United States v. John Walsh
2013 U.S. App. LEXIS 14892
7th Cir.2013Background
- John E. Walsh and Charles Martin operated One World Capital Group, a registered futures commission merchant (FCM) and forex dealer, from 2005 until the CFTC shut it down in December 2007.
- Walsh (owner/president) and Martin (disallowed publicly as a principal because of prior convictions) misappropriated customer margin funds, used funds for personal expenses and business ventures, and concealed Martin’s role from regulators.
- They diverted roughly $10 million directly to personal accounts and charged millions more on corporate cards; Metatrader records showed unpaid customer liabilities of approximately $17.65 million and One World assets of about $677,932 as of November 5, 2007.
- Both pleaded guilty to multiple federal counts (wire fraud, tax evasion; Walsh also to false CFTC reporting; Martin to a Commodities Exchange Act violation) and admitted substantial misappropriations in their plea agreements.
- The PSRs applied a 20-level Guidelines increase for $7–$20 million loss and a 4-level enhancement for being officers/directors of an FCM; district court found loss ≈ $16,976,554, imposed below-Guidelines sentences (Walsh 150 months; Martin 204 months) and ordered restitution for $16,976,554.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Loss amount for Guidelines (20-level) | Gov: loss ≈ $17.65M based on Metatrader unpaid customer liabilities | Walsh: loss lower; government didn’t prove subjective intent or reliable actual loss; margin balances inappropriate measure | Court: No clear error — relied on admissions and Metatrader analysis; $16,976,554 reasonable estimate; 20-level increase proper |
| Whether loss was "intended" vs "actual" | Walsh (on appeal): district court based on intended loss | Walsh below: argued government failed to show intended loss | Held: Argument forfeited; record shows district court used actual loss, not intended loss; no plain error |
| Burden / reliability of Metatrader analysis | Walsh: government’s analyst unreliable; court shifted burden; excluded accounts/losses flawed | Gov: analysis conservative, excluded test/unknown accounts, only subset of customers counted | Held: Government met burden; defendant’s general objections insufficient to overcome proof; court didn’t shift burden |
| 4-level enhancement for officer/director of FCM | Defendants: One World not an FCM (primarily forex, Zelener casts doubt) | Gov: One World admitted in plea agreements to be an FCM and to file required FCM reports; defendants admitted facts supporting enhancement | Held: Waived in plea agreements; even if forfeited, ample record that One World provided futures services and was an FCM; enhancement proper |
Key Cases Cited
- United States v. Natour, 700 F.3d 962 (7th Cir.) (loss estimate for fraud need only be reasonable)
- United States v. Westerfield, 714 F.3d 480 (7th Cir.) (new sentencing arguments forfeited on appeal reviewed for plain error)
- United States v. Scott, 657 F.3d 639 (7th Cir.) (plea stipulations waive later challenges to admitted facts)
- United States v. Dokich, 614 F.3d 314 (7th Cir.) (distinguishing intended vs actual loss in Guidelines analysis)
- United States v. Gordon, 495 F.3d 427 (7th Cir.) (defendant’s unsupported statements insufficient to rebut government’s loss proof)
- United States v. Caputo, 517 F.3d 935 (7th Cir.) (no need to pinpoint loss within Guidelines’ broad brackets)
- United States v. Mount, 966 F.2d 262 (7th Cir.) (embezzled funds constitute loss even if defendant planned to repay)
- United States v. Jaimes-Jaimes, 406 F.3d 845 (7th Cir.) (plain error review where enhancement applied based on erroneous factual view)
- CFTC v. Zelener, 373 F.3d 861 (7th Cir.) (forex rollovers are spot sales, relevant to defining commodity/futures contexts)