USA. v. Hanley

• Citation: 190 F.3d 1017
• Decision Date: 08 September 1999
• Docket Number: No. 98-10011,No. 98-10294,No. 98-10010,No. 98-10012,98-10010,98-10011,98-10012,98-10294
• Parties: (9th Cir. 1999) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. CARL R. HANLEY, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee, v. RANDALL E. MOORE, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee, v. WILLIAM B. SCOTT, JR., Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JOHN WILLIAM FRY, Defendant-Appellant
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1017

190 F.3d 1017 (9th Cir. 1999)

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. CARL R. HANLEY, Defendant-Appellant.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. RANDALL E. MOORE, Defendant-Appellant.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. WILLIAM B. SCOTT, JR., Defendant-Appellant.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JOHN WILLIAM FRY, Defendant-Appellant.

No. 98-10010 No. 98-10011 No. 98-10012 No. 98-10294

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted August 9, 1999

Decided September 8, 1999

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Anthony P. Sgro, Patti & Sgro, Las Vegas, Nevada; Curt Obront and Paul A. McKenna, McKenna & Obront, Coconut Grove, Florida; David J. Kramer, Novi, Michigan, for the defendants-appellants.

Daniel S. Goodman, U.S. Department of Justice, Criminal Division, Appellate Section, Washington, D.C., for the plaintiff-appellee.

Appeals from the United States District Court for the District of Nevada; Edward C. Reed, Jr., District Judge, Presiding. D.C. No. CR-95-00312-ECR.

Before: John T. Noonan, David R. Thompson, and Susan P. Graber, Circuit Judges.

GRABER, Circuit Judge:

In this consolidated appeal, defendants Carl R. Hanley, Randall E. Moore, William B. Scott, Jr., and John William Fry appeal from their convictions and sentences for wire fraud, conspiracy to commit wire fraud, and money laundering. Defendants' convictions stem from their operation of a fraudulent telemarketing enterprise, Legendary Concepts, Inc. We affirm.

FACTUAL AND PROCEDURAL HISTORY

I. FACTUAL HISTORY

Our recitation of facts is governed by the principle that the evidence introduced at trial must be viewed in the light most favorable to the government. See United States v. Lothian, 976 F.2d 1257, 1259 (9th Cir. 1992).

Defendants Hanley, Moore, and Scott were the owners and officers of Legendary Concepts, a telemarketing company located in Las Vegas, Nevada. Hanley was the President ofthe company and had primary responsibility over its sales force; Moore was the company's Secretary and oversaw its shipping department; and Scott was the company's Treasurer and was in charge of the company's financial matters. Although each owner had primary responsibility for a particular segment of the company, each owner was active in all aspects of the company's operations and management. Defendant Fry was a salesperson at Legendary Concepts, who trained other telemarketers and assisted them in completing sales.

Beginning in February of 1993, Defendants embarked on a scheme to defraud individuals throughout the United States. Legendary Concepts' sales personnel called people, who previously had responded to direct mail offerings, to persuade them to buy exorbitantly overpriced products, such as cosmetics, cleaning supplies, fire safety kits, Fisher "space" pens, and "Say no to drugs" promotional goods. The price of those goods far exceeded what Legendary Concepts paid for them. For example, the "Say no to drugs" product package, which included such low-cost items as Frisbees, baseball caps, rulers, calculators, and desk clocks, was sold by Legendary Concepts for between $1,299 and $3,999. The Fisher "space" pens, which Legendary Concepts had acquired for $7.70 each, sold for $159.95. From March 1993 to November 1995, Legendary Concepts took in a total of $13.1 million from its customers. During that same period, the company spent only $53,000 on prizes for its contest "winners."

Legendary Concepts' telemarketers used a sales pitch designed to convince customers that they had to buy the company's products to win a "valuable" prize. In one promotion, Legendary Concepts "guaranteed" customers that they would win one of five "valuable" prizes. The prizes included $3,000 in cash, a Whirlpool appliance package, a "limited edition artwork," $5,000 in cash, and a brand new Ford Taurus. Telemarketers told each customer that the prize would be selected randomly by a computer. In reality, the customers would always "win" the least valuable award, or a "gimme gift." In the promotion described above, the "gimme gift " was the "limited edition artwork," a framed lithograph by Jane Wooster Scott for which Legendary Concepts had paid less than $75 apiece. Other "gimme gifts" included poor-quality stereos, home video systems, and watches, none of which compared in value to the other prizes offered in the promotion.

