United States v. James Lloyd

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 12-50499
Plaintiff-Appellee,
D.C. No.
v. 2:11-cr-00542-
JFW-1
JAMES LLOYD, AKA James V.
Lloyd, Jr., AKA James Vernon
Lloyd,
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 12-50500
Plaintiff-Appellee,
D.C. No.
v. 2:11-cr-00543-
JFW-3
JAMES LLOYD, AKA James V.
Lloyd, Jr., AKA James Vernon
Lloyd,
Defendant-Appellant.
2 UNITED STATES V. LLOYD
UNITED STATES OF AMERICA, No. 12-50509
Plaintiff-Appellee,
D.C. No.
v. 2:11-cr-00543-
JFW-4
PAUL BAKER, AKA Darwin Stanton
Baker, Jr., AKA Paul D. Baker,
AKA Paul Douglas Baker,
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 12-50514
Plaintiff-Appellee,
D.C. No.
v. 2:11-cr-00543-
JFW-11
DAVID NELSON, AKA David Paul
Nelson,
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 12-50526
Plaintiff-Appellee,
D.C. No.
v. 2:11-cr-00543-
JFW-7
ALBERT GREENHOUSE, AKA Albert
Michael Greenhouse,
Defendant-Appellant.
UNITED STATES V. LLOYD 3
UNITED STATES OF AMERICA, No. 12-50566
Plaintiff-Appellee,
D.C. No.
v. 2:11-cr-00542-
JFW-4
ROBERT KESKEMETY,
Defendant-Appellant. OPINION
Appeal from the United States District Court
for the Central District of California
John F. Walter, District Judge, Presiding
Argued and Submitted
July 8, 2014—Pasadena, California
Filed December 4, 2015
Before: Marsha S. Berzon and Richard R. Clifton, Circuit
Judges and Lee H. Rosenthal,* District Judge.
Opinion by Judge Rosenthal
*
The Honorable Lee H. Rosenthal, District Judge for the U.S. District
Court for the Southern District of Texas, sitting by designation.
4 UNITED STATES V. LLOYD
SUMMARY**
Criminal Law
The panel affirmed in part, reversed in part, vacated in
part, and remanded in part in cases in which five
defendants—who worked for telemarketing “boiler rooms” in
California and Florida, soliciting investments in partnerships
to finance the production and distribution of movies—appeal
their convictions or sentences for selling unregistered
securities.
James Lloyd pleaded guilty to two counts of wire fraud
and Robert Keskemety to one count of mail fraud. The panel
affirmed Lloyd’s sentence, but concluded that Keskemety’s
sentence for managing the Florida telemarketing boiler room
improperly included fraud losses from the California boiler
room that Lloyd managed. The panel vacated Keskemety’s
sentence and remanded for resentencing.
The jury convicted both David Nelson and Paul Baker of
one count of conspiracy to commit mail and wire fraud and
to offer and sell unregistered securities, two counts of mail
and wire fraud, and two counts of offering and selling
unregistered securities. The panel reversed Nelson’s
conviction based on evidentiary errors—including improper
admission of lay opinion testimony, Fed. R. Evid. 404(b)
evidence, and an email containing hearsay statements. The
panel affirmed Baker’s conviction due to the overwhelming
evidence against him, making the evidentiary errors harmless.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES V. LLOYD 5
The panel vacated Baker’s sentence and remanded for
resentencing because the district court did not account for
U.S.S.G. § 4A1.2(k), cmt. n.11, in calculating his criminal
history score.
The panel found no error in Albert Greenhouse’s
sentence.
COUNSEL
Edward M. Robinson (argued), Law Office of Edward M.
Robinson, Torrance, California, for Defendant-Appellant
James Lloyd.
John C. Lemon (argued), San Diego, California, for
Defendant-Appellant Paul Baker.
Sean K. Kennedy and Kathryn A. Young (argued), Deputy
Federal Public Defenders, Los Angeles, California, for
Defendant-Appellant David Nelson.
Lawrence Jay Litman (argued), Los Angeles, California, for
Defendant-Appellant Albert Greenhouse.
Russell S. Babcock (argued), Law Offices of Russell S.
Babcock, San Diego, California, for Defendant-Appellant
Robert Keskemety.
André Birotte, Jr., United States Attorney, Central District of
California, Robert E. Dugdale, Chief, Criminal Division,
Steven A. Cazares and Ellyn Marcus Linsday (argued),
Assistant United States Attorneys, Los Angeles, California,
for Plaintiff-Appellee.
6 UNITED STATES V. LLOYD
OPINION
ROSENTHAL, District Judge:
Five defendants appeal their convictions or sentences for
selling unregistered securities. The defendants worked for
telemarketing “boiler rooms” in California and Florida,
soliciting investments in partnerships to finance the
production and distribution of movies. The defendants
promised potential investors that the investments would
return swift and large profits, with little to no risk.
Approximately 650 individuals—including unsophisticated
people who could not afford the financial loss—invested over
$23 million. Most of the investors lost it all.
These appeals arise from two indictments issued in the
Central District of California on June 15, 2011. The
indictment in United States v. Daniel Toll et al., No.
11-cr-543-JFW, charged James Lloyd, who managed a boiler
room in Los Angeles, California; telemarketers Paul Baker,
David Nelson, and Albert Greenhouse; and eight others, all of
whom worked through a California boiler room to sell
partnership units in three movies produced (or supposed to be
produced) by Cinamour Entertainment, LLC. The indictment
in United States v. James Lloyd, No. 11-cr-542-JFW, charged
Lloyd, who left Cinamour to manage a different boiler room
in California, and Robert Keskemety, who managed a Florida
boiler room, along with seven others, for selling partnership
units in two movies. These movies were produced by Q
Media Assets LLC, a company owned by the same person
who owned Cinamour. Both indictments charged conspiracy,
mail fraud, wire fraud, and securities fraud between 2001 and
2009.
UNITED STATES V. LLOYD 7
The two boiler room managers, James Lloyd and Robert
Keskemety, were convicted after they pleaded guilty. They
appeal only their sentences. Two Cinamour telemarketers
working in California, David Nelson and Paul Baker, and
Albert Greenhouse, a Cinamour telemarketer working in
Florida, were tried together. Nelson and Baker appeal their
convictions and sentences. The only issue in the Greenhouse
appeal is the sentence. We have jurisdiction under 28 U.S.C.
§ 1291 and 18 U.S.C. § 3742(a).
The number of defendants, the lengthy period involved,
and the type of conduct made this a difficult case for any trial
court to resolve. The record shows that the district judge
competently and fairly resolved many of the innumerable
issues that arose in trial and at sentencing. The points on
which we disagree with the district judge raise issues that are
both complex and close.
James Lloyd pleaded guilty to two counts of wire fraud
and Robert Keskemety to one count of mail fraud. They
appeal their sentences. We affirm Lloyd’s sentence, but we
conclude that Keskemety’s sentence for managing the Florida
telemarketing boiler room improperly included fraud losses
from the California boiler room that Lloyd managed. We
vacate Keskemety’s sentence and remand for resentencing.
David Nelson and Paul Baker appeal both the convictions
and sentences entered after the jury convicted each of one
count of conspiracy to commit mail and wire fraud and to
offer and sell unregistered securities, two counts each of mail
and wire fraud, and two counts of offering and selling
unregistered securities. We reverse Nelson’s conviction
based on evidentiary rulings, vacate the sentence, and
remand. We affirm Baker’s conviction due to the
8 UNITED STATES V. LLOYD
overwhelming evidence against him, making the evidentiary
errors harmless, but we vacate Baker’s sentence and remand
for resentencing because of an error in calculating the
Guidelines sentence.
Finally, Albert Greenhouse appeals the sentence he
received after the jury convicted him of two counts of
offering and selling unregistered securities. We find no error,
and we affirm.
BACKGROUND
Glen Hartford, a film producer, founded Cinamour in
2000 to make and distribute independent films, and served as
its chief executive officer and majority shareholder. Hartford
used telemarketing to solicit money from individual investors
to finance three movies: Forbidden Warrior, From Mexico
with Love, and Red Water 12. These three movies are the
basis of the United States v. Toll indictment.
Cinamour began raising money for Forbidden Warrior in
2001 out of a telemarketing boiler room in Los Angeles,
California. Lloyd and Baker were involved in the Forbidden
Warrior fundraising. That movie was released in 2005
directly to video distribution and made about $500,000, a
commercial failure of large proportions.
From 2004 to 2007, Cinamour used telemarketing to
solicit purchases of partnership units to finance From Mexico
With Love. Cinamour raised approximately $14.2 million
from 445 investors nationwide. From Mexico With Love
grossed about $800,000 from a very limited theatrical release.
The investors received no return on the money they sent.
UNITED STATES V. LLOYD 9
Lloyd, Baker, and Greenhouse were involved in soliciting
investments in From Mexico With Love.
In 2007, Cinamour began telemarketing sales of
partnership units in Red Water. Cinamour raised
approximately $2.8 million from approximately 100 victims
nationwide but spent only $23,000 on making the movie. The
investors lost everything. Baker and Nelson were involved in
soliciting the investments in Red Water.
In 2009, after an undercover investigation, the FBI raided
Cinamour’s Los Angeles offices. Hartford committed suicide
days after the raid.
The indictment in United States v. Lloyd arose from
telemarketed investments in two movies written, directed, and
produced by a former Central Intelligence Agency officer,
Michael D. Sellers. Sellers retained Joel Lee Craft, Jr.,
founder and chief executive officer of American Information
Strategies, Inc., to help raise capital for the films, Eye of the
Dolphin and Way of the Dolphin. Sellers worked with Craft
to set up telemarketing boiler rooms, hiring Keskemety in
Florida, and later, Lloyd in California, to manage them.
In 2002, Sellers recruited Keskemety to establish and
manage the Florida telemarketing office. The goal was to
raise money for the two Dolphin movies. In 2004,
Keskemety began soliciting investments for Eye of the
Dolphin. Sellers asked Craft to introduce him to other
potential boiler-room managers. Through Craft, Sellers met
Lloyd and hired him in 2007 to move from managing the
Cinamour telemarketing office in Los Angeles to managing
an office in the same city to solicit investments in partnership
units to finance Sellers’s films. Keskemety and Lloyd hired
10 UNITED STATES V. LLOYD
and paid the other telemarketers to raise money for the
Dolphin films.
When Lloyd began managing the Los Angeles boiler
room for Sellers, he had been working for Cinamour for over
four years soliciting money for Forbidden Warrior and From
Mexico With Love. He brought the same marketing
techniques to selling partnership units in Eye of the Dolphin
and Way of the Dolphin. The California and Florida boiler
rooms together raised $9.6 million from 264 investors for the
two Dolphin movies. Both movies failed. The investors in
the first movie, as a group, received only $370,656 of their
initial investment. The investors in the second movie lost
everything.
The boiler rooms were similar. Less experienced
telemarketers served as “fronters,” cold-calling potential
investors from lists of leads and reading from scripts to pitch
the investments. The scripts included assurances to
prospective investors of quick and large profits with little to
no risk. These promises, and the details supporting them,
were false. If the cold-calls led to expressions of interest,
“closers”—more experienced telemarketers—would follow
up and try to get signed investment documents and a check to
close the deal. “Reloaders” would induce some of those who
had already invested to put in more.
Many of the defendants had multiple roles, but each of the
appellants worked as closers some of the time. Lloyd helped
close investments in Forbidden Warrior and From Mexico
with Love. Baker helped close investments in Forbidden
Warrior, From Mexico with Love, and Red Water. Nelson
helped close investments in Red Water. Greenhouse helped
close investments in From Mexico with Love. Lloyd and
UNITED STATES V. LLOYD 11
Keskemety were closers for Eye of the Dolphin and Way of
the Dolphin.
Lloyd, Baker, Nelson, and Greenhouse also worked as
“reloaders” on the Cinamour films, targeting those who had
already invested to persuade them to invest more. Reloaders
participated in conference calls with these investors. The
calls included telemarketers who pretended to be investors
and enthusiastically agreed to commit more money. Lloyd
also worked as a reloader on the two Dolphin films, but
Keskemety did not.
Most of the defendants asserted that they believed the
leads they cold-called and persuaded to invest were suitable
and accredited individuals who were sophisticated and
financially able to risk losing the money. The trial testimony
from and about the investors, as well as the information in the
presentence reports, tell a different story. Many of the
investors had no significant experience in investing and few
had significant liquid assets. Many had or were about to
retire. At the trial, some of the investors testified that they
had told the fronters, the closers, and the reloaders about their
limited investment experience, their limited resources, and
their life situations. The investors repeatedly testified about
the defendants’ assurances that the investments were risk free
and would be returned with a profit within a short period.
The investors briefly testified about the effects on them of
losing the money.
The scripts the telemarketers used varied depending on
the movie they were pitching, but there were many common
elements. In initial solicitation cold-calls, the fronters stated
that: (1) there was little to no risk in the investment because
there were presale distribution contracts for the movies,
12 UNITED STATES V. LLOYD
which guaranteed that the investors would recoup their
investments and make a profit; (2) investors would quickly
begin to receive returns because the movies were completed
or nearing completion and, with the presales contracts, would
be distributed in the near future; (3) films previously
produced by the same company had yielded good returns for
investors; (4) the money invested would be used to make,
promote, and distribute the movies, not to pay for fundraising,
overhead expenses, or sales commissions; (5) the marketers
earned little to no commissions; (6) investors would get their
money back and more out of the movie proceeds before the
promoters and sellers were paid; and (7) there was a time
limit because the units would shortly become unavailable,
requiring a quick commitment. These statements were
affirmatively and materially false or omitted material
information needed to make them true.
The evidence presented at trial and recounted in the
presentence reports showed that there were few or no
guaranteed presale distribution contracts and no prospects of
obtaining them. While some of the movies were finished and
failed in distribution, some were not in production and were
never made. Prior investors in films produced by the same
company had lost money. Most of the money from investors
did not go to make or distribute the films, but to pay
personnel and promoters. Most of the telemarketers earned
35 percent in commissions, although some earned as little as
12 percent and others as much as 40 percent. There was no
time limit on the investments. Lies abounded.
If a fronter’s cold-call produced an expression of interest,
the potential investor would receive a private placement
memorandum. The memorandum contained some cautionary
language but repeated many of the same lies. Closers would
UNITED STATES V. LLOYD 13
follow up, making similar promises to get signed investment
contracts and checks. Some of the investors were later
targeted for reloading through the staged conference calls. In
general, the defendants did not contend that the statements
they made were true, but rather that they believed what they
were told to say.
The first set of issues analyzed below arises from the
sentencing appeals of the two defendants who pleaded guilty,
Robert Keskemety and James Lloyd. The second set of
issues arises from the appeals of the three defendants tried
together and convicted.
DISCUSSION
I. Keskemety’s and Lloyd’s Sentencing Appeals
A. The Standard of Review
We review a district court’s sentencing decision for an
abuse of discretion. United States v. Carty, 520 F.3d 984,
993 (9th Cir. 2008) (en banc). A district court abuses its
discretion when it improperly calculates the Guidelines range
or bases its sentencing decision on clearly erroneous facts.
Id.; United States v. Treadwell, 593 F.3d 990, 999 (9th Cir.
2009). When a defendant does not object at sentencing, we
review for plain error. See United States v. Vargem, 747 F.3d
724, 727 (9th Cir. 2014). “Under the plain error standard,
relief is warranted where the district court committed
(1) error that (2) is plain; (3) ‘affected substantial rights;’ and
(4) ‘seriously affected the fairness, integrity, or public
reputation of judicial proceedings.’” Id. at 728 (quoting
United States v. Teague, 722 F.3d 1187, 1190 (9th Cir.
2013)).
14 UNITED STATES V. LLOYD
B. The Guilty Pleas and Sentences
In 2002, Michael Sellers hired Keskemety to set up and
run a telemarketing boiler room in Florida to solicit
investments in the two Dolphin movies. Keskemety would
pay for the boiler-room expenses, including buying his own
lead lists and paying the telemarketers. Sellers would pay
Keskemety 25 to 40 percent of the money raised in the
Florida boiler room. Keskemety began running the boiler
room in 2004, soliciting investments first for the Eye of the
Dolphin, then for the Way of the Dolphin. The telemarketers
made their solicitation calls using lead lists Keskemety
purchased from Craft. Keskemety managed the Florida boiler
room from 2004 to 2009. During this period, the
telemarketers raised approximately $2 million from victims
who invested in making and marketing the two Dolphin films.
Lloyd worked as Cinamour’s boiler-room manager from
2003 to 2007. Among other things, Lloyd recruited
telemarketers and helped prepare scripts that closers used to
get signed investment contracts and checks.
In 2007, Sellers hired Lloyd to set up and run a boiler
room in Los Angeles to sell partnership units in Sellers’s
Dolphin films. Unlike his arrangement with Keskemety in
Florida, Sellers paid the overhead for the Los Angeles–based
boiler room that Lloyd managed. Lloyd convinced many of
the telemarketers who worked with him at Cinamour as
closers, including Allen Agler, to join him and do the same
kind of telemarketing solicitation for Sellers’s Dolphin films
that they had been doing for Cinamour.
