United States v. Kay F. Gow
19-12053
| 11th Cir. | Sep 16, 2021Background
- Robert and Kay Gow founded VR Labs (and were affiliated with HerbalScience); VR Labs applied for and received a $5 million Lee County economic-development grant in 2011 based on representations that it was a "multinational" company, would invest ~$9 million, and would create 208 jobs.
- The Lee County grant agreement required county reimbursement only for "qualified capital investments" and conditioned the award on VR Labs having "skin in the game." VR Labs provided little to no financial history when applying.
- John Williams (a longtime friend/investor) acted as a middleman to procure a bottling line despite no bottling experience; Williams submitted inflated invoices (substantially above APACKS’s quotes), VR Labs paid them, and Lee County reimbursed VR Labs from grant funds.
- Large sums flowed back into VR Labs from Williams’s entities; county reimbursement (~$4.69M) financed non-qualified expenses (licensing fees, salaries, travel, personal expenses), and the Gows personally received about $552,164 from grant proceeds.
- VR Labs failed to obtain full equipment or become profitable; APACKS was unpaid and later bankrupt. Separately, Haynes invested $500,000 after being told VR Labs was "full steam ahead" and that Kottkamp had invested $1M (which was false).
- A jury convicted Kay Gow, Robert Gow (deceased post-trial), and Williams on counts including wire fraud and conspiracy; Kay and Williams appealed claiming insufficient evidence of intent to defraud. The Eleventh Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Kay Gow intended to defraud Lee County by obtaining grant funds | Gov: VR Labs’ application contained material misrepresentations ("multinational," $9M investment, 208 jobs) and defendants submitted/reimbursed inflated invoices and used funds for non-qualified expenses | Kay: representations were aspirational/puffery or honest efforts to build the company; county approved expenditures; no intent to cause financial injury | Affirmed: A reasonable jury could infer intent from misrepresentations, knowledge invoices were inflated, improper use of funds, and personal enrichment |
| Whether Kay Gow intended to defraud investor Haynes | Gov: Robert misrepresented VR Labs’ finances and Kottkamp’s $1M investment; refused to produce financials; these misrepresentations were calculated to induce Haynes’ $500K investment | Kay: Haynes was a sophisticated investor warned of risks; employment agreement disclosed shareholders and investment amounts | Affirmed: Jury could find material misrepresentations and concealment intended to induce Haynes’ investment |
| Whether Williams knowingly joined conspiracy to defraud Lee County | Gov: Williams submitted inflated invoices, received and redirected grant-funded payments, used a fictitious entity to transfer funds back, profited and reinvested—circumstantial evidence of knowing participation | Williams: acted in good faith to help VR Labs, lacked understanding or willful participation in any fraud | Affirmed: Circumstantial evidence (profits, invoice inflation, fund transfers, lies to agents) supports inference he knowingly joined conspiracy |
Key Cases Cited
- United States v. Gamory, 635 F.3d 480 (11th Cir. 2011) (standard: de novo review of sufficiency-of-evidence and Rule 29 denial)
- United States v. Machado, 886 F.3d 1070 (11th Cir. 2018) (wire-fraud elements and intent may be inferred from circumstantial evidence)
- United States v. Maxwell, 579 F.3d 1282 (11th Cir. 2009) (material misrepresentation/omission elements of scheme to defraud)
- United States v. Ross, 131 F.3d 970 (11th Cir. 1997) (punishment under wire fraud not limited to successful schemes; communications must be reasonably calculated to deceive)
- United States v. Bradley, 644 F.3d 1213 (11th Cir. 2011) (personal profit can be circumstantial evidence of intent to participate in fraud)
- United States v. Chafin, 808 F.3d 1263 (11th Cir. 2015) (affirming standard that convictions survive if a reasonable trier of fact could find guilt beyond a reasonable doubt)
- United States v. Suba, 132 F.3d 662 (11th Cir. 1998) (guilty knowledge in fraud can be proven circumstantially)