Court Opinion

ID: 4252837
Source: CourtListenerOpinion
Date Created: 2018-03-08 17:00:29.928354+00
Date Added: 2024-06-11T09:24:08.825725
License: Public Domain

NONPRECEDENTIAL DISPOSITION
                    To be cited only in accordance with Fed. R. App. P. 32.1

                    United States Court of Appeals
                                         For the Seventh Circuit
                                         Chicago, Illinois 60604

                                         Argued January 3, 2018
                                         Decided March 8, 2018

                                                    Before

                          FRANK H. EASTERBROOK, Circuit Judge

                          DIANE S. SYKES, Circuit Judge

                          MICHAEL J. REAGAN, District Judge*1

No. 17-1501

UNITED STATES OF AMERICA,                                    Appeal from the United States District
     Plaintiff-Appellee,                                     Court for the Northern District of
                                                             Illinois, Eastern Division.
        v.
                                                             No. 14-CR-00103-1
GREGORY WEBB,
    Defendant-Appellant.                                     Virginia M. Kendall, Judge.

                                         ORDER
       Gregory Webb was convicted of three counts of wire fraud and six counts of mail
fraud for perpetrating a multiyear, multimillion dollar scheme to keep investors buying
shares in his failed business. The district court sentenced Webb to concurrent prison
terms of 108 months and ordered restitution in the amount of $9,359,384.57. On appeal,
Webb raises one ground for relief, challenging the sufficiency of the evidence underlying
his conviction. Webb originally challenged the district court’s calculation of restitution
under the Mandatory Victims Restitution Act as well, but his counsel expressly
abandoned this claim at oral argument, so we do not address this issue. Finding no merit
in Webb’s insufficiency of the evidence argument, we affirm his conviction and sentence.

* Of the Southern District of Illinois, sitting by designation.
No. 17-1501                                                                            Page 2

       I.     Background

        In the spring of 2003, Gregory Webb founded a technology company called
InfrAegis. Throughout the company’s existence, he was the chairman, chief executive
officer and majority shareholder. The company’s purported mission was to protect the
public from terrorism by developing technology that could detect potential threats.
Webb’s primary development efforts went towards an all-in-one security kiosk and
detection device called the “iaMedium” that would be placed along public
thoroughfares in major cities. Despite Webb’s best efforts, by January of 2007, it was
clear that InfrAegis was doomed to fail. Faced with the inevitable collapse of his
company, Webb began lying to potential investors about nearly every aspect of the
business.

        The flagship of InfrAegis was the iaMedium. Webb claimed that the iaMedium
could perform any number of revolutionary and extraordinary security functions such
as: (1) passively detecting nuclear, biological and chemical weapons out in the open, as
people walked past the machine; (2) detecting threatening behaviors or threatening
people as they walked by on a crowded street; (3) triangulating the location of gunfire;
and (4) providing counter-measures to first responders faced with a biological, chemical
or nuclear attack. The iaMedium also allegedly possessed 360 degrees of camera
coverage, facial recognition software and video displays that Webb hoped to utilize for
personalized advertising. Webb’s claims about the iaMedium’s abilities did not comport
with reality. Indeed, despite ten years of work, the company never created a single
fully-functional product.

        Webb’s sensational claims were not limited to his terrorism deterrence efforts. At
some point, InfrAegis operated a subsidiary called Bacteria Sciences Worldwide
(“BSW”) that was focused on agriculture and food products. BSW’s successes, according
to Webb, included the following improbable “breakthroughs”: (1) a food additive that
can eliminate 99.9999% of bacteria in food and still be safe for consumption; (2) a
fertilizer that is so effective that two gallons replace one ton of regular fertilizer; (3) an
all-natural white powder that when added to food would instantly remove all the fat in
the product; and (4) a kit that could accurately test an entire agricultural farm field for
the presence of bacteria in three hours, when the current prevailing testing takes
anywhere from twenty-four to forty-eight hours. These were not simply lofty
development targets. Rather, investors were told by Webb that InfrAegis possessed
these revolutionary products. Again, Webb’s ground-breaking claims did not comport
with reality.
No. 17-1501                                                                        Page 3

       Throughout trial it was made abundantly clear that the alleged products either
did not exist or, at best, were in the initial laboratory stages of development.
Nevertheless, Webb fraudulently proclaimed to investors that the products were ready
for deployment.

