UNITED STATES of America, Appellee, v. Harold Richard GRAHAM, Mitchell Reisman, Gregory C. Scarlato, Harry K. Kahale, Defendants-Appellants.
Nos. 10-4119-cr (L), 10-4231-cr (Con), 10-4557-cr (Con), 11-1043-cr (Con).
United States Court of Appeals, Second Circuit.
May 1, 2012.
477 Fed. Appx. 818
Accordingly, the appeal from the judgment of the district court hereby is DISMISSED AS MOOT and the matter REMANDED for further proceedings consistent with this order. Each party shall bear its own costs.
Jeremy Gutman, New York, NY, for defendant-appellant Harold Richard Graham.
B. Alan Seidler, New York, NY, for defendant-appellant Mitchell Reisman.
Richard D. Willstatter, Green & Willstatter, White Plains, NY, for defendant-appellant Gregory C. Scarlato.
Allen Lashley, Brooklyn, NY, for defendant-appellant Harry K. Kahale.
Present: WALKER, JOSEPH M. MCLAUGHLIN and JOSÉ A. CABRANES, Circuit Judges.
SUMMARY ORDER
Defendants-appellants Harold Richard Graham, Mitchell Reisman, Gregory C. Scarlato, and Harry K. Kahale appeal from separate judgments of conviction entered in the District Court. We assume the parties’ familiarity with the facts and procedural history of the case, expounding on each only where necessary below.
BACKGROUND
The defendants were charged in a seven-count Superseding Indictment with conspiracy to commit mail and wire fraud and various individual counts of mail and wire fraud. The Indictment charged that, between 2003 and 2008, the defendants conspired to fraudulently solicit investors and lenders for B.I.M. Mining Corporation (“B.I.M.“), a Nevada-based corporation which the defendants falsely portrayed as possessing significant gold and mineral rights around the world. In order to secure investments and loans, the defendants misrepresented B.I.M.‘s size and financial state, claiming that it was “cash poor but asset rich” and needed investments in cash in order to withdraw and process its gold and mineral reserves. In exchange for investor money, the defendants issued fraudulent “Gold Delivery Certificates,” which promised strong investment returns within specified periods of time, usually between two and twelve months. When these certificates reached maturation without any return on investment, the defendants issued letters providing various fraudulent explanations for the delay in redemption. In order to perpetuate the fraud, the defendants used investor and lender money to repay earlier investors
After a nearly three-week trial, all four defendants were convicted on all seven counts. Each defendant subsequently moved for a judgment of acquittal. Those motions were denied and the defendants timely appealed.
DISCUSSION
The appellants raise multiple, and occasionally overlapping, arguments on appeal, and each joins in the arguments raised by the others, pursuant to
A. Severance
Scarlato argues that the District Court abused its discretion in denying his renewed motion to sever his trial from that of Reisman.1 He maintains that, as a mere agent of B.I.M., he honestly believed that he was securing funds to assist the company in recovering highly valuable assets and that, had he been tried separately, he would have been able to elicit evidence that Reisman was a “flat-out con man” and thereby persuade the jury that, in contrast to Reisman, he lacked any intent to defraud. In short, he contends that, in light of their “mutually antagonistic defenses,” his trial should have been severed from Reisman‘s.
Pursuant to
Applying this deferential standard, we affirm the decision of the District Court denying Scarlato‘s motions to sever for substantially the reasons stated in its Memorandum and Order of December 23, 2009, and its order of February 3, 2010. As the District Court correctly found, “evidence of Reisman‘s involvement in other, totally unrelated business ventures does not exculpate Scarlato ... because Reisman‘s other business dealings neither negate, nor are probative of, [Scarlato‘s] spe-
We therefore conclude that the District Court‘s denial of his motions to sever did not cause him “prejudice so severe as to amount to a denial of a constitutionally fair trial.” Diaz, 176 F.3d at 102.
