Opinion ID: 77683
Heading Depth: 2
Heading Rank: 1

Heading: Count Two: Mail Fraud Against Richard Rabenstein

Text: 10 Count Two, the first mail fraud count, charged in the operative paragraph that: 11 In or about September, 2000, in the Middle District of Florida and elsewhere, the defendants, Artemus E. Ward, Jr., and Jeffrey Pipher, for the purpose of executing the aforementioned conspiracy to defraud, and for obtaining money and property by means of false pretenses, representations and promises, did knowingly mail and cause to be mailed a matter to be delivered by the United States Postal Service, a collateralized CEC promissory note to Richard Rabenstein, who had invested approximately $155,000 with the defendants. All in violation of Title 18, United States Code, Sections 1341 and 2. 12 The central document alleged in Count Two of the indictment—a promissory note mailed to victim Richard Rabenstein and dated September 1, 2000—was signed only by Pipher and not Ward. See Gov. Ex. 4. The note said that CEC promise[d] to pay . . . monthly interest payments on the principal sum of One Hundred Fifty Five Thousand Dollars ($155,000) at the rate of three and one half percent (3.5%) per month, which calculates to a rate of Forty two percent (42%), per annum. Id. At trial, the government produced ample evidence establishing that, although Ward was not responsible for actually mailing the promissory note listed in Count Two, he was substantially involved in a variety of other mailings and transactions with Richard Rabenstein, all designed to further the fraudulent scheme. 13 Richard Rabenstein's ill-fated business venture with CEC and Ward began when he responded in June 1999 to CEC's classified advertisement posted in the Investor's Business Daily. He called the number listed in the ad and spoke with Pipher, who soon thereafter mailed him a brochure signed by both Ward and Pipher. See Gov. Ex. 2. The introductory letter to the brochure, dated July 15, 1999, falsely represented that [f]or the past three and half years we have been involved in a very lucrative business in a burgeoning industry. Id. The letter promised the very high return of 42% on your loan dollars with a minimum $10,000 investment. Id. Indeed, the CEC Executive Summary, attached to the introductory letter, falsely said that [c]urrently CEC is servicing twelve dealers in greater San Diego and an additional two in the Los Angeles area—the limit of our current capitalization of approximately $400k. Id. The back page of the packet, marked Company Confidential, falsely listed seventeen car dealerships in San Diego County, ten of which had a dollar amount in the column titled Note Bal[ance]. Id. To assuage any doubts about CEC's legitimacy, Rabenstein was also provided with three references of ostensibly satisfied investors. 14 Additionally, on July 27, 1999, Ward sent Rabenstein a handwritten letter of invitation, bearing Ward's signature, to make an initial investment. Ward's handwritten letter on CEC stationery read in part: For your convenience I've enclosed a pre-paid return express-mail envelope. Because of the high interest we are paying it is important to place your funds with dealers ASAP. As such, you have 3 payment options: A) personal check[,] B) bank, or cashier's check[,] C) bank wire. Gov. Ex. 63. Rabenstein then used the enclosed prepaid U.S. Postal Service envelope to make his first investment of $25,000 by endorsing a personal check made payable to Pipher. In return, Rabenstein received an investor agreement signed again both by Ward and Pipher. 15 Rabenstein acknowledged that for the first few months after he invested with CEC, the interest payments would arrive on time each month. He then made an additional $70,000 investment with a check made payable to both Ward and Pipher. Rabenstein's investment, including promised interest payments that were rolled over into his principal investment but never paid, ultimately totaled $155,000. 16 The promissory note specified in Count Two (dated September 1, 2000) reflects the total amount that Rabenstein had invested. In a subsequent letter mailed to Rabenstein, dated November 25, 2000, this time signed by both Ward and Pipher, CEC explained how rolling interest payments would work. See Gov. Ex. 65. In March 2002, Ward called Rabenstein to tell him there would be an investor meeting in California to assure worried investors that they would be paid their interest and repaid their principal. According to Rabenstein's testimony, Ward said that all of the funds were intact. Around this time, Rabenstein noticed an advertisement in the classified section of Investor's Business Daily, dated March 11, 2002. The ad promised guaranteed residual income for life, 3-4% of investment paid monthly. 5 year track record. Rabenstein spoke with Ward about the new advertisements and Ward admitted that he had placed the ads and told Rabenstein that CEC was a fully operational, ongoing business. After Rabenstein began receiving numerous checks that bounced and noticing that missed payments were recurring, he contacted FBI Agent Michael DeLeon in March 2002 to complain about the conduct of CEC and its principals. 17