        Without fully-developed or functional products, Webb’s business naturally
transitioned from tech start-up to tech failure. By January 2007, Webb had exhausted
nearly all of his funds and had no legitimate prospect for additional revenue. Facing the
inevitable collapse of his company, Webb began lying to potential investors to keep his
sole source of revenue from drying up. Documents produced at trial showed that the
victim investors were the only material source of income during InfrAegis’ entire
ten-year existence.

       Webb’s fraudulent representations were effective in part because he and others in
the company were engaged in legitimate efforts to develop the business. For example,
senior representatives from the Chicago Mayor’s Office testified that they met with
Webb and his associates on a few occasions to view demonstrations of the iaMedium.
The city officials, who regularly met with vendors for demonstrations, were told that
InfrAegis could provide a network of machines detecting terrorist activities in their city
with absolutely no cost to taxpayers. All that InfrAegis required in return was
permission to place the iaMedium (a large six-foot-tall kiosk) throughout the city on
public thoroughfares. According to Webb’s business model, InfrAegis would pay for the
production, installation and maintenance of the network of iaMediums. The company
would then supposedly generate $3 billion in revenue per year through advertising on
the screens attached to the kiosk.

        Like every other extraordinary claim made by Webb about InfrAegis, the lofty
revenue projections were untethered from reality for a variety of reasons. First, Webb
knew that his proposed business model was not viable. At a meeting in 2007, the
Chicago city officials informed Webb that a separate advertising firm had exclusive
rights to advertise for at least two more years in the same areas InfrAegis wanted to
place the iaMedium. Second, the existing advertising agency was only generating $150
million per year in revenue. Third, and most importantly, Webb did not have a
fully-functional product ready for deployment. When one official discovered that the
company had not performed even the most basic due diligence, i.e., field testing the
device in cold weather conditions, he terminated the meeting.

       None of the negative feedback Webb received from the city of Chicago deterred
him from pushing his stock on average citizens. To the contrary, Webb informed existing
No. 17-1501                                                                                    Page 4

and potential investors that InfrAegis had received an “overwhelming endorsement”
from the city of Chicago, including the statement: “I can say tonight, that's unequivocal.
And in two to three weeks, the contract will be signed and deployment will begin.” At
trial, each city official told the jury that they were never close to signing a contract with
InfrAegis. Nor did they give the defendant any indication that a contract was imminent.
When one city official discovered that Webb was representing that “contracts were
imminent with the city of Chicago,” he became upset and confronted Webb and his
co-conspirator about the misrepresentations.

       The closest InfrAegis came to deploying the iaMedium in Chicago was an offer to
run a limited, no-cost, proof-of-concept pilot program. Despite the offer, the iaMedium
was never fully assembled, field tested or deployed.

       Webb’s efforts to find a city willing to sign a contract with InfrAegis did not stop
with the city of Chicago. The same failed pattern played out across multiple cities
including Atlanta, Georgia and Washington, D.C. With each city, the promise of a
no-cost nuclear, biological and chemical detection system got Webb in the door;
however, issues with basic due diligence ushered him right back out. Nevertheless,
Webb continually told potential investors that contracts were “in hand” or “imminent.”

       One of Webb’s most outlandish fraudulent representations concerned his claim
that InfrAegis had signed a contract to sell 51% of the company’s shares for $8.7 billion.
Between 2008 and 2012, Webb repeatedly claimed that an individual named Donald
Wamhof had purchased the majority interest in InfrAegis and that the payoff from his
investment was “a week to ten days” from concluding.1 As time progressed and the
transfer deadlines passed, investors began questioning Webb as to the status of the deal.
In subsequent calls, Webb would explain that the money was pending but “held up
overseas” or was held up by “Homeland Security.” Like all of the other assurances made
to investors, Webb’s claims about the $8.7 billion deal were fraudulent representations.

