United States v. Ramer, s. 15-6014/6402/16-5356
| Decision Date | 26 February 2018 |
| Docket Number | Nos. 15-6014/6402/16-5356,s. 15-6014/6402/16-5356 |
| Parties | UNITED STATES of America, Plaintiff–Appellee, v. Henry Irving RAMER (15-6014 & 15-6402); John G. Westine, Jr. (16-5356), Defendants–Appellants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
ARGUED: David J. Guarnieri, MCBRAYER MCGINNIS, LESLIE & KIRKLAND, PLLC, Lexington, Kentucky, for Appellant in 15-6014 and 15-6402. Kevin M. Schad, FEDERAL PUBLIC DEFENDER, Cincinnati, Ohio, for Appellant in 16-5356. David B. Goodhand, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: David J. Guarnieri, MCBRAYER MCGINNIS, LESLIE & KIRKLAND, PLLC, Lexington, Kentucky, for Appellant in 15-6014 and 15-6402. Kevin M. Schad, FEDERAL PUBLIC DEFENDER, Cincinnati, Ohio, for Appellant in 16-5356. David B. Goodhand, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., Charles P. Wisdom, Jr., Kenneth Taylor, Neeraj K. Gupta, UNITED STATES ATTORNEY'S OFFICE, Lexington, Kentucky, for Appellee.
Before: CLAY, GIBBONS, and BUSH, Circuit Judges.
Defendants John Westine and Henry Ramer ("Defendants") appeal their convictions and sentences in their criminal cases involving charges of mail fraud, in violation of 18 U.S.C. § 1341 ; money laundering, in violation of 18 U.S.C. § 1956 ; and securities fraud, in violation of 15 U.S.C. § 78j(b). Defendants were convicted in separate jury trials. For the reasons set forth below, we AFFIRM both convictions and both sentences.
This case involves a group of individuals who schemed to defraud investors through the marketing of a series of spurious oil and gas drilling projects. Prosecutors indicted several individuals in connection with the scheme, including Defendants. The evidence presented at Defendants' trials supports the following timeline of events.
In October 2011, Defendant Westine completed a 235-month sentence following his conviction for securities fraud, whereupon he returned to his home in California. The crime that led to this prior term of imprisonment involved the sale of fraudulent Kentucky oil and gas interests as well as non-existent shares of crude oil from Saudi Arabia. Investors knew Westine by his aliases, John Scott and Michael Fairchild. Westine operated through a company he called TriState Development, and he hired a sales team that worked out of a Los Angeles call center.
Less than a year after Westine was released from prison, he began offering investments in Kentucky oil wells through three companies: Liberty Oil Leasing, Three Star Leasing, and Clementsville Oil & Gas Leasing. The companies published promotional materials claiming that their wells were currently producing oil and would generate a steady stream of royalty payments. These promotional materials highlighted the leadership of "John Scott," a "long-time oil and gas operator" (R. 357 at PageID #3415), and the companies rented virtual office space in Kentucky under the names Michael Fairchild and Michael Ross. Prospective investors were promised that they would receive their "[f]irst monthly check within 90 days." (R. 357 at PageID #3414.) The government refers to the operations of these three companies as "Phase I" of the fraud.
When investors never received royalty checks from the Phase I companies, they began filing complaints with the Kentucky Department of Financial Institutions ("DFI"). DFI investigators concluded that the companies were selling unlawful securities. DFI's investigation culminated in the issuance of a restraining order that, among other things, prohibited the individuals affiliated with the companies from "making offers to sell and selling interests in oil and gas programs." (GEX 57 at 2.)
By this point, Defendant Westine had recruited Defendant Ramer as a partner in his scheme. Together, Defendants began winding down the Phase I companies' operations and transitioning them to three new companies—the start of what the government calls "Phase II." Over the course of the following year, Royal Leasing of Tennessee, Royal Energy of Tennessee, and Royal Energy LLC collected over $2 million from 138 investors. When these investors complained about not receiving royalty payments, "Michael Ross" reassured them, blaming "freakish weather" for delays, telling them he had multiple wells generating 15–20 barrels of oil per day, and promising that checks were forthcoming. (R. 358 at PageID #3934–35, 3948, 3990.) But none of this was true, and investors never received the promised checks.
