review the record it was enormous we have a a month long trial here and in that trial the government never proved with enough evidence that mr smith knowingly joined in agreement commit fraud or that at least one act in furtherance was committed the government alleged between two thousand and three and eight just briefly that investors were induced by false statements in a failure to disclose material information and that they hired inexperienced people in drafted misleading reports that the record shows otherwise rogers what it shows is that target was a legitimate business that engaged in a speculative area of oil and gas production what we have here is a company that spent large sums of money to be successful the company was created in good faith the wife and the husband mr smith engaged in efforts with an attorney and a investors who had a certain amount of money and it's patient to engage in this sort of investment and that's a normal thing to do for a business for example that sells mercedes would not go after clientele that couldn't afford to do that and when you're talking about large sums of money like you are here you need to invest in people who are willing to do that then gauging legitimate accounting with an independent c p a and most importantly your honour's  target thrilled for the wells they said they would what you have here is a company that engaged an enormous amount of people and spent a lot of sums of money and used much whitman to drill when they said they would is not a situation where they simply took in money from investors and said see you later thanks for the money they are in there a lot of testimony about misrepresentation there was your honor but there was also a lot of testimony from investors who said they were not misrepresented they felt that target dealt fairly with them and in the brochures that they received your honor it said that this was speculative and they should consult with experts and that's why they targeted those the testimony shows that mr smith actually instructed the geologists not to lie to tell the truth any told regarding who was the primary geologist to only use truthful information after  been doing the prospect you can solve was that is correct your honor if there's any weakness in what happened it would be that but we what we don't have is if it was that a normal business practice or not mr gardner testify or mr gardner testify that he originally went to the well sites and self and eventually he did not but that he testified that the information he provided was truthful and he did not manipulate the information or provide inaccurate information because he doesn't know when it was true or not  the hours he did not himself but what he testified to was the source of the law on your own he relied on geological surveys done by of a geologists in terms of the geology of the geology goal information that he provided and now there is some sales involved in this i mean you know the brochures they didn't why is there puffing i don't know perhaps there was but that's not unusual the question is was there intentional fraud behalf of target and he said that twenty five percent of wells ever hit and only ten percent are commercially successful or i need a c e o he was a field manager your honor he testified that he had extensive field experience drilling wells so what we don't know is that is the witness of the government's case is we don't know what was normal i mean this almost reads like a civil case civil negligence case rather than a criminal case the government kept alleging fr target was able to counter with we drilled for these wells we drill for these wells which they did so we don't know when the government never prove that the workers the fraud we have it we have a man testifying that only ten percent of wells are commercially successful pockets was there a testimony as to what the division was between those there was your honor there was figures given as to what salaries were paid out i don't recall the exact numbers but they didn't seem abnormal  i want to say the principals over a five year period received six hundred thousand dollars in salary i recall correctly and a million dollars in bonuses which is a large sum but it's divided over a five year  period the rest of the money the accountant testified was used for with the exception of the royalties was used for drilling and legitimate expenses good like that and when i look at the figures you end up everything  a brief i won't read it all but you know we have people they engaged who did wire line data retrieval geophysical well logging field were acquired equipment they spent a lot of money to do this this was not a fraudulent operation where it was just some sham company we had people testifying at great length to the effort state they want to drill this stuff and so you know they're trying to be successful here beyond that he also owned to get a permit would be legitimate if one company can't do it because of violations i don't see any reason why the other put it that testimony was that any violations they had were minor based on not having the wells and most of is the argument essentially the same were is there something about the specific else that are different from the conspiracy the argument is the same your honor because what they sent out you know that the main thing they sent out w those brochures the sales pressures what geological information are going to be the same and that they drilled when they said they were going to drill and it was a speculative business and then investors were advised that it was indeed in the deficiency shall we say or morning your honour's jeffery blom representing