United States v. Wayne Stephens

Wayne Stephens was employed as a manager in a technical support unit for Accenture's New York office when he repeatedly used an "add to pay" function on his time and expense reports to obtain a total of approximately $67,395 in unauthorized cash advances for personal use. That conduct resulted in his criminal conviction for wire fraud in violation of 18 U.S.C. § 1343.

In his position at Accenture, Stephens was required to use the computer program called Automatic Remote Time and Expense System (ARTES) to file a bi-weekly time and expense report (hereinafter "expense report") that was used in calculating his paycheck. Through ARTES, employees would input information regarding expenses incurred, and Accenture would use that information to bill the client and to reimburse the employee in the paycheck. Employees could request reimbursement for business-related expenses by filling in the fields labeled "expenses without receipt," "expenses with receipt," and "business meals." In addition, the form included a "add to pay/deduct from pay" line which allowed employees to add to or deduct from their paychecks. The "deduct from pay" line could be used for certain personal expenses, such as charges incurred by employees as a result of personal telephone calls or use of a concierge service that Accenture operated for its employees. The proper use of the "add to" function was at issue in the trial. Some testimony indicated that the "add to" function was to be used only for business-related expenses such as expenses related to international assignments or employee relocations. Stephens, on the other hand, argued that there was no policy related to the use of that function, and that it could be used for personal expenses. Prior to January 2000, Accenture's written Policy 526 stated that "[c]ash advances are not provided via time reports nor through petty cash in the offices." In January 2000, however, that policy was replaced by Policy 63.044, which did not contain that sentence. Policy 526 was in place at the time Stephens was hired, but Policy 63.044 had subsumed it by the time of the criminal actions. Therefore, during the time period of the conduct at issue here, Accenture did not have a written policy regarding the availability of cash advances through the time and expense reports. Accenture's Policy 63.044 did expressly allow the use of corporate credit cards for cash advances or for personal expenses, but further declared that Accenture had no liability for the balance on the accounts and that employees were required to directly pay the entire balance on their monthly statements.

Once an employee completed the expense report, it was sent electronically to Accenture's processing center and its payroll department, where the employee's check was automatically generated based upon that information and deposited into the employee's bank account. Approximately 5% of the expense reports were audited after they were submitted. In addition, the expense reports contained a field for the name of the employee's supervisor, and a copy of the expense report was automatically sent to that designated supervisor upon submission. The supervisor could also access a supervisee's expense report by using the "auditor's view" of the ARTES program and typing in the supervisee's identification number.

When Stephens was hired in May 1999, his supervisor was Sandra Lieb-Gieger. Lieb-Gieger required Stephens to submit his expense report to her the day before it was due. She would then review it and once approved, would personally submit it to the processing center. While Lieb-Gieger was his supervisor, Stephens often recorded business expenses, but never sought a cash advance using the "add to" function. He also consistently entered Lieb-Gieger's name in the reviewer field. Beginning in March 2000, Neil Penney became Stephens' supervisor. Penney did not preapprove expense reports prior to submission to the processing department. Instead, Penney allowed Stephens to submit the expense reports directly to the processing department, but required Stephens to e-mail a copy to him. Penney testified, however, that he did not check those expense reports and did not notice when his supervisees failed to e-mail copies to him.

In March 2000, shortly after Penney became his supervisor, Stephens submitted his expense report and e-mailed a copy to Penney. Stephens did not request a cash advance through the "add to" function on that expense report. Beginning on April 30, 2000, however, Stephens began utilizing the "add to" function to secure cash advances. His April 30 expense report requested a cash advance in the amount of $7,800. Stephens did not include Penney's name in the reviewer field of that expense report, instead designating himself as his own reviewer, and he did not e-mail a copy to Penney. He also requested reimbursement for business expenses in the amount of $78.00. The government argued at trial that Stephens used the $7,800 figure in the "add to" function because, if confronted, he could argue that it reflected his business expenses of $78.00 and was a mistake in the placement of the decimal point.

