Justia U.S. 8th Circuit Court of Appeals Opinion Summaries

Rodd, an investment advisor who produced and was regularly featured on a Minnesota local radio show, “Safe Money Radio,” was convicted of wire fraud, 18 U.S.C. 1343 and mail fraud, 18 U.S.C. 1341, for swindling 23 investors out of $1.8 million. Rodd used the radio show to market low-risk investment products to gain customers’ trust and maintain a client base for soliciting participants in a fraudulent investment scheme. Rodd solicited money by promising liquidity, safety, and a 60% six-month return. Rodd instead used the money for personal and business expenses, hiding behind false assurances of security and payouts to his early investors. Finding an advisory guidelines range of 70 to 87 months, the district court sentenced Rodd to 87 months in prison, applying a two-level enhancement for abusing a position of trust, U.S.S.G. 3B1.3, The Eighth Circuit affirmed, upholding the finding that Rodd occupied a position of trust. As a self-employed investment advisor, Rodd was subject to no oversight except by his investors. The discretion and control he possessed over client funds adequately supported the finding. The court did not err in failing to apply a two-level acceptance-of-responsibility reduction. Rodd took his case to trial and denied his guilt to the end. View "United States v. Rodd" on Justia Law

Stonebridge, an engraver of promotional pocket knives, sued its former distributor Cutting-Edge and its members; competitor knife engraver TaylorMade and its sole member and manager Taylor, a former Stonebridge employee; and Massey, a TaylorMade employee and former Stonebridge employee, arising from Massey’s copying Stonebridge’s computer files and using those files to solicit business from Stonebridge customers. Stonebridge brought claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961-1968; the Arkansas Deceptive Trade Practices Act (ADTPA), Ark. Code 4-88-101; and Arkansas common law. The district court partially found for Stonebridge on its fraud and conversion claims, dismissed the remaining eight claims, and denied the parties’ motions for attorney fees. The Eighth Circuit upheld: the finding that defendants converted the copies of certain files created by Stonebridge; an award of damages for unjust enrichment; a finding Stonebridge did not establish the existence of a business expectancy under Arkansas law; a finding Cutting-Edge fraudulently induced Stonebridge to send sample knives while intending to employ TaylorMade as its engraver on the orders placed as a result of seeing the samples; and dismissal of the RICO and ADTPA claims. View "Stonebridge Collection, Inc. v. Carmichael" on Justia Law

In 2006-2009, the five defendants’ partial Ponzi scheme received more than $193 3 million from hundreds of investors. Only $49 million was returned, all from new investors’ money. Some investors lost their life savings. Each defendant took between $432,000 and $12.2 million. Defendants described investing in foreign currency trading, which was guaranteed and had a fixed rate of return. Some money was invested in foreign currencies, but none was invested in a safe, guaranteed currency product. They also promised instant liquidity and that each investor’s account would be “segregated.” Defendants, who used fund names such as “Oxford” and “UBS” were apparently sued by the Swiss bank, UBS. After the scheme collapsed, two pled guilty. A jury found the others guilty of committing or aiding and abetting commission of wire fraud or mail fraud, 18 U.S.C. 1341 and 1343; conspiracy to commit mail and wire fraud, 18 U.S.C. 1349; and money laundering, 18 U.S.C. 2 and 1957. Defendant Beckman, individually, was also convicted for his interactions with elderly victims; his attempt to purchase an interest in an NHL hockey team; filing false tax returns; and tax evasion. The district court sentenced Beckman to 360 months and the others to 240 months imprisonment. The Eight Circuit affirmed the convictions and sentences, View "United States v. Beckman" on Justia Law