Meanwhile, Defendant Ramer recruited new investors and persuaded existing investors to double down, sometimes even after they complained. To find new recruits, he oversaw two call centers in California and developed a promotional video that boasted a fictional production capacity of 75 barrels per day. Ramer helped Westine keep track of his many aliases, tutoring him on which identity to use during at least one meeting with Ramer's call center sales staff. For existing investors, Ramer organized a trip so that they could "see[ ] the oil wells" and "smell[ ] the oil." (R. 358 at PageID #3945–46; R. 473 at PageID #6005; R. 474 at PageID #6203.) On this trip, Ramer introduced investors to a third co-conspirator, Mark Cornell, who provided a tour of his JMack Energy oil facility. In reality, this facility was capable of producing only a small amount of oil—nowhere near 75 barrels per day—but it served to create an appearance of legitimacy. During the tour, Cornell even gave the investors jars of oil, purportedly produced by JMack Energy.
Not all the investors were placated. In mid-2014, investor complaints again started to weigh on Defendants. Defendants began to wind down the Phase II companies and to shift operations to a new company called Marathon Leasing. Defendant Ramer also proposed that they form a company called Midwest Leasing "so ... there will not be a link to Marathon or Royal." (GEX 501; see R.476 at PageID #6753–54.) During a period of less than two months, which prosecutors referred to as "Phase III," Defendants collected $242,233 from twelve investors. But before Defendants could fully transition from Phase II to Phase III, prosecutors had Defendant Westine arrested. Upon learning of the arrest, Defendant Ramer directed his associates to "take [out] as much money" as possible from the corporate accounts and send it to him. (R. 356 at PageID #3277; R. 237 at Page ID #1301–02; GEX 371 (audio recording); R.450 at PageID #5507.) Ramer's arrest followed shortly thereafter.
On October 9, 2014, the government indicted two individuals in connection with the scheme, including Defendant Westine. A superseding indictment named additional individuals, including Defendant Ramer. The superseding indictment charged Defendants with 29 counts of mail fraud, in violation of 18 U.S.C. § 1341 ; conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) ; securities fraud, in violation of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5 ; and three forfeiture allegations.
Defendants were tried separately. The government presented overwhelming evidence implicating both Defendants in the scheme, including extensive testimony from oil and gas experts, victims, co-conspirators, and federal investigators. At the conclusion of each trial, a jury found each Defendant guilty of multiple counts of mail fraud, conspiracy to commit money laundering, and securities fraud. The district court sentenced Defendant Westine to 480 months' imprisonment and Defendant Ramer to 156 months' imprisonment.
The government also obtained a conviction for co-conspirator Mark Cornell. In connection with Cornell's sentencing, which took place after Defendants' sentencing, the government submitted evidence that Cornell had conducted a separate criminal securities fraud scheme. The government described a "side deal" that resembled the one for which Cornell, Westine, and Ramer were indicted, but which Cornell conducted on his own. (R. 496 at PageID #7352–57.) An independent team of state investigators discovered Cornell's scheme based on a web page he created to recruit investors.
On September 3, 2015, Ramer filed a Motion for New Trial "pursuant to Brady v. Maryland evidence or, in the alternative, newly discovered evidence pursuant to F.R.C.P. 33." (R. 388 at l.) Westine, who represented himself through the trial, filed several motions that the district court construed as also requesting a new trial. The district court concluded that neither Defendant was entitled to a new trial and denied their motions.
Defendants then filed timely appeals, raising numerous challenges to the trial proceedings. We address each of their challenges in turn.
The government's theory of mail fraud involved allegations that both Defendants failed to disclose material facts to prospective investors, including that Defendant Westine had been convicted in 1992 for "conducting essentially the same oil production scam" and that Defendant Ramer was "the subject[ ] of state regulatory cease and desist orders for selling unregistered securities." (R. 51 at PageID #217–18.) The district court permitted the introduction of prior acts evidence showing that Defendant Westine had indeed been convicted for the fraudulent sale of oil and gas interests. The court also permitted the jury to learn of regulatory actions in California and Arizona that directed Defendant Ramer to cease and desist the sale of unregistered securities.
The government also alleged that Defendants made affirmative misrepresentations to investors regarding the production capacity of their oil wells and the corresponding returns on investment. In their defense, Defendants largely focused on the knowledge and intent elements of mail fraud; they asserted that they were not sophisticated enough to recognize or understand that the representations they made to investors were false or misleading. Westine also...
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