Court Opinion

ID: 3050739
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:32:29.092926+00
Date Added: 2024-06-11T12:06:03.624481
License: Public Domain

Case: 12-16001        Date Filed: 03/19/2014      Page: 1 of 28

                                                                       [DO NOT PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                              ________________________

                                     No. 12-16001
                               ________________________

                        D. C. Docket No. 0:11-cr-60150-MGC-1

UNITED STATES OF AMERICA,
                                                                           Plaintiff-Appellee,

                                            versus

DOUGLAS NEWTON,
                                                                        Defendant-Appellant.

                               ________________________

                      Appeal from the United States District Court
                          for the Southern District of Florida
                            _________________________

                                      (March 19, 2014)

Before ANDERSON, Circuit Judge, and MOODY* and SCHLESINGER,** District
Judges.

       *
          Honorable James S. Moody, Jr., United States District Judge for the Middle District of
Florida, sitting by designation.
       **
          Honorable Harvey E. Schlesinger, United States District Judge for the Middle District
of Florida, sitting by designation.
             Case: 12-16001     Date Filed: 03/19/2014   Page: 2 of 28

SCHLESINGER, District Judge:

      Defendant was the President, Secretary, and sole Director of Real American

Brands, Inc. (“RLAB”).        The Second Superseding Indictment alleged that

Defendant agreed to pay kickbacks to induce a pension fund to buy restricted

shares of RLAB’s penny stock. When informed that the pension fund would no

longer purchase any more of RLAB stock, Defendant conspired with a friend, Yan

Skwara, to pay the same kickbacks for the purchase of stock in Skwara’s company.

Unbeknownst to Defendant, the pension fund was fictitious and he was speaking

with undercover FBI agents.

      Defendant was charged by a seven-count Second Superseding Indictment.

Counts 1 and 2 alleged that Defendant knowingly and with intent to defraud,

devised a scheme and artifice to defraud and to obtain money and property by

means of materially false and fraudulent pretenses, and that, in furtherance of that

scheme, “did knowingly cause to be delivered certain mail matter by a private

carrier,” in violation of 18 U.S.C. § 1341 and 2. Counts 3 and 4 alleged that

Defendant knowingly, willfully, and unlawfully, employed a device, scheme, and

artifice to defraud in connection with the purchase and sale of securities, in

violation of 15 U.S.C. § 78j(b), 15 U.S.C. § 78ff(a), 17 C.F.R. § 240.10b-5, and 18

U.S.C. § 2. Count 5 alleged conspiracy to commit securities fraud, in violation of

18 U.S.C. § 371. Counts 6 and 7 alleged securities fraud, in violation of 15 U.S.C.
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§ 78j(b), 15 U.S.C. § 78ff(a), 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2. Defendant

was convicted on all counts and was sentenced to 30 months’ imprisonment

followed by one year of supervised release.

I. Background

      On March 24, 2009, Defendant met, for the first time, with FBI Agent

Robert Strickland, who was posing as “Robert Scott,” the President of Northern

Springs Capital Group (“NSCG”).           Richard Epstein introduced Defendant to

Strickland. Defendant and Epstein had done deals in the past, and the three men

met in Epstein’s home in South Florida.

      Defendant introduced himself as the founder of Billy Martin’s USA, a

“western lifestyle retail company,” which later changed its name to RLAB. RLAB

owned the Billy Martin’s USA brand and operated a Billy Martin’s retail boutique

at Trump Plaza in New York City. RLAB was a publicly-traded company with

common stock traded on the “pink sheet” market under the ticker symbol “RLAB.”

Defendant told Strickland that he was able to offer five hundred million shares of

stock in his company, that 135 million shares of “mostly all restricted stock” had

been issued, and that as the “sole director and CEO,” Strickland would not have to

“deal with anybody other than me.”

      Epstein told Defendant that he and Strickland had “found a way” to “get

money.” Epstein explained to Defendant that he and Strickland had been doing
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some “very interesting deals lately,” which had been a “win, win, win situation for

all those involved.” Strickland cautioned that this would be a “sensitive deal” and

asked Defendant “to kind of keep it amongst ourselves.” Strickland explained that

“this thing that I have is kind of the goose that . . . laid a golden egg for me,” and

that he and the “limited number of other people who” were involved “can’t really

afford to let it get out.” Defendant promised to keep their discussions confidential.

Strickland told Defendant that he had a close personal friend named Chris Russo

who was a senior executive of a national retail chain and served as the trustee of

the employee pension fund. As the trustee, Russo could control the pension fund

manager, whom Russo had hired and placed in that position. Russo and the fund

manager had discretion “over every cent of the fund” and were able to provide

“opportunities” to buy stocks in companies like Defendant’s. Generally, Russo

would cause the pension fund to buy $20,000 to $30,000 worth of stock at a time.

