United States v. Wetherald, 2011 U.S. App. LEXIS 6269

Background

Appellants Wetherald, Shiner, and Swichkow were convicted on 31 counts relating to a scheme to create and sell CLECs and defraud investors from 2000 to 2003.
The scheme involved partnerships in multiple states and a management arrangement through ON Systems and Telecom Advisory Services.
Investors were misled with false or omitted information about past legal problems, finances, and the viability of the partnerships.
Investors ultimately lost over $8 million as the CLECs collapsed amid SEC enforcement actions and a bankruptcy filing by Mile High Joint Venture.
At sentencing, the district court used the more recent 2008 Guidelines rather than the 2002 Guidelines in effect at the time of the offenses, and departed downward for some defendants.
Appellants challenged pre-indictment delay, evidentiary rulings, the constitutionality of the securities law charged, and the application of the Ex Post Facto Clause to sentencing.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Ex Post Facto and Guidelines application	Appellants argue sentencing using 2008 Guidelines violated Ex Post Facto.	Defense contends using later Guidelines increased punishment compared to offense time.	No Ex Post Facto violation; 2008 Guidelines did not create substantial risk of harsher punishment.
Pre-indictment delay due process	Delay prejudiced defendants and was unreasonable.	Delay occurred without tactical advantage against Appellants.	No due process violation; delay not shown to be tactical or prejudicial.
Sufficiency of evidence and intent to defraud	Evidence supported intent to defraud investors through misrepresentation and omissions.	Arguments dispute how intent and misrepresentations were proven.	Sufficient evidence supported convictions; intent to defraud established.
Securities law application to partnership interests	Partnership interests fit within securities law as investment contracts.	Partnerships not securities; vagueness challenges to 15 U.S.C. § 78j(b).	Partnership interests were securities; statute not void-for-vagueness.
Evidentiary rulings and other trial issues	Prior convictions and other acts were admissible and probative.	Challenged admission and curative measures were prejudicial.	No reversible error; any error was harmless given strong evidence.

Key Cases Cited

United States v. Paz, 405 F.3d 946 (11th Cir. 2005) (preserves review standard for constitutional challenges to sentencing)
United States v. Robison, 505 F.3d 1208 (11th Cir. 2007) (standard for review of indictment dismissals and related procedures)
Jackson v. Virginia, 443 U.S. 307 (U.S. 1979) (sufficiency of evidence standard)
Rita v. United States, 551 U.S. 338 (U.S. 2007) (Guidelines as anchoring starting point in sentencing)
United States v. Irey, 612 F.3d 1160 (11th Cir. 2010) (role of 3553(a) in appellate review of sentences)
United States v. Kapordelis, 569 F.3d 1291 (11th Cir. 2009) (ex post facto consideration in light of guideline application)
United States v. Masferrer, 514 F.3d 1158 (11th Cir. 2008) (apply more lenient guidelines at offense time to avoid ex post facto)
United States v. Simmons, 368 F.3d 1335 (11th Cir. 2004) (guidelines applicability and ex post facto concerns pre-Booker)
United States v. Turner, 548 F.3d 1094 (D.C. Cir. 2008) (as-applied ex post facto approach under advisory guidelines)
Ortiz v. United States, 621 F.3d 82 (2d Cir. 2010) (substantial risk standard for ex post facto in advisory regime)
Garner v. Jones, 529 U.S. 244 (U.S. 2000) (ex post facto limits in parole context)
S.E.C. v. W.J. Howey Co., 328 U.S. 293 (U.S. 1946) (durable test for investment contract securities)
S.E.C. v. Merchant Capital, LLC, 483 F.3d 747 (11th Cir. 2007) (economic reality test for securities in partnerships)
Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981) (test for when partnership interests are securities within fraud statutes)
Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981) (binding pre-1981 Fifth Circuit decisions as Eleventh Circuit law)