United States v. Jason Bo-Alan Beckman

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 13-1162
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Jason Bo-Alan Beckman, also known as Bo Beckman
lllllllllllllllllllll Defendant - Appellant
___________________________
No. 13-1163
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Gerald Joseph Durand, also known as Jerry Durand
lllllllllllllllllllll Defendant - Appellant
___________________________
No. 13-2603
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Patrick Joseph Kiley, also known as Pat Kiley
lllllllllllllllllllll Defendant - Appellant
____________
Appeals from United States District Court
for the District of Minnesota - St. Paul
____________
Submitted: October 8, 2014
Filed: May 12, 2015
____________
Before RILEY, Chief Judge, WOLLMAN and BYE, Circuit Judges.
____________
RILEY, Chief Judge.
Five players in a partial Ponzi scheme received over $193 million from
unsuspecting investors. Trevor Cook and Christopher Pettengill pled guilty, and
defendants Jason Bo-Alan Beckman, Gerald Durand, and Patrick Kiley proceeded to
trial. After a twenty-nine day trial, a jury found the defendants guilty on all counts,
including fraud, conspiracy, and money-laundering, and the district court1 sentenced
each to decades in prison. The defendants appeal their convictions and sentences.
We affirm.2
1
The Honorable Michael J. Davis, Chief Judge, United States District Court for
the District of Minnesota, adopting the report and recommendation of the Honorable
Jeffrey J. Keyes, United States Magistrate Judge for the District of Minnesota.
2
We possess appellate jurisdiction under 28 U.S.C. § 1291.
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I. BACKGROUND
A. Facts
“We present the facts in a light most favorable to the verdicts, drawing all
reasonable inferences from the evidence that support the jury’s verdicts.” United
States v. Ramon-Rodriguez, 492 F.3d 930, 934 (8th Cir. 2007). From July 2006
through September 2009, the defendants’ partial Ponzi scheme3 received over $193
million from hundreds of investors. Only $49 million was returned to some investors,
all of which came from new investors’ money. Some investors lost their life savings.
The five schemers profited in varying amounts: $12.2 million for Cook; $4.8 million
for Beckman; $4.3 million for Pettengill; $1.9 million for Durand; and $432,000 for
Kiley.
The schemers induced victims to invest in various entities they created, many
named either with the initials “UBS” (UBS entities) or the word “Oxford” (Oxford
entities). According to SEC accountant Scott Hlavacek, the schemers described a
“currency program” to potential investors leading investors to believe “they would
be investing in foreign currency trading, which was guaranteed and . . . had a . . .
fixed rate every month.” Some of the money “was actually invested in foreign
currencies,” but none of the money was “invested in a completely safe, secure, and
guaranteed currency product,” as the defendants promised.
For example, Beckman’s firm, “Oxford Global Advisors,” which was “one of
the . . . primary recipients of investor funds” in the scheme, stated in a solicitation
3
U.S. Securities and Exchange Commission (SEC) accountant Scott Hlavacek
testified, “In a true Ponzi scheme[,] the money . . . is just used for the benefit of the
people raising the money and then to make payments to older investors with new
investors’ money.” In contrast, “[i]n a partial Ponzi scheme[,] some of the money
might be . . . use[d] for something close to what [the schemers are] saying, but the rest
of the money is used to pay old investors with new investors’ money and to benefit
the individuals raising the money.”
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brochure that its “Federal Funds Income Advantage” program had a current annual
yield of 12% and promised “instant[] liquid[ity]” and “zero fluctuation of principal.”
Each investor’s account would be “segregated”—“not co-mingled [sic] with the
general assets of the custodian, bank or dealer,” and funds would be invested in
various foreign currencies and then traded for gain depending on favorable interest
rates. Beckman told his victims they could not lose money in the currency
program—the investment was “risk-free” and “completely safe”—and that it was a
“fixed income product” “that delivers this safe 10 to 12 percent return on your
money.” Beckman also falsely inflated his own credentials. For example, Beckman
claimed to be “in the top-ranked tier of portfolio managers per a Morningstar
comparative study,” a study and ranking that did not exist. One victim testified this
false credential “factored into [her] decision to make this investment.”
Beckman claims it was only in April 2008 that he learned the investors’ money
in the currency program was not held in segregated accounts but was pooled together.
Yet, Beckman still obtained another $24 million of investors’ money for the currency
program. For the period August 2006 to July 2009, Beckman’s personal clients
invested more than $47 million.
At trial, a securities executive, Donald Bizub, who had a professional
relationship with Beckman, testified that in August 2008 he had seen “an ad on an
Oxford related page talking about a fixed income investment paying I believe it was
10 and a half percent guaranteed.” Bizub was concerned because “typically when you
see ads like this, there’s always an asterisk with a whole bunch of disclaimer at the
bottom; and [he did not] see an asterisk or any disclaimer.” Bizub clicked a link on
the website and sent an email with the subject line, “How’s 10.5% fixed return
sound,” and requested, “Please tell me more about this investment.” Beckman’s
colleague, Gene Walden, forwarded Bizub’s email to Beckman, stating, “Just got
this—he must have seen this in our e-newsletter on the web site.”
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Beckman forwarded the email to Cook, writing, “Now the ship begins to sink.
This is not good. I will needless to say take care of it, I just wanted you to know.”
Cook wrote back to Beckman, “I am very sorry about this. . . . I think the good news
is that . . . we can blame it on a trainee sales rep who was fired . . . say nothing he did
was approved . . . also say we have opinion letters from attorneys about the product
. . . . So please see me if you would like any ammunition to respond . . . .
Individually managed accounts is very im[p]ortant . . . remember this bullet point.”
Even after the ship began to sink, Beckman still solicited over $12 million in
additional investor funds into non-segregated accounts.
Some of the victims learned of the currency program through Gerald Durand’s
radio shows, “Expand Your Wealth” and “Wealth Survival”—on which Beckman was
a guest. Durand also solicited investors by advertising “educational workshop[s],”
stating he and “UBS Diversified, which manages over 2 billion dollars in assets,”
could advise how to “double your money in less than 5 years” and “earn 15% per year
with no risk.” Durand testified at a hearing in a related civil case that Cook chose the
name “UBS Diversified” “to confuse people.” For example, Beckman emailed to one
of his investors that the “fixed income alternative” would yield “12% for 12 months
and [was] backed by UBS (not someone we met on the street),” and the investor was
led to believe “UBS” meant the Union Bank of Switzerland. Beckman’s brochure
included the genuine UBS logo on the last page, along with several other investment
banks. Durand testified the schemers stopped using the fund name “UBS” after the
Swiss bank sued them.
One investor victim testified that after listening to Durand’s radio show, he
attended six or seven seminars where “the emcee would kick things off . . . and say
that these are some of the most brilliant people that he knows in the financial industry
. . . and then . . . he would have . . . Jerry Durand come up and give a little spiel for
15 minutes, then [Jason] Beckman, then Trevor Cook, and they would all give their
deal . . . . I thought these people were the best and the brightest. And I’m usually a
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very conservative type person and they really sold me.” The investor and his family
lost over $370,500.
Durand, who was also “Managing Director” of Oxford Global Advisors, placed
his name on a UBS Diversified version of the “Federal Funds Income Advantage”
brochure, which promised “[i]nterest rates . . . [c]redited at 12% annually” and stated,
“The entire contents of this brochure is solely the responsibility of UBS
Diversified. . . . For more information, please contact Gerald J. Durand.” Durand
wrote an investor that UBS Diversified’s customer funds were “insured by measures
enacted by the Federal Government” and “held in segregated accounts,” and that
Durand’s “people” at the firm were licensed brokers. Based on Durand’s
representations that the investor’s funds would be held in a segregated account and
the principal could not be lost, the investor mortgaged his home, entrusted the
proceeds and more to Durand, and lost several million dollars.
Kiley also had a radio show, “Follow the Money.” Kiley’s radio show was
broadcast on a Christian radio station, and Kiley described himself as a Christian
man—“he always closed his broadcast with a prayer.” One of Kiley’s early investors,
Duke Thietje, stated this “ha[d] an impact on [his] investment decision” because
[Thietje] was “a person of the Bible [him]self [and] wanted someone who was of
personal integrity.” On the radio, Kiley gave a phone number that listeners could call
for more information—Kiley would then talk with the caller and send brochures from
“UBS,” claiming it was a “registered financial advisory firm.” While telling potential
investors their funds would be kept in segregated accounts, Kiley personally
deposited many investors’ funds into the same account and also wrote checks to
satisfy occasional withdrawal requests.
Kiley’s radio show also suggested listeners consult his website,
www.patkiley.com, where he lied about his own credentials, stating he was “an
independent financial analyst for a multi billion dollar corporation” and “[h]is clients
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range from top international funds and banks to the everyday investor.” Kiley’s
website advertised “The Wealth Management Group” that “currently oversees several
billions in assets” and “provides individual investors access to arbitrage,” known as
“a risk-less transaction” with “individually segregated” customer accounts that are
“totally liquid.” Kiley told Thietje “the funds would be traded in foreign currencies
and it was a rather successful program, having stops and so on, so there would be
little chance to really lose a large amount.” Thietje testified Kiley’s representation
of “complete safety” for his funds “was the most determining factor” in his decision
to invest with Kiley. Thietje stated Kiley’s representations led him to conclude his
funds “would be safer in the program than with [his] bank.” Thietje lost
approximately $340,000. Undeterred after Thietje’s loss, Kiley and his
representatives repeated the same promises on his radio show, his website, and in
brochures and letters to currency program investors who lost their investments just
as Thietje did. Kiley “was a money machine” who “brought in the vast
majority”—about two thirds—of the money invested in the currency program.
B. Procedural History
A jury found the defendants guilty on all counts charged against them in a
second superseding indictment (indictment). As relevant to this appeal, all three
defendants were convicted of committing or aiding and abetting the commission of
wire fraud or mail fraud in violation of 18 U.S.C. §§ 2, 1341, and 1343; conspiracy
to commit mail fraud and wire fraud in violation of 18 U.S.C. § 1349; and money
laundering in violation of 18 U.S.C. §§ 2 and 1957. Beckman, individually, was also
convicted of committing or aiding and abetting the commission of wire fraud
regarding his interactions with elderly victims Charlotte and Raymond Olson in
violation of 18 U.S.C. §§ 2 and 1343; committing or aiding and abetting the
commission of mail fraud, regarding his attempt to purchase an interest in the
Minnesota Wild hockey team of the National Hockey League (NHL) in violation of
18 U.S.C. §§ 2 and 1341; and filing false tax returns in 2007 and 2009 and tax
evasion in 2008 in violation of 26 U.S.C. §§ 7201 and 7206(1). The district court
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sentenced Beckman to 360 months imprisonment and Durand and Kiley to 240
months imprisonment.
II. DISCUSSION
A. Evidentiary Rulings
“We review evidentiary rulings of a district court for abuse of discretion,
giving substantial deference to the district court’s determinations. This court may
reverse only if an error ‘affects the substantial rights of the defendant’ or has ‘more
than a slight influence on the [jury’s] verdict.’” United States v. Manning, 738 F.3d
937, 942 (8th Cir. 2014) (alteration in original) (internal citations omitted) (quoting
United States v. Yarrington, 634 F.3d 440, 447 (8th Cir. 2011)).