Because RLAB stock was so thinly traded, Strickland explained that the pension

fund would buy restricted shares so that it would not raise “red flags,” meaning

unwanted scrutiny from securities regulators. Strickland told Defendant that “what

these guys do is, they do things in a very measured fashion, so as to not draw any

suspicion at all.” Strickland stated that the pension fund would purchase $20,000

worth of stock “about once every three weeks.” Once the stock was purchased, it

would “be buried,” meaning it would not be sold. Strickland said this to assure
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Defendant that the stock would not be sold all at once and depress the price.

      In exchange for the pension fund’s purchase of $20,000 of RLAB restricted

stock, Defendant would be required to pay a 30% kickback of $6,000, to be

divided among Strickland, Russo, and the fund manager. The $6,000 kickback

would be disguised as Defendant’s payment for “consulting” services, and they

would sign a phony consulting agreement in case they were ever questioned by the

FBI or the SEC. Defendant agreed, noting that “on the very off chance” that he

was ever questioned about the $6,000 payment, he could claim it was for

consulting services. Strickland emphasized that despite the consulting agreement,

Defendant and his company would not receive any actual consulting services.

      Strickland and Defendant agreed that the pension fund would purchase

$20,000 of restricted stock at the market “ask” price for free-trading shares of .005

per share, which was higher than the “bid” price of .003 per share. Strickland

explained that the purchase price of the RLAB stock, and whether the stock price

ultimately rose or fell, was frankly irrelevant to him and Russo. They only cared

about the $6,000 kickback payment. When Defendant said that he thought Russo

would be happy about the prospect of investing in an American company,

Strickland responded: “Chris is gonna be happy about getting paid.” Defendant

responded, “Now I didn’t hear that.” Strickland laughed, and Defendant added, “If

he gets, you know, I mean that’s fine. He’ll get, he’ll get happy.”
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         Strickland could only “guarantee” an “initial deal” of $20,000, but that there

was the possibility that the pension fund would continue to buy stock in the future.

Defendant was interested in more deals and stated he wanted to “have more fun,

make more money.”

         Strickland and Defendant called Chris Russo on speaker phone. Russo, an

undercover FBI agent, confirmed that he would get the pension fund to pay

$20,000 for 4,000,000 restricted shares of RLAB stock in exchange for

Defendant’s payment of a 30% kickback. Russo emphasized the confidentiality of

the deal, warning that “as far as we’re all concerned here, um, we, we never had

this discussion, and our relationship shouldn’t really be discussed.” After the

phone call ended, Defendant asked Strickland, “what was the reason why he said

we didn’t have this discussion?” Strickland replied, “well, it’s the uh, the thirty

points.” Defendant replied, “I hear ya. I hear ya. Well, that and that never even

came up. I didn’t know about that,” and “I’m not making any connection between

the two.” Referring to the phony consulting agreement, Defendant added, “the

consulting firm has already benefitted me immensely.”

         Later that same day, Russo, on behalf of the purported pension fund,

“Benefits and Pension Group,” and Defendant, on behalf of RLAB, signed a

subscription agreement for the purchase of 4,000,000 shares of restricted RLAB

stock.     Strickland, as “Robert Scott,” and Defendant signed a “consulting
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agreement” between RLAB and a shell company called “Great Lakes Advisors,

LLC” (“Great Lakes”). Defendant promised to maintain the fiction that there was

no connection between his deal with Russo and the phony consulting agreement.

Defendant suggested that if he and Strickland were ever talking on the phone about

the deal when somebody walked into his office, Defendant would start talking

about baseball as a code to indicate that he could not talk openly about their

scheme. Defendant added that he wanted the scheme “to be bigger than just uh

you know, um, a monthly deal.”

      A. First RLAB Stock Purchase

      On March 25, 2009, the next day, Defendant mailed Strickland a $6,000

check, from the Billy Martin’s USA account, made payable to Great Lakes. The

same day, the pension fund wire transferred $20,000 to Defendant for the purchase

of 4,000,000 shares of restricted RLAB stock. On March 30, 2009, Defendant

mailed a certificate for 4,000,000 restricted shares of RLAB stock, issued to

Benefits and Pension Group.

      Epstein wanted $5000 worth of stock for every $20,000 worth of stock the

pension fund purchased to compensate him for introducing Defendant to

Strickland. On March 30, 2009, Defendant issued 1,000,000 restricted shares of

RLAB stock to Epstein.

