U.S. v. Thornburgh

• Decision Date: 27 May 2011
• Docket Number: No. 09–5156.,09–5156.
• Citation: 645 F.3d 1197
• Parties: UNITED STATES of America, Plaintiff–Appellee,v.Joseph Lynn THORNBURGH, Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

645 F.3d 1197

UNITED STATES of America, Plaintiff–Appellee,

v.Joseph Lynn THORNBURGH, Defendant–Appellant.

No. 09–5156.

United States Court of Appeals, Tenth Circuit.

May 27, 2011.

Fred Randolph Lynn, Tulsa, OK, for Defendant–Appellant.Charles M. McLoughlin, Assistant United States Attorney (Thomas Scott Woodward, United States Attorney, with him on the brief), Tulsa, OK, for Plaintiff–Appellee.Before TYMKOVICH, SEYMOUR, and ANDERSON, Circuit Judges.ANDERSON, Circuit Judge.

Defendant and appellant Joseph Lynn Thornburgh was found guilty by a jury of conspiracy to commit mail and wire fraud and conspiracy to commit money laundering. He was sentenced to 292 months' imprisonment, three years of supervised release, and $3,684,213 in restitution. Challenging his conviction on seven grounds, Mr. Thornburgh brings this appeal.¹ We affirm his conviction.²

BACKGROUND

Beginning in the late 1990s, Mr. Thornburgh, along with co-conspirators Robert Searles, Wayne Davidson, Steven Fishman and others, executed a scheme to defraud investors by inducing them to buy allegedly valuable “historic bonds.” In reality, the bonds were century-old railroad bonds, issued by a railroad which had long ago gone bankrupt, and bonds issued by a country which no longer exists. The railroad bonds were issued by the defunct Galveston, Houston & Henderson Railroad (“GH & H Railroad”), and the other type of bond was issued by the Republic of China in the early 1900s (“Chinese bonds”).

This conspiracy was much like many other such conspiracies. Mr. Thornburgh and his co-conspirators misrepresented the value of the bonds, claiming that interest in the amount of hundreds of millions of dollars had accrued on the bonds since their issuance, and that payment on that interest was still due and owing. They also misled investors by claiming that the “historic bonds” were backed by Amtrak and/or the United States government.

The conspiracy also involved the use of exotic and enigmatic terminology. Besides the “historic bonds,” the scheme involved using the bonds in some vague way to lure unspecified European banks to use proceeds from the bonds (or use the bonds as collateral) to engage in high-yield trading programs.³ These programs would generate vast sums of money, and the investors were told they would soon receive weekly payments of amounts far larger than their investments.

The conspirators further bolstered their story by representing that the Florida Supreme Court had secretly issued an opinion, being kept under seal in chambers, which established the validity of the bonds. They also determined “hypothecated” values of the bonds, and used individuals called “authenticators” to purportedly verify the authenticity of the bonds. Investors were promised that their bonds were placed in “safekeeping depositories” which issued certificates called “safekeeping receipts.”

The entity into which investors placed their money was called Caribou Capital Corporation (“Caribou”), which had been incorporated by Mr. Searles in 1991, apparently for purposes unrelated to the conspiracy. Mr. Searles served as the president of Caribou and the banker for the scheme. He maintained an account for Caribou at SunTrust Bank in Loudon, Tennessee, into which the majority of investor funds were deposited and then distributed to the conspirators. The investors were assured that the program involved little to no risk, and that, if the large returns did not develop, they would receive a complete refund of their investments. Mr. Fishman apparently mentioned to some investors that Norah Cali, allegedly the niece of Alan Greenspan, the former Chairman of the Federal Reserve Board, was involved in the Chinese bond part of the Caribou program.

The enterprise promoted in the United States was not very large, and, at times, it sputtered and slowed. But it still moved along, with its various conspirators interacting with each other in greater and lesser ways. Eventually, the co-conspirators spent much of their time and efforts trying to pacify increasingly anxious and irritated investors, who were becoming suspicious because they had not received the promised large returns.