1. Federal Rule of Evidence 404(b)
“Evidence of a crime, wrong, or other act is not admissible to prove a person’s
character in order to show that on a particular occasion the person acted in accordance
with the character.” Fed. R. Evid. 404(b)(1). But “[t]his evidence may be admissible
for another purpose, such as proving motive, opportunity, intent, preparation, plan,
knowledge, identity, absence of mistake, or lack of accident.” Id. 404(b)(2). To be
admissible at trial, prior acts must:
(1) be relevant to a material issue raised at trial, (2) be similar in kind
and close in time to the crime charged, (3) be supported by sufficient
evidence to support a finding by a jury that the defendant committed the
other act, and (4) not have a prejudicial value that substantially
outweighs its probative value.
United States v. Turner, 583 F.3d 1062, 1066 (8th Cir. 2009). We review the district
court’s Rule 404(b) decisions for abuse of discretion. See id. at 1065.
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a. Beckman
Beckman claims the district court improperly admitted several pieces of
damaging character evidence. First, Beckman admits he was “involuntarily
disenrolled” from the Air Force Academy “for lying.” Second, the government stated
it intended to introduce evidence that Beckman purportedly forged his mother’s
signature on two student loan applications. The district court granted Beckman’s
motion in limine to exclude both lines of inquiry but stated in the order—and again
before Beckman took the stand—that the government could introduce the evidence
“for impeachment purposes.” On Beckman’s cross-examination, the district court
properly admitted both pieces of evidence under Federal Rule of Evidence 608(b).
See Rule 608(b)(1) (“[T]he court may, on cross-examination, allow [specific
instances of conduct] to be inquired into if they are probative of the character for
truthfulness or untruthfulness of . . . the witness.”); cf. Rule 404(b)(2).
Finally, at trial, Beckman’s mother stated that around 2002, she sued him as
personal representative of his grandfather’s estate after he (1) mortgaged his
grandfather’s house to pay his own debts; (2) pocketed the profit from the later sale
of the house; and (3) failed to distribute other assets—testimony Beckman also had
attempted to exclude with a motion in limine. Beckman complains the district court
erred by admitting this Rule 404(b) evidence because the events were remote in time
and the evidence could have had “an incendiary effect.” Although the evidence was
relatively remote, the government examined Beckman’s mother on these points to
refute Beckman’s statement to the NHL that he invested the principal of his
grandfather’s estate for the benefit of his mother. The evidence was directly relevant
to the charges against Beckman of defrauding the NHL, and “‘[t]his court gives great
deference to the district court’s weighing of the probative value of evidence against
its prejudicial effect.’” United States v. Gant, 721 F.3d 505, 510 (8th Cir. 2013)
(quoting United States v. Tyerman, 701 F.3d 552, 563 (8th Cir. 2012)); see Fed. R.
Evid. 403. The district court did not abuse its discretion in admitting Beckman’s
mother’s testimony.
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b. Durand
In a pretrial order, the magistrate judge required the government to disclose any
Rule 404(b) evidence “no less than thirty days before trial.” The “government’s trial
memorandum, 404(b) notice, motions in limine and memorandum in support thereof,”
filed March 6, 2012, stated, “The trial evidence will show that Trevor Cook and
Gerald J. Durand and their associates – the people running the currency program that
Mr. Beckman repeatedly promoted as a principal-protected, legitimate, prudent
investment – routinely drank alcohol and/or used drugs at the mansion to the point
of morbid intoxication.” This sentence was included in a section of the document that
addressed Beckman, not Durand, and did not specifically refer to Rule 404(b). As
such, Durand claims he was not given notice as required by the magistrate judge, even
though trial began on April 19, 2012, more than thirty days after the government filed
its notice. While the government did not include the challenged drug information
under a 404(b) heading specifically addressed to Durand, the document still gave
Durand notice of the evidence the government intended to introduce, effectively
satisfying the magistrate judge’s order.4
At trial, the government introduced witness Stephanie Bolton, Durand’s former
assistant. Bolton testified, over Durand’s objection, she would smoke marijuana5 at
the currency program place of business three to four days a week, on a daily basis
Durand would interact with clients “when he was stoned,” and Durand knew Cook
conducted business while drunk. Durand now argues the district court erred by
allowing the testimony. See Fed. R. Evid. 401, 403, 404(b).
4
Before the noticed witness testified in front of the jury, the district court heard
argument on Durand’s motion.
5
Durand also argues he had no notice because the government’s memo referred
to “drugs,” and not specifically “marijuana.” Durand’s argument is specious—he,
too, uses the terms interchangeably in his brief—and we reject this disingenuous
argument.
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After Bolton’s testimony, a juror advised the district court the juror, too,
smoked marijuana, and he may have been “more sympathetic to” Durand. The district
court removed the juror on the government’s motion. Later, Durand moved to voir
dire the remaining jury members as to marijuana use, which the district court denied.
Durand appeals this decision as well.
The district court did not abuse its discretion by declining to ask already
impanelled jurors questions about their views concerning illegal drug use on the
seventh day of a lengthy, complicated trial. Durand was on notice from the
government’s trial brief that it intended to introduce such evidence, so Durand could
have filed a motion to ask such questions himself on voir dire before the jury’s
impanelment. While it may strain credulity to imagine this drug and alcohol evidence
was necessary to the government’s case, we reverse “‘only when the evidence clearly
had no bearing on the case and was introduced solely to show defendant’s propensity
to engage in criminal misconduct.’” Gant, 721 F.3d at 509 (quoting United States v.
Farish, 535 F.3d 815, 819 (8th Cir. 2008)). The district court did not abuse its
considerable discretion in evidentiary matters by allowing the marijuana testimony.
2. Hypothetical Questions
Beckman objects to what he calls the government’s use of “guilt assuming
hypotheticals” during trial. See United States v. Barta, 888 F.2d 1220, 1224-25 (8th
Cir. 1989) (holding the district court erred by allowing “questions premised on an
assumption of guilt”). Beckman objected to two such questions early in the trial, but
admits he opted not to object to the questions he challenges on appeal because
“further objections would only highlight [the issue] for the jury.” We now review for
plain error. See United States v. Big Eagle, 702 F.3d 1125, 1130 (8th Cir. 2013).
“Under plain error review,” Beckman “must show ‘that the district court committed
an error that is clear or obvious, that the error affected his substantial rights, and that
the error seriously affects the fairness, integrity, or public reputation of judicial
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proceedings.’” Id. (quoting United States v. Troyer, 677 F.3d 356, 358-59 (8th Cir.
2012)).
The district court did not err, plainly or otherwise, by allowing what Beckman
describes as the hypothetical questions. First, Beckman does not adequately develop
an argument about most of the challenged hypothetical questions, merely reciting
them in footnotes and conclusively stating the questions assume guilt, so we do not
address the undeveloped challenges here. See Fed. R. App. P. 28(a)(8)(A); Rotskoff
v. Cooley, 438 F.3d 852, 854 (8th Cir. 2006) (declaring an argument waived when not
developed in appellate brief).
Beckman does argue the district court clearly erred by allowing the following
line of questioning of Jitesh Mehta, who worked as an unlicensed broker for
Beckman:
Q. I want to call your attention to the date here. The date of this
e-mail is October 21, 2008; is that correct?
A. That’s correct.
Q. Prior to this time had Mr. Beckman indicated to you at all that in
August of 2008 he was told that this was a Ponzi scheme or very
likely a Ponzi scheme?
A. No, I was not told.
Before Mehta’s testimony, Martin Klotz, an attorney with the Willkie Farr law
firm (Willkie Farr), testified he had represented Oxford Global Advisors and had been
retained “to analyze the [currency] program and give advice on the legality of it.”
Klotz testified he told Beckman, “[i]n substance,” that he thought Cook was “a crook”
who was “likely running a Ponzi scheme.” So the question to Mehta was not a
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hypothetical, but repeated an assertion already in evidence. The district court did not
plainly err in admitting Mehta’s testimony.
3. Internal Revenue Service (IRS) Agent Matthew Schommer
On appeal, though not at trial, Beckman objects to questions the government
asked IRS Agent Matthew Schommer. Again, we review for plain error. Beckman
specifically objects to the use of the term “investigative significance”:
Q. Based on your investigation in the case, Agent Schommer -- well,
what if any, investigative significance did this have? Let’s put it
that way.
A. The victim investors that are purported here to get wire transfers
never received the money.
Agent Schommer made a statement of fact, that the victims did not receive the money,
and Beckman claims Agent Schommer was drawing inappropriate conclusions about
the evidence. Again in a footnote, Beckman cites over a dozen other instances of use
of the term “investigative significance,” to which he did not object at trial.
Beckman’s contention is without merit. Beckman has not shown any error (if one
existed) affected Beckman’s substantial rights or “‘seriously affect[ed] the fairness,
integrity, or public reputation of judicial proceedings.’” Big Eagle, 702 F.3d at 1130
(quoting Troyer, 677 F.3d at 358-59).
Both Beckman and Durand also challenge Agent Schommer’s testimony as a
lay witness.6 They claim on appeal, as Durand objected at trial, the government’s
6
On one occasion during Agent Schommer’s testimony spanning five days, the
district court errantly stated Agent Schommer was an expert. Soon thereafter, the
government agreed with Durand that Agent Schommer was not testifying as an
expert, but as a summary witness, which Beckman clarified at the beginning of his
cross-examination of Agent Schommer.
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questions elicited lay opinion testimony in violation of Federal Rule of Evidence 701.
Agent Schommer’s testimony was based upon his work as case agent in this case, and
“the ‘testimony of a summary witness may be received so long as []he bases h[is]
summary on evidence received in the case and is available for cross-examination,”
United States v. Robinson, 439 F.3d 777, 781 (8th Cir. 2006) (quoting United States
v. King, 616 F.2d 1034, 1041 (8th Cir. 1980)). The district court did not abuse its
discretion by admitting Agent Schommer’s testimony.
4. Attorney-Client Privilege
In February 2008, Beckman personally hired Kari Berman of the Briggs and
Morgan law firm (Briggs) with regard to his application to purchase an interest in the
Minnesota Wild NHL team. In February or March 2008, “the Oxford Group” also
hired Briggs for representation in “general corporate and transactional matters.”
After a due diligence investigation, in May 2008, Briggs advised the Oxford Group
that Pettengill informed Briggs that notes sold by Oxford Global Advisors’ agents
(OGA Notes) “have not been registered under federal or state law and have not been
qualified for any exemption from registration.” Briggs advised the Oxford Group to
“immediately stop all sales and the solicitation of any sales of OGA Notes.” Briggs
stated, “Because of potential conflicts of interest between various individuals and
entities and the potential for criminal law consequences, we recommend that you
promptly retain other legal counsel to advise you regarding the past sales of OGA
Notes and any future actions you should take with respect to such sales.” Briggs also
advised, “During the course of Briggs and Morgan’s legal representation of you, it
has also come to our attention that other Oxford business activities appear to be in
violation of numerous federal statutes and regulations. . . . [W]e recommend that you
promptly retain other legal counsel to advise you regarding such matters.”
