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Trial judge dismissed fraud charges against two for lack of evidence but court of appeals saw it differently

Five co-defendants including Matthew Wheeler were charged in federal court with wire fraud, mail fraud, and conspiracy in violation of 18 U.S.C. §§1341 and 1349 for their involvement in a telemarketing scheme to defraud stock investors.  Following an eight-week trial the jury found each defendant guilty on all counts.  However, post-trial, the federal trial judge granted the judgments of acquittal based on insufficient evidence as to two defendants, Wheeler and Long.  The three convicted defendants appealed their convictions while the government appealed the acquittal judgments.

The codefendants were charged with substantive mail and wire fraud and conspiracy to commit mail and wire fraud.   It alleged that the defendants played various roles in a telemarking scheme that tricked investors into making stock purchases and misappropriated their money while operating out of two phone rooms. Certain codefendants worked as salespeople using an alias.  Others had the role of managers, instructing salespersons on how to pitch a stock.  Others played the role a loaders, who would play the role of high-level executives pushing the buyer to purchase “institutional” shares.  Both phone rooms used and prepared written materials to aid their pitches to investors which contained inaccurate information but also included exaggerations and fabrications.  Using the press releases and scripts, salespeople made false representations to potential investors, stating they were paid only in company stock, did not work for commissions, and that important businesspeople or celebrities were involved in the company they were pitching.

The government’s evidence at trial came from codefendants who pleaded guilty, defrauded investors who bought stock from the defendants, and a confidential informant who took a job undercover in the Florida “boiler room”.

The appellate court reversed the trial court’s decision to dismiss the federal charges on the grounds that the government did not prove Wheeler and Long’s intent to defraud investors.  It agreed with the Government’s argument there was evidence they lied about their employer, lied about their compensation structure, and misled investors about the value if the stock they were selling.

Though the appellate court conceded the evidence was not overwhelming, viewing the evidence in the light most favorable to the government and drawing all reasonable inferences and credibility choices in the government’s favor, the evidence provided a basis for a reasonable jury to conclude that Wheeler and Long violated federal laws by scheming to defraud investors.  As to the federal conspiracy charge, the appellate court found sufficient evidence to support a finding that Wheeler and Long knew of a conspiracy to sell stock by lying to investors.  The evidence supported a jury’s verdict on the conspiracy counts.

The appellate court rejected the remaining codefendant’s arguments that there was insufficient evidence they lacked intent to defraud investors.  Though the evidence was not overwhelming as to one defendant, the appellate court found that a reasonable construction of the evidence showed the defendant intended to defraud victims by deceiving them about the stock.  As to another defendant, the appeals court found the jury could have drawn the inference that he made false claims about the stock knowing the claims to be false.

The Defendants also challenged the trial court’s denial of a motion for mistrial claiming the prosecutor acted improperly by the prosecutor attacking the defense’s theory of defense instruction during closing arguments.   While the appellate court thought this was a close question, it concluded the prosecutor could have reasonably believed his comments were proper, so it did not find grounds for a reversal.

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