Once a year, Legendary Concepts awarded to certain customers the "real" prizes, such as the cash awards or the Ford Taurus, but not by random computer selection. Instead, either an employee of the company or the owners themselves picked the winner, who was always a customer who had purchased a substantial amount from the company.

Legendary Concepts' standard sales pitch was deceptive in three ways. First, the sales pitch misrepresented the method by which Legendary Concepts selected "prizes" and "winners." Second, it led customers to believe that they had to buy the company's products in order to receive a "valuable" prize. Although the sales pitch included an initial disclaimer notifying customers that they were "under no obligation to make a purchase," a number of customers testified that Legendary Concepts' sales personnel had told them, or had led them to believe, that they had to buy products to win a prize or that their odds of winning a prize would improve if they made a purchase.

Third, the sales pitch was deceptive because, as one former employee testified, it was "designed to make the customer think that they're going to receive something better than what they're going to receive." In other words, the sales pitch led customers to believe that the "valuable" prize that they had won would be worth more than the amount of money that the customer paid for the products. As noted, this impression was not true.

II. PROCEDURAL HISTORY

In March of 1996, a grand jury returned a 39-count indictment against Defendants and others. Count 1 of the indictment alleged that, from February 22, 1993, to September 14, 1995, each Defendant had engaged in a conspiracy to commit wire fraud, in violation of 18 U.S.C. S 371. Counts 2 through 22 charged Hanley, Moore, and Scott with 21 instances of wire fraud, in violation of 18 U.S.C. S 1343; Fry was charged in three of those counts (Counts 5, 11, and 22). The remaining counts of the indictment charged Hanley, Moore, and Scott with 17 instances of laundering of monetary instruments, in violation of 18 U.S.C. S 1957.

After a month-long trial, the jury returned guilty verdicts against all Defendants on all counts. The district court sentenced Hanley, Moore, and Scott each to 121 months' imprisonment and defendant Fry to 46 months' imprisonment. Defendants bring this timely appeal.

DISCUSSION

I. THE WIRE-FRAUD COUNTS

Defendants first claim that there was insufficient evidence to support their convictions for wire fraud and conspiracy to commit wire fraud. In advancing that argument, Defendants also assert that the district court committed several legalerrors in interpreting the substantive law relating to proof of wire fraud.

"We review the sufficiency of the evidence by viewing it in the light most favorable to the prosecution and asking whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." United States v. Blitz, 151 F.3d 1002, 1006 (9th Cir.), cert. denied sub nom., Marie v. United States, 119 S. Ct. 567 (1998) (internal quotation marks and citation omitted) (emphasis in original). We review de novo the district court's interpretation of criminal statutes. See United States v. Mirabella, 73 F.3d 1508, 1515 (9th Cir. 1996) (reviewing de novo whether a money-laundering statute requires "tracing" to prove a violation).

A. Requirements to Prove Wire Fraud

First, each Defendant (except Fry) asserts that his convictions cannot stand as a matter of law, because he personally did not make any fraudulent statements to any customer over the wires. Defendants further contend that they cannot be held vicariously liable for the fraudulent statements of the company's telemarketers. Defendants' arguments are foreclosed by the well-established law of this circuit.

This court has made clear that, in cases involving mail and wire fraud, "[t]he defendant need not personally have mailed the letter or made the telephone call; the offense may be established where one acts with the knowledge that the prohibited actions will follow in the ordinary course of business or where the prohibited acts can reasonably be foreseen." Lothian, 976 F.2d at 1262. We have explained further that coschemers in a scheme to defraud may be held vicariously liable for the acts of their co-schemers. See id. "Because an essential element of [mail and wire fraud] is a fraudulent scheme, [those offenses] are treated like conspiracy in several respects . . . . Like co-conspirators, `knowing participants in the scheme are legally liable' for their co-schemers' use of the mails or wires." Id. at 1262-63 (citation and internal quotation marks omitted). Thus, contrary to their assertions, Defendants cannot escape liability merely because they themselves did not pick up the telephone and make fraudulent statements to Legendary Concepts' customers.

Second, Defendants argue that their convictions must be reversed, because the government failed to prove that they had devised a scheme reasonably calculated to deceive persons of ordinary prudence and comprehension. See Pelletier v. Zweifel, 921 F.2d 1465, 1498-99 (11th Cir. 1991) (stating that rule). However, the law of this circuit does not require such a showing. In this circuit, "[i]t is immaterial whether only the most gullible would have been deceived" by thedefendants' scheme. Lemon v. United States, 278 F.2d 369, 373 (9th Cir. 1960). In Lemon, this court observed that the wire-fraud statute "protects the naive as well as...