Submitted: October 8, 2014.
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Appeals from United States District Court for the District of Minnesota - St. Paul.
For United States of America, Plaintiff - Appellee (13-1163): David J. MacLaughlin, Assistant U.S. Attorney, Tracy Lynne Perzel, Assistant U.S. Attorney, U.S. Attorney's Office, Minneapolis, MN.
Gerald Joseph Durand, Defendant - Appellant (13-1163), Pro se, Milan, MI.
For Gerald Joseph Durand, Defendant - Appellant (13-1163): Brian N. Toder, Chestnut & Cambronne, P.A., Minneapolis, MN.
For United States of America, Plaintiff - Appellee (13-2603): David J. MacLaughlin, Assistant U.S. Attorney, Tracy Lynne Perzel, Assistant U.S. Attorney, U.S. Attorney's Office, Minneapolis, MN.
Patrick Joseph Kiley, Defendant - Appellant (13-2603), Pro Se, Rochester, MN.
For Patrick Joseph Kiley, Defendant - Appellant (13-2603): John William Lundquist, Kevin C. Riach, Fredrikson & Byron, Minneapolis, MN.
For United States of America, Plaintiff - Appellee (13-1162): David J. MacLaughlin, Assistant U.S. Attorney, Tracy Lynne Perzel, Assistant U.S. Attorney, U.S. Attorney's Office, Minneapolis, MN.
For Jason Bo-Alan Beckman, Defendant - Appellant (13-1162): Douglas Altman, Altman & Izek, Minneapolis, MN.
Jason Bo-Alan Beckman, Defendant - Appellant (13-1162), Pro se, Pekin, IL.
Before RILEY, Chief Judge, WOLLMAN and BYE, Circuit Judges.
RILEY, Chief Judge.
Five players in a partial Ponzi scheme received over $193 million from unsuspecting investors. Trevor Cook and Christopher Pettengill pled guilty, and defendants Jason Bo-Alan Beckman, Gerald Durand, and Patrick Kiley proceeded to trial. After a twenty-nine day trial, a jury found the defendants guilty on all counts, including fraud, conspiracy, and money-laundering, and the district court sentenced each to decades in prison. The defendants appeal their convictions and sentences. We affirm.
" We present the facts in a light most favorable to the verdicts, drawing all reasonable inferences from the evidence that support the jury's verdicts." United States v. Ramon-Rodriguez, 492 F.3d 930, 934 (8th Cir. 2007). From July 2006 through September 2009, the defendants' partial Ponzi scheme received over $193 million from hundreds of investors. Only $49 million was returned to some investors, all of which came from new investors' money. Some investors lost their life savings. The five schemers profited in varying amounts: $12.2 million for Cook; $4.8 million for Beckman; $4.3 million for Pettengill; $1.9 million for Durand; and $432,000 for Kiley.
The schemers induced victims to invest in various entities they created, many named either with the initials " UBS" (UBS entities) or the word " Oxford" (Oxford entities). According to SEC accountant Scott Hlavacek, the schemers described a " currency program" to potential investors leading investors to believe " they would be investing in foreign currency trading, which was guaranteed and . . . had a . . . fixed rate every month." Some of the money " was actually invested in foreign currencies," but none of the money was " invested in a completely safe, secure, and guaranteed currency product," as the defendants promised.
For example, Beckman's firm, " Oxford Global Advisors," which was " one of the . . . primary recipients of investor funds" in the scheme, stated in a solicitation brochure that its " Federal Funds Income Advantage" program had a current annual yield of 12% and promised " instant liquid[ity]" and " zero fluctuation of principal." Each investor's account would be " segregated" --" not co-mingled [sic] with the general assets of the custodian, bank or dealer," and funds would be invested in various foreign currencies and then traded for gain depending on favorable interest rates. Beckman told his victims they could not lose money in the currency program--the investment was " risk-free" and " completely safe" --and that it was a " fixed income product" " that delivers this safe 10 to 12 percent return on your money." Beckman also falsely inflated his own credentials. For example, Beckman claimed to be " in the top-ranked tier of portfolio managers per a Morningstar comparative study," a study and ranking that did not exist. One victim testified this false credential " factored into [her] decision to make this investment."
Beckman claims it was only in April 2008 that he learned the investors' money in the currency program was not held in segregated accounts but was pooled together. Yet, Beckman still obtained another $24 million of investors' money for the currency program. For the period August 2006 to July 2009, Beckman's personal clients invested more than $47 million.