      Although they had signed a consulting agreement, neither Strickland nor
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Great Lakes ever provided consulting services to Defendant, RLAB or Billy

Martin’s USA.      Nevertheless, Defendant sent Strickland numerous e-mails

referring to the consulting services Strickland had provided about the company’s

new clothing lines and retail locations. Strickland chuckled when he received the

e-mails, knowing they were Defendant’s attempt to conceal the kickback as

payment for his consulting services.

      B. The Second RLAB Stock Purchase

      On April 7, 2009, Russo, on behalf of Benefits and Pension Group, signed a

second subscription agreement for the purchase of 2,222,222 restricted shares of

RLAB stock, at that day’s price of .009 per share, for a total of $20,000. This

agreement was in exchange for Defendant’s payment of a 30% kickback to

Strickland, Russo, and the pension fund manager.

      On April 8, 2009, Defendant mailed Strickland a $6,000 check, from the

Billy Martin’s USA account, made payable to Great Lakes. The same day, the

pension fund wire transferred $20,000 to Defendant for the purchase of 2,222,222

shares of restricted RLAB stock.       Defendant mailed, by Federal Express, a

certificate for 2,222,222 restricted shares of RLAB stock to Benefits and Pension

Group.

      After the second purchase and kickback, Defendant continued to send

Strickland e-mails referring to Strickland’s suggestions about his new apparel line,
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retail locations, and a trade show in Las Vegas. Strickland never gave Defendant

any such advice or suggestions about his company.

      On April 13, 2009, Defendant sent Epstein a certificate for 2,000,000

restricted shares of RLAB stock. Defendant enclosed a note stating that he wanted

Epstein to “have additional stock incentive and ownership in RLAB based on the

contributions you have been making and are making to the continued growth and

implementation of RLAB’s new business plan.”

      Defendant met with Strickland and Epstein in South Florida for a second

time on April 28, 2009. Defendant said that he had traveled to Florida to “check

with my consultant Great Lakes,” and that if anyone ever questioned “what am I

doing with Great Lakes, why am I writing checks,” he wanted to have “a fine

record of what we’ve done to justify et cetera, et cetera.” Defendant announced

that he had brought a “fancy looking agenda” to the meeting, and suggested they

could “dispense with” the consulting in “about thirty seconds.”         Defendant

commented, “I wanna make sure that everything looks cool with my, uh, with my

consultant Great Lakes Advisors, yada, yada, yada, okay.”

      Strickland remarked that he liked Defendant’s effort to create a phony

agenda to conceal the scheme. Epstein noted, “this is a great cover your a-- piece

of paper.” While Defendant spoke about his ideas for the development of a new

line of denim apparel and new boutique locations, Strickland never offered any
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comment, advice, or consulting services.

       Defendant wanted the pension fund to buy more stock in his company and

brought a blank subscription agreement and “consulting” agreement between

“Stock Services LLC” and RLAB.                  Defendant, Strickland, and Epstein also

discussed ways to increase RLAB’s trading volume and stock price. Defendant

stated, “I am not interested in getting dumped, okay, I would like to find the right

people to do a, a, a, I don’t wanna say a pump and dump,” and Epstein replied,

“let’s call it a push,” and Defendant characterized it as a promotional benefit for

his shareholders.”1 Epstein observed that increasing the stock’s trading volume

“would probably win you some brownie points with the fund,” and Strickland

agreed that it would “lower the scrutiny” of SEC regulators. Defendant told them

that he had been making an effort to increase the trading volume of the stock.

Defendant, Strickland, and Epstein also discussed other ways to manipulate the

market, such as the payment of brokers to push the stock, and the disclosure of

company press releases to Russo before they were made public. Epstein warned

that they should not talk about these things over the phone or in e-mails.

       Meanwhile, Defendant continued to send e-mails to Strickland referring to

       1
           A “pump and dump” is a money-making scheme where one drives the price of a stock
up to a certain level and immediately sells it once it hits a certain price. A stock is “pumped” or
“pushed” when the price is pushed up, and a stock is “dumped” when a large number of shares
are offered for sale.
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consulting work that Strickland never provided. For example, in a May 27, 2009

e-mail, Defendant thanked Strickland for his “good input on this new product.”

Strickland never provided any such advice.

      C. Defendant’s Use of the Proceeds

      Between March 25, 2009, and June 22, 2009, Defendant’s participation in

the fraudulent scheme netted him $14,000 from each of the two RLAB stock sales

($20,000 purchase price minus his $6,000 kickback), plus $6,000 from Yan

Skwara, for a total of $34,000. During that same time period, Defendant wrote

checks on the Billy Martin’s USA account for his own personal expenses,

including his homeowners’ association, his country club, his residential gas and

electric bills, and the rent on his son’s apartment.

