United States v. Bryan Reichel , 911 F.3d 910 ( 2018 )

United States Court of Appeals
For the Eighth Circuit
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No. 17-2562
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United States of America
lllllllllllllllllllllPlaintiff - Appellee
v.
Bryan S. Reichel
lllllllllllllllllllllDefendant - Appellant
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: October 19, 2018
Filed: December 28, 2018
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Before SHEPHERD, KELLY, and STRAS, Circuit Judges.
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KELLY, Circuit Judge.
Bryan Reichel appeals from his convictions for wire fraud, filing for
bankruptcy for the purpose of executing a scheme to defraud, and making false
statements in relation to bankruptcy proceedings. Upon careful consideration of the
issues presented, we affirm the judgment of the district court.1
1
The Honorable Wilhelmina M. Wright, United States District Judge for the
District of Minnesota.
I
This case stems from Reichel’s operation of PureChoice, Inc., a business that
developed indoor air quality monitoring systems. Reichel founded PureChoice in
1992. During his tenure as president and CEO, Reichel obtained millions of dollars
in bank loans for the company. PureChoice, having not yet turned a profit, was
unable to pay back these loans. Reichel approached private investors, seeking and
obtaining bridge loans, many of which he personally guaranteed. Reichel told the
investors that PureChoice would use the money to restructure its debt and to fund its
operations until it could reach profitability. What Reichel didn’t tell the investors
was that PureChoice was already in default on many of its bank loans, with collection
actions threatened or pending against the company and himself—which is the type
of information that PureChoice’s lawyer urged him to disclose and that several
investors indicated would have caused them to rethink their decisions to invest.
After obtaining bridge loans under false pretenses, Reichel did not attempt to
pay them back until threatened with collection actions. Nor did he primarily use the
loans to fund PureChoice operations, as he had promised. Instead, he paid off earlier
loans, paid himself a large salary and bonuses, and occasionally instructed
PureChoice employees to simply write him checks for tens of thousands of dollars in
company funds. He did the same with the millions of dollars in stock sales that he
collected from some of the same investors.
In 2010, Reichel was forced out of the company after an employee discovered
that he had been stealing money. Soon after, one of PureChoice’s investors, George
Anderson, filed suit against Reichel to recover $1.5 million in unpaid loans.
Reichel’s stated defense was that payment on the loans was not due until May 2011.
Anderson’s counsel agreed to delay filing his summary judgment motion until May,
giving Reichel an opportunity to pay off the debt. But on April 29, 2011, Reichel
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filed for bankruptcy under Chapter 7, thus automatically staying Anderson’s
collection action.
During the course of the bankruptcy proceedings, the trustee discovered that
Reichel had failed to disclose household goods worth at least $97,000, the sale of
utility equipment, the transfer of $212,000 to an account in the name of “Reichel
Investments, LP,” and the fact that he was using the Reichel Investments account to
pay his personal expenses. The trustee asked the bankruptcy court to deny discharge
due to fraudulent activity. In 2012, Reichel waived his right to discharge.
In 2014, Reichel was indicted on seven counts of wire fraud in connection with
the PureChoice investments, in violation of 18 U.S.C. § 1343. In 2015, the
government filed a superseding indictment, which added five new counts related to
Reichel’s failed bankruptcy proceedings: one count of filing for bankruptcy for the
purpose of executing a scheme to defraud, in violation of 18 U.S.C. § 157; three
counts of making a false statement in relation to bankruptcy proceedings, in violation
of 18 U.S.C. § 152(3); and one count of concealing a tax refund that was bankruptcy
estate property, in violation of 18 U.S.C. § 152(1).
A jury found Reichel guilty on all counts except the concealment of a tax
refund. At sentencing, the district court applied multiple enhancements to Reichel’s
offense level, resulting in a Guidelines range of 262 to 327 months. It sentenced
Reichel to 264 months of imprisonment. Reichel appeals, challenging several of the
district court’s decisions before and after trial and at sentencing.
