Evidence sufficient to convict defendant of running a fraudulent business but not sufficient to prove more than 10 victims
The defendant in U.S. v. Rodriguez was convicted and sentenced to 120 months for conspiracy to commit the crime of federal wire fraud. He raised two issues on appeal. First he argued the evidence was not sufficient to support the conviction. The evidence at trial showed that from 2003 through 2007 Rodriguez owned and operated four different companies that sold coffee machines and other vending machines to the public. His companies tried to generate sales by posting ads on the internet seeking investors looking to a own their own small business by offering investment in new coffee machine, vending machine or drinking water machine. Rodriguez or his associates induced customers to buy products by offering a number of guarantees. Sales people would routinely guarantee the amount of money that customers would make each day and how quickly they would recoup their money. They promised to provide advanced marketing analytics to secure high-end locations where machines would have plenty of potential patrons. The companies also promised technical support and assistance and if not satisfied they could return the machines for a full refund. These guarantees were too good to be true. The machines arrived in months rather than weeks, if they arrived at all. When they did arrive, many customers found they did not work or they cost more to operate than they had been advertised. The locations the machines were placed in were in remote locations rather than high-end venues and they could barely cover their operational costs. Many customers testified their machines generated zero profits or substantial losses. None said they were able to recoup the cost of the initial investment. When they asked Rodriguez for help with the machines, there was no technical support as promised. Rodriguez almost never honored the money back guarantee when customers asked for a refund. Furthermore, the evidence showed that Rodriguez knew that this was happening and yet he continued to sell the machines to customers and guaranteed profit figures he knew were not real. Even after receiving a cease and desist order from the Maryland Attorney General, he created new companies selling different machines. While trying to hide his ties to the earlier companies from his prospective customers.
To support a conviction for wire fraud the evidence must show the defendant intentionally participated in a scheme to defraud another of money or property and used or caused the use of wires for executing the fraud. Evidence to sustain a conspiracy conviction requires proof the defendant knew and willfully joined the unlawful scheme to defraud. While puffing or sellers talk is not a crime under the federal fraud statutes, fraud requires proof of a material misrepresentation or the omission of a material fact calculated to deceive another out of money or property. The evidence showed Rodriguez did not simply puff up the profitability of his machines to prospective customers, rather he made material misrepresentations of fact in the course of an ongoing scheme to defraud. Rodriguez guaranteed specific profit figures and provided a definitive time for when his customers would recoup their investments, and he did this knowing his representations were completely unfounded. He knew his sales associates did no research on the placement of the machines and placed them in haphazard locations. He was not just overstating the facts to sell his product but he was actively concealing relevant information from potential customers. This type of federal crime is commonly prosecuted in Miami and the Southern District of Florida.
Rodriguez argued against the 4 level enhancement based on the number of victims. At sentencing he argued the government only proved 10 victims. At the sentencing the government presented 42 affidavits from victims who suffered losses and presented a summary chart indicating there were 238 victims but it provided no witnesses nor did it provide any underlying data for the chart. The court erred in finding the offense involved more than 50 victims because the government presented no witnesses to authenticate what the chart represented, how it was prepare, or by whom. While the district court could consider trial evidence, there was no testimony or evidence tying the summary chart to any of the trial evidence. There was no witness to verify that the information on the chart was correct. The summary chart amounted to little more than an allegation by the government on a piece of paper that Rodriguez’ offense involved more than 50 victims.