Court Opinion

ID: 1010517
Source: CourtListenerOpinion
Date Created: 2013-07-04 20:13:02.864512+00
Date Added: 2024-06-11T15:38:01.793252
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,               
                 Plaintiff-Appellant,
                 v.                              No. 02-4317
DAVID J. LENERTZ,
               Defendant-Appellee.
                                        
           Appeal from the United States District Court
          for the District of South Carolina at Rock Hill.
            Matthew J. Perry, Jr., Senior District Judge.
                             (CR-99-21)

                      Argued: February 28, 2003

                       Decided: May 16, 2003

  Before WILLIAMS, GREGORY, and SHEDD, Circuit Judges.

Reversed and remanded by unpublished opinion. Judge Shedd wrote
the majority opinion, in which Judge Williams joined. Judge Gregory
wrote a dissenting opinion.

                             COUNSEL

ARGUED: Eric William Ruschky, Assistant United States Attorney,
Columbia, South Carolina, for Appellant. James Paul Rogers, Colum-
bia, South Carolina, for Appellee.
2                     UNITED STATES v. LENERTZ
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                             OPINION

SHEDD, Circuit Judge:

   After a jury found David J. Lenertz guilty of three counts of wire
fraud involving the development of a resort in the Bahamas, the dis-
trict court granted judgment of acquittal in favor of Lenertz. The gov-
ernment appeals. We reverse the judgment of acquittal by the district
court and remand for reinstatement of the jury verdict and for entry
of judgment against Lenertz.

                                  I.

  The family of Hubert Bowe, a Bahamian national, owned several
hundred acres of land on the island of Exuma in the Bahamas. In the
early 1990s, Bowe, a high school dropout, formed a corporation and
began the process of attempting to attract potential investors to help
him develop the property as a resort. He expected that the project
would cost several hundred million dollars to complete. Bowe, who
was living in Charlotte, North Carolina, at the time, became
acquainted with William Tindall. Although a high school teacher with
no experience in developing resorts, Tindall got involved in trying to
promote the project. Tindall backed out of the project, however, after
he was asked to invest $200,000 of his own money.

   In January 1996, Tindall resumed working on the project with
Bowe. He searched the internet looking for a reputable venture capi-
talist and found the website for Stokker-Alpine International LLC
(Alpine), a Wyoming corporation founded by Lenertz. The website
represented that Alpine "is emerging as a world leader in the interna-
tional finance arena." J.A. 509. Alpine claimed that it had financed
several projects, one of which Tindall noticed was similar in size to
Bowe’s Bahamas project. The website also stated that one of Alpine’s
main services was arranging and negotiating loan commitments with
private and institutional investors for world-class resorts.
                       UNITED STATES v. LENERTZ                        3
   Tindall contacted Alpine via e-mail and completed the necessary
forms to become an Alpine broker, thereby hoping to ensure that he
would get a 1% placement fee for any funds for the Bahamas project
arranged through Alpine. When Tindall did not get a response from
Alpine, he faxed a letter in early March requesting a reply. The next
day Mary Steinbacher, who is, and was at the time, Lenertz’s former
wife, wrote Tindall explaining that Lenertz was out of the country but
could be reached by e-mail, which she provided to Tindall.

   Tindall continued to provide additional information to Alpine con-
cerning the project. In particular, he completed a five-page Funding
Application Form provided by Alpine. Tindall represented that the
first phase of the Bahamas project would cost $257 million. He also
stated that the Bowe family had no money to fund the project but
would instead invest the real property and would offer a significant
percentage of the profits from the project to investors in return for
investor financing.

   On March 21st, Lenertz wrote Tindall, saying that he had recently
been in London and had presented Tindall’s application for funding
to one of Alpine’s largest investor groups. Eventually, Lenertz asked
Tindall to provide him certain documents relating to the project.
Lenertz represented that once he received this documentation "my
underwriting staff will be in a better position to analyze the transac-
tion." J.A. 63.

