Court Opinion

ID: 217488
Source: CourtListenerOpinion
Date Created: 2011-05-25 23:36:51+00
Date Added: 2024-06-11T17:28:32.591552
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                MAY 25 2011

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,                        No. 08-50517

              Plaintiff - Appellee,              D.C. No. 2:07-cr-01076-PA-3

  v.
                                                 MEMORANDUM*
ROBERT JENNINGS, AKA Seal C,

              Defendant - Appellant.

UNITED STATES OF AMERICA,                        No. 09-50191

              Plaintiff - Appellee,              D.C. No. 2:07-cr-01076-PA-1

  v.

HENRY ULIOMEREYON JONES,

              Defendant - Appellant.

                   Appeal from the United States District Court
                      for the Central District of California
                    Percy Anderson, District Judge, Presiding

                     Argued and Submitted December 6, 2010
                              Pasadena, California

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: B. FLETCHER, BERZON, and CALLAHAN, Circuit Judges.

      Robert Jennings and Henry Jones appeal from their convictions and

sentences for mail fraud, wire fraud, and securities fraud. Jennings and Jones

challenge the good faith instruction given to the jury. Jennings also challenges the

sufficiency of the evidence to support his conviction for securities fraud under

Count 15, his sentence, and the amount of restitution. We affirm.

      Jennings and Jones contend on appeal that the good faith instruction misled

the jury into thinking that it only had to “consider” their good faith, failed to

inform the jury that good faith was a complete defense, and failed to indicate that

the government had the burden of proving that they lacked good faith. Because

Jennings and Jones withdrew their objections to the good faith instruction,

however, we review only for plain error. See United States v. Romm, 455 F.3d

990, 1003 (9th Cir. 2006).

      In this case, the judge instructed the jury that “[a] defendant’s good faith in

the truth of the misrepresentations . . . may be considered by you in determining

whether he acted with an intent to defraud.” (emphasis added). This court

approved a similar instruction in United States v. Shipsey, 363 F.3d 962, 967 (9th

Cir. 2004). Consequently, we cannot say that the instruction was clearly

erroneous.

                                           2
      Jennings also challenges his conviction on Count 15 on the grounds of

insufficient evidence. Because Jennings failed to object at trial, the plain error

standard applies. United States v. Delgado, 357 F.3d 1061, 1068 (9th Cir. 2004).

Examining the evidence as a whole, the jury could have reasonably found that

Jennings was guilty of securities fraud for actions taken in November 2002 in

connection with an investment regarding the coal mines, the purported gold

transaction, and the African country of the Seychelles. See United States v. Nevils,

598 F.3d 1158, 1163-64 (9th Cir. 2010).

      The evidence showed that Jennings was heavily involved in the coal mining

ventures and the solicitation conference calls from the beginning. Further, he was

the President of both H&J Energy and Tri Energy and had responsibility for

handling the company bank accounts. He provided information to investors on the

progress of the mines and the expected returns – information that was not realistic

in light of the actual production and the equipment problems. Moreover, the

information was also not realistic in light of the amounts of money flowing in and

out of the company bank accounts that Jennings handled. In addition, Jennings had

a close relationship with Schubert, the mine manager who falsified mine

documents, made misrepresentations about the mines and the gold transaction, and

eventually went to jail. Jennings and Schubert’s close relationship supports a jury

                                          3
finding that Jennings knew about the fraud, but continued to make positive

representations to investors about the workings of the mines and the expected

returns, knowing they had no basis in fact.

      Also, Jennings helped induce the November 2002 investment at issue in

Count 15 by talking about an impossible gold transaction, which the jury could

have determined Jennings knew did not exist. Investor Roger Sohn testified that

based on his conversations with Jennings and Simburg, he thought his investment

involved securing the release of $56 million from the Seychelles, and that some of

the money also would be used to fund coal mines. Then at some point, the

Seychelles transaction “faded away” and was replaced by the “gold transaction,”

brokered by Jones. Based on the evidence at trial, the supposed magnitude of the

gold transaction was so outrageous that if the transaction had been real it would

have caused the entire gold market to collapse. The fact that Jennings – the

president of the companies, who handled the bank accounts – helped to perpetuate

                                         4
such an outlandish story to solicit more money supports a jury finding that

Jennings had the requisite knowledge for fraud.1

      Later, in 2004, Jennings vouched for Jones’s character to investors, saying

that he “knew the facts” on Jones, who was his “joint-venture partner.” Jennings

did not specify when he learned these “facts,” and the jury reasonably could infer

that because of Jennings’s longstanding and symbiotic business relationship with

Jones, he knew the “facts” on him early on, and thus knew all about Jones’s use of

investor funds for music business and personal expenses. Given that Jones was

supposedly brokering the November 2002 investment, Jennings’s knowledge of

“the facts” on Jones suggests that Jennings the requisite knowledge and intent for

fraud regarding this investment, which was at the heart of Count 15.

      Thus, there was sufficient evidence for the jury to convict Jennings on Count

15 based on (1) specific, direct evidence of fraud from after 2002, in conjunction

with (2) evidence of Jennings’s heavy involvement in the mining venture,

oversight of the bank accounts, solicitation of money, and close association with

      1
        Also, Jennings told Mrs. Lord, an investor, a story about “bizarre, crazy
circumstances” involving a Dubai prince held captive, which resulted in a $10,000
investment from the Lords in 2003, with a promised 2-to-1 return that never
happened. Although this story was told in 2003, after the November 2002
investment at issue in Count 15, the jury could fairly infer that it showed
Jennings’s continuing practice of stretching the truth to obtain investments.

