairness and affirm appellants' convictions.

The appellants next argue that their wire fraud convictions should be reversed because the indictment was constructively amended. Appellants contend that the Ohio Valley Medical Center employee pension plan was defrauded, but that the only proof offered or able to be offered by the government demonstrated that it was the hospital and not the Plan that suffered the loss. Appellants state that the presentation of evidence at trial that a different entity than the one charged in the indictment was victimized amounts to per se reversible error.

Appellee argues that there was ample evidence presented at trial to support the jury's finding of guilt based on the indictment. Appellee states that, because the money used to pay appellants came out of the Plan's account, there is clear evidence that the intended victim was the Plan itself.

The federal courts have developed two approaches when dealing with a situation where the indictment allegedly differs from the evidence presented at trial. The indictment may be deemed to be "amended." If so, the Supreme Court has stated that certain types of "amended indictments" require per se reversal. Ex parte Bain, 121 U.S. 1, 7 S. Ct. 781, 30 L. Ed. 849 (1887); Stirone v. United States, 361 U.S. 212, 80 S. Ct. 270, 4 L. Ed. 2d 252 (1960). The premise of Bain, Stirone, and their progeny that is still good law is that a conviction may not be allowed to stand if it was based on an offense which was different than the one charged in the indictment.²  See United States v. Miller, 471 U.S. 130, 105 S. Ct. 1811, 1818, 85 L. Ed. 2d 99 (1985).

Consequently, charges may not be broadened without resubmission to a grand jury and neither may a defendant be tried on charges which are not included in the original indictment. See Miller, supra, 105 S. Ct. at 1818-19; Stirone, supra, 361 U.S. at 217.

The second approach that courts use to determine the validity of a conviction if it allegedly differs from the indictment is by analyzing the difference under the "variance doctrine." Courts have been much more reluctant to require per se reversals of convictions under this doctrine and instead have adopted a case-by-case analysis. United States v. Goldman, 750 F.2d 1221 (4th Cir. 1984). The test enunciated by the Supreme Court to determine whether a variance will prove fatal to a conviction was stated in Berger v. United States, 295 U.S. 78, 82, 55 S. Ct. 629, 630, 79 L. Ed. 1314 (1935), as follows:

The true inquiry, therefore, is not whether there has been a variance of proof, but whether there has been such a variance as to "affect the substantial rights" of the accused. The general rule that allegations and proof must correspond is based upon the obvious requirements (1) that the accused shall be definitely informed as to the charges against him, so that he may be enabled to present his defense and not be taken by surprise by the evidence offered at the trial; and (2) that he may be protected against another prosecution for the same offense.

Id. (citations omitted).

This Court has held that "any variance between indictment and proof which does not modify the elements of the crime charged will not invalidate a conviction unless it prejudices the defendant." United States v. Odom, 736 F.2d 104, 118 (4th Cir. 1984). Accord United States v. Mason, 68 F.R.D. 619, 633 (D. Md. 1975). See also Kotteakos v. United States, 328 U.S. 750, 66 S. Ct. 1239, 90 L. Ed. 1557 (1946).³ 

The existence or nonexistence of prejudice is usually determined with reference to the two factors set forth in Berger, supra, namely the possibility of unfair surprise to the defendant and the potential for subsequent prosecution for the same crime. See United States v. Quicksey, 525 F.2d 337, 341 (4th Cir. 1975).

In this case, appellants were convicted of six counts of wire fraud in violation of 18 U.S.C. § 1343. The indictment alleged violations of the aforementioned statute. Appellants contend that identity of the victim is a separate, additional element of wire fraud. In United States v. Condolon, 600 F.2d 7, 8 (4th Cir. 1979), we held "the gravamen of the offense [wire fraud] is simply the misuse of interstate communication facilities to execute 'any scheme or artifice to defraud.' " Condolon contained an intangible rights theory that was later disapproved by McNally v. United States, supra. However, the part of Condolon relied upon here is still good law as interpreted by the language in Mandel requiring a scheme to defraud someone of money or property. See also United States v. Bagdasian, 291 F.2d 163 (4th Cir. 1961). Accord United States v. Gordon, 780 F.2d 1165, 1171 (5th Cir. 1986). We agree that the victim is important in a case of wire fraud, but do not agree that the victim is an element of the offense. As demonstrated by this Court in Mandel, the emphasis of the statute is that a property or monetary loss was incurred by the victim as a result of the defendant's scheme to defraud. We read the McNally mandate to subsume the issue of victim identity into the bar on suits based on intangible rights. Thus, the victim is incorporated into the "scheme to defraud" element of the statute. Therefore, the elements of wire fraud are unchanged by McNally and Mandel. They merely have been clarified.

