UNITED STATES OF AMERICA, Plаintiff-Appellee, versus DAVID W. SVETE, RON GIRARDOT, Defendants-Appellants.
No. 05-13809
D.C. Docket No. 04-00010 CR-3-001-MCR
IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
March 26, 2008
Appeals from the United States District Court for the Northern District of Florida
(March 26, 2008)
Before DUBINA and KRAVITCH, Circuit Judges, and COOGLER,* District Judge.
COOGLER, District Judge:
* Honorable L. Scott Coogler, United States District Judge for the Northern District of Alabama, sitting by designation.
Because the jury instruction seriously impaired the defendants’ ability to conduct their defense on the substantive counts of mail fraud, we reverse as to those counts. We affirm as to all other issues raised by the defendants.
I. Background
A. Procedural History
Svete and Girardot were charged in a superseding indictment with conspiracy to violate the laws of the United States in violation of
B. Facts1
1. Introduction
Viaticals are legitimate insurance products in all states, allowing patients (“viators“) to sell the right to receive benefits under their life insurance policies for
Svete became involved with viaticals in 1997 when he incorporated LifeTime Capital, Inc. (“LCI“) in Nevada as a provider company. He later incorporated Alexander Chase, d/b/a WSI, for the same purpose, as well as multiple additional businesses offering financial, office, marketing, and viatical services.2 According to trial testimony, Svete‘s control of these corporations was secreted, thus misleading investors and providing an avenue to launder money taken by fraud.
Svete‘s right hand man was Ron Girardot. Girardot first became employed with Alexander Chase, Svete‘s financial advisory company, in 1997 as an operations
During the course of trial, the government presented evidence that defendants defrauded viatical investors by intentionally misrepresenting: (1) life expectancies of viators; (2) the status of the life insurance contracts; and (3) the risks associated with the purchase of certain viatical contracts. During the time Svete‘s companies were buying viaticals and selling investments, not less than $101,811,873.88 was invested by at least 3,125 investors. Of that group, at least 1,351 were investors over the age of 65.
2. Evidence of Fraudulent Misrepresentations
Thirty-five witnesses testified during the course of the trial that their investment failed to mature when anticipated. Those investors had been told or provided marketing materials stating that their investment policies concerned terminally ill patients as determined by independent medical specialists who had access to the viators’ complete medical records and doctors. This was inaccurate on
Additional evidence of fraud perpetuated on investors came in the form of testimony regarding altered contracts. Initial viatical settlement contracts reflected that the terminally ill status of the viator was determined by a physician‘s medical opinion. Nanette Zima,3 who served as President and CEO of LCI for about one year,
Finally, investors were told that an independent investment servicing company maintained a premium reserve account for the purpose of underwriting the policies. In fact, the company was created and controlled5 by Svete and lacked sufficient funds to pay premiums on purchased policies as they came due for one year past the life expectancy established by a particular policy, as most of the investors’ contracts required.
II. Discussion
Of the five issues presented for appeal, only two, the jury instruction issue6 and
A. Sufficiency of the Evidence
We address the sufficiency of the evidence at the outset, as a finding of insufficient evidence would obviate any need to consider the alleged trial errors. See United States v. Smith, 459 F.3d 1276, 1286 (11th Cir. 2006); United States v. Bobo, 419 F.3d 1264, 1268 (11th Cir. 2005) (noting the Court‘s prudential rule “that requires the court to review sufficiency of the evidence claims raised by defendants, even if resolution on alternative grounds would otherwise dispose of the case“). We review the record for sufficiency of the evidence de novo in the light most favorable to the government. See United States v. Brown, 40 F.3d 1218, 1221 (11th Cir. 1994) (citing United States v. Harris, 20 F.3d 445, 452 (11th Cir. 1994), and United States v. Camargo-Vergara, 26 F.3d 1075, 1078 (11th Cir. 1994)). For there to be sufficient evidence from which a reasonable jury could find guilt,
[i]t is not necessary that the evidence exclude every reasonable hypothesis of innocence or be wholly inconsistent with every conclusion except that of guilt, provided that a reasonable trier of fact could find that the evidence established
guilt beyond a reasonable doubt. A jury is free to choose among the constructions of the evidence.
Brown, 40 F.3d at 1221 (citing Harris, 20 F.3d at 452). That is, where testimony may lead to one or more conclusions, it is for the jury to decide the outcome. See Harris, 20 F.3d at 452. If, on the other hand, the record reveals a lack of substantial evidence from which a fact-finder could find guilt beyond a reasonable doubt, we must reverse the defendant‘s conviction. See id.
