United States v. Robert Jennings

FILED
NOT FOR PUBLICATION MAY 25 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 08-50517
Plaintiff - Appellee, D.C. No. 2:07-cr-01076-PA-3
v.
MEMORANDUM*
ROBERT JENNINGS, AKA Seal C,
Defendant - Appellant.
UNITED STATES OF AMERICA, No. 09-50191
Plaintiff - Appellee, D.C. No. 2:07-cr-01076-PA-1
v.
HENRY ULIOMEREYON JONES,
Defendant - Appellant.
Appeal from the United States District Court
for the Central District of California
Percy Anderson, District Judge, Presiding
Argued and Submitted December 6, 2010
Pasadena, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: B. FLETCHER, BERZON, and CALLAHAN, Circuit Judges.
Robert Jennings and Henry Jones appeal from their convictions and
sentences for mail fraud, wire fraud, and securities fraud. Jennings and Jones
challenge the good faith instruction given to the jury. Jennings also challenges the
sufficiency of the evidence to support his conviction for securities fraud under
Count 15, his sentence, and the amount of restitution. We affirm.
Jennings and Jones contend on appeal that the good faith instruction misled
the jury into thinking that it only had to “consider” their good faith, failed to
inform the jury that good faith was a complete defense, and failed to indicate that
the government had the burden of proving that they lacked good faith. Because
Jennings and Jones withdrew their objections to the good faith instruction,
however, we review only for plain error. See United States v. Romm, 455 F.3d
990, 1003 (9th Cir. 2006).
In this case, the judge instructed the jury that “[a] defendant’s good faith in
the truth of the misrepresentations . . . may be considered by you in determining
whether he acted with an intent to defraud.” (emphasis added). This court
approved a similar instruction in United States v. Shipsey, 363 F.3d 962, 967 (9th
Cir. 2004). Consequently, we cannot say that the instruction was clearly
erroneous.
2
Jennings also challenges his conviction on Count 15 on the grounds of
insufficient evidence. Because Jennings failed to object at trial, the plain error
standard applies. United States v. Delgado, 357 F.3d 1061, 1068 (9th Cir. 2004).
Examining the evidence as a whole, the jury could have reasonably found that
Jennings was guilty of securities fraud for actions taken in November 2002 in
connection with an investment regarding the coal mines, the purported gold
transaction, and the African country of the Seychelles. See United States v. Nevils,
598 F.3d 1158, 1163-64 (9th Cir. 2010).
The evidence showed that Jennings was heavily involved in the coal mining
ventures and the solicitation conference calls from the beginning. Further, he was
the President of both H&J Energy and Tri Energy and had responsibility for
handling the company bank accounts. He provided information to investors on the
progress of the mines and the expected returns – information that was not realistic
in light of the actual production and the equipment problems. Moreover, the
information was also not realistic in light of the amounts of money flowing in and
out of the company bank accounts that Jennings handled. In addition, Jennings had
a close relationship with Schubert, the mine manager who falsified mine
documents, made misrepresentations about the mines and the gold transaction, and
eventually went to jail. Jennings and Schubert’s close relationship supports a jury
3
finding that Jennings knew about the fraud, but continued to make positive
representations to investors about the workings of the mines and the expected
returns, knowing they had no basis in fact.
Also, Jennings helped induce the November 2002 investment at issue in
Count 15 by talking about an impossible gold transaction, which the jury could
have determined Jennings knew did not exist. Investor Roger Sohn testified that
based on his conversations with Jennings and Simburg, he thought his investment
involved securing the release of $56 million from the Seychelles, and that some of
the money also would be used to fund coal mines. Then at some point, the
Seychelles transaction “faded away” and was replaced by the “gold transaction,”
brokered by Jones. Based on the evidence at trial, the supposed magnitude of the
gold transaction was so outrageous that if the transaction had been real it would
have caused the entire gold market to collapse. The fact that Jennings – the
president of the companies, who handled the bank accounts – helped to perpetuate
4
such an outlandish story to solicit more money supports a jury finding that
Jennings had the requisite knowledge for fraud.1
Later, in 2004, Jennings vouched for Jones’s character to investors, saying
that he “knew the facts” on Jones, who was his “joint-venture partner.” Jennings
did not specify when he learned these “facts,” and the jury reasonably could infer
that because of Jennings’s longstanding and symbiotic business relationship with
Jones, he knew the “facts” on him early on, and thus knew all about Jones’s use of
investor funds for music business and personal expenses. Given that Jones was
supposedly brokering the November 2002 investment, Jennings’s knowledge of
“the facts” on Jones suggests that Jennings the requisite knowledge and intent for
fraud regarding this investment, which was at the heart of Count 15.
Thus, there was sufficient evidence for the jury to convict Jennings on Count
15 based on (1) specific, direct evidence of fraud from after 2002, in conjunction
with (2) evidence of Jennings’s heavy involvement in the mining venture,
oversight of the bank accounts, solicitation of money, and close association with
1
Also, Jennings told Mrs. Lord, an investor, a story about “bizarre, crazy
circumstances” involving a Dubai prince held captive, which resulted in a $10,000
investment from the Lords in 2003, with a promised 2-to-1 return that never
happened. Although this story was told in 2003, after the November 2002
investment at issue in Count 15, the jury could fairly infer that it showed
Jennings’s continuing practice of stretching the truth to obtain investments.
