Aрpellants Timothy Wetherald, Marc Shiner, and Leon Swichkow (collectively “Appellants”) appeal their convictions and sentences resulting from a thirty-one count indictment for their involvement in a scheme — running from approximately 2000 to 2003 — to defraud investors in telecommunication companies, known as competitive local exchange carriers (“CLECs”), operated by Appellants. Counts 1-3, 7-8, and 10-18 charged Shiner and Swichkow with wire fraud in violation of 18 U.S.C. § 1343. Counts 4-6 and 9 charged Wetherald with wire fraud. Counts 19-22 charged Shiner and Swichkow with mail fraud in violation of 18 U.S.C. § 1341. Count 23 charged all three men with securities frаud in violation of 15 U.S.C. §§ 78j(b) and 78ff. Finally, counts 24-31 charged Shiner and Swichkow with money laundering in violation of 18 U.S.C. § 1957. A jury found Appellants guilty on all counts.
Appellants appeal their convictions on a number of grounds. Appellants argue the district court should have dismissed the case for pre-indictment delay, the evidence was insufficient to support their convictions, the securities fraud statute is unconstitutional, the district court’s trial rulings resulted in reversible error, application of the Sentencing Guidelines in effect at the time of sentencing violated the Ex Post Facto Clause of the U.S. Constitution, and the district court imposed unreasonable sentences. With the benefit of the parties’ briefs and oral argument, we find no merit in the bulk of Appellants’ contentions. But Appellants’ argument that the district court violated the Ex Post Facto Clause by applying a different Guideline range than that in effect at the time of the offense raises questions that this court has not
*1319
squarely addressed in the wake of the Supreme Court’s decision in
United States v. Booker,
I.
Appellants’ convictions stem from a scheme by the three men to create and sell partnerships in CLECs operating in Colorado, Arizona, Washington, Minnesota, Oregon, and one serving both Iowa and Nebraska. The underlying business model— buying wholesale telecommunications services for resale — was not itself unsound. Due to an effort to prevent the monopolization of local telephone service by national outfits, Congress enacted the Federal Telеcommunications Act of 1996. As a part of this legislation, the so-called “Regional” or “Baby Bells” that dominated the telecommunications industry at the time are required to offer local retail telecommunications services for resale at a wholesale discount to any CLECs that possess the proper state licenses. These CLECs are then able to offer communications services without any infrastructure of their own. Thus, the business of the CLECs consists only of acquiring customers and reselling to those customers at a retail price services purchased from the Regional Bell аt a wholesale cost.
In 2000, Wetherald created ON Systems, a company intended to establish and manage CLECs. His plan was to purchase services from Qwest, a large western telecommunications company, and then resell those services around the western United States. After Wetherald had difficulty finding investors for his venture, he met with Shiner who, with Swichkow, ran a telemarketing company known as Telecom Advisory Services (“Telecom”). Working together, ON Systems and Telecom eventually gathered 250 investors for six limited-liability partnerships: Mile High Telecom Partners, LLP in Colorado (“Mile High”); The Phone Company of Arizona, LLP; The Washington Phone Company, LLP; The Minnesota Phone Company Financial Group, LLP; The Iowa/Nebraska Phone Company, LLP; and The Oregon Phone Company Financial Group, LLP.
A Securities and Exchange Commission investigation later revealed that these investors were enticed by misleading and in some cases patently false claims made by Appellants. They also were not informed that Shriner was a convicted felon who had been a defendant in previous regulatory actions or that Wetherald, in addition to steering several telecommunications companiеs into bankruptcy, was the subject of a permanent injunction in Washington and Oregon regarding his actions in the telecommunications industry in those states. By the time the Securities and Exchange Commission stepped in — filing an enforcement action against Appellants that later became the basis of this criminal action— the CLECs had collapsed, losing investors in excess of $8 million.