   By early May, Lenertz and Tindall began making arrangements for
Lenertz to travel to the Bahamas to inspect the property. Lenertz
required that all his expenses be prepaid and that he receive a $10,000
inspection fee prior to traveling to the Bahamas. Lenertz also pro-
posed that for an additional $10,000 fee Alpine would agree to repre-
sent Bowe rather than the investor on this project. Lenertz said that
he would have his "legal staff" prepare the consulting agreement and
would bring it with him to the site inspection in the Bahamas. J.A. 69.

   Lenertz and Tindall scheduled the site inspection for early June. On
May 22nd, Steinbacher, on behalf of Lenertz, faxed Tindall explain-
ing that the site inspection would be cancelled if Lenertz’s fees and
expenses were not received in Lenertz’s account by noon the next day.1
  1
   At trial, Steinbacher testified that the signature on this fax was not
hers.
4                     UNITED STATES v. LENERTZ
Tindall, along with several others, had been trying to enlist other fam-
ily members and acquaintances to invest start-up money for the proj-
ect. On May 24th, Tindall finally obtained a commitment from a
person in Texas to invest $10,000. That investor wired the money to
Tindall, who then wired the $10,000 on the same day to Lenertz’s
account in Wyoming.

   Lenertz met both Tindall and Bowe for the first time when Lenertz
arrived in the Bahamas for the site inspection in early June. The eve-
ning before the inspection, Tindall and Lenertz met privately. Lenertz
told Tindall that he had done numerous funding arrangements for
resorts all around the world and that all of them were operating suc-
cessfully. Lenertz also told Bowe that he had financed hotels all
around the world, and that his company owned 182 resorts. During
part of the next day, Tindall, Bowe, and Lenertz traveled to Exuma
and viewed some of the Bowe family property.

   One week later, after having seen only some of the property once
and having obtained only minimal information about the project,
Lenertz forwarded to Tindall a proposed contract to provide a $30
million funding commitment for the Bahamas project. In fact, Lenertz
warranted that he already had an investor for the project.2 Pursuant to
the proposal, Lenertz would obtain $30 million in funding for the
development. In return, Bowe would be required to pay Alpine
$900,000 for obtaining the financing. Bowe would pay this fee in two
installments. The first, a payment of $75,000, would be due when
Alpine presented to and Bowe accepted the commitment to provide
the funding. The second installment, a payment of $825,000, would
be due when the $30 million was actually provided to Bowe to be
used for the project. All fees were to be "considered fully earned, pay-
able and completely non-refundable as and when paid." J.A. 506.
Bowe accepted this proposal on June 20th.

  Tindall and Lenertz arranged for a second meeting between Lenertz
and Bowe to be held on July 5th in Charlotte. On June 25th, Tindall
wired $11,760 to Lenertz’s account in Wyoming to pay his travel
expenses and consulting fee. After he received the additional money,
    2
  Lenertz told the FBI that the investor was to be Bassam Farha, who
was associated with the First Merchant Bank in Cyprus.
                        UNITED STATES v. LENERTZ                          5
Lenertz wrote Tindall outlining what he expected to happen at the
Charlotte meeting. Among other things, Bowe would bring $75,000
for the funding commitment, and Lenertz would bring the funding
commitment to the meeting so that Bowe could examine it and decide
whether to accept it. Tindall asked Lenertz to bring with him to the
meeting evidence of other projects he had completed.

   When the parties met in Charlotte on July 5th, Lenertz showed
Bowe and Tindall a notebook filled with pictures of several other
projects throughout the world that Lenertz claimed he had funded. At
the meeting, Bowe did not make the first installment payment, and
Lenertz, although he "flashed" the purported funding commitment in
front of Bowe, would not allow Tindall or Bowe to review it.