At trial, a securities executive, Donald Bizub, who had a professional relationship with Beckman, testified that in August 2008 he had seen " an ad on an Oxford related page talking about a fixed income investment paying I believe it was 10 and a half percent guaranteed." Bizub was concerned because " typically when you see ads like this, there's always an asterisk with a whole bunch of disclaimer at the bottom; and [he did not] see an asterisk or any disclaimer." Bizub clicked a link on the website and sent an email with the subject line, " How's 10.5% fixed return sound," and requested, " Please tell me more about this investment." Beckman's colleague, Gene Walden, forwarded Bizub's email to Beckman, stating, " Just got this--he must have seen this in our e-newsletter on the web site."
Beckman forwarded the email to Cook, writing, " Now the ship begins to sink. This is not good. I will needless to say take care of it, I just wanted you to know." Cook wrote back to Beckman, " I am very sorry about this. . . . I think the good news is that . . . we can blame it on a trainee sales rep who was fired . . . say nothing he did was approved . . . also say we have opinion letters from attorneys about the product . . . . So please see me if you would like any ammunition to respond . . . . Individually managed accounts is very im[p]ortant . . . remember this bullet point." Even after the ship began to sink, Beckman still solicited over $12 million in additional investor funds into non-segregated accounts.
Some of the victims learned of the currency program through Gerald Durand's radio shows, " Expand Your Wealth" and " Wealth Survival" --on which Beckman was a guest. Durand also solicited investors by advertising " educational workshop[s]," stating he and " UBS Diversified, which manages over 2 billion dollars in assets," could advise how to " double your money in less than 5 years" and " earn 15% per year with no risk." Durand testified at a hearing in a related civil case that Cook chose the name " UBS Diversified" " to confuse people." For example, Beckman emailed to one of his investors that the " fixed income alternative" would yield " 12% for 12 months and [was] backed by UBS (not someone we met on the street)," and the investor was led to believe " UBS" meant the Union Bank of Switzerland. Beckman's brochure included the genuine UBS logo on the last page, along with several other investment banks. Durand testified the schemers stopped using the fund name " UBS" after the Swiss bank sued them.
One investor victim testified that after listening to Durand's radio show, he attended six or seven seminars where " the emcee would kick things off . . . and say that these are some of the most brilliant people that he knows in the financial industry . . . and then . . . he would have . . . Jerry Durand come up and give a little spiel for 15 minutes, then [Jason] Beckman, then Trevor Cook, and they would all give their deal . . . . I thought these people were the best and the brightest. And I'm usually a very conservative type person and they really sold me." The investor and his family lost over $370,500.
Durand, who was also " Managing Director" of Oxford Global Advisors, placed his name on a UBS Diversified version of the " Federal Funds Income Advantage" brochure, which promised " [i]nterest rates . . . [c]redited at 12% annually" and stated, " The entire contents of this brochure is solely the responsibility of UBS Diversified. . . . For more information, please contact Gerald J. Durand." Durand wrote an investor that UBS Diversified's customer funds were " insured by measures enacted by the Federal Government" and " held in segregated accounts," and that Durand's " people" at the firm were licensed brokers. Based on Durand's representations that the investor's funds would be held in a segregated account and the principal could not be lost, the investor mortgaged his home, entrusted the proceeds and more to Durand, and lost several million dollars.
Kiley also had a radio show, " Follow the Money." Kiley's radio show was broadcast on a Christian radio station, and Kiley described himself as a Christian man--" he always closed his broadcast with a prayer." One of Kiley's early investors, Duke Thietje, stated this " ha[d] an impact on [his] investment decision" because [Thietje] was " a person of the Bible [him]self [and] wanted someone who was of personal integrity." On the radio, Kiley gave a phone number that listeners could call for more information--Kiley would then talk with the caller and send brochures from " UBS," claiming it was a " registered financial advisory firm." While telling potential investors their funds would be kept in segregated accounts, Kiley personally deposited many investors' funds into the same account and also wrote checks to satisfy occasional withdrawal requests.