In this issue, appellants' only allegation of amendment to the indictment concerned the identity of the victim. Because this Court does not find identity of the victim to be a separate element of 18 U.S.C. § 1343, no per se error occurred under Bain or Stirone because the offense charged in the indictment is the same offense on which appellants were convicted.⁴  Similarly, under the "variance" analysis, we find that because the alleged variance did not modify an element of the crime, no per se reversal is required. After careful consideration, we hold that the defendant has not been prejudiced so as to require reversal. There can be no doubt that appellants were informed of the identity of the alleged intended victim, since the indictment specified the intended victim as "the OHIO VALLEY MEDICAL CENTER employee pension plan." This description provided appellants with notice of the alleged intended victim regardless of whether the victim was the Center or the Plan. Any variance of the evidence from the indictment could not have prejudiced the appellants or taken them by surprise in the presentation of their defense.⁵  And, given the detail of the indictment, appellants could not be subject to later prosecution for the violations of the wire fraud statute which were the subject of these convictions. See generally Miller, supra. We affirm the validity of the wire fraud convictions and find no amendment of the indictment existed.

Appellants next argue for reversal of their embezzlement conviction (Count 10) on the grounds that there has been a constructive amendment of the indictment. This amendment allegedly occurred, appellants contend, because of a discrepancy between the indictment and the jury instructions.

Appellants were convicted under 18 U.S.C. § 664, which provides:

Any person who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use or to the use of another, any of the moneys, funds, securities, premiums, credits, property, or other assets of any employee welfare benefit plan or employee pension benefit plan, or of any fund connected therewith, shall be fined not more than $10,000, or imprisoned not more than five years, or both.

The jury instruction essentially parroted the statute (however, the judge did equivocate), while the indictment omitted the words "or to the use of another." Appellants state that because the jury instruction added the phrase "or to the use of another," the jury was allowed to convict appellants on a theory not articulated in the indictment. We are not persuaded.

The Supreme Court has stated in Henderson v. Kibbe, 431 U.S. 145, 154, 97 S. Ct. 1730, 1736, 52 L. Ed. 2d 203 (1977), "it is the rare case in which an improper instruction will justify reversal of a criminal conviction when no objection has been made in the trial court."

We have also stated in United States v. McCaskill, 676 F.2d 995, 1002 (4th Cir. 1982):

... [A]n exception to the requirement mandated under Rule 30, is always to be applied cautiously and only in the exceptional case where, after reviewing the entire record, it can be said the claimed error is a "fundamental error, something so basic, so prejudicial, so lacking in its elements that justice cannot have been done," or "where [the error] is grave error which amounts to a denial of a fundamental right of the accused," or the error has " 'resulted in a miscarriage of justice or in the denial to appellant of a fair trial' " or where the error is such as to "seriously affect the fairness, integrity or public reputation of judicial proceedings" or where it can be fairly said "the instructional mistake had a probable impact on the jury's finding that the defendant was guilty."

(Citations omitted; emphasis in original.)

Also Federal Rule of Criminal Procedure 30 states in part:

No party may assign as error any portion of the charge or omission therefrom unless that party objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which that party objects and the grounds of the objection.

In this case, the only objections to the jury instructions came after they had been read to the jury. Appellant Shehan's counsel was the only attorney to raise objections and those objections were labeled by him as "housekeeping and housecleaning." (Joint Appendix at 340-41.) The appellants did not object to instruction number 4 or that part of the court's charge containing the words "or to the use of another." The characterization of these objections and the lack of urgency in presenting them combined with their vague and conclusory nature do not satisfy the standard of distinction and clarity required by Rule 30.