Stephens continued that use of the "add to" function for the next six expense reports. On each of six expense reports between April 30 and July 31, 2000, Stephens requested cash advances in amounts between $9,800 and $9,985, increasing his cash advance yield to $67,395. None of those reports were reviewed by Penney because Stephens did not e-mail a copy to Penney and did not include Penney's name in the reviewer field, thus bypassing the automatic sending of the report to Penney.

In his August 15, 2000, expense report, Stephens deviated from his previous pattern of keeping his requests slightly under the $10,000 mark. Instead, he requested a cash advance of $22,980. That request was noticed by Accenture's audit team, and Stephens was fired on August 23, 2000 based on unauthorized cash advances.

Stephens was subsequently convicted of wire fraud and sentenced to 21 months' imprisonment, 2 years supervised release, and $50,000 in restitution. He appeals that conviction, alleging that the evidence was insufficient to support the jury verdict and that the jury selection process violated the Equal Protection Clause.

* We turn first to Stephens' challenge to the sufficiency of the evidence. In considering this claim, we consider the evidence in the light most favorable to the government, making all inferences in its favor, and must affirm if a rational trier of fact could have found all the elements of the offense beyond a reasonable doubt. United States v. Owens, 301 F.3d 521, 527 (7th Cir.2002); United States v. Paneras, 222 F.3d 406, 410 (7th Cir.2000). In order to convict Stephens of wire fraud under 18 U.S.C. § 1341, the jury had to find that: (1) there was a scheme to defraud; (2) wires were used in furtherance on the scheme; and (3) Stephens participated in the scheme with the intent to defraud. Owens, 301 F.3d at 528. Stephens contends that the jury could not rationally find either a scheme to defraud or the intent to defraud. Instead, Stephens contends that the evidence at best establishes simple theft. He argues that the government failed to demonstrate that Accenture's policy expressly prohibited Stephens from making requests for personal cash advances. Furthermore, he asserts that the government failed to establish that he made affirmative misrepresentations or misleading statements when seeking the cash advances or that he engaged in elaborate efforts to conceal his cash requests.

In determining whether conduct evinced a scheme to defraud, the Supreme Court has noted that the words "to defraud" in the mail fraud statute "refer `to wronging one in his property rights by dishonest methods or schemes,' and `usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.'" McNally v. United States, 483 U.S. 350, 358, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), quoting Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 68 L.Ed. 968 (1924); United States v. Lack, 129 F.3d 403, 406 (7th Cir.1997); see also United States v. Wingate, 128 F.3d 1157, 1162 n. 3 (7th Cir.1997) ("Cases construing the mail fraud statute are equally applicable to the wire fraud statute."). We have previously held that "a necessary element of a scheme to defraud is the making of a false statement or material misrepresentation, or the concealment of a material fact." Williams v. Aztar Indiana Gaming Corp., 351 F.3d 294, 299 (7th Cir.2003). We have held that the concept includes both statements that the defendant knows to be false, as well as a "half truth" that the defendant knows to be misleading and which the defendant expects another to act upon to his detriment and the defendant's benefit. Emery v. American General Finance, Inc., 71 F.3d 1343, 1346 (7th Cir.1995). In Emery, we further noted that "[a] half truth, or what is usually the same thing a misleading omission, is actionable as fraud ... if it is intended to induce a false belief and resulting action to the advantage of the misleader and the disadvantage of the misled." Id. at 1348. The mere failure to disclose information will not always constitute fraud, but an omission accompanied by acts of concealment or affirmative misrepresentations can constitute fraud.

The government presented sufficient evidence for a rational jury to find a scheme to defraud. Stephens utilized the cash advance field in his expense report although the money was not sought for any purpose related to work. A jury could find that the request for funds on that expense report carried the implied representation that it was for purposes related to work. Moreover, even if a jury were inclined to believe Stephens that he thought the "add to" line could be used to receive cash advances that he could subsequently repay using the "deduct from" line, a jury could find that Stephens' actions were inconsistent with that use of the "add to" option. The sheer frequency of his requests, along with the increasingly large amounts requested, belie any intention of repaying the funds and are inconsistent with what an employee could reasonably believe an employer would allow. Accenture allowed the use of credit cards for cash advances, but held the employee responsible for clearing the balances on a monthly basis. Given those conditions on the use of the credit card, the contention that Stephens' actions were a proper use of the "add to" function need not be credited. Accordingly, a jury could find that Stephens used that function in a improper manner to obtain corporate funds for personal use.