B. Evidentiary Rulings
Kahale, Graham, and Scarlato raise two separate challenges to evidentiary rulings of the District Court, which we review in turn.
1. Admission of Co-Conspirator Statements
Kahale argues that the District Court committed clear error in admitting hearsay statements made by Reisman and Scarlato while soliciting B.I.M. investors that were not in furtherance of the conspiracy.
“[W]e afford district courts wide latitude in determining whether evidence is admissible,” and so “review ... evidentiary rulings for abuse of discretion, reversing only if we find manifest error.” United States v. Miller, 626 F.3d 682, 687-88 (2d Cir.2010) (internal quotation marks and alterations omitted).2
Under
Having reviewed the record, we are satisfied that the District Court‘s findings that statements made by Reisman and Scarlato were made in furtherance of the conspiracy and that Kahale was a member of the conspiracy are supported by a preponderance of the evidence. We therefore cannot conclude that the District Court committed error, let alone plain error, in allowing the statements to be admitted into evidence.
2. Admission of Document Server‘s Testimony Regarding Subpoena Responses
Both Graham and Scarlato argue that the District Court committed error by admitting the testimony of an FBI case agent, who testified that, prior to trial, he
Graham contends the agent should have been precluded from testifying because his testimony constituted double hearsay and did not qualify under the business-records exception of
Whether a statement is hearsay is a matter of law, which we review de novo. United States v. Ferguson, 676 F.3d 260, 285-86 (2d Cir.2011). The District Court concluded that the agent‘s testimony was not hearsay because it was not offered to prove the truth of the matters stated. We agree. The agent testified simply that he had served a document subpoena on B.I.M. and that certain of the requested documents were not returned in response to the subpoena. He did not testify that the requested documents in fact did not exist, let alone that the absence of the documents signified that B.I.M. did not possess any gold or mineral rights. Similarly, we are not persuaded that the Confrontation Clause was implicated here. Even if the subpoena responses constituted a testimonial statement by B.I.M.‘s custodian of records, those responses were not themselves admitted. Rather, it was only the FBI agent who testified, on the basis of his own (albeit limited) personal knowledge, regarding what was contained in the response. The defendants were free to cross-examine the agent, and, indeed, doing so would (and did) expose the limits of his knowledge.
In any event, we conclude that any error in admitting the FBI agent‘s testimony regarding B.I.M.‘s document production was harmless. See United States v. McClain, 377 F.3d 219, 222 (2d Cir.2004) (admission of evidence in violation of the Confrontation Clause is “reviewable for harmless error“). In making this determination, we take into account: (1) “the strength of the government‘s case“; (2) “the degree to which the statement was material to a critical issue“; (3) “the extent to which the statement was cumulative“; and (4) “the degree to which the government emphasized the erroneously admitted evidence in its presentation of the case.” United States v. Reifler, 446 F.3d 65, 87 (2d Cir.2006). Although no factor is dispositive, “[t]he strength of the prosecution‘s case is probably the single most critical factor.” Id. (alteration in original) (internal quotation marks omitted).
The point of the FBI agent‘s testimony was to provide further circumstantial evidence that, despite the representations the defendants made to their victims, B.I.M. in fact possessed limited-to-nonexistent gold and mineral rights and was not a financially stable enterprise. In this regard, the agent‘s testimony was cumulative of other evidence adduced at trial tending to show that B.I.M. did not have the assets it claimed to possess. This included the testimony, on cross-examination, of one of the defendants’ own witnesses, the owner of a mining concern, who testified unequivocally that B.I.M. did not have rights to any gold based on contracts with his company. In addition, B.I.M.‘s bank account showed
C. Jury Charge
Graham argues that the District Court violated his due process rights by failing to instruct the jury that the Government was required to prove the victims’ “justifiable reliance ... on a misrepresentation or material omission.”