From 2007 to 2009, the California and Florida boiler
rooms together sold partnership units in the Dolphin movies
UNITED STATES V. LLOYD 15
to 264 victims, raising $9.3 million. Keskemety contends that
his Florida boiler room raised $1.5 to $2 million of this
amount. There is no controverting information. Based on
this, Lloyd’s California boiler room raised approximately
$7.3 million. The number of victims attributable to each
location is unclear.
The June 2011 indictment arising from the Dolphin
movies, United States v. Lloyd, et al., No. 11-cr-542, charged
Keskemety with conspiracy under 18 U.S.C. § 371, two
counts of mail fraud under 18 U.S.C. § 1341, and offering
and selling unregistered securities under 15 U.S.C. §§ 77e
and 77x and aiding and abetting under 18 U.S.C. § 2.1 On
March 2, 2012, Keskemety pleaded guilty without a plea
agreement to one count of mail fraud.
The same indictment charged Lloyd with one count of
conspiracy under 18 U.S.C. § 371, seven counts of mail fraud
under 18 U.S.C. § 1341, seven counts of wire fraud under
18 U.S.C. § 1343, eight counts of offering and selling (or
aiding and abetting the offer and sale of) an unregistered
security under 15 U.S.C. §§ 77e and 77x and 18 U.S.C. § 2,
and two counts of engaging in monetary transactions in
property derived from illegal activity under 18 U.S.C. § 1957.
Lloyd was also named in United States v. Toll, et al., No. 11-
cr-543, arising from the Cinamour film telemarketing. This
indictment charged Lloyd with one count of conspiracy under
18 U.S.C. § 371, four counts of mail fraud under 18 U.S.C.
§ 1341, four counts of wire fraud under 18 U.S.C. § 1343,
1
The indictment also charged Craft for his role at American Information
Strategies and Agler, Jady Laurence Herrmann, Joseph McCarthy,
Matthew Bryan Wellman-Mackin, Morabito, and Robert Ramirez for their
roles as closers.
16 UNITED STATES V. LLOYD
three counts of offering and selling (or aiding and abetting the
offer and sale of) an unregistered security under 15 U.S.C. §§
77e and 77x and 18 U.S.C. § 2, and one count of engaging in
monetary transactions in property derived from illegal
activity under 18 U.S.C. § 1957.2
In February 2012, Lloyd pleaded guilty to one count of
wire fraud in United States v. Lloyd; in April 2012, he
pleaded guilty to one count of wire fraud in United States v.
Toll. The two actions were consolidated for sentencing.
Neither Keskemety nor Lloyd appeals his conviction.
Both appeal their sentences. Keskemety received an
80-month prison sentence, well below the 121 to 151 month
Guidelines range, and was ordered to pay $8,628,733.93 in
restitution. The offense level and restitution amount were
based on the victims’ losses in both the Florida boiler room
Keskemety managed between 2004 and 2009 and the Los
Angeles boiler room Lloyd managed between 2007 and 2009.
Keskemety agrees that he is properly held accountable for the
fraud losses from the Florida boiler room while he worked
there, but he challenges including the Los Angeles boiler-
room fraud losses in his relevant conduct.
Lloyd received a 156-month sentence and had to pay
$22,258,489.04 in restitution. He challenges the sentence
2
The indictment also charged Daniel Toll for his role as Cinamour’s
president; Joel Lee Craft, Jr. for his role as head of American Information
Strategies, which supplied Cinamour with telemarketers, sales materials,
telephone scripts, private placement memoranda, and lists of prospects to
cold-call; and Bart Douglas Slanaker, Allen Bruce Agler, Delitha Floyd,
Brian Emmanuel Ellis, Daniel Morabito, and Daryl Van Snowden, who
were closers.
UNITED STATES V. LLOYD 17
length as both procedurally flawed and substantively
unreasonable.
C. Keskemety’s Sentencing Appeal
The district court largely adopted the revised presentence
report and overruled Keskemety’s objections, including his
objections to the fraud loss. The court calculated the
Guidelines range based on a 20-level increase in offense level
under § 2B1.1(b)(1)(K) for $9,304,929.62 in intended fraud
losses and a 6-level increase for over 250 victims. These
amounts included both the California and Florida victims and
their losses. The court calculated restitution the same way,
including the 242 investors solicited by the California and
Florida boiler rooms who could be identified by name. With
a 2-level increase for the vulnerability of some of the victims
and a 3-level reduction for acceptance of responsibility, the
result was an offense level of 32, which produced a
sentencing range of 121 to 151 months. Citing Keskemety’s
military service, age, and poor health, the district court
sentenced him to serve 80 months in prison and ordered him
to pay $8,628,733.93 in restitution.
Keskemety does not dispute that he is accountable for
Guideline-calculation purposes for the amount raised from
telemarketers’ solicitations in the Florida boiler room during
the time he managed it, a fraud loss of $1.5 to $2 million.
Nor does he dispute that he must pay restitution to the
identifiable investors solicited from the Florida boiler room.
He does dispute that his relevant conduct includes the fraud
losses generated by the Los Angeles telemarketing office that
James Lloyd managed during the same period; that the
number of victims of the Florida office exceed 250; and that
he owes restitution to the identifiable investors solicited by
18 UNITED STATES V. LLOYD
the Los Angeles as well as the Florida operation. Kesketemy
agrees that he knew that the California boiler room existed
and what it was doing, but he disputes that this knowledge is
enough to include the fraud losses from the California boiler
room in his own relevant conduct.
“[I]n the case of jointly undertaken criminal activity,” a
defendant is responsible for “all reasonably foreseeable acts
and omissions of others in furtherance of the jointly
undertaken criminal activity, that occurred during the
commission of the offense of conviction, in preparation for
that offense, or in the course of attempting to avoid detection
or responsibility for that offense.” U.S.S.G.
§ 1B1.3(a)(1)(B). The defendant is accountable for the
conduct of others that was both: “‘(i) in furtherance of the
jointly undertaken criminal activity; and (ii) reasonably
foreseeable in connection with that criminal activity.’”
United States v. Blitz, 151 F.3d 1002, 1012 (9th Cir. 1998)
(quoting U.S.S.G. § 1B1.3, cmt. n.2). “[W]e have held that
a district court may not automatically hold an individual
defendant responsible for losses attributable to the entire
conspiracy, but rather must identify the loss that fell within
the scope of the defendant’s agreement with his
co-conspirators and was reasonably foreseeable to the
defendant.” United States v. Treadwell, 593 F.3d 990, 1002
(9th Cir. 2010). Although a district court need not “proceed
item-by-item through a complete list of all losses attributed
to a criminal conspiracy and . . . then make an individualized
determination whether or not each item was within the scope
of the defendant’s ‘joint undertaking’ and was ‘reasonably
foreseeable’ to that defendant,” id. at 1002–03, the court must
make particularized findings about “‘the scope of the criminal
activity the particular defendant agreed to jointly undertake,’”
UNITED STATES V. LLOYD 19
Blitz, 151 F.3d at 1012–13 (quoting U.S.S.G. § 1B1.3, cmt.
n.2).
“In determining the scope of the criminal activity that the
particular defendant agreed to jointly undertake (i.e., the
scope of the specific conduct and objectives embraced by the
defendant’s agreement), the court may consider any explicit
agreement or implicit agreement fairly inferred from the
conduct of the defendant and others.” U.S.S.G. § 1B1.3, cmt.
n.2. The example of jointly undertaken criminal activity in
the Application Notes is a street-level drug dealer who pools
resources and shares profits with four other street-level drug
dealers. The first dealer is engaged in jointly undertaken
criminal activity and is accountable for all the drugs he and
the four other dealers sell during the time he works with
them. Their sales are in furtherance of the first dealer’s
jointly undertaken criminal activity and reasonably
foreseeable to him. Id., cmt. n.2, Illustration (c)(6). By
contrast, a dealer who sells to his own customers, in his own
territory, and does not share information, other resources, or
profits with other dealers who have their own territories and
customers, is not engaged in jointly undertaken drug dealing
with the other dealers and is not accountable for the drugs
they sell. That is true even if the first dealer knows about the
other dealers and who they are and knows that the drugs
come from the same supplier. Similarly, even if the first
street-level drug dealer knows that the person who recruited
him to sell drugs also recruited the other dealers for the same
purpose, the first dealer is generally accountable only for the
drugs he sells. U.S.S.G. § 1B1.3, cmt. n.2, Illustration (c)(7).
The dealers are doing the same kind of criminal activity at the
same time, but it is not a jointly undertaken criminal activity.
U.S.S.G. § 1B1.3, cmt. n.2, Illustration (c)(6).
20 UNITED STATES V. LLOYD
Knowledge of “another participant’s criminal acts is not
enough to hold the defendant responsible for those acts,”
United States v. Studley, 47 F.3d 569, 575 (2d Cir. 1995), and
knowledge of a conspiracy’s overall objectives does not make
the defendant accountable for all the coconspirators’ acts
furthering those objectives. In the telemarketing context, “the
scope of a joint undertaking for sentencing purposes
depend[s] on whether the telemarketers ‘worked together,’
‘relied on one another to make a sale,’ attended the same
sales meetings, and ‘depended on the success of . . . the
operation as a whole for their financial compensation.’”
Treadwell, 593 F.3d at 1005 (quoting Blitz, 151 F.3d at
1013). If two defendants, working together, design and
execute a scheme to sell fraudulent stocks in a telephone
boiler-room operation, each is accountable for all the fraud
losses that result. The conduct of each is in furtherance of
their jointly undertaken criminal activity and is reasonably
foreseeable in connection with that criminal activity.
U.S.S.G. § 1B1.3, cmt. n.2, Illustration (c)(2). To determine
a defendant’s fraud-loss amount and resulting offense level,
a district court must consider that defendant’s role in the
overall scheme. See Treadwell, 593 F.3d at 1005; Studley,
47 F.3d at 576.
The district court made the following statements about the
scope of the criminal activity Keskemety agreed to jointly
undertake:
[T]hat the losses of that amount
[$9,304,929.62] to those [264] victims were
sustained during the period of, the relevant
period of [Keskemety’s] participation in the
scheme and also that they do include relevant
conduct with respect to Mr. Lloyd, and they
UNITED STATES V. LLOYD 21
were clearly foreseeable and therefore
properly attributable to [Keskemety].
The court appeared to base this conclusion on Keskemety’s
knowledge about Lloyd’s operations and Sellers’s overall
objectives and goals:
Although [Kesketemy] was in Florida, he was
fully aware of all the major facets of the
scheme, knew others who were raising money
from the [Dolphin] movies, [sic] ran his own
boiler room operation that employed several
closers who worked for him.
The district court did not identify additional facts supporting
its conclusion that the solicitation and sales activities in
Lloyd’s Los Angeles boiler room were within “the scope of
the criminal activity [Keskemety] agreed to jointly
undertake.” U.S.S.G. § 1B1.3, cmt. n.2.
There is evidence that Lloyd and Keskemety were
engaged in the same type of activity. Both used similar
scripts and materials obtained from Craft’s American
Information Strategies. But Lloyd and Keskemety did not
pool customers, information, or other resources. In this
respect, Keskemety was like the drug dealer who gets the
drugs he sells from the same source as other dealers and
knows about their work, but does not share drugs, customers,
or information with them. Keskemety and Lloyd both got
lead lists and scripts from Craft, but they did not share
information with each other.
At sentencing and on appeal, the government made a
number of arguments to show that Keskemety was properly
22 UNITED STATES V. LLOYD
held accountable for the fraud losses from the Los Angeles as
well as the Florida boiler room. The government cited
evidence that Keskemety received a commission check when
Lloyd reloaded Keskemety’s investors, even after Keskemety
had stopped actively soliciting investments himself. The
district court properly rejected this argument because the
government could not show that Keskemety “knew that Lloyd
. . . [was] reloading his investors other than the fact that he
continued to get paid[.]” The district court was “not
convinced that there [was] sufficient evidence that
[Keskemety] was aware of . . . the [reloading] conference
calls.” The district court expressly rejected the statement in
the revised PSR that Keskemety profited from the conference
calls Lloyd used to reload investors:
I don’t see any evidence in this record that
would support this defendant profited from
the conference calls or that he provided his
investor client list to . . . Lloyd for reloading.
The record shows that Keskemety did not benefit from the
solicitations and sales made in Lloyd’s Los Angeles boiler
room and did not share the proceeds of his boiler-room
solicitations with Lloyd.
The government argues that Keskemety and Lloyd were
“acting in concert for the same purported goal: to raise money
for Sellers.” The fact that Keskemety and Lloyd
independently worked for Sellers does not mean that
Keskemety and Lloyd jointly undertook their criminal
activity. Similarly, the government urges that because “all
[telemarketers] used the same materials to sell the deal,” all
were engaged in jointly undertaken criminal activity. As
Keskemety points out, using the same marketing materials
UNITED STATES V. LLOYD 23
does not tie Keskemety’s compensation to Lloyd’s
solicitations and sales such that the California fraud losses
should be included in Keskemety’s relevant conduct. The
fact that Keskemety dealt with some investors who
complained and “lulled” them does not show that he did so
for Lloyd’s investors or that Lloyd shared in the benefits of
this work. Evidence that Keskemety eventually “went to a
salary plus bonus payment plan that was equal to the
commissions he would have earned,” does not tie
Keskemety’s compensation to Lloyd’s solicitations and sales
sufficiently to include the California fraud loses in
Keskemety’s relevant conduct.
The government cites evidence that Keskemety had an
acting role in one of the Dolphin movies, but this does not
show that he had an interest in the success of the operation as
a whole that would justify including the fraud losses from the
Los Angeles boiler room in his own relevant conduct.
Keskemety had a very small role in the film, and there is no
evidence that it contributed to making the money Lloyd
raised through the California boiler room.
In sum, the record support for holding Keskemety
accountable for Lloyd’s similar criminal activity appears
limited to Keskemety’s knowledge of Lloyd’s operations and
of Sellers’s overall objectives and goals. That is not enough,
given the evidence that Keskemety operated the Florida boiler
room independently from Lloyd’s California boiler room and
did not share information, resources, or profits.
The government contends that United States v. Blitz,
151 F.3d at 1012, supports holding Keskemety accountable
for the losses attributable to the Los Angeles–based boiler
room. The telemarketing scheme in Blitz was different from
24 UNITED STATES V. LLOYD
the scheme the record discloses here. In Blitz, the “[d]ialers
and closers strongly relied on one another to make a sale,”
“[a]ll employees attended sales meetings,” and the
“employees did not work on a pure commission basis” and
instead “received a salary,” thus making them “depend[] on
the success of the [fraudulent] operation as a whole for their
financial compensation.” 151 F.3d at 1013. In holding the
individual telemarketers accountable for the money raised by
the other telemarketers as reasonably foreseeable jointly
undertaken criminal activity, the Blitz court distinguished
Studley, in which the court refused to hold one telemarketer
accountable for the other telemarketers’ intended fraud
losses. In Studley, the defendant “did not design or develop
the fraudulent scheme; did not work in any way to further the
scheme outside of his own sales efforts; was paid on a pure
commission basis, receiving no profits from the overall
operation; did not assist other representatives with their sales,
but rather competed with them for commissions; did not pool
resources with other telemarketers; and had no interest in the
success of the operation as a whole.” Blitz, 151 F.3d at 1013.
The record shows that Keskemety is much closer to the
defendant in Studley than to the telemarketers in Blitz.
Keskemety did not design or develop the overall scheme;
Sellers did. Lloyd joined the conspiracy to raise money for
the Dolphin movies long after Keskemety. Keskemety’s
efforts to further the scheme related to the boiler room he
managed. He did not pool resources with Lloyd’s boiler
room, and he was paid commissions based on the proceeds
from the Florida boiler room’s sales.
The other cases the government cites do not change the
analysis. In United States v. Treadwell, 593 F.3d 990 (9th
Cir. 2010), “[b]oth defendants described themselves as
UNITED STATES V. LLOYD 25
‘founders’ of the investment companies they were asking
investors to support with funds,” “[b]oth defendants led
conference calls with the companies’ nationwide sales force,”
“[b]oth defendants traveled around the country selling their
companies’ investment strategy,” “[b]oth defendants
misrepresented the investments made by their companies,”
and “both defendants profited from the mutual efforts of their
coconspirators in selling non-existent investments.” Id. at
1005. In this case, by contrast, the district court did not make
similar particularized findings of jointly undertaken criminal
activity.3 Instead, the district court did not find, and the
present record does not show, that the solicitations made and
money obtained from Lloyd’s Los Angeles boiler room were
within the scope of the criminal activity that Keskemety
agreed to undertake for Sellers.
We reverse the district court’s judgment on the amount of
fraud loss, vacate the restitution order, and remand for
resentencing. We need not and do not address Keskemety’s
other arguments about substantive reasonableness or
restitution.
