United States v. Lewis
| Decision Date | 08 December 2014 |
| Docket Number | No. 14–10119.,14–10119. |
| Citation | 774 F.3d 837 |
| Parties | UNITED STATES of America, Plaintiff–Appellee v. David Kevin LEWIS, also known as David Shane Lewis, also known as “DW”, Defendant–Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Joseph Michael Revesz, Assistant U.S. Attorney, James Nicholas Bunch, Esq., Assistant U.S. Attorney, James Wesley Hendrix, Assistant U.S. Attorney, U.S. Attorney's Office, Dallas, TX, for Plaintiff–Appellee.
Edgar A. Mason, Esq., Robert T. Baskett, Dallas, TX, for Defendant–Appellant.
Appeal from the United States District Court for the Northern District of Texas.
Before KING, DENNIS, and CLEMENT, Circuit Judges.
David Kevin Lewis challenges his convictions for one count of conspiracy to commit securities fraud and twenty-three counts of securities fraud. For the following reasons, we AFFIRM the convictions.
David Kevin Lewis was indicted alongside co-defendant Bruce Kyle Griffith on one count of conspiracy in violation of 18 U.S.C. § 371 and twenty-three counts of securities fraud and aiding and abetting in violation of 15 U.S.C. §§ 77q(a), 77x, and 18 U.S.C. § 2. Thomas Markham, another co-defendant, was indicted on one count of conspiracy.
Lewis and Griffith co-founded Always Consulting, Inc. (“ACI”), after meeting at a halfway house in 2003. Lewis had previously been convicted of securities and mail fraud in connection with oil and gas offerings. Griffith had several prior convictions, including convictions for bank robbery. Lewis served as chairman and director of field operations of ACI, and testimony at trial established that he was generally in charge of running the company. Although Griffith served as President and CEO, Lewis hired and fired all personnel at ACI. While Griffith was the signatory on all of ACI's accounts, Lewis had to approve all checks. Further, Lewis was responsible for training all of ACI's sales force. Markham was the chief—and only—geologist at ACI.
ACI sold interests in the Rattlesnake Springs Drilling Program—an oil and gas drilling project on the Osage Indian Reservation in Oklahoma—to members of the public. ACI offered thirty-five units of interest in the program at a cost of $100,285.71 per unit, for a total of $3,509,999.80. These interests were sold to the public by two groups of salespeople: fronters and closers. Fronters made the initial contact with investors through cold calls; closers handled the later contacts to convince potential investors to buy an interest in the project. Lewis wrote the scripts used by the fronters and closers. These scripts contained several misrepresentations. For example, they stated that there was already pipeline infrastructure for the Rattlesnake Springs Program in place, when in reality such pipeline infrastructure was not in place. Lewis also provided the ACI salespeople with “Do Not Call” lists containing the names of suspected undercover regulators. Furthermore, ACI falsely told investors that investments would be used only for the Rattlesnake Springs wells, and that ACI had special connections within the Osage Nation in Oklahoma, where the mineral leases were supposed to be located.
The case against Lewis was brought to trial in August 2013. Griffith, who had previously agreed with the Government to testify against Lewis in exchange for the possibility of a reduced sentence, testified that Lewis prepared the offering memorandum that became the center of the Government's case at trial. Markham provided additional support for this assertion, testifying that Griffith lacked the knowledge of the oil and gas industry to have prepared it. The offering memorandum was sent out to investors, via interstate carriers. Griffith testified that it contained many assertions that were false. For example, Griffith testified that the offering memorandum falsely stated that he had been in the oil and gas industry since 1985, when he really had at most eight months of experience. The offering memorandum also stated that ACI was profitable, when in reality, it was not. Furthermore, the offering memorandum falsely stated that ACI had already secured millions of dollars of funding for the project. Crucially, the offering memorandum did not disclose Lewis's, Griffith's, or Markham's prior criminal convictions.
