Opinion ID: 2643963
Heading Depth: 3
Heading Rank: 2

Heading: Statements About Parking Money in Escrows

Text: The district court also found fault with the government's characterization of Benistar's representations of its business as involving parking money in escrows. This issue was not even adverted to in the defendant's objections. The court thought this characterization contravened its jury instruction that neither the contracts nor governing laws limited how a qualified intermediary could handle an exchangor's funds and improperly led the jury to believe that Carpenter had breached some agreement. Without restrictions either in statutes or in the contract, the court concluded, the government's argument was improper because no such representation [of having a limit to Benistar's ability to 'invest' funds] could be implied. We disagree and do not credit that conclusion of impropriety. 6 Carpenter argues that we should not limit our analysis to the three particular statements listed by the district court because, he argues, those instances were merely examples of a general theme of wrongdoing. We have considered the entire closing argument in context and disagree. -17- The government did not seek to have the jury convict on the basis that Carpenter was in breach of contract or transgressing a law regulating qualified intermediaries qua intermediaries. Rather, it sought to show that Carpenter had misrepresented his approach by pursuing a riskier investment strategy than exchangors would have expected from the representations made and the nature of their purposes in entering exchange contracts. And he knew his strategy differed from their expectations and he deliberately failed to correct or prevent those expectations. As the government argued, a § 1031 exchange is commonly viewed as a conservative transaction: it is generally pursued by someone who has chosen to invest in real estate and is primarily seeking to avoid capital gains liability rather than to obtain large, quick returns. Under the government's theory, this sort of investor would have expected the funds in the escrow accounts to be invested in safe assets like money market accounts or treasury bills. Such an investing strategy could fairly be described as parking money, particularly when exchangors were promised returns of 3% or 6% when much higher rates were available in riskier investment vehicles.7 By leading exchangors to believe 7 The district court took issue with the specific terms park and escrow account based on a theory, articulated in its order but not the subject of discussion at trial, of how banks operate. In fact, each exchangor signed a contract with Benistar entitled ESCROW AGREEMENT, and those documents themselves were before the jury. The court explained that an account is not a separate deposit box of money but merely an amount a bank promises to pay, -18- that Carpenter would take that approach but instead knowing that he would invest in riskier stocks or options, the government argued, Carpenter committed fraud. We see nothing wrongful in the manner in which the government presented that argument to the jury in this case.