United States v. Harry Proudfoot, III ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS FEB 25 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 19-30074
Plaintiff-Appellee, D.C. No. 3:15-cr-00427-SI-1
v.
MEMORANDUM*
HARRY DEAN PROUDFOOT III,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Oregon
Michael H. Simon, District Judge, Presiding
Argued and Submitted February 3, 2021
Seattle, Washington
Before: GRABER, McKEOWN, and PAEZ, Circuit Judges.
Harry Proudfoot, III, appeals his jury conviction for one count of Conspiracy
to Commit Wire Fraud (18 U.S.C. § 1349), four counts of Wire Fraud (18 U.S.C.
§ 1343), one count of Conspiracy to Commit Money Laundering (18 U.S.C.
§ 1956(h)), and seven counts of Engaging in Monetary Transactions with
Criminally Derived Property (18 U.S.C. § 1957). All of the charges arise from a
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
fraudulent gold-mining investment scheme, known as Three Eagles. Proudfoot
argues that the district court abused its discretion in several of its evidentiary
rulings and that the errors were not harmless. Proudfoot also challenges the district
court’s restitution order, arguing that the court improperly included investors who
had invested prior to the charged Three Eagles venture. We have jurisdiction
under 28 U.S.C. § 1291, and we affirm.
We review evidentiary rulings for an abuse of discretion and will reverse
only if nonconstitutional error more likely than not affected the verdict. United
States v. Hankey, 203 F.3d 1160, 1166–67 (9th Cir. 2000). We review the district
court’s interpretation of the legality of a restitution order de novo, the district
court’s factual findings for clear error, and the amount of restitution for abuse of
discretion. United States v. Peterson, 538 F.3d 1064, 1074 (9th Cir. 2008).
1. The district court did not abuse its discretion in admitting the testimony of
Norm and Eric Stadeli. Before trial, Proudfoot moved to exclude evidence that
Norm Stadeli invested in other mining ventures with Proudfoot before investing in
Three Eagles. Proudfoot also moved to exclude evidence that Eric Stadeli invested
$50,000 with Proudfoot in March 2008, when Three Eagles was exploring a
mining operation site in Nevada. After Three Eagles moved to Ohio, Proudfoot
revised Eric Stadeli’s promissory note to reflect that Three Eagles owed him
$100,000.
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The Stadelis’ testimony was directly relevant and not “other acts” evidence
under Federal Rule of Evidence 404. The money invested by the Stadelis was
transferred to the new Three Eagles venture and Three Eagles investor funds were
used to pay back the original investments. Both Norm and Eric Stadeli were
effectively converted into Three Eagles investors when Proudfoot was unable to
make good on their original investment. The history of how Proudfoot obtained
the Stadelis’ investments and the testimony about their losses was thus
“inextricably intertwined” with the charged scheme. See United States v. Loftis,
843 F.3d 1173, 1178 (9th Cir. 2016); United States v. Lillard, 354 F.3d 850, 854
(9th Cir. 2003).
Further, the evidence was not inadmissible under Federal Rule of Evidence
403. “Relevant evidence is inherently prejudicial.” Hankey, 203 F.3d at 1172(internal quotation marks omitted). Proudfoot fails to establish how the Stadelis’
evidence resulted in unfair prejudice, substantially outweighing its probative value.
See Fed. R. Evid. 403.
2. The district court did not abuse its discretion in admitting evidence of a 1993
cease and desist order related to securities violations because Proudfoot failed to
disclose the order to his investors, while claiming in promotional materials for
Three Eagles that he had a “successful” career in the 1990s. In the context of mail
and wire fraud schemes, a duty to disclose occurs when the relationship is a
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“formal fiduciary relationship, or an informal, trusting relationship in which one
party acts for the benefit of another and induces the trusting party to relax the care
and vigilance which it would ordinarily exercise.” United States v. Shields, 844
F.3d 819, 823 (9th Cir. 2016) (internal quotation marks omitted). Proudfoot’s
statements about the success of his career, unaccompanied by the disclosure of the
cease and desist order, prevented investors from making a fully informed decision
about investing in the mining operation. .
3. Even if we were to conclude that the district court abused its discretion in
admitting the challenged evidence, any error was harmless. See United States v.
Morales, 108 F.3d 1031, 1040 (9th Cir. 1997) (en banc) (setting standard of review
for nonconstitutional error). In this case, there was ample evidence of Proudfoot’s
guilt independent of the challenged evidence.
4. The district court did not err in ordering restitution to Norm Stadeli. Under
to the Mandatory Victims Restitution Act (“MVRA”) 18 U.S.C. § 3663A(a)(2),
restitution for wire fraud offenses is not limited to harm caused by the particular
counts of conviction, but may include“related butuncharged conduct that is part of
a fraud scheme.” United States v. Lo, 839 F.3d 777, 788 (9th Cir. 2016) (internal
quotation marks omitted). When Three Eagles collapsed, Norm Stadeli lost his
$700,000 investment, which had previously been transferred to Three Eagles.
Norm Stadeli was, therefore, “directly harmed by [Proudfoot’s] criminal conduct
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in the course of the scheme” and the district court properly included him as a
victim of the offense for purposes of the MVRA. 18 U.S.C. § 3663A(a)(2); see
United States v. Gamma Tech Indus., Inc., 265 F.3d 917, 928 (9th Cir. 2001).
Therefore, the district court’s conclusion that Norm Stadeli was a victim of the
Three Eagles fraud scheme was not clearly erroneous, and the decision to include
those losses in the restitution order, for a total amount of $4,020,706.33, was not an
abuse of discretion.
AFFIRMED.
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