The indictment contained twenty-three counts of fraud for twenty-three individual investors; however, only five testified at trial. The testifying investors all stated that, had they known of Griffith's lack of experience or Lewis's and Griffith's criminal histories, they would not have invested with ACI. For the non-testifying investors, the Government entered into evidence each of their checks and the signature page of their participation agreements. Lewis testified in his own defense, asserting that he was a mere employee and that he resigned his management role within ACI in 2004 when he found out that Griffith intended to sell interests in ACI's oil and gas projects to the public. Lewis also testified that he had no involvement with orchestrating the Rattlesnake Springs Drilling Project. In rebuttal, the Government introduced a document, identified as GX115, dated September 5, 2006. GX115 purported to remind employees that Lewis was going to hold a meeting that Friday and “every Friday going forward.” The document indicates that Lewis had a supervisory role over the salespeople at ACI.
On September 4, 2013, the jury found Lewis guilty on all counts. The district court denied Lewis's motion for a judgment of acquittal and for a new trial. Lewis timely appealed the denial of the motion for judgment of acquittal.
Lewis challenges the sufficiency of the evidence presented at trial to support his convictions for both conspiracy to commit securities fraud, in violation of 18 U.S.C. § 371, and those counts of his substantive securities fraud conviction for which the named victim did not testify, in violation of 15 U.S.C. §§ 77q(a), 77x.
This court reviews “de novo the district court's denial of a properly preserved motion for judgment of acquittal.” United States v. Fuchs, 467 F.3d 889, 904 (5th Cir.2006). We review a challenge to the sufficiency of the evidence supporting a conviction by reviewing “all evidence in the light most favorable to the verdict to determine whether a rational trier of fact could have found that the evidence established the essential elements of the offense beyond a reasonable doubt.” United States v. Harris, 740 F.3d 956, 962 (5th Cir.2014) (internal quotation marks omitted). In determining whether there is sufficient evidence to support a verdict, “this court asks only whether the jury's decision was rational, not whether it was correct.” United States v. Rodriguez, 553 F.3d 380, 389 (5th Cir.2008). We must accept “all credibility choices and reasonable inferences made by the trier of fact which tend to support the verdict.” United States v. Moreno–Gonzalez, 662 F.3d 369, 372 (5th Cir.2011) (internal quotation marks omitted). “The evidence need not exclude every reasonable hypothesis of innocence or be wholly inconsistent with every conclusion except that of guilt, and the jury is free to choose among reasonable constructions of the evidence.”Fuchs, 467 F.3d at 904 (internal quotation marks omitted).
Lewis argues that there was insufficient evidence to convict him of securities fraud on the counts for which the government did not call the victim-investor: counts 3–4, 6, 8–15, 17–18, 20–22, and 24 (the “Challenged Counts”). More specifically, he argues that there was insufficient evidence to prove that he had any contact with the investors in those counts of the indictment. He also argues that, because none of the investors in the Challenged Counts testified, there was insufficient evidence to prove that the scheme to defraud had an impact on those investors. As explained below, viewing the evidence in the light most favorable to the guilty verdict, we find that there was sufficient evidence for a “rational trier of fact [to] have found that the evidence established the essential elements of the offense beyond a reasonable doubt.” Harris, 740 F.3d at 962.
In order to prove securities fraud, the Government must show: (1) the offer or sale of securities; (2) “by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly,” and (3) one of the varieties of fraudulent conduct in the statute.1 15 U.S.C. § 77q.
This court has previously established that “[s]pecific reliance by the investor” on the fraudulent scheme or fraudulent statements need not be shown. United States v. Ashdown, 509 F.2d 793, 799 (5th Cir.1975). Rather, the Government must show that the defendant's scheme had “some impact ... on the investor and that the mails were used in those instances where the impact occurred.” Id. (quoting United States v. Schaefer, 299 F.2d 625, 629–30 (7th Cir.1962) ). In Ashdown, we held that the mailing of stock certificates or confirmations of purchase in the mail was sufficient evidence to show an impact of the scheme on investors. Id. However, in Ashdown, unlike here, each victim-investor testified that he or she was “influenced either by the misleading shareholder literature, including the annual report, or by [one of the co-defendant's] representations.” Id.
Lewis argues that there was insufficient evidence to prove that he had ever promoted the Rattlesnake Springs offering to the non-testifying investors. Accordingly, he asserts that the Government failed to prove that the scheme to defraud had an impact on the investors in the Challenged Counts. He explains that the decision to invest could have been prompted by ACI's fronters or closers, thus, indirectly arguing that the Government has failed to prove that he was responsible for having an impact on the decision to invest by the investors in the Challenged Counts. Howev...
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