Beltramea solicited investments to open a Subway restaurant franchise, but used the funds for personal expenses and for a real estate development, “Castlerock,” made fraudulent representations to banking institutions, and attempted to avoid paying taxes. Beltramea pled guilty to 16 counts, including: wire fraud, 18 U.S.C. 1343; aggravated identity theft, 18 U.S.C. 1028(A)(a)(1); money laundering, 18 U.S.C. 1957, 1956(a)(1)(A)(ii) and (a)(1)(B)(i); false statements to a financial institution, 18 U.S.C. 1014; and tax evasion, 26 U.S.C. 7201. The court imposed additional upward departures for understated criminal history and for dismissed and uncharged conduct. Beltramea's adjusted Guidelines' range was 70 to 87 months, before adding the mandatory 24 consecutive months for aggravated identity theft. He was sentenced to a total of 111 months. The court stated that, even if it erred in granting upward departures, it would impose the same sentence based on the factors under 18 U.S.C. 3553(a). The court entered a forfeiture order, 18 U.S.C. 981(a)(1)(C), 28 U.S.C. 2461(c) and 18 U.S.C. 982(a)(1) for rental properties, Castlerock parcels, $125,000 in wire fraud proceeds, and $65,472.02 in money laundering proceeds. The Eighth Circuit reversed the forfeiture order but otherwise affirmed. The government presented no facts connecting the rental properties and the lots to any offense for which Beltramea was convicted. View "United States v. Beltramea" on Justia Law

Petters orchestrated a $3.65 billion Ponzi scheme, operating a sham business, PCI, which purportedly purchased electronics in bulk and resold them. Ritchie advanced $189 million to PCI, in exchange for promissory notes. Ritchie assigned notes with face values totaling $25 million to VICIS. PCI and Petters made payments to Ritchie, who used part of the funds to pay VICIS $17,703,227.39 toward the assigned notes. After Petters’s scheme ended in 2008, Kelley was appointed as receiver, sought Chapter 11 bankruptcy relief, and was appointed as trustee. Kelley and the bankruptcy trustee for Petter’s wholly-owned company, Polaroid, entered into a coordination agreement. Kelley commenced an adversary proceeding against Ritchie, VICIS, and others, to recover alleged fraudulent and preferential transfers. VICIS held a claim against PCI for amounts outstanding on the promissory notes. The parties reached a settlement: VICIS paid $7.5 million to Kelley for release of all claims. The unsecured creditors’ committee supported the settlement and Kelley’s allocation, but Ritchie objected to the allocation. The bankruptcy court approved the t agreement, finding the allocation reasonable because Kelley applied an objective mathematical calculation, the unsecured creditors committee participated in the process and approved the allocation, and the circumstances in the case dealt with complex issues, unsettled law, and massively complicated factual disputes. The district court and Eighth Circuit affirmed. View "Ritchie Capital Mgmt., LLC v. Kelley" on Justia Law

In 2008, an explosion and fire substantially damaged the Hereford House, a well-known restaurant in downtown Kansas City. Surveillance footage from immediately before the incident showed individuals entering with containers of gasoline and setting an ignition device. The suspects used the security code of a former Hereford House employee to deactivate the security system. Between the employee’s firing and the fire, the same code had been used twice by Anderson, a part owner of the Hereford House, in what appeared to be practice for the arson. The Bureau of Alcohol, Tobacco, Firearms and Explosives investigated Anderson, who had infused $380,000 into the business, from cash advances on personal and business credit cards, withdrawals from his mother’s IRA and his 401(k), and a loan from his brother-in-law. In an email, Anderson had stated: “We were unable to pay our payroll taxes of $50,000. Things are not getting any better.” Anderson, Pisciotta, and Sorrentino were convicted and sentenced to 180, 240, and 180 months’ imprisonment, respectively. The Eighth Circuit affirmed, rejecting arguments that conspiracy to commit arson cannot be a predicate to convictions for the use of fire to commit another felony under 18 U.S.C. 844(h); that the convictions constituted double jeopardy; that the trials should have been severed; and challenging evidentiary rulings. View "United States v. Anderson" on Justia Law

Retired seamstress, Joseph, never had annual household income exceeding $40,000; her condominium, worth $169,990, was foreclosure. Joseph was born in Haiti. She did not speak English well. Jean referred Joseph to the Diverse insurance agency for a fee. In 2008, Diverse applied for a $10 million life-insurance policy on Joseph’s life to PHL. The application falsely stated Joseph’s net worth was $11,906,000 and her income was $497,000. The application listed a 2008 Irrevocable Trust as the proposed beneficiary and owner. Joseph signed an agreement establishing the Trust and appointed BNC as the trustee and Jean as the trust protector. Joseph did not know of the misrepresentations and likely signed blank documents. The Trust financed the premiums through a loan from PFG. In 2010, Jean directed BNC to surrender the Policy to PFG in satisfaction of the loan obligations. PHL sought to rescind the Policy for fraud. After Joseph died in 2011, the new policy owner claimed the proceeds. The district court granted rescission and held that PHL could keep the premium. The Eighth Circuit affirmed, rejecting arguments that PHL could not rescind the Policy because its own agent completed the application and that PHL was estopped from rescinding the Policy because it had reason to know of the misrepresentations. View "PHL Variable Ins. Co. v. Midas Life Settlements LLC" on Justia Law