Thereafter, at least as of May 20, 2008, two of the Oxford entities hired Robert
Mendelson of the Morgan, Lewis & Bockius law firm (Morgan Lewis) for securities
law advice. In response to the question, “[W]ho was the primary face of the client?”
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Mendelson testified, “I primarily interacted with Mr. Beckman.” Morgan Lewis
withdrew its services from the Oxford entities on June 27, 2008, sending a “noisy
withdrawal letter,”7 because the attorneys “reached the conclusion [their] advice was
not going to be followed.” The subject line of the withdrawal letter read “Retention
of Morgan, Lewis & Bockius LLP by Oxford Global Advisors, LLC and Oxford
PCG” and reported, “We concluded that, at a minimum, the investment was not
marketed in compliance with regulatory requirements.” The letter listed the remedial
measures Morgan Lewis had recommended and stated, “Despite your agreement that
these actions should be taken, they simply have not. . . . Given the circumstances, we
believe we have no option other than to withdraw. . . . We highly recommend that
these entities obtain legal counsel to evaluate the issues we have outlined herein.”
On July 17, 2008, Oxford Global Advisors, LLC next engaged Martin Klotz
at Willkie Farr.8 The subject line of Willkie Farr’s engagement letter read,
“Representation of Oxford Global Advisors, LLC,” and the letter declared, “We are
delighted to have the opportunity to represent Oxford Global Advisors, LLC (the
‘Client’).” Klotz testified Beckman “was the face of [his] client.”
Finally, Beckman signed another personal representation letter with Briggs
dated July 21, 2008.
7
Mendelson testified a “noisy withdrawal letter” “is a letter you send to a client
when you are withdrawing as their counsel and you want the reasons to be readily
apparent.”
8
Within a few weeks, Klotz “made a comment [to Beckman] to the effect of
. . . [t]he notion that you can borrow unlimited amounts of money interest-free and
create a risk-free investment is ridiculous. Among other things, some clever person
would have figured it out a long time ago if it was that easy. This just makes no
sense.”
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Before trial, the district court denied motions to quash subpoenas by law firms
Briggs, Morgan Lewis, and Willkie Farr, along with Beckman’s motions to exclude
attorney-client communications. The district court noted the Oxford entities were in
receivership, see, e.g., SEC v. Cook, No. 0:09-cv-3333 (D. Minn. Dec. 11, 2009)
(second amended order appointing receiver), and the receiver had waived the
attorney-client privilege. The district court found Morgan Lewis and Willkie Farr
were hired to represent Oxford entities, not Beckman, and no attorney-client privilege
attached between Beckman and either Morgan Lewis or Willkie Farr. Attorneys
Berman, Mendelson, and Klotz testified at trial, and the government introduced the
letters quoted above, as well as other attorney-client communications. “We review
[the district court’s privilege] finding for clear error.” United States v. Spencer, 700
F.3d 317, 320 (8th Cir. 2012).
Beckman now proposes the district court erred by admitting attorney-client
privileged evidence because Beckman sought legal advice from Morgan Lewis and
Willkie Farr for himself personally, as well as on behalf of Oxford entities, and the
personal relationship cannot be separated from the corporate relationship. “The
attorney-client privilege protects confidential communications between a client and
his attorney made for the purpose of facilitating the rendering of legal services to the
client.” Id. While Beckman may have been the “face of” the client, he was not the
client itself. The May 2008 Briggs letter clearly advised that the separation of
representation of Beckman personally and the Oxford entities was of paramount
importance, and the purpose of retaining Morgan Lewis, and then Willkie Farr,
ostensibly was to accomplish that separation. The district court properly found, based
on the correspondence introduced, that Morgan Lewis and Willkie Farr represented
Oxford entities, not Beckman.
Similarly, the district court properly denied Beckman’s motion in limine to
exclude a July 31, 2008, email from Klotz to Beckman—quoted in the
indictment—that reads, “Under the most optimistic analysis of what happened here,
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. . . the . . . investment program is riddled with illegalities: illegal sale of unregistered
securities, inadequate or misleading disclosures to clients, both about the investment
product and about the fees, and transactions by unlicensed persons and entities, to
take the most obvious examples.” Beckman argued to the district court that the
introduction of the email violated his attorney-client privilege with Klotz, but the
district court found (1) Beckman waived the privilege by disclosing the
communication to a third party, and (2) the receiver waived the Oxford Group’s
privilege with Klotz, and Klotz did not represent Beckman personally, so the
privilege did not apply.
As to Briggs, who did represent Beckman personally, the district court
determined the crime-fraud exception to the attorney-client privilege applied and
admitted Berman’s testimony. See United States v. Zolin, 491 U.S. 554, 562-63
(1989) (explaining the attorney-client privilege does not extend to communications
regarding future wrongdoing). We review the district court’s determination “for
abuse of discretion, according its determination considerable deference.” In re Grand
Jury Proceedings, G.S., F.S., 609 F.3d 909, 913 (8th Cir. 2010).
Beckman suggests there is no evidence he intended to engage in future
wrongdoing when he hired Briggs in February 2008. The government introduced
ample evidence to the contrary. First, the government introduced an affidavit from
Joel Barth, a financial analyst. The NHL hired Barth’s firm “to perform financial due
diligence on persons who apply to acquire ownership interests in NHL teams.” After
Beckman applied to become a part owner of the Minnesota Wild, Barth “performed
the financial due diligence on Mr. Beckman to ascertain if Mr. Beckman had the
financial resources he reported.” Barth received most of Beckman’s financial
information directly from Briggs. For example, Beckman provided a “Statement of
Financial Condition” that stated his net worth, together with his wife, was over $21
million, including over $20 million from an investment in Oxford Group, LLC. Barth
doubted the legitimacy of most of the Oxford Group assets. Barth found an “error . . .
-17-
of such magnitude – amounting to millions of dollars – that it appeared to [him] that
[he] had been misled.” Beckman had also “reported through counsel that the Oxford
Group had at least $4.2 billion under management,” but this “was strongly
contradicted by other readily available data.”
Second, IRS Special Agent John Tschida also reviewed the materials Beckman
had made available to Barth. Special Agent Tschida concluded in his affidavit, “With
the assistance of Briggs and Morgan, Mr. Beckman prepared and then submitted a
large volume of false and misleading information to the NHL in order to fraudulently
induce it to accept his ownership application and even used the same Briggs and
Morgan attorneys as references on his application.”
Relying on the two affidavits and additional evidence reviewed in camera, the
district court determined the evidence showed an ongoing effort to defraud the NHL
and applied the crime-fraud exception. The district court did not abuse its discretion
by finding the crime-fraud exception applied and receiving into evidence the attorney
communications.
5. Durand-Pettengill Video Recording
During the government’s investigation of Beckman, Durand, and Kiley,
Pettengill agreed to assist the government by surreptitiously using a video-recording
device during a meeting with Durand. The government moved in limine to exclude
the admission of the recording at trial. In response, Durand asked to introduce the
recording to impeach Pettengill. On May 10, 2012, without the jury present, the
district court heard argument and granted the government’s motion, stating “[the
recording] will be excluded from being used as impeachment.”
The next day, May 11, 2012, the district court entered a written order granting
the government’s motion in limine as to statements by Durand only, stating they were
exculpatory and therefore inadmissible hearsay because they would be advanced by
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Durand as proof of “the truth of the matter asserted.” Fed. R. Evid. 801(c)(2); see
also Fed. R. Evid. 802; United States v. Edwards, 159 F.3d 1117, 1127 (8th Cir.
1998) (“[E]xculpatory out-of-court declarations are not admissible hearsay.”). In the
written order, the district court did allow Durand to introduce Pettengill’s statements
for impeachment purposes. That day at trial, Durand confirmed he had received the
written order, but Durand did not use the recording to impeach Pettengill.
Days later, during Durand’s cross-examination of Agent Schommer, Agent
Schommer acknowledged he considered the Durand-Pettengill recording in preparing
for trial. At that point, Durand again attempted to enter the entire recording into
evidence, including Durand’s statements. After argument at sidebar, the district court
confirmed its written order.
On appeal, Durand argues he should have been able to play the recording
during his cross-examination of Agent Schommer, when the recording would not be
offered for the truth of the matter asserted, but rather “to reveal the effect on SA
Schommer who considered it in forming lay opinions.” Durand does not offer any
specifics as to how the recording would have assisted the trier of fact in evaluating
Agent Schommer’s testimony, merely concluding the jury would have seen that Agent
Schommer’s “conclusions could not have been based upon a real investigation.”
“‘A statement offered to show its effect on the listener is not hearsay.’” United
States v. Wright, 739 F.3d 1160, 1170 (8th Cir. 2014) (quoting United States v.
Dupree, 706 F.3d 131, 136 (2d Cir. 2013)). But here, Durand does not establish the
relevance of the Durand-Pettengill recording in relation to any effect on Agent
Schommer. Unlike other cases where we have admitted similar evidence, see, e.g.,
id. at 1171; United States v. Cline, 570 F.2d 731, 734-35 (8th Cir. 1978), Durand
does not offer any hint as to how the recording would be relevant to Agent
Schommer’s investigation. The district court did not abuse its discretion by
excluding Durand’s statements on the recording as inadmissible, exculpatory hearsay.
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6. Kiley’s Objections
For the first time on appeal, Kiley argues the district court erred by admitting
improper opinion testimony from three witnesses. We review for plain error. See Big
Eagle, 702 F.3d at 1130.
First, Kiley objects to Pettengill’s testimony (1) agreeing Pettengill himself was
“right in the middle of this fraudulent mess,” (2) stating there was “no doubt in
[Pettengill’s] mind [the information Kiley ‘put on his website about himself’] was
false,” and (3) agreeing “that at some point in time Mr. Kiley knew that this currency
program was not what [the schemers] were telling people it was.” Kiley also objects
to attorney Klotz’s testimony (1) that Klotz suspected Beckman and Cook were
operating a Ponzi scheme, and (2) implying Cook and “Kiley brought in billions” and
to Agent Schommer’s testimony that (1) “the fraud was exposed” right after June 29,
2009, (2) Kiley provided a response in a civil case “post the time that the fraud had
been discovered,” and (3) Kiley’s denials in an answer in the civil case were “false.
They are lies.”
In each case, Kiley argues the district court plainly erred by admitting improper
opinion testimony, particularly by stating “a defendant’s conduct [w]as ‘fraud’ or
‘fraudulent.’” Spencer, 700 F.3d at 321-22 (rejecting the defendant’s “contention that
[the witness’s] testimony usurped the jury’s role as factfinder, and thereby created
unfair prejudice” when the witness “did not express an opinion about whether [the
defendant] had the requisite mens rea to commit fraud . . . or whether [the
defendant’s] actions were fraudulent”). Even if we assume Spencer suggests that a
witness who concludes a defendant’s actions were fraudulent usurps the jury’s role,
here, the witnesses used the word “fraud” only as a shorthand for the Ponzi scheme
itself, which no one denies. The testimony did not “‘affect [Kiley’s] substantial
rights, and . . . seriously affect[] the fairness, integrity, or public reputation of judicial
proceedings.’” Big Eagle, 702 F.3d at 1130 (quoting Troyer, 677 F.3d at 358-59).
The district court did not plainly err by failing to strike this testimony sua sponte.