II
Reichel first contends that the district court erred in denying his pretrial motion
to sever the wire fraud counts from the bankruptcy-related counts. He argues that the
counts were misjoined under Federal Rule of Criminal Procedure 8(a), which allows
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for joinder of separate counts only where the offenses “are of the same or similar
character, or are based on the same act or transaction, or are connected with or
constitute parts of a common scheme or plan.” “The propriety of joinder is . . .
determined from the face of the indictment.” United States v. Massa, 740 F.2d 629,
644 (8th Cir. 1984), overruled on other grounds by United States v. Inadi, 475 U.S.
387 (1986). Rule 8(a) is “broadly construed in favor of joinder.” United States v.
Colhoff, 833 F.3d 980, 983 (8th Cir. 2016) (quoting United States v. McCarther, 596
F.3d 438, 441–42 (8th Cir. 2010)). We review allegations of misjoinder under Rule
8(a) de novo. United States v. Colbert, 828 F.3d 718, 728 (8th Cir. 2016).
Joinder was appropriate here because the offenses were all connected to a
common scheme. The superseding indictment alleges a single “scheme to defraud
and to obtain and retain money by means of materially false and fraudulent
pretenses.” And it goes on to allege facts supporting the conclusion that all of the
charged offenses were connected to this single scheme: Reichel obtained money
through wire fraud and tried to keep that money through bankruptcy fraud. Reichel
was free to argue at trial that he had no such scheme, but the district court correctly
looked to the allegations in the superseding indictment to determine that joinder was
proper.
Reichel also argues that the district court abused its discretion when it refused
to sever the counts for trial under Rule 14. Rule 14 allows for severance at trial if
joinder “appears to prejudice a defendant.” Fed. R. Crim. P. 14(a). We review denial
of severance under Rule 14 for an abuse of discretion and will reverse only upon a
showing of severe prejudice, that is, if the defendant would have had “an appreciable
chance for an acquittal” in a severed trial. United States v. Geddes, 844 F.3d 983,
988 (8th Cir. 2017) (quoting United States v. Scott, 732 F.3d 910, 916 (8th Cir.
2013)).
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Here, the district court’s decision to try the counts together was not an abuse
of discretion. It concluded that evidence of wire fraud would be admissible as to the
bankruptcy-related counts, and vice versa. “A defendant cannot show prejudice when
evidence of the joined offense would be properly admissible in a separate trial for the
other crime.” Id. (cleaned up). We agree that evidence of the wire fraud would have
been relevant to the § 157 count (filing for bankruptcy for the purpose of executing
a scheme to defraud), and so it likely would have been admissible in a trial of the
bankruptcy-related counts. It is less clear whether evidence of the bankruptcy fraud
would have been admissible in a trial of the wire fraud counts, but even so, Reichel
has not shown that he would have had “an appreciable chance for an acquittal” on any
count had the trials been severed.
III
Reichel next contends that his convictions are not supported by sufficient
evidence. When considering Reichel’s challenge to the jury’s verdict, “we review de
novo the sufficiency of the evidence to sustain the conviction,” viewing the evidence
in the light most favorable to the jury’s verdict, resolving all conflicts in favor of the
verdict, and accepting all reasonable inferences that support the verdict. United
States v. Whitlow, 815 F.3d 430, 435 (8th Cir. 2016). We will reverse “only where
no reasonable jury could find all the elements beyond a reasonable doubt.” Id.
(quoting United States v. Cole, 721 F.3d 1016, 1021 (8th Cir. 2013)).
Reichel argues that the government failed to prove his fraudulent intent as to
either the wire fraud or the bankruptcy counts.2 He points to evidence from which,
2
See 18 U.S.C. § 152(3) (requiring a false statement in relation to bankruptcy
proceedings to be made “knowingly and fraudulently”); 18 U.S.C. § 157 (requiring
a bankruptcy to be filed “for the purpose” of executing or concealing a scheme to
defraud); United States v. Krug, 822 F.3d 994, 999 (8th Cir. 2016) (per curiam)
(“Intent is an essential element of wire fraud [under 18 U.S.C. § 1343].” (cleaned
up)).
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he says, the jury could have inferred that he wanted PureChoice to succeed, that he
merely made a series of bad business decisions concerning the bridge loans, and that
his false statements concerning his bankruptcy proceedings were the result of
confusion and misunderstanding. But “[e]ven where the evidence rationally supports
two conflicting hypotheses, the reviewing court will not disturb the conviction.”
United States v. Huyck, 849 F.3d 432, 441 (8th Cir. 2017) (quoting United States v.