At sentencing, the district judge sentenced Appellants according to the 2008 U.S. Sentencing Guidelines rather than the 2002 Guidelines in effect at the time the Appellants committed the offenses. Departing downward for each Apрellant, the court sentenced Wetherald to 144 months, Shiner to 168 months, and Swichkow to *1320 108 months. Appellants filed timely notices of appeal and are presently incarcerated.
II.
Preserved constitutional challenges to the district court’s application of the sentencing guidelines are reviewed
de novo. United States v. Paz,
III.
Prior to the Supreme Court’s decision in
Booker,
this court had repeatedly held that although the district courts should “presumptively apply the Guidelines as they exist at the time of sentencing, they may not do so where those Guidelines would lead to imposition of a harsher penalty than that to which the defendant was subject at the time of the offense.”
United States v. Simmons,
This court has yet to directly address the ex post facto implications of
Booker
on the Guidelines. In
United States v. Masferrer,
the court, citing our
pre-Booker
decision in
Simmons,
wrote, “However, if a more lenient guidelines sentence was in effect at the time of the offense, the Guidelines Manual applicable at the time of the offense must be applied to avoid an Ex Post Facto Clause violation.”
Our sister circuits have split on the impact of
Booker
in regards to the Ex Post Facto Clause. The Seventh Circuit has
*1321
taken the view that the Ex Post Facto Clause no longer poses a problem, as it applies “only to laws and regulations that bind rather than advise.”
United States v.
Demaree,
The D.C. Circuit has squarely rejected this position, finding that the application of a harsher Guidelines range in place at sentencing presents a constitutional problem.
United States v. Turner,
Because it is consistent both with our interpretation of Supreme Court precedent and this circuit’s jurisprudence, we find the approach taken by the D.C. Circuit more compelling than that of the Seventh Circuit. It is true that the Guidelines are no longer mаndatory, but neither are they without force. The simple reality of sentencing is that a “sentencing judge, as a matter of process, will normally begin by considering the presentence report and its interpretation of the Guidelines.”
Rita v. United States,
Thus, the application of the correct Guidelines range is of critical importance, and it cannot be said that the Ex Post Facto Clause is never implicated when a more recent, harsher, set of Guidelines is employed.
1
But it is equally clear that we need not “invalidate every sentence imposed after a Guidelines range has been increased after the date of the offense.”
Ortiz,
Although the district court should have applied the more lenient Guidelines sentence in effect at the time of the Appellants’ offense, they have failed to show a substantial risk that the application of the 2008 Guidelines resulted in the imposition of a harsher sentence. In Kapordelis, we refused to overturn a sentence based on incorrectly calculated Guidelines because the district court made it clear it would have imposed the same sentence regardless. Id. Here the sentencing judge explicitly stated that he was aware of the conflict between the Guidelines and that although he applied the more recent version, he believed the totality of the circumstances called for a significantly lower sentence. He explained,
So I’m going to agree with the Government that the current guideline manual should be used in this case, because it does not have an ex post facto effect, becausе the guidelines are discretionary, I’m free to disregard them. And I can tell you right now I’m going to. I’m not going to apply the guideline — I’m not going to impose a 360-month sentence on any of these Defendants, but I think that’s the guidelines where we have to start .... But, again, I’m giving everybody advance notice that I think those guidelines are — I’m going to deviate from them and vary from them when I do impose sentence.
(R.296 at 52:12-19, 22-25.)
The court also commented specifically on each defendant, stating as to Shriner,
I don’t think it would have made a difference. I think — and, as a matter of fact, if I was operating under the 2002 guidelines versus the 2008 guidelines, I dоn’t think it would have made a difference. I tried to impose the sentence that I thought was appropriate based upon the facts of the case without regard to the guidelines, and I think this is where I — I’m pretty certain this is where I would have come out, regardless of whether I would have had that two-level increase or not.
(R.296 at 245:5-13.)