-20-
Kiley also asserts the district court plainly erred by allowing testimony from
an ex-wife and an ex-girlfriend as to his alleged drug use and inability to manage his
finances. Kiley claims the evidence violated Federal Rules of Evidence 403 and 404.
The government claims the questions about Kiley’s ability to manage his finances
were relevant to Kiley’s assertions of his financial acumen, and the comment about
drug use was blurted out unexpectedly from the ex-girlfriend. The district court did
not plainly err by failing to strike the testimony sua sponte.9
B. Sufficiency of the Evidence
Beckman and Kiley appeal the district court’s denial of their motions for
acquittal on the grounds of insufficient evidence.10 “We review the district court’s
decision to deny the motion for judgment of acquittal de novo. ‘When reviewing the
sufficiency of the evidence, we consider the evidence in the light most favorable to
the verdict rendered and accept all reasonable inferences which tend to support the
jury verdict.’” United States v. Bordeaux, 570 F.3d 1041, 1047 (8th Cir. 2009)
(internal citation omitted) (quoting United States v. Ramirez, 362 F.3d 521, 524 (8th
Cir. 2004)). “Evidence supporting conviction ‘need not preclude every outcome other
than guilty.’” United States v. Pierson, 544 F.3d 933, 938 (8th Cir. 2008) (quoting
Ramirez, 362 F.3d at 524). “If any interpretation of the evidence would allow a
reasonable-minded jury to find the defendant guilty beyond a reasonable doubt, we
must uphold the verdict. This standard of review is very strict, ‘and the jury’s verdict
is not to be lightly overturned.’” United States v. Teague, 646 F.3d 1119, 1122 (8th
9
The defendants contend the district court’s errors in admitting improper
evidence, even if harmless individually, warrant reversal when viewed cumulatively.
“Because we have not found multiple errors, harmless or otherwise, we must also
reject this contention.” United States v. Wilkens, 742 F.3d 354, 364 (8th Cir. 2014).
10
Durand states he does not challenge the sufficiency of the evidence, yet he
does appeal the district court’s denial of a motion of acquittal, stating the district
court committed “cumulative reversible error.”
-21-
Cir. 2011) (internal citation omitted) (quoting United States v. Hayes, 391 F.3d 958,
961 (8th Cir. 2004)).
1. Beckman
a. No Knowledge
Beckman primarily claims he had no knowledge “that Cook and Pettengill ran
a Ponzi scheme” until “the Phillips lawsuit” hit the papers.11 A reasonable jury could
have believed evidence to the contrary, including the following: the Briggs law firm
May 2008 letter; the Morgan Lewis law firm June 2008 letter; testimony from
Mendelson that in June 2008 he advised Beckman “there was the very strong
potential [the currency program] was an unregistered public offering” and must be
rescinded; Klotz’s July 2008 email to Beckman advising the “investment program is
riddled with illegalities”; Klotz’s testimony he told Beckman in July 2008 the
currency program “made no sense whatsoever,” “a risk-free investment is ridiculous,”
and “the initial offering to the Oxford Global Advisors investors was likely illegal”;
and Cook’s August 2008 email to Beckman outlining a plan to cover their tracks
when an outsider questioned their website’s promise of a 10.5% fixed rate. Applying
all inferences supporting the verdict, we accept the jury’s conclusion that Beckman
was aware of the scheme as it unfolded prior to July 2009.
b. The Olsons
Beckman was found guilty as charged in Counts 14 and 15, committing or
aiding and abetting the commission of wire fraud, regarding his interactions with
elderly victims Charlotte and Raymond Olson, whose trust lost almost $5 million.
Beckman claims he had no intent to defraud the Olsons. Among other evidence
11
In July 2009, numerous investors sued Cook, Durand, and many of the UBS
and Oxford entities. See Phillips v. Cook, No. 0:09-cv-1732 (D. Minn. July 7, 2009)
(complaint).
-22-
supporting the charges,12 the government produced a letter ostensibly written by
Raymond Olson transferring $1.975 million that ViaSource Funding Group, LLC
(ViaSource) was to receive from Olson’s Bear Stearns Securities Corp. (Bear Stearns)
account to a new account not named in the letter, along with a letter dated the same
day from Beckman to ViaSource directing the wire transfer of the Bear Stearns funds
to Oxford Global Advisors, LLC. A substantial part of the $1.975 million was then
transferred to other Oxford entities. Mr. Olson testified at trial he did not recall
writing the letter and did not recall having heard of ViaSource. A reasonable jury
could conclude Beckman intended to defraud the Olsons and prepared the letter to
access and misappropriate the $1.975 million.
c. The NHL
Beckman was found guilty as charged in Counts 16 and 17, committing or
aiding and abetting the commission of mail fraud, regarding two applications
Beckman submitted in his effort to purchase an interest in the Minnesota Wild. The
first application asked, “Have you ever been a party to any litigation, including
litigation alleging harassment or discrimination? . . . If yes, attach Schedule G setting
forth [additional information].” Beckman answered “yes” and attached Schedule G,
but he did not include the fact that his mother sued him with regard to his handling
of his grandfather’s estate, his employer sued him for refusing to pay back a
promissory note, and two convictions for drunk driving. Beckman claims he acted
under the advice of counsel and the errors were immaterial. Beckman’s counsel,
Berman, did not corroborate Beckman’s claim that she advised him to omit the
incidents. As to the deficiencies in Beckman’s financial disclosures, Beckman’s
evidence fails to “refute” the strong evidence of his intent to defraud. Barth testified
at trial to substantially the same facts averred in his affidavit, outlining the serious
12
SEC accountant Hlavacek testified in detail how Beckman misappropriated
the proceeds from the viatical sales of two separate insurance policies, each for
$1.975 million, as alleged in Counts 14 and 15.
-23-
fabrications Beckman provided as purported evidence of his self-worth. A reasonable
jury could believe Berman and Barth, rather than Beckman, and find Beckman’s
omissions both intentional and material. See United States v. Gaona-Lopez, 408 F.3d
500, 505 (8th Cir. 2005) (finding credibility questions are the province of the jury).
d. Tax Counts
Finally, Beckman disputes the sufficiency of the evidence supporting his tax
fraud convictions.13 Beckman maintains the government did not prove he acted
willfully. IRS Special Agent Anna Johnson testified as to Beckman’s omissions of
income for his 2007 and 2009 returns (Beckman did not file a return in 2008). A
reasonable jury could credit Special Agent Johnson’s testimony and conclude
Beckman acted willfully when in 2007 he submitted a tax return reporting a
substantial negative income based on a loss from his interest in Oxford Global
Advisors, LLC—even though he testified in a deposition that he did not contribute
any capital of his own into the entity—resulting in a $328,126 tax refund rather than
a $165,204 tax payment. A reasonable jury could also conclude Beckman acted
willfully when in 2009, in a self-prepared return, Beckman claimed a deductible theft
loss of $1,498,853 due to a Ponzi scheme, which required Beckman to represent he
had “no actual knowledge” of the fraud before it was made public.
2. Kiley
Kiley admits he made “self-aggrandizing statements” as to “his professional
credentials both on his website and in his radio show” that were “not true.” Like
Beckman, Kiley claims “the government failed to prove that Mr. Kiley knew or
understood the fraudulent nature of Cook’s scheme,” making his lies as to his
financial success and abilities merely “puffery,” not fraud. A reasonable jury could
have believed evidence to the contrary, such as Kiley’s carefully integrated, false
13
Beckman also summarily disputes his conviction on the money-laundering
counts. We do not reach this undeveloped argument. See Rotskoff, 438 F.3d at 854.
-24-
statements on his website, on the radio, in brochures, and in conversations about the
safety of the currency program. Kiley assured potential investors their money would
be safe with him, intending to secure investors for the currency program without
regard to whether the program would deliver what Kiley promised.
To take but one example, investor Joseph Kalina testified he listened to Kiley’s
radio show, “Follow the Money,” in 2008. Kalina heard Kiley advertise a minimum
return on investment of ten to twelve percent and “pretty much guarantee” safety,
with the ability to withdraw anytime. Kalina called the phone number given on the
radio show and talked with Kiley, who sent Kalina “a big folder on all the good
things that’s [sic] going to happen.” Kiley wrote to Kalina on “Universal Brokerage
FX” letterhead, “The safety and integrity of customer funds on deposit are ensured
[sic] by measures enacted by the Federal Government, various exchanges, and the
firm itself. Customer funds are held in segregated accounts providing safety,
security and liquidity. . . . Each and every broker has gone through extensive testing,
examination and personal screening by Universal Brokerage FX before he or she has
received their license.” Kiley sent Kalina a brochure advertising the “Yield
Enhancement Analysis Program” (YEAP) that “offers a fully protected principal. . . .
The system objective is simple; the strategy aims to take advantage of the ‘free
money’ policy in Japan. . . . All currency risk is insured through other financial
markets. . . . The YEAP simply collects daily interest and utilizes other financial
markets to eliminate currency fluctuation risk.” Relying on Kiley’s representations
made in the letter and the brochure, on the phone, and in person that his investment
would be safe and insured, Kalina withdrew his money from an individual retirement
account—and paid almost a ten percent penalty, which Kiley assured Kalina he would
earn back in the currency program. At the time Kalina invested with Kiley, Kiley was
aware Kalina was retired and was investing all of his retirement savings, just over
$100,000. At the time of trial, $3,000 had been returned to Kalina. Based on the
evidence adduced at trial, a reasonable jury could have found Kiley knew of the
-25-
falsehoods he advanced—“the ‘free money’ policy in Japan”—about the scheme he
promoted.
C. Kiley’s Trial Attorney
At the district court, Kiley retained attorney H. Nasif Mahmoud to represent
him. Kiley now asserts he was denied his Sixth Amendment right to competent
assistance of counsel at trial because “Mahmoud labored under multiple conflicts of
interest while representing” Kiley. Kiley also argues the district court’s failure to
address the conflicts violated his Fifth Amendment right to Due Process.
Count 23 in the indictment (Count 17 in the original indictment) charged that
on July 7, 2009, Kiley engaged in money laundering via a “[w]ire transfer of
$100,000.00 from the Basel Group, LLC, bank account at Associated Bank to the
account of an attorney.” Well before trial, in a “motion for inquiry,” the government
apprised the district court that the attorney cited in Count 23 was Kiley’s attorney,
Mahmoud. The government advised the district court (1) Mahmoud might be a
necessary witness because he attended meetings and purportedly stayed at the
mansion where the schemers conducted the business of the currency program for as
much as three weeks in July 2009; (2) during that time, Cook told Mahmoud that
Cook initiated the Count 23 wire transfer, not Kiley; (3) Mahmoud currently
represented “Individual A,” who would “certainly” be called as a trial witness; and
(4) Mahmoud formerly represented “Individual B,” a “likely” government witness.
The government advised the district court to explore the potential conflict issues in
order to ensure Kiley’s Sixth Amendment right to counsel was protected.