Additionally, we do not find that the factors set forth in McCaskill, supra, have been met. First, the judge's reading of the charge in question was not definite but rather was equivocal. See United States v. Fish, 432 F.2d 107, 108 (4th Cir. 1970) (equivocal instruction without contemporaneous objection and with no opportunity for trial judge to clarify was held not to be plain error).

Second, the trial court alleviated any alleged prejudice with its instruction which stated in part: "The defendants are not on trial for any act or conduct or offense not alleged in the indictment." (Joint Appendix at 325.)

We conclude that there has been no miscarriage of justice or denial of fundamental fairness and, for these reasons, affirm the trial court.

The appellants next argue that their convictions should be reversed because the evidence presented at trial was insufficient in several regards. We find their arguments to be without merit.

First, appellants contend that their convictions based on violations of the wire fraud statutes are void because there was allegedly no proof of appellants' intent to defraud. We have previously held that, in evaluating the sufficiency of proof presented at trial, the evidence must be reviewed in the light most favorable to the government. United States v. Seidlitz, 589 F.2d 152 (4th Cir. 1978), citing Glasser v. United States, 315 U.S. 60, 62 S. Ct. 475, 86 L. Ed. 680 (1942).

This Court has also stated that this requisite intent (which is embodied within the scheme to defraud) may be inferred from circumstantial evidence. See Seidlitz, supra, at 160. Accord United States v. Alston, 609 F.2d 531, 538 (D.C. Cir. 1979); United States v. Andrade, 788 F.2d 521, 527 (8th Cir. 1986).

We are persuaded that the record below contained ample evidence from which the jury could have concluded that appellants knew that their statements and actions were false and were intended to defraud their hearers. There was evidence introduced to show that appellants negotiated their own commission from 5% to 7% (Joint Appendix at 256-57) and represented to the administration that their fees would be .4% (Joint Appendix at 89, 156). Further evidence was introduced to show that the appellants misrepresented the bid of one of the carriers in order to push another carrier with a higher commission for them (Joint Appendix at 397, 262). The jury could have reasonably found that appellants submitted a forged hospital administrator's signature on a disclosure form that showed appellants' commission, which form was required to be executed by one of the insurance companies (Joint Appendix at 263-67, 295-98). Moreover, the jury could have found that Strothman himself forged it.

The second area in which appellants allege the evidence was insufficient to support their convictions concerns the identity of the victim. Appellants contend that the indictment charged that the victim was the Plan but allegedly the only evidence offered at trial showed that the victim was the hospital. This contention was discussed at length in regard to an alleged constructive amendment of the indictment in Part III., supra. We find that there was sufficient evidence presented at trial to justify the convictions regardless of whether the victim was the Plan or the hospital. It was established at trial that the money to pay appellants to purchase the annuities (and thereby to pay appellants' commissions) came out of the Plan's bank account. (Joint Appendix at 227, 229.) Thus, the Plan would have had over $500,000 more in it than it does at the present time had appellants not acted as they did. (Joint Appendix at 305-06.) It was also established that hospital administrators were the primary negotiators with appellants. (Joint Appendix at 84, 89.) It was a hospital administrator whose signature was forged. (Joint Appendix 263-67, 295-98.) Thus, even were the identity of the victim an element that was necessary to sustain the convictions, we find that there was ample evidence presented to support the jury's verdict.

Finally, appellants contend that there was insufficient evidence of justifiable reliance by the Plan upon any representations made by appellants. Appellants state that the only misrepresentations that were made were made to hospital administrators. Appellants further argue that even though the administrators made recommendations to the Plan's decision makers, the evidence did not establish justifiable reliance by the decision makers on those recommendations nor was there any evidence to show appellants made misrepresentations directly to the decision makers. We do not agree.

It should be noted that justifiable reliance is not an element of either wire fraud or of embezzlement (see Parts III. and IV., supra, and cases cited therein). As United States v. Brien, 617 F.2d 299, 311 (1st Cir. 1980), states:

If a scheme to defraud has been or is intended to be devised, it makes no difference whether the persons the schemers intended to defraud are gullible or skeptical, dull or bright. These are criminal statutes, not tort concepts. The only issue is whether there is a plan, scheme or artifice intended to defraud. We discern no intention on the part of Congress to differentiate between schemes that will ensnare the ordinary prudent investor and those that attract only those with lesser mental acuity.