5
fraudulent characters from before and during 2002. The scheme at issue in this
case was continuing and much of the evidence was overlapping; the jury
reasonably could make connections between one time period and another when
drawing conclusions about Jennings’s intent and actions.
Further, Jennings challenges his sentence on the grounds that the district
court did not reasonably consider the factors set forth in 18 U.S.C. § 3553 and
because the sentence was substantively unreasonable. The district court considered
all of Jennings’s non-frivolous sentencing arguments and gave an adequate
explanation for imposing a below-Guidelines sentence of 144 months. See United
States v. Ressam, 593 F.3d 1095, 1118-19 (9th Cir. 2010); United States v. Carty,
520 F.3d 984, 993 (9th Cir. 2008) (en banc). Moreover, the sentence was not
substantively unreasonable in light of the evidence at trial. See Gall v. United
States, 552 U.S. 38, 51 (2007). Despite having many opportunities to put an end to
the fraud, Jennings spent years soliciting the investments, and even when
confronted with the truth, he continued to lie to the investors and take advantage of
their faith. Even though Jennings received little of the proceeds in relation to his
co-defendants, the district court did not abuse its discretion in finding that the co-
defendants were all equally culpable.
6
Finally, Jennings argues that the district court erred in calculating the
amount of loss and restitution. “A restitution order is reviewed for an abuse of
discretion, provided that it is within the bounds of the statutory framework.
Factual findings supporting an order of restitution are reviewed for clear error.
The legality of an order of restitution is reviewed de novo.” United States v.
Gordon, 393 F.3d 1044, 1051 (9th Cir. 2004) (quotations and citations omitted);
see United States v. Showalter, 569 F.3d 1150, 1160-61 (9th Cir. 2009). Here,
Jennings argues that he should have been treated differently from his co-defendants
and that he could not have reasonably foreseen this level of harm. The record
reflects, however, that the district court considered the entirety of the evidence at
trial, including the government’s financial analysis as to fraud loss amounts, and
considered Jennings’s arguments at sentencing. See United States v. Treadwell,
593 F.3d 990, 1003 (9th Cir. 2010). The district court’s determinations that the
fraud loss was reasonably foreseeable to Jennings, and that he is responsible for the
entire amount of restitution, do not constitute an abuse of discretion. See id.For the foregoing reasons, Jennings’s conviction and sentence, as well as the
restitution order entered against him, are AFFIRMED, and Jones’s conviction is
AFFIRMED.
7
FILED
United States v. Jennings, 08-50517 MAY 25 2011
United States v. Jones, 09-50191 MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
BERZON, J., concurring in part and dissenting in part, with whom B. FLETCHER,
J., joins except as to the penultimate paragraph regarding Count 15 against
Jennings:
Good faith is a complete defense to the wire, mail, and security fraud
offenses at issue here. If a fraud defendant actually believes what he says, then
saying it can’t be a crime under these statutes. This is only logical: intent to
defraud is an element of each offense. If a defendant had a good-faith belief in the
truthfulness of his representations, then he could not have intended to defraud
anyone by making them.
In this case, the judge instructed the jury that “[a] defendant’s good faith
belief in the truth of the misrepresentations . . . may be considered by you in
determining whether he acted with an intent to defraud.” (Emphasis added). This
statement of the law, of course, is technically correct. But it’s also misleading. A
defendant’s good faith not only may be considered by a jury; it must be considered
by a jury. If the jury determines that the defendant acted in good faith, it must
acquit him. See, e.g., United States v. Sayakhom, 186 F.3d 928, 940 (9th Cir.
1999).
Our law entitles defendants to more than “technically correct” instructions.
Jurors are not jurists, and they should not be expected to parse an instruction in the
same way that a court parses a statute. As we have repeatedly stated, “[t]he
relevant inquiry is whether the instructions as a whole are misleading or
inadequate to guide the jury’s deliberation.” United States v. Redlightning, 624
F.3d 1090, 1122 (9th Cir. 2010) (emphases altered and quotation omitted).
Unfortunately, in United States v. Shipsey, 363 F.3d 962 (9th Cir. 2004), this
Court approved an instruction on good faith that was close to identical to the one
here. See id. at 967; see also Ninth Circuit Manual of Model Jury Instructions --
Criminal § 3.16 cmt. (2010).1 Though I believe Shipsey was wrong on this point, I
also recognize that it is controlling.
This Court should revisit Shipsey.2 But I don’t believe this case should be
the vehicle for doing so. I agree with the Court that the instruction here is subject
to review only for plain error, see United States v. Delgado, 357 F.3d 1061, 1065
(9th Cir. 2004), and so we would reverse only if the error were of a sufficient
magnitude to meet that standard. See id. Given the ample evidence of defendants’
bad faith as to all but one of the counts, I would say the error here was harmless.
1
United States v. Molinaro, 11 F.3d 853 (9th Cir. 1993), also approved a
similar instruction, but arguably did not do so in face of a challenge to the
instruction’s use of the word “may.” See id. at 863.
2
In the meantime, the drafters of our model instructions might revisit the
commentary to their model intent to defraud instruction. The Shipsey instruction
may be legally adequate, but district judges who want to do better should consider
instructing juries more clearly that good faith is a complete defense.
As to the remaining count, Count 15 against Jennings, I would reverse even
if I had no reservations about the instruction. I disagree with the majority’s
conclusion that there was sufficient evidence to support the conviction on that
count.
For the foregoing reasons, I respectfully concur in part and dissent in part.