Court Opinion

ID: 2827968
Source: CourtListenerOpinion
Date Created: 2015-08-18 16:03:34.332737+00
Date Added: 2024-06-11T11:31:29.088027
License: Public Domain

In the

    United States Court of Appeals
                For the Seventh Circuit
                    ____________________
No. 13-3747

UNITED STATES OF AMERICA,
                                                 Plaintiff-Appellee,

                                v.

LARRY PUST,
                                             Defendant-Appellant.
                     ___________________

        Appeal from the United States District Court for the
            Northern District of Illinois, Eastern Division.
       No. 1:10-cr-00859-2 — Sharon Johnson Coleman, Judge.
                    ____________________

   ARGUED OCTOBER 27, 2014 — DECIDED AUGUST 18, 2015
               ____________________

  Before WOOD, Chief Judge, and EASTERBROOK and
WILLIAMS, Circuit Judges.
    WILLIAMS, Circuit Judge. Larry Pust was convicted after a
jury trial of four counts of wire fraud. He and his co-
conspirator Robert Anderson ran a $10 million Ponzi scheme
for over two years getting clients to invest in a phony low-
income housing investment program in the Chicagoland ar-
2                                                 No. 13-3747

ea. He was sentenced to 34 months’ imprisonment to run
concurrently on each count. He now appeals his conviction,
arguing that the evidence was insufficient to establish that
he acted with intent to defraud the alleged victims. He also
challenges the district court’s decision to admit statements of
a co-conspirator under Federal Rule of Evidence
801(d)(2)(E). For the reasons stated herein, we affirm Pust’s
conviction.
                     I. BACKGROUND
    Larry Pust met a man named Robert Anderson sometime
before 2005. Robert Anderson was the owner and officer of
several corporations and ran different investment programs.
Pust lived in Spokane, Washington, and had no professional
experience as an investment broker. Nevertheless, Pust in-
vested $10,000 in one of Anderson’s programs and began
helping Anderson find investors for various other programs.
One such program was called Rosand Enterprises, Inc.
(“REI”), a supposed low-income housing program based in
Chicago. Pust and Anderson solicited funds from investors
for REI and guaranteed that the funds went into an attor-
ney’s escrow account, which was “absolutely secure.” They
told investors that the funds were only used as leverage to
secure lines of credit in order to construct and sell low-
income housing. The “guaranteed returns” were promised to
be as high as 20% each month. In actuality, no such program
existed. REI never purchased lots in Chicago and did not
participate in any government-sponsored low-income hous-
ing programs. Instead, Anderson and Pust ran a Ponzi
scheme where new investor funds were used to make inter-
est payments to old investors and to make purchases in se-
No. 13-3747                                                    3

curities trading programs which the defendants referred to
as Dr. Fred, Methwold, Lady Jane, and Howard Norris.
   In December 2011, Anderson and Pust were indicted for
wire fraud in violation of 18 U.S.C. §1343. Anderson pled
guilty, but Pust proceeded to trial. Before trial, the govern-
ment made a Santiago proffer to admit as evidence against
Pust statements of Anderson under FRE 801(d)(2)(E). See
United States v. Santiago, 582 F.2d 1128, 1130–31 (7th Cir.
1978). Defense counsel did not object pre-trial or during trial
as the statements were admitted. When the district court
asked defense counsel if he had any objections as the state-
ments were admitted, defense counsel responded “no” and
“no objection.”
    At trial, several of REI’s victim-investors testified regard-
ing conversations they had with Pust and Anderson. Other
evidence admitted at trial included numerous emails be-
tween Pust and Anderson, Pust and the victim-investors,
and Anderson and the victim-investors. At the conclusion of
trial in March 2013, a jury found Pust guilty of four counts of
wire fraud. This appeal followed.
                        II. ANALYSIS
   On appeal, Pust challenges the sufficiency of the evi-
dence underlying his conviction for wire fraud. He also chal-
lenges the district court’s decision to admit statements of
Anderson under FRE 801(d)(2)(E). We address each argu-
ment in turn.
   A. Sufficient Evidence to Support Wire Fraud Convic-
      tion
   When evaluating the sufficiency of the evidence, we con-
sider the evidence in the light most favorable to the prosecu-
4                                                    No. 13-3747