Assuming, for sake of argument, that justifiable reliance is an element of one of the offenses, this Court finds that sufficient evidence was presented at trial that the Plan's decision makers did rely on the representations made to them by the hospital administrators (Joint Appendix at 109-10, 242-52), and that the particular annuities in question would not have been purchased had the true amount of appellants' commission been known (Joint Appendix at 94-95, 98, 159, 184-85, 197).

Lastly, appellants argue that their convictions should be reversed because the trial court abused its discretion in denying appellants' motion to transfer the trial. Appellants filed a motion to transfer the trial from Clarksburg, West Virginia, to Wheeling, West Virginia. This motion was denied by Judge Kidd by order dated December 9, 1987. Appellants contend that the denial of their motion violates Rule 18 of the Federal Rules of Criminal Procedure, which states:

Except as otherwise permitted by statute or by these rules, the prosecution shall be had in a district in which the offense was committed. The court shall fix the place of trial within the district with due regard to the convenience of the defendant and the witnesses and the prompt administration of justice.

Appellants state that the district court failed to consider the convenience of the defendants and the witnesses and declined to transfer the case because of a per se rule that Judge Kidd tries all criminal cases in Clarksburg. Appellants further state that this allegedly inflexible rule was developed solely for the trial court's personal convenience.

Appellee argues that the trial court exercised due regard for the defendants' and witnesses' convenience. It contends that a careful balancing of convenience with the administration of justice mandated the denial of appellants' motion.

There is no constitutional right that a defendant be able to determine in which division of a district his trial shall be. This Court has held that, subject to Rule 18 concerns, the trial court has discretion to fix the place of trial at any place within the district. United States v. Florence, 456 F.2d 46, 50 (4th Cir. 1972); United States v. Truglio, 731 F.2d 1123, 1130 (4th Cir. 1984). Wheeling and Clarksburg are both in the Northern District of West Virginia. Therefore, the inquiry is limited to the standards enunciated in Rule 18. We have held that it is for the trial court to balance the competing interests of convenience with the prompt administration of justice. Truglio, supra, at 1130.

We are not persuaded, as appellants argue, that the trial court did not fully balance all considerations in making its decision on appellants' motion. Oral argument was heard on appellants' motion for change of venue (Joint Appendix at 29-40). The judge acknowledged the existence of a problem on both sides of the equation (Joint Appendix at 34). The district court informed counsel for appellants that it would take the problem under advisement and would transfer the trial if, in the court's opinion, Clarksburg was too burdensome (Joint Appendix at 35). Additionally, in its order of December 9, 1987, the court stated if convenience was the sole issue in this case, the trial would most likely have to be in Wheeling. But the court went on to balance convenience with the prompt administration of justice.

The court stated that there was a distinct possibility that appellants could be prejudiced by the granting of their motion because of the complexity of the case and the inadequacy of the Wheeling facilities. The court noted that Wheeling had no computer research tools, no word processing, an inadequate law library and was not set up for an extended trial. The court also found that the costs involved in relocating to Wheeling would be exorbitant. Additionally, the court was concerned with the Speedy Trial Act implications involved in continuing this case a third time, not to mention the fact that other criminal defendants with pending cases could run afoul of the Speedy Trial Act if the court continued their cases in order to travel to and from Wheeling for appellants' trial. For similar facts where no abuse of discretion was found see United States v. Pepe, 747 F.2d 632 (11th Cir. 1984).

We do not agree with appellants' contention that United States v. Burns, 662 F.2d 1378 (11th Cir. 1981), is "virtually identical" to this case. In Burns, the appellate court found an abuse of discretion when the trial court denied defendant's motion to change venue. However, in Burns, there was no evidence in the record that the trial court considered the factors set forth in Rule 18. Burns, supra, at 1383. The Eleventh Circuit stated: "For speedy trial considerations to outweigh such factors [convenience] they should be set forth in findings sufficiently detailed to allow review." Id.

In this case, the trial judge gave extensive consideration to appellants' claim and enunciated numerous bases for his ruling on December 9, 1987. For these reasons, we find no abuse of discretion and affirm the denial of the change of venue.

Appellants' convictions are hereby affirmed.

AFFIRMED.