appellant christopher smith i would like to reserve three minutes for rebuttal you may and christopher smith has asked me to emphasize in this argument that the reasons for his innocence are the same as for michael smith's and the son so it may sound like i'm talking on behalf of both of them but i do just represent christopher smith and one thing that i know my client would want is for me to supplement the answer to judge gilman's very good questions about the overall functioning of of target oil and gas first of all geologists do not pick well sites that's done by the company owners and surveyors and other people cause the primary concern with a specific well side as opposed to the general lease area has to do with accessibility to roads ease of drilling through the surface that kind of thing and what regard did was absolutely typical of the oil and gas industry it's the same thing stuff he had been doing for many many different clients of which target was the tenth largest wall and i need been doing this for thirty almost thirty years and that has to do with the using general geology the regional geology of the area taken from us geological surveys and so forth to say we recommend this well because it is in vis area and this area is relatively favorable for finding the oil and gas every one of those brochures was totally upfront about that there is no testimony of any lies or misrepresentations in the brochures garton was consistent in his testimony which is repeated through the briefs and even the kentucky board of registration for professional geologist concluding there is no difference between what's even in these reports and the kentucky geological survey the kentucky geological survey is the main geological survey and it's not frau t similarly there are some misstatement of figures the amount of money target paid out to investors during a certain limited indictment period was somewhat over one point five million not less than five million and i think this fifteen million figure had to do with the entire lifetime of target as a company i believe so it's not anywhere near that disproportion i know when the government started out they claimed only thirty seven thousand dollars was paid out to investors and then it turned out during this one period over that i thought it's the same but the brief has the correct answer and i don't remember it well enough right now the  this is a case where the panel can either affirm the convictions or affirm its belief in the federal rules of evidence but it really can't do because a number of practices were committed by the government in this case that struck at the very heart of what rules of evidence for a were about first was my co counsel pointed out it was never clearly stated anywhere what is the fraud one of the material misrepresentations what was the conspiracy none of that was ever clearly stated but on the other hand the government showed a hollywood movie the border room of ruined by a wall street firm and they didn't even show the whole movie they showed seven selected clips of that other not until the government's brief on appeal there was no testimony of those clips being shown the government's brief or mistakenly on page thirteen identifies these as clips shown to salespeople states attorney francis kept trying to admitted that she made the clips those clips never existed to show the target closers they were made before trial the purpose was not to influence investors it was to influence the court more training purposes won't no matter what that wouldn't justify putting in seven selected clips that reverse the message of the movie the movie is don't commit telemarketing fraud ah yes beyond put you in jail  case because the misrepresentations in the omissions that were delivered to these investors with were done with the intent to get in money regardless of whether or not all or gas was ever hit i mean i think we would agree the wells were drilled the wells that were an issue in this case were drilled but i don't think it made any difference to tar with oil whether those drilling programs were successful so long as they had the investor money and there's proof that say three fourths or two thirds of  smith was a salesman primarily and he was compensated on a commission basis here nearly a million dollars in commission on these sales so there was certainly a financial benefit to the principles of the company from the didn't matter if they hit oil or not in order to keep the scheme going they had to show that they were doing something if they had just taken the money put surely this was obviously the jury made its own determination but if i were looking at these numbers and they took in fifteen million and spent a million to drill and kept fourteen that looks like paul if they if they actually drill a six or eight or ten million then it gets a little gets a little closer doesn't that mean don't lots of oil companies take in fifty million drill and hit nothing they might i don't know what other oil companies do but the success of the fraud is not the point the point is where are the misrepresentations and omissions that these sales people in this company made to investors were they material and did they induce these investors to send the company money that whether it was used or not for drilling expenses or whether it went to the smiths bottom line the point is that they lied to these investors and how they got the money well there were multiple misrepresentations but to give a few examples shannon williams was the young geologist right out of college who was allowed to call himself a senior geologist a month or so on the job chris smith asked him to drop