U.S. v. Taylor, 86-2836

• Citation: 832 F.2d 1187
• Decision Date: 04 November 1987
• Docket Number: No. 86-2836,86-2836
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Delbert TAYLOR, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1187

832 F.2d 1187

UNITED STATES of America, Plaintiff-Appellee, v. Delbert TAYLOR, Defendant-Appellant.

No. 86-2836.

United States Court of Appeals, Tenth Circuit.

Nov. 4, 1987.

John Walsh, Salt Lake City, Utah, for defendant-appellant.

Tena Campbell, Asst. U.S. Atty., Salt Lake City, Utah (Brent D. Ward, U.S. Atty., Salt Lake City, Utah, was also on the brief), for plaintiff-appellee.

Before HOLLOWAY, Chief Judge, BARRETT, Circuit Judge, and CONWAY, District Judge ^*.

HOLLOWAY, Chief Judge.

The defendant was convicted on three counts of mail fraud and three counts of interstate transportation of moneys obtained by fraud in violation of 18 U.S.C. sections 1341 and 2314 (1982). On appeal, he argues (1) that there was insufficient evidence to support the jury's verdict; and (2) that he was deprived of effective assistance of counsel in violation of the Sixth Amendment. We affirm.

I. FACTS

Viewing the evidence in the light most favorable to the government, as we must at this point, it tends to show these facts:

In December 1983 the defendant, Delbert Taylor ("Taylor"), was approached by Connie Lynn Dyson ("Dyson") about providing financing for a multi-level marketing program to distribute vitamins. Dyson, a marketing consultant with a background in health and nutrition, had developed the marketing program in 1981, but had been unable to locate sufficient financial backing to implement it. A friend suggested that she talk to Taylor.

Between December 1983 and March 1984, Dyson met with Taylor, as well as several of his associates, on numerous occasions. At these meetings, Taylor portrayed himself as an expert at acquiring financing for investment concepts. He told Dyson "that he had raised a lot of money before and that he had a group of investors that would invest in ideas that he came up with." III R. 95. Moreover, he claimed to have a special expertise in selling "products that could be sold on television with 800 numbers where you can call in and buy products over the television." III R. 95-96. In particular, Taylor spoke glowingly about the success of a product he was marketing at that time known as "Beauty Lash." III R. 97.

Although Taylor was receptive to Dyson's proposal, he indicated that he and his associates might be interested in acquiring the proposed company outright rather than merely providing the financing for it. As a consequence, the agreement that Dyson and Taylor eventually reached provided that Taylor and his associates would own and manage the fledgling company, christened Gold 'N Health, while Dyson would work for the company as a full-time salaried employee. Under the agreement, Dyson was to be compensated at a salary of $2500 a month plus an automobile.

After beginning her employment, Dyson's first priority was to prepare a marketing budget for Gold 'N Health. When she submitted an initial budget of $80,000 however, the reaction of Taylor and his associates was very critical. In a meeting with Craig Alder ("Alder"), the secretary-treasurer of Gold 'N Health, Dyson's budget was rejected as too expensive. Instead, Alder suggested that the marketing budget be limited to $10,000. In response, Dyson proposed an alternative method of financing the marketing:

So then I said: What if I can think of a way where we could raise money for marketing, would you be open to that, and they said yes, they were, and so I explained this brilliant idea that I had, that we could have what a multi-level company has, what we call a first row of distributors, which are right directly under the company, and it's a very favorable position to be in when you're in a new company because all distribution is built beneath you. So I said: What if we had 20 people on that first row, and we charged them $5,000 to be in that desirable position and they thought that was a good idea....

III R. 104.

Although Taylor and his associates were supportive of Dyson's proposal, an attorney expressed concern that Dyson's plan--which appeared to sell an interest in the new company--could be construed as a sale of securities and thus involve the SEC. To avoid this complication, the attorney suggested an alternative option. Under it, each investor would advance $5,000 to Gold 'N Health and receive a promissory note from Gold 'N Health signed by Taylor and guaranteed by Rainbow Mortgage Corporation ("Rainbow"), a corporation owned by Taylor. It would provide that if the notes were not redeemed within nine months of the purchase date, Rainbow would repurchase the notes for the face amount plus twelve percent interest per annum, accrued monthly.