      On the other hand, between April and August 2009, Defendant paid only

$13,000 of the approximately $196,620 that Billy Martin’s USA owed in back rent

for its retail space in Trump Plaza.

      D. Yan Swara

      On April 29, 2009, Strickland called Defendant to tell him that Russo had

decided against the pension fund’s purchase of any more RLAB stock. Strickland

explained that Russo was very upset that the trading volume was so high, which he

feared would attract unwanted attention. Defendant asked whether Strickland and

Russo would be interested in doing the same scheme with other public companies,
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and suggested his friend, Yan Skwara.

      Skwara, who lived in San Diego, was the CEO, President, Secretary, and

Treasurer of U.S. Farms, Inc. (“USFM”). USFM was a farming and nursery

company that grew aloe vera plants and marketed aloe-based products. Skwara

also had a small consulting business. Skwara had met Defendant in late 2008.

       Defendant told Skwara that he had a relationship with people in Florida who

had caused a large pension fund to invest in RLAB, and he offered to arrange for

the pension fund to invest in USFM. USFM’s stock was publicly traded on the

over-the-counter “pink sheet” market under the ticker symbol “USFM.” It was

thinly traded and considered to be a “penny stock” because its price was between

one and three cents a share. Its investors were mostly private individuals, and it

had never had any large institutional investors. Skwara was interested in having a

large institutional investor, like a pension fund, invest in his company.

      Defendant told Skwara that if the pension fund agreed to invest in USFM,

Skwara would be required to pay a kickback to the people controlling the pension

fund, which would be concealed by a phony consulting agreement. In addition,

Defendant wanted $6,000 for making the introduction. Defendant described this to

him as an “opportunity for both our companies to make some money” and was

“anxious to see this come through.” Skwara understood that the pension fund

would invest in his company “primarily due to the kickback, not so much on the
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fact that the company had merits.”

      Defendant and Strickland arranged for Skwara to travel to Florida for a

meeting. Defendant gave Strickland some personal information about Skwara and

promised to provide directions to Epstein’s house.

      Skwara flew to South Florida and met with Strickland and Epstein at

Epstein’s home on May 28, 2009. Strickland, again posing as Robert Scott, told

Skwara that he had a relationship with the trustee of a large pension fund, and that

in exchange for a 30% kickback paid to Strickland, Russo, and the pension fund

manager, the pension fund would buy USFM stock. Strickland and Skwara agreed

that the kickback would be concealed as payments to a consulting company, Great

Lakes, although there would not be any actual consulting work performed.

       E. The First USFM Stock Purchase

      Skwara signed a consulting agreement with Great Lakes, and on June 5,

2009, he mailed Strickland a $6,000 check for the kickback. Great Lakes never

provided any consulting services to USFM. The same day, the pension fund wire

transferred $20,000 to USFM for the purchase of 1,000,000 restricted shares of

USFM stock. On June 15, 2009, 1,000,000 restricted shares of USFM stock were

issued to Benefits and Pension Group.

      To compensate Defendant for Skwara’s introduction to Strickland, between

June 8, 2009 and June 22, 2009, Skwara sent Defendant four cashier’s checks,
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totaling $6,000, made payable to Billy Martin’s USA.

      F. The Second USFM Stock Purchase

      On July 10, 2009, 2,000,000 restricted shares of USFM stock were issued to

Benefits and Pension Group. On July 14, 2009, the pension fund wire transferred

$20,000 to USFM for the purchase of that stock. On the same day, Skwara mailed

Strickland a $6,000 check, made payable to Great Lakes, as the agreed-upon

kickback payment. Skwara also caused 200,000 restricted shares of USFM stock

to be issued to Epstein as part of the kickback scheme.

      Skwara subsequently pleaded guilty to conspiracy to commit securities

fraud. He testified for the government at Defendant’s trial.

II. Issues Presented

      Defendant raises five issues on appeal.2           First, Defendant maintains his

convictions must be vacated because the government failed to prove the offenses

charged in the indictment. Second, according to Defendant, his Count 7 conviction

must be vacated because the sole co-conspirator testified that he had no agreement

with Defendant regarding that transaction.            Third, cumulative error deprived

Defendant of a fair trial. Fourth, Defendant argues that the District Court erred by

improperly calculating the intended loss amount under U.S.S.G. § 2B1.1(b)(1)(E).

      2
          Defendant’s issues have been reordered for convenience.
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Fifth, and finally, Defendant maintains the District Court erred by imposing a

position-of-trust enhancement under U.S.S.G. § 3B1.3.