D. Lloyd’s Sentencing Appeal
Lloyd pleaded guilty to one count of wire fraud in each of
the two cases naming him as a defendant, and he does not
3
The government also cites United States v. Boatner, 99 F.3d 831 (7th
Cir. 1996), in which the court held that the defendants, conspirators in an
insurance-fraud scheme, were accountable for the entire scheme’s fraud
losses despite the fact that they had not pooled profits or resources. The
court distinguished Studley because the Boatner defendants “concocted a
common story; they feigned injuries together; they lied to the police
together; and they retained the same attorney to pursue a fraudulent claim
against a single victim.” Id. at 837. No such evidence is present here.
26 UNITED STATES V. LLOYD
challenge his convictions. He does challenge the 156-month
sentence the district court imposed as both procedurally
flawed and substantively unreasonable.
“Procedural errors include, but are not limited to,
incorrectly calculating the Guidelines range, treating the
Guidelines as mandatory, failing to properly consider the
[18 U.S.C.] § 3553(a) factors, using clearly erroneous facts
when calculating the Guidelines range or determining the
sentence, and failing to provide an adequate explanation for
the sentence imposed.” United States v. Armstead, 552 F.3d
769, 776 (9th Cir. 2008). The district court’s 156-month
sentence was a downward variance from the Guidelines range
of 210 to 262 months. Lloyd asserts—for the first time on
this appeal—that the district court failed adequately to
explain why it did not impose an even lower
below-Guidelines sentence. His argument is without merit.
The district court thoroughly explained its reasons for the
sentence in over 20 pages of transcript. A careful review of
the record satisfies us that the sentence was procedurally
sound and that the district court did not abuse its discretion,
much less plainly err, in the below-Guidelines sentence
imposed and the explanation provided.
Lloyd’s argument that the district court erred in not
departing further goes to substantive reasonableness. See
United States v. Ellis, 641 F.3d 411, 421 (9th Cir. 2011). The
record shows that the 156-month sentence, well below the
bottom of the Guidelines range, was substantively reasonable
in light of the 18 U.S.C. § 3553(a) sentencing factors and the
totality of the circumstances. See Gall v. United States,
552 U.S. 38, 51 (2007).
UNITED STATES V. LLOYD 27
We affirm.
II. The Appeals from the Convictions: Baker and
Nelson
A. The Indictments
Baker, Nelson, and Greenhouse were indicted in United
States v. Daniel Toll, et al., No. 11-cr-543, for soliciting
investments in the Cinamour movies. Baker was charged
with one count of conspiracy under 18 U.S.C. § 371, two
counts of mail fraud under 18 U.S.C. § 1341, two counts of
wire fraud under18 U.S.C. § 1343, and two counts of offering
and selling (or aiding and abetting the offer and sale of) an
unregistered security under 15 U.S.C. §§ 77e and 77x and
18 U.S.C. § 2. Nelson was charged with one count of
conspiracy under 18 U.S.C. § 371, two counts of mail fraud
under 18 U.S.C. § 1341, two counts of wire fraud under
18 U.S.C. § 1343, and two counts of offering and selling (or
aiding and abetting the offer and sale of) an unregistered
security under 15 U.S.C. §§ 77e and 77x and 18 U.S.C. § 2.
Greenhouse was charged with one count of conspiracy under
18 U.S.C. § 371, three counts of mail fraud under 18 U.S.C.
§ 1341, and two counts of offering and selling (or aiding and
abetting the offer and sale of) an unregistered under
15 U.S.C. §§ 77e and 77x and 18 U.S.C. § 2. The three
defendants were tried together.
Baker worked from his home in California as a closer
from 2004 to 2009, soliciting investments in From Mexico
with Love and in Red Water. Nelson worked in Cinamour’s
Sherman Oaks and Encino, California, offices as a fronter and
closer from October 2007 to May 2009, soliciting
investments in Red Water. Greenhouse worked from his
28 UNITED STATES V. LLOYD
home in Florida from 2005 to 2007, soliciting investments in
partnership units for From Mexico with Love.
The jury convicted Baker and Nelson on all the counts
submitted against them. The jury acquitted Greenhouse of
conspiracy and mail fraud but convicted him for offering and
selling unregistered securities and aiding and abetting and
causing those sales, in violation of 15 U.S.C. §§ 77e and 77x
and 18 U.S.C. § 2.
At sentencing, the district court calculated a 292 to 365
month Guidelines range for Baker but varied downward,
imposing a 194-month prison term and a $12,043,678.25
restitution obligation. The district court calculated a 97 to
121 month Guidelines range for Nelson but sentenced him to
serve 84 months in prison and to pay $1,860,000 in
restitution. Baker and Nelson timely appealed their
convictions and sentences. Greenhouse was sentenced to 60
months in prison, below the Guidelines range of 63 to 78
months, and to pay $530,000 in restitution. He appeals only
his sentence.
B. Baker’s and Nelson’s Challenges to Their Convictions
1. The Trial Evidence Against Baker
In 2001, Hartford hired Baker as an “associate producer”
at Cinamour. Baker was working as a telemarketer soliciting
money for Forbidden Warrior when he was arrested and
jailed in March 2003 for a parole violation. Baker went back
to working for Cinamour in January 2004 and, with his
partner, worked for Cinamour out of their home in Coachella
Valley, California until 2009.
UNITED STATES V. LLOYD 29
In March 2004, Baker and his partner, doing business as
Independent Essentials, entered into a written agreement with
Cinamour for a 20 percent commission on the money they
raised working as telemarketers and closers soliciting
investments in From Mexico With Love. From January 2005
to January 2007, Baker closed $200,000 in From Mexico
With Love investments. Baker also earned a commission for
the investments that Lloyd closed using Baker’s investor list
from Forbidden Warrior. Lloyd used Baker’s investor
information to reload those who had sent money for
Forbidden Warrior, producing more money for From Mexico
With Love.
In 2007, Cinamour stopped soliciting for From Mexico
With Love and turned to soliciting money from investors for
Red Water. Baker and his partner ran the Red Water
fundraising. Baker hired codefendant Bart Slanaker, who had
experience operating telemarketing boiler rooms. Baker’s
partner managed the money, received investor checks, and
paid commissions. Baker gave Slanaker Red Water sales
materials and paid him a 15 percent commission.
Baker contacted prospective investors from lead lists.
Diane Houseknecht testified that in a letter and conversations,
Baker told her that investors would receive 90 cents on every
dollar the film earned until they got back all the principal they
had paid plus 10 percent. Baker also promised her that the
return would be fast. He did not reveal that he would earn a
15 to 20 percent commission. Instead, he emphasized that the
investors would get paid before the promoters or salespeople
received anything and that the invested funds would be used
to make and market the movies, not to pay promoters or
salespeople. Houseknecht, who had no investment
experience, invested $25,000 in Forbidden Warrior, $10,000
30 UNITED STATES V. LLOYD
in cash and $15,000 from her retirement account. She got
back $1,000. Lloyd later convinced Houseknecht to invest
another $20,000 in From Mexico with Love, using $10,000 in
cash and $10,000 from her retirement account.
Gary Tranter testified that Baker called him in 2002 to
solicit an investment in Forbidden Warrior. In the telephone
call, Baker compared Forbidden Warrior to the well-known
and commercially successful film Crouching Tiger, Hidden
Dragon. Baker stated that a majority of the Forbidden
Warrior units had already been sold and that Tranter needed
to act quickly. Baker told Tranter that Forbidden Warrior
was ready for release in theaters in the near future; it was not.
Baker also said that investors would be paid back first and
that promoters and sales personnel would be paid only after
the investors. Baker did not disclose the fact or amount of
commissions he and others were getting. Tranter worked as
a wholesale broker of indoor houseplants and had little
financial or investment experience. He invested $10,000 in
Forbidden Warrior and got back $800. Baker unsuccessfully
tried to reload Tranter in From Mexico With Love but did get
him to send another $5,000 for Red Water. Tranter never got
any of his investment in Red Water back.
Another investor, Thomas Beacham, an office manager
for a paint shop, testified that Baker cold-called him in 2002
about investing in Forbidden Warrior. Baker told Beacham
that Forbidden Warrior would be a “big moneymaker”
because it was comparable to Crouching Tiger, Hidden
Dragon. When Beacham said that he did not have the money
to invest, Baker emphasized that this was a limited-time offer
and asked if Beacham had retirement savings he could use.
When Beacham pointed out that he did not meet the
requirements for an accredited investor—including that his
UNITED STATES V. LLOYD 31
net worth was far below the $1 million minimum—Baker
urged him not to “worry about that. It’s just in there for
formality. We can make an exception in your case.”
Beacham invested $5,000 from his retirement account in
Forbidden Warrior. Baker successfully convinced Beacham
to invest another $10,000 from his retirement account in
From Mexico With Love after Beacham participated in a
reloading conference call run by Lloyd and Agler. Beacham
lost all the money he invested except “a hundred bucks or
so.” Beacham testified that he had lost his job in 2008 and
had to cash out his retirement account, which was “15 grand
shorter than it probably should have been.”
FBI Special Agent Sean Sterle, who worked undercover
posing as a Florida businessman interested in investment
opportunities, also testified. After a cooperating witness
introduced Baker to Sterle, five or six telephone
conversations followed in which Baker tried to convince
Sterle to invest in Red Water. Sterle recorded his
conversations with Baker and the jury heard them at trial.
The recordings included Baker’s statements that Red Water
had secured $5.4 million in presale commitments to distribute
the film in 31 countries; that the presales revenues would pay
investors a 110 percent return; that Sterle would receive a 110
percent return in eight to ten months, get his full investment
back within the year, and triple his money in two years; and
that the sales personnel received no commissions.
The evidence showed that the promises Baker repeatedly
made were either false or made without any reasonable basis
to believe that they were true.
32 UNITED STATES V. LLOYD
2. The Trial Evidence Against Nelson
David Nelson worked for Cinamour as a fundraising
telemarketer from October 2007 to May 2009. Nelson had a
sad personal history. He began drinking at age 11. He
dropped out of high school. His drinking and drug use lost
him job after job. He tried to rehabilitate himself by joining
the Marines, which trained him as a software engineer, but
even the Marines could not get him to stop drinking. He
received a general discharge. Although the training helped
him get jobs, he lost them every few months. Nelson became
homeless in 2001. In 2005, after four years of living on the
streets and jumping from one job to another, Nelson got
treatment for his alcoholism at a halfway house that required
its clients to have jobs. Nelson found work as a telemarketer
selling industrial equipment, but lost this job. Nelson again
became homeless, living behind a dumpster. On March 30,
2007, paramedics found Nelson behind the dumpster and took
him to the hospital.
Nelson readmitted himself to the halfway house for a
third time in 2007 and got another telemarketing job.
Nelson’s supervisor there, Bart Slanaker, later convinced him
to follow him to Cinamour’s boiler room to work soliciting
money for a new movie, Red Water.
Several victims testified about talking to Nelson. Melvin
Bitikofer was a retired stove salesman who had owned his
own store. Nelson cold-called him in October 2007. Nelson
described the Red Water investment as a once-in-a-lifetime
opportunity and promised Bitikofer that he would begin to
receive returns as early as the first quarter of 2008. Nelson
told Bitikofer that investors would get a 110 percent return,
that the movie was already being filmed, that presale
UNITED STATES V. LLOYD 33
distribution contracts worth $5.9 million were already in
place, and that nothing could go wrong. Nelson touted
Cinamour’s previous movie, From Mexico With Love, as a
proven commercial success that had rewarded its investors
well. Nelson omitted his commissions from the discussions
and downplayed the investment risks. Bitikofer invested
$50,000.
Nelson and his colleagues successfully reloaded Bitikofer
several times. In February 2009, Bitikofer participated in a
reloading conference call led by Bart Slanaker. Bitikofer
testified that the other persons participating in the call
appeared to be potential investors and that they
enthusiastically endorsed the Red Water investment
opportunity. These other participants were, in fact, Cinamour
telemarketers. During the call, Bitikofer stated that he did not
have more money and that any investment would have to
come from his wife’s IRA. After the call, Nelson and
Slanaker persuaded Bitikofer to get $100,000 from his wife’s
IRA.
Bitikofer and his wife invested a total of $250,000, which
they repeatedly told Nelson was from their retirement and
IRA funds. They lost all they invested. Bitikofer testified
that this loss resulted in a “[t]errible” financial hardship for
the couple. They could “hardly keep up with the bills coming
in” and faced the prospect of “tak[ing] out bankruptcy.”
Richard Clark was a farmer with no investment
experience. He wanted a conservative investment that could
provide some income to help him stop farming because of its
physical demands. Nelson cold-called Clark in April 2009
34 UNITED STATES V. LLOYD
and solicited him to invest in Red Water.4 Clark told Nelson
what he did for a living and that he had no investment
experience. Nelson told Clark that very few units were left
and that the investment was the “best thing” he had seen in
his career. Nelson told Clark that he would start to receive
distributions by the summer of 2009. Nelson assured Clark
that there were already enough presale contracts to cover
production and marketing costs and ensure him a fast profit.
Clark also participated in a conference call with Slanaker,
Nelson, and people he understood to be other investors.
Clark testified that Nelson actively participated in this call.
Clark invested $15,000, which he lost; he described the loss
as “a bad lick for me.”
Dennis Eliassen was retired when Nelson cold-called him
in June 2008. Nelson told him that Cinamour already had $6
million in presale contracts, twice the amount needed to cover
all the film production and marketing costs. Nelson sent
Eliassen an email assuring him that investment “security is in
place through our pre-sales distribution.” Nelson told
Eliassen that everything was on track to begin filming Red
Water in December 2008, and that the investors would be
paid first and quickly. Nelson also told him that From
Mexico With Love and Forbidden Warrior had been
successful for the investors. Eliassen invested $50,000 from
his IRA and lost it all, a “pretty” big hardship.
4
Clark at first testified that Nelson called him in April 2005 to raise
money for Red Water, but other evidence and Clark’s testimony that he
was “a little rusty” about the precise date shows that it was actually April
2009.
UNITED STATES V. LLOYD 35
Connie Hurd testified that when Nelson cold-called her in
early 2008, she told him that she and her husband owned a
tool company and had very little investment experience.
Nelson assured her that the Red Water investment presented
minimal risk and that the investors would be paid back
everything before the promoters and sales personnel received
anything. Nelson assured her that Cinamour already had
presale contracts projected to be worth $5.9 million, which
guaranteed a secure and profitable investment. Nelson did
not disclose the existence or amount of his or others’
commissions. Hurd lost her $5,000 investment.
The jury heard from Stephanie Alarcon, a Cinamour
telemarketer hired by Slanaker to work as a fronter cold-
calling potential investors and passing the names of those
expressing interest to closers, who would follow up to finalize
the sale. She made the calls from a lead list and read a script.
Nelson listened to make sure she did it properly and gave her
tips. Nelson asked her to write down personal information
potential investors gave her in the calls for him to use in his
closing pitches. Alarcon followed this instruction. For
example, when she talked to Richard Clark, she noted that he
was a Christian and that Nelson should emphasize “Christian
things” in trying to finalize his investment. Alarcon’s
account of what she was told to say when she called potential
investors was consistent with their testimony about what they
were promised.
Nadav Shimoni, another fronter, testified that he
participated with Nelson in some of the reloading conference
calls. Nelson would read a sales pitch from a script, and
Shimoni would pretend that he was an investor who had
decided to invest more money. His testimony was consistent
36 UNITED STATES V. LLOYD
with what the investors who participated in these calls
described.
Nelson testified and told the jury about his background.
He testified that in April 2007, just after he became sober, he
got a job as a telemarketer working under Bart Slanaker.
Nelson testified that Slanaker was so domineering and
abusive that Nelson feared him and was intimidated into
doing whatever Slanaker told him to do. His fear of losing
yet another job contributed to his unquestioning obedience.
Nelson testified that when he began working at Cinamour,
he believed it was legitimate. Slanaker took Nelson to the
production location for From Mexico With Love. Nelson
testified that he recognized Cinamour’s logo and some of the
actors in the film. Nelson looked at Cinamour’s website and
saw that it was a production and distribution company
working in film and television. Nelson read that the Better
Business Bureau rated Cinamour Triple A, with no
complaints. Nelson learned that Cinamour was raising
money for Red Water. In October 2007, Nelson followed
Slanaker to Cinamour and began soliciting investments in
Red Water.
Nelson testified that Slanaker prohibited him from
associating with anyone else at Cinamour. The office
manager testified that Slanaker often screamed at Nelson,
who remained quiet and kept to himself, away from the other
telemarketers.
Nelson testified that at Cinamour, he was given lead
sheets and a script. If a call was met with interest, Nelson
filled out a sheet and gave it to Slanaker, who sent an
information package to the potential investor. Nelson would
UNITED STATES V. LLOYD 37
then call and go over the package using a preset script,
answer questions, and try to persuade the prospect to sign the
papers and send a check made out to Red Water Films.
Nelson testified that he did not know that the
representations he made were false and insisted that he did
not intend to defraud investors. He believed that the purpose
of the script was to keep the telemarketers honest about what
they told potential investors, not to give the telemarketers lies
to tell. He also believed that Cinamour had $5.9 million in
presale distribution contract commitments. Nelson
acknowledged that he was getting paid for the sales he made
but testified that he did not lie when he stated that no
commissions were being paid, because what he received was
a “management fee.” Nelson did admit, however, that the
Red Water private placement memorandum he sent to
potential investors provided a misleading description of how
and when the promoters and sales people would be paid.