California posts information about unclaimed property on a public website. Bolt made claims in 2011 and 2012 in the name of his company, Situs Cancer Research Center,. Bolt created fraudulent donation agreements which purported to transfer the unclaimed assets from their lawful owners to Situs. In some instances Bolt created fictitious employees of the companies and signed their names; in others he forged the signatures of actual people. He also fabricated notary stamps and used interstate mail and wire systems to transmit the fraudulent documents to California. The assets transferred to Situs totaled approximately $2,400,000. Bolt bought cars and real estate with funds from the Situs bank account. In another scheme, Situs similarly acquired unclaimed funds from a trust account ($108,251.78) held by the state of Nevada, which were a woman's life savings. Bolt pled guilty to wire fraud, 18 U.S.C. 1343; mail fraud, 18 U.S.C. 1341; and money laundering, 18 U.S.C. 1957. The Eighth Circuit affirmed the sentence of 100 months, calculated by applying an enhancement for the use of sophisticated means and concluding that an upward departure was warranted based on the inadequacy of his criminal history category under the guidelines. View "United States v. Bolt" on Justia Law

In 2006, Robinson opened Paideia Academy, a non-profit charter St. Louis charter school. State and federal monies, disbursed through the Missouri Department of Elementary and Secondary Education, exclusively funded the school, and were restricted to operating kindergarten through eighth grade. Robinson directed $242,533 from Paideia to develop a pre-kindergarten child care center. Robinson also worked, beginning in 1990, purporting to inspect parking meters. On weekly timesheets, he always recorded 40 hours, regardless of holidays, and even after parking meter services were outsourced. In 2009, the FBI investigated his “employment,” interviewing former Parking Division employees and watching Robinson’s car. They reasonably suspected that Robinson did not inspect meters. The agents installed, without a warrant, a GPS device on his car while parked on a public street. Tracking confirmed that Robinson did not inspect meters. The government charged Robinson with Paideia-related wire fraud, 18 U.S.C. 1343; two Paideia-related counts of federal program theft, 18 U.S.C. 666(a)(1)(A); and five parking-related counts of federal program theft. The district court denied Robinson’s motion to suppress the GPS evidence, motion to sever counts 1-3 from counts 4-8, and Batson objection to the jury’s composition. At trial, the court rejected his challenges to certain testimony and parking-related jury instructions. The court sentenced him to 24 months’ imprisonment and awarded $419,333 in restitution. The Eighth Circuit affirmed View "United States v. Robinson" on Justia Law

Petters purported to purchase and resell electronics. His operations were a Ponzi scheme. In 2005, Petters purchased Polaroid and become Chairman of Polaroid’s board of directors. Polaroid continued to engage in legitimate business. Petters took several million dollars from Polaroid. In 2007-2008, Petters’s companies, including Polaroid, experienced major financial difficulty. Ritchie made short term loans of more than $150 million, with annual interest rates of 80 to 362.1%. Polaroid was not a signatory, although some proceeds were used to repay a Polaroid debt. When the loans were past due, Ritchie demanded collateral. Petters executed a Trademark Security Agreement (TSA) giving Ritchie liens on Polaroid trademarks. Polaroid’s CEO objected to the TSA as impeding Polaroid’s ability to raise needed capital. The TSA did allow Polaroid to grant first-priority trademark liens to secure $75 million in working capital. After the FBI raid, which resulted in Petters’s convictions for mail fraud, wire fraud, and money laundering, and sentence of 50 years in prison, Ritchie accelerated all of the loans. Polaroid filed for bankruptcy and challenged the TSA as an actual fraudulent transfer under federal and Minnesota bankruptcy law, citing the “Ponzi scheme presumption.” The bankruptcy court presumed Petters executed the liens with fraudulent intent, found Ritchie had not received them in good faith and for value, and granted summary judgment. The district court upheld the admission of expert testimony and application of the Ponzi scheme presumption. The Eighth Circuit affirmed. View "Ritchie Capital Mgmt., LLC v. Stoebner" on Justia Law