United States v. Spalding

• Decision Date: 26 June 2018
• Docket Number: No. 16-10289,16-10289
• Citation: 894 F.3d 173
• Parties: UNITED STATES of America, Plaintiff–Appellee v. David Lyman SPALDING, Defendant–Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

894 F.3d 173

UNITED STATES of America, Plaintiff–Appellee

v.David Lyman SPALDING, Defendant–Appellant

No. 16-10289

United States Court of Appeals, Fifth Circuit.

June 26, 2018

Brian W. Portugal, James Wesley Hendrix, Assistant U.S. Attorneys, U.S. Attorney's Office Northern District of Texas, Dallas, TX, for Plaintiff–Appellee.

Brian James Newman, Fort Worth, TX, for Defendant–Appellant.

David Lyman Spalding, Seagoville, TX, Pro Se.

Before DAVIS, JONES, and HIGGINSON, Circuit Judges.

STEPHEN A. HIGGINSON, Circuit Judge:

David Lyman Spalding convinced about a hundred people—neighbors, strangers, and even his jeweler—to lend his companies millions of dollars. As Spalding put it, his ventures were poised to strike pay dirt; all they needed was a bit more cash. He obtained loans by promising rapid repayment and stock options, and by assuring that he would use the money for the business. In fact, Spalding spent much of it on himself. Eventually, an investor tipped the FBI, a grand jury indicted, and a petit one convicted. Spalding now appeals his convictions and sentences for various fraud and perjury charges. We affirm.

I.

A.

From about 2004 to 2010, Spalding founded and ran several companies, including Wind Plus Inc. and Wind Plus Holdings, Inc. (collectively, Wind Plus). Spalding billed these businesses to investors as seeking to sell energy projects, wind power, and wind-farm sites.

The pitch was simple: Wind Plus was about to go public and presented guaranteed returns. In exchange for loans, Spalding offered short-term promissory notes and potential stock options in the soon-to-be-public corporation. He also erected a pyramid scheme, pledging extra options to lenders who convinced others to chip in. Making overtures to some noteholders, Spalding falsely promised to use "a hundred percent" of their loans on Wind Plus’s projects and legal fees. To others, he fabricated the scope of Wind Plus’s designs and prospects.

Spalding also sent updates that swayed some backers to double down. He issued fake newsletters about Wind Plus’s financing opportunities and third-party offers. He claimed to have entered valuable agreements that didn’t exist. And he falsely described Wind Plus as shouldering only a "small amount of outstanding debt." Nevertheless, said Spalding, the company was "burn[ing] through cash" and required more capital to "cover[ ] legal and outside consulting expenses, secur[e] additional leases, and build[ ] overall momentum."

Reality painted a more sobering portrait. Wind Plus lacked a business plan and financial oversight. Burdened by scores of unpaid notes, the company swiftly incurred new expenses without compensating workers. At one point, Wind Plus Inc. failed to pay taxes and its corporate status lapsed. At another, Wind Plus saw its bank accounts dwindle to $4,000. Even its one success—a $2.3 million return on the sale of a project site—occurred despite Spalding’s refusing to pay for proper wind data.¹

But as the firm floundered, its founder flourished. Wind Plus occasion-ally "advanced" Spalding sums ranging from $10,000 to $50,000 at a time. Spalding obtained $1,638,170 through wires and cashiers’ checks, and another $485,525 in cash withdrawals. All told, he pilfered $2,123,695 from company coffers.²

Spalding, in fact, had no personal bank accounts; he just tapped Wind Plus’s. In the year he informed investors that Wind Plus was "burn[ing] through cash," for example, his personal expenses comprised over one third of the company’s expenditures. And Spalding masked his actions by transferring funds from Wind Plus’s main account to a shell account, which he then used to replenish the main one after his assorted purchases.

What did he buy? A forensic accountant traced how investor funds covered Spalding’s rent, utilities, homeowners’ dues, taxes, groceries, dating services, and membership in a singles’ vacation club. Spalding’s more lavish spends included a home, Mercedes–Benz, yacht consultant, Caribbean vacation, $76,000 engagement ring,³ six-figure wedding, and European honeymoon.

Tired of Spalding’s "grandiose" but empty promises of repayment, one suspicious noteholder contacted the FBI. Others sued. Spalding then personally filed for Chapter 13 bankruptcy and sought to reorganize the Wind Plus companies under Chapter 11.

Wind Plus’s Chapter 11 filings drew skepticism. Spalding produced no financial records besides bank statements. And the records he did provide failed to blunt concerns. They "showed really unusual expenses" that, according to the Chapter 11 trustee, "weren’t reflected in any ... bankruptcy paperwork."