Nelson testified that he thought the conference calls he
participated in were to give status reports to people who had
already invested. Nelson denied knowing that the calls were
to “reload” investors or that Cinamour employees were
playing the role of happy investors. Nelson was shown a
script for a reloading conference call. The script identified
him as the Vice President of Technology at View Partners.
Nelson denied having seen or used the script or having read
or heard that false description of his job and title, but the
script was found on Nelson’s office computer at Cinamour.
The government pointed out that the script made clear the
purpose of the call and the presence of the fake “other
investors.” The script contained a list of the Cinamour
employees who participated in at least one reloading
conference call playing the role of investors. The script also
38 UNITED STATES V. LLOYD
had handwritten notes about some of the victims who took
part. Nelson denied that the notes were his. But another
exhibit, which Nelson admitted to writing, had very similar
handwriting. The government argued that the similarity
between the two documents provided additional support for
inferring that Nelson was lying about his role in the Red
Water conference calls, about not knowing that Cinamour
employees were acting as shills, and about not having seen
scripts for the calls.
C. Baker’s and Nelson’s Challenges to Their Convictions
Baker and Nelson challenge the trial court’s evidentiary
rulings and jury instructions, the prosecutor’s comments at
closing, and the sufficiency of the evidence. They contend
that if no one error justifies vacating their convictions, the
cumulative effect does. We identify several errors, find them
harmless as to Baker, but conclude that Nelson’s conviction
must be reversed.
1. The Challenges to the Evidentiary Rulings
We review the district court’s evidentiary rulings for
abuse of discretion. See United States v. Pineda-Doval,
614 F.3d 1019, 1031 (9th Cir. 2010).
a. The Victims’ Testimony
Baker and Nelson argue that the district court should not
have allowed victims to testify about their financial situations
and the impact of losing the money they invested. Baker and
Nelson argue that the district court erred in admitting the
victims’ testimony because the risk of unfair prejudice
UNITED STATES V. LLOYD 39
substantially outweighed the probative value. See Fed. R.
Evid. 403. We disagree.
Because Nelson objected to Eliassen’s testimony, we
review its admission as to both Nelson and Baker for an
abuse of discretion. See United States v. Orm Hieng,
679 F.3d 1131, 1141 (9th Cir. 2012).5 We review testimony
elicited without objection for plain error. See United States
v. Lopez, 762 F.3d 852, 859 (9th Cir. 2014).
“A district court’s Rule 403 determination is subject to
great deference, because ‘the considerations arising under
Rule 403 are susceptible only to case-by-case determinations,
requiring examination of the surrounding facts,
circumstances, and issues.’” Hinkson, 585 F.3d at 1267
(quoting R.B. Matthews, Inc. v. Transamerica Transp. Serv.,
Inc., 945 F.2d 269, 272 (9th Cir. 1991)). Eliassen’s testimony
that he told Nelson that he had no cash to invest and would
have to use his retirement money was relevant to rebut the
defendants’ argument that they believed their
investor-victims to be accredited investors. Eliassen also
testified that losing his investment was a “very big” hardship.
Any error in admitting this limited and brief victim-impact
testimony was harmless. The thrust of Eliassen’s testimony
5
Although only Nelson objected to Eliassen’s testimony, the
government concedes that “[a]buse-of-discretion review applies to
[Baker’s] claim regarding Eliassen.” See United States v. Orm Hieng,
679 F.3d 1131, 1141 (9th Cir. 2012) (reviewing the defendant’s claim of
evidentiary error for abuse of discretion even though he did not object
because his codefendant did and “the matter was sufficiently brought to
the attention of the district court”).
40 UNITED STATES V. LLOYD
was relevant to show not only what Nelson said, but also
what he knew and intended.6
For similar reasons, the district court did not plainly err
by allowing Bitikofer, Beacham, and Clark to testify about
how they described their financial situations to Nelson or
Baker. Both Nelson and Baker argued at trial that they
believed each person they successfully persuaded to invest in
partnership units was a wealthy and experienced investor who
could afford to lose the money. The testimony was relevant
to rebut this defense, and there was no error, much less plain
error, in allowing it. Although these victims also briefly
described the impact of losing the money, that limited
testimony did not affect the defendants’ substantial rights.
There was no plain error.
Baker and Nelson contend that Rao’s testimony that
Greenhouse refused to return the money he and his girlfriend
invested, even after Greenhouse was told that it was needed
for her cancer treatment, was plain error. Rao’s testimony
discussed only Greenhouse and Agler and did not mention
either Baker or Nelson. At oral argument, Nelson’s counsel
agreed that this testimony prejudiced only Greenhouse.
Baker, however, contends that Rao’s testimony “was unfairly
prejudicial to all the trial defendants because they were
charged in Count One with a conspiracy” and the district
6
The parties do not cite Ninth Circuit case law on using similar victim-
impact testimony to show intent to defraud. Other circuits have allowed
it under limited circumstances. See, e.g., United States v. Cloud, 680 F.3d
396, 402 (4th Cir. 2012) (district court did not abuse its discretion in
admitting victim-impact testimony because it “met the low bar of
relevancy, given [the defendant’s] defense that the [victims] were guilty
of bank fraud.”). The case law also recognizes limits on such testimony.
See, e.g., United States v. Copple, 24 F.3d 535, 544–46 (3d Cir. 1994).
UNITED STATES V. LLOYD 41
court did not specifically instruct the jury to consider the
testimony only against Greenhouse. The record shows that
any error in failing to give the limiting instruction was not
plain and did not affect Baker’s or Nelson’s substantial rights.
Baker separately argues that because he had no duty to
tell potential investors about the commissions he was paid,
the district court erred in allowing the victims he solicited to
testify that they would not have invested had they known
about the commissions. Baker relies on cases stating that
“[a]bsent an independent duty, such as a fiduciary duty or an
explicit statutory duty, failure to disclose cannot be the basis
of a fraudulent scheme,” United States v. Ali, 620 F.3d 1062,
1070 n.7 (9th Cir. 2010) (internal quotation marks omitted),
and that “otherwise truthful statements made by [a broker]
about the merits of a particular investment are not
transformed into misleading ‘half-truths’ simply by the
broker’s failure to reveal that he is receiving added
compensation for promoting a particular investment,” United
States v. Skelly, 442 F.3d 94, 97 (2d Cir. 2006). Baker’s
argument fails to take into account the evidence that he
affirmatively told victims that he, other sales personnel, and
promoters would not receive any commissions or other
payments until after the investors had received a 110 percent
return. Baker’s argument also fails to take into account that
the Red Water private placement memorandum, which Baker
sent to Gary Tranter and to the undercover FBI agent posing
as an investor, included the false statement that no
commissions would be paid until the investors had received
a profitable return on their investments. The jury heard
recorded conversations of Baker telling the undercover FBI
agent posing as an investor that he received no commissions.
Baker admitted that he lied to the agent about commissions.
“[A] broker cannot affirmatively tell a misleading half-truth
42 UNITED STATES V. LLOYD
about a material fact to a potential investor . . . [because] the
duty to disclose in these circumstances arises from the telling
of a half-truth, independent of any responsibilities arising
from a truth relationship.” United States v. Laurienti,
611 F.3d 530, 541 (9th Cir. 2010).
Baker’s affirmative misrepresentations that he would
receive no commissions until the investors received a
profitable return supported his fraud conviction without the
need to prove a fiduciary relationship. See United States v.
Benny, 786 F.2d 1410, 1418 (9th Cir. 1986) (“Proof of an
affirmative, material misrepresentation supports a conviction
of mail fraud without any additional proof of a fiduciary
duty.”). The district court did not err in allowing the victims
to testify about Baker’s representations and omissions about
commissions.
b. The Lay Opinion Testimony
Baker and Nelson argue that the district court erred in
allowing Allen Bruce Agler,7 who had worked in several
movie telemarketing boiler rooms (including for Cinamour
during the fundraising for From Mexico With Love between
2005 and 2007), to testify about boiler-room management,
activity, and strategy. Agler’s testimony included his
opinions about the information and knowledge telemarketers
have when they cold-call potential investors and when they
close a deal. Agler’s testimony was not admissible under
Rule 702 of the Federal Rules of Evidence because the
government did not give the defendants the notice required
under Rule 16 of the Federal Rules of Criminal Procedure.
See Fed. R. Crim. P. 16(a)(1)(G) (requiring, at the
7
Agler also used the name Paul Kingman.
UNITED STATES V. LLOYD 43
defendant’s request, pretrial disclosure of expert witnesses
and a written summary of their testimony). Baker and Nelson
argue that this limit could not be avoided by admitting
Agler’s testimony as lay opinion testimony under Rule 701.
“The admissibility of lay opinion testimony under Rule
701 is committed to the sound discretion of the trial judge and
his decision will be overturned only if it constitutes a clear
abuse of discretion.” United States v. Gadson, 763 F.3d
1189, 1209 (9th Cir. 2014) (quoting Nationwide Transp. Fin.
v. Cass Info. Sys., Inc., 523 F.3d 1051 (9th Cir. 2008)). The
government contends that plain-error review applies because
Baker objected on other grounds, not raised on appeal, before
moving to strike Agler’s testimony as unnoticed expert
testimony, and Nelson did not specifically adopt Baker’s
objections. But Baker’s attorney repeatedly objected to
Agler’s testimony about whether investors ever read the
private placement memoranda they were sent. The objections
were that Agler was giving “an expert opinion without
foundation,” as well as hearsay. “[T]he matter was
sufficiently brought to the attention of the district court”
through Baker’s objections for us to review for abuse of
discretion. Gadson, 763 F.3d at 1201 n.3 (quoting United
States v. Orm Hieng, 679 F.3d 1131, 1141 (9th Cir. 2012)).
Under Federal Rule of Evidence 701, a lay witness may
testify “in the form of an opinion” if it is “(a) rationally
based on the perception of the witness; (b) helpful to a clear
understanding of the witness’ testimony or the determination
of a fact in issue; and (c) not based on scientific, technical, or
other specialized knowledge.” Fed. R. Evid. 701. “Rule
701(a) contains a personal knowledge requirement.” United
States v. Lopez, 762 F.3d 852, 864 (9th Cir. 2014). “In
presenting lay opinions, the personal knowledge requirement
44 UNITED STATES V. LLOYD
may be met if the witness can demonstrate firsthand
knowledge or observation.” Id. “A lay witness’s opinion
testimony necessarily draws on the witness’s own
understanding, including a wealth of personal information,
experience, and education, that cannot be placed before the
jury.” Gadson, 763 F.3d at 1208. But a lay opinion witness
“may not testify based on speculation, rely on hearsay or
interpret unambiguous, clear statements.” United States v.
Vera, 770 F.3d 1232, 1242 (9th Cir. 2014).
Agler testified about his experience in working in
telemarketing boiler rooms selling investments. He testified
that:
• “[e]verybody that I’ve ever worked with will always
stretch the truth and make out—outright lies
especially in certain techniques”;
• “[i]n my experience, the vast majority of people who
invest do not read the private placement
memorandum or if they do they read it on a limited
basis, and they have no idea what it says”;
• this was “absolutely” a “well-known fact” in the
boiler rooms that he worked in; and
• investors relied on what telemarketers told them.
On cross-examination, Agler testified that “most investors
never gave me an indication that they read the private
placement memoranda” and he never brought “the subject
up” when “he talked to them.” When pressed on the basis for
this opinion, Agler testified that he relied on his experience
and the assumption that only those investors who asked a lot
UNITED STATES V. LLOYD 45
of questions about a memorandum had read it. On redirect,
the government asked whether the fact that “investors did not
read” private placement memoranda was “something that was
openly discussed among closers that you worked with?”
Agler responded, “sure.” When asked if “it was a topic of
discussion that investors don’t read the [private placement
memoranda],” he responded, “absolutely.”
At the end of Agler’s testimony, the prosecutor asked
whether, “in all your own personal experience and all the
closers who have worked in these rooms that you’ve spoken
to, have you ever heard of any investor making any money on
any of these investments?” Agler responded, “[n]o, I have
not.”
Baker and Nelson argue that Agler’s testimony
impermissibly opined on what the telemarketers who solicited
and closed investments, including themselves, knew about
what they were selling and about what the investors were
doing and thinking. They argue that to the extent Agler
expressed a lay opinion, he relied on speculation and hearsay,
and to the extent he expressed an expert opinion based on
specialized knowledge gained from working in boiler rooms,
the government failed to give the notice required under Rule
702 of the Federal Rules of Evidence and Rule 16 of the
Federal Rules of Criminal Procedure.
Agler had extensive personal experience working as a
telemarketer in boiler rooms soliciting and closing
investments, including in Cinamour films. But his testimony
that investors did not understand the risks, that all
telemarketers knew of and took advantage of this ignorance,
and that telemarketers knew that investors never made any
money, was largely based on statements he heard from
46 UNITED STATES V. LLOYD
unidentified telemarketers and investors, well beyond his own
personal experience with investors. Our cases make clear that
Rule 701 prohibits opinions based on such a foundation. See,
e.g., United States v. Freeman, 498 F.3d 893, 904 (9th Cir.
2007) (“If Shin relied upon or conveyed hearsay evidence
when testifying as a lay witness or if Shin based his lay
testimony on matters not within his personal knowledge, he
exceeded the bounds of properly admissible testimony.”).8
Agler’s testimony is different from the lay testimony that
we have permitted law-enforcement officers to give. See,
e.g., Gadson, 763 F.3d at 1208; United States v. Simas,
937 F.2d 459 (9th Cir. 1991). In those cases, the officers did
not base their lay opinions on hearsay statements made by
unidentified individuals. See Simas, 937 F.2d at 464 (no
abuse of discretion in allowing FBI agents to interpret the
defendant’s own “vague and . . . incomprehensible”
8
The government did not argue that Agler’s testimony about what other
closers had told him was admissible under the coconspirator exception to
the hearsay rule until oral argument in this court. The argument is both
untimely and unpersuasive. Agler did not identify the Cinamour closers
who made the hearsay statements. Although Rule 801(d)(2)(E) provides
that statements made by a “party’s coconspirator during and in furtherance
of the conspiracy” are “not hearsay,” Fed. R. Evid. 801(d)(2)(E), more
information about who made the statements would be needed to establish
that the persons were coconspirators and that the statements were in
furtherance of the conspiracy. See, e.g., United States v. Mouzin, 785 F.2d
682, 692 (9th Cir. 1986) (“[B]efore a statement is that of a ‘co-
conspirator’ there must be independent proof of the defendant’s and the
declarant’s status as members of the same ongoing conspiracy. In order
to corroborate or refute this status, the litigants must know the identity of
the declarant.”). Because Agler’s testimony about these other
unidentified telemarketers was both vague and general, we cannot
conclude on this record that the statements were made by Cinamour
coconspirators or in furtherance of the Cinamour conspiracy.
UNITED STATES V. LLOYD 47
statements). In Gadson, we held that the district court did not
abuse its discretion in admitting lay opinion testimony that
the defendant’s coconspirator “made these admissions to us
[the police]” because the officer “did not testify as to the
nature of ‘these admissions,’ repeat any assertion made by
[the coconspirator], or suggest that the jury should consider
any admission made by [the coconspirator] to be truthful.”
763 F.3d at 1211–12. We emphasized that “an officer’s
interpretation of intercepted phone calls may meet Rule 701's
‘perception’ requirement when it is an interpretation ‘of
ambiguous conversations based upon [the officer’s] direct
knowledge of the investigation.’” Id. at 1207 (quoting
Freeman, 498 F.3d at 904–05). Here, by contrast, Agler’s
opinions that all telemarketers knew that investors rarely—if
ever—read any private placement memoranda and never
received a return on their investments were based primarily
on the statements of unidentified telemarketers and of
unidentified investor-victims. And, unlike the record we
considered in Gadson, Agler testified about the nature of
statements by other, unidentified telemarketers and investors.
Agler’s testimony was not admissible as lay opinion
testimony under Rule 701.
During closing argument, the prosecutor urged the jury to
consider the statements Agler testified he heard to be truthful
and encouraged the jury to rely on them:
Ladies and gentlemen, do you remember
when Allen Agler testified and he told you
that he committed fraud in this case and he
pled guilty, and he stated that in all his
experience as a telemarketer in boiler rooms
raising money for movies, and in all his
discussions with other people who were boiler
48 UNITED STATES V. LLOYD
room closers, not one single investor that he
knew of in a movie investment from cold call
telemarketing ever made a cent, not one?
....
Remember, all the closers knew that no
investor makes money from an independent
movie where the money is raised by cold call
telemarketing.
Agler testified that all victims ignored the written
materials—including any risk-disclosure statements in the
private placement memoranda—and instead relied
exclusively on what the telemarketers orally promised in their
sales pitches, and that all telemarketers knew and relied on
victims following this pattern. Agler based his testimony on
taking as true the contents of statements made by unidentified
telemarketers and victims. The record is inadequate to allow
us to conclude that a hearsay exception or exclusion applies.
