Opinion
IP 01-031-CR-01
December 5, 2001
ENTRY
The prosecution, United States of America (the "government"), seeks a criminal conviction of Defendant, Francine Roxanne Franks ("Franks") for use of the mails in furtherance of a fraudulent scheme or plan in violation of 18 U.S.C. § 1341. For the reasons discussed, we find the defendant GUILTY as charged in the grand jury's one-count indictment.
Factual Background
On December 3, 2001, a bench trial was conducted, during which five witnesses testified: Phillip D. Foley, M.D., Franks' former employer; Sharon Reedy and Angelia West, two of Franks' former coworkers; Renee Lee Clendenin, a KeyBank employee; and Neal Freeman, agent for the Federal Bureau of Investigation. We derive our factual recitation from the testimony of these witnesses and the exhibits introduced into evidence.
From 1990 to 1995, Franks worked as a teller at KeyBank branches in both Anderson and Chesterfield, Indiana, both located in Madison County. In May 1999, Franks, after having been a patient of Dr. Foley, began working for Dr. Foley at his sole practice medical clinic in Middletown, Indiana. Franks' tasks primarily included filling out sick leave and disability forms for patients, sorting mail, and routing mail to the appropriate office personnel; occasionally she would assist with patients making office visits. Reedy was primarily responsible for receiving and opening insurance-related correspondence and posting payments to patient accounts and preparing bank deposits of those checks. Checks received as insurance payments were routinely stamped for endorsement (see Ex. 7) and deposited in designated business accounts.
In the spring of 2000, Reedy noticed an irregularity in one patient's account file. Specifically, she noted that a typically timely insurance carrier had not posted a payment to the patient's account after several months. Reedy contacted the insurance company to investigate the discrepancy, and the company responded that the payments had in fact been made. At Reedy's request, the insurance company provided Reedy with a copy of one of the cancelled checks. Unlike those typically deposited by Dr. Foley's office personnel using an endorsement stamp, this check bore the handwritten endorsement "for deposit only." When this discovery was made by Reedy and shared with her coworkers, West and Franks, Franks was suspiciously non-forthcoming and unhelpful. Upon further investigation, Reedy discovered that numerous checks from other accounts had been endorsed for deposit in a similar fashion, either in handwriting or by a different form of the stamp. The time period in which the checks turned up missing corresponded closely to Franks' term of employment, and the disappearances stopped when her employment ceased. Based on these discoveries, Dr. Foley contacted the FBI, whose investigation revealed that Franks had deposited 149 checks into her personal accounts at KeyBank on 65 separate occasions. The checks endorsed by Franks had been honored for deposit by the drawee banks. These deposits had all occurred without the knowledge or consent of Dr. Foley.
On March 6, 2001, a federal Grand Jury returned an indictment charging Franks with devising and participating in a scheme to defraud her employer and using the United States mail to obtain control over 149 insurance reimbursement checks totaling approximately $41, 948. The defense filed a Motion to Dismiss, based on the government's alleged failure to provide any evidence that Franks "used or caused the use of the mails" in furtherance of the alleged scheme. The government responded to the Motion, and subsequently filed a superseding indictment, which charged:
Between on or about July 1999 through August 2000, in Madison County, within the Southern District of Indiana, and elsewhere, the defendant, FRANCES ROXANNE FRANKS, did knowingly devise and participate in a scheme to defraud; and a scheme to obtain money and property from her employer; specifically, on approximately 65 different occasions FRANCES ROXANNE FRANKS acquired and deposited checks payable to her employer into bank accounts controlled by her. For the purpose of executing the scheme, and attempting to do so, the defendant, FRANCES ROXANNE FRANKS, knowingly did place and cause to be deposited by a private and commercial interstate carrier to be sent and delivered according to the directions thereon, approximately 449 checks totaling approximately $41,948 for her employer which checks represented insurance reimbursements for services rendered by her employer and to which FRANCES ROXANNE FRANKS was not entitled. All of which is in violation of Title 18, United States Code, Section 1341.
In response to this superseding indictment, the defense withdrew its Motion to Dismiss, and the matter proceeded to trial.