Turning to Swichkow, the court stated that it would “impose a sentence below the advisory guideline range because the Court believes the sentence it will impose will reflect the seriousness of the offense and provide just punishment.” (R.296 at 247:9-11.) The district court made a similar statеment regarding Wetherald’s sentence, reiterating that it would depart from the Guidelines and impose a sentence that was appropriate. (R.296 at 209:4-210:11.)
The district court is not required to utter a set of magic words in order "to come within Kapordelis. We find the statements of the district court more than sufficient to show that the improper application of the Guidelines did not create a substantial risk of a harsher sentence. The sentences imposed bolster this position. Under the 2008 Guidelines, all three defendants were subject to a Guidelines range of 210-262 months. The 2002 Guidelines range was significantly lower at 151-188 months fоr all three defendants. Nevertheless, only Shiner’s sentence of 168 months even fell within the 2002 Guidelines range. Wetherald’s sentence of 144 months was below the range, and Swiehkow’s sentence of 108 months represented a significant downward departure, 43 months below the minimum sentence recommended by the 2002 Guidelines. Ap *1324 pellants have presented no evidence that these sentences were affected by the district court’s reference to the 2008 Guidelines, and their speculation that the judge might have departed even further had he employed the 2002 Guidelines is not sufficient to show a substantial risk of hаrsher punishment. Therefore, we conclude that the district court did not violate the Ex Post Facto Clause in sentencing Appellants.
Appellants’ other arguments do not merit relief. Turning first to Appellants’ claims of pre-indictment delay, we have found that pre-indictment delay may raise due process concerns in certain circumstances. In
United States v. Solomon,
we held, “To establish that a pre-indictment delay violated his due process rights, a defendant must show (1) that he was actually prejudiced by the delay in preparing his defense, and (2) that the delay was unreasonable.”
There is simply no evidence that the government intentionally delayed this action in an effort to gain a tactical advantage over Appellants. Therefore, Appellants cannot prevail on their due process claim.
Turning to Appellants’ argument that the government failed to show an intent to defraud, the evidence shows otherwise. Intent may be found when “the defendant believed that he could deceive the person to whom he made the material misrepresentation out of money or property of some value.”
United States v. Maxwell,
The information Appellants gave investors was replete with misinformation and key omissions, and investors testified that had they known the correct information, *1325 they would never have invested in the CLECs. Shiner and Wetherald neglected to inform the investors of their prior problems with the law or the bankrupted businesses they left behind. Appellants sold non-voting shares they had promised to retain without informing the other investors. Appellants falsely claimed that the existing CLECs were experiencing excellent results in an effort to draw more investors.
While Shiner and Swichkow plead ignorance, the fact that they set up offices in ON Systems’ Colorado location and eventually became part owners of ON Systems belies this claim. Furthermore, several witnesses testified to Shiner and Swiehkow’s knowledge of the licensing problems and billing disputes with Qwest. Witnesses testified to Wetherald’s efforts to mislead the Colorado Public Utilities Commission as well as the investors. The evidence repeatedly shows that all Appellants were intimately involved in the scheme and that none of them can claim ignоrance. The jury evaluated this evidence, and taking it in the light most favorable to the government, there can be no doubt that the evidence was sufficient to support the jury verdict. 2
Appellants also attempt to overcome their securities fraud conviction by claiming that the jury improperly determined that the partnership interests were, in fact, securities. Long-standing precedent holds, “[A]n investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to еxpect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise.”
S.E.C. v. W.J. Howey Co.,
A general partnership or joint venture interest can be designated a security if the investor can establish, for example, that (1) an agreement among the parties leaves so little power in the hands of the partner or venturer that the arrange *1326 ment in fact distributes power as would a limited partnership; or (2) the partner or venturer is so inexperienced and unknowledgeable in business affairs that he is incapable of intelligently exercising his partnership or venture powers; or (3) the partner or venturer is so dependent on some unique entrepreneurial or managerial ability of the promoter or manager that he cannot replace the manager of the enterprise or otherwise exercise meaningful partnership or venture powers.
