United States v. Lloyd

• Decision Date: 04 December 2015
• Docket Number: 12–50526,Nos. 12–50499,12–50514,12–50509,12–50566.,12–50500,s. 12–50499
• Citation: 807 F.3d 1128
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. James LLOYD, aka James V. Lloyd, Jr., aka James Vernon Lloyd, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. James Lloyd, aka James V. Lloyd, Jr., aka James Vernon Lloyd, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Paul Baker, aka Darwin Stanton Baker, Jr., aka Paul D. Baker, aka Paul Douglas Baker, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. David Nelson, aka David Paul Nelson, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Albert Greenhouse, aka Albert Michael Greenhouse, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Robert Keskemety, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

807 F.3d 1128

UNITED STATES of America, Plaintiff–Appellee,

v.James LLOYD, aka James V. Lloyd, Jr., aka James Vernon Lloyd, Defendant–Appellant.

United States of America, Plaintiff–Appellee,

v.James Lloyd, aka James V. Lloyd, Jr., aka James Vernon Lloyd, Defendant–Appellant.

United States of America, Plaintiff–Appellee,

v.Paul Baker, aka Darwin Stanton Baker, Jr., aka Paul D. Baker, aka Paul Douglas Baker, Defendant–Appellant.

United States of America, Plaintiff–Appellee,

v.David Nelson, aka David Paul Nelson, Defendant–Appellant.

United States of America, Plaintiff–Appellee,

v.Albert Greenhouse, aka Albert Michael Greenhouse, Defendant–Appellant.

United States of America, Plaintiff–Appellee,

v.Robert Keskemety, Defendant–Appellant.

Nos. 12–50499

12–50500

12–50509

12–50514

12–50526

12–50566.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 8, 2014.

Filed Dec. 4, 2015.

Edward M. Robinson (argued), Law Office of Edward M. Robinson, Torrance, CA, for Defendant–Appellant James Lloyd.

John C. Lemon (argued), San Diego, CA, for Defendant–Appellant Paul Baker.

Sean K. Kennedy and Kathryn A. Young (argued), Deputy Federal Public Defenders, Los Angeles, CA, for Defendant–Appellant David Nelson.

Lawrence Jay Litman (argued), Los Angeles, CA, for Defendant–Appellant Albert Greenhouse.

Russell S. Babcock (argued), Law Offices of Russell S. Babcock, San Diego, CA, for Defendant–Appellant Robert Keskemety.

André Birotte, Jr., United States Attorney, Central District of California, Robert E. Dugdale, Chief, Criminal Division, Steven A. Cazares and Ellyn Marcus Linsday (argued), Assistant United States Attorneys, Los Angeles, CA, for Plaintiff–Appellee.

Appeal from the United States District Court for the Central District of California, John F. Walter, District Judge, Presiding. D.C. No. 2:11–cr–00542–JFW–1, D.C. No. 2:11–cr–00543–JFW–3, D.C. No. 2:11–cr–00543–JFW–4, D.C. No. 2:11–cr–00543–JFW–11, D.C. No. 2:11–cr–00543–JFW–7, D.C. No. 2:11–cr–00542–JFW–4.

Before: MARSHA S. BERZON and RICHARD R. CLIFTON, Circuit Judges and LEE H. ROSENTHAL,^* District Judge.

OPINION

ROSENTHAL, District Judge:

Five defendants appeal their convictions or sentences for selling unregistered securities. The defendants worked for telemarketing "boiler rooms" in California and Florida, soliciting investments in partnerships to finance the production and distribution of movies. The defendants promised potential investors that the investments would return swift and large profits, with little to no risk. Approximately 650 individuals—including unsophisticated people who could not afford the financial loss—invested over $23 million. Most of the investors lost it all.

These appeals arise from two indictments issued in the Central District of California on June 15, 2011. The indictment in United States v. Daniel Toll et al., No. 11–cr–543–JFW, charged James Lloyd, who managed a boiler room in Los Angeles, California; telemarketers Paul Baker, David Nelson, and Albert Greenhouse; and eight others, all of whom worked through a California boiler room to sell partnership units in three movies produced (or supposed to be produced) by Cinamour Entertainment, LLC. The indictment in United States v. James Lloyd, No. 11–cr–542–JFW, charged Lloyd, who left Cinamour to manage a different boiler room in California, and Robert Keskemety, who managed a Florida boiler room, along with seven others, for selling partnership units in two movies. These movies were produced by Q Media Assets LLC, a company owned by the same person who owned Cinamour. Both indictments charged conspiracy, mail fraud, wire fraud, and securities fraud between 2001 and 2009.

The two boiler room managers, James Lloyd and Robert Keskemety, were convicted after they pleaded guilty. They appeal only their sentences. Two Cinamour telemarketers working in California, David Nelson and Paul Baker, and Albert Greenhouse, a Cinamour telemarketer working in Florida, were tried together. Nelson and Baker appeal their convictions and sentences. The only issue in the Greenhouse appeal is the sentence. We have jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a).

