U.S. v. Jenkins

• Decision Date: 25 January 2011
• Docket Number: Nos. 09–10109,09–10110.,s. 09–10109
• Citation: 633 F.3d 788
• Parties: UNITED STATES of America, Plaintiff–Appellee,v.Randy W. JENKINS, Defendant–Appellant.United States of America, Plaintiff–Appellee,v.Ira W. Gentry, Jr., aka Ira Willie Gentry, aka Donald Isaac Williams, aka Don Williams, aka Fred Koone, aka Don Brown, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

633 F.3d 788

107 A.F.T.R.2d 2011-637

11 Cal. Daily Op. Serv. 1083

2011 Daily Journal D.A.R. 1346

UNITED STATES of America, Plaintiff–Appellee,

v.Randy W. JENKINS, Defendant–Appellant.United States of America, Plaintiff–Appellee,

v.Ira W. Gentry, Jr., aka Ira Willie Gentry, aka Donald Isaac Williams, aka Don Williams, aka Fred Koone, aka Don Brown, Defendant–Appellant.

Nos. 09–10109

09–10110.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 9, 2010.Filed Jan. 25, 2011.

Phillip Edward Hantel, Phoenix, AZ, for defendant-appellant Randy Jenkins.Daniel Robert Drake, Drake Law PLC, Phoenix, AZ, for defendant-appellant Ira W. Gentry.Frank Phillip Cihlar, Michael Vasiliadis, and Elissa Hart–Mahan, United States Department of Justice, Tax Division, Washington, D.C.; Frank T. Galati and Reid Charles Pixler, Office of the United States Attorney, Phoenix, AZ, for the plaintiff-appellee.Appeal from the United States District Court for the District of Arizona, Susan R. Bolton, District Judge, Presiding. D.C. Nos. 2:06–cr–00464–SRB–2, 2:06–cr–00464–SRB–1.Before: BETTY B. FLETCHER, RICHARD C. TALLMAN and JOHNNIE B. RAWLINSON, Circuit Judges.

OPINION

B. FLETCHER, Circuit Judge:

INTRODUCTION

This case arises out of a “pump and dump” scheme during which Randy Jenkins and Ira Gentry conspired to secretly acquire millions of shares of UniDyn Corporation stock, artificially inflate its value, sell it for significant profit, and launder the proceeds. After a sixteen-day trial, a jury convicted Jenkins and Gentry (“Appellants”) of multiple counts of securities fraud (15 U.S.C. §§ 78ff, 78j(b) ¹); wire fraud ( 18 U.S.C. § 1343); international concealment money laundering ( 18 U.S.C. § 1956(a)(2)(B)(i)); concealment money laundering ( 18 U.S.C. § 1956(a)(1)(B)(i)); and transactional money laundering ( 18 U.S.C. § 1957(a)). The jury also convicted each appellant of one count of tax evasion ( 26 U.S.C. § 7201) and for conspiracy to defraud the United States and commit wire fraud, securities fraud, and mail fraud ( 18 U.S.C. § 371).

The district court sentenced Jenkins to 90–months imprisonment, and Gentry to 180–months imprisonment. In addition, the district court ordered appellants to forfeit approximately $9 million in ill-gotten gains to the government. In a related civil action, the government sought forfeiture of Gentry's residence.

Appellants timely appeal both their convictions and sentences. The district court had jurisdiction under 18 U.S.C. § 3231. We have jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a), and we now affirm.

The principal legal issue we face is whether 18 U.S.C. § 3292 suspended the running of the statute of limitations for all counts. Section 3292 permits the district court to suspend the statute upon finding that the government reasonably believes evidence of a crime under investigation by a grand jury is in a foreign country and has requested that evidence. Subject to defined outer limits, the suspension period lasts until the foreign government has taken “final action” on the official request.

Appellants argue that an application to suspend the running of the statute of limitations must be supported by a sworn affidavit or other material of evidentiary value and that § 3292 does not permit the district court to suspend the statute of limitations if the government applies after the statute has expired. The fact that the government submitted its official request for evidence to a foreign government before the expiration of the statute is irrelevant, they argue. Consequently, they contend that even though the government submitted a sworn affidavit in support of its § 3292 application on June 20, 2005, the district court could not suspend any of the pertinent statutes of limitation that expired before that date. Finally, appellants argue that Canada took “final action” on or before July 5, 2005, ending the suspension period and rendering several counts of the indictment untimely. We agree only with appellants' first contention and conclude that the statute of limitations had not expired on any counts before the grand jury returned its indictment.

In addition, both appellants contend (1) there was insufficient evidence to support conviction on many counts; (2) the jury's instructions on money laundering were reversible error; and, (3) the district court erred at sentencing in calculating the amount of loss and number of victims. Jenkins also argues that his sentence was substantively unreasonable. Gentry argues that the district court wrongly denied his motion to sever his trial from Jenkins's, and that the district court erred in denying his motion for additional cross examination of a government witness. We reject each of these claims and affirm the convictions and sentences.