In a strong response to the government’s motion, Kiley stated Mahmoud was
“not a necessary witness” because other attorneys were present at the meetings, and
they could testify rather than Mahmoud. Kiley stated the government’s motion was
“a transparent attempt to prevent Kiley from securing the attorney of his choice” and
on five occasions suggested the district court “consider sanctions against the
-26-
government.” Although Kiley was also represented by a local attorney, David Zins,
Kiley suggested disqualifying Mahmoud would result in hardship because Zins was
less experienced and knew less about the case than Mahmoud. Kiley also stated
Individual A was not a necessary witness because he was “the wrong witness” and
Mahmoud had represented “Individual B on a one time basis” “years before.” Kiley
went so far as to suggest the money-laundering count was included in the indictment
in “an effort to keep Kiley’s present defense counsel [Mahmoud] from representing
Kiley.”
A magistrate judge granted the government’s motion for inquiry and heard
argument on the matter. At the hearing, after explanation by the magistrate judge,
Kiley waived his rights as to any conflict with Individual A, Steve Nortier, and
Individual B, Thietje. Also at the hearing, Kiley personally volunteered, “I have the
utmost confidence in Mr. Mahmoud in many areas. His veracity, his commitment.”
Kiley expressly “waive[d] any potential conflict of interest” and declared, “I want to
keep Mr. Mahmoud.”
After the hearing, Kiley filed written “waivers of potential conflicts of interest”
as to Nortier and Thietje. The magistrate judge recommended Mahmoud not be
disqualified because of Kiley’s waivers and because Mahmoud was not a necessary
witness, and the district court agreed.
Kiley now argues the district court erred by not considering the conflict
inherent in Count 23 itself—that Kiley was convicted of a crime that implicated his
attorney, Mahmoud. This potential conflict was not raised by the government in its
motion for inquiry, nor raised by Kiley at the magistrate judge’s hearing, nor
addressed by the magistrate judge or the district court before trial. At trial, several
witnesses testified as to Mahmoud’s receipt of the charged wire transfer. Mahmoud
asked a witness about it himself, referring to himself in the first person—Mahmoud
asked Kiley’s administrative assistant, “In July of 2009, about the time you sent that
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wire to me, what was [Kiley’s] condition from what you observed when he learned
of the fraud?” Kiley now suggests the potential conflict regarding Count 23 was
(1) so obvious the district court should have investigated the matter whether or not
Mahmoud raised it on Kiley’s behalf, and (2) so grave it violated Kiley’s Fifth
Amendment right to due process.
“Where a constitutional right to counsel exists, our Sixth Amendment cases
hold that there is a correlative right to representation that is free from conflicts of
interest.” Wood v. Georgia, 450 U.S. 261, 271, 272-73 (1981) (vacating and
remanding on due process grounds where defendants “were represented by their
employer’s lawyer,” and “[a]ny doubt as to whether the court should have been aware
of the problem [wa]s dispelled by the fact that the State raised the conflict problem
explicitly and requested that the court look into it”). In the context of an assertion of
ineffective counsel due to multiple representation of co-defendants in state court,
trial courts [must] investigate timely objections to multiple
representation. But nothing in our precedents suggests that the Sixth
Amendment requires state courts themselves to initiate inquiries into the
propriety of multiple representation in every case. Defense counsel have
an ethical obligation to avoid conflicting representations and to advise
the court promptly when a conflict of interest arises during the course of
trial. Absent special circumstances, therefore, trial courts may assume
either that multiple representation entails no conflict or that the lawyer
and his clients knowingly accept such risk of conflict as may exist. . . .
[T]rial courts necessarily rely in large measure upon the good faith and
good judgment of defense counsel. . . . Unless the trial court knows or
reasonably should know that a particular conflict exists, the court need
not initiate an inquiry.
Cuyler v. Sullivan, 446 U.S. 335, 346-47 (1980) (footnotes omitted). Nevertheless,
as we have stated,
-28-
The Supreme Court [has rejected the] argument that, where the trial
judge has failed to make a Sullivan-type inquiry notwithstanding an
apparent attorney conflict of interest, reversal is automatic regardless of
whether the conflict affected the attorney’s performance. . . . The
Supreme Court [has] concluded that, where the trial court knew or
reasonably should have known about a potential attorney conflict of
interest and yet failed to make an inquiry, the petitioner, in order to void
the conviction, must show that the conflict of interest had an adverse
effect on his or her counsel’s performance.
Koste v. Dormire, 345 F.3d 974, 975, 981-82 (8th Cir. 2003) (citing Mickens v.
Taylor, 535 U.S. 162, 172-74 (2002)) (reviewing a petition for relief under 28 U.S.C.
§ 2254 asserting a conflict that did not involve multiple representation); see also
Ausler v. United States, 545 F.3d 1101, 1102, 1104 (8th Cir. 2008) (reviewing a
motion for relief under 28 U.S.C. § 2255 that did not involve multiple representation
and stating, “[I]n cases involving a [district court’s] failure to inquire into . . .
potential conflicts [other than one attorney representing co-defendants, a] defendant
[must] show that ‘a conflict of interest actually affected the adequacy of’” his
attorney’s representation, as opposed to “Strickland prejudice” (quoting Mickens, 535
U.S. at 170-71 & nn.3, 4)).14
In this case, the district court relied on (1) Mahmoud’s assurance that no
conflict existed and his adamant response to the government’s motion for inquiry and
(2) Kiley’s clear statement to the magistrate judge he wanted Mahmoud to represent
him—“I want to keep Mr. Mahmoud.” See Powell v. Alabama, 287 U.S. 45, 53
(1932) (“It is hardly necessary to say that the right to counsel being conceded, a
14
To the extent later cases conflict with Ausler, see, e.g., Noe v. United States,
601 F.3d 784, 790 (8th Cir. 2010) (“[W]e have not yet determined whether
[Sullivan’s] presumed prejudice analysis extends beyond conflicts arising from
multiple representation.”), we must follow the earliest opinion, Ausler. See Mader
v. United States, 654 F.3d 794, 800 (8th Cir. 2011) (en banc) (explaining we are
bound by prior panel opinions).
-29-
defendant should be afforded a fair opportunity to secure counsel of his own
choice.”). Unlike Wood, the government’s motion for inquiry did not apprise the
district court of the Count 23 issue Kiley now raises. We therefore reject Kiley’s due
process challenge raised under the Fifth Amendment, and we find the district court
was not required to address sua sponte the potential Count 23 conflict in the midst of
this complex and lengthy trial.
As to Kiley’s ineffective-assistance challenge, the district court has not heard
argument on the alleged inherent conflict in Count 23. Because Kiley “must show
that the” alleged “conflict of interest had an adverse effect on” Mahmoud’s
performance, Koste, 345 F.3d at 981, and the district court has not passed on this
issue, we decline to address it on direct appeal in the first instance. Cf. United States
v. Hubbard, 638 F.3d 866, 869 (8th Cir. 2011) (“‘We will consider ineffective-
assistance claims on direct appeal only where the record has been fully developed,
where not to act would amount to a plain miscarriage of justice, or where counsel’s
error is readily apparent.’” (quoting United States v. Ramirez-Hernandez, 449 F.3d
824, 827 (8th Cir. 2006))); United States v. McAdory, 501 F.3d 868, 872-73 (8th Cir.
2007) (stating ineffective-assistance claims are ordinarily deferred to 28 U.S.C.
§ 2255 proceedings). Whether the alleged Count 23 conflict resulted in ineffective
assistance by Mahmoud is more appropriately addressed in a § 2255 proceeding with
the benefit of the fact-finding and appraisal by the trial judge, who is in a better
position to assess Mahmoud’s performance.
D. Newly Discovered Evidence—Murder Plot
Several months before the start of trial, Pettengill met with Federal Bureau of
Investigation (FBI) agents and told them Durand suggested to Pettengill they should
arrange for Beckman to be murdered in order to collect on a key man life insurance
policy on Beckman. Pettengill’s comments were noted on an FBI “Form 302,” dated
November 3, 2011 (Form 302).
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Over a year later, on December 21, 2012, the government alluded to the murder
plot in its sentencing memorandum for Durand. On December 26, 2012, the
government moved for an evidentiary hearing “at which the United States will prove
by the preponderance of the evidence that, in December of 2009, Mr. Durand
proposed to Mr. Pettengill that they arrange for the murder of Jason Bo-Alan
Beckman in order to collect and split the proceeds of a life insurance policy on
Beckman’s life.”
The government did not disclose the Form 302 to Beckman and Durand until
December 28, 2012, more than six months after trial. In an email to the defendants’
attorneys, the government stated it looked in its files for this Form 302 in preparation
for sentencing. Not finding the Form 302, the government asked the FBI to review
its files. The FBI delivered the Form 302 on December 27, 2012. The government
explains the lack of disclosure “was a mistake” and “it intended to turn over all of its
interview memoranda in this enormous case.” On December 28, 2012, and December
30, 2012, Durand and Beckman, respectively, moved for a new trial based on the
newly discovered Form 302 evidence.
A few days later, on January 3, 2013, the district court held an evidentiary
hearing on the morning of the sentencing hearings. The district court denied
Beckman’s and Durand’s motions for a new trial and later issued a memorandum
opinion to that effect.
1. Federal Rule of Criminal Procedure 33(b)
This court “review[s] the district court’s denial of [a defendant’s] motion for
a new trial based on newly discovered evidence for abuse of discretion.” United
States v. Haskell, 468 F.3d 1064, 1076 (8th Cir. 2006); see also Fed. R. Crim. P.
33(b)(1).
A successful Rule 33(b) movant must show that:
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(1) the evidence [was] unknown or unavailable to the defendant at
the time of trial;
(2) the defendant [was] duly diligent in attempting to uncover it;
(3) the newly discovered evidence [is] material; and
(4) the newly discovered evidence . . . probably will result in an
acquittal upon retrial.
United States v. Rubashkin, 655 F.3d 849, 857 (8th Cir. 2011) (alterations and
emphasis in original). “[T]he standard in our circuit for a Rule 33 motion is clear and
binding. The rule requires that the newly discovered evidence ‘probably will result
in an acquittal.’” Id. at 858 (internal citation omitted) (quoting United States v.
Baker, 479 F.3d 574, 577 (8th Cir. 2007)).
The district court found Beckman failed to satisfy the last two elements for a
Rule 33(b) motion because (1) the alleged murder plot occurred after the fraud ended,
and so was immaterial, and (2) the Form 302 contained inculpatory, rather than
exculpatory, statements as to Beckman, i.e., Pettengill and Beckman “knew the
money was gone, and the plan was to blame Cook.” The district court did not clearly
err in its findings and did not abuse its discretion.
Beckman also states the district court erred because if Beckman had access to
the Form 302 before trial, he may have reconsidered “his decision not to seek a
severance from Durand” and might not have engaged in “‘hands off’ treatment of
Durand” at trial. The district court did not explicitly address this argument in its
order.
“Federal Rule of Criminal Procedure 14(a) vests the district court with
authority to order severance if consolidation for trial appears to prejudice the
government or a defendant. Nevertheless, there is a strong presumption against
-32-
severing trials.” United States v. Kramer, 768 F.3d 766, 770 (8th Cir. 2014).
Beckman does not allude to any prejudice he suffered by being joined as a co-
defendant with Durand, nor does he delineate just what evidence he would have
produced about Durand relevant to the time frame of the fraud had Beckman known
about the alleged murder plot before trial. Thus, his argument is unsupported and
without merit.
