August 24, 2019

Tenth Circuit: Incidental Mailings Triggered by Fraud Qualify as Mail Fraud Acts

The Tenth Circuit Court of Appeals issued its opinion in United States v. Zander on Friday, July 24, 2015.

Jeffrey Zander began working for the Paiute Indian Tribe in Utah in 1998 as a tribal planner, and he later became the Tribe’s trust resource and economic development director. In 2004 or 2005, he recommended to the Tribe that it seek federal grant money to fund development of an Integrated Resource Management Plan (IRMP) for each of the Tribe’s bands. Between 2005 and 2007, Zander prepared grant proposals to request funding from the Bureau of Indian Affairs (BIA) for the Tribe to develop IRMPs for each of its bands. Each proposal represented most of the grant funds would be used to hire and pay an outside facilitator to assist the Tribe. Each proposal was approved by that band’s council and the Tribal Council, then submitted to the BIA, which approved and awarded five IRMP development grants for a total of $165,000. Instead of hiring an outside consultant, Zander transferred the funds to four fictitious companies he created, then represented to the Tribe that these companies had provided consulting services for the IRMP development. The Tribe then issued checks to the companies, which were either mailed or hand-delivered to Zander. The Tribe then requested reimbursement from the BIA, which it approved, sometimes via fax.

Zander deposited the checks made out to the fictitious companies into his personal checking account and spent all of the $165,000. The Tribe learned of Zander’s scheme when a bank employee contacted it in March 2008 to ask about check made out to one of the fictitious businesses that Zander had tried to deposit in his personal checking account. The Tribe conducted a short investigation and fired Zander. The Tribe thereafter received a notice of collection from the BIA seeking repayment of the grant funds based on the Tribe’s failure to product the IRMPs the grants were intended to fund.

In February 2012, Zander was indicted on several charges, including mail fraud, wire fraud, money laundering, and failure to file tax returns. He was tried before a jury and convicted on all of the counts in the indictment. He was sentenced to 68 months’ imprisonment and ordered to pay $202,543.92 in restitution to the Tribe based on the actual grant funds, attorney fees, unemployment benefits, and Tribal employees’ time and travel costs associated with the case. He appealed, arguing five points of error: (1) insufficient evidence to support his mail fraud convictions; (2) insufficient evidence to support his wire fraud convictions; (3) a conditional challenge to his money laundering conviction; (4) a challenge to the procedural reasonableness of his sentence; and (5) a challenge to the restitution award. The Tenth Circuit addressed each in turn.

The Tenth Circuit meticulously examined Zander’s mail fraud challenge. Zander argued that although the BIA had mailed checks for the proposed IRMP development, those checks would have been mailed regardless of fraudulent intent had the Tribe submitted grant proposals. The Tenth Circuit rejected this argument, finding that although the mailings were an innocent side effect of Zander’s fraud, he set in motion the mechanism that caused the checks to be mailed. The Tenth Circuit compared Zander’s fraud to that of the defendant in Schmuck v. United States, where defendant altered the odometers of used cars and sold them to dealers at inflated prices. There, as in Zander’s case, although the mailings themselves were an innocent by-product of fraud, they would not have occurred but for the defendants’ fraudulent acts. The Tenth Circuit similarly rejected Zander’s wire fraud arguments, concluding that although the faxed themselves were innocuous, they occurred solely because of Zander’s fraudulent acts. Because Zander’s challenge to the money laundering conviction was conditional based on the Tenth Circuit’s findings on the mail and wire fraud counts, the Tenth Circuit affirmed the money laundering conviction.

Next, the Tenth Circuit addressed Zander’s challenges to the procedural reasonableness of his sentence and his restitution award. The Circuit found that the district court incorrectly included costs in the restitution award without requisite findings affirmatively showing that the costs were directly and proximately caused by Defendant’s conduct. These costs raised the base offense level for the conviction, resulting in a higher sentence. The Tenth Circuit reversed and remanded for resenting and recalculation of the restitution award based on the new offense level and based on evidence tying costs directly to Zander’s conduct.

The district court’s conviction was affirmed. The sentence and restitution award were reversed and remanded for recalculation.

Tenth Circuit: Denial of Suppression Motion Upheld Where Other Evidence of Guilt Overwhelmingly Supported Conviction

The Tenth Circuit Court of Appeals issued its opinion in United States v. Mulliken on Tuesday, July 15, 2014.

John Edward Mulliken solicited participants for purported weight loss studies in 2006 and 2008. In 2008, the FDA began investigating two studies, and as a result of the investigation, Mulliken was indicted by a grand jury sitting in the District of Colorado in November 2011. The indictment consisted of 19 counts of mail fraud. Mulliken was arrested in January 2012 at his residence. In August 2012, a superseding indictment issued asserting the same 19 counts of mail fraud, alleging that the purported weight loss studies were part of an “advance fee scheme” in which Mulliken made false representations intended to induce participants to mail deposits that Mulliken had no intention of refunding. In September 2012, Mulliken’s house was searched pursuant to a warrant, and two hard drives, a computer, two binders, and two folders were seized.

Mulliken was tried before a jury and convicted of 17 counts of mail fraud. Prior to trial, he moved to suppress the contents of the search, but the district court denied suppression. Mulliken appealed the denial of suppression to the Tenth Circuit, arguing that the affidavit underlying the search warrant failed to establish probable cause that the items would be found at his residence, that the affidavit failed to establish a nexus between the criminal acts and his residence, and that the list of items to be seized in the search was impermissibly broad.

The Tenth Circuit did not reach the merits of Mulliken’s arguments, determining instead that any error that could have come from the denial of suppression was harmless beyond a reasonable doubt. Only four exhibits were introduced at trial related to the search. Two of them were pictures of computers, one was a copy of an electronic document regarding one of the purported studies, and one was a copy of an email exchange between Mulliken and his father regarding allegations made on Good Morning America. The Tenth Circuit determined that there was overwhelming evidence of Mulliken’s guilt, including testimony from all 17 victims of the 17 counts of conviction. The Tenth Circuit further found that the two pictures could not have influenced the jury, since they were simply pictures of computers. The contents of the document regarding purported studies were largely duplicated by Mulliken’s own testimony. The only potentially harmful part of the email exchange was admitted separately, having been obtained from Mulliken’s father independent of the potentially illegal search. Because there was overwhelming evidence of Mulliken’s guilt and the four exhibits gained from the search in question had little to no impact on the jury, the district court’s denial of the suppression motion was upheld.