The government argues that any error in admitting
Agler’s testimony under Rule 701 was harmless because he
would have qualified as an expert under Rule 702. The
government cites United States v. Mendoza, 244 F.3d 1037
(9th Cir. 2001), and United States v. Figueroa-Lopez,
125 F.3d 1241, 1246–47 (9th Cir. 1997). Both cases are
distinguishable. In Mendoza, the defendant was tried and
convicted for endangering the safety of an aircraft in flight
after he called in a bomb threat to delay a flight so that his
girlfriend would not miss it. See 244 F.3d at 1042–43. The
government had originally given notice that the flight captain
would testify but instead presented lay testimony from the
first officer to show that the bomb threat endangered the
UNITED STATES V. LLOYD 49
aircraft’s safety. See id. at 1043, 1047. On appeal, the
defendant argued that the first officer was an undisclosed
expert witness and that admitting his testimony made the trial
unfair. See id. at 1046. We found that “the government had
given notice that the captain of the flight would testify to
emergency procedures, what occurred on [the flight], and
endangerment,” and “[f]or the purposes of a fair trial it was
immaterial that the captain was not available, and that an
equally qualified witness who had experienced the same
factual circumstances, was substituted.” Id. Unlike Nelson,
the defendant in Mendoza had been given notice of the
challenged testimony and its basis before trial and could
prepare.
In Figueroa-Lopez, a special agent with the Drug
Enforcement Administration testified about “the means
utilized by drug traffickers to detect certain things, . . . and
their patterns and other activities.” Figueroa-Lopez, 125 F.3d
at 1247. The officer did not rely on hearsay statements made
by unidentified traffickers or others, taken as true. The record
contained extensive evidence of the officer’s training and
experience in drug traffickers’ methods, a common subject of
expert opinion. Id. The record in this case, by contrast,
provides less support to find Agler qualified as an expert or
that his opinions were reliable, and what telemarketers
“know” is not a common subject for Rule 702 expert
testimony. The record does not present a basis to excuse the
failure to provide the defense timely notice of Agler’s Rule
702 expert testimony by holding it admissible as lay opinion
testimony under Rule 701.
50 UNITED STATES V. LLOYD
We consider below whether this error and others were
harmless in light of the extensive evidence that was properly
admitted.9
c. The Rule 404(b) Evidence
Nelson testified that he believed Cinamour was a
legitimate company, that he never knowingly lied to an
investor, and that he would not have worked at Cinamour had
he known about the false representations made by others
working there. On cross-examination, the government
introduced evidence that shortly after law-enforcement agents
raided Cinamour, Nelson went to work in a movie
telemarketing boiler room for Big Gunn Productions. During
his employment there, Nelson received a check from Slanaker
with the notation for “leads.” The government offered the
evidence of Nelson’s subsequent employment as a
telemarketer for Big Gunn Productions,10 his work there with
Slanaker, and the check from Slanaker, as evidence of
subsequent bad acts under Federal Rule of Evidence 404(b).
Outside the jury’s presence, the district court found that the
evidence was admissible. The court found that the evidence
9
When we find evidentiary error, we typically review for harmlessness
before considering other issues, reversing “only if such nonconstitutional
error more likely than not affected the verdict.” United States v. Tran,
568 F.3d 1156, 1162 (9th Cir. 2009). But “[w]here, as here, there are a
number of errors at trial, ‘a balkanized, issue-by-issue harmless error
review’ is far less effective than analyzing the overall effect of all the
errors in the context of the evidence introduced at trial against the
defendant.” United States v. Frederick, 78 F.3d 1370, 1381 (9th Cir.
1996) (quoting United States v. Wallace, 848 F.2d 1464, 1476 (9th Cir.
1988)).
10
Big Gunn was previously known as First Take Productions.
UNITED STATES V. LLOYD 51
showing that Nelson subsequently worked in a similar boiler
room doing very similar work tended to disprove his
testimony that he did not know Cinamour’s fundraising
efforts were fraudulent. The court reasoned that the
subsequent employment occurred shortly after the events at
issue, involved acts similar to the offense charged, and so
supported finding that Nelson had committed the uncharged
acts. The court concluded that the evidence was “highly
probative of [] Nelson’s intent and knowledge, and any
prejudice [could] be mitigated through the agreed-upon jury
instruction.”
Evidence of a subsequent bad act is admissible under
Rule 404(b) to show “motive, opportunity, intent,
preparation, plan, knowledge, identity, absence of mistake, or
lack of accident.” Fed. R. Evid. 404(b); see also United
States v. Hinostroza, 297 F.3d 924, 928 (9th Cir. 2002)
(“[O]ur precedent has squarely resolved in the government’s
favor the issue that subsequent Rule 404(b) evidence may be
relevant and admissible.” (citing United States v. Bibo-
Rodriguez, 922 F.2d 1398, 1400 (9th Cir. 1991)). The
government must show that “(1) the evidence tends to prove
a material point; (2) the other act is not too remote in time;
(3) the evidence is sufficient to support a finding that
defendant committed the other act; and (4) (in certain cases)
the act is similar to the offense charged.” United States v.
Ramos-Atondo, 732 F.3d 1113, 1123 (9th Cir. 2013) (internal
quotation marks omitted). “[T]he probative value of the
evidence must not be ‘substantially outweighed by the danger
of unfair prejudice.’” Blitz, 151 F.3d at 1008 (quoting Fed.
R. Evid. 403).
Nelson does not dispute that he began working at Big
Gunn less than a year after the FBI raided Cinamour or that
52 UNITED STATES V. LLOYD
he received the check from Slanaker 19 months after the raid.
He argues that the government failed to show that Big Gunn
was fraudulent or that it hired telemarketers to sell fraudulent
or unregistered securities, that he made fraudulent
misrepresentations while working for Big Gunn, or that
Slanaker paid him for leads. At trial, Nelson testified that he
left Big Gunn after he learned that the company was changing
the movie’s scheduled distribution date, because FBI agents
had told him after the Cinamour raid that Cinamour had done
the same thing.
Nelson’s Big Gunn employment and the check he
received from Slanaker were “not too remote in time,” see
Johnson, 132 F.3d at 1282, and were “introduced to disprove
[Nelson’s] claim that he did not know [Cinamour] was a
fraud,” Blitz, 151 F.3d at 1008. But the record does not show
“sufficient evidence from which the jury could conclude that
[Nelson] was involved in fraudulent telemarketing at [Big
Gunn]” to justify admission under Rule 404(b). Blitz,
151 F.3d at 1008. The government points to a Form 302
report of an FBI agent’s interview with a telemarketer,
Amanda Payne, who overlapped with Nelson at Big Gunn.11
Payne called investors from lead lists to raise money for a
movie called Baby O, using a script stating that investments
in the film would return three to five times the amount
invested and omitting any reference to using invested funds
to pay the fundraisers. Payne also worked as a secretary,
11
After FBI agents conduct a formal interview, they “incorporate[]”
their handwritten notes “into a more complete report of the interview on
the FBI’s Interview Report Form FD-302,” known colloquially as a “302.”
See United States v. Harris, 543 F.2d 1247, 1249 (9th Cir. 1976); see also
United States v. Rewald, 889 F.2d 836, 866 (9th Cir. 1989) (“A 302 report
is an FBI agent’s formal account of a witness interview filed on the FBI’s
Interview Report Form FD–302.”).
UNITED STATES V. LLOYD 53
fielding investor follow-up calls, purchasing leads, and doing
accounting work. She told the agents that of the 10 to 20
investors she spoke with daily, only a few were disgruntled
and most wanted an update on Baby O’s status. Although
Payne testified that she would not recommend that her mother
invest in the movie, that was because of some production
problems. She would be comfortable having her mother
invest in other Big Gunn productions under the right
circumstances. Payne told the agents that she did not think
that investors had been misled and that those closers who had
lied to investors no longer worked for the company. She also
told the FBI that Big Gunn’s president had stopped taking a
salary and had sold personal property to help cover overhead
and maximize returns to investors. Payne told the FBI that
Slanaker and Nelson worked for Big Gunn for only “a few
months.” By the time Nelson joined Big Gunn, Baby O was
already completed and his fundraising work on the movie was
limited. The district court repeatedly, and correctly, noted
that the Payne interview did not show that Big Gunn was
fraudulent. (“Amanda Payne, the problem with her 302 is she
concludes by saying that she didn’t believe that any of the
investors of Big Gun[n] were misled.”); (“I don’t have the
evidence in front of me, that there was something fraudulent
about the—about the Baby-O raise. I don’t seem to have that
in my notes.”); (“I need some better evidence that it was a
boiler room and that there was a raise going on for Baby-O.”).
The government also points to a Form 302 report of the
FBI’s interview with Leigh Clark, who invested $120,000 in
Baby O after investing $100,000 in another Big Gunn film.
Clark had Nelson’s name and contact information on a note
in his Big Gunn files, but he could not recall whether he
actually spoke with Nelson. To the contrary, Clark thought
he talked to someone named “Arnold,” not Nelson, before he
54 UNITED STATES V. LLOYD
invested, and Big Gunn’s records showed that
“Gary/Bart/Dave” closed Clark’s investment. Clark did not
state that Nelson made any misrepresentations to him or that
Big Gunn’s solicitation was fraudulent.
Similarly, apart from the check Nelson received from
Slanaker with the word “leads” written in the memo line,
there was no evidence that Nelson provided Slanaker with
leads at Cinamour or at Big Gunn. According to Nelson, the
check was to repay a long-outstanding loan. Nelson testified
that he wrote the word “leads” in the check at Slanaker’s
request. When the district court asked the government
outside the jury’s presence what evidence “other than the
existence of the check” showed that Nelson sold Slanaker
leads, the government cited “[t]he fact that Slanaker was
engaged in unlawful telemarketing, so leads would be an
extremely appropriate thing for him to be buying.” No
evidence showed that Nelson had the means or the ability to
generate a lead list.12 The evidence did not show that Nelson
supplied Slanaker or others with leads at Cinamour or Big
Gunn.
12
The government responds with an argument that it never made to the
district court: the check was admissible to rebut Nelson’s purported
testimony that he would never be dishonest because it shows he was
willing to lie and write “leads” on the check at Slanaker’s behest. See
Blitz, 151 F.3d at 1008 (“[W]hen the evidence of other acts is offered to
prove knowledge, the other acts need not be similar to the charged acts as
long as they tend to make the existence of the defendant’s knowledge
more probable than it would be without the evidence.”). But Nelson did
not testify that he would never be dishonest in his personal dealings.
Instead, he testified that he would not lie in the course of his employment,
whether to a customer or to an investor. And in any event, the risk of
unfair prejudice of submitting the check to the jury substantially
outweighed its minimal relevance to impeaching Nelson’s claims of
honesty.
UNITED STATES V. LLOYD 55
The government argues that “if [the Big Gunn] scheme
was indeed legitimate, [Nelson] cannot assert that it
prejudiced the jury, or that it was inadmissible evidence of
other bad acts.” Melvin, 91 F.3d at 1222; see also Blitz,
151 F.3d at 1008. But in neither Melvin nor Blitz did the
prosecution introduce lay or expert testimony and argue that
all companies engaging in a type of business similar to the
charged scheme were fraudulent. See id. In Melvin, the
defendant “himself introduced the evidence relating to the
[other acts] scheme, in order to highlight its legitimacy as
compared to the [charged] schemes.” 91 F.3d at 1222 n.2.
And in Blitz, “the government presented substantial evidence
to establish that the [the business where the uncharged
conduct occurred] was engaged in fraudulent telemarketing.”
151 F.3d at 1008. It was a “typical scam” in which “victims
were told that they were ‘guaranteed winners’ of a big prize,”
which they would never receive, “but also were told that in
order to quality for it, they had to buy a product, such as
cosmetics, perfumes, pens or pencils” and “[t]hose products
were sold at grossly inflated prices ranging from $250 to a
couple of thousand dollars.” Id. The defendant “conceded
that he sold pen sets, vitamins, and makeup for $299 to
$999,” that “he never heard of a customer who got one of the
promised large prizes,” and that his prior work included
“trying to get money back for people who felt that they had
been defrauded by [the other company].” Id.
Unlike the record in Melvin and Blitz, which included
specific evidence showing the fraudulent nature of the
uncharged scheme, the government here relied heavily on lay
opinion testimony based on statements by unidentified
telemarketers to show that all movie telemarketing operations
are fraudulent. The government then used that conclusion as
evidence that Big Gunn’s telemarketing was fraudulent.
56 UNITED STATES V. LLOYD
When cross-examining Nelson about his telemarketing work
for Big Gunn, the prosecutor asked if it was “[j]ust as crooked
as Cinamour, just as crooked as all the movie boiler rooms
that Mr. Allen Agler told us about, correct?” During closing
arguments, the prosecutor told the jury that the “clearest
evidence” that Nelson intended to defraud investors at
Cinamour was that he went to work at another “movie
investment boiler room” shortly after the FBI raided
Cinamour’s offices. The prosecutor argued that if the jury
believed Nelson’s testimony that the check was for a loan
repayment, then Nelson “accepted money from a fraudulent
company that was telemarketing and raising money from
investors.” Finally, the government told the jury that
Slanaker, who took Nelson to Big Gunn, was a “convicted
felon in a [prior] movie boiler room case.”
We conclude that the district court abused its discretion
in admitting this evidence of Nelson’s subsequent
employment at Big Gunn. We consider below whether this
error was harmless. See Frederick, 78 F.3d at 1381.
d. The Testimony About Nelson’s Involvement in
the Conference Calls “Reloading” Prior
Investors
Nelson asserts that the district court committed reversible
error in admitting Stephanie Alarcon’s testimony about
conference calls encouraging victims to reload. Alarcon
testified not only about reloading conference calls she
participated in, but also about conference calls Nelson
participated in, even though she was not on those calls or in
the room when they occurred. Her information came from
what another telemarketer, Verna Capelli, then working as
one of the closers, told her about conference calls that she
UNITED STATES V. LLOYD 57
was on with Nelson and Slanaker. Nelson raised a hearsay
objection at trial. We review the district court’s ruling for an
abuse of discretion. See United States v. Orm Hieng,
679 F.3d 1131, 1141 (9th Cir. 2012).
Alarcon’s testimony about what Capelli told her is not
hearsay if both Capelli and Alarcon were coconspirators of
Nelson’s and the statement was offered against him. “A
statement is not hearsay if . . . [t]he statement is offered
against a party and is . . . a statement by a coconspirator of a
party during the course and in furtherance of the conspiracy.”
Bourjaily v. United States, 483 U.S. 171, 173 (1987); accord
Fed. R. Evid. 801(d)(2)(E). Nelson argues that Alarcon was
not his coconspirator because after the FBI and the U.S.
Attorney’s Office were involved, “the case agent and
prosecutors told Alarcon that she was not in trouble and did
not have to worry about being arrested.” Nelson cites no
authority for his argument, and our cases provide no support.
“It is not necessary that the statement be made to another
member of the conspiracy for it to come under [R]ule
801(d)(2)(E),” United States v. Williams, 989 F.2d 1061,
1068 (9th Cir. 1993), and “[a] coconspirator’s statement is
admissible upon proof that it was made in furtherance of a
conspiracy,” even if “the indictment does not contain a
conspiracy count” against that coconspirator, United States v.
Manning, 56 F.3d 1188, 1197 (9th Cir. 1995). “The question
is merely whether there was proof of a sufficient concert of
action to show the individuals to have been engaged in a joint
venture.” Manning, 56 F.3d at 1197.
Both Capelli and Alarcon were working at Cinamour
when Capelli took part in the calls with Nelson and described
them to Alarcon. Both Alarcon and Capelli worked as
fronters, and Capelli also worked as a closer. Their work as
58 UNITED STATES V. LLOYD
fronters enabled closers, like Nelson, to get potential
investors to sign and return the investment agreements to
Cinamour with the checks. There is ample evidence that both
Alarcon and Capelli were Nelson’s coconspirators when
Capelli and Nelson took part in reloading conference calls
and when Capelli told Alarcon about Nelson’s participation
in the calls.
The record also supports finding that Capelli’s statements
kept Alarcon “abreast of an ongoing conspiracy’s activities”
and were therefore made “in furtherance of” the conspiracy.
See United States v. Yarbrough, 852 F.2d 1522, 1536 (9th
Cir. 1988). For example, Capelli told Alarcon about the
participants in, and the substance of, the conference calls in
which she took part. Capelli explained the strategy behind
the conference calls: to “get all the investors together” so that
if one decided to invest, the others would be more likely to
follow suit “because [of] their egos.” And Capelli warned
Alarcon that she thought the calls were not “a good idea” and
that if the FBI was recording them, the company would be
shut down. Although “[m]ere conversations between
coconspirators, or merely narrative declarations among them,
are not made ‘in furtherance’ of a conspiracy,” the evidence
is sufficient to find by a preponderance that Capelli’s
statements “were made with the intent to keep [Alarcon]
abreast of what [Cinamour] had done, was doing, or would do
in the future.” See id. at 1535–36.