Williamson v. Tucker,
Appellants argue that the CLECs were partnerships and that the investors exercised substantial control over the enterprise. Thus, they contend, securities law does not apply. The evidence shows otherwise. The partnerships were sold as having the advantage of ON Systems expertise as a managing company, headed by the experienced Wetherald. Investors testified that they had no telecommunications experience or knowledge of how to operate a company, but they were assured that experience was not necessary. Investors testified that once they signed the joint venture agreement, Appellants did not ask them to vote on important decisions. The partnership committees had no power, met over the telephone, and were largely symbolic. Time commitment was minimal. The investors did not control disbursement of funds. Wetherald filed a petition for bankruptcy for Mile High Joint Venture without consulting the investors. A Colorado Public Utility Commission employee testified thаt Wetherald stated that the investors merely provided funding and had no say in the operations of the company. As the scheme began to fall apart, the investors attempted to gain information, including financial statements of the CLECs, but found themselves powerless to do so. The jury was aware that certain investors had moderately more involvement in the operation of the CLECs than others, and they were also aware that as the fraudulent nature of the scheme was revealed, some investors were able to organize themselves and remove On Systems as the management company for their CLECs. But the totality of the evidence was more than sufficient to allow the jury to conclude that, indeed, these were securities, not partnership interests.
Shiner and Swichkow claim that 15 U.S.C. § 78j is vague and leads to arbitrary and capricious application of the securities law. Void-for-vagueness challenges, absent a First Amendment claim, are evaluated as applied to the facts of each case.
United States v. Fisher,
to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement ..., any manipulative or deceptive device or *1327 contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
Appellants claim it is impossible to determine whether partnership agreements such as the one at issue in this case fall within the security laws. In reality, however, this is not a case in which it is impossible or even difficult to classify the partnership interests involved; they fall well within the securities statute. The void-for-vagueness challenge is without merit.
Appellants allege a number of evidentiary errors, claiming that either individually or cumulatively these errors should lead to a reversal of their convictions. These arguments fail. Appellants argue extensively about admission of their prior convictions, regulatory actions, and bankruptcies. As detailed above, however, Appellants asked investors to trust them with then-money and the management of these companies. Their past was material to these investors and thus relevant to the government’s case, outweighing any prejudicial effect. The district court addressed Appellants’ other claims by sustaining objections, striking testimony, and providing curative instructions to the jury. The strength of the government’s evidence was sufficient to overcome any errors the Appellants allege the district court made at trial. Thus, we conclude that any error was harmless.
Finally, the sentences imposed upon the Appellants are neither procedurally nor substantively unreasonable. The district courts have broad discretion to impose sentence, and the sentencing judge exercised that discretion, departing downward for Swichkow and Wetherald and sentencing Shiner squarely within the range recommended by the 2002 Guidelines. We find no reason to disturb the well-reasoned judgment of the district court.
IV.
Because we conclude that Appellants’ challenges are without merit, we affirm their convictions and the sentences' imposed.
AFFIRMED.
Notes
. While the government attempts to analogize to cases involving the grant of discretionary parole, we do not find sentencing and parole to be perfectly analogous. While several ex post facto cases have revolved around parole procedures, there is a distinction between how the court treats the granting of parole— what amounts to an act of undeserved mercy — and the imposition of criminal sentence. Justice Scalia recognized
this
aspect of parole, writing, "Any sensible application of the
Ex Post Facto
Clause, and any application faithful to its historical meaning, must draw a distinсtion between the penalty that a person can anticipate for the commission of a particular crime, and opportunities for mercy or clemency that may go to the reduction of the penalty .... In Georgia parole, like pardon (which is granted or denied by the same Board), is — and was at the time respondent committed his offense — a matter of grace.”
Garner v. Jones,
. Appellants challenge their monеy laundering convictions as well. To the extent Appellants are guilty of mail and wire fraud, however, their challenge to their money laundering convictions also fails.
United States v. Johnson,
. In
Bonner v. City of Prichard,