The number of defendants, the lengthy period involved, and the type of conduct made this a difficult case for any trial court to resolve. The record shows that the district judge competently and fairly resolved many of the innumerable issues that arose in trial and at sentencing. The points on which we disagree with the district judge raise issues that are both complex and close.

James Lloyd pleaded guilty to two counts of wire fraud and Robert Keskemety to one count of mail fraud. They appeal their sentences. We affirm Lloyd's sentence, but we conclude that Keskemety's sentence for managing the Florida telemarketing boiler room improperly included fraud losses from the California boiler room that Lloyd managed. We vacate Keskemety's sentence and remand for resentencing.

David Nelson and Paul Baker appeal both the convictions and sentences entered after the jury convicted each of one count of conspiracy to commit mail and wire fraud and to offer and sell unregistered securities, two counts each of mail and wire fraud, and two counts of offering and selling unregistered securities. We reverse Nelson's conviction based on evidentiary rulings, vacate the sentence, and remand. We affirm Baker's conviction due to the overwhelming evidence against him, making the evidentiary errors harmless, but we vacate Baker's sentence and remand for resentencing because of an error in calculating the Guidelines sentence.

Finally, Albert Greenhouse appeals the sentence he received after the jury convicted him of two counts of offering and selling unregistered securities. We find no error, and we affirm.

BACKGROUND

Glen Hartford, a film producer, founded Cinamour in 2000 to make and distribute independent films, and served as its chief executive officer and majority shareholder. Hartford used telemarketing to solicit money from individual investors to finance three movies: Forbidden Warrior, From Mexico with Love, and Red Water 12. These three movies are the basis of the United States v. Toll indictment.

Cinamour began raising money for Forbidden Warrior in 2001 out of a telemarketing boiler room in Los Angeles, California. Lloyd and Baker were involved in the Forbidden Warrior fundraising. That movie was released in 2005 directly to video distribution and made about $500,000, a commercial failure of large proportions.

From 2004 to 2007, Cinamour used telemarketing to solicit purchases of partnership units to finance From Mexico With Love. Cinamour raised approximately $14.2 million from 445 investors nationwide. From Mexico With Love grossed about $800,000 from a very limited theatrical release. The investors received no return on the money they sent. Lloyd, Baker, and Greenhouse were involved in soliciting investments in From Mexico With Love.

In 2007, Cinamour began telemarketing sales of partnership units in Red Water. Cinamour raised approximately $2.8 million from approximately 100 victims nationwide but spent only $23,000 on making the movie. The investors lost everything. Baker and Nelson were involved in soliciting the investments in Red Water.

In 2009, after an undercover investigation, the FBI raided Cinamour's Los Angeles offices. Hartford committed suicide days after the raid.

The indictment in United States v. Lloyd arose from telemarketed investments in two movies written, directed, and produced by a former Central Intelligence Agency officer, Michael D. Sellers. Sellers retained Joel Lee Craft, Jr., founder and chief executive officer of American Information Strategies, Inc., to help raise capital for the films, Eye of the Dolphin and Way of the Dolphin. Sellers worked with Craft to set up telemarketing boiler rooms, hiring Keskemety in Florida, and later, Lloyd in California, to manage them.

In 2002, Sellers recruited Keskemety to establish and manage the Florida telemarketing office. The goal was to raise money for the two Dolphin movies. In 2004, Keskemety began soliciting investments for Eye of the Dolphin. Sellers asked Craft to introduce him to other potential boiler-room managers. Through Craft, Sellers met Lloyd and hired him in 2007 to move from managing the Cinamour telemarketing office in Los Angeles to managing an office in the same city to solicit investments in partnership units to finance Sellers's films. Keskemety and Lloyd hired and paid the other telemarketers to raise money for the Dolphin films.

When Lloyd began managing the Los Angeles boiler room for Sellers, he had been working for Cinamour for over four years soliciting money for Forbidden Warrior and From Mexico With Love. He brought the same marketing techniques to selling partnership units in Eye of the Dolphin and Way of the Dolphin. The California and Florida boiler rooms together raised $9.6 million from 264 investors for the two Dolphin movies. Both movies failed. The investors in the first movie, as a group, received only $370,656 of their initial investment. The investors in the second movie lost everything.

The boiler rooms were similar. Less experienced telemarketers served as "fronters," cold-calling potential investors from lists of leads and reading from scripts to pitch the investments. The scripts included assurances to prospective investors of quick and large profits with little to no risk. These promises, and the details supporting them, were false. If the cold-calls led to expressions of interest, "closers"—more experienced telemarketers—would follow up and try to get signed investment documents and a check to close the deal. "Reloaders" would induce some of those who had already invested to put in more.

Many of the defendants had multiple roles, but each of the appellants worked as closers some of the time. Lloyd helped close investments in Forbidden Warrior and From Mexico with Love. Baker helped close investments in Forbidden Warrior, From Mexico with Love, and Red Water....