III. Standards of Review

      “‘We review challenges to the sufficiency of the evidence de novo,’” and ask

“‘whether a reasonable jury could have found the defendant guilty beyond a

reasonable doubt.’” United States v. House, 684 F.3d 1173, 1196 (11th Cir. 2012)

(quoting United States v. Mercer, 541 F.3d 1070, 1074 (11th Cir. 2008)).

      A challenge to the sufficiency of the evidence to sustain a defendant’s

conviction is reviewed de novo. United States v. To, 144 F.3d 737, 743 (11th Cir.

1998). “But where a defendant ‘present[s] his case after denial of a motion for

judgment of acquittal’ and then ‘fails to renew his motion for judgment of acquittal

at the end of all of the evidence,’ we review the defendant’s challenge to the

sufficiency of the evidence for a manifest miscarriage of justice.” House, 684 F.3d

at 1196 (quoting United States v. Jones, 32 F.3d 1512, 1516 (11th Cir.1994)).

“This standard requires us to affirm the defendant’s conviction unless ‘the

evidence on a key element of the offense is so tenuous that [the] conviction [is]

shocking.’” Id. (quoting United States v. Milkintas, 470 F.3d 1339, 1343 (11th

Cir.2006)). “‘In making this determination, we must view the evidence in the light

most favorable to the government and accept all reasonable inferences and

credibility determinations that support the jury’s verdict.’” Id. (quoting Milkintas).
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      To demonstrate plain error, the defendant “must show that there is (1) error

(2) that is plain and (3) that affect[s] substantial rights.”         United States v.

Lejarde-Rada, 319 F.3d 1288, 1290 (11th Cir. 2003) (internal quotations and

citations omitted). “If all three conditions are met, an appellate court may then

exercise its discretion to notice a forfeited error, but only if (4) the error ‘seriously

affect[s] the fairness, integrity, or public reputation of judicial proceedings.’” Id.

      Claims of prosecutorial misconduct are ordinarily reviewed de novo. United

States v. Eckhardt, 466 F.3d 938, 947 (11th Cir. 2006). But when a defendant has

failed to assert a contemporaneous objection to the alleged misconduct, plain error

review applies. United States v. Newton, 44 F.3d 913, 920 (11 Cir. 1995); United

States v. Hernandez, 921 F.2d 1569, 1573 (11th Cir. 1991).

      We review the district court’s amount-of-loss calculation for clear error.

United States v. Nosrati-Shamloo, 255 F.3d 1290, 1291 (11th Cir. 2001). Clear

error will be present when we are “left with a definite and firm conviction that a

mistake has been committed.” United States v. Crawford, 407 F.3d 1174, 1177

(11th Cir. 2005) (citation omitted). We review de novo the question of whether the

district court properly determined a defendant’s relevant conduct under U.S.S.G. §

1B1.3. United States v. McCrimmon, 362 F.3d 725, 728 (11th Cir. 2004).

      We review for clear error a district court’s “factual determination that a

defendant abused a position of . . . trust.” United States v. Garrision, 133 F.3d
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831, 837 (11th Cir. 1998). But the district court’s “conclusion that the defendant’s

conduct justifies the abuse-of-trust enhancement is a question of law” reviewed de

novo. Id.

IV. Discussion

       A. Trial Issues

       The government, according to Defendant, never established the central

allegation in this case—that the stock was sold at an artificially inflated price. The

difficulty for Defendant, however, is that defense counsel did not renew his motion

for judgment of acquittal at the close of the defense case. Due to this, we may

reverse “only to prevent a manifest miscarriage of justice.” House, 684 F.3d at

1196. “This standard requires us to affirm the defendant’s conviction unless the

evidence on a key element of the offense is so tenuous that [the] conviction [is]

shocking.”   Id. (internal quotations omitted).     As discussed below, evidence

supports Defendant’s convictions beyond a reasonable doubt, and Defendant fails

to demonstrate that his convictions are shocking or a manifest miscarriage of

justice.

       Moreover, the record refutes Defendant’s assertions. The evidence at trial

established that the 30% kickbacks made the price of the stock irrelevant. The

parties involved cared only about the kickback payments, not the stock price. In

addition, because of the kickbacks, the pension fund purchased restricted shares at
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the higher price set for freely-traded shares. Thus, the kickback itself artificially

increased the stock price. The pension fund paid $20,000 for stock that should

have cost only $14,000—absent the $6,000 bribe. Ample evidence existed for the

jury to conclude that the fraudulent scheme caused the pension fund to pay inflated

prices for the restricted shares of stock.

      Likewise, Defendant’s contention that there was no evidence that he made

any misrepresentation material to the fraud lacks merit. A “scheme to defraud” has

been broadly defined, and it may include more than fraudulent misrepresentations.