Moreover, a jury could find that Stephens engaged in a number of actions to conceal his acquisition of the cash. Accenture maintained a system of supervisor review to ensure that only authorized expenses were allowed. When Lieb-Gieger was Stephens' supervisor, she reviewed his expense reports prior to submission, and Stephens never attempted to seek cash advances using the "add to" function. He also did not do so in his first expense report under his new supervisor, Penney. With his second expense report under Penney's supervision, Stephens did not use the "add to" function, but included his own name rather than Penney's in the reviewer field and did not forward a copy of the report to Penney via e-mail. Only when those actions went unchallenged, indicating that his expense reports were not being monitored, did Stephens proceed to use the "add to" line to acquire cash. Even then, he structured his first request in a manner to avoid suspicion, seeking $7,800 under the "add to" function while seeking $78.00 in payment for proper business expenses. A jury could find that the amounts were calculated to provide him with a plausible explanation if the "add to" request was noticed, in that he could claim that it merely reflected the $78.00 business expenses and he misplaced the decimal point. When that request was successful, Stephens increased the amount of the requests, but kept the amount just under the $10,000 amount that could possibly trigger an audit — another indication that he was attempting to avoid detection.

Stephens nevertheless argues that he made no misrepresentations or misleading omissions, and that his actions therefore constitutes simple thefts at worst. A similar argument was made, unsuccessfully, in United States v. Lack, 129 F.3d 403, 406 (7th Cir.1997), a case which involved mail fraud. Lack was employed as a materials manager by Dairyland Power Cooperative ("Dairyland"), responsible for the sale of scrap or salvage items on behalf of Dairyland. Id. at 404. In that capacity, he devised a scheme to steal money from Dairyland. He accomplished this by opening a checking account in the name of Darrell H. Lack, d/b/a Dairyland Power Conversion, division of Midwest Computer. Id. at 404-05. Bank statements were mailed to Lack providing a record of all action on that account. Id. at 405. When Lack sold a scrap or salvage item to a buyer, he would deposit the check in that checking account rather than forwarding it to his employer. Id. Occasionally, he would forward a check in a smaller amount to his employer Dairyland, with the original purchaser listed as remittur. Id. That check would either be delivered or mailed to Dairyland. Id. Lack argued that his actions constituted a series of simple thefts rather than a scheme to defraud, because he merely took the funds that were meant for Dairyland, but did not do so by means of deception. Id. at 406. We rejected that argument.

We held that the pattern of deceit and the use of false pretenses by Lack constituted a scheme to defraud. Id. Essentially, Lack obtained funds meant for one purpose (implicitly at least representing to the buyers that they were paying the proper party for the purchases), converted them to his own personal use, and then engaged in conduct designed to deceive his employer so as to prevent the employer from obtaining knowledge of his improper use of the money. Id. That is similar to the scheme in the present case. Stephens obtained funds through the "add to" provision meant to clear an existing personal expense balance that Accenture owed employees. He then converted them to his own personal use even though he knew Accenture did not owe him any money and that his use was unrelated to his employment. In order to evade detection, he misrepresented the name of his reviewer on the form, failed to send the copy to his supervisor as required, and structured his requests and his other expense requests so as to avoid an audit. That evinces the type of pattern of deceit that properly demonstrates a scheme to defraud.