Legal Analysis
Trial testimony established that the parties agreed on the vast majority of relevant facts. The defense primarily argued that the government had failed to establish the third essential element of mail fraud, namely that Franks had "used or caused the use of the mails in furtherance of that scheme." U.S. v. Barger, 178 F.3d 844, 847 (7th Cir. 1999); U.S. v. Fernandes, 2001 WL 1518775, at *5 (7th Cir. Nov. 30, 2001); U.S. v. Serpico, 2001 WL 803703, at *4 (N.D.Ill. July 10, 2001).
A defendant commits mail fraud when she: "(1) places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service; (2) deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier; (3) takes or receives therefrom, any such matter or thing; or (4) knowingly causes to be delivered by mail or such carrier according to the direction thereon." U.S. v. Crossley, 224 F.3d 847, 858 (6th Cir. 2000), quoting 18 U.S.C. § 1341. In addition, a defendant may commit mail fraud without actually mailing any correspondence if he takes some action with knowledge that the use of the mails will follow in the ordinary course of business or, at least, that such use could reasonably be foreseen. U.S. v. Ledesma, 632 F.2d 670, 675 (7th Cir. 1980). "To be part of the execution of the fraud . . . the use of the mails need not be an essential element of the scheme. It is sufficient for the mailing to be incident to an essential part of the scheme, or a step in the plot." Schmuck v. U.S., 489 U.S. 705, 710-11 (1989); U.S. v. Lack, 129 F.3d 403, 407 (7th Cir. 1997).
Decision
The evidence adduced at trial established the following: through her daily mail-sorting responsibilities, Franks acquired possession and control of numerous insurance checks payable to her employer, Dr. Foley. Without permission from Dr. Foley, Franks devised a scheme to defraud Dr. Foley by endorsing and depositing these checks into her personal accounts at KeyBank. Once deposited, the checks were sent via courier by KeyBank to the respective drawee banks for payment. This pattern continued for nearly one year until it came to light following Reedy's discovery of payment discrepancies in a patient file.
The Defendant has not attacked the factual basis of the mail fraud charge, only the legal sufficiency of the government's evidence to establish use of the mails sufficient to trigger application of the mail fraud statute. We find that the evidence adduced at trial supports the charge in this case and Defendant's guilt as charged. The essential goal of Franks' scheme was to acquire the actual monies reflected by the checks, not the physical checks themselves, which merely embodied promises to pay. Franks' deposits of the fraudulently acquired checks set in motion a process that required KeyBank to utilize its standard processes to make those funds available, which processes included the mailing of the checks and corresponding with the drawee banks. To bring the scheme to fruition, Franks had to present the checks to KeyBank for deposit, and the bank had to obtain proper authorization through its customary procedures to make the funds available. This use of the mails naturally and incidentally resulted from Franks' scheme to obtain the funds.
Moreover, the means by which Franks diverted the funds necessarily implicated the use of the mails. Franks presented the checks with improper endorsements for deposit into her personal accounts. Each of the misappropriated checks was handwritten or stamped "for deposit only." This endorsement did not render the checks bearer paper, "negotiable simply by delivering the instrument to a transferee." Black's Law Dictionary, 7th ed. The checks remained order paper, "payable to a specific payee or to any person that the payee designates." Id. This required the bank's evaluation of the endorsement before the transfer of funds was complete. Had Franks attempted to steal cash or property from her employer, she could have utilized an endorsement that made the proceeds payable to her immediately upon presentment at the bank. In that event, the plan would have come to fruition immediately upon Franks' acquisition of the stolen money. However, Franks' scheme relied on communication between the banks to award her control over the improperly acquired funds, a process Franks might reasonably have surmised, given her previous employment with KeyBank and her knowledge of standard operating procedures, includes the use of the mails. Regardless of Franks' knowledge or intent, it is clear that the use of the mails to complete this transaction was necessary and incidental to the plan as Franks devised it. Therefore, the evidence adduced relating to Franks' scheme satisfies all the elements of the mail fraud statute, including the third.
Conclusion
For the reasons discussed, based on the evidence adduced at trial, Defendant Franks is hereby adjudged guilty beyond a reasonable doubt of a violation of 18 U.S.C. § 1341, as charged in the indictment.
It is so ORDERED this day of January 2002.