“We review de novo the propriety of jury instructions.” United States v. Naiman, 211 F.3d 40, 50 (2d Cir.2000). “A jury instruction is erroneous if it misleads the jury as to the correct legal standard or does not adequately inform the jury on the law.” United States v. Walsh, 194 F.3d 37, 52 (2d Cir.1999) (internal quotation marks omitted). However, we will only reverse a conviction based on improper jury instructions “if the instructions, viewed as a whole, caused the defendant prejudice.” Naiman, 211 F.3d at 51.
Graham‘s request was premised on the fact that, under New York law, justifiable reliance is essential to establishing civil liability for the type of fraud charged in this case. It is not, however, an essential element of mail fraud or wire fraud under federal criminal law. As the Supreme Court has made clear, “[t]he common-law requirement[] of ‘justifiable reliance’ ... plainly ha[s] no place in the federal fraud statutes.” Neder v. United States, 527 U.S. 1, 24-25, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999). This is because the fraud statutes criminalize the “‘scheme to defraud,’ rather than the completed fraud.” Id. at 25, 119 S.Ct. 1827; see also Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 648, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008) (“Using the mail to execute or attempt to execute a scheme to defraud is indictable as mail fraud ... even if no one relied on any misrepresentation.“).
Accordingly, because “justifiable reliance” is not an element of mail fraud or wire fraud under federal criminal law, the District Court did not err in refusing Graham‘s requested instruction.
D. Sufficiency Challenges
Scarlato and Reisman challenge the sufficiency of the evidence supporting their convictions, each arguing principally that he lacked the intent to defraud.3 Each defendant moved for a judgment of acquittal under
Defendants challenging the sufficiency of the evidence supporting their convictions face a “heavy burden.” United States v. Aguilar, 585 F.3d 652, 656 (2d Cir.2009). A jury‘s verdict must be sustained if, “viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). Applying this standard, we affirm the District Court‘s sufficiency findings for substantially the reasons stated in its persuasive and comprehensive Memorandum & Order of Sep-
In order to convict on charges of mail or wire fraud, a jury must find proof beyond a reasonable doubt of fraudulent intent, meaning “that the defendant had a conscious, knowing intent to defraud ... and that the defendant contemplated or intended some harm to the property rights of the victim.” United States v. Guadagna, 183 F.3d 122, 129 (2d Cir.1999) (internal quotation marks and brackets omitted). Proof of fraudulent intent may be established through circumstantial evidence. Id.
Scarlato contends that the evidence at trial showed that he honestly believed that B.I.M. was a legitimate venture, which really had rights to the assets that he represented it possessed. He points to the fact that he transmitted to B.I.M. at least some small portion of the money he obtained from victims on its behalf.
We agree with the District Court that the evidence at trial was sufficient to prove Scarlato‘s fraudulent intent. The evidence revealed that Scarlato was, in the District Court‘s words, “prolific in his recruitment of investors for B.I.M.” He also attempted to mollify victims who complained that they had seen no return on their investments. He continued to “pitch” B.I.M. as a solid investment even as he was aware of its failure to make returns, and even as he spent investor funds on personal items, including a new pickup truck. From these and other facts, a rational juror could certainly conclude that Scarlato was aware that B.I.M. was not using investor funds to recover gold and mineral assets, and yet persisted in soliciting these funds in an effort to enrich himself at the victims’ expense.
Reisman similarly claims that the evidence did not support a finding that he acted with the intent to defraud investors. He insists that he performed due diligence with regard to B.I.M. and its principals and that he, himself, was a victim of a scheme concocted by Kahale, Graham, and Scarlato. We reject Reisman‘s arguments, as well, for the reasons stated by the District Court. Reisman‘s argument that he was a victim of his co-defendants is audacious, inasmuch as he kept most of the money he took from the victims of the scheme. His solicitation of a $100,000 from Vernon Wetmore is itself sufficient to sustain the jury‘s verdict. Reisman did not forward any of this investment to B.I.M., instead using it for his own personal expenses, including the purchase of a house.