Each member of the Caribou program had a specific role, although the roles at times overlapped. Mr. Searles acted as the banker and organizer of the conspiracy. He established Caribou as the shell corporation, served as its president, and maintained the SunTrust account. The “authenticator” was John Clancy, the “program manager” was Patrick Henriette, who resided in Europe, and Mr. Thornburgh and Mr. Davidson were the salesmen who induced investors to buy the bonds. Mr. Thornburgh's primary area of operation was the United States, while Mr. Davidson sought international investors, particularly from New Zealand. Mr. Fishman was involved in many aspects of the conspiracy, including drafting and reviewing documents for Caribou, obtaining bonds, arranging for depositories for the bonds, finding bond “traders,” receiving funds, responding to questions from investors, and other functions.

Mr. Thornburgh convinced approximately fifteen individuals in the United States to invest in the Caribou bond scheme. Apparently the total number of investors exceeded 250, the vast majority of whom were lured into the scheme by Mr. Davidson, operating in New Zealand and Australia. Indeed, this circumstance particularly distresses Mr. Thornburgh, as he is required to serve a lengthy prison term and pay over three and one-half million dollars in restitution, whereas Mr. Davidson remains out of the country and has never been convicted for his part in the scheme. The total known loss was $4,057,846.26. ⁴

The conspiracy ran from the late 1990s until 2005. Not surprisingly, despite the promises made to investors, the reality of the Caribou program was quite different. The “historic bonds” had only nominal value as collector items, and the “hypothecated” values of the historic bonds were false representations of their worth for investment, redemption, or use as collateral. There was, in fact, no European bank trading program through which to generate profits for the Caribou investors. Finally, “Caribou was incapable of fulfilling its contractual obligations to refund monies to investors because the funds were spent as soon as Caribou received them.” Second Superseding Indictment at ¶ 7(g), R. Vol. 1 at 315. Rather than going into the bank trading programs in Europe, investor money went from Caribou to the co-conspirators.

To prove these actions and expenditures, the government introduced evidence of hundreds of emails, telephone calls, mailings, wires and numerous other forms of communication by which the co-conspirators contacted investors, made transactions among themselves, deposited funds in the SunTrust account of Caribou, and otherwise maintained the elaborate fraudulent scheme. Money provided by investors to the SunTrust account was disbursed to the coconspirators to make payments for purchasing bonds, to pay fees for allegedly authenticating and determining the purported value of the bonds, to pay fees to the safekeeping depositories, to pay “broker” fees to the co-conspirators themselves, to pay personal legal fees and to make occasional payments to investors, which they often called “loans.” Mr. Thornburgh, in particular, used investor funds to pay some of his legal fees and to pay for his bail in a domestic violence prosecution. Additionally, some of the co-conspirators bought a glove manufacturing plant and shares in a gold mine.

Further, the scheme gained no returns through its claimed relationship with European banks or based on the value of the bonds that investors bought; any returns were derived simply from the deposits of more recent investors. Of the $4,057,846.26 total loss to investors from this scheme, $3,819,315.13 in funds were laundered through Caribou.

When investors became suspicious, Mr. Thornburgh and his co-conspirators

provided “lulling” reports about the progress supposedly made by Caribou's associates in securing Caribou's participation in the financial trading programs purportedly conducted by European banks. The co-conspirators' lulling reports repeatedly explained to investors that unforeseen problems had arisen to prevent payments being made to the investors, but that completion of the arrangements for Caribou's participation in the financial trading programs was imminent.

Id. at ¶ 11, R. Vol. 1 at 319. The co-conspirators then attempted to convince investors that a different type of bond (the Chinese bonds) would be another fruitful form of investment. In March 2003, the co-conspirators attempted to further pacify unhappy investors by offering them “hold harmless” agreements which purported to agree to fully refund their investments if the large returns did not materialize.

The conspiracy came to a halt following a lengthy investigation that began with a telephoned complaint in early 2003 to the United States Postal Inspection Service in the Northern District of Oklahoma. The caller reported that she had made an investment into a program promoted by Caribou Capital Corporation, but had not received the promised return on her investment and was growing suspicious of the program. Several United States federal agencies joined in the investigation, as well as an agency in New Zealand. This investigation led to the indictment against Mr. Thornburgh and his co-conspirators.

Mr. Thornburgh ultimately went to trial on a second superseding indictment, filed on June 2, 2009, alleging a conspiracy to commit mail and wire fraud, in violation of 18 U.S.C. §§ 1341, 1343, and 1349, and a conspiracy to commit money laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i), (h), and 1957(a). Count one addressed the promotion and sales of the bonds, whose value Mr. Thornburgh vastly overrepresented and whose promised returns he falsified. Count two addressed the distribution, through the SunTrust...