Both Girardot and Svete contend that the evidence presented by the government was insufficient to support their convictions. Each defendant, however, makes separate arguments regarding the sufficiency of the evidence. The Court first addresses the argument made by Girardot.
1. Girardot
Girardot argues that the government failed to provide substantial evidence of his knowing participation in any scheme to defraud. Indeed, knowing participation is relevant to each of the charges.
To sustain the conspiracy counts (Counts One and Two), the government must prove that Girardot knew of the essential nature of the charged conspiracy and that he voluntarily joined the conspiracy. See United States v. High, 117 F.3d 464, 468 (11th Cir. 1997); United States v. Miller, 22 F.3d 1075, 1080 (11th Cir. 1994).
Finally, to sustain the remaining convictions for interstate transportation of money obtained by fraud (Counts Eight, Nine, and Ten), the Court must conclude that a reasonable fact-finder could determine that the defendants knew that certain property of a value in excess of $5,000 had been obtained by fraud and that the defendants caused that fraudulently obtained prоperty to be transported in interstate commerce. See United States v. Ross, 131 F.3d 970, 986 (11th Cir. 1997).
a. Evidence Specific to the Charged Offenses
Girardot contends that the evidence presented by the government of his knowing participation in the scheme to defraud was flawed and insufficient to establish his guilt. Specifically, he argues that the only evidence presented by the government to establish his knowing participation was: (1) Charme Austin‘s
Girardot‘s argument is not only flawed under the clear holding in Brown, 40 F.3d at 1221, which permits the jury to choose among constructions of the evidence, but also fails because the evidence of Girardot‘s knowing participation in the scheme to defraud encompassed much more than the three areas outlined by Girardot. Trial testimony revealed that Girardot was Svete‘s “right hand man,” someone who “knew everything” there was to know about LCI. Girardot was the “go-between” for marketing materials created by Svete‘s Dove Creative, Inc. These materials inaccurately stated that Svete‘s companies were independent and operated by medical professionals who, where applicable, contacted up to ten doctors for mortality reports. Girardot was also responsible for selecting files for MUI‘s audit, choosing only those that did not disclose the existence of fraudulently obtained policies. Later, when
b. Girardot‘s Testimony
Perhaps the most substantive evidence of Girardot‘s guilt is his own testimony. It is axiomatic that a defendant in a criminal case may choose whether to testify in his or her own defense. However, the decision of a criminal defendant to testify presents a substantial risk of not only bolstering the government‘s case, but also providing substantive evidence of his or her own guilt:
[A] statement by a defendant, if disbelieved by the jury, may be considered as substantive evidence of the defendant‘s guilt. By “substantive evidence” we mean evidence “аdduced for the purpose of proving a fact in issue, as opposed to evidence given for the purpose of discrediting a witness (i.e. showing that he is unworthy of belief), or of corroborating his testimony.” . . . [W]hen a defendant chooses to testify, he runs the risk that if disbelieved the jury might conclude the opposite of his testimony is true. . . .
United States v. Brown, 53 F.3d 312, 314 (11th Cir. 1995) (internal citations and quotations omitted).
Girardot testified under oath that he acted in good faith at all times. He also generally denied that he participated in or was aware of any wrongdoing by Svete.
“At least where some corroborative evidence of guilt exists for the charged offense . . . and the defendant takes the stand in his own defense, the defendant‘s testimony, denying guilt, may establish, by itself, elements of the offense.” Brown, 53 F.3d at 314-15. This rule especially applies “where the elements to be proved for a conviction include highly subjective elements: for example, the defendant‘s intent or knowledge. . . .” Id. at 315 (citations omitted). In this case, we have both. As thoroughly discussed above, the government presented more than some corroborative evidence of guilt of the charged offenses. In fact, the evidence presented was in and of itself sufficient to support the convictions. Moreover, the highly subjective element of Girardot‘s knowledge is the evidence challenged by Girardot. That the jury disbelieved or believed the opposite of Girardot‘s testimony is the only
2. Svete
As to the sufficiency of the evidence, Svete appeals only the substantive mail fraud convictions and his convictions for interstate transportation of money obtained by fraud. Svete contends that a properly instructed jury could not have found beyond a reasonable doubt that a reasonably prudent investor would have relied on the charged misrepresentations. More specifically, Svete argues that because the investors signed contracts, which articulated the risks of the investment, it was unreasonable for any prudent investor to rely upon contrary statements made by the sales agents or the promotional literature. Because “[a] ‘scheme to defraud’ . . . has not been proved where a reasonable juror would have to conclude that the representation is about something which the customer should, and could, easily confirm–if they wished to do so–from readily available external sources,” Brown, 79 F.3d at 1559, Svete contends that the government‘s еvidence was insufficient to establish the substantive mail fraud counts and the counts for interstate transportation of money obtained by fraud.