   Ten days after the Charlotte meeting, Tindall wrote Lenertz on
behalf of Bowe requesting biographical information and a listing of
other similar projects that Lenertz had completed. Lenertz never pro-
vided the requested information.

   Soon thereafter, Bowe fired Tindall. Lenertz, however, continued
working on the deal. He traveled to the Bahamas in the fall of 1996
and met with Bowe and his attorney. The attorney specifically asked
to examine the financing commitment, but Lenertz refused to let him
see it. The attorney accused Lenertz of being a cheat and told him to
leave. Nevertheless, Lenertz thereafter telephoned Bowe directly a
few more times trying to renegotiate the deal.

   About a year later, Lenertz was interviewed by an FBI agent. The
agent asked Lenertz to bring to the interview documents relating to
his company in general and to the Bahamas project in particular. At
the interview, Lenertz produced only 88 pages of documents. Lenertz
said that he had very few documents relating to his business dealings
since 1986. During the interview, Lenertz told the agent that he oper-
ated Alpine out of his house and that he had no employees. Thereaf-
ter, the government charged Lenertz with four counts of wire fraud
relating to the Bahamas project.

  In addition to the above evidence which is part of the record,3 the
  3
   The government’s brief contains a significant amount of evidence
which it proffered at trial but which the district court excluded. The court
has not relied on any of the excluded evidence.
6                      UNITED STATES v. LENERTZ
government adduced additional testimony from several other wit-
nesses at trial. Of particular import was the testimony of Steinbacher
and William Kerr, a national bank examiner from the office of the
Comptroller of the Currency.

   As stated above, Steinbacher is the former wife of Lenertz. They
met in 1983 and married within two years. Lenertz was already work-
ing in the field of finance when they met. The couple moved to Wyo-
ming in 1994, but they divorced a couple of months later.
Nevertheless, by early 1996, Lenertz and Steinbacher were again liv-
ing together in the same home, and Lenertz was using the home as
his office. Steinbacher was named as an officer of Alpine, and she had
authority to write checks for the company. She also helped make
travel arrangements for Lenertz. Steinbacher was not aware that
Alpine had any other employees. Also, she was not aware whether
Lenertz had ever closed a deal during the 13 years that they were
together.

   Kerr, the bank examiner, testified that the financial data and project
information for the Bahamas project that Lenertz had acquired was
insufficient in several respects. For instance, there was no profes-
sional feasibility study and no appraisal of the land. No soil samples
had even been taken to determine if the undeveloped land where the
project would be constructed would support buildings. There was no
information as to whether the Bahamian government would allow
such a project. Also, the financing package lacked any basis upon
which to determine basic projections for costs and revenues. The
financing commitment was for $30 million, but it failed even to spec-
ify what the money would be used to build. Based on the clearly
insufficient data that Lenertz had acquired relating to the Bahamas
project, the bank examiner concluded that no lender would commit to
funding a loan for the project.

   At the close of all the evidence, the district court granted judgment
of acquittal on Count 3. That count is not at issue in this appeal. After
the jury returned a guilty verdict as to the three remaining counts, the
defendant moved for judgment of acquittal on all three counts.
Lenertz argued generally that there was insufficient evidence to sup-
port the jury’s verdict. He argued in particular that there was no evi-
dence that anyone relied on any misrepresentation by Lenertz. The
                          UNITED STATES v. LENERTZ                            7
government failed to argue to the district court that reliance is not an
element. Lenertz now concedes that reliance is not an element of the
crime of wire fraud. After hearing arguments, the district court, from
the bench, granted judgment of acquittal on the remaining three
counts.

                                       II.