        Wamhof is not a multibillionaire venture capitalist as Webb led investors to
believe. Wamhof is a 72-year-old, retired mortgage broker whose sole source of income
is social security. Wamhof testified at trial that he informed Webb of his plan to raise the
$8.7 billion by “monetizing international bills of exchange.” The plan, as described to
Webb, was to use Wamhof’s home computer to simply print “IOUs” on behalf of the U.S.

1Wamhof signed the bogus contract with InfrAegis on April 21, 2009. Prior to that date, Webb repeatedly
represented to potential investors that the huge capital buyout was “imminent.”
No. 17-1501                                                                                      Page 5

Treasury Department and then sell the homemade documents to foreign banks.2 Webb
knew that Wamhof did not have the $8.7 billion. He also knew that despite his best
efforts, Wamhof had never succeeded in his scheme to “monetize international bills of
exchange.” Nevertheless, he told investors that the multibillion-dollar infusion was
about to hit the company, and investors stood to make a 4,000% return on their
investments.

        Webb communicated his fraudulent sales pitches primarily through conference
calls and offering memoranda. Between 2007 and 2010, Webb led a series of telephonic
conference calls in which he provided “updates” about the company’s latest
developments. Additionally, he would send out offering memoranda and executive
summaries that included the same false and misleading information discussed during
the conference calls. Webb continued to sell InfrAegis stock to the victim investors even
though the State of Illinois issued a Temporary Order of Prohibition from September
2008 until June 2010, precluding anyone affiliated with the company from selling
InfrAegis stock.

       Webb’s trial began on June 27, 2016. After listening to two full weeks of
testimony, the jury returned a guilty verdict on all nine remaining counts of mail and
wire fraud.3 Following the trial, Webb was sentenced on March 1, 2017, to 108 months of
confinement, concurrent on each count, and ordered to pay restitution in the amount of
$9,359,384.57.

        II.     Discussion

       Webb’s sole issue on appeal is that there was insufficient evidence to support his
convictions for wire and mail fraud. Webb preserved this argument by moving for a
judgment of acquittal before the district court, so our review is de novo. United States v.
Tavarez, 626 F.3d 902, 906 (7th Cir. 2010). When a defendant challenges the sufficiency of
the evidence underlying a conviction, we will reverse only if no rational trier of fact,
viewing the evidence in the light most favorable to the government, could have found
the defendant guilty beyond a reasonable doubt. United States v. Chapman, 692 F.3d 822,
825 (7th Cir. 2012). This is an “extremely deferential” standard that presents a “nearly

2It is not clear from the record whether Donald Wamhof was a knowing participant in Webb’s scheme, an
unwitting patsy, or simply delusional about his ability to raise $8.7 billion dollars.
3 The original indictment contained eleven counts relating to five victim investors. At the conclusion of
Webb’s case-in-chief, the court dismissed Count 6 and Count 8 because the relevant victim never testified
at trial.
No. 17-1501                                                                                   Page 6

insurmountable hurdle” for an appellant. United States v. Thomas, 763 F.3d 689, 691 (7th
Cir. 2014).

          To convict a defendant of mail fraud, the government must prove:

          (1) that the defendant knowingly devised or participated in a scheme to
          defraud or obtain money or property by means of materially false
          pretenses, representations, promises, or omissions as described in that
          count of the indictment; (2) that the defendant did so knowingly and with
          the intent to defraud; and (3) that the defendant used the United States
          mail as a carrier.

United States v. Thyfault, 579 F.3d 748, 751 (7th Cir. 2009); 18 U.S.C. § 1341.

          To convict a defendant of wire fraud, the government must prove:

          (1) the defendant participated in a scheme to defraud; (2) the defendant
          intended to defraud; and (3) a use of an interstate wire in furtherance of the
          fraudulent scheme.

    United States v. Turner, 551 F.3d 657, 664 (7th Cir. 2008); 18 U.S.C. § 1343.