Svete‘s argument fails for two reasons. First, Svete‘s scheme was so sophisticated and complex that even the most intelligent investor would have been
Second, and more importantly, Svete‘s argument fails under the reasoning of United States v. Brown, 53 F.3d 312. Like Girardot, Svete chose to testify in his own defense. The jury, who heard Svete‘s testimony and witnessed his demeanor, was еntitled to disbelieve Svete‘s testimony and was entitled to believe the opposite of Svete‘s testimony. Brown, 53 F.3d at 314. Because of the combination of Svete‘s testimony and the other corroborative evidence supporting Svete‘s convictions, see id., the evidence was sufficient to support Svete‘s convictions.
B. The Jury Instructions
Defendants contend that the district court abused its discretion when it gave the pattern mail fraud charge to the jury instead of using language consistent with United States v. Brown, 79 F.3d 1550, 1557 (11th Cir. 1996). We review a question of the propriety of the jury instruction for abuse of discretion. See United States v. Cornillie, 92 F.3d 1108, 1109 (11th Cir. 1996) (citing United States v. Morris, 20 F.3d 1111, 1114 (11th Cir. 1994)). Reversible error occurs only when the requested instruction: (1) was correct; (2) was not substantially covered by the charge actually given; and (3) dealt with some point in the trial so important that the failure to give the requested instruction seriously impaired the defendants’ ability to conduct their defense. See United States v. Chastain, 198 F.3d 1338, 1350 (11th Cir. 1999), cert. denied sub nom.; see also United States v. Carrasco, 381 F.3d 1237, 1242 (11th Cir. 2004) (internal citations omitted).
In this Circuit, mail fraud requires the government to prove that the defendant intended to create a scheme “reasonably calculated to deceive persons of ordinary prudence and comprehension.” See Brown, 79 F.3d at 1557 (citing Pelletier, 921 F.2d at 1498-99). This burden is not reflected in the current Eleventh Circuit pattern jury instruction for mail fraud. Pattern Instruction 50.1 merely states that a “scheme to defraud” is “any plan or course of action intended to deceive or cheat someone out of money or property by means of false or fraudulent pretenses, representations, or promises.” Pattern Jury Instructions (Criminal Cases), No. 50.1 (11th Cir. Jud. Council 2003 rev.) (Mail Fraud). Because the definition does not include the reasonable person standard as articulated in Brown, Pattern Instruction 50.1 is
The inaccuracy of the definition of “scheme to defraud” in the jury instruction seriously impaired defendants’ ability to conduct their defense on the substantive counts of mail fraud. Defendants did not have the opportunity to argue in connection with charged law that the contracts, signed by the investors, made it unreasonable for any prudent investor to have relied upon contrary statements by sales agents or LCI‘s promotional literature. Defendants did not have the opportunity to argue in connection with charged law that investors should have sought independent advice on investing in viaticals. Such arguments are clearly contemplated by controlling law in this Circuit. Therefore, the district court abused its discretion when it did not include the Brown, 79 F.3d at 1557, language in the jury instruction. Svete and Girardot are entitled to a new trial on the substantive counts of mail fraud.
The incomplete jury charge did not however affect Defendants’ ability to
C. The Motion for New Trial
Prior to sentencing, Svete moved the district court for a new trial based upon what he contends were Brady and Giglio violations. Svete points to inconsistencies between the trial and sentencing testimony of government witness Charme Austin. Svete insists that the district court was in error to deny the motion.
To resolve this issue, we must delve into the circumstances surrounding
Austin‘s involvement with defendants led to her being scrutinized by the government for her own participation in the fraud. She was ultimately charged with conspiracy, pled guilty on August 30, 2004, testified on January 18 and 19, 2005, and was sentenced on May 6, 2005.10 One week after Austin‘s sentencing, the
To establish a Brady violation, Svete must show: (1) that the government possessed evidence favorable to the defendant; (2) that the defendant did not possess the evidence nor could he have obtained it himself with any reasonable diligence; (3) that the prosecution suppressed the favorable evidence; and (4) that had the evidence been revealed to the defense, there is a reasonable probability that the outcome of the proceedings would have been different. See United States v. Perez, 473 F.3d 1147, 1150 (11th Cir. 2006); see also Woodruff, 296 F.3d at 1043 n.1. Failure to meet any one of these elements will defeat a motion for a new trial. See United States v. Starrett, 55 F.3d 1525, 1554 (11th Cir. 1995).