The district court did not abuse its discretion in admitting
Alarcon’s testimony about Nelson’s participation in reloading
conference calls.
UNITED STATES V. LLOYD 59
e. The Email Evidence About Baker
Baker asserts that the district court erred in admitting an
email containing hearsay statements that he had been warned
to stop giving potential investors false information about the
investments. The email was admitted during the
government’s examination of Jennifer Nakamori, Cinamour’s
Los Angeles office manager during the time Baker worked
for that office. Nakamori wrote the email to Glen Hartford in
August 2002. It included the following statements:
Paul [Baker] brings in money because he’s
giving investors false information. We’ve
given him 5 warning[s] already and he still
can’t get it right. . . . You [Hartford] are the
one who told me that Paul [Baker] would be
let go after one more warning. You told me
this morning that we are accepting money
from investors who’ve been given false
promises. It sounds like we're just taking
money from anyone. How can we make a
movie this way? What’s going to happen in
the future? They may come back and you will
be held liable. Paul, Evan, Matt, and
everyone else will just walk away happy with
their commission monies in their pockets.
Nakamori’s information that Baker gave potential
investors and victims false information came only from
“[t]hings I heard in the office” and was “[j]ust rumors that I
heard.” Nakamori could not remember who said the “things”
or spread the “rumors.” Hartford told her that he had warned
Baker not to give false information or make false promises
60 UNITED STATES V. LLOYD
about the investments. Nakamori could not remember
hearing Hartford warn Baker.
Baker objected to the email and Nakamori’s testimony
about it. His objection was overruled and the email and
related testimony were admitted. Baker renews his objection
on appeal. We find an abuse of discretion in admitting the
email and related testimony. Nakamori had no personal
knowledge about whether Baker was making false statements
to get victims to invest. Nor did she have personal
knowledge about whether Baker had been repeatedly warned
not to do this.
The government argues that the email and Nakamori’s
testimony about it are admissible because they were offered
to show Baker’s state of mind—his knowledge that what he
was telling investors was false—rather than for the truth of
the matter stated. The problem is that unless the email
contents and related testimony were true, they are not relevant
to show Baker’s state of mind. The email does not show that
Baker knew he was making false representations unless the
statements that he was doing so and had been warned about
it are accepted as true. The evidence was hearsay.
We consider below whether the error was harmless in
light of the other evidence properly submitted to the jury. See
Frederick, 78 F.3d at 1381.
f. Nelson’s Proffered Testimony About His
Daughter’s Birth
Nelson argues that the district court erred in excluding his
testimony about his daughter’s birth and the role it played in
motivating him to stay sober, law-abiding, and employed.
UNITED STATES V. LLOYD 61
Nelson argues that he followed Slanaker’s instructions not
because he intended to violate the law, but because he was
determined to keep his job. In his opening statement,
Nelson’s counsel stated:
[B]ehind [an] alcohol soaked haze, behind [a]
dumpster, [Nelson] realized that he was about
to be a father. He realized that his girlfriend
was about to give birth to his daughter. . . . [he
found out] that his girlfriend [was] going to
give the baby up for adoption [and that] he’s
going to lose his parental rights, and there is
something that he can do about that, and he
does something about that. He was unable to
contest the adoption, but he [was] able to
somehow retain his parental rights.
The next day, a juror asked to be excused because he
“might have a problem being completely objective in regards
to the prosecution’s case against [Nelson] because of the
far-reaching ramifications [another prosecution] had on my
own family.” The juror remained as an alternate, but the
government asked the district court for a limine order
excluding evidence about the birth of Nelson’s daughter. The
government argued that this evidence was intended only to
elicit sympathy, was irrelevant to the legal and factual issues
before the jury, and would encourage jury nullification.
Nelson responded that the evidence was relevant to show his
lack of mens rea.
The court denied the government’s limine request in part
and granted it in part, allowing Nelson to testify about his
history of alcoholism, homelessness, and joblessness. The
court allowed Nelson to testify that during this period, “some
62 UNITED STATES V. LLOYD
things [were] happening” that motivated him to become and
stay sober, out of jail, and employed. The court refused to let
Nelson identify those “things” or provide details. The court
reasoned that the evidence about Nelson becoming a father
and achieving a relationship with his daughter was “designed
to improperly appeal to the sympathy of the jury,” and
concluded that “the probative value is substantially
outweighed by the risks of unfair prejudice.”
Nelson argues that the court’s ruling prevented him from
presenting a complete and meaningful defense, violating the
Due Process Clause, see California v. Trombetta, 467 U.S.
479, 485 (1984), and Federal Rule of Evidence 401. Nelson
contends that this testimony was crucial to explain his
“history and state of mind in the time period leading up to his
employment at Cinamour.” We disagree.
As the experience with the juror who remained as the
alternate demonstrates, this testimony carried a high risk of
evoking an emotional response. The jury heard undisputed
evidence that Nelson stayed sober, out of jail, and employed
throughout his time at Cinamour. The jury also heard
undisputed testimony that Nelson was so determined to keep
his job at Cinamour that he continued to work despite the
abuse he took from Slanaker. Given the testimony the jury
did hear, the additional testimony about the birth of Nelson’s
daughter was only marginally relevant to show his mens rea
and was cumulative of other evidence. Because the
prejudicial impact outweighed the probative value, the district
court did not abuse its discretion in excluding this testimony.
UNITED STATES V. LLOYD 63
2. The Jury Instructions
a. Baker’s Claim that the Instructions
Constructively Amended the Indictment
“A constructive amendment occurs when the charging
terms of the indictment are altered, either literally or in effect,
by the prosecutor or a court after the grand jury has last
passed upon them.” United States v. Ward, 747 F.3d 1184,
1190 (9th Cir. 2014) (internal quotation marks omitted). The
mail- and wire-fraud counts alleged that Baker “knowingly
and with the intent to defraud” participated in and executed
a scheme “to obtain money from [] investors by means of
materially false and fraudulent pretenses, representations, and
promises, and the concealment of material facts.”
The district court instructed the jury that
[a] statement or representation is “false or
fraudulent” for purposes of mail and wire
fraud if known to be untrue, or made with
reckless disregard as to its truth or falsity, and
made or caused to be made with the intent to
deceive.
The court gave a similar instruction on Baker’s good-faith
defense:
The defendant does not have the burden of
proving he acted in good faith. The
government must prove beyond a reasonable
doubt that the defendant acted with the intent
to defraud and did not act in good faith. Proof
that a defendant acted with reckless disregard
64 UNITED STATES V. LLOYD
as to the truth or falsity of material
misrepresentations he may have made is
inconsistent with good faith.
Baker argues that the district court constructively amended
the indictment by using the term “reckless disregard,” which
permitted the jury to convict on a lesser mental state than
“knowing.”
When a defendant makes a constructive-amendment
objection at trial, our review is de novo. Ward, 747 F.3d at
1190. The government argues that plain-error review applies
because although Baker objected to the instruction, it was on
the basis of an improper variance, not a constructive
amendment. Our precedent does not support the
government’s argument. In Ward, we reviewed the
defendant’s constructive-amendment argument on appeal de
novo despite his failure to use specific words, including “the
term ‘Fifth Amendment,’” when he objected at trial. We
reasoned that “the substance of the objection”—the fear that
the jury would convict on the basis of conduct not alleged in
the indictment—“was patently clear.” 747 F.3d at 1189.
Similarly, although Baker did not use the words “constructive
amendment” in objecting, he did state that “the government
in no way alleged a theory of reckless indifference as a
mental state on any defendant’s part in the indictment.” The
substance of Baker’s objection was clear. Our review is de
novo.
“[A] constructive amendment occurs when ‘the crime
charged [is] substantially changed at trial, so that it [is]
impossible to know whether the grand jury would have
indicted for the crime actually proved.’” United States v.
Pisello, 877 F.2d 762, 765 (9th Cir. 1989) (quoting United
UNITED STATES V. LLOYD 65
States v. Von Stoll, 726 F.2d 584, 586 (9th Cir. 1984)). In
United States v. Love, 535 F.2d 1152 (9th Cir. 1976), “the
indictment charged [the defendant] with certain fraudulent
representations while ‘well knowing’ that the representations
were falsely made.” Id. at 1157. The defendant appealed,
arguing that the district court impermissibly varied from the
indictment by instructing the jury that
[a] statement or representation is false and
fraudulent within the meaning of the statute if
known to be untrue or made with reckless
indifference as to its truth or falsity and made
or caused to be made with the intent to
deceive.
Id. (emphasis added). Applying de novo review, the court
rejected the argument, reasoning that in a mail-fraud
prosecution, “‘[o]ne who acts with reckless indifference as to
whether a representation is true or false is chargeable as if he
had knowledge of its falsity.’” Id. at 1158 (quoting Irwin v.
United States, 338 F.2d 770, 774 (9th Cir. 1964)).13
The instruction at issue here was clearer than the
instruction in Love in that it required the jury to find the
statement “known to be untrue, or made with reckless
disregard as to its truth or falsity, and made or caused to be
made with the intent to deceive.” An indictment charging
that a defendant knowingly participated in a scheme to
defraud does not necessarily charge that defendant with
making specific false statements. See United States v. Woods,
13
Although Love was a variance challenge, courts have applied its
reasoning to constructive-amendment challenges similar to Baker’s. See
United States v. Hathaway, 798 F.2d 902, 911 (6th Cir. 1986).
66 UNITED STATES V. LLOYD
335 F.3d 993, 999 (9th Cir. 2003) (“[A] scheme to defraud
. . . may or may not involve any specific false statements.”).
We conclude that the district court’s instruction did not
constructively amend the indictment.
b. Nelson’s Claim that the District Court Erred in
Rejecting His Definition of “Reckless
Disregard”
Nelson argues that the district court erred by not including
his timely submitted instruction defining reckless
indifference. “In reviewing jury instructions, the relevant
inquiry is whether the instructions as a whole are misleading
or inadequate to guide the jury’s deliberation.” United States
v. Dixon, 201 F.3d 1223, 1230 (9th Cir. 2000). “A single
instruction to a jury may not be judged in artificial isolation,
but must be viewed in the context of the overall charge.” Id.
De novo review applies to determining “whether the district
court’s instructions adequately presented the defendant’s
theory of the case” or “misstate[] the elements of a statutory
crime.” Id.; United States v. Frega, 179 F.3d 793, 807 n.16
(9th Cir. 1999). Review for abuse of discretion applies to the
district court’s “precise formulation” of the instructions.
Dixon, 201 F.3d at 1230 (quoting United States v. Knapp,
120 F.3d 928, 930 (9th Cir. 1997)).
Nelson asked the court to instruct the jury that
a person acts with reckless indifference as
used in these instructions if he consciously
disregards a substantial and unjustifiable risk
that his statements are false or
misleading—that is, if he deliberately closes
UNITED STATES V. LLOYD 67
his eyes to what would otherwise have been
obvious to him. The government has the
burden of showing reckless indifference
beyond a reasonable doubt.
The district court instead told the jury that
[a] statement or representation is “false or
fraudulent” for purposes of mail and wire
fraud if known to be untrue, or made with
reckless disregard as to its truth or falsity, and
made or caused to be made with the intent to
deceive.
The court did not define “reckless disregard.”
Nelson contends that the district court erred in failing to
include the deliberate-blindness or deliberate-ignorance
instruction he submitted because leaving the meaning to lay
understanding could lead the jury to convict based on
negligence. We have repeatedly held that similar “reckless
indifference” or “reckless disregard” instructions sufficiently
protect against this risk. See, e.g., United States v. Munoz,
233 F.3d 1117, 1135–36 (9th Cir. 2000), superseded by
statute on other grounds, 18 U.S.C. § 1341; United States v.
Gay, 967 F.2d 322, 326–27 (9th Cir. 1992). Recklessness in
this context is “within the comprehension of the average
juror” and needs no special definition. United States v.
Tirouda, 394 F.3d 683, 688–89 (9th Cir. 2005) (“‘[C]riminal
recklessness under Alaska law relates essentially to the
common-sense definition of recklessness, which the average
juror could understand and apply without an instruction.’”
(quoting Walker v. Endell, 850 F.2d 470, 475 (9th Cir.
1987)).
68 UNITED STATES V. LLOYD
The court’s instructions, considered as a whole, clearly
told jurors that they could not convict Nelson unless they
unanimously found that the government had proven beyond
a reasonable doubt that he acted with intent to defraud—the
intent to deceive or cheat—and did not act in good faith. The
instructions told the jury that they could not convict on the
basis of negligence.
We find no basis for reversal on this ground.
c. Nelson’s Claim that the District Court Erred in
Instructing on the Alleged Securities-Law
Violations
Nelson argues that the district court erred in instructing
the jury on the counts alleging that he violated 15 U.S.C.
§ 77e, which forbids the offer or sale of unregistered
securities, and § 77x, which punishes “willful[]” violations of
the securities laws.
i. The Instruction on Aiding or Abetting the
Offer or Sale of Unregistered Securities
The parties agreed to, and the court gave, the following
instruction on15 U.S.C. § 77e and 18 U.S.C. § 2:
In order for a defendant to be found guilty of
the illegal sale or distribution of unregistered
securities as charged in the Indictment, the
government must prove each of the following
elements beyond a reasonable doubt:
First, that the securities which the
defendant sold were not registered with
UNITED STATES V. LLOYD 69
the [S]ecurities and Exchange
Commission;
Second, that the securities sold were
required to be registered with the
Securities and Exchange Commission—
that is, that the transactions were not
exempt from registration;
Third, that, knowing the securities were
not registered and not exempt, the
defendant willfully sold or caused them to
be sold to the public; and
Fourth, that the defendant used or caused
to be used the mails or the means and
instrumentalities of interstate commerce
to sell the securities.
Nelson contends that this instruction failed to convey the
government’s burden to prove that he knew that the
unregistered securities he was selling had to be registered.
Nelson contends that it was not enough for the government to
prove his knowledge that the securities were not exempt from
the registration requirement. Because Nelson agreed to the
instruction without objection, plain-error review applies. See
United States v. Feldman, 853 F.2d 648, 652 (9th Cir. 1988).
Nelson cites no authority for his argument, and we have
found none. In context, the difference between knowing that
the law required registering the securities in order to sell them
and knowing that the unregistered securities were not exempt
from the registration requirement is not material. We find no
reversible error.
70 UNITED STATES V. LLOYD
ii. The Instruction on Willfully Violating the
Federal Securities Laws
The court gave the following instruction of “willfully” in
instructing the jury on the alleged 15 U.S.C. § 77x violation:
A person acts “willfully” under the federal
securities laws by intentionally undertaking an
act that one knows to be wrongful.
“Willfully” does not require that the person
know specifically that the conduct was
unlawful.
Nelson renews the objection he made at trial that the
instruction would allow conviction without proof that he
knew his conduct violated the securities laws. He contends
that because 15 U.S.C. § 77e forbids offering or selling
unregistered securities, which is not inherently wrongful, this
proof is required to show a “willful[]” violation of 15 U.S.C.
§ 77x.
We rejected a similar argument in United States v. Reyes,
577 F.3d 1069 (9th Cir. 2009), an appeal from a conviction
for knowingly falsifying “book[s], record[s], and account[s],”
in violation of 15 U.S.C. § 78m(b)(5). The defendant argued
that because “the knowing falsification of books, records, and
accounts is not ‘inevitably nefarious,’” she could not be
convicted without proof that she knew her conduct violated
the law. Id. at 1080. We held that her argument was
“foreclosed” by United States v. Tarallo, 380 F.3d 1174 (9th
Cir. 2004), and other cases “reject[ing] the argument that, in
the context of the securities fraud statutes, willfulness
requires a defendant know that he or she was breaking the
law.” Reyes, 577 F.3d at 1080 (citing Tarallo, 380 F.3d at
UNITED STATES V. LLOYD 71
1187–88; United States v. Charnay, 537 F.2d 341, 351–52
(9th Cir. 1976)). The district court “correctly instructed the
jury that it had to find that” the defendant “was aware of the
falsification and did not falsify through ignorance, mistake,
or accident,” but “[t]here is no higher standard for a willful
violation of the securities laws.” Id. (quotation marks
omitted).
Nelson attempts to distinguish Reyes by arguing that it
involved “securities fraud” under § 78m, not “regulatory
violations” under § 77e that are not “inherently bad acts.”
But both § 78m and § 77e use the scienter standard under
15 U.S.C. § 77x, which allows conviction if a person
“willfully violates” the securities laws. There is no basis in
the statutory language or in our cases to read a higher level of
scienter into § 77x when the alleged violation is under § 77e.
The district court did not commit reversible error in
instructing the jury on the counts alleging that Nelson
violated the securities laws.
d. The Rule 404(b) Instruction
Nelson argues, without citing authority, that the district
court erred in instructing the jury on the Rule 404(b) evidence
of his telemarketing work at Big Gunn after the FBI raided
the Cinamour office where he worked. Although we find it
error to admit the evidence, we find no error in the
instruction, which tracked the Ninth Circuit model jury
instruction for Rule 404(b) evidence:
You have heard the evidence that defendant
Nelson committed other acts not charged here.