tion, making all reasonable inferences in its favor. United
States v. Paneras, 222 F.3d 406, 410 (7th Cir. 2000). We will af-
firm the conviction so long as any rational trier of fact could
have found the defendant to have committed the essential
elements of the crime. Id.
    In order to convict Pust for wire fraud under 18 U.S.C.
§1343, the government needed to prove that (1) there was a
scheme to defraud; (2) wires were used in furtherance of the
scheme; and (3) Pust participated in the scheme with the in-
tent to defraud. United States v. Sheneman, 682 F.3d 623, 628
(7th Cir. 2012); United States v. Stephens, 421 F.3d 503, 507 (7th
Cir. 2005). Here, Pust only challenges the sufficiency of the
evidence with respect to the intent to defraud element. “An
‘intent to defraud’ means that the defendant acted willfully
and with specific intent to deceive or cheat, usually for the
purpose of getting financial gain for himself or causing fi-
nancial loss to another.” Paneras, 222 F.3d at 410 (internal
quotations and citations omitted). “However, because direct
evidence of a defendant’s fraudulent intent is typically not
available, specific intent to defraud may be established by
circumstantial evidence and by inferences drawn from ex-
amining the scheme itself which demonstrate that the
scheme was reasonably calculated to deceive persons of or-
dinary prudence and comprehension.” Id. (citing United
States v. LeDonne, 21 F.3d 1418, 1426 (7th Cir. 1994)).
   Pust argues that to reasonably infer an intent to defraud
requires more than involvement in a scheme or repeating the
scheme’s misrepresentations or even persisting in selling the
scheme despite some awareness of areas of concern. He does
not challenge the fact that Anderson was running a Ponzi
scheme, but he claims that he did not know the fraudulent
No. 13-3747                                                  5

nature of the scheme and merely repeated misrepresenta-
tions that Anderson made to him. Pust acknowledges that he
told victim-investors that their money would be invested in-
to a low-income housing program, that no low-income hous-
ing investment program actually existed, that new investor
funds were used to pay old investors, and that other investor
funds were used to pay for unrelated securities trading. But
Pust says that there is no evidence that he did not believe the
misrepresentations were true.
    We disagree. The government presented ample evidence
from which a rational jury could find that Pust knew what
he was telling investors was false and that he acted with an
intent to defraud. Particularly, the emails exchanged be-
tween Pust and Anderson and between Pust and victim-
investors were evidence from which a reasonable jury could
infer that Pust knew no low-income housing project existed
and that REI investor funds were being taken out of the sup-
posedly secure escrow account and used for other trading
projects.
    FBI Special Agent Joseph Karmik testified that he re-
viewed approximately 7,500 email messages involving Pust’s
email addresses in the course of his investigation. None of
the messages the government examined between Pust and
Anderson discussed topics related to building low-income
housing like closing dates, purchase agreements, or con-
struction. Pust was in Spokane during the relevant events,
but he and Anderson communicated frequently through
email. If the two were truly involved in a program that built
low-income housing, over the course of 7,500 emails, one
would expect to see at least one email discussing the logistics
6                                                 No. 13-3747

of housing construction. So the jury was entitled to infer that
Pust knew the low-income housing project was a lie.
    Moreover, the government introduced many of these
7,500 emails at trial. For example, emails back and forth be-
tween Pust and Anderson show that Pust knew the funds
did not remain in the escrow account, even though Pust ad-
mits that he told investors that is where the funds would
stay. In emails dated February 21, 2007 and March 30, 2007,
Anderson discussed needing to repay the escrow account. In
the March 30 email, Anderson told Pust that he would use
the Methwold monies to “cover our March debts to the in-
vestors” and “[s]hould Fred get us caught up as he stated,
then I could catch up on the escrow.” Then, on January 9,
2008, Pust emailed victim-investor Brian Ford and told him
that the price of inner city lots had increased, which is why
the monthly interest had decreased to 10%. This email is one
of many in which Pust lied to investors about the existence
of the housing project. Additionally, on April 30, 2008, An-
derson and Pust exchanged emails regarding $175,000 they
received from a new investor. They discussed which inves-
tors should now receive payments as a result of the influx in
funds. The investors identified by Pust as needing payment
were both investors in the supposed low-income housing
project.
   We find Pust’s argument that he was an unwitting partic-
ipant in Anderson’s scheme unpersuasive. There was suffi-
cient evidence from which a reasonable jury could infer that
Pust knew the material facts that he represented to investors
were false and that he acted with intent to deceive.
No. 13-3747                                                     7