Because Rainbow was to act as guarantor of the promissory notes, Taylor supplied Dyson with a financial statement for Rainbow. According to the financial statement, Rainbow had assets exceeding $4.8 million in value, including real estate worth $3,967,583; inventory in a product called "Beauty Lash" valued at $500,000; inventory in a product known as "Sober-Up", worth $40,000; and claims to "trace minerals" in southern Utah, valued at $200,000.

Rainbow's balance sheet contained several material misstatements. The real estate valued at $3.9 million was not in fact owned by either Taylor or Rainbow, but instead belonged to a Utah rancher named O.B. Oberhansly. In addition, the values placed on both Beauty Lash and Sober-Up were grossly exaggerated. The valuation of the Beauty Lash inventory was based on prospective future sales, rather than on its inventory value, even though only 200-300 units out of the 10,000 units that had been purportedly manufactured were ever sold. Similarly, Sober-Up was virtually worthless. The Food and Drug Administration had ordered Taylor not to market Sober-Up as a sobriety aid. Finally, although Taylor asserted at trial that he held claims on trace minerals in southern Utah, he was unable to produce any evidence of ownership.

Using Taylor's false representations, Dyson began a campaign to acquire investors for Gold 'N Health. During her presentations, Dyson told potential investors that the money to be raised--a total of $100,000--"was strictly for marketing...." III R. 107-109. She provided prospective investors with a copy of Rainbow's balance sheet and informed them, based on Taylor's representations to her, that Taylor himself would provide $50,000 seed money to get the Gold 'N Health project off the ground. Finally, she told potential investors that $50,000 was adequate seed money because: (1) Taylor had arranged 90 day credit terms with the manufacturer of the vitamins, a tremendously favorable arrangement; and (2) Taylor had negotiated tradeouts in exchange for computer access to handle the mechanics of the business. As a consequence, the start-up costs of the company would be considerably lower than normal.

In addition to Dyson's efforts to secure investors in Gold 'N Health, Taylor participated to a limited extent in the sales effort. In a few instances, he individually met with potential investors. Further, he participated in a meeting with a group of potential investors in March 1984. At that meeting, a discussion ensued "regarding where things were at; how things were going; how much had been raised; the fact the money that was put in by the investors ... was to be used only for marketing the product. It was not to be used for purchasing product, paying expenses for the office, anything like that." II R. 95, 140.

By the end of April 1984 Dyson had located nineteen investors ¹, including her son and her fiance, who purchased promissory notes from Gold 'N Health. Soon after, Dyson went on a marketing trip. During Dyson's absence, Gold 'N Health's banking account--which contained the investment money raised by Dyson--was dissipated by Taylor. A substantial amount of money was withdrawn from Gold 'N Health's account and deposited into Rainbow's account. Moreover, Taylor used Gold 'N Health funds to pay personal obligations, including his car payment. In addition, debts of Beauty Lash were paid from Gold-N-Health's account. By June 11, 1984, the funds invested in Gold 'N Health were completely depleted and the Gold 'N Health account showed a negative balance.

Despite the dire straits of Gold 'N Health, on June 11, 1984, Taylor mailed a letter to the investors which sought to dispel their concerns. In the letter, Taylor acknowledged that Gold 'N Health had incurred problems. At the same time, however, he stated that he was implementing measures--including establishing a special account to pay off the promissory notes--that would correct any problems. In addition, Taylor offered to repurchase the promissory notes from dissatisfied investors and promised to "fulfill all agreements made to the twenty [investors]...." IV R. 100. The representations contained in the letter were false and Gold 'N Health completely collapsed soon after.

On May 21, 1986, Taylor was indicted on three counts of mail fraud, and three counts of interstate transportation of moneys obtained by fraud. At trial, Taylor denied that he had "an intent and a scheme to defraud" the investors. IV R. 126. Instead, he said that Gold 'N Health's failure was the result of incompetence rather than due to any intentional scheme. The financial misrepresentations, he insisted, arose either from misunderstandings by investors, or from unauthorized statements by Dyson. Furthermore, he contested Dyson's claim that the funds were to be used solely for marketing, arguing that they were intended to provide an infusion of capital into the umbrella corporation of Rainbow, rather than to be used solely for Gold 'N Health.

The jury found Taylor guilty on all six counts, and following the judgment of conviction and sentence, Taylor appealed.

II. SUFFICIENCY OF THE EVIDENCE ²

In pertinent part, 18 U.S.C. section 1341 provides:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses,...