U.S. v. Lewis

• Decision Date: 12 February 2010
• Docket Number: No. 08-1170.,No. 08-1171.,08-1170.,08-1171.
• Citation: 594 F.3d 1270
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Charles LEWIS, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. Norman Schmidt, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

594 F.3d 1270

UNITED STATES of America, Plaintiff-Appellee, v. Charles LEWIS, Defendant-Appellant.

United States of America, Plaintiff-Appellee, v. Norman Schmidt, Defendant-Appellant.

No. 08-1170.

No. 08-1171.

United States Court of Appeals, Tenth Circuit.

February 12, 2010.

Jonathan S. Willett, Denver, CO, for Defendant-Appellant Charles Lewis.

Peter R. Bornstein, Law Offices of Peter R. Bornstein, Denver, CO, (Keyonyu X. O'Connell, Denver, CO, with him on the briefs), for Defendant-Appellant Norman Schmidt.

Matthew T. Kirsch and James C. Murphy, Assistant United States Attorneys, (David M. Gaouette, United States Attorney, with them on the brief), Denver, CO, for Plaintiffs-Appellees.

Before HARTZ, BALDOCK, and TYMKOVICH, Circuit Judges.

HARTZ, Circuit Judge.

I. INTRODUCTION

Norman Schmidt and Charles Lewis conducted a Ponzi scheme through a number of ostensible investment companies (the "scheme companies"). Prospective investors were told that they would be participating in an exclusive program that purchased high-yield notes whose principal was guaranteed by reputable insurers. But their money was never used to purchase such notes. Rather, funds from new clients were used to pay the operators of the scheme and to pay off earlier investors. The scheme, which lasted from April 1999 until late 2004, resulted in estimated losses to investors of more than $40 million.

Schmidt, Lewis, and two codefendants were tried before a jury in the United States District Court for the District of Colorado. Trial began on April 4, 2007. Evidence was presented over the course of six weeks, and jury deliberations lasted two weeks. Schmidt was convicted on one count of conspiracy, five counts of mail fraud, six counts of wire fraud, twelve counts of securities fraud, and thirteen counts of money laundering (and acquitted on five counts). He was sentenced to 330 years' imprisonment. Lewis was convicted on one count of conspiracy, two counts of mail fraud, one count of wire fraud, five counts of securities fraud, and one count of money laundering (and acquitted on 12 counts), and was sentenced to 360 months' imprisonment. One codefendant was convicted on three counts and acquitted on 27; the other was convicted on three counts and acquitted on 14.

Schmidt and Lewis raise a number of issues on appeal. Schmidt contends (1) that there was insufficient evidence to sustain his convictions on four counts of wire fraud and one count of securities fraud; (2) that his sentence was procedurally and substantively unreasonable; and (3) that he was deprived of a fair trial by the district court's rulings (a) refusing to require the government to disclose matters necessary for the preparation and conduct of the defense (including boxes of bank records to be offered at trial, witness and exhibit lists, and a computer database used to prepare government exhibits), and (b) admitting hearsay statements by alleged coconspirators. Lewis raises one issue also raised by Schmidt: (4) that the district court improperly admitted coconspirator hearsay. He further argues (5) that the jury instructions on the conspiracy charge constructively amended the indictment to state a charge of aiding and abetting a conspiracy; (6) that the district court improperly denied his request for an evidentiary hearing under Franks v. Delaware, 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978), to show that the affidavit supporting a warrant to search an office contained false information; and (7) that at sentencing, the district court (a) improperly calculated his offense level under the United States Sentencing Guidelines and (b) improperly imposed consecutive sentences on several counts.

We reject all the contentions by Schmidt and Lewis, save one. (1) We agree with Schmidt that there was insufficient evidence to sustain his convictions on three counts of wire fraud and one count of securities fraud based on sales to investors solicited by Rebecca Taylor, an agent of a scheme company. The government concedes that it had no evidence that Taylor knew that her sales pitch was fraudulent, and it has failed to point to any evidence supporting the theory that Schmidt caused Taylor to make any of her false statements. We therefore reverse those convictions and remand to the district court to vacate the convictions and the sentences imposed on those counts. We affirm, however, Schmidt's conviction on the remaining challenged wire-fraud count; there was sufficient evidence of guilt even though the victim did not testify. (2) The district court properly calculated Schmidt's guidelines sentencing range and he has not overcome the presumption of reasonableness of his within-guidelines 330-year sentence (which is reduced to 310 years by our setting aside his convictions on four counts). (3)(a) Schmidt was not entitled to any of the disclosures he sought, and he has not shown any prejudice from nondisclosure. (3)(b), (4) Neither defendant has pointed to the admission at trial of any inadmissible hearsay. (5) The aiding-and-abetting instruction of which Lewis complains did not constructively amend the indictment because an indictment need not charge aiding and abetting in addition to the substantive offense. (6) Lewis was not entitled to a Franks hearing because he did not allege that the affiant lied in the search-warrant affidavit. And (7) Lewis has not demonstrated that his offense level was improperly calculated or that consecutive sentences were improper.