   B. Co-Conspirator’s Statements Properly Admitted
    Pust also argues that the district court erred in admitting
statements of Anderson under FRE 801(d)(2)(E). For a co-
conspirator’s statements to be admissible under FRE
801(d)(2)(E), the government must establish by a preponder-
ance of the evidence (1) that a conspiracy existed, (2) that the
defendant and the declarant were members of the conspira-
cy, and (3) that the statements were made in furtherance of
the conspiracy. United States v. Villasenor, 664 F.3d 673, 681–82
(7th Cir. 2011). Normally, we review the district court’s deci-
sion to admit a co-conspirator’s statements under FRE
801(d)(2)(E) for an abuse of discretion. Id. at 681. Under this
standard, findings of fact are reviewed for clear error. United
States v. Rea, 621 F.3d 595, 604 (7th Cir. 2010). However,
Pust’s attorney did not object to the admission of Anderson’s
statements at trial. Furthermore, when asked if he had any
objections to the statements, at times, the attorney said “no
objection” or “no.” Therefore, the government argues that
Pust has waived his right to challenge the admission of these
statements.
    “When a defendant intentionally relinquishes or aban-
dons a known right, the issue has been waived and cannot
be reviewed on appeal, not even for plain error.” United
States v. Locke, 759 F.3d 760, 763 (7th Cir. 2014). A defendant
who affirmatively states “I do not object” has intentionally
waived the right and cannot ask for review. Id. Forfeiture, on
the other hand, comes about through neglect. United States v.
Spells, 537 F.3d 743, 747 (7th Cir. 2008). Forfeited issues are
reviewed for plain error. Id. To reverse for plain error, this
court must find (1) error, (2) that is plain, (3) that affects the
defendant’s substantial rights; and (4) that seriously affected
8                                                  No. 13-3747

fairness, integrity, or public reputation of judicial proceed-
ings. United States v. Ambrose, 668 F.3d 943, 963 (7th Cir.
2012).
    In his reply brief, Pust argues that he may have forfeited
his challenge to the admissibility of Anderson’s statements,
but he has not waived the issue because there was no inten-
tional relinquishment. We agree with the government that
Pust has come very close to waiving his right to challenge
this issue because he was asked if he had any objections and
his attorney replied “no objection” or “no.” See United States
v. Natale, 719 F.3d 719, 730 (7th Cir. 2013). But in Natale, we
recognized the harshness of the waiver rule where defense
counsel’s statements likely resulted from negligently bypass-
ing a valid argument rather than a knowing and intentional
decision. See id. at 730–31. In circumstances where defense
counsel’s approval of some action is “nothing more than a
simple ‘no’ or ‘no objection’ during a rote call-and-response
colloquy with the district judge,” we suggested we could
more closely examine whether the defendant truly waived
his challenge or merely forfeited it. Id.
    However even if we were to find Pust’s challenge only
forfeited and subject to plain error review, Pust has not
demonstrated plain error. “To establish the existence of a
conspiracy, the offering party must show that there was an
agreement to commit some illegal act and the alleged con-
spirator knew ‘something of its general scope and objec-
tive.’” United States v. Mahkimetas, 991 F.2d 379, 382 (7th Cir.
1993) (citations omitted). To prove a defendant’s involvement
in a conspiracy, the government must show that (1) the de-
fendant knew of the conspiracy, and (2) the defendant in-
tended to associate himself with the criminal scheme. United
No. 13-3747                                                     9

States v. Schumpert, 958 F.2d 770, 773 (7th Cir. 1992). Circum-
stantial evidence may be used to establish the existence of a
conspiracy and a defendant’s involvement in the conspiracy.
Id. In fact, circumstantial evidence is often the only proof
available when no members of the conspiracy testify against
their co-conspirators. See id.
    Pust argues that the government failed to show that a
conspiracy existed between Anderson and himself because
there was no evidence that Pust knew the general scope and
objective of the conspiracy or that he had an intent to associ-
ate with the purported conspiracy. But we disagree. The
same evidence used to establish that Pust acted with an in-
tent to defraud—namely, the email correspondences—is cir-
cumstantial evidence from which the district court properly
inferred the existence of a conspiracy and Pust’s involvement
in that conspiracy. For example, emails show Pust and An-
derson discussing where to move investor funds and what
lies to tell investors about the mortgage industry when they
inquired about the decline in monthly interest payments
from the REI project. The emails provide compelling evi-
dence of Pust’s knowledge of and involvement in the
scheme. We agree with the government that Pust’s challenge
to the admission of Anderson’s statements is simply a rehash
of his challenge to the sufficiency of the evidence, and for the
same reasons we found the evidence sufficient to support
the verdict, we reject his evidentiary challenge. See United
States v. Yoon, 128 F.3d 515, 526 (7th Cir. 1997) (rejecting chal-
lenge to admission of co-conspirator statements under FRE
801(d)(2)(E) where essentially identical to sufficiency chal-
lenge). There was no error in admitting Anderson’s state-
ments.
10                                              No. 13-3747

                    III. CONCLUSION
    For the foregoing reasons, we AFFIRM the judgment of the
district court.