2. Brady and Giglio Violations
Beckman and Durand argue the government’s failure to produce the Form 302
violated the requirements of Brady v. Maryland, 373 U.S. 83, 87 (1963). “‘To show
a Brady violation, the defendant must establish that (1) the evidence was favorable
to the defendant, (2) the evidence was material to guilt, and (3) the government
suppressed evidence. . . . Evidence is material only if there is a reasonable probability
that, had the evidence been disclosed to the defense, the result of the proceeding
would have been different.’” United States v. Jeanpierre, 636 F.3d 416, 422 (8th Cir.
2011) (quoting United States v. Ladoucer, 573 F.3d 628, 636 (8th Cir. 2009)). “‘We
review de novo allegations of Brady violations.’” Mandacina v. United States, 328
F.3d 995, 1001 (8th Cir. 2003) (quoting United States v. McElhiney, 275 F.3d 928,
932 (10th Cir. 2001)).
Beckman also argues the government violated the requirements of Giglio v.
United States, 405 U.S. 150, 153-55 (1972). “‘Under [Giglio], the government must
disclose matters that affect the credibility of prosecution witnesses. [F]or example,
a defendant is entitled to know of a promise to drop charges against a key witness if
that witness testifies for the government.’ However, the nondisclosure of Giglio
evidence only justifies a retrial if the withheld information is deemed material.”
United States v. Garcia, 562 F.3d 947, 952 n.7 (8th Cir. 2009) (second alteration in
original) (internal citations omitted) (quoting United States v. Morton, 412 F.3d 901,
906 (8th Cir. 2005)).
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a. Beckman
Beckman claims the Form 302 was exculpatory because the evidence of a
murder plot would “buttress[] his arguments about his lack of knowledge of any
overall conspiracy.” But the Form 302 actually is inculpatory on that issue, so this
evidence was not favorable to Beckman, as Brady requires.
Second, Beckman states the “fact that Pettengill never disclosed the murder
plot to Mr. Beckman . . . seriously undermines credibility and character.” But
Pettengill’s admitted role in the scheme seriously affected his credibility from the
beginning, and it is unclear how the revelation of another purported act of deception
would have materially affected the jury’s interpretation of Pettengill’s testimony.
Beckman has not established the withheld information is material, as both Brady and
Giglio require.
b. Durand
Durand first contends Pettengill’s statement in the Form 302 that the “fund was
doing great and had $40 million” supports his argument that the enterprise did not
begin as a scam and that Durand reasonably believed the program was legitimate.
Pettengill substantially testified to the $40 million balance at trial, and the Form 302
would have only amounted to cumulative evidence. Second, in the Form 302,
Pettengill stated, “Swiss FX [a firm run by Pettengill and Durand] was pitched more
correctly than the Oxford currency program. It was not pitched with a guaranteed
rate.” This information, too, came out at trial when Pettengill testified as to Swiss FX
that he “wanted to have an organization that was actually compliant with the law.”
Neither assertion reasonably would have produced a different outcome, as Brady
requires.
Third, and “[m]ost importantly,” Durand conclusively states, “[s]howing the
jury what the government knew and when they would have known it, was crucial.
That missing piece of paper would more likely than not have caused a different
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outcome with respect to the [c]onspiracy [c]ount [] against Mr. Durand.” Finally, in
his reply brief, Durand cites for the first time several more of Pettengill’s statements
in the Form 302 that Durand surmises might have led to exculpatory statements by
Pettengill on cross-examination. Such conjecture does not meet the Brady materiality
requirement.
3. Jencks Act
Beckman and Durand argue the government’s failure to produce the Form 302
also violated the Jencks Act. See 18 U.S.C. § 3500. “After a witness called by the
United States has testified on direct examination, the court shall, on motion of the
defendant, order the United States to produce any statement (as hereinafter defined)
of the witness in the possession of the United States which relates to the subject
matter as to which the witness has testified.” Id. § 3500(b). This court “review[s] a
district court’s ruling under the Jencks Act for clear error.” United States v. New,
491 F.3d 369, 376 (8th Cir. 2007). Assuming the Form 302 is a “statement” within
the meaning of 18 U.S.C. § 3500(e), “[w]e will not overturn a conviction for
noncompliance with the Jencks Act where there is no indication of bad faith on the
part of the government, nor an indication of prejudice to the defendant.” United
States v. Douglas, 964 F.2d 738, 741 (8th Cir. 1992).
Even if Beckman or Durand could establish prejudice, neither has established
bad faith on the part of the government. Beckman provides no argument whatsoever
as to bad faith. Durand assumes bad faith simply from the non-disclosure itself,
arguing the government did not produce the Form 302 because it was exculpatory as
to him. On the contrary, it is hard to imagine Durand would not have objected and
filed a motion in limine to exclude the Form 302 if it had been timely produced,
considering the revelation of a possible murder-for-hire. Because the Form 302 is
inculpatory as to both Beckman and Durand, the government had no obvious motive
to exclude it. The district court did not clearly err by denying Beckman’s and
Durand’s motion for a new trial based on a Jencks Act violation.
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4. Impeachment
Finally, both Beckman and Durand argue the Form 302 would have provided
impeachment material during cross-examination of Pettengill. Yet, generally, “new
evidence which is merely cumulative or impeaching is not, according to the often-
repeated statement of the courts, an adequate basis for the grant of a new trial.”
Mesarosh v. United States, 352 U.S. 1, 9 (1956) (internal quotation marks omitted);
accord United States v. Burns, 495 F.3d 873, 875 (8th Cir. 2007) (explaining
“impeachment evidence is rarely sufficient to entitle a defendant to a new trial”). The
district court properly denied the motions for a new trial on this basis.
E. Sentencing
“When we review the imposition of sentences, whether inside or outside the
[United States Sentencing] Guidelines [U.S.S.G. or Guidelines] range, we apply ‘a
deferential abuse-of-discretion standard.’” United States v. Hayes, 518 F.3d 989, 995
(8th Cir. 2008) (quoting Gall v. United States, 552 U.S. 38, 41 (2007)). In reviewing
a district court’s sentencing decision, an appellate court “must first ensure that the
district court committed no significant procedural error, such as failing to calculate
(or improperly calculating) the Guidelines range, treating the Guidelines as
mandatory, failing to consider the [18 U.S.C.] § 3553(a) factors, selecting a sentence
based on clearly erroneous facts, or failing to adequately explain the chosen
sentence.” Gall, 552 U.S. at 51. “When reviewing the district court’s calculation of
the sentencing guidelines advisory sentencing range, ‘[w]e review the district court’s
factual findings for clear error and its construction and application of the Guidelines
de novo.’” United States v. Pappas, 715 F.3d 225, 228 (8th Cir. 2013) (alteration in
original) (quoting United States v. Raplinger, 555 F.3d 687, 693 (8th Cir. 2009)).
“Under an advisory Guidelines regime, sentencing judges are only required to find
sentence-enhancing facts by a preponderance of the evidence.” United States v.
Garcia-Gonon, 433 F.3d 587, 593 (8th Cir. 2006). But see Alleyne v. United States,
570 U.S. ___, ___, 133 S. Ct. 2151, 2155 (2013) (holding “any fact that increases the
mandatory minimum is an ‘element’ that must be submitted to the jury”).
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The Guidelines advise the district court to consider “all reasonably foreseeable
acts and omissions of others in furtherance of [a] jointly undertaken criminal activity”
such as “a criminal plan, scheme, endeavor, or enterprise undertaken by the defendant
in concert with others, whether or not charged as a conspiracy.” U.S.S.G.
§ 1B1.3(a)(1)(B) (Nov. 2012). “[T]he emphasis under § 1B1.3,” however, “is the
scope of the individual defendant’s undertaking and foreseeability in light of that
undertaking, rather than the scope of the conspiracy as a whole.” United States v.
Spotted Elk, 548 F.3d 641, 674 (8th Cir. 2008); see U.S.S.G. § 1B1.3, cmt. n.2. “[A]
defendant’s conviction for conspiracy does not automatically mean that every
conspirator has foreseen the” amount of loss, number of victims, or number of
insolvent victims “involved in the entire conspiracy; in addition to membership in the
conspiracy, the district court must find the scope of the individual defendant’s
commitment to the conspiracy and the foreseeability of particular” fraudulent
transactions “from the individual defendant’s vantage point.” Spotted Elk, 548 F.3d
at 674. “‘We review the district court’s findings as to scope of the defendant’s
undertaking, foreseeability to the defendant, and furtherance of the conspiracy for
clear error.’” United States v. Adejumo, 772 F.3d 513, 533 (8th Cir. 2014) (quoting
Spotted Elk, 548 F.3d at 677).
1. Beckman
a. Advisory Guidelines Calculation
Beckman maintains the district court procedurally erred in calculating his
advisory Guidelines range. First, Beckman claims the district court erred in
calculating the amount of loss. At trial, the government introduced a detailed report
listing the amount invested by each victim, totaling over $193 million. Beckman
states he should not be accountable for the total amount because he was not
responsible for the investments brought in via the radio shows or by any of the other
schemers. See U.S.S.G. § 2B1.1(b)(1)(N) (increasing the offense level by 26 if the
loss exceeded $100 million). For the same reason, Beckman contends he should not
be responsible for over 250 victims generally, nor for over 100 victims whose
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solvency was threatened. See id. § 2B1.1(b)(2)(C), (b)(15)(B)(iii). Beckman also
alleges his personal clients were more sophisticated than the general pool of victims
because many were wealthy and had invested with him before the currency program
began.
Beckman’s arguments are unavailing. Together with his fellow schemers,
Beckman appeared on a radio show, gave public seminars, and produced brochures
advertising the currency program with the objective of casting the victim-ensnaring
net as wide as possible to all reaches of the general public. The evidence introduced
at trial renders inconceivable Beckman’s present contention that he could not
reasonably foresee, nor did he commit to, the scope of the currency program. The
district court did not clearly err in attributing the aggregate losses caused by the
conspiracy to Beckman.
Second, Beckman argues the Olsons, who were in their nineties at the time of
the trial, were not vulnerable victims. See id. § 3A1.1(b)(1) & cmt. n.2 (increasing
the offense level by two “[i]f the defendant knew or should have known that a victim
of the offense was a vulnerable victim,” including a victim “who is unusually
vulnerable due to age”). Whether the Olsons were vulnerable victims is a factual
determination we review for clear error. See, e.g., United States v. Fiorito, 640 F.3d
338, 351 (8th Cir. 2011). “As a group, older persons are more experienced investors,
so it would be clear error to impose a § 3A1.1(b)(1) increase simply because some of
the victims of a widespread investment scam were elderly.” United States v.
Anderson, 349 F.3d 568, 572 (8th Cir. 2003). Rather, “the enhancement . . . requires
a fact-based explanation of why advanced age or some other characteristic made one
or more victims ‘unusually vulnerable’ to the offense conduct, and why the defendant
knew or should have known of this unusual vulnerability.” Id. In Anderson, we
decided the government’s “breezy assertion” “that the instant scheme featuring the
too good to be true, tax free, risk free, 12% rate of return investment, would have
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little chance of success without such a vulnerable audience” fell “far short of the
necessary showing.” Id. at 573 n.3 (internal quotation marks omitted).