Stephens also contends that the jury lacked sufficient evidence to find an intent to defraud. The intent requirement targets "a willful act by the defendant with the specific intent to deceive or cheat, usually for the purpose of getting financial gain for one's self or causing financial loss to another." Owens, 301 F.3d at 528. Because direct evidence of fraudulent intent is rare, "`specific intent to defraud may be established by circumstantial evidence and by inferences drawn from examining the scheme itself that demonstrate that the scheme was reasonably calculated to deceive persons of ordinary prudence and comprehension.'" Id., quoting Paneras, 222 F.3d at 410. Examination of the scheme in this case provides ample evidence that it was reasonably calculated to deceive. Stephens began his "add to" request only after changing supervisors and ascertaining that his new supervisor was not monitoring the expense reports. He structured his requests so as to avoid detection, beginning with an amount that resembled his proper business expenses so as to provide him with an explanation if it were detected. After that request was successful, he continued the requests, keeping them near, but not over, the $10,000 mark that could plausibly trigger an audit. In each case, he prevented detection by failing to correctly identify his reviewer on the form and by failing to e-mail a copy to his supervisor. Those actions were reasonably calculated to deceive his employer as to the unauthorized cash payments he was receiving. The evidence was sufficient to support the jury verdict here.

Stephens next argues that even if he is not entitled to judgment of acquittal on the sufficiency of the evidence, he nonetheless should receive a new trial because the jury selection was unconstitutional. Specifically, Stephens contends that the government exercised its peremptory challenges in a discriminatory manner in violation of the Equal Protection Clause.

In Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712, 90 L.Ed.2d 69 (1986), the Supreme Court reaffirmed the principle that the Equal Protection Clause prohibits a prosecutor from using a peremptory challenge to strike a prospective juror based on race. The Court recognized that the harm inflicted by such an action extends beyond the defendant to the entire community, and undermines public confidence in the fairness of our justice system. Id. at 87, 106 S.Ct. 1712. Recently, the Supreme Court again catalogued the harms inherent in the discriminatory use of peremptory challenges. The Court noted that the constitutional interests Batson sought to vindicate "are not limited to the rights possessed by the defendant on trial, nor to those citizens who desire to participate in the administration of the law, as jurors," but extend to the entire community, undermining public confidence in the fairness of our system of justice. Johnson v. California, ___ U.S. ___, 125 S.Ct. 2410, 2418, 162 L.Ed.2d 129 (2005).

In an effort to identify and to prevent such harmful practices, Batson set forth the test for analyzing such claims: first, the defendant must establish a prima facie case of racial discrimination by showing facts and circumstances that raise an inference of discrimination, 476 U.S. at 93-94, 106 S.Ct. 1712; second, once the prima facie case is established, the government must offer a race-neutral explanation for the challenged strike, id. at 97, 106 S.Ct. 1712; and third, the defendant may then offer additional evidence to demonstrate that the proffered justification was pretextual or to otherwise establish that the peremptory strike was motivated by a discriminatory purpose, id. at 98, 106 S.Ct. 1712.

The only issue in this appeal is whether Stephens set forth a prima facie case of discrimination. That issue comes to us via a circuitous path not typically seen. During jury selection, the Batson issue was never raised by the parties. It was in fact flagged in the first instance by the district court after the jury returned the guilty verdict. The court at that time expressed its concerns that the government's peremptory challenges were disproportionately exercised against prospective non-white jurors, a fact that the court had noticed during jury selection but had not addressed because defense counsel had failed to object. Upon reflection, the court regretted its failure to confront the Batson issue, determining that it should have required the government to provide explanations for its challenges. The court ultimately concluded that the time for filing a motion for a new trial had elapsed, and therefore that it was without authority to order a new trial. Accordingly, it concluded that it could not address the Batson issue, but it informed Stephens of legal avenues still available to pursue the challenge.

Because the issue was not raised at trial by Stephens, the government could have argued before this court that it was forfeited. Of course, the government was well aware that a forfeiture on direct appeal would merely delay consideration of the issue. The district court had already informed the defendant of his right to pursue the Batson issue in the context of a post-conviction motion under § 2255. Rather than argue forfeiture and proceed along that path, the government instead informed both Stephens and this court that it would affirmatively waive any forfeiture argument it may have on this issue for purposes of this appeal, and the issue was briefed to this court on the merits.