       Webb claims that for both the wire and mail fraud charges, the government failed
to prove that he knowingly participated in a scheme to defraud and that they failed to
prove that he acted with the requisite intent. Four victim investors testified at trial that
over the course of several years they listened in on numerous conference calls led by
Webb.4 The witnesses did not have a specific memory of each conference call but instead
relied upon a “collective memory” when testifying. Webb asserts that this “collective
memory” is a euphemism for an incomplete memory that renders their testimony fatally
flawed. Because the victim investors could not differentiate what they heard before they
invested from what they heard after they invested, Webb asserts that no reasonable jury
could have made such a determination. Relying heavily on our decision in United States
v. Durham, 766 F.3d 672 (7th Cir. 2014), Webb argues that while there was evidence that
the conduct in question occurred, there is no evidence that it was part of a scheme to
defraud.

4 The nine surviving counts in the indictment are associated with Webb's criminal conduct against five
investor victims--four individuals and an LLC.
No. 17-1501                                                                          Page 7

        In Durham, we held that there was insufficient evidence to support two wire fraud
convictions when the government introduced only a single-page printout of what was
intended to be a much larger exhibit showing how a wire deposit was used in
furtherance of a scheme to defraud investors. Id. at 678-9. Without the rest of the exhibit,
there was no other evidence anchoring the wire transfers to the other criminal activity of
the defendants. Id. at 679. On appeal, the government attempted to assert that there was
sufficient modus operandi of the entire scheme to support the convictions as to the
particular wire transfers in question. Id. We soundly rejected the “Hail Mary” attempt to
salvage the convictions, noting that the record had not established that fraud was the
company’s exclusive function. Webb asserts that the witnesses’ “collective memory” in
his case is akin to the incomplete one-page exhibit and that there is nothing left but an
impermissible effort by the government to claim that fraud was InfrAegis’s exclusive
function. We find Webb’s interpretation of the record in his case to be unsubstantiated
and misguided for two primary reasons.

       First, starting in 2007, Webb’s statements to the victim investors about the
contracts with potential buyers, status of the technology and Donald Wamhof’s buyout
were always fraudulent. Webb may have had good intentions when he created his
company in 2003. However, by January of 2007, it was clear that InfrAegis had failed,
and Webb was desperately lying to potential investors to keep his dream alive. Contrary
to Webb’s assertions, the jury was not presented with calls where Webb “tamped down”
projections touted in earlier conference calls. To be clear, the statements presented at
trial were not lofty projections. They were fraudulent factual assertions about nearly
every aspect of the company.

       Second, all four victim investors provided specific testimony as to the fraudulent
statements that caused them to invest with Webb. For example, Brian Caine, the victim
investor in Count 5 and Count 7, listened to calls from 2009 through 2010. Caine’s first
investment occurred in January of 2009, when he wired Webb $30,000. After listening to
additional calls, he wired Webb another $15,000 in January 2010. Caine testified that he
listened to half a dozen calls prior to investing with InfrAegis. When asked why he
decided to invest with InfrAegis, he testified it was because Webb represented that
almost $9 billion was going to be infused into the company and he felt fortunate to be
getting in on the ground floor. Webb would have us reverse Count 5 and Count 7,
because Caine referred to his memory as “more of a collective recollection.”

      We find no ambiguity in Caine’s testimony. Starting in 2009, he listened to
approximately six conference calls with Webb before investing. During this same time,
No. 17-1501                                                                          Page 8

we know from multiple other witnesses that Webb was fraudulently representing that
the $8.7 billion was “a week to ten days” away from hitting the company. Caine testified
that it was this specific representation that caused him to invest with Webb. Qualifying
his memories as “more of a collective recollection” does not negate the fact that he
provided the jury with specific details about why and when he gave Webb $45,000.
Additionally, the fact that Webb continued to lie about nearly every aspect of InfrAegis
for another three years and that Caine may have listened to some of these calls does not
render his testimony fatally flawed.

       A review of the other three victims’ testimony yields the same result. All of the
witnesses testified that they listened to conference calls led by Webb occurring in the
2007 through 2010 timeframe, and all described the fraudulent statements Webb
employed that induced their investments. At best, Webb’s “collective memory”
argument serves only as an impermissible invitation to second-guess the credibility
determination of the jury. See United States v. Alcantar, 83 F.3d