Kiley's radio show also suggested listeners consult his website, www.patkiley.com, where he lied about his own credentials, stating he was " an independent financial analyst for a multi billion dollar corporation" and " [h]is clients range from top international funds and banks to the everyday investor." Kiley's website advertised
" The Wealth Management Group" that " currently oversees several billions in assets" and " provides individual investors access to arbitrage," known as " a risk-less transaction" with " individually segregated" customer accounts that are " totally liquid." Kiley told Thietje " the funds would be traded in foreign currencies and it was a rather successful program, having stops and so on, so there would be little chance to really lose a large amount." Thietje testified Kiley's representation of " complete safety" for his funds " was the most determining factor" in his decision to invest with Kiley. Thietje stated Kiley's representations led him to conclude his funds " would be safer in the program than with [his] bank." Thietje lost approximately $340,000. Undeterred after Thietje's loss, Kiley and his representatives repeated the same promises on his radio show, his website, and in brochures and letters to currency program investors who lost their investments just as Thietje did. Kiley " was a money machine" who " brought in the vast majority" --about two thirds--of the money invested in the currency program.
B. Procedural History
A jury found the defendants guilty on all counts charged against them in a second superseding indictment (indictment). As relevant to this appeal, all three defendants were convicted of committing or aiding and abetting the commission of wire fraud or mail fraud in violation of 18 U.S.C. § § 2, 1341, and 1343; conspiracy to commit mail fraud and wire fraud in violation of 18 U.S.C. § 1349; and money laundering in violation of 18 U.S.C. § § 2 and 1957. Beckman, individually, was also convicted of committing or aiding and abetting the commission of wire fraud regarding his interactions with elderly victims Charlotte and Raymond Olson in violation of 18 U.S.C. § § 2 and 1343; committing or aiding and abetting the commission of mail fraud, regarding his attempt to purchase an interest in the Minnesota Wild hockey team of the National Hockey League (NHL) in violation of 18 U.S.C. § § 2 and 1341; and filing false tax returns in 2007 and 2009 and tax evasion in 2008 in violation of 26 U.S.C. § § 7201 and 7206(1). The district court sentenced Beckman to 360 months imprisonment and Durand and Kiley to 240 months imprisonment.
A. Evidentiary Rulings
" We review evidentiary rulings of a district court for abuse of discretion, giving substantial deference to the district court's determinations. This court may reverse only if an error 'affects the substantial rights of the defendant' or has 'more than a slight influence on the [jury's] verdict.'" United States v. Manning, 738 F.3d 937, 942 (8th Cir. 2014) (alteration in original) (internal citations omitted) (quoting United States v. Yarrington, 634 F.3d 440, 447 (8th Cir. 2011)).
1. Federal Rule of Evidence 404(b)
" Evidence of a crime, wrong, or other act is not admissible to prove a person's character in order to show that on a particular occasion the person acted in accordance with the character." Fed.R.Evid. 404(b)(1). But " [t]his evidence may be admissible for another purpose, such as proving motive, opportunity, intent, preparation, plan, knowledge, identity, absence of mistake, or lack of accident." Id. 404(b)(2). To be admissible at trial, prior acts must:
(1) be relevant to a material issue raised at trial, (2) be similar in kind and close in time to the crime charged, (3) be supported by sufficient evidence to support a finding by a jury that the defendant
committed the other act, and (4) not have a prejudicial value that substantially outweighs its probative value.
United States v. Turner, 583 F.3d 1062, 1066 (8th Cir. 2009). We review the district court's Rule 404(b) decisions for abuse of discretion. See id. at 1065.
Beckman claims the district court improperly admitted several pieces of damaging character evidence. First, Beckman admits he was " involuntarily disenrolled" from the Air Force Academy " for lying." Second, the government stated it intended to introduce evidence that Beckman purportedly forged his mother's signature on two student loan applications. The district court granted Beckman's motion in limine to exclude both lines of inquiry but stated in the order--and again before Beckman took the stand--that the government could introduce the evidence " for impeachment purposes." On Beckman's cross-examination, the district court properly admitted both pieces of evidence under Federal Rule of Evidence 608(b). See Rule 608(b)(1) (" [T]he court may, on cross-examination, allow [specific instances of conduct] to be inquired into if they are probative of the character for truthfulness or untruthfulness of . . . the witness." ); cf. Rule 404(b)(2).
Finally, at trial, Beckman's mother stated that around 2002, she sued him as personal representative of his grandfather's estate after he (1) mortgaged his grandfather's house to pay his own debts; (2) pocketed the profit from the later sale of the house; and (3) failed to distribute other assets--testimony Beckman also had attempted to exclude with a motion in limine. Beckman complains the district court erred by admitting this Rule 404(b) evidence because the events were remote in time and the evidence could have had " an incendiary effect." Although the evidence was relatively remote, the government examined Beckman's mother on these points to refute Beckman's statement to the NHL that he invested the principal of his grandfather's estate for the benefit of his mother. The evidence was directly relevant to the charges against Beckman of defrauding the NHL, and " '[t]his court gives great deference to the district court's weighing of the probative value of evidence against its prejudicial effect.'" United States v. Gant, 721 F.3d 505, 510 (8th Cir. 2013) (quoting United States v. Tyerman, 701 F.3d 552, 563 (8th Cir. 2012)); see Fed.R.Evid. 403. The district court did not abuse its discretion in admitting Beckman's mother's testimony.