   When reviewing a district court’s post-verdict judgment of acquit-
tal, we must sustain the jury’s verdict if there is substantial evidence,
viewed in the light most favorable to the government, to support it.
United States v. Steed, 674 F.2d 284, 286 (4th Cir. 1982). In deter-
mining whether the evidence in the record is sufficient, we consider
whether any rational trier of fact could have found the essential ele-
ments of the crime beyond a reasonable doubt. See United States v.
Lomax, 293 F.3d 701, 705 (4th Cir. 2002). Also, in evaluating the evi-
dence, we are not entitled to weigh the evidence or to assess the credi-
bility of the witnesses, but rather we must assume that the jury
resolved all contradictions in the testimony in favor of the govern-
ment. United States v. Romer, 148 F.3d 359, 364 (4th Cir. 1998). A
reviewing court, therefore, may not overturn a substantially supported
verdict merely because it finds the verdict unpalatable or determines
that another, reasonable verdict would be preferable. United States v.
Burgos, 94 F.3d 849, 862 (4th Cir. 1996) (en banc).

   Because the government alleged in the indictment that a misrepre-
sentation was part of Lenertz’s scheme, the elements of wire fraud,4
as applied to the instant case, are: (1) the existence of a scheme to
defraud that involved a material misrepresentation; and (2) the use of
interstate wire communications to facilitate the scheme. See Neder v.
United States, 527 U.S. 1 (1999); United States v. ReBrook, 58 F.3d
  4
   18 U.S.C.A. § 1343 (West 1996) provides, in pertinent part:
      Whoever, having devised or intending to devise any scheme or
      artifice to defraud, or for obtaining money or property by means
      of false or fraudulent pretenses, representations, or promises,
      transmits or causes to be transmitted by means of wire . . . com-
      munication in interstate or foreign commerce, . . . for the purpose
      of executing such scheme or artifice, shall be fined . . . or impris-
      oned not more than five years . . . .
8                      UNITED STATES v. LENERTZ
961, 966 (4th Cir. 1995). To establish the first element, the govern-
ment must prove that the defendant acted with specific intent to
defraud. See 18 U.S.C.A. § 1343; United States v. Godwin, 272 F.3d
659, 666 (4th Cir. 2001) (holding that proof of specific intent to
defraud is required in the prosecution of the similar crime of mail
fraud under § 1341). Fraudulent intent may be established by circum-
stantial evidence and by inferences deduced from facts and situations.
United States v. Bales, 813 F.2d 1289, 1294 (4th Cir. 1987). Simi-
larly, fraudulent intent may be inferred from the totality of the cir-
cumstances and need not be proven by direct evidence. United States
v. Ham, 998 F.2d 1247, 1254 (4th Cir. 1993).

   Lenertz does not dispute that there is substantial evidence estab-
lishing the three interstate wire transfers alleged in the three counts.
Instead, Lenertz argues that the jury, as a matter of law, could not
have inferred that his actions were part of a scheme to defraud.

   There is ample evidence that Lenertz devised a scheme to defraud.5
The jury could reasonably find that Lenertz’s business strategy was
driven by deception. All of his falsehoods6 about the experience and
capacity of Alpine were designed to make Bowe and his associates
believe that Alpine could readily obtain funding for the project from
his usual sources of funding. Instead, the evidence, when viewed in
the light most favorable to the government, suggests that Lenertz had
never completed a deal and, as such, never had usual sources of fund-
ing from which he could or would even attempt to obtain funding.

    Also, there is ample evidence that Lenertz’s scheme to defraud
    5
     "To defraud" commonly refers to "wronging one in his property rights
by dishonest methods or schemes." Hammerschmidt v. United States,
265 U.S. 182, 188 (1924).
   6
     The government alleged three specific misrepresentations in the
indictment. See discussion, page 8-9, infra. The government also pro-
duced evidence at trial of several other ancillary misrepresentations that
Lenertz made regarding Alpine (e.g., that Alpine had an underwriting
staff and that it had successfully financed several other projects). The
government was not required to allege these particular ancillary misrep-
resentations in the indictment. They were admissible, nevertheless, as
circumstantial evidence of Lenertz’s scheme to defraud.
                       UNITED STATES v. LENERTZ                          9
involved at its very core a material misrepresentation. The material false-
hood7 alleged in all three counts is that Lenertz represented that he
could arrange and negotiate a $30 million loan commitment to finance
the development of the Bahamas project. This allegation is taken
almost verbatim from the terms of the written proposal offered by
Lenertz to Bowe. Lenertz promised that Alpine would negotiate for
and "provide a formal Commitment for Financing" a $30 million loan
for the Bahamas project. J.A. 502, 506.