Thus Wind Plus’s proceedings converted from Chapter 11 to Chapter 7—from reorganization to liquidation. Yet, when the Chapter 7 trustee asked for financial documents besides bank statements, Spalding provided none. (The trustee later learned that Spalding used Wind Plus’s bank accounts instead of keeping his own.) Also odd was Spalding’s claim that during his tenure he had pocketed only one year’s salary, worth $42,000. Some amended filings further disclosed that Wind Plus had transferred—outside the course of ordinary business—Harry Winston jewelry and Ritz–Carlton sundries to Spalding’s wife.

The bankruptcy proceedings proved pivotal not just for what Spalding put on paper, but also for what he said aloud. Spalding allegedly perjured himself during a creditors’ meeting when asked to describe Wind Plus’s noteholders.

Despite lender lawsuits and Wind Plus’s bankruptcy, Spalding kept collecting new noteholders for yet another entity, Baseload Energy, LLC. He secured those loans through the familiar gambit. He promised to use the funds on things like the company’s attorney’s fees, confirmed that he would not take any salary until he got the latest project funded, and falsely claimed that he had secured a bank’s "commitment to purchase 100 percent" of a venture. Spalding’s speeches said nothing of bankruptcy, or lawsuits, or tax troubles, or his intent to use the loans to bankroll his personal life. Thus he continued to pocket the lenders’ "investments."

The upshot: ninety-seven people gave Spalding $3,755,521. And instead of receiving quick and full repayment as promised, the few noteholders who recouped anything got pennies on the dollar.

B.

In its final superseding indictment, a federal grand jury charged Spalding with seven offenses: two counts of wire fraud (Counts One and Three),⁴ one count of mail fraud (Count Two),⁵ two counts of false testimony under oath (Counts Four and Five),⁶ and two counts of bankruptcy fraud by false statement (Counts Six and Seven).⁷ Spalding successfully moved to dismiss Count Seven on multiplicity grounds. He unsuccessfully moved to suppress statements he gave during a deposition in an investor’s civil suit. That motion relied on the Fifth Amendment’s privilege against self-incrimination, but the government disclaimed plans to introduce the deposition and the district court ruled the prior testimony fair game for impeachment.

The trial lasted seven days. Included on the government’s witness list were some spurned investors, a forensic accountant, the bankruptcy trustees, and former Wind Plus workers. The investors described Spalding’s representations, omissions, and failures to repay, and underscored that they would not have invested had Spalding been forthcoming about his past and plans. The forensic accountant traced activity on Wind Plus’s six bank accounts to show how Spalding diverted company funds for personal expenses. The trustees testified about the bankruptcy proceedings and confirmed that Spalding’s filings reflected his penchant for transferring Wind Plus funds outside the enterprise’s "ordinary course of business." And the Wind Plus workers explained how Spalding controlled the company but balked at spending money for business purposes. One Wind Plus consultant recalled how Spalding admitted his intent not to repay noteholders.

Though Spalding did not testify, he mounted a vigorous defense. His trial counsel cast him as an unwary and failed businessman who otherwise paid legitimate expenses. Several defense witnesses, however, belied that narrative. Wind Plus’s former corporate counsel, for example, verified that Spalding "us[ed] funds that were invested in Wind Plus in part to pay personal living expenses." (Spalding waived whatever attorney-client privilege he may have enjoyed with Wind Plus’s counsel.) Another former officer testified that Spalding "misled" him, and that the company’s brass and investors alike "fell in the same trap." This witness also recounted how the board of directors eventually ousted Spalding, only to discover "nothing" to build on besides "[h]ot air." Another former colleague attested that Spalding hid company financials not just from investors, but from corporate officers, too.

The jury convicted on all six counts and the district court imposed a variant, below-Guidelines term of 180 months in prison.⁸

The sentence required Spalding to pay restitution for $3,391,146.80 and to forfeit his house.⁹ Spalding timely appealed.¹⁰

II.

We start with Spalding’s sufficiency challenges. We give the evidence a de novo look, probing "whether, considering the evidence and all reasonable inferences in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." United States v. Gibson , 875 F.3d 179, 185 (5th Cir. 2017) (quoting United States v. Vargas–Ocampo , 747 F.3d 299, 303 (5th Cir. 2014) (en banc) ). This is a "highly deferential" task, one requiring us to accept all credibility choices and reasonable inferences the jury made to support its verdict. United States v. Chon , 713 F.3d 812, 818 (5th Cir. 2013).¹¹ Spalding targets four of his six convictions.

A.

First are the mail- and wire-fraud counts. The evidence sufficed to prove each.

Wire fraud comprises three elements: "(1) a scheme to defraud; (2) the use of, or causing the use of, wire...