Griffith, 786 F.3d 1098, 1102 (8th Cir. 2015)). Here, a juror could have inferred that
Reichel intended to deceive the investors from the evidence that Reichel convinced
them to lend money to PureChoice, used some of that money for his own expenses,
and failed to repay them according to the terms of the loan. See United States v.
Walker, 818 F.3d 416, 421 (8th Cir. 2016) (“Intent to defraud need not be proved by
direct evidence. Provided the victims suffered some tangible loss . . . the scheme itself
often serves as evidence of a defendant’s intent to defraud.” (cleaned up)). Likewise,
a juror could have inferred fraudulent intent concerning the bankruptcy from the
evidence that Reichel filed for bankruptcy just before a creditor planned to file his
summary judgment motion, then transferred funds to a hidden account, and finally
failed to disclose that account and other items to the trustee. In light of all of the
evidence presented, we cannot conclude that no reasonable jury could have found that
Reichel possessed fraudulent intent sufficient to convict him of wire fraud and
bankruptcy fraud.
IV
Reichel also contends that the district court erred in denying his post-trial
motions to continue sentencing and dismiss the superseding indictment. Both
motions were based on his theory that the original indictment should have been
dismissed because it contained inaccurate information about PureChoice, and that as
a result, it did not toll the statute of limitations on the wire fraud counts. Because the
superseding indictment was not filed until after the limitations period, Reichel argued,
the wire fraud counts must be dismissed. The district court denied Reichel’s motions
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as untimely. It reasoned that an affirmative defense based on the statute of limitations
should have been brought in a pretrial motion if possible, and here, it would have
been possible.
We review the district court’s refusal to consider an untimely motion for abuse
of discretion. See United States v. Trancheff, 633 F.3d 696, 697 (8th Cir. 2011) (per
curiam). The district court has discretion to consider an untimely motion if the party
shows good cause for the delay. Id.; Fed. R. Crim. P. 12(c)(3). “[G]ood cause . . .
requires a showing of cause and prejudice.” United States v. Paul, 885 F.3d 1099,
1104 (8th Cir. 2018) (cleaned up).
Here, we need not address whether Reichel could have raised his statute-of-
limitations defense before trial, because he has not shown prejudice. Both of his
motions hinge on his argument that the original indictment should have been
dismissed due to inaccurate information allegedly presented to the grand jury. The
inaccurate information concerned PureChoice’s compliance with federal regulations.
Reichel believes, based on the original indictment’s allegations, that the grand jury
was presented with testimony that PureChoice’s products were required to comply
with the regulations but did not comply, whereas in fact, at least some PureChoice
products did comply. Reichel theorizes that the inaccurate compliance information
would have led the grand jury to believe that PureChoice was a full-fledged Ponzi
scheme rather than a legitimate business. But Reichel fails to articulate why the
inaccurate compliance information was vital to the decision to indict, such that the
grand jury would not have indicted without it. The petit jury, presented with a
superseding indictment that did not contain the inaccurate compliance information,
found Reichel guilty beyond a reasonable doubt on all wire fraud counts. Thus, we
are confident that the grand jury could have indicted Reichel even without this
inaccurate information, and thus that dismissal of the original indictment would have
been improper. See United States v. Mechanik, 475 U.S. 66, 70 (1986) (holding that,
despite an error in the grand jury proceeding, “the supervening jury verdict made
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reversal of the conviction and dismissal of the indictment inappropriate.”); see also
Bank of N.S. v. United States, 487 U.S. 250, 255–56 (1988) (“[D]ismissal of the
indictment is appropriate only if it is established that the [error] substantially
influenced the grand jury’s decision to indict, or if there is grave doubt that the
decision to indict was free from the substantial influence of such [errors].” (cleaned
up)). Because Reichel did not show that his motion to dismiss might have succeeded,
the district court did not abuse its discretion in denying it or the motion to continue
sentencing.3
V
At sentencing, the district court overruled Reichel’s objection to three
sentencing enhancements. Reichel appeals, arguing that these enhancements were
erroneously applied given the facts and circumstances of his offenses. We review the
district court’s interpretation and application of the Guidelines de novo, and we
review findings of fact for clear error. See United States v. Markert, 774 F.3d 922,
923 (8th Cir. 2014).