”Giglio error is a species of Brady error that occurs when the undisclosed evidence demonstrates that the prosecution‘s case included perjured testimony and that the prosecution knew, or should have known, of the perjury.” Ventura v. Attorney Gen., Fla., 419 F.3d 1269, 1276 (11th Cir. 2005) (internal quotations and citations omitted). “When the reliability of a given witness may wеll be determinative of guilt or innocence, nondisclosure of evidence affecting credibility falls within this general rule.” Giglio, 405 U.S. at 154; see also Jennings v. McDonough, 490 F.3d 1230, 1236 (11th Cir. 2007). Further, the materiality standard under Giglio is less stringent than under a garden variety Brady claim; under Giglio,
2. The Government‘s Duty
What then was the government required to do? First, the government was required to disclose any material evidence that it possessed that was favorable to the defendant that (1) the defendant did not possess and (2) could not have been obtained by the Defendant himself with reasonable diligence. The government further had the duty to step forward and disclose “[i]f false testimony surface[d] during [the] trial and the government [had] knowledge of it. . . .” Brown v. Wainwright, 785 F.2d 1457, 1464 (11th Cir. 1986) (emphasis added). “That the prosecutor . . . chose not to run an FBI or NCIC check on the witness, does not change “known” information into
Austin disclosed to the government that while she was in the military, she had been subjected to a disciplinary proceeding stemming from an allegation of theft for which she received a “less than honorable discharge.” What she failed to tell the government, and the government failed to discover prior to her testimony, was that she had also served time in the military stockades as a result of the charge. Although the government revealed the information it had to the defense prior to her testimony, it did not reveal Austin‘s confinement in the military stockades and did not “step forward” and disclose the apparent inconsistency in her testimony when she denied imprisonment.14
3. Materiality of the Evidence
Whether the government‘s failure to disclose should result in a new trial is largely dependant upon whether the evidence was material.15 Evidence is material if there is “any reаsonable likelihood that the false testimony could have affected the judgment of the jury.” See Grossman, 466 F.3d at 1342 n.14.
Whether the false testimony offered . . . could in any reasonable likelihood have affected the judgment of the jury must be analyzed in light of a number of highly context-specific factual considerations, including the importance of the testimony of the falsely testifying witness to the government‘s case, the nature and significance of the falsehood, and, notably, to what extent the witness‘s testimony is substantially corroborated by other evidence.
a. Importance of the Testimony of the Witness and Purpose of Impeachment
When discussing Austin‘s military discharge record with the district court, Svete made it clear that his purpose in asking about the record was to demonstrate that Austin had said something different in obtaining her employment with Svete. This testimony supports one of the defenses theories—that Austin was manipulating and misleading Svete. This conclusion is supported by the fact that Svete did not seek the assistance of the district court in obtaining further information about the theft aspects of the military discharge even though he confirmed to the district judge that he knew theft was involved. For that matter, when Austin was asked whether she had ever been in prison, it was not in an effort to impeach her with past criminal conduct. Instead, it is clear from the context of the questions that Svete was attempting to establish a motive for Austin to be less than truthful. That is, since she had never
Svete had sufficient information from the government‘s disclosure to conclude that Austin had been the subject of some type of proceeding arising from a charge of theft in the military that resulted in at least her less than honorable discharge. He obviously deсided not to pursue that line of impeachment. His impeachment of Austin was clearly a two-edged sword for the defense. A thorough review of Austin‘s testimony reveals that she was, in many respects, a positive witness for Svete and attacking her credibility would have distracted from that evidence. For example, she revealed that she exerted a significant amount of control over MUI. She related in her testimony that it was her idea to hire three doctors as MUI staff. She confirmed that she was the signatory on MUI‘s bank accounts. She held 25,000 shares of MUI stock. Austin further described how she refused to “sign over” her MUI ownership to Svete when he asked her for it, informing him that she had worked too hard to just sign it over. She also related to the jury how she received a significant sum of money from the sale of MUI. Thus, Austin‘s testimony was arguably, at least in part, beneficial to Svete.
b. Other Impeachment of the Witness
c. Corroborating Evidence
Where the government‘s case depends almost entirely on the testimony of a single witness, such witness‘s credibility is undeniably essential to the jury‘s
When Austin was sentenced on May 6, 2005, the court addressed her as follows:
[T]he lion‘s share of your testimony or the pertinent portion of your testimony was corroborated by other witnesses, and for that reason the motions to strike were denied and I think the jury figured out the same thing, that others corroborated your testimony, gave credence to it and, thus, they credited your testimony about the life expectancies and about what wаs going on at LifeTime Capital and MUI.