You may consider this evidence for its
bearing, if any, on the question of defendant
72 UNITED STATES V. LLOYD
Nelson’s intent, knowledge, absence of
mistake and absence of accident and for no
other purpose. You may not consider this
evidence against any other defendant on trial.
See Ninth Cir. Crim. Model Jury Instructions § 4.3 (2010
ed.).
According to Nelson, the language “not charged here”
implies that the uncharged acts could have been charged.
We find that the instruction, considered as a whole,
accurately and clearly stated the law. We have recently cited
this model instruction with approval. United States v.
Hardick, 766 F.3d 1051, 1054, 1056 (9th Cir. 2014) (the
district court did not abuse its discretion in admitting Rule
404(b) evidence in part because the court “gave a limiting
instruction at the close of evidence” describing “‘other acts
not charged here’” that mirrored the “legally correct model
instruction.”). The district court did not abuse its discretion
in giving the Rule 404(b) instruction.
3. Nelson’s Claim of Prosecutorial Misconduct
Nelson asserts that the prosecutor’s statements about the
victims’ testimony, made in closing argument, requires
reversal. “To obtain a reversal based on prosecutorial
misconduct, [Nelson] must establish both misconduct and
prejudice.” United States v. Wright, 625 F.3d 583, 609–10
(9th Cir. 2010), superseded by statute on other grounds as
recognized by United States v. Brown, 785 F.3d 1337, 1351
(9th Cir. 2015). Nelson did not “object[] at trial to acts of
alleged prosecutorial misconduct.” Our review is for plain
error. See United States v. Hinton, 31 F.3d 817, 824 (9th Cir.
1994).
UNITED STATES V. LLOYD 73
Nelson argues that the prosecutor intentionally misstated
the testimony Melvin Bitikofer gave at trial. Bitikofer
testified that Slanaker, not Nelson, asked him to participate in
the February 2009 reloading conference call in which he was
persuaded to invest another $100,000 in a Cinamour movie,
this time using money from his wife’s IRA. Bitikofer
testified that he did not know if Nelson was on the call or not.
During closing, however, the prosecutor told the jury that
Nelson “got Mr. Bitikofer on a conference call—look at
Exhibit 289—and he took a hundred thousand dollars more.”
The prosecutor also incorrectly attributed to Melvin Bitikofer
the testimony given by another victim, Richard Clark, that
“Mr. Nelson told [him] that he wasn’t just a salesman, but
was also involved in the technology aspect of the company as
well.”
The government concedes that the prosecutor’s closing
argument contained both statements and that both were
wrong. Our review of the record shows no basis for finding
that the prosecutor’s errors were intentionally made or that
they substantially affected Nelson’s right to a fair trial. The
prosecution accurately described the testimony about the
reloading conference call but inaccurately attributed the call
to Nelson rather than Slanaker. There was no error in the
prosecutor’s description of what the victim-witness said, only
that Clark, not Bitikofer, was the victim who said it. In
context, these mistakes appear to have been inadvertent.
A prosecutor’s inadvertent mistakes or misstatements are
not misconduct. See United States v. Del-Toro Barboza,
673 F.3d 1136, 1153 (9th Cir. 2012) (a prosecutor’s
attribution of one defendant’s statement to both defendants
was “an honest mistake and not prosecutorial misconduct”);
Downs v. Hoyt, 232 F.3d 1031, 1038 (9th Cir. 2000) (a
74 UNITED STATES V. LLOYD
prosecutor’s passing reference to a statement not in evidence
was not misconduct when the prosecutor was “confused about
which portions of the voluminous medical records had been
admitted into evidence”); United States v. Carrillo, 16 F.3d
1046, 1050 (9th Cir. 1994) (a prosecutor’s “misstatement
ha[d] earmarks of inadvertent mistake, not misconduct”).
Nor were the misstatements “so gross as probably to
prejudice” Nelson. United States v. Navarro, 608 F.3d 529,
536 (9th Cir. 2011). That is particularly so in light of Clark’s
testimony that Nelson played a substantial role in his
conference call and the district court’s repeated instructions
that the jury’s recollections—not the prosecutor’s
summation—controlled.
The prosecutor’s misstatements during closing are not a
basis for reversal.
4. Cumulative Error
“Even if no error individually supports reversal, the
cumulative effect of numerous errors may support reversal.”
United States v. Inzunza, 638 F.3d 1006, 1024 (9th Cir. 2009)
(citing United States v. Frederick, 78 F.3d 1370, 1381 (9th
Cir. 1996)). “Where, as here, there are a number of errors at
trial, ‘a balkanized, issue-by-issue harmless error review’ is
far less effective than analyzing the overall effect of all the
errors in the context of the evidence introduced at trial against
the defendant.” United States v. Frederick, 78 F.3d 1370,
1381 (9th Cir. 1996) (quoting United States v. Wallace,
848 F.2d 1464, 1476 (9th Cir. 1988)). “In those cases where
the government’s case is weak, a defendant is more likely to
be prejudiced by the effect of cumulative errors.” Id. “This
is simply the logical corollary of the harmless error doctrine
UNITED STATES V. LLOYD 75
which requires us to affirm a conviction if there is
overwhelming evidence of guilt.” Id. (internal quotation
marks omitted).
a. Baker
Although the district judge erred in admitting Agler’s lay
opinion testimony about what telemarketers know and intend,
and in admitting the Nakamori email and related testimony,
the errors were harmless in light of the overwhelming
evidence against Baker. The evidence included voice
recordings of Baker’s calls with an undercover agent posing
as a potential investor in Red Water. In the calls, Baker
repeatedly lied. He told the agent that Cinamour had already
secured $5.4 million presales contracts to distribute the film
in 31 countries, guaranteeing a risk-free and profitable
investment. He told the agent that there was already enough
revenue from the presale contracts to guarantee a 110 percent
return to the investors. He told the agent that investors would
receive the 110 percent return in 8 to 10 months and triple
their money in 2 years. He told the agent that the film’s
promoters and sales personnel would receive no money until
the investors had received their money back with a profit, and
that none of the fundraisers were receiving commissions.
Baker’s victims testified that he made the same statements to
them. Baker’s coconspirators testified about his false
statements and role in the conspiracy, including his role in
including false statements about commissions in the Red
Water private placement memorandum. Finally, the jury
heard that after the raid, Baker confessed to law-enforcement
agents that he had lied in the call with the undercover agent
about the presale contracts and the commissions.
76 UNITED STATES V. LLOYD
In light of the overwhelming admissible evidence against
him, the errors we have found do not require reversing
Baker’s conviction. See United States v. Ruiz, 710 F.3d 1077,
1080 n.1 (9th Cir. 2013) (“Finally, since the errors that
occurred at trial were isolated, reversal for cumulative error
is not warranted.”). Baker’s conviction is affirmed.
b. Nelson
There was certainly evidence against Nelson, but it was
not overwhelming. Nelson’s victims testified that he too
misrepresented the existence of presale distribution contracts,
the resulting profit guarantee and the absence of risk, and the
absence of commissions or other payments to promoters and
sales personnel. Although Nelson denied these allegations at
trial, he admitted using a script with those statements. Nelson
also sent an email to one victim, Eliassen, promising that
presales distribution contracts made the investment secure.
Nelson testified that some unidentified person at Cinamour
had told him at some unidentified time that the presales
contracts described in the script did exist. Nelson told his
victims that investors in Cinamour’s prior movies had been
successful even though his coconspirator, Stephanie Alarcon,
testified that she and Nelson had talked about the fact that
prior investors were unhappy because they had not made
money. The evidence showed that Nelson told prospective
investors and the victims who invested that filming on Red
Water had begun or was about to begin. He admitted on the
stand that filming had not started and was not about to start.
Nelson testified that he did not reveal his 12.5 percent
commission to the prospective investors or victims he talked
to, and the evidence, including Nadav Shimoni’s testimony
and scripts, showed that Nelson was involved in the reloading
conference calls.
UNITED STATES V. LLOYD 77
There was also evidence favorable to Nelson’s defense
theory that he lacked the intent to defraud necessary to show
that he willfully violated the securities laws. Nelson joined
Cinamour much later than his codefendants, giving him less
exposure to the fraudulent practices before the FBI’s 2009
raid. He testified that he was only involved in a few
reloading conference calls and then only for a brief period,
and that he was unaware of the use of “shills” like Shimoni.
Although we conclude that there was sufficient evidence to
support each count of conviction, see infra Part II.C.5, the
government has not met its burden to show that the
evidentiary errors we have found were harmless. United
States v. Vizcarra-Martinez, 66 F.3d 1006 (9th Cir. 1995)
(evidence properly admitted was sufficient to support the
conviction but the error in admitting evidence was not
harmless, requiring reversal and remand). The inadmissible
evidence of Nelson’s subsequent employment at Big Gunn
and the check he wrote to Slanaker, especially when refracted
through the lens of Agler’s testimony that all movie
telemarketing operations are fraudulent and that all fronters
and closers knew this, may have “substantially swayed” the
jury in concluding that the government had met its burden of
proving Nelson’s knowledge and intent. See Freeman,
498 F.3d at 905.
The risk that the improperly admitted evidence affected
the verdict is increased because the government’s closing
argument repeatedly encouraged the jury to rely on this
evidence. The government argued during closing that
Nelson, Baker, and Greenhouse “knew” that “there was no
way these investors would ever make a dime” and that “they
lied in order to get the people to invest their money.” The
government emphasized Allen Agler’s testimony that “all the
closers knew that no investor makes money from an
78 UNITED STATES V. LLOYD
independent movie where the money is raised by cold call
telemarketing.” And the government told the jury that “the
clearest evidence” that Nelson had the intent to defraud while
working at Cinamour was that he went to work at another
“movie investment boiler room”—Big Gunn—after the FBI
raided Cinamour.
Our review of the record leaves us without a “fair
assurance” that the “jury was not substantially swayed by the
error[s]” in convicting Nelson. See Freeman, 498 F.3d at
905. We conclude that the errors were not harmless and that
they require us to reverse Nelson’s conviction, vacate his
sentence, and remand.
5. Nelson’s Claim that the Evidence Is Insufficient to
Sustain His Convictions
Nelson argues that the government presented insufficient
evidence to convict him of violating 15 U.S.C. §§ 77e and
77x by selling unregistered securities.14 We address this
question even though we reverse the conviction and remand
because a retrial may implicate double jeopardy. “‘It has
long been settled . . . that the Double Jeopardy Clause’s
general prohibition against successive prosecutions does not
prevent the government from retrying a defendant who
succeeds in getting his first conviction set aside, through
direct appeal or collateral attack, because of some error in the
proceedings leading to conviction.” United States v. Preston,
751 F.3d 1008, 1028 (9th Cir. 2014) (en banc) (quoting
Lockhart v. Nelson, 488 U.S. 33, 38 (1988)). “But the
Supreme Court has recognized an exception to the
14
Nelson does not argue that the evidence was insufficient to support his
convictions for conspiracy, mail fraud, or wire fraud.
UNITED STATES V. LLOYD 79
government’s right to retry a defendant without offending the
Double Jeopardy Clause where the conviction is overturned
for insufficient evidence.” Id. (citing Burks v. United States,
437 U.S. 1, 11 (1978)). “This exception recognizes that the
‘Double Jeopardy Clause forbids a second trial for the
purpose of affording the prosecution another opportunity to
supply evidence which it failed to muster in the first
proceeding.’” Id. (quoting Burks, 437 U.S. at 11). We “must
address the sufficiency of the evidence question” on the
securities-fraud convictions “even though we are remanding
for a new trial.” Id.
A “two-step inquiry for considering a challenge to a
conviction based on sufficiency of the evidence” applies.
United States v. Nevils, 598 F.3d 1158, 1164 (9th Cir. 2010)
(en banc). “First, a reviewing court must consider the
evidence presented at trial in the light most favorable to the
prosecution.” Id. (citing Jackson v. Virginia, 443 U.S. 307,
319 (1979)). The reviewing court “may not usurp the role of
the finder of fact by considering how it would have resolved
the conflicts, made the inferences, or considered the evidence
at trial.” Id. “Rather, when faced with a record of historical
facts that supports conflicting inferences,” the reviewing
court “must presume—even if it does not affirmatively
appear in the record—that the trier of fact resolved any such
conflicts in favor of the prosecution, and must defer to that
resolution.” Id. (internal quotation marks omitted).
“Second, after viewing the evidence in the light most
favorable to the prosecution, the reviewing court must
determine whether this evidence, so viewed, is adequate to
allow ‘any rational trier of fact [to find] the essential elements
of the crime beyond a reasonable doubt.’” Id. (quoting and
emphasizing Jackson, 443 U.S. at 319). “More than a ‘mere
80 UNITED STATES V. LLOYD
modicum’ of evidence is required to support a verdict.” Id.
(quoting Jackson, 443 U.S. at 320). “At this second step,
however, a reviewing court may not ask itself whether it
believes that the evidence at the trial established guilt beyond
a reasonable doubt, only whether ‘any’ rational trier of fact
could have made that finding.” Id. (internal quotation marks
and citations omitted).
Nelson argues that the government failed to show that he
had the required intent to violate § 77e and § 77x. He points
to the statement in the private placement memorandum for
Red Water that the partnership units were exempt from the
registration requirement, and he argues that the evidence
failed to show he “had any information to the contrary.” The
record undercuts his argument.
The evidence included a copy of the private placement
memorandum found in Nelson’s office. The memorandum
clearly stated that “[n]o general solicitation or advertisement
in any form may be utilized regarding the offering.” The
exhibit contained handwritten notes matching a sample of
Nelson’s known handwriting. A highlighted section
discussing the registration exemption clearly stated that if a
security was unregistered, solicitations and sales had to be
limited to “accredited investors,” and handwritten notes on an
accompanying subscription document contained annotations
about the meaning of that term. Stephanie Alarcon testified
that Nelson told her what it meant for an investor to be
accredited. There was ample evidence that Nelson knew and
understood the accredited-investor limitation on soliciting
and selling the unregistered securities and what being an
accredited investor meant. There was also ample evidence
that Nelson pursued the leads he was provided without any
inquiry about whether the investors he successfully solicited
UNITED STATES V. LLOYD 81
were accredited. The evidence showed that he sold units to
investors who gave him information showing that they failed
to meet the accreditation standards.
Viewing the evidence in the light most favorable to the
government, a rational juror could conclude beyond a
reasonable doubt that Nelson knew that the securities he was
selling had to be registered unless he and others limited offers
and sales to accredited investors, and that the investors he
solicited—some successfully—included many who were
clearly not accredited. The evidence was sufficient for the
jury to convict Nelson for violating 15 U.S.C. §§ 77e and
77x.15 Nelson may be retried on these counts, as well as on
the counts he does not challenge on the basis of insufficient
evidence, without violating the Double Jeopardy Clause.16
15
Nelson’s reliance on United States v. Crosby, 294 F.2d 928 (2d Cir.
1961), is unavailing. In that case, the defendants had opinion letters from
attorneys stating that the securities they were selling through solicitations
were exempt. See id. at 939–41. Nelson had no similar opinion or basis
for believing that the securities he sold were exempt.
16
Although we need not consider whether the evidence was sufficient
to sustain Nelson’s conspiracy, mail-fraud, and wire-fraud convictions
because he does not raise that issue on appeal, we note that, viewing the
evidence in the light most favorable to the government, a rational
factfinder could find the essential elements of those crimes beyond a
reasonable doubt.
82 UNITED STATES V. LLOYD
III. Baker’s Sentencing Challenge17
The district court calculated Baker’s Guidelines range as
292 to 365 months, based on a total offense level of 35 and a
criminal history category of VI, and sentenced him to serve
a 194-month prison term and pay $12,043,678.25 in
restitution. Baker argues that the court committed procedural
error in applying a two-level enhancement for targeting
vulnerable victims and increasing his criminal history points
based on two prior sentences. The increase in points put him
in criminal history category VI instead of V.
“Procedural errors include, but are not limited to,
incorrectly calculating the Guidelines range, treating the
Guidelines as mandatory, failing to properly consider the
[18 U.S.C.] § 3553(a) factors, using clearly erroneous facts
when calculating the Guidelines range or determining the
sentence, and failing to provide an adequate explanation for
the sentence imposed.” United States v. Armstead, 552 F.3d
769, 776 (9th Cir. 2008). “We review the district court’s
interpretation of the [G]uidelines de novo,” its “application of
the [G]uidelines to the facts for an abuse of discretion,” and
“the substantive reasonableness of the sentence for an abuse
17
Nelson also challenges his sentence, but because we reverse his
convictions for selling unregistered securities, we need not address that
challenge here.
UNITED STATES V. LLOYD 83
of discretion.”18 United States v. Hurtado, 760 F.3d 1065,
1068 (9th Cir. 2014).
A. The Vulnerable-Victim Enhancement
A two-level enhancement “applies to offenses involving
an unusually vulnerable victim in which the defendant knows
or should have known of the victim’s unusual vulnerability.”