United States v. Svete, 556 F.3d 1157, 1161-62 (11th Cir. 2009) (en banc). “‘A

scheme to defraud need not be carried out to constitute a violation of the mail and

wire fraud statutes. These statutes punish unexecuted, as well as executed,

schemes.’” United States v. Ross, 131 F.3d 970, 986 (11th Cir. 1997) (citing

Pelletier v. Zweifel, 921 F.2d 1465, 1498 (11th Cir. 1991). “The Government

merely needs to show that the accused intended to defraud his victim and that his

or her communications were reasonably calculated to deceive persons of ordinary

prudence and comprehension.” Id. (internal quotation and citation omitted).

      The evidence here demonstrated that Defendant engaged in a scheme to

defraud the pension fund beneficiaries by making undisclosed kickbacks to induce

the purchase of stock at inflated prices. While the undercover FBI agents initiated

the deal and proposed the terms, Defendant voluntarily joined the scheme, and then
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urged Skwara to participate for Defendant’s own gain. Furthermore, Defendant

attempted to conceal the kickback agreement with a fictitious consulting

agreement, and numerous e-mails referring to advice he never received. Finally,

Defendant’s words and conduct, as captured on the recorded tapes played at the

trial, demonstrated his intent to defraud the pension fund investors. Accordingly,

there was no miscarriage of justice.

      Defendant also maintains the prosecutor’s comments to the jury

constructively modified the indictment. “It is well settled that a defendant enjoys a

Fifth Amendment right to be tried on felony charges returned by a grand jury

indictment and that only the grand jury may broaden the charges in the indictment

once it has been returned.” United States v. Sanders, 668 F.3d 1298, 1309 (11th

Cir. 2012) (citing Stirone v. United States, 361 U.S. 212, 215–16 (1960)). A

constructive amendment to an indictment occurs “when the essential elements of

the offense contained in the indictment are altered to broaden the possible bases for

conviction beyond what is contained in the indictment.” United States v. Keller,

916 F.2d 628, 634 (11th Cir. 1990). A constructive amendment is present when

“the jury instructions modify the elements of the charged offense so much that the

defendant may have been convicted on a ground not alleged by the grand jury’s

indictment.” Sanders, 668 F.3d at 1309.

      There was no constructive amendment here.           The Second Superceding
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Amended Indictment alleged a fraudulent scheme pursuant to which a 30%

kickback would be paid to induce the pension fund to buy stock at an artificially

inflated price. That is what the government argued to the jury that the evidence

proved.

      While the prosecutor mentioned “pump and dump” schemes and insider

trading in his closing argument, the jury was never urged to convict Defendant on

those theories.   Finally, the District Court properly instructed the jury on the

elements of mail fraud, securities fraud, and conspiracy.

      Defendant maintains that his conviction for Count 7 must be set aside

because Skwara’s second transaction with the pension fund was outside the scope

of Defendant’s criminal agreement.       Count 7 alleged securities fraud base on

Skwara’s second sale of USFM stock to the pension fund. However, Defendant

asserts that due to Skwara’s testimony that he and Defendant had no agreement for

this transaction, the conviction must be reversed.

      The evidence demonstrated that the scope of Defendant’s agreement with

Skwara was not limited to the first purchase of USFM stock in June, 2009. Skwara

explained that when Defendant first approached him, he told Skwara that “this is

an opportunity for both our companies to make some money and help our

companies” and “indicated that if the pension fund liked the deal, that they could

be a long-term investor in the company.” Defendant provided the introduction of
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Skwara to the undercover agents, and coordinated Skwara’s travel to meet with

them. The jury could have understood this to mean that Defendant anticipated the

pension fund’s “long-term” investment in USFM stock, not a one-time transaction,

and Defendant’s continued involvement. Accordingly, the Count 7 conviction

need not be set aside.

      Defendant maintains that cumulative errors mandate a new trial. While

Defendant asserts a number of errors, only two arguments merit discussion. First,

that the District Court allowed inadmissable hearsay testimony from FBI Agent

Sputo. Second, that government argued that Defendant was guilty because Skwara

had pled guilty to the same offense.

      According to Defendant, the District Court abused its discretion by allowing

inadmissable hearsay testimony from FBI Agent Sputo that Defendant used

corporate funds to pay for his homeowners’ association, county club, son’s

apartment and other personal expenses.