pools of oil on the ice so patch three d i saw a patch map representing oil that would be presumably recovered and williams testify that there was no geological basis for that he just drew it on the map it was sent to investors at christmas request likewise chris smith would make representations to investors with very specific sums of money that they could expect to receive from these in their words speculative joint programs if it's so speculative then any statement to an investor that you will receive for embellishing facts to omitting negative facts and in fact what he said was chris smith was the main closer and so if he was having difficulty closing the deal they would bring in chris smith to get on the phone with the investor and he would that argument it's believed to disclose when you have an obligation to disclose but usually you see this sort of big commercial prospectus documents that giving information and they're aware of material negative facts that would go to that investors decision and they're consciously withholding that information from the investor then that's that's an omission a material or mission think continue on for a very long and in fact they did it i mean i think that was the problem investors began complaining and and that's how this came to to a head i mean investors were not receiving their money back there were there was testimony from numerous investors about the amounts that they had put in and receiving nothing back or eight hundred dollars back something to that effect the when they ask you this question but we got half a million with there was another million but we need and no i think that that i think if i recall in the record there was a well that was quite successful and that well paid out good money to investors after the indictment period and so during the last calculation at sentencing the court used that fifteen hundred dollar figure gave them credit for royalties that were paid out after the scheme period so that even though they were indicted to shift the discussion if i could your honour's to the government's cross appeal and at issue here is the district court's decision to grant a motion for acquittal on count seventeen as to christopher smith as you know from the briefs the jury was instructed that they could find viability on the mail fraud counts either based on the defendant's personal involvement or based on the pinkerton theory of vicarious conspiratorial liability and  the evidence i think was overwhelming that chris smith was a part of this conspiracy the evidence was frankly there was no direct evidence of his personal involvement in the drilling program an issue account seventeen the jury convicted him like count seventeen by the quoted of the conspiracy charge and they also acquitted of a large number of individuals all right that's right and effectively they acquitted on all of the counts that were a time period subsequent to seventeen that's correct as well as a couple that were media prior to or seventeen and the judge dismissed number fifteen which was also the before that time period so in terms of consistency at least there's a certain consistency that seventeen is the only count that stands you know after early two thousand and six so number one where is the unit consistency and number two why is it important to begin to but if you prevail here everything you know well i think being consistency is that this gentleman chris smith was involved in the conspiracy and you had an instruction that if he was involved in a conspiracy and did not withdraw and the acts of his coconspirators were reasonably forseeable that they could find him liable to be had  raul months before they are well so he had left target oils employment but as a legal matter he never withdrew from the conspiracy it's not as if he went to the authorities and awarded them to the fraud or if he went to investors and told them look you've been hoodwinked he simply left employment with part of the oil so he was still in the conspiracy for illegal purposes and you know and as far as how you how you reconcile  smith move for acquittal the district court's obligation was to review the evidence and determine if he could have been convicted either based on his personal involvement or under a pinkerton theory and the district court concluded that you know there was not sufficient evidence to convict based on his personal involvement but the district court did not undertake any analysis under pinkerton and that's where we claim area honors the fact of acquittal on the conspiracy count alone being reasonably forseeable but here he was employed at the time they obtained the lease for this drilling program and he presumably knew that they were going to drill at this site i think the jury could infer that the count seventeen was i don't believe so i'm not sure the evidence was clear on that point only know that they had a lease to the general area which you say he only would have affirmatively known that they had a lease to the general area for x but th but there was a clear process not think the evidence showed there was a clear process that this company went through they have tamed a lease they selected a drilling site with the assistance of the owner of the property they apply for permits they put together a program where they solicited investors it may affect the restitution amount that chris smith may be ordered to pay reset and saying in terms of calculation of last year on their at sentencing the court the district court found that the amount of loss attributable to him was in excess of seven million one but as a as a practical matter that would be the effect as a legal matter there