Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-12-50526/USCOURTS-ca9-12-50526-0/pdf.json

Parties Involved:
Albert Greenhouse
Appellant
United States of America
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

JAMES LLOYD, AKA James V.

Lloyd, Jr., AKA James Vernon

Lloyd,

Defendant-Appellant.

No. 12-50499

D.C. No.

2:11-cr-00542-

JFW-1

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

JAMES LLOYD, AKA James V.

Lloyd, Jr., AKA James Vernon

Lloyd,

Defendant-Appellant.

No. 12-50500

D.C. No.

2:11-cr-00543-

JFW-3

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2 UNITED STATES V. LLOYD

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

PAUL BAKER, AKA Darwin Stanton

Baker, Jr., AKA Paul D. Baker,

AKA Paul Douglas Baker,

Defendant-Appellant.

No. 12-50509

D.C. No.

2:11-cr-00543-

JFW-4

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

DAVID NELSON, AKA David Paul

Nelson,

Defendant-Appellant.

No. 12-50514

D.C. No.

2:11-cr-00543-

JFW-11

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

ALBERT GREENHOUSE, AKA Albert

Michael Greenhouse,

Defendant-Appellant.

No. 12-50526

D.C. No.

2:11-cr-00543-

JFW-7

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UNITED STATES V. LLOYD 3

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

ROBERT KESKEMETY,

Defendant-Appellant.

No. 12-50566

D.C. No.

2:11-cr-00542-

JFW-4

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.

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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 evidentiaryerrors 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.

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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.

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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) byCinamour 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.

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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

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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 verylimited theatrical release. 

The investors received no return on the money they sent. 

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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 investmentsin 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

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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

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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,

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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

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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)).

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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. Keskemetymanaged 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

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UNITED STATES V. LLOYD 15

to 264 victims, raising $9.3 million. Keskemetycontends 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,

MatthewBryanWellman-Mackin, Morabito, andRobert Ramirez for their

roles as closers.

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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 boilerroom 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.

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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

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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

activitythe particular defendant agreed to jointly undertake,’” 

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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).

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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

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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

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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

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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 Keskemetyoperated 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

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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

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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.

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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).

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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

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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.

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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, producingmore 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

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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

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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.

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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

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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

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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.

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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 coldcalling 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

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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

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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

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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

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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”).

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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 victimimpact 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).

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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

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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.

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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 theywere 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

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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

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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 anymoney on

any of these investments?” Agler responded, “[n]o, I have

not.”

Baker and Nelson argue that Agler’s testimony

impermissiblyopined 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

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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 ofthe conspiracy. See, e.g., United States v. Mouzin, 785 F.2d

682, 692 (9th Cir. 1986) (“[B]efore a statement is that of a ‘coconspirator’ 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.

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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 maymeet 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

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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 orallypromised 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

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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 testimonymade 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.

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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 shortlyafter 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,10his 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.

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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. BiboRodriguez, 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

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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’sInterviewReport FormFD-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 (9thCir. 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.”).

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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

alreadycompleted 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

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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.

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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 allmovie telemarketing operations

are fraudulent. The government then used that conclusion as

evidence that Big Gunn’s telemarketing was fraudulent. 

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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

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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

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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 testimonyabout Nelson’s participation in reloading

conference calls.

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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 ofJenniferNakamori,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? Theymay 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

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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 testimonywere 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. 

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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

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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.

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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

materiallyfalse 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

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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

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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).

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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

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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)).

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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

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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.

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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 byintentionallyundertaking 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 knowinglyfalsifying “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

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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

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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).

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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

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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

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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 testimonyabout 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.

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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.

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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, especiallywhen 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

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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.

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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

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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

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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.

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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.

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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.

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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.

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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 historyby 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 historyscore 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

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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.

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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

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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).

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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.

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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.

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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.

StatutoryProvisions; 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).

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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,

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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

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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.

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