Opinion ID: 2735150
Heading Depth: 3
Heading Rank: 2

Heading: Defendants’ Appeals as to Count 5

Text: Lombardo and Barkus argue that there was insufficient evidence to support their conviction on count 5 because Rothgarn was not defrauded. According to the jury instructions, for a guilty verdict on count 5, the government had to prove beyond a reasonable doubt: First, the defendant knowingly did any one of the following: Employed any device, scheme or artifice to defraud, as detailed in Count 5; or made any untrue statement of a material fact or omitted to state a material fact which made what was said, under the circumstances, misleading; or engaged in a transaction, practice, or course of business that operated, or would operate, as a fraud or deceit upon any person. Second, that the defendant did so in connection with the purchase or sale of securities. Third, in connection with this purchase or sale, the defendant made use of or caused the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national security exchange. And, fourth, that the defendant acted with the intent to defraud. The government was able to prove through Rothgarn that the defendants engaged in securities fraud. Rothgarn made two investments in AuraSoothe in exchange for an equity interest in the company. Even though Lombardo instructed him to characterize his investment as - 13 - Case Nos. 12-4056; 4060 United States v. Lombardo and Barkus a loan on his checks, Rothgarn thought of it as an investment in the company. Rothgarn also used wire transfers for his second investment. He testified that he felt pressured by Barkus to invest the second time and was uncomfortable with the arrangement since he was borrowing from his 401(k) retirement plan. Rothgarn did not receive repayment by the terms of his purchase agreements despite multiple reassurances from the defendants that he would receive repayment, and only received $10,000 after repeatedly pressuring the defendants. Further, Lombardo contends that he did not make fraudulent statements about the company or the product, but the fact that he may not have made any misrepresentations regarding the product itself does not preclude a securities fraud conviction. The government produced sufficient evidence that the defendants misrepresented the nature of the investment.