BACKGROUND

In the early 1990s, Gentry formed Universal Dynamics, a “vibration testing” company that analyzed the quality of circuit boards using shaking machines. Gentry was the president and owner of Universal Dynamics. Universal Dynamics also produced a line of hardware and software products which controlled the shakers and analyzed results. In 1996, Gentry learned of attempts to use infrared cameras to identify flaws in circuit boards. The concept was created by Irene Murphy, a student at General Motors Institute, but her research revealed that the technology was not viable for mass production. Gentry claimed to have invented the technology, called it the “Sterling concept,” and proclaimed that it would revolutionize the industry.

In December 1997, Universal Dynamics merged with a shell corporation and became UniDyn Corporation. At the time it was created, UniDyn issued nearly fifteen million shares of stock to a Bahamian corporation called UniDyn, Inc. (UniDyn–Bahamas). UniDyn–Bahamas was created by Jenkins, a disbarred attorney and friend of Gentry's with expertise in setting up offshore corporations. UniDyn–Bahamas was a nominee entity with no independent business. Its registered agent and director were figureheads chosen to conceal Gentry and Jenkins's control. It later changed its name to Mearns Acceptance Corporation.

At its creation, UniDyn also issued approximately eight million shares to Universal Dynamics. Though the corporate tax returns and SEC filings for Universal Dynamics indicated that Gentry was only a minority shareholder, the other alleged shareholders included aliases for Gentry and Jenkins and the names of acquaintances who did not, in fact, own stock and were not aware appellants were using their names. In actuality, Gentry was the sole owner and president of Universal Dynamics.

UniDyn was publicly traded on the Over the Counter Electronic Bulletin Board. Because of its low share price (under $5 per share), it was called a “penny stock.” As a publicly traded company, UniDyn was required to file annual and quarterly SEC reports. The reports were required to disclose any shareholders owning or controlling a 5% or greater interest in the company and to announce any significant events in the company. SEC filings did not reflect Gentry and Jenkins's beneficial ownership of either Universal Dynamics or Mearns.

Engineers at UniDyn and its subsidiaries tested Sterling between 1998 and 1999, and concluded that the technology was not commercially viable. Yet, in SEC filings and press releases, Gentry continued to falsely promote the company's prospects. Between 1997 and 2001, among other misrepresentations, Gentry claimed that Sterling was 100% effective at estimating the life span of circuit boards; UniDyn was pursuing a patent for Sterling; UniDyn had a commitment from Technet, a Japanese corporation owned by Hiroshi Tsuriya, to purchase $200 million in Sterling units; Sterling had been successfully tested by IBM; UniDyn had constructed a Sterling unit ready to be placed with a customer; and UniDyn had entered into a $900,000 licensing deal for Sterling. In addition, both Gentry and Jenkins posted messages on Raging Bull, an online investors's message board, touting UniDyn's potential, announcing lucrative deals, and attempting to assuage concerns about the identities of its largest shareholders, including those in Mearns.

Having “pumped” the value of UniDyn stock, appellants proceeded to “dump” their holdings. See United States v. Laurienti, 611 F.3d 530, 534 (9th Cir.2010) (describing a “pump and dump” scheme). In early 2000, Gentry and Jenkins opened accounts for a number of nominee corporations and individual aliases at Thomson Kernaghan and Union Securities brokerage houses in Canada. Over the next few months, they transferred millions of UniDyn-shares held by UniDyn–Bahamas and Universal Dynamics to these accounts. Between March 7 and March 15, 2000, Jenkins and Gentry sold almost 900,000 shares from Universal Dynamics' Union Securities brokerage account in Canada, netting proceeds of $1.8 million. Between March and June 2001, they sold millions of shares of stock from accounts at Thomson Kernaghan, with net proceeds of over $6 million. Jenkins and Gentry continued to sell UniDyn stock from the Canadian accounts in the latter half of 2001 and in 2002.

Jenkins and Gentry wired funds from the Canadian brokerage accounts to a variety of bank accounts in the United States and abroad. The bulk of the funds were used for personal purchases and investments, including $300,000 in gold and silver coins and $70,000 in silver bullion in Jenkins's name at Monex Deposit Company, a $1.5 million home in Scottsdale for Gentry, several vehicles, and $30,000 worth of jewelry. In addition, appellants used approximately $2 million to make UniDyn appear profitable: $900,000 was used to fund a purported licensing deal of Sterling's technology, and $1 million was used to fund a “longtime shareholder's” investment in UniDyn. Neither Gentry nor Jenkins disclosed on their 2000 tax returns any income or profits from their nominees' sales of UniDyn stock.

The scheme began to unravel in ...