United States v. Bates, 073119 FED6, 17-6263

Docket Nº:17-6263, 17-6273, 17-6284, 17-6288
Opinion Judge:ROGERS, CIRCUIT JUDGE.
Party Name:UNITED STATES OF AMERICA, Plaintiff-Appellee, v. CHARLES LARRY BATES, et al., Defendants-Appellants.
Judge Panel:BEFORE: ROGERS, DONALD, and THAPAR, Circuit Judges.
Case Date:July 31, 2019
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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UNITED STATES OF AMERICA, Plaintiff-Appellee,

v.

CHARLES LARRY BATES, et al., Defendants-Appellants.

Nos. 17-6263, 17-6273, 17-6284, 17-6288

United States Court of Appeals, Sixth Circuit

July 31, 2019

NOT RECOMMENDED FOR PUBLICATION

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TENNESSEE

BEFORE: ROGERS, DONALD, and THAPAR, Circuit Judges.

ROGERS, CIRCUIT JUDGE.

Larry Bates held himself out to the public as an apocalyptic economist committed to helping customers safeguard their wealth by purchasing precious metals from his company, First American Monetary Consultants. The reality was quite different. First American Monetary Consultants regularly failed to deliver gold and silver coins to its customers after they had mailed checks or wired money for their orders, and it ultimately defrauded hundreds of people to the tune of over twenty million dollars. After a joint jury trial, Larry Bates and three of his family members were convicted of mail fraud, wire fraud, and conspiracy to commit mail and wire fraud. In this consolidated appeal, the defendants challenge their convictions on multiple grounds, including sufficiency of the evidence and the allegedly improper denial of their motions for severance. Defendants also argue that their sentences were procedurally and substantively unreasonable, that they should not have been held joint and severally liable for forfeiture, and that the forfeiture amount was disproportionately excessive in violation of the Eighth Amendment. None of their arguments succeeds.

I.

First American Monetary Consultants acted as a broker for precious metal transactions, purchasing gold and silver coins from wholesale suppliers and selling them to individuals looking for investment opportunities. Established in 1984, First American was initially incorporated in Colorado and subsequently became incorporated in Tennessee. Its founder, President, and CEO, Dr. Larry Bates, was a former member of the Tennessee House of Representatives with a doctorate in Christian education. Larry Bates and his wife, Barbara Bates, were First American's sole shareholders.

First American began as a small consulting business consisting of Larry Bates and a secretary. It eventually expanded, in no small part due to the public outreach conducted by Larry Bates. Bates had turned his dissertation into a best-selling book entitled "The New Economic Disorder," and he capitalized on that success by becoming a frequent guest on Christian television shows and radio programs by the mid-2000s. First American also organized conferences throughout the country in which Larry Bates would speak to prospective customers. The pitch was always similar. Larry Bates would warn his audience about an imminent economic disaster, characterizing it as an "end time scenario" out of the Book of Revelation that would destroy the value of currency and threaten the savings of everyone invested in the stock market. First American offered a solution. With the assistance of its "economists," First American's term for its sales staff, customers could invest in precious metals that would not lose value in an economic collapse. First American also sold other products to help its customers prepare for Armageddon, including Larry Bates' books and freeze-dried food.

Each of Larry Bates' immediate family members worked for First American. Barbara Bates served as the Vice President and was responsible for maintaining the company's financial records. The couple has two sons, Charles Edward Bates ("Chuck Bates") and Robert Bates ("Bob Bates"). Chuck Bates was a Senior Monetary Consultant and Larry Bates' second-in-command, whose responsibilities included selling precious metals to customers, hiring and training new salesmen, and calculating sales commissions. Bob Bates also served as a Senior Monetary Consultant, but his role was limited to that of a salesman. Kinsey Bates (formerly Kinsey Brown) was hired in 2009 and became Larry Bates' personal assistant in 2010. She was responsible for handling customer calls, picking up First American's mail from the post office, sorting mail, and delivering mail to Larry Bates. Kinsey married Bob Bates in October of 2012.

