U.S. v. Oberhauser

• Decision Date: 04 April 2002
• Docket Number: No. 01-1812.,01-1812.
• Citation: U.S. v. Oberhauser, 284 F.3d 827 (8th Cir. 2002)
• Parties: UNITED STATES of America, Appellant, v. Louis B. OBERHAUSER, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

284 F.3d 827

UNITED STATES of America, Appellant, v.Louis B. OBERHAUSER, Appellee.

No. 01-1812.

United States Court of Appeals, Eighth Circuit.

Submitted: February 12, 2002.

Filed: April 4, 2002.

COPYRIGHT MATERIAL OMITTED

Lizabeth A. McKibben, Assistant U.S. Attorney, Minneapolis, MN, argued, for appellant.

William J. Mauzy, Minneapolis, MN, argued, for appellee.

Before McMILLIAN, FAGG, and RILEY, Circuit Judges.

FAGG, Circuit Judge.

Richard Gravatt, Joe King, Richard King, Murray Evans, Frank Taylor, and Scott Wallis were charged in an eighty-nine count indictment with conspiracy, wire fraud, mail fraud, money laundering, and conducting a continuing financial crime enterprise.The charges arose from their operation of a Treasury bill-leasing "ponzi" scheme through a corporation called K-7.Investors in the scheme lost over $11 million.Louis B. Oberhauser, the group's lawyer, held some of the invested funds in an attorney trust account designated for K-7 investment money, and a superseding indictment added him as a defendant.All the defendants except for Gravatt and Oberhauser pleaded guilty.At a joint trial, Gravatt was convicted on 68 counts and sentenced to 262 months in prison.The jury acquitted Oberhauser of 64 of 66 counts, but convicted him on two counts of money laundering under 18 U.S.C. § 1956(a)(1)(A)(i).The district court granted Oberhauser's motion for acquittal, and conditionally granted his alternative motion for a new trial.The Government appeals.

We must reinstate the jury's verdict "if, drawing all reasonable inferences in favor of the verdict, `there is an interpretation of the evidence that would allow a reasonable minded jury to find the defendant[] guilty beyond a reasonable doubt.'"United States v. Ervasti,201 F.3d 1029, 1036(8th Cir.2000)(quotingUnited States v. Vig,167 F.3d 443, 447(8th Cir.1999)).To convict Oberhauser of money laundering under 18 U.S.C. § 1956(a)(1)(A)(i), the Government was required to prove that Oberhauser, "engaged in financial transactions with the knowing use of the proceeds of illegal activities" and with the "intent to promote the carrying on" of unlawful activity.United States v. Jolivet,224 F.3d 902, 909(8th Cir.2000).The criminalized act under § 1956(a)(1)(A)(i) is the reinvestment of illegal proceeds rather than the concealment of those proceeds.Id.

The Government relies on the following trial evidence as proof of Oberhauser's guilt.Oberhauser's first contact with anyone involved in K-7 was in the spring of 1995 when Gravatt and Steven Cudlipp hired Oberhauser, a real estate and corporate attorney, to facilitate the purchase of a $2.8 million property.The realtor, who worked in the same building as Oberhauser, introduced Gravatt to Oberhauser.Unbeknowst to the realtor and Oberhauser, Gravatt had served time in prison for fraud.On behalf of his clients, Oberhauser incorporated Carlingford Management Services, which was to own the property.The Carlingford Foundation deposited $250,000 in earnest money, but after numerous delays, the earnest money was forfeited when Gravatt and Cudlipp did not pay the balance due.Gravatt explained to Oberhauser that he had a falling out with Cudlipp.In January 1996, Gravatt established a high finance company (the predecessor to K-7) for the purpose of performing trading programs organized by Gravatt.Oberhauser was retained on the company's behalf.

Gravatt's trading program was a "roll program" in which the company would supposedly trade $100 million in treasuries making a small percentage on every trade, which through a multiplication factor would yield a large income.Gravatt said the Treasury bills could not be leased until the company had $5.5 million in investment money.According to cash investment sheets provided to investors, the $5.5 million total investment would be used to lease $100,000,000 in Treasury bills, and trades on those bills would yield $2,000,000 per trade and $900,000 per trade to investors, with a weekly amount to investors of $3,600,000.Rental fees of $13,750,000 and a set up fee of $3,000,000 would be paid.For a participant investing $50,000 towards the $5.5 million, the total treasury amount would be $909,091, the yield per trade would be $18,182, the yield per trade to investor would be $8182, the weekly amount to the investor would be $28,459, and the net amount to the investor would be $1,166,818.At trial, the Government's expert witness testified the program's claims amounted to a preposterous 2000% return.To make the program attractive to employees and investors, profits from the trading program were to go to the charity ChildHelp.

On February 8, 1996 Oberhauser sent Joe King a retainer letter acknowledging Oberhauser's firm had been retained to consult with King about matters relating to the company and the distribution of funds.Oberhauser stated he would "accept wire transfers of funds into a designated depository account on [the company's] behalf, and [would] disburse the[] funds ... per written direction of Joe W. King or other parties properly authorized."Gravatt introduced Oberhauser to Taylor as the escrow attorney who was to receive the funds from the investors and hold them until he could "authenticate, verify and validate the treasuries," then release them for trading.Oberhauser drafted an escrow agreement, letter of authorization to act on the investor's behalf, and agreement of procedures.In April 1996, after Oberhauser helped incorporate K-7, Gravatt promised Oberhauser 1% of any deal if he helped arrange a standby letter of credit in the amounts of $9, 18, or 27 million.Oberhauser introduced K-7 to a bank in an effort to secure financing for them.In the spring of 1996, Scott Wallis joined K-7 as a consultant and was paid a weekly salary to bring investors to K-7.Wallis was introduced to Oberhauser at K-7's offices, 12 rented apartments in an upscale Minneapolis suburb, as K-7's attorney.

K-7 raised money in two ways.First, K-7 and certain investors entered into a contract that represented K-7 had "knowledge, experience and contacts in the marketplace for bank instruments necessary to make prudent decisions in the contracting for leasing of United States Treasury `T'Bills," with the funds being deposited in the Group Resources, Inc. bank account.Between May and December 1996, $1.43 million in investment money was deposited in the Group Resources account.Second, investors and Oberhauser's law firm entered into contracts giving Oberhauser "authorization to act upon [the investor's] behalf for the purpose of entering into a trading program with International Capital Services, Inc.," after receiving $5.5 million.The funds were deposited in an Oberhauser firm trust account set up for the exclusive purpose of holding investors' money.Oberhauser did not solicit the investors or advise the investors himself.

In August 1996, Gravatt and King discussed with Oberhauser the preparation of a termination contract for Lin Fox, a woman hired by K-7 to be Gravatt's girlfriend.For this legal work, he billed K-7 for a "general corporate matter."In the fall of 1996, Wallis overheard Gravatt and King discussing that Oberhauser was going to "make $20 million on this deal," and later asking Oberhauser what he was going to do with all those millions.

On August 28, 1996 King transferred $160,000 of investors' funds from the Group Resources account to the Oberhauser trust account.Oberhauser was familiar with Group Resources because his firm had been paid $5000 on April 17, 1996, for legal services on behalf of K-7 from an account in the name of Group Resources.Further, Oberhauser identified the $160,000 as investors' funds on his trust account bank statement.Oberhauser was convicted of money laundering for this transaction.Meanwhile, the K-7 principals attempted to buy a $10 million office...