In sum, we agree with the District Court that there was sufficient evidence from which a rational jury could find both Scarlato and Reisman guilty of the charges beyond a reasonable doubt. See Memorandum & Order, United States v. Kahale, et al., No. 09-cr-159 (Sept. 27, 2010) ECF No. 378. Accordingly, we reject their sufficiency arguments.
E. Sentencing
Scarlato and Reisman also challenge their sentences as procedurally and/or substantively unreasonable.
We review the reasonableness of a district court‘s sentencing determinations under a “deferential abuse-of-discretion standard.” Gall v. United States, 552 U.S. 38, 41, 128 S.Ct. 586, 169 L.Ed.2d 445 (2007). A sentence will therefore be upheld unless “the district court‘s decision cannot be located within the range of permissible decisions or is based on a legal error or clearly erroneous factual finding.” United States v. Villafuerte, 502 F.3d 204, 206 (2d Cir.2007) (internal quotation marks omitted). “This form of appellate scrutiny encom-
Scarlato argues that his sentence was procedurally unreasonable because it was based on an erroneous loss calculation. Specifically, he contends that a total of $395,000 in losses from three different victims should not have been attributed to him because they were not reasonably foreseeable to him. A district court need only make a “reasonable estimate” of the loss amount for purposes of determining a defendant‘s offense level under the Sentencing Guidelines. See
Reisman challenges the substantive reasonableness of his sentence, arguing that the sentence of incarceration for 51 months was excessive in view of his personal characteristics. The sentence Reisman received was 46 months less than that recommended by the United States Probation Office in its Presentence Investigation Report and at the low end of the Guideline range that resulted after the District Court recalculated the offense level and granted Reisman a four-level downward departure in recognition of the fact that he had not been a part of the conspiracy for as long as the other defendants. Although there is no presumption that a sentence within the Guidelines range is reasonable, we have recognized “that in the overwhelming majority of cases, a Guidelines sentence will fall comfortably within the broad range of sentences that would be reasonable in the particular circumstances.” United States v. Fernandez, 443 F.3d 19, 27 (2d Cir.2006). Reisman has provided us with no basis for concluding that the Guidelines sentence imposed by the District Court falls outside the broad range of reasonable sentences.
F. Ineffective Assistance of Counsel
Scarlato and Reisman each allege that their trial attorneys rendered ineffective assistance of counsel, necessitating the reversal of their convictions. Scarlato claims that his attorney seriously erred in failing to move to dismiss Count Six for want of venue ahead of trial. See note 3, ante. Reisman argues, more generally, that his counsel‘s performance was deficient insofar as he called no witnesses and placed no documents into evidence.
To prevail on a claim of ineffective assistance of counsel, a defendant must establish both (1) that defense counsel‘s actions or omissions fell below an objective standard of reasonableness and (2) that there exists a reasonable probability that, but for counsel‘s unprofessional errors, the result
Here, we conclude that the record on appeal is insufficient for us to resolve either claim. With respect to Scarlato‘s claim, it is not clear whether his counsel was unaware that Count Six contained a jurisdictional defect or whether in fact he strategically decided not to challenge venue so as to prevent the Government from separately indicting Scarlato in the Western District of New York, where venue for Count Six actually lay. Similarly, though Reisman faults his trial counsel for failing to call certain witnesses and introduce certain documentary evidence, it is not clear on the present record whether this decision may in fact have been one of sound trial strategy. As the Government points out, much of the testimony and documentary evidence Reisman refers to was not exculpatory and could have done him more harm than good. Accordingly, we decline to reach the merits of the claim of ineffective assistance of counsel, without prejudice to the defendants’ ability to raise the issue in a collateral proceeding. See, e.g., United States v. Hasan, 586 F.3d 161, 170 (2d Cir.2009). We of course express no view on the merits of these claims.
CONCLUSION
We have considered all of the defendants’ arguments on appeal and, having conducted an independent review of the record, we find no error in the District Court‘s careful handling of this case. Accordingly, we AFFIRM the judgments of the District Court.