Charlotte Olson testified she held two college degrees and at one time had the
“knowledge and ability and acumen” to manage her money herself. But Mrs. Olson
suffered a stroke in 1998, and after that she was not “able to manage [her] money as
[she was] before.” The “stroke removed [her] memory[,] and [she] had a very
difficult time getting it back.” She also testified “the stroke ma[de her] more foggy”
and made it “harder for [her] to make well-informed decisions about [her] money.”
The district court did not clearly err by finding Mrs. Olson was a vulnerable victim
and that Beckman, who described her as “a long-standing client,” knew or should
have known of her vulnerable status.
Third, Beckman objects to an enhancement for a violation of a securities law
by an investment advisor. See U.S.S.G. § 2B1.1(b)(18)(A)(iii) (requiring a four-level
enhancement “[i]f the offense involved . . . a violation of securities law and, at the
time of the offense, the defendant was . . . an investment adviser”).15 Beckman does
not dispute the charged offenses involved a violation of securities law or that he was
an SEC-registered investment advisor. Rather, Beckman claims he was not acting in
the role of an SEC-registered investment advisor with regard to the currency program
because he did not charge a fee, and thus was “an independent agent, a function that
did not require . . . licensing.” Beckman cites no case law in support of his claim, nor
do we find any. We are persuaded by the reasoning of the Eleventh Circuit, which
was not convinced by a defendant’s arguments that the § 2B1.1(b)(18) enhancement
did not apply because the defendant was not licensed. See United States v. Elia, 579
F. App’x 752, 755 (11th Cir. 2014) (unpublished per curiam) (reasoning that “the
15
“A conviction under a securities law . . . is not required in order for
subsection (b)(18) to apply. This subsection would apply in the case of a defendant
convicted under a general fraud statute if the defendant’s conduct violated a securities
law.” U.S.S.G. § 2B1.1(b)(18), cmt. n.14(B).
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term ‘investment adviser’ does not require formal licensing” in the first instance); see
U.S.S.G. § 2B1.1(b)(18)(A)(i)-(iii). The district court did not clearly err by finding
Beckman was an investment advisor and applying the enhancement.
Fourth, Beckman denies the conspiracy and questions whether it involved
sophisticated means. See id. § 2B1.1(b)(10)(C) (increasing the offense level by two
if “the offense . . . involved sophisticated means”). “For purposes of subsection
(b)(10)(C), ‘sophisticated means’ means especially complex or especially intricate
offense conduct pertaining to the execution or concealment of an offense.” Id.
§ 2B1.1(b)(10)(C), cmt. n.8(B). “Conduct such as hiding assets or transactions, or
both, through the use of fictitious entities [or] corporate shells . . . ordinarily indicates
sophisticated means.” Id. “‘Even if any single step is not complicated, repetitive and
coordinated conduct can amount to a sophisticated scheme.’” United States v.
Huston, 744 F.3d 589, 592 (8th Cir. 2014) (quoting Fiorito, 640 F.3d at 351). “The
enhancement applies when the offense conduct, viewed as a whole, was notably more
intricate than that of the garden-variety offense.” Adejumo, 772 F.3d at 531 (quoting
United States v. Jenkins, 578 F.3d 745, 751 (8th Cir. 2009) (internal marks omitted)).
“‘We review the factual finding of whether a . . . scheme qualifies as sophisticated for
clear error.’” Huston, 744 F.3d at 592 (alteration in original) (quoting United States
v. Brooks, 174 F.3d 950, 958 (8th Cir. 1999)). Given the obviously complex nature
of this financial crime, which involved “‘repetitive and coordinated conduct,’” see id.(quoting Fiorito, 640 F.3d at 351), and defrauded hundreds of investors, the district
court did not clearly err by finding the defendants’ scheme involved sophisticated
means.
Finally, Beckman asserts he did not obstruct justice. See U.S.S.G. § 3C1.1
(increasing the offense level by two for obstruction “related to . . . the defendant’s
offense of conviction”); id. cmt. n.4(B) (stating perjury is an example of obstruction).
“A defendant commits perjury if, under oath, he or she gives false testimony
concerning a material matter with the willful intent to provide false testimony, rather
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than as a result of confusion, mistake, or faulty memory.” Adejumo, 772 F.3d at 535
(internal marks omitted) (quoting United States v. O’Dell, 204 F.3d 829, 836 (8th Cir.
2000)). “‘We review a district court’s factual findings in support of an obstruction
of justice enhancement for clear error and its application of the sentencing guidelines
to the facts de novo.’” Id. (quoting O’Dell, 204 F.3d at 836).
During the Phillips litigation, Beckman swore in an affidavit and testified to
the court he and his wife invested over $6 million in the currency program, of which
almost $4 million was his “earnings.” At trial, Beckman also testified he invested
millions of dollars with the currency program. In contrast, SEC accountant Hlavacek
testified that at the most, Beckman invested only $44,000 into the currency program.
The district court did not err by crediting Hlavacek’s testimony and the evidence
introduced at trial rather than Beckman’s affidavit and testimony, and properly
applied the obstruction of justice enhancement.
b. Comparison with Cook
Beckman argues the district court procedurally erred by failing to explain why
Beckman’s sentence was sixty months longer than Cook’s, even though, according
to Beckman, Cook was “[t]he acknowledged kingpin of the Ponzi scheme.” See
18 U.S.C. § 3553(a)(6) (requiring a sentencing court to consider “the need to avoid
unwarranted sentence disparities among defendants with similar records who have
been found guilty of similar conduct”). Beckman’s argument fails because
“avoidance of unwarranted disparities was clearly considered by the Sentencing
Commission when setting the Guidelines ranges,” and a district judge “necessarily
g[ives] significant weight and consideration to the need to avoid unwarranted
disparities” when he “correctly calculate[s] and carefully review[s] the Guidelines
range.” Gall, 552 U.S. at 54.
Beckman also ignores Cook’s different status with regard to sentencing. First,
Cook pled guilty, while Beckman proceeded with a lengthy, complex jury trial.
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Second, Cook pled guilty to two crimes, aiding and abetting mail fraud and tax
evasion, while a jury convicted Beckman of many more, including crimes unique to
him concerning the Olsons and the NHL. As a result, Cook was not similarly situated
with Beckman. See United States v. Williams, 624 F.3d 889, 897 (8th Cir. 2010)
(finding “no procedural error in the district court’s consideration of 18 U.S.C.
§ 3553(a)(6) [when] the two defendants were not similarly situated”).
At Beckman’s sentencing hearing, the district court said, “I have reviewed all
the case law that is pertinent to this case from the Eighth Circuit Court of Appeals and
of course the United States Supreme Court and most assuredly I have reviewed Title
18, 3553(a), and those provisions in fashioning the sentence that I will hand down in
a few moments.” The district court continued, “All four of you that I am going to be
sentencing today, from Pettengill, to Durand, to Kiley to you [Beckman], were
essential to the whole scheme, as was Trevor Cook, and for that you will be sentenced
to a term of imprisonment that I believe is appropriate.” The district court did not
procedurally err when it considered § 3553(a)(6), and the district court adequately
explained the sentences of the defendants in relation to each other, particularly
considering the obvious disparities between Beckman and Cook.16
16
Beckman urges us to remand for clarification of his sentence in relation to
Cook, citing United States v. Cole, 721 F.3d 1016 (8th Cir. 2013), where the
sentencing court sentenced Cole to three years probation when her advisory
Guidelines range was 135 to 168 months imprisonment and her co-conspirators
received “much harsher” sentences of 180 months and 90 months imprisonment. Id.
at 1019, 1025. Noting “the magnitude of the downward variance” and that Cole’s
sentence was “a ‘major departure’ from the advisory Guidelines range,” we
“remand[ed] for the district court to more fully explain the defendant-specific facts
and policy decisions upon which it relied in determining that the probationary
sentence [was] ‘sufficient, but not greater than necessary’ . . . to achieve the
sentencing objectives set forth in section 3553(a).” Id. at 1025 (quoting Gall, 552
U.S. at 50 and 18 U.S.C. § 3553(a)). Our remand in Cole was predicated upon the
unique facts of that case and does not require the same result here, where Beckman
received a well-considered and well-explained sentence of imprisonment.
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2. Durand
Durand argues the district court procedurally erred in calculating his sentence,
which “violate[s] the letter and spirit of 18 U.S.C. § 3553(a),” because his
“culpability was exponentially less than that of the other defendants.” In reviewing
the district court’s sentencing decision, again, we emphasize “the scope of the
individual defendant’s”— Durand’s—“undertaking and foreseeability in light of that
undertaking, rather than the scope of the conspiracy as a whole.” Spotted Elk, 548
F.3d at 674; see U.S.S.G. § 1B1.3, cmt. n.2. We “focus . . . on acts, reasonably
foreseeable to” Durand “even though committed by others, that furthered a criminal
activity that he had agreed to undertake jointly with those others.” Davison, 761 F.3d
at 685. Again, “‘[w]e review . . . for clear error.’” Adejumo, 772 F.3d at 533 (quoting
Spotted Elk, 548 F.3d at 677).
Durand proposes he should not be responsible for all the losses attributed to the
conspiracy because he claims he played a smaller role than his co-conspirators. See
U.S.S.G. § 2B1.1(b)(1)(N). Durand claims he “was responsible for recruiting [only]
17 individuals who invested and lost less than seven million dollars.” Alternatively,
Durand suggests the district court should have calculated the loss as Durand’s gain
of $1.9 million. See id. § 2B1.1, cmt. n.3(B). Durand contends, “if he was part of a
conspiracy, he joined it well into 2008,” and he “solicited zero investors for the
Cook-Kiley currency program after [he] was fired in early June of 2008.”
The evidence presented at trial contradicts Durand’s proposition. Durand
admits he started soliciting investors for Cook through his radio show and by hosting
seminars as early as 2005. Durand produced brochures, practically identical to
Beckman’s, advertising the currency program and making utterly false statements
about the safety and liquidity of investors’ funds. Durand forwarded names of
investors to Cook, knowing Cook was a liar who purposely misled people by using
the name “UBS.” Although Durand now claims he was “fired” in June 2008, at the
time, he stated he had moved out of the currency program’s principal place of
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business but “nothing else has changed.” (Emphasis added). Durand stated he would
“still do the radio, the newsletter, seminars and oh yes . . . still continue to be an
owner of Oxford!!!” An Oxford Global Advisor newsletter dated August 2008
containing articles by Beckman and Durand lists Durand as “Managing Director,
Oxford Global Advisors” and directs investors to “[t]une in” to Durand’s radio show
“to tune up [their] portfolio[s].”17 The district court did not clearly err by finding the
evidence adduced at trial, including Durand’s radio shows, brochures, seminars,
newsletters, advice to investors and personal gain, showed Durand personally
understood and foresaw the scope of the scheme that wrought economic disaster on
the investors. The district court did not clearly err in finding Durand responsible for
over $100 million in actual losses. See U.S.S.G. § 2B1.1(b)(1)(N).
3. Kiley
“Assuming that the district court’s sentencing decision is procedurally sound,
the appellate court should then consider the substantive reasonableness of the
sentence imposed under an abuse-of-discretion standard.” Gall, 552 U.S. at 51.