   Because the alleged material misrepresentation by Lenertz relates
to future performance of a contractual obligation, the government
must show beyond a reasonable doubt that Lenertz, at the time he
indicated he could obtain funding for the Bahamas project, never
intended to fulfill his promised performance. The government can
meet this burden by showing that Lenertz, even though he could have
possibly performed his obligation, never intended to perform it. See
Durland v. United States, 161 U.S. 306, 313 (1896) (ruling that the
similar mail fraud statute "includes everything designed to defraud by
representations as to the past or present, or suggestions and promises
as to the future."); Elmore v. United States, 267 F.2d 595, 603 (4th
Cir. 1959) ("In practical effect, a false promise fraudulently given
amounts to a false statement of an existing intent . . . .").

   From the start of his relationship with Bowe and the others
involved in developing the Bahamas project, Lenertz misrepresented
several facts about his company. A reasonable jury could decide that
they were all designed and consistent with a scheme which had as its
main purpose to obtain advance fees from Bowe and his associates.
The success of this scheme hinged on Lenertz making Bowe believe
that he could and would obtain $30 million in funding for the project.
The very structure of the contract proposal offered by Lenertz was
entirely consistent with accomplishing this scheme. For instance,
Lenertz demanded and was paid more than $20,000 in fees even
before he was required to commit to obtaining a loan. Also, under the
proposed contract, Lenertz would obtain an advance fee of $75,000
which would be payable for merely producing a funding commitment
  7
   The government alleged two other misrepresentations in the indict-
ment, but it now concedes that there is insufficient evidence to support
a conviction as to those particular allegations.
10                    UNITED STATES v. LENERTZ
letter from an investor indicating that $30 million would be commit-
ted to the project. Based on the expert testimony of the bank exam-
iner, who concluded that no legitimate lender would commit funding
to the Bahamas project based on the inadequate supporting materials
obtained by Lenertz, a reasonable jury could decide that any such
funding commitment letter produced by Lenertz would have been
fraudulent.

   Moreover, based on the totality of the circumstances, a reasonable
jury could also find that Lenertz acted with fraudulent intent.
Although there is no direct evidence that Lenertz intended to defraud
Bowe and others interested in the project, no such direct evidence is
required. Instead, the reasonable inferences deduced from the circum-
stantial evidence would allow a jury to find that Lenertz intended to
defraud Bowe and others into paying him advance fees and that he
never intended to attempt to obtain funding for the Bahamas project.

                                  III.

   In the instant case, we find that the jury could have found the
essential elements of the crime of wire fraud beyond a reasonable
doubt. There is sufficient evidence in the record to support a finding
that Lenertz designed a scheme to defraud Bowe and others involving
a material falsehood and used interstate wire communications to facil-
itate the scheme.

   Therefore, we reverse the judgment of acquittal by the district court
and we remand for reinstatement of the jury verdict and for entry of
judgment against Lenertz.

                                         REVERSED AND REMANDED

GREGORY, Circuit Judge, dissenting:

  I cannot find substantial evidence in the record to support Lenertz’s
wire fraud conviction. For this reason, I would affirm the district
court’s decision to grant Lenertz’s motion for judgement of acquittal.