The dissent protests our consideration of the Batson issue now despite the government's waiver, concluding that a first-time consideration at this late stage is particularly unwise. The dissent argues that the deference due a district court judge has little force when that judge fails to act contemporaneously, and decriers the district court judge's consideration of a jury selection matter for which he could provide no remedy.

We note initially that although deference is afforded fact findings in a Batson challenge, the prima facie determination is subject to de novo review. United States v. Jordan, 223 F.3d 676, 686 (7th Cir.2000). Moreover, the record is quite clear that the district judge raised the Batson issue in order to provide a remedy, and that the court in fact believed — even at the time of jury selection — that the use of peremptory challenges by the prosecutor raised at least an inference of discrimination under Batson. Although the trial court raised the Batson issue only after the guilty verdict, the court then revealed that it perceived a Batson problem at the time of voir dire. At that time, the court did not sua sponte raise the issue because defense counsel had not objected. The court later concluded that it had erred in failing to raise Batson sua sponte, because the court, not just the defendant, has an interest in a trial process free of discrimination. The court concluded that the prima facie case had been met.

Because the court noted the problem at the time of voir dire, we have the court's fresh recollection of the manner in which those peremptories were used. The court in fact was so troubled by what it perceived at that time to be a discriminatory use in the voir dire, that it raised the issue on its own after the verdict. That commitment by the court to a fair trial process should be commended. Only after the government objected to the court's Batson ruling did the district court judge determine that it could not in fact remedy the situation because the time period for filing a motion for a new trial had already elapsed and thus the court lacked the authority to order a new trial. Therefore, the district court judge did not, as the dissent implies, raise an issue for which it knew it could not provide a remedy. It goes without saying that a defendant risks forfeiting an issue by failing to timely raise it, and that a court should address a Batson issue pre-trial. But that gets us nowhere. Although not the preferred route by any measure, this is the situation we must face. The issue was noted but not addressed by the court pre-trial, and the government has affirmatively waived its forfeiture argument on appeal. The issue therefore is properly before us now. It will be no fresher in a post-conviction proceeding.

The Supreme Court in Batson held that in order to establish a prima facie case, the defendant must show that he is a member of a cognizable group, that the prosecutor has exercised peremptory challenges to remove venire members of his race, and that the relevant circumstances raise an inference that the prosecutor excluded venire members. Id. at 96, 106 S.Ct. 1712. That test was expanded in Powers v. Ohio, 499 U.S. 400, 402, 415, 111 S.Ct. 1364, 113 L.Ed.2d 411 (1991), in which the Court held that a defendant may object to race-based peremptory challenges whether or not the excluded jurors are the same race as the defendant.

It has further been clarified by Supreme Court recently in Johnson v. California, ___ U.S. ___, 125 S.Ct. 2410, 162 L.Ed.2d 129 (2005). In Johnson, the Court considered the showing required to establish a prima facie case. The California Supreme Court had held that an objector could not establish a prima facie case by presenting merely some evidence permitting the inference of discrimination, but instead must provide strong evidence that makes discriminatory intent more likely than not if the peremptory challenges are not explained. Id. at 2415. It therefore held that the prima facie showing was not met in that case, where the Batson showing consisted primarily of the statistical disparity of peremptory challenges between African-Americans and others. Id. The Supreme Court granted certiorari to determine whether Batson permits a court to require, at the prima facie stage, that the objector show it is more likely than not that the peremptory challenges, if unexplained, were based on impermissible group bias. The government makes the same argument in this appeal, contending that a prima facie case is established only if Stephens presented evidence establishing that discrimination was more likely than not. In Johnson, however, the Court held that such a requirement was inappropriate at the prima facie stage:

[I]n describing the burden-shifting framework, we assumed in Batson that the trial judge would have the benefit of all relevant circumstances, including the prosecutor's explanation, before deciding whether it was more likely than not that the challenge was improperly motivated. We did not intend the first step to be so onerous that a defendant would have to persuade the judge — on the basis of all the facts, some of which are impossible for the defendant to know with certainty — that the challenge was more likely than not the product of purposeful discrimination. Instead, a defendant satisfies the requirements of Batson's first step by producing evidence sufficient to permit the trial judge to draw an inference that discrimination has occurred.