Indeed Austin‘s testimony was well-supported by other witnesses, as evidenced by the following non-exhaustive examples:
- Nanette Kveder-Zima testified that Svete instructed that life expectancy sheets were not to be given to salesmen and that LCI often “guessed” life expectancies instead of sending medical records to doctors for review. She testified that Svete himself would “chop[] off [or change] life expectancies” to make policies more attractive. She testified that Svete instructed her to alter existing contracts by removing the phrases “terminally ill” and “by a physician” because “that would be similar to what the original document said, but would not legally bind LifeTime Capital in the same manner that “terminally ill” and “physician” would.” She testified that Svete owned and directed MUI, despite the fact that it gave the appearance of being a separate company.
Brian Barclay, Assistant Network Administrator and later Supervisor of Funding Operations at LCI testified that he was informed by Shausta Merrill, an LCI employee, that LCI would not receive medical summaries regarding life expectancies signed by doctors. Instead, “the life expectancies that I would be receiving would be a cover letter signed by [a representative of MUI].” - David Ganzsanto, an LCI employee responsible for developing relationships with brokers to bring in insurance policies, testified from personal experience that LCI was not buying policies on terminally ill patients as represented to investors.
- David Kozee, an account executive, was told by Girardot that the company sold products involving the terminally ill, and when Kozee asked for medical information to establish life expectancies, Svete told him to make it up.
- Steven Stuсker, formerly an attorney with Laughlin and Associates in Nevada, testified that Svete used Laughlin‘s services to secrete his involvement in “several corporations.”
Clearly, Austin‘s testimony was not the lynchpin of the government‘s case.
4. Motion for New Trial Properly Denied
Had Austin disclosed her incarceration from the witness stand when asked by Svete, this issue would not have been made the subject of his appeal. Further, had Svete sought the assistance of the district court in determining the details of the military theft charge, it also may have prevented the need for this discussion. That is not to say, however, that even if Svete had known of the incarceration in the
Despite the government‘s failure to disclose the incarceration, this defect does not rise to the level of requiring a new trial under Brady or Giglio. Ample corroborating and other impеachment evidence allowed the jury to effectively determine what weight, if any, to afford the testimony of Charme Austin.
D. Sentencing Issues
Svete contends that the district court miscalculated the loss to investors, finding it exceeded $80,000,000.00 under
1. Loss Calculation
We review a district court‘s determination of the amount of loss involved in an offense for clear error. See United States v. Woodard, 459 F.3d 1078, 1087 (11th Cir. 2006).
A preponderance of the evidence developed at trial established that the victim-investors lost in excess of $80 million. Although Svete contends that the loss attributable to him should be measured only by the amount by which selling prices were inflated by false misrepresentations, fraudulent schemes come in various forms and may require different methods to calculate loss. See United States v. Orton, 73 F.3d 331, 333 (11th Cir. 1996). This Court has upheld methods which hold “a defendant fully accountable for all losses suffered by those victims who lose money, but does not allow the defendant to fully benefit from payments made to others.” Id.
During the sentencing hearing, Svete did not challenge the qualifications of the Receiver or present evidence to contradict his testimony. The Receiver testified that the loss to the victim-investors could be as high as $114 million and would be in excess of $80 million even if the value of the portfolios was considered, as Svete suggests. Recognizing the difficulty in determining an exact loss amount, the district court reasonably found a loss of $100 million. As the district court correctly concluded, it was “certainly over 80 million” based on the reliable testimony presented. Therefore, the district court did not err when it increased Svete‘s offense level by 18 under
2. Restitution
Neither the Eleventh Circuit nor the Supreme Court has determined whether funds to ensure the viability of fraudulently induced investments may be included in a restitution order. As such, if there was error, it was not plain. See Lejarde-Rada, 319 F.3d at 1291. The district court, therefore, did not plainly err when it included
III. Conclusion
Defendants’ convictions on Counts Three through Seven are VACATED and REMANDED for a new trial based on the erroneous jury instruction. Defendants’ convictions as to Counts One, Two, Eight, Nine, and Ten are AFFIRMED. The sentences as to all counts, while they may be wholly accurate, are REVERSED for re-sentencing consistent with this opinion.
Notes
As to the withheld adjudication,