  The majority correctly notes that in order to convict Lenertz of
wire fraud, the government must prove: (1) that the scheme to defraud
                      UNITED STATES v. LENERTZ                      11
involves a material misrepresentation; and (2) that the defendant acted
with fraudulent intent. See Neder v. United States, 527 U.S. 1, 25
(1999). In its indictment, the government alleged that Lenertz made
three material misrepresentations in furtherance of his scheme to
defraud Bowe and the other investors. However, on appeal, the gov-
ernment concedes that there was insufficient evidence in the record
to prove that two of the representations were false and misleading.
Thus, the government’s appeal focuses solely on one statement made
by Lenertz — that he could negotiate and arrange a $30 million loan
commitment to finance the development of Bowe’s resort project —
which the government contends is a material misrepresentation.

   To successfully prosecute this case, the government must prove
that Lenertz’s statement that he "could negotiate and arrange a $30
million loan commitment" was false at the time he made it. See
Elmore, 267 F.2d at 603 (noting that "a false promise fraudulently
given amounts to a false statement of an existing intent"). The gov-
ernment concedes, as the majority affirms, that there is no direct evi-
dence in the record to prove that Lenertz knew this statement was
false when he made it. The success of the government’s case, there-
fore, depends entirely upon circumstantial evidence. See Ham, 998
F.2d at 1254 (explaining that fraudulent intent, for purposes of estab-
lishing a wire fraud conviction, may be proven with circumstantial
evidence).

   The majority relies upon the following circumstantial evidence to
prove that, at the time he made the statement, Lenertz knew that he
could not negotiate and arrange the loan commitment: (1) Lenertz’s
misrepresentation of several facts about his company; (2) Lenertz’s
contract with Bowe, which required Bowe to pay Lenertz certain con-
sulting and advance fees before Lenertz actually secured the loan
commitment; and (3) the testimony of a national bank examiner that,
in his opinion, no legitimate lender would commit funding to the
resort project based on the documents drafted by Lenertz. Ante, at
9-10. Based on this evidence, the majority concludes that "the jury
could have found the essential elements of the crime of wire fraud
beyond a reasonable doubt." Ante, at 10.

   I dissent because no rational jury could have inferred the essential
elements of the crime of wire fraud based on this circumstantial evi-
12                    UNITED STATES v. LENERTZ
dence. Although the government need not "‘exclude every reasonable
hypothesis other than that of guilt,’" United States v. Guadagna, 183
F.3d 122, 130 (2d Cir. 1999) (quoting Holland v. United States, 348
U.S. 121, 139 (1954)), the summation of evidence must permit a con-
clusion of guilt beyond a reasonable doubt. United States v. Burgos,
94 F.3d 849, 858 (4th Cir. 1996); United States v. Hughes, 716 F.2d
234, 240 (4th Cir. 1983) (explaining that "the proper construction is
to view the evidence together as a coordinated and interrelated
whole"). The summation of evidence in this case, viewing it in the
light most favorable to the government, does not prove beyond a rea-
sonable doubt that Lenertz could not negotiate or arrange this deal.
Failure to prove this factual element is alone dispositive of the gov-
ernment’s case. Indeed, the evidence establishes only that Lenertz’s
ability to negotiate and arrange a deal of this magnitude was question-
able — or perhaps that he was an incompetent broker. This incompe-
tence may be sufficient to satisfy the burden of proof for civil
liability, but it falls short of satisfying the heightened evidentiary
standard necessary to support a criminal conviction for wire fraud.
Because I find that the jury’s verdict in this case "crosses the line
from permissible inference to improper speculation," United States v.
Teffera, 985 F.2d 1082, 1088 (D.C. Cir. 1993), I would uphold the
district court’s determination that the government failed to satisfy its
burden of proof in this case.

   This is a case where the alternate hypotheses consistent with inno-
cence are sufficiently strong that they must be deemed to instill a rea-
sonable doubt in the hypothetical reasonable juror. Teffera, 985 F.2d
at 1088. For this reason, I would affirm the district court’s decision
on Lenertz’s motion for judgment of acquittal. I therefore respectfully
dissent.