All of the defendants worked in First American's Memphis office. Chuck and Bob Bates had offices in a locked hallway behind the receptionist's desk, where the First American economists worked as well. At the end of the hallway there was another locked door that opened into an executive suite where Larry, Barbara, and Kinsey Bates worked. Kinsey Bates stayed with a First American employee named Sherry Barnett in the "outside area" of the executive suite, while Larry and Barbara Bates had separate offices within it. The executive suite also contained a locked shipping room with two safes, and only Larry, Bob, and Chuck Bates knew the combinations. Larry, Barbara, Chuck, Bob, and Kinsey Bates were each able to access the executive suite, and other economists could only do so when accompanied by a member of the Bates family or another authorized employee. If an economist had a message or customer order to provide to Larry Bates, then the standard practice was to "slip it under the door where it was retrieved by somebody in the executive suite."

In addition to running First American, Larry Bates served as the CEO and majority shareholder of Information Radio Network ("IRN"), a Tennessee corporation and First American's affiliate. Larry Bates used IRN as an additional source of advertising for First American. A couple of the other Bates family members were also involved in managing IRN. Barbara Bates was a director, and Chuck Bates worked as an officer and news director for the company. Larry Bates also produced a radio show through IRN called "News and Views," and Chuck Bates assisted as a co-host.

The process for ordering precious metals through First American would work as follows. Customers typically contacted First American after hearing Larry Bates speak on a TV show, on a radio program, or at a First American conference. First American would respond by mailing an information packet and assigning an economist to advise the customer on how to invest in gold and silver coins. After the customer placed an order, First American would fill out a transaction form and instruct the customer to either send a check through U.S. mail or pay through a wire transfer. Larry Bates was in charge of purchasing the requested coins from a wholesale supplier. First American would then send order confirmations through U.S. mail advising customers that they should expect to wait twenty-five to forty-five business days for their coins to be delivered.

Although customers were initially drawn to First American based on Larry Bates' reputation as a Christian, many of them became disillusioned after experiencing delivery delays of months or years. The volume of customer complaints increased from 2009 to 2013, as the orders for hundreds of customers remained partially or completely unfulfilled. Customers attempted to obtain their coins by contacting First American employees-including each of the defendants- through phone calls, letters, emails, and voicemail messages. One customer became desperate enough that she traveled to First American's Memphis office to pick up her coins in person. Another accused Larry Bates of operating a "Ponzi scheme." Others hired attorneys and threated to contact the attorney general about First American's bad business practices.

Eventually, the criticism took a toll on the company. Customers had filed an increasing number of complaints with the Better Business Bureau and the Tennessee Department of Consumer Affairs between 2008 and 2013, prompting the Better Business Bureau to downgrade First American's rating from an "A plus" in 2008 to a "D plus" in 2010. The downgrade caused First American to lose its accreditation with the Better Business Bureau, and its rating dropped to an "F" in 2013. Multiple First American employees resigned during that same period due in part to the stress of handling a high volume of customer complaints. Larry Bates lost the support of Jonathan Bernis, the host of a TV program called "The Jewish Voice," who had invested in First American and frequently invited Bates to speak on his show. Customers with unfulfilled orders also brought a class action lawsuit against Larry Bates and his family, seeking to recover the value of their investments.

In 2015 and 2016, the Government brought the following charges against the defendants: twenty-eight counts of mail fraud, seventeen counts of wire fraud, and one count of conspiracy to commit mail and wire fraud against Larry Bates; thirteen counts of mail fraud, three counts of wire fraud, and one count of conspiracy to commit mail and wire fraud against Chuck Bates; five counts of mail fraud, three counts of wire fraud, and one count of conspiracy to commit mail and wire fraud against Bob Bates; and two counts of aiding and abetting wire fraud and one count of conspiracy to commit mail and wire fraud against Kinsey Bates. After a joint jury trial, the defendants were convicted of all charges. For the purposes of this appeal, the following portions of the trial and sentencing are relevant.

A.

Chuck, Bob, and Kinsey Bates moved to sever their trials from that of Larry Bates. Before trial, their argument for severance was that Larry Bates possessed exculpatory information that they would be unable to present in a joint trial if Larry Bates were to exercise his Fifth Amendment right against self-incrimination. The district court denied severance on that ground.

Larry Bates testified during trial, and the defendants accordingly revised their reasons for requesting severance....

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