      Following a review of the record, we determine that Sputo’s testimony was

not improperly admitted. Sputo testified that based on his review of bank records,

Defendant had used corporate funds to pay for his homeowners’ association,

country club, son’s apartment, and other personal expenses. Such testimony was

permissible for a lay witness consistent with Federal Rule of Evidence 701. See

Agro Air Assocs., Inc. v. Houston Cas. Co., 128 F.3d 1452, 1456 (11th Cir. 1997)
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(finding that, pursuant to Rule 701, a lay witness is entitled to testify about their

“opinions or inferences” which may be helpful to give a clear understanding of the

witnesses testimony). Furthermore, Sputo was subject to cross-examination on this

testimony, therefore “any objection to the testimony went to the weight of the

evidence, not to its admissibility.” Id.

      Even assuming, arguendo, that this testimony was mistakenly admitted, an

erroneous evidentiary ruling does not require reversal if the resulting error was

harmless. “[A] non-constitutional error is harmless if, viewing the proceedings in

their entirety, a court determines that the error did not affect the verdict, or had but

very slight effect.” United States v. Arias, 431 F.3d 1327, 1338 (11th Cir. 2005)

(quotation omitted). “Overwhelming evidence of guilt is one factor that may be

considered in finding harmless error.” United States v. Phaknikone, 605 F.3d

1099, 1109–11 (11th Cir. 2010). Therefore, even if we were to conclude that any

of Sputo’s testimony was inadmissible hearsay, the error would be harmless in

light of the overwhelming evidence of mail and securities fraud presented at trial.

      The government argued, according to Defendant, that Defendant was guilty

because Skwara had pled guilty to doing the same. The prosecutor compared

Defendant’s and Skwara’s conduct, and reminded the jury that Skwara admitted

that he had committed fraud.

      “It is a well-accepted principle that ‘evidence about the conviction of a
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coconspirator is not admissible as substantive proof of the guilt of a defendant.’”

United States v. Mitchell, 1 F.3d 235, 240 (4th Cir. 1993) (internal citation

omitted).     However, that did not occur in this case.              We have reviewed the

comments that Defendant finds objectionable, and conclude these statements,

while possibly not advisable, were not erroneous and did not rise to the level of

plain error.3

       Tellingly, all but one of the prosecutor’s alleged inappropriate comments

occurred in the government’s rebuttal argument. Prior to the rebuttal argument,

defense counsel painted the picture of Defendant as a down on his luck business

owner in need of cash was snared into this case by Epstein—an opportunistic

cooperating witness for the government. Once Defendant unwittingly agreed to

become involved in a sting operation, it was the government, not Defendant, who

set the terms of the deal. In rebuttal, the prosecutor explained that both Skwara

and Defendant made their respective decisions to become involved in the scheme,

not the government. This was fair comment on the evidence.

       There do not appear to have been any inappropriate comments by the

prosecutor about Skwara’s guilty plea.                   Nevertheless, Defendant cannot

demonstrate plain error because he fails to show that the comments made in

       3
            No objections were raised before the District Court to any of these comments.
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closing argument affected his substantial rights. Indeed, the jury was instructed

that thier decision should not be based on what the lawyers said, but only on facts

they decided were true based on the evidence presented at trial.4

       B. Sentencing Issues

       Defendant argues that the District Court erred by improperly calculating the

intended loss amount under U.S.S.G. § 2B1.1(b)(1)(E). Under the Guidelines,

promulgated by the Untied States Sentencing Commission, the amount of loss

caused by a defendant’s offense will provide a basis for an enhancement. U.S.S.G.

§ 2B1.1(b)(1).      The reduction in value of equity securities resulting from the

offense is one factor the sentencing court shall take into account when estimating

loss. U.S.S.G. § 2B1.1, cmt. (n.3)(C)(v)). Moreover, the loss shall be reduced by

the fair market value of the “collateral” provided by the defendant. U.S.S.G. §

2B1.1, cmt. (n.3(E)(ii)).

       The district court is required “to make independent findings establishing the

factual basis for its Guidelines calculations.” United States v. Hamaker, 455 F.3d

1316, 1338 (11th Cir. 2006). It may base these finding on “‘among other things,

evidence heard during trial, undisputed statements in the PSI, or evidence

presented during the sentencing hearing.’” Id. (quoting United States v. Ndiaye,

       4
          Defendant also suggested that the District Court erred by failing to give the witness-
accomplice guilty plea limiting instruction. However, Defendant failed to request such an
instruction, and the failure to give such an instruction was not plain error.
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434 F.3d 1270, 1300 (11th Cir. 2006)). The burden of proof is on the government

to establish “facts relevant to the loss calculation by a preponderance of the

evidence.” Id. The district court’s loss calculation is “entitled to appropriate

deference” and its “reasonable estimate . . . will be upheld on appeal.” United

States v. Gupta, 463 F.3d 1182, 1200 (11th Cir. 2006) (citations and quotations

omitted). But the district court may not base its calculation on “mere speculation

and the government bears the burden of supporting its loss calculation with reliable

and specific evidence.” Id. Fraudulent schemes come in a variety of forms,

ranging from “theft-like fraud where the perpetrator intends to keep the entire

amount fraudulently obtained,” to “contract fraud where the perpetrator, while

fraudulently obtaining the contract, intends to perform the contract and to cause no

loss to the victim.” United States v. Orton, 73 F.3d 331, 334 (11th Cir. 1996). The

nature of the scheme, however, must be considered to determine “what method is

to be used to calculate the harm caused or intended.” Id. at 333.