was a clear error here and that's the purpose of the appeal  we think in the law the six circuit where there where pinkerton instruction has been given to the jury even in the event of acquittal of conspiracy on the motion for acquittal the district court still still needs to no and here's why i think this is the point that the palace what was trying to make in that supreme court decision all you know from the jury verdict is that he was acquitted you don't know that they're all to that their conclusion was he was not a part of the liability could attach the district court is still obligated to review evidence to see if that was a basis for liability on the substantive count and there's two different legal theories two different sets of evidence that could that could sustain the conviction and here the district court only looked at one so that means his personal involvement in this drone program so if we if the judges found the essential elements beyond a reasonable doubt so could any rational trier of fact have found that chris smith was involved in this conspiracy and that the in the drilling program was reason effectively of saying the district judge did not answer that question he did not and he looked at the fact that he had left the employment i asked on the word withdrawn but correct no longer involved in the company in order to have any right or even  rational to have any direct involvement direct involvement or even any evidence of connection to this particular event and that is there wasn't anything that he did before you left that was connected to this event you rely on that he was still in the company potentially in the conspiracy at the time of the general things right correct right you have two minutes rebuttal runners just briefly in rebuttal the court for the government goes on in their argument about how the target of oil mr smith intentionally defraud investors that that's the weakness of their case it's true that the success of a fraud is is immaterial it's not an element but you have to have an intentional fraud and here we have a company that spent enormous psalms and hired an enormous amount of people to do a lot of work the record is so large because they had in part because they had to interview so many people who did work for them whether it was drilling or clearing roads or doing any kind of locating wells and  whatnot you know the government can cite no law that says what they're required to disclose i don't know that there is any here they didn't put on an expert to say what is required you know we have investor after perera who says hey i did research i don't get anything without checking it out and hey it's a bad investment but you know it was speculative other investors said the same thing we know this is a risky business that's what it is this is the oil business some people make it big some don't maybe they didn't run their company in the best way that's not for me to say i don't know and i'm not in that business but from the jury's point of view though if me doesn't prove he didn't kill somebody else and i agree judge but there are so many people who said they were defrauded and at the end of the day the evidence is the same for both of them the bush for both sides the bush years that sent out which is the  mail fraud didn't contain fraud they advise these savvy investors to do their research and that it was speculative and for that reason it wasn't fraud thank you thank you bluntly of three minutes  well the panel has certainly zero in on the big question what is the for a lot and the answer that the government gave was it was misrepresentations and omissions ok that's a good start what misrepresentations of what the idea of omitting not including state cease and desist orders certainly wasn't because those had nothing to do with these well projects all those were ballots you have to register in our state in order to solicit investors in our state and most of these small companies don't try for all fifty states they just accept the c n d and don't proceed there the case got going because the government confuse  do have to do with actual wrongdoing now what was the one specific example their best shot at the misrepresentation the for a while it was drawing a schematic diagram of a well  derrick imposed on top of an iso patch thickness map and the well included a black dot under it meaning this is an oil well we're going to drill for oil here no reasonable investor is going to look at that and say oh well the put posed well side is guaranteeing oil under the proposed well site because that wouldn't make any sense that is if you're talking about now is that the same thing  but then they put in sixty citations to the record of this roll out and i want through all of those and i did my best to summarize the actual testimony in twelve pages but look to the primary sources  sixty every one of their sixty citations was about something else i started or wal mart first so on and so forth nothing to do with fraud not a zero out of sixty nobody has a batting average bad not even our favorite baseball team playoff time zero out of sixteen means the government is really really stretching to find fraud and just can't find it anywhere and that's why they rely on things like the i saw patch thing in this map and it's schematic diagram of a pool of oil but the real testimony eight salesman all testified they were told not to lie no one says michael smith  christopher smith told me to lie ten drillers and other types of new employees like that say i work with target for years they look like a fully legitimate company in everything they did they didn't do the stuff that shady companies do that's