Id. at 2417. The Court further clarified that the first two steps of Batson govern the production of evidence which allows the trial court, at the third step, to determine the persuasiveness of the defendant's constitutional claim. Id. at 2417-18. An attempt to transport that final persuasiveness inquiry into the prima facie stage was therefore improper. Id. The California Supreme Court had acknowledged that it certainly appeared suspicious that all three African-American prospective jurors were removed from the jury by the prosecutor's peremptory challenges. That suspicion constituted an inference that discrimination may have occurred, thus establishing a prima facie case under Batson. Id. at 2419. Therefore, the Court clarified in Johnson that the burden at the prima facie stage is low, requiring only circumstances raising a suspicion that discrimination occurred, even where those circumstances are insufficient to indicate that it is more likely than not that the challenges were used to discriminate.

Among the circumstances relevant in making that determination, a pattern of strikes against jurors of a particular race may give rise to an inference of discrimination. Batson, 476 U.S. at 97, 106 S.Ct. 1712.1 Such a pattern can be evident where a prosecutor uses peremptory challenges to eliminate all, or nearly all, members of a particular race. In determining whether a pattern is present, courts have also considered whether a disproportionate number of peremptory challenges were exercised to exclude members of a particular cognizable group. Miller-El v. Cockrell, 537 U.S. 322, 331, 342, 123 S.Ct. 1029, 154 L.Ed.2d 931 (2003); Overton v. Newton, 295 F.3d 270, 279 (2d Cir.2002); Fernandez v. Roe, 286 F.3d 1073, 1078 (9th Cir.2002); Coulter v. Gilmore, 155 F.3d 912, 918-19 (7th Cir.1998).2 The strikes in Stephens' case evidence a pattern that gives rise to an inference of discrimination.

After prospective jurors were excused for hardship or cause, the venire consisted of prospective jurors of the following races: 24 Caucasians, 3 African-Americans, 4 Hispanic-Americans, and 1 Asian-American. The government exercised 6 of the 7 peremptory challenges available to it. Of those challenges, none were exercised against Caucasian prospective jurors. The government used six peremptory challenges to eliminate 2 African-Americans, 3 Hispanic-Americans, and the sole Asian-American. The defendant excluded the remaining African-American prospective juror, and the jury ultimately was comprised of 11 Caucasians and one Hispanic-American, with two Caucasian alternate jurors.

We consider first the use of two peremptory strikes against African-American venire members. With those challenges the government eliminated 66% of the African-American prospective jurors. Moreover, with those challenges, the prosecutor used 33% of its strikes against African-Americans, who comprised less than 10% of the venire. We are cognizant that with the small numbers involved, a pattern is difficult to detect, and we need not determine whether those strikes alone would demonstrate a prima facie case. Instead, we follow the Supreme Court's command to consider "all relevant circumstances" in determining whether an inference of discrimination is met.

One such relevant circumstance is the prosecutor's use of the remaining peremptory challenges. See, e.g., Fernandez v. Roe, 286 F.3d 1073, 1079 (9th Cir.2002) (considering strikes against African-American prospective jurors in context of previous disproportionate strikes against Hispanic-American venire members). In this case, all of the six peremptory challenges were used against members of minority racial groups. Three challenges were used against Hispanic-Americans, eliminating 75% of the Hispanic-Americans on the venire. That also represented a use disproportionate to the representation on the venire, with the government using 50% of its challenges to eliminate members of a racial group that comprised approximately 13% of the venire. Finally, the prosecutor struck the sole Asian-American venire member. Even more compelling, however, is that the prosecutor used no challenges at all against prospective white jurors, which meant that the government used 0% of its challenges on the group that comprised 75% of the venire at the time the peremptories were exercised. As the Supreme Court has said, "[h]appenstance is unlikely to produce this disparity." Miller-El v. Cockrell, 537 U.S. 322, 342, 123 S.Ct. 1029, 154 L.Ed.2d