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United States v. Klein

decided: April 30, 1975.

THE UNITED STATES OF AMERICA, APPELLEE,
v.
MERRILL H. KLEIN A/K/A "MORRIE", ELDON G. STUDEBAKER, FRANK GRAZIER A/K/A "BUNNY", AND CARL LUICK CARL LUICK, APPELLANT



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA Criminal No. 73-277.

Van Dusen, Gibbons and Hunter, Circuit Judges.

Author: Hunter

Opinion OF THE COURT

HUNTER, Circuit Judge:

Appellant, Carl Luick, and three others were indicted for mail fraud, 18 U.S.C. § 1341,*fn1 and for conspiracy to commit mail fraud, 18 U.S.C. § 371.*fn2 Luick was convicted on all counts.*fn3 On this appeal we must decide whether there was sufficient evidence to show that Luick knew he was dealing with a conspiracy to defraud several insurance companies of the proceeds owing on fire insurance policies. Because we believe there was insufficient evidence of that knowledge, we reverse.

I.

The alleged conspiracy revolved around a scheme to destroy by fire a debt-ridden hotel for the proceeds of several fire insurance policies. During the summer of 1968, two of the hotel owners contacted one Karsnak about their continuing financial difficulties in managing the hotel. Karsnak, an unindicted co-conspirator who testified as the government's chief witness, introduced the owners to codefendant, Merrill Klein. The evidence shows that it was Klein who suggested arson as a solution to the hotel owners' financial difficulties. After negotiations in which Karsnak acted as intermediary between the owners and Klein, Klein was hired to destroy the hotel for $60,000.

On March 1, 1969 the hotel was partially destroyed by fire. The representative of the insurance companies, Mr. Roy Cook, suspected that arson had been the cause of the fire because large plastic bags of gasoline were found in the remains. There was no indication that the owners had been involved, however, so the insurance representative entered negotiations to settle on the policies.

The evidence shows that appellant Luick's role in the proceedings began only after the fire had taken place. Luick, a public fire insurance adjuster, was hired by Karsnak at a percentage-of-settlement fee to prepare proof of loss claims for the owners. Luick submitted proof of loss forms to Cook, the insurance representative, and after several adjustments, a $310,000 settlement for the hotel owners was reached.

Two of the hotel owners, with Luick and Klein, were indicted for conspiracy to defraud the insurance companies by mail and for twenty substantive counts of mail fraud. After a joint trial by jury, Klein and Luick were found guilty on all counts and the two hotel owners were acquitted.

II.

To support a conspiracy conviction, the government must show both an agreement and a specific intent to achieve some unlawful goal. United States v. DeCavalcante, 440 F.2d 1264, 1275 (3d Cir., 1971); United States v. Borelli, 336 F.2d 376, 384 (2nd Cir., 1964). We do not dispute that a party who associates himself with an ongoing conspiracy may become a party to that agreement, either expressly by agreement or implicitly by acts done in furtherance of that conspiracy. Direct Sales v. United States, 319 U.S. 703, 709, 87 L. Ed. 1674, 63 S. Ct. 1265 (1943); United States v. Lester, 282 F.2d 750, 753 (3d Cir., 1960). At a minimum, however, it must be shown that such a person has knowledge of the conspiracy's illicit purpose when he performs acts which further that illicit purpose. Direct Sales, supra, United States v. Salerno, 485 F.2d 260, 263 (3d Cir., 1973); United States v. American Radiator & Standard Sanitary Corporation, 433 F.2d 174 (3d Cir., 1970).*fn3a By acting in furtherance of the co-conspirators' goals with knowledge of the improper purpose, the jury can reasonably infer that the new member has achieved a tacit agreement with members of the ongoing conspiracy. Without knowledge of some improper purpose, the agreement, which is the heart of any conspiracy indictment, cannot be inferred from acts, even acts which further the purpose of the conspiracy. United States v. Kates, 508 F.2d 308 (3d Cir., 1975).

Knowledge of the illicit purpose will also serve as the foundation for the required proof of specific intent. According to the Supreme Court in Direct Sales, supra, the intent requirement in conspiracy,

In judging whether knowledge or specific intent have been shown in this case, we must, after a jury verdict of guilty, "view the evidence in the light most favorable to the prosecution." United States v. DeCavalcante, 440 F.2d at 1273. Glasser v. United States, 315 U.S. 60, 80, 86 L. Ed. 680, 62 S. Ct. 457 (1942). Circumstantial evidence is clearly proper to show ...


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