Ponzi-scheme Defendants Lose on Most Issues

U.S. v. Lewis, 2010 WL 481282 (2/12/10) (Published) - The offense was a classic Ponzi scheme. The 10th found insufficient evidence of a few counts of wire and security fraud because the government cited no evidence that the person pitching the fake investments knew she was lying and no evidence the defendant caused her to lie. Interestingly, the 10th says that maybe there is such evidence in the record, but it was not going to bother to "scour without guidance the voluminous record for that evidence." There was, however, sufficient evidence for other counts, even though the victim did not testify.

It was okay for the district court to admit 16 boxes of bank records through a declaration by a records custodian, pursuant to Fed. R. Evid. 902(11). While the notice of authentication was only given 12 days before trial, the defense had access to the boxes for years. Any lateness in the pretrial disclosure of witnesses and exhibits, concerning which the defendant has no right, did not prejudice the defendant. Rule 1006 did not require disclosure of the database the government used to aid in preparing the exhibit summarizing the documents. It only requires access to the summarized documents, which the defendant had. The 10th caustically says: "Apparently misunderstanding what hearsay is, the defendant fails to point to any hearsay admitted by the court." False statements of co-conspirators were not hearsay because they were not introduced for the truth of the matter asserted, but actually the government meant to prove the statements were false. The 10th thought it was fair to rule on that basis, even though the government never raised the non-hearsay claim below, because the record clearly established the admissibility of the statements. With respect to other alleged hearsay statements, the defendant just cited to a transcript page without saying what the objectionable statement was. The 10th says: "He apparently invites us to examine each statement on the cited pages to determine whether it was in fact hearsay. We decline his invitation. We will save our resources for properly framed arguments." Ouch. The better explanations in the reply brief came too late. The 10th found no "holistic" fundamental unfairness, which requires a shocking of the conscience. "The court's conscience is at peace," the 10th concludes.

An aiding and abetting conviction is okay, even though there was no allegation of such in the indictment. The defendant was not entitled to a Franks hearing, because, while he alleged certain omissions in the warrant affidavit, he never alleged the missing information was intentionally or recklessly omitted.

There was no procedural error in imposing a 330-year sentence on one defendant. The court properly decided the defendant had not proffered a significant justification for a major variance to 25 years, did consider the defendant's health and the fact that the defendant was 72 years old and could not determine if the defendant's sentence created an unwarranted disparity with other financial-crime defendants because the defendant only noted the financial-crime defendants' names, offenses and sentences, but not the facts of their cases. The sentence was substantively reasonable. The district court didn't have to give equal weight to all factors. Here the district court could give more weight to the heinous nature of the offense: stealing over 43 million dollars with ruinous consequences for hundreds, including"the elderly, infirm and disabled."

The other defendant could not meet the plain error standard because he could not show that on remand the district court would certainly not impose the enhancement for violating a cease-and-desist order. And, besides, the evidence indicated the defendant did know about the order. Finding of facts by a preponderance with respect to acquitted conduct is just fine. The amount of foreseeable loss was properly calculated based on reliable evidence.