      Under the Guidelines, conduct relevant to sentencing includes all acts that a

defendant “aided, abetted, [or] counseled.” U.S.S.G § 1B1.3(a)(1)(A). It also

includes “all reasonably foreseeable acts and omissions of others in furtherance of

the jointly undertaken criminal activity.”        U.S.S.G § 1B1.3(a)(1)(B).       A

defendant’s conduct may result in sentencing accountability under more than one

subsection.   U.S.S.G § 1B1.3, cmt. (n.2(b)(1)).         To determine a defendant’s
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liability for the acts of others pursuant to § 1B1.3(a)(1)(B), the district court “‘must

first make individualized findings concerning the scope of criminal activity

undertaken by a particular defendant.’” Hunter, 323 F.3d at 1319 (quoting United

States v. Ismond, 993 F.2d 1498, 1499 (11th Cir. 1993)). Only upon making this

finding of scope is the district court to determine reasonable foreseeability. Id. A

conspirator’s mere knowledge of the larger conspiracy and agreement to participate

in a particular act does not necessarily amount to acquiescence in all of the acts of

the criminal enterprise. Id. at 1320. However, a defendant is liable under §

1B1.3(a)(1)(B) when he is “fully aware of the objective of the conspiracy and . . .

actively involved in recruiting investors to further the . . . scheme.” McCrimmon,

362 F.3d at 732.

       The District Court did not err in the loss calculation. Instead, it gave a

reasonable estimate of the loss that accounted for the likely effect that the

undisclosed fraud would have on the market value of Defendant’s company stock.

In this case, the District Court found that the Pension Plan would not have bought

the stock at all in the absence of the fraud, and found that, in light of the fraud, the

Pension Fund held stock that was essentially worthless. Moreover, the District

Court properly found Defendant responsible for both of his co-conspirator’s

transactions under the relevant-conduct principles of § 1B1.3. Accordingly, we

affirm as to this issue.
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      Secondly, Defendant maintains that the District Court improperly applied a

two-level enhancement under U.S.S.G. § 3B1.3 for abuse of trust because

Defendant had no relationship with the victims of the criminal transaction.

Specifically, Defendant maintains it was improper for the District Court to apply a

bright-line rule that it was an abuse of trust whenever a CEO commits a crime

related to that CEO’s company. Moreover, the conduct on which the conviction is

based must be independent of the abuse of trust itself. But here, according to

Defendant, paying a bribe was the basis both of the conviction and the

enhancement.

      Under the Guidelines, a two-level enhancement may be applied if a

defendant “abused a position of public or private trust . . . in a manner that

significantly facilitated the commission or concealment of the offense.” U.S.S.G. §

3B1.3.   The enhancement “only applies when the victim conferred the trust.”

United States v. Walker, 490 F.3d 1282, 1300 (11th Cir. 2007). In the context of

fraud, with its “[inherent] component of misplaced trust,” a district court must not

be “overly broad” in applying the enhancement.          Garrison, 133 F.3d at 838

(citations and quotations omitted). Instead, the enhancement, should be applied in

two circumstances: “where the defendant steals from his employer, using his

position in the company to facilitate the offense,” and “where a fiduciary or

personal trust relationship exists with other entities, and the defendant takes
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advantage of the relationship to perpetrate or conceal the offense.” Id. at 837-38

(quotations omitted). In the fiduciary context, courts “must distinguish between

those arms-length commercial relationships where trust is created by the

defendant’s personality or the victim’s credulity, and relationships in which the

victim’s trust is based on defendant’s position in the transaction.” Id. at 838

(citation omitted).

      The District Court properly found that an abuse-of-trust enhancement was

justified in this case.   Defendant abused his position as a fiduciary to his

shareholders, and used that position to facilitate the commission of the offense.

Accordingly, we affirm as to this issue.

      V. Conclusion

      Based on the foregoing and our review of the record and the parties’ briefs,

we affirm Defendant’s convictions and sentence.

      AFFIRMED.

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