                                         5
fraudulent characters from before and during 2002. The scheme at issue in this

case was continuing and much of the evidence was overlapping; the jury

reasonably could make connections between one time period and another when

drawing conclusions about Jennings’s intent and actions.

      Further, Jennings challenges his sentence on the grounds that the district

court did not reasonably consider the factors set forth in 18 U.S.C. § 3553 and

because the sentence was substantively unreasonable. The district court considered

all of Jennings’s non-frivolous sentencing arguments and gave an adequate

explanation for imposing a below-Guidelines sentence of 144 months. See United

States v. Ressam, 593 F.3d 1095, 1118-19 (9th Cir. 2010); United States v. Carty,

520 F.3d 984, 993 (9th Cir. 2008) (en banc). Moreover, the sentence was not

substantively unreasonable in light of the evidence at trial. See Gall v. United

States, 552 U.S. 38, 51 (2007). Despite having many opportunities to put an end to

the fraud, Jennings spent years soliciting the investments, and even when

confronted with the truth, he continued to lie to the investors and take advantage of

their faith. Even though Jennings received little of the proceeds in relation to his

co-defendants, the district court did not abuse its discretion in finding that the co-

defendants were all equally culpable.

                                           6
      Finally, Jennings argues that the district court erred in calculating the

amount of loss and restitution. “A restitution order is reviewed for an abuse of

discretion, provided that it is within the bounds of the statutory framework.

Factual findings supporting an order of restitution are reviewed for clear error.

The legality of an order of restitution is reviewed de novo.” United States v.

Gordon, 393 F.3d 1044, 1051 (9th Cir. 2004) (quotations and citations omitted);

see United States v. Showalter, 569 F.3d 1150, 1160-61 (9th Cir. 2009). Here,

Jennings argues that he should have been treated differently from his co-defendants

and that he could not have reasonably foreseen this level of harm. The record

reflects, however, that the district court considered the entirety of the evidence at

trial, including the government’s financial analysis as to fraud loss amounts, and

considered Jennings’s arguments at sentencing. See United States v. Treadwell,

593 F.3d 990, 1003 (9th Cir. 2010). The district court’s determinations that the

fraud loss was reasonably foreseeable to Jennings, and that he is responsible for the

entire amount of restitution, do not constitute an abuse of discretion. See id.

      For the foregoing reasons, Jennings’s conviction and sentence, as well as the

restitution order entered against him, are AFFIRMED, and Jones’s conviction is

AFFIRMED.

                                           7
                                                                                   FILED
United States v. Jennings, 08-50517                                                MAY 25 2011
United States v. Jones, 09-50191                                              MOLLY C. DWYER, CLERK
                                                                                U.S. COURT OF APPEALS

BERZON, J., concurring in part and dissenting in part, with whom B. FLETCHER,
J., joins except as to the penultimate paragraph regarding Count 15 against
Jennings:

         Good faith is a complete defense to the wire, mail, and security fraud

offenses at issue here. If a fraud defendant actually believes what he says, then

saying it can’t be a crime under these statutes. This is only logical: intent to

defraud is an element of each offense. If a defendant had a good-faith belief in the

truthfulness of his representations, then he could not have intended to defraud

anyone by making them.

         In this case, the judge instructed the jury that “[a] defendant’s good faith

belief in the truth of the misrepresentations . . . may be considered by you in

determining whether he acted with an intent to defraud.” (Emphasis added). This

statement of the law, of course, is technically correct. But it’s also misleading. A

defendant’s good faith not only may be considered by a jury; it must be considered

by a jury. If the jury determines that the defendant acted in good faith, it must

acquit him. See, e.g., United States v. Sayakhom, 186 F.3d 928, 940 (9th Cir.

1999).

         Our law entitles defendants to more than “technically correct” instructions.

Jurors are not jurists, and they should not be expected to parse an instruction in the
same way that a court parses a statute. As we have repeatedly stated, “[t]he

relevant inquiry is whether the instructions as a whole are misleading or

inadequate to guide the jury’s deliberation.” United States v. Redlightning, 624

F.3d 1090, 1122 (9th Cir. 2010) (emphases altered and quotation omitted).

      Unfortunately, in United States v. Shipsey, 363 F.3d 962 (9th Cir. 2004), this

Court approved an instruction on good faith that was close to identical to the one

here. See id. at 967; see also Ninth Circuit Manual of Model Jury Instructions --

Criminal § 3.16 cmt. (2010).1 Though I believe Shipsey was wrong on this point, I

also recognize that it is controlling.

      This Court should revisit Shipsey.2 But I don’t believe this case should be

the vehicle for doing so. I agree with the Court that the instruction here is subject

to review only for plain error, see United States v. Delgado, 357 F.3d 1061, 1065

(9th Cir. 2004), and so we would reverse only if the error were of a sufficient

magnitude to meet that standard. See id. Given the ample evidence of defendants’

bad faith as to all but one of the counts, I would say the error here was harmless.

      1
        United States v. Molinaro, 11 F.3d 853 (9th Cir. 1993), also approved a
similar instruction, but arguably did not do so in face of a challenge to the
instruction’s use of the word “may.” See id. at 863.
      2
        In the meantime, the drafters of our model instructions might revisit the
commentary to their model intent to defraud instruction. The Shipsey instruction
may be legally adequate, but district judges who want to do better should consider
instructing juries more clearly that good faith is a complete defense.
         As to the remaining count, Count 15 against Jennings, I would reverse even

if I had no reservations about the instruction. I disagree with the majority’s

conclusion that there was sufficient evidence to support the conviction on that

count.

         For the foregoing reasons, I respectfully concur in part and dissent in part.