In a pretrial order, the magistrate judge required the government to disclose any Rule 404(b) evidence " no less than thirty days before trial." The " government's trial memorandum, 404(b) notice, motions in limine and memorandum in support thereof," filed March 6, 2012, stated, " The trial evidence will show that Trevor Cook and Gerald J. Durand and their associates -- the people running the currency program that Mr. Beckman repeatedly promoted as a principal-protected, legitimate, prudent investment -- routinely drank alcohol and/or used drugs at the mansion to the point of morbid intoxication." This sentence was included in a section of the document that addressed Beckman, not Durand, and did not specifically refer to Rule 404(b). As such, Durand claims he was not given notice as required by the magistrate judge, even though trial began on April 19, 2012, more than thirty days after the government filed its notice. While the government did not include the challenged drug information under a 404(b) heading specifically addressed to
Durand, the document still gave Durand notice of the evidence the government intended to introduce, effectively satisfying the magistrate judge's order.
At trial, the government introduced witness Stephanie Bolton, Durand's former assistant. Bolton testified, over Durand's objection, she would smoke marijuana at the currency program place of business three to four days a week, on a daily basis Durand would interact with clients " when he was stoned," and Durand knew Cook conducted business while drunk. Durand now argues the district court erred by allowing the testimony. See Fed.R.Evid. 401, 403, 404(b).
After Bolton's testimony, a juror advised the district court the juror, too, smoked marijuana, and he may have been " more sympathetic to" Durand. The district court removed the juror on the government's motion. Later, Durand moved to voir dire the remaining jury members as to marijuana use, which the district court denied. Durand appeals this decision as well.
The district court did not abuse its discretion by declining to ask already impanelled jurors questions about their views concerning illegal drug use on the seventh day of a lengthy, complicated trial. Durand was on notice from the government's trial brief that it intended to introduce such evidence, so Durand could have filed a motion to ask such questions himself on voir dire before the jury's impanelment. While it may strain credulity to imagine this drug and alcohol evidence was necessary to the government's case, we reverse " 'only when the evidence clearly had no bearing on the case and was introduced solely to show defendant's propensity to engage in criminal misconduct.'"
Gant, 721 F.3d at 509 (quoting United States v. Farish, 535 F.3d 815, 819 (8th Cir. 2008)). The district court did not abuse its considerable discretion in evidentiary matters by allowing the marijuana testimony.
2. Hypothetical Questions
Beckman objects to what he calls the government's use of " guilt assuming hypotheticals" during trial. See United States v. Barta, 888 F.2d 1220, 1224-25 (8th Cir. 1989) (holding the district court erred by allowing " questions premised on an assumption of guilt" ). Beckman objected to two such questions early in the trial, but admits he opted not to object to the questions he challenges on appeal because " further objections would only highlight [the issue] for the jury." We now review for plain error. See United States v. Big Eagle, 702 F.3d 1125, 1130 (8th Cir. 2013). " Under plain error review," Beckman " must show 'that the district court committed an error that is clear or obvious, that the error affected his substantial rights, and that the error seriously affects the fairness, integrity, or public reputation of judicial proceedings.'"
Id., (quoting United States v. Troyer, 677 F.3d 356, 358-59 (8th Cir. 2012)).
The district court did not err, plainly or otherwise, by allowing what Beckman describes as the hypothetical questions. First, Beckman does not adequately develop an argument about most of the challenged hypothetical questions, merely re
citing them in footnotes and conclusively stating the questions assume guilt, so we do not address the undeveloped challenges here. See Fed. R. App. P. 28(a)(8)(A); Rotskoff v. Cooley, 438 F.3d 852, 854 (8th Cir. 2006) (declaring an argument waived when not developed in appellate brief).
Beckman does argue the district court clearly erred by allowing the following line of questioning of Jitesh Mehta, who worked as an unlicensed broker for Beckman:
Q. I want to call your attention to the date here. The date of this e-mail is October 21, 2008; is that correct?
A. That's correct.
Q. Prior to this time had Mr. Beckman indicated to you at all that in August of 2008 he was told that this was a Ponzi ...