U.S.S.G. § 3A1.1(b)(1), cmt. n.2. A “vulnerable victim” is “a
person . . . who is unusually vulnerable due to age, physical
or mental condition, or who is otherwise particularly
susceptible to the criminal conduct.” Id., cmt. n.2. We review
the district court’s “findings that the victims were vulnerable
. . . for clear error.” United States v. Randall, 162 F.3d 557,
560 (9th Cir. 1998).
Baker contends that the district court erred in applying the
vulnerable-victim enhancement because targeting victims for
reloading and successfully reloading them did not make them
“vulnerable” under § 3A1.1(b)(1). The district court correctly
found, and we have twice held, that when, as here, a
defendant “reloads” victims by soliciting more money from
those who have already proven susceptible to an investment
fraud, including in the telemarketing context, the
vulnerable-victim enhancement is appropriate. See, e.g.,
United States v. Ciccone, 219 F.3d 1078, 1086 (9th Cir. 2000)
(“[V]ictims of a ‘reloading’ scheme . . . are vulnerable for the
18
“There is an intracircuit split as to whether the standard of review for
application of the Guidelines to the facts is de novo or abuse of
discretion.” United States v. Tanke, 743 F.3d 1296, 1306 (9th Cir. 2014).
This issue is currently the subject of en banc review. See United States v.
Gasca-Ruiz, No. 14-50342, 2015 WL 7067873 (9th Cir. Nov. 12, 2015)
(mem.). We would reach the same result under either standard.
84 UNITED STATES V. LLOYD
purpose of enhancing a convicted person’s sentence.”);
Randall, 162 F.3d at 560 (“[W]hether these persons are
described as gullible, overly trusting, or just naive[,] their
readiness to fall for the telemarketing rip-off, not once but
twice[,] demonstrated that their personalities made them
vulnerable in a way and to a degree not typical of the general
population.” (emphasis original)).
Not only does our precedent make clear that a reloaded
investor-victim of a telemarketing scheme is a vulnerable
victim, see, e.g., Ciccone, 219 F.3d at 1086; Randall,
162 F.3d at 560, but the record also shows that Baker
intentionally targeted several of his investor-victims for
reloading because they had a “track record of falling for
fraudulent schemes,” Randall, 162 F.3d at 560. The district
court specifically identified three individuals, Tranter,
Beacham and Houseknecht, as vulnerable victims. Baker
solicited investments from each for Forbidden Warrior. Five
years after Tranter’s first investment in Forbidden Warrior,
Baker successfully reloaded him to invest in Red Water.
Baker tried to reload Beacham to invest in From Mexico with
Love a few years after convincing him to invest in Forbidden
Warrior. Although Baker did not initially succeed, his
efforts, combined with those of Lloyd and Agler, convinced
Beacham to make the additional investment. Beacham was
convinced in part because of Baker’s representations that he
would soon see returns on his earlier investment in Forbidden
Warrior. Lloyd and Agler had already reloaded Houseknecht
when Baker later tried to reload her again, this time without
success. Baker received commissions for each successful
reloading, including Houseknecht’s reloading by Lloyd and
Agler. The record amply supports the district court’s
vulnerable-victim enhancement. There was no procedural
error.
UNITED STATES V. LLOYD 85
B. The Claim of Error in Calculating Baker’s Criminal
History Category
Baker argues that the district court erred in calculating his
criminal history by double-counting the sentences he received
when his probation for two prior convictions was revoked. In
September 1990, Baker was arrested for forgery, grand theft,
and passing bad checks. In January 1991, while on bond for
that offense, Baker was arrested for committing grand theft
on five separate occasions. On October 9, 1991, Baker was
sentenced on both convictions. In the September 1990 case,
Baker was sentenced to serve six months on one count of
forgery, to be followed by probation. In the January 1991
case, Baker was sentenced to serve six months on one count
of grand theft, to be followed by probation for two additional
counts. Baker served the custodial sentence, was released,
and violated his probation. In August 1992, his probation
was revoked in both cases and he was sentenced to serve two
18-month prison terms, to run concurrently with each other
and consecutively to his current term of incarceration.
The district court followed the presentence report’s
recommendation to increase Baker’s criminal history score by
six points for the sentences imposed in the September 1990
and January 1991 cases. Baker objected that only three
points should have been assessed for the two prior sentences.
He objects on appeal as well, but not for the reason he
identified at sentencing.
At sentencing, Baker pointed to U.S.S.G. § 4A1.2(a)(2)
to argue that the September 1990 and January 1991 sentences
should have been treated as a single sentence. Because the
two sentences were separated by an intervening arrest, the
district court reasoned that they counted as two separate
86 UNITED STATES V. LLOYD
sentences under the Guidelines. See U.S.S.G. § 4A1.2(a)(2)
(“Prior sentences always are counted separately if the
sentences were imposed for offenses that were separated by
an intervening arrest . . . .”).
On appeal, Baker argues that adding six rather than three
criminal history points was incorrect under Application Note
11 to U.S.S.G. § 4A1.2(k). The Note provides that “[w]here
a revocation applies to multiple sentences, and such sentences
are counted separately under § 4A1.2(a)(2), add the term of
imprisonment imposed upon revocation to the sentence that
will result in the greatest increase in criminal history points.”
U.S.S.G. § 4A1.2(k), cmt. n.11. The Note gives the following
example:
A defendant was serving two probationary
sentences, each counted separately under
§ 4A1.2(a)(2); probation was revoked on both
sentences as a result of the same violation
conduct; and the defendant was sentenced to
a total of 45 days of imprisonment. If one
sentence had been a “straight” probationary
sentence and the other had been a
probationary sentence that had required
service of 15 days of imprisonment, the
revocation term of imprisonment (45 days)
would be added to the probationary sentence
that had the 15-day term of imprisonment.
Id.
“The effect of this application note would be to add the
additional term of incarceration to only one of [the
defendant’s] first two disputed convictions.” United States v.
UNITED STATES V. LLOYD 87
Flores, 93 F.3d 587, 592 (9th Cir. 1996). Although “‘the
sentencing court can tack the probation revocation sentence
to any one’” of the defendant’s underlying sentences, the
others would “‘remain unaffected.’” Id. (quoting United
States v. Streat, 22 F.3d 109, 111 (6th Cir. 1994)).
On appeal, the government concedes that “when multiple
probationary sentences are revoked at the same time for the
same violation conduct, only one of the new sentences
imposed at the revocation hearing can be added to the
underlying sentences for purposes of U.S.S.G. § 4A1.2(a).”
If Note 11 applies, Baker argues that one of his prior
sentences would be 24 months, consisting of 6 months for the
original prison term, plus 18 months for the term imposed on
revocation. The other prior sentence, Baker contends, would
be limited to 6 months under Note 11. Because the
revocation applied to both the September 1990 and January
1991 probations, the court would “add the additional term of
incarceration to only one of [Baker’s] first two disputed
convictions.” See Flores, 93 F.3d at 592. One of these two
prior sentences would exceed 13 months, and 3 points, not 6,
would be added to Baker’s criminal history score. See
U.S.S.G. § 4A1.1(a); § 4A1.2(e). Baker’s criminal history
category would be V, not VI, and his Guidelines range would
be 262 to 327 months, not 292 to 365 months.
The government argues that plain-error review applies
because Baker failed to object on the basis of the Application
Note during sentencing.19 But “it is claims that are deemed
19
The government goes on to argue that any error would be harmless
because Baker received a below-Guidelines sentence. A
below-Guidelines sentence does not avoid or make harmless an error in
the Guidelines calculation. See United States v. Bonilla-Guizar, 729 F.3d
88 UNITED STATES V. LLOYD
waived or forfeited, not arguments.” United States v.
Pallares-Galan, 359 F.3d 1088, 1095 (9th Cir. 2004)
(applying de novo, rather than plain-error, review). Although
Baker argued at sentencing that the September 1990 and
January 1991 sentences should be treated as a single sentence
under U.S.S.G. § 4A1.2(a)(2), and on appeal that Application
Note 11 meant that the single revocation triggered only a
three-point increase, his argument here is “an alternative
argument to support what has been his consistent claim from
the beginning.” Pallares-Galan, 359 F3d at 1095. The
consistent claim is that “for the two sentences imposed on the
cases reported in paragraphs 99 and 102 of the Presentence
Report, only one 3 point assessment should have been made.”
“Once a federal claim is properly presented, a party can make
any argument in support of that claim; parties are not limited
to the precise arguments they made below.” Pallares-Galan,
359 F.3d at 1095 (quoting Yee v. Escondido, 503 U.S. 519,
534 (1992)).
The record does not provide an adequate basis for us to
determine whether Baker’s criminal history score should be
increased by three rather than six points in light of Note 11 to
U.S.S.G. § 4A1.2(k). The government argues that because
the revised presentence report referred to the revocation
sentencing as taking place on both August 21 and August 24,
1992, it was unclear whether he was sentenced for the two
revocations at the same time or on two different dates. There
is no requirement in either Flores or the § 4A1.2(k)
Application Note that the underlying revocations be
sentenced on the same day, and the record makes clear that
there was one motion to revoke and a single revocation,
1179, 1188–89 (9th Cir. 2013); United States v. Kilby, 443 F.3d 1135,
1140 (9th Cir. 2006).
UNITED STATES V. LLOYD 89
which occurred on August 24, 1992. Read in context, the
reference in the presentence report to August 21 is likely a
scrivener’s error. The report’s prior paragraph identifies the
revocation sentence as “08/24/92: 18 mos.” Two paragraphs
in the presentence report refer to the sentencing in the other
revocation as taking place on “08/24/92,” and that “[o]n
August 24, 1992, Baker admitted violating probation and the
18 month prison sentence was imposed.”
It is, however, not clear that both of the probation terms
imposed for Baker’s prior sentences were revoked because of
the “same violation conduct.” Although the record shows
that probation in both cases was revoked and both sentences
imposed on the same day, that does not mean that both
revocations resulted from the same conduct. See U.S.S.G.
§ 4A1.2(k), cmt. n.11.
Because the district court understandably did not account
for Note 11 in calculating Baker’s criminal history score, and
because the record does not allow us to determine whether the
correct score is based on a three- or a six-point increase, we
vacate Baker’s sentence and remand to the district court for
resentencing, so that the district court can consider whether
Note 11 applies, and correctly calculate the criminal history
category and Guidelines sentencing range.
90 UNITED STATES V. LLOYD
IV. Albert Greenhouse’s Sentencing Appeal20
Greenhouse worked from his home in Florida from 2005
to 2007, soliciting investments in partnership units for From
Mexico with Love. His work succeeded in getting victims to
send Cinamour approximately $1,340,000. Greenhouse was
indicted on one count of conspiracy under 18 U.S.C. § 371,
three counts of mail fraud under 18 U.S.C. § 1341, and two
counts of offering and selling (or aiding and abetting the offer
and sale of) an unregistered security under 15 U.S.C. § 77e
and 77x and 18 U.S.C. § 2. He was tried and convicted on
two counts of willfully engaging in the offer and sale of
unregistered securities and aiding and abetting and causing
those sales. The jury acquitted him on the remaining charges.
The district court calculated his Guidelines range as 63 to 78
months, including enhancements under U.S.S.G. §§ 2B1.1
and 3A1.1 for the fraud-loss amount, for the number of
victims (10 or more), and for the victims’ vulnerability. The
court overruled Greenhouse’s objections to the
enhancements. The government recommended a 78-month
sentence and an $8,981,676.68 restitution obligation, based
on the total loss for all investors in both the Florida and
California boiler rooms during the time Greenhouse was
involved. Greenhouse argued for a $10,000 fine and no
restitution. The district court sentenced Greenhouse to serve
a below-Guidelines 60-month prison term and to pay
$530,000 in restitution.
20
Greenhouse did not challenge his conviction in his opening brief. In
his reply brief, he sought reversal of his conviction based on an SEC
proposal to lift the Regulation D ban on general solicitations and
advertising in limited certain circumstances. At oral argument, however,
Greenhouse abandoned that challenge to his conviction. We consider only
his challenge to his sentence.
UNITED STATES V. LLOYD 91
We review Greenhouse’s sentencing challenges to the
district court’s interpretation of the Sentencing Guidelines de
novo, to the factual findings during sentencing for clear error,
and to the application of the Sentencing Guidelines for abuse
of discretion. United States v. Lynn, 636 F.3d 1127, 1138
(9th Cir. 2011). “The legality of an order of restitution is
reviewed de novo, and factual findings supporting the order
are reviewed for clear error.” United States v. Brock-Davis,
504 F.3d 991, 996 (9th Cir. 2007) (emphasis removed).
“Provided that it is within the bounds of the statutory
framework, a restitution order is reviewed for abuse of
discretion.” Id.
Greenhouse first argues that the district court should not
have increased the offense level based on the loss amount.
Citing no authority, he argues that the district court
improperly applied § 2B1.1(b) because it requires a
conviction involving fraud or moral turpitude, and he was
acquitted of fraud and convicted only of selling unregistered
securities. Greenhouse ignores the fact that he was convicted
of violating 15 U.S.C. §§ 77e and 77x, which are
cross-referenced with § 2B1.1 in the Statutory Index. See
U.S.S.G. App. A-Statutory Index; U.S.S.G. § 2B1.1, cmt.
Statutory Provisions; United States v. McEntry, 659 F.3d 893,
897 (9th Cir. 2011) (“When deciding which guideline to
apply, a district court must determine the guideline section in
Chapter Two (Offense Conduct). . . . To do this, the court is
to refer to the Statutory Index, Appendix A of the Guidelines,
to find the offense of conviction . . . .” (citation omitted)). He
also ignores the relationship between the sale of unregistered
securities and the absence of disclosures about, or review of,
those securities, designed to prevent and address fraudulent
misrepresentations. The district court did not err in applying
the 16-level enhancement under § 2B1.1(b).
92 UNITED STATES V. LLOYD
Greenhouse also argues that even if § 2B1.1(b)’s loss
enhancement does apply to his securities convictions, the
district court erred in concluding that he caused $1,340,000
in investor losses. Greenhouse stipulated that he personally
solicited $1,340,000 from victims and that they all lost
everything they invested. Greenhouse argues that the failure
to register the securities and the way they were marketed did
not cause these losses. Instead, he asserts, the investors lost
money because the movie “bombed at the box office.” The
district court rejected Greenhouse’s argument that he was not
responsible for any of the investors’ losses. We review the
district court’s loss-causation finding for clear error. See
Miller v. Thane Int’l, Inc., 615 F.3d 1095, 1104 (9th Cir.
2010).
The evidence showed that the victims invested after
Greenhouse made promises that their money was safely
invested, with no risk of loss, and they would get a
guaranteed and fast return on their investment. Greenhouse
specifically promised victims that the money they invested
would go to making and distributing the movie, not to paying
the promoters or sales personnel. Contrary to his promises,
most of the investments went to pay the telemarketers and
promoters and very little went to make or distribute the
movie, contributing to the box-office disaster Greenhouse
identifies as the only reason for his losses and as unrelated to
his acts or omissions. The evidence showed that Greenhouse
sold unregistered securities when he “knew or, under the
circumstances, reasonably should have known,” that
“pecuniary harm” was at least “a potential result.” U.S.S.G.
§ 2B1.1, cmt. n.3(A)(iv). It was reasonably foreseeable to
Greenhouse that making these misrepresentations in selling
unregistered securities would cause investors to lose their
money. These losses were not “caused by the intervening,
UNITED STATES V. LLOYD 93
independent, and unforeseeable criminal misconduct of a
third party,” United States v. Hicks, 217 F.3d 1038, 1049 (9th
Cir. 2000), or by the vagaries of the movie-watching public.
The record supports the district court’s conclusion that
Greenhouse was a causal factor in his victims’ losses and did
not err in applying the loss enhancement.
Nor did the district court err in applying either the
two-level increase under § 2B1.1(b)(2)(A)(i) for ten or more
victims or the two-level increase under § 3A1.1(b)(1) for
vulnerable victims, or in imposing $530,000 in restitution as
a condition of supervised release. Greenhouse admits that he
sold partnership interests in From Mexico with Love to ten or
twelve investors who lost a total of $1,340,000. Greenhouse
admits that he solicited some victims who had already
invested money in From Mexico with Love. These victims
were vulnerable under the applicable law. Ciccone, 219 F.3d
at 1086; Randall, 162 F.3d at 560. Finally, the restitution
amount did no more than compensate for the loss caused by
the specific conduct that was the basis of Greenhouse’s
“offense[s] of conviction.” United States v. Batson, 608 F3d
630, 636 (9th Cir. 2010).
We affirm Greenhouse’s sentence.
CONCLUSION
We (1) affirm Lloyd’s sentence; (2) vacate Keskemety’s
sentence and remand for resentencing; (3) reverse Nelson’s
convictions, vacate his sentence, and remand; (4) affirm
94 UNITED STATES V. LLOYD
Baker’s convictions but vacate his sentence and remand for
resentencing; and (5) affirm Greenhouse’s sentence.
AFFIRMED in part, REVERSED in part, VACATED
in part, and REMANDED in part.