II. DISCUSSION

A. Schmidt's Issues

1. Insufficiency of the Evidence

Schmidt challenges the sufficiency of the evidence with respect to three counts of wire fraud (counts 12, 13, and 14) and two counts of securities fraud (counts 18 and 20). Wire fraud requires (1) a scheme to defraud; (2) intent to defraud; and (3) use of interstate wire or radio communications to execute the scheme. See 18 U.S.C. § 1343; United States v. Welch, 327 F.3d 1081, 1104 (10th Cir.2003). Securities fraud requires (1) fraudulent conduct (2) in connection with the offer or sale of any security (3) by the use of any means or instruments of transportation or communication in interstate commerce. See 15 U.S.C. § 77q(a)(1); C.E. Carlson, Inc. v. SEC, 859 F.2d 1429, 1433 (10th Cir.1988). We review the sufficiency of the evidence de novo to assess whether a reasonable jury, viewing the evidence in the light most favorable to the government, could have found Schmidt guilty beyond a reasonable doubt. See United States v. Baum, 555 F.3d 1129, 1131 (10th Cir.2009).

We first address the three counts of wire fraud and one count of securities fraud (count 18) based on transactions with two victims whose investments were solicited by Rebecca Taylor, apparently an agent of Reserve Foundation Trust (RFT), one of the scheme companies. Taylor gave false information to both investors. The government does not contend, however, that Taylor knew that her representations to the investors were false, or even that she has any criminal culpability for her conduct. Because Taylor did not herself act with criminal intent, Schmidt could not be liable as one who aided and abetted Taylor. See United States v. Langston, 970 F.2d 692, 705 n. 12 (10th Cir.1992) ("[A]s a prerequisite to aiding and abetting the government is required to prove that someone has committed the underlying substantive offense." (internal quotation marks omitted)). And the government does not contend that Schmidt conspired with her. Rather, its sole theory is that Schmidt is liable under 18 U.S.C. § 2(b), which states: "Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal." In other words, the government contends that Schmidt is liable because he caused Taylor to make her false statements, even though she may not have known that they were false. See United States v. McGee, 291 F.3d 1224, 1226-27 (10th Cir.2002) (discussing 18 U.S.C. § 2(b)).

The problem for the government is that it has failed to point to evidence of such causation. Its appellate brief relies exclusively on the testimony of the two investors. They said that they had thought that Schmidt played an important leadership role within RFT and that they attempted to contact Schmidt after they became concerned about their investments. But the government does not cite any evidence that Schmidt knew that Taylor was making false statements to investors, much less that he caused her to make such statements. Although there may be such evidence in the record (for example, evidence regarding how sales personnel were trained), it is not this court's duty to scour without guidance a voluminous record for evidence supporting the government's theory. Cf. Baum, 555 F.3d at 1132 (when an argument would require appellate court "to scan volumes aimlessly in a search for what was established at trial, [i]t may well be within our power as a court to refuse to consider [the] argument" (citation and internal quotation marks omitted)). Accordingly, we reverse Mr. Schmidt's convictions on counts 12, 13, 14, and 18.

Schmidt also contends that there was insufficient evidence to support his conviction on count 20—a charge of securities fraud with respect to an investment by Shirley Lehr. His opening brief on appeal devotes one sentence to his substantive argument: "Because Lehr did not testify at trial, there was no evidence presented that there was fraudulent conduct in connection with her investment." Schmidt Br. at 60-61. But Lehr's investment file was introduced as evidence at trial. And it suffices to show that she was deceived regarding her investment. We are aware of no doctrine requiring that fraud be proved by testimony of the victim. We reject Schmidt's argument that the evidence cannot sustain his conviction on count 20.

2. Schmidt's 330-year Sentence

Schmidt received an unusually long sentence of 330 years' imprisonment. He...