A
The first sentencing enhancement that Reichel challenges is a 22-level increase
under § 2B1.1(b)(1)(L), which applies if the total loss amount exceeds $25 million.
The Guidelines provide for several different methods of calculating the total loss
3
During the pendency of his appeal, this court received two pro se motions
concerning this issue from Reichel. We grant the first, a motion to supplement the
record with additional documentation. The additional documents do not alter our
analysis. We deny the second, a motion for the production of grand jury transcripts,
because as discussed above, Reichel has not shown “that a ground may exist to
dismiss the indictment because of a matter that occurred before the grand jury.” Fed.
R. Crim. P. 6(e)(3)(E)(ii).
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amount. See USSG § 2B1.1 cmt. n.3. The district court used the actual loss, which
is calculated as the pecuniary harm that Reichel “knew, or under the circumstances,
reasonably should have known, was a potential result of the offense.” Id. cmt.
n.3(A)(iv). It found an actual loss of $28,290,114.31, comprising the wire fraud
victims’ losses and the assets that Reichel concealed from the bankruptcy court.
Reichel argues that some of the investors’ losses were due to market forces rather
than Reichel’s fraud, making it impossible to calculate actual loss. But Reichel
misses the point: the investors would not have given any money to PureChoice were
it not for Reichel’s fraud, so all of the money invested and lost is properly included
in the actual loss calculation. See Walker, 818 F.3d at 422–23.
Reichel also questions the district court’s calculations, pointing out that the
amount of restitution is about $6,000,000 less than the actual loss amount for
Guidelines purposes. He theorizes that money returned prior to the discovery of the
fraud was credited to the restitution calculation but not to the Guidelines calculation.
But the district court explained that the discrepancy was due to an unindicted co-
conspirator’s losses, which were included in the Guidelines calculation but not
included in the restitution calculation. Because the loss amount determination under
the Guidelines and for restitution purposes are distinct inquiries, the district court did
not err by including the unindicted co-conspirator’s losses in one, but not the other.
See United States v. Binkholder, 832 F.3d 923, 929 (8th Cir. 2016). The district court
made a “reasonable estimate of the loss,” which is all that the Guidelines require.
USSG § 2B1.1 cmt. n.3(C) (“The sentencing judge is in a unique position to assess
the evidence and estimate the loss based upon that evidence. For this reason, the
court’s loss determination is entitled to appropriate deference.”).
B
Next, Reichel challenges a two-level enhancement under § 2B1.1(b)(10)(C) for
offenses involving “sophisticated means” that defendants intentionally engage in or
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cause. Sophisticated means represents “especially complex or especially intricate
offense conduct pertaining to the execution or concealment of an offense.” Id. cmt.
n.9(B). Whether an offense involves sophisticated means is a factual finding that we
review for clear error. United States v. Meadows, 866 F.3d 913, 917 (8th Cir. 2017).
Here, the district court did not clearly err. Reichel’s bankruptcy fraud involved
sophisticated means. See § 2B1.1 cmt. n.9(B) (listing “[c]onduct such as hiding
assets or transactions, or both, through the use of fictitious entities” as an example of
sophisticated means). And Reichel’s multi-year use of bridge loans from one investor
to cover the debts of another constituted sophisticated means for the wire fraud
counts. See Meadows, 866 F.3d at 917–18.
C
Finally, Reichel challenges a two-level enhancement under § 3B1.3 for abusing
“a position of public or private trust . . . in a manner that significantly facilitated the
commission or concealment of the offense.” This enhancement “is not intended to
apply to every fraud offense,” Walker, 818 F.3d at 423, but the district court properly
applied it here. Reichel repeatedly used his position as the president and CEO of
PureChoice, in addition to his status as one of two long-term board members, to
perpetrate and conceal his fraud. This is the type of conduct contemplated by this
Guideline provision. See § 3B1.3 cmt. n.1 (listing “a bank executive’s fraudulent
loan scheme” as an example of an offense warranting the enhancement); Walker, 818
F.3d at 423 (holding that it was not clear error to apply the enhancement where the
defendant “repeatedly used his controlling corporate trust position to conceal his
massive fraud offenses”).
VI
Based on the foregoing, we affirm.
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