Kiley first argues his “sentence was substantively unreasonable because it placed too
much weight on the Sentencing Guidelines’ ‘loss amount’ enhancement under
§ 2B1.1(b)(1)(N), which adds 26 points to a defendant’s offense level where ‘actual
losses’ exceed $100,000,000.” Kiley states, “The government did not provide any
evidence that the ‘actual loss’ suffered by the investors was ‘reasonably foreseeable’
by Mr. Kiley. As such, it is not proper to attribute that loss to Mr. Kiley under the
guidelines.” Kiley contends he was unaware the purpose of the scheme was to
defraud the investors and “he did not know that the statements he made about the
17
In his article, Durand wrote, “My desire to address the investor is dwarfed by
my concern for the masses—those hard working Americans who exist from paycheck
to paycheck, blissfully unaware of how close to the edge of economic disaster they
reside.”
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currency program were . . . false.” Based on sufficient evidence produced at trial, the
jury found otherwise.
Second, Kiley theorizes his sentence violates the Eighth Amendment because
“use of the loss amount enhancement to punish individuals involved in large financial
crimes results in sentences that are excessive and disproportionate to the crime
charged, and therefore serve no valid legislative purpose.” Yet, “even ‘assuming that
a sentencing court may disregard [a guideline] on pure policy grounds,’” the United
States Supreme Court has not held “‘that a district court must disagree with any
sentencing guideline, whether it reflects a policy judgment of Congress or the
[Sentencing] Commission’s characteristic empirical approach.’” United States v.
O’Connor, 567 F.3d 395, 398 (8th Cir. 2009) (first alteration in original) (quoting
United States v. Barron, 557 F.3d 866, 871 (8th Cir. 2009)). Kiley’s policy argument
did not compel the district court to accept his theory.
“‘[W]here a district court has sentenced a defendant below the advisory
guidelines range, it is nearly inconceivable that the court abused its discretion in not
varying downward still further.’” United States v. McKanry, 628 F.3d 1010, 1022
(8th Cir. 2011) (alteration in original) (quoting United States v. Moore, 581 F.3d 681,
684 (8th Cir. 2009) (per curiam)). The district court did not abuse its discretion by
applying the loss amount enhancement and then sentencing Kiley to 240 months
imprisonment, well below his advisory Guidelines range of 3,360 months for all
fifteen counts.
F. Beckman’s Motion to Strike
Twice in its brief, the government states Charlotte and Raymond Olson are now
deceased. Beckman filed a motion to strike these references. Because the statements
played no part in our analysis, we deny Beckman’s motion as moot.
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III. CONCLUSION
We affirm the conviction and sentence of each defendant.
BYE, Circuit Judge, concurring in part and dissenting in part.
I agree in all respects with affirming the convictions and sentences of Jason
Beckman and Gerald Durand. I believe Patrick Kiley's Sixth Amendment rights were
violated at trial, however, because his counsel was laboring under a conflict of
interest that adversely affected his representation of Kiley. As a result, I would
reverse Kiley's conviction and remand for a new trial. I therefore respectfully dissent
from Section II.C. of the majority's opinion.18
The district court never considered whether Kiley's trial counsel, H. Nasif
Mahmoud, was operating under a conflict of interest while representing Kiley on the
grounds that Mahmoud was directly implicated in one of Kiley's crimes. Count 23
of the Second Superseding Indictment charged Kiley with money laundering in
connection with a 2009 wire transfer of $100,000 from one of Trevor Cook's
fraudulent enterprises. The purported purpose of the wire transfer was to pay
Mahmoud to represent the fraudulent enterprise and Kiley in a related civil case.
Mahmoud attended meetings at the currency program's place of business in July 2009,
purportedly to discuss the civil litigation. The government cross-examined Julie
Gilsrud, Kiley's secretary, with the intent to show the wire transfer was done for
Kiley's benefit, or at least with Kiley's approval. Mahmoud admitted during trial he
received the $100,000 wire transfer. In closing argument, the government argued the
wire transfer "was directed by Trevor Cook for the benefit of Pat Kiley. Pat Kiley
had utilized Mr. Mahmoud in connection with a civil litigation. That $100,000 was
for Kiley's benefit." The jury determined the funds Mahmoud received were
18
Because I would reverse Kiley's conviction, I would not reach the other trial
and sentencing issues relevant to him.
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laundered funds within the meaning of 18 U.S.C. § 1957, and found Kiley guilty of
Count 23.
Kiley's current counsel – appointed to represent Kiley following the
postponement of his initial sentencing hearing – argues Mahmoud's receipt of the
laundered funds (as well as his presence at the currency program's place of business)
could lead reasonable jurors to regard Mahmoud as a co-conspirator in the currency
program. He further contends that where an attorney is implicated in his own client's
crimes, a conflict necessarily exists because the client and attorney have divergent
interests with respect to the factual and legal underpinnings of the charge, as well as
the course of action to be taken in defending against the charge. See, e.g., United
States v. Fulton, 5 F.3d 605, 611-13 (2d Cir. 1993) (indicating when an attorney is
implicated in criminal activity sufficiently related to crimes charged against a client,
an unwaivable conflict of interest exists and a per se violation of the Sixth
Amendment occurs because the attorney's "fear of, and desire to avoid, criminal
charges, or even the reputational damage from an unfounded but ostensibly plausible
accusation, will affect virtually every aspect of his or her representation of the
defendant").
Applying our decision in Ausler v. United States, 545 F.3d 1101 (8th Cir.
2008), the majority does not presume prejudice from Mahmoud's implication in the
money laundering charge and automatically reverse Kiley's conviction. Instead, in
this case where the district court failed to inquire into the potential conflict, the
majority concludes Kiley must show the conflict actually affected the adequacy of
Mahmoud's representation. See id. at 1104 (quoting Mickens v. Taylor, 535 U.S.
162, 170-71 & nn. 3, 4 (2002)). Based solely upon Mahmoud's assurance that no
conflict existed, coupled with Kiley's statement to the magistrate judge that he wanted
Mahmoud to represent him, the majority concludes "the district court was not
required to address the potential Count 23 conflict in the midst of this complex and
lengthy trial." Ante at 30.
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I do not agree the majority's analysis is sufficient to address the issues raised
by Kiley. First, I fail to see how a conflicted attorney's own assurance that no conflict
exists should be relevant. But even assuming it is relevant, Mahmoud's assurance
only pertained to the two potential conflicts the government raised in its motion for
inquiry: 1) whether Mahmoud was a necessary witness because he was present at the
July 2009 meetings; and 2) whether he had a potential conflict because he currently
represented one government witness (Stephen Nortier) and formerly represented
another government witness (Duke Thietje). Mahmoud's assurance did not address
the conflict that matters – whether Mahmoud's implication in Kiley's crime, as the
recipient of Count 23's laundered funds, adversely affected his representation of
Kiley.
Similarly, Kiley's statement to the magistrate judge indicating he "want[ed] to
keep Mahmoud" as his attorney did not address the Count 23 implication conflict.
Kiley's statement responded solely to questions regarding Mahmoud's representation
of Nortier and Thietje. See Mot. Tr. at 14-25, District Ct. Docket #127. Kiley was
never questioned about the conflict stemming from Mahmoud's receipt of $100,000
in laundered funds, nor was he ever given the opportunity to knowingly and
voluntarily waive that conflict, assuming it could be waived. See United States v.
Lopesierra-Gutierrez, 708 F.3d 193, 201-02 (D.C. Cir. 2013) (concluding the conflict
stemming from defense counsel's receipt of laundered funds could be knowingly and
voluntarily waived, but only "where a stipulation bars presentation of incriminating
testimony" and thus the jury never learns that defense counsel received laundered
funds).
Kiley contends the possibility that Mahmoud's implication in Count 23 created
a conflict "was sufficiently apparent . . . to impose upon the court a duty to inquire
further," such that the failure to conduct the inquiry violated Kiley's Fifth Amendment
due process rights. Wood v. Georgia, 450 U.S. 261, 272, 273 (1981). I do not find
the majority's analysis – which appears to consist solely of an examination of the
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district court's inquiry into other potential conflicts – particularly helpful in
addressing that due process issue.
With respect to Kiley's claim that his Sixth Amendment rights were violated,
the majority defers ruling on Kiley's ineffective-assistance-of-counsel claim until it
has been presented in a subsequent proceeding under 28 U.S.C. § 2255. I would
address the Sixth Amendment claim now. In my view, Mahmoud's ability to provide
constitutionally effective representation to his client came to an end when the jury
learned Mahmoud was the recipient of Count 23's laundered funds, was present at the
currency program's place of business, and participated in discussions with Kiley's co-
conspirators about the currency program. The jury's knowledge of Mahmoud's
implication in Count 23 is a bell that has been rung, and cannot be undone for
purposes of this trial by requiring the district court to hold an evidentiary hearing in
a § 2255 proceeding.
In the situation we have here, where the jury knew Mahmoud received the
laundered funds and was directly implicated in Kiley's charged conduct, it is at least
debatable whether the conflict should be viewed as a per se violation of the Sixth
Amendment and require automatic reversal of Kiley's conviction. See Fulton, 5 F.3d
at 611-13 (applying a per se rule). But even assuming Kiley must demonstrate the
conflict adversely affected Mahmoud's performance under Cuyler v. Sullivan, 446
U.S. 335, 350 (1980), I believe Kiley satisfies that standard.
In Dawan v. Lockhart, 31 F.3d 718 (8th Cir. 1994), our court addressed a
conflict created by the same attorney representing both the defendant and his
co-defendant in a burglary and theft-of-property prosecution. Stout, the co-defendant,
pleaded guilty and gave a sworn statement implicating Dawan, the defendant. At
Dawan's trial, after the attorney called Stout as a witness and he testified Dawan was
not involved in the charged crimes, the prosecutor cross-examined Dawan about his
prior sworn testimony implicating Dawan, specifically "highlight[ing] the fact that
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Dawan's counsel was the attorney who had represented Stout when the statement was
made." Dawan, 31 F.3d at 720. Stout then admitted he had previously implicated
Dawan, but claimed he had lied under oath. Id.Applying Cuyler's adverse effect standard, our court held Dawan's Sixth
Amendment rights were violated because the jury learned – via the prosecutor's cross-
examination – that Dawan's counsel had also represented a witness who changed his
story. We said the "prosecutor's comments made Dawan's attorney look less credible
and, by extension, made Dawan look less credible as well." Id. at 722.
Similarly, here the jury learned that Mahmoud received laundered funds
derived from the fraudulent currency program. The jury also learned Mahmoud was
present at the currency program's place of business and participated in discussions
regarding civil litigation the co-conspirators faced. Based on these facts, it strains
credulity not to expect a reasonable jury to consider whether Mahmoud himself was
part of the criminal conspiracy. If it was even ostensibly plausible for the jury to
believe Mahmoud was involved in the criminal conspiracy, I believe we should
presume it would have "affect[ed] virtually every aspect of [Mahmoud's]
representation of the defendant." Fulton, 5 F.3d at 613. At a minimum, however,
Mahmoud's implication in Count 23, as the admitted recipient of funds the jury found
to be laundered, would undoubtedly hurt Mahmoud's credibility with the jury, and by
extension make Kiley look less credible as well. "This is a sufficient adverse effect
for purposes of Cuyler." Dawan, 31 F.3d at 722.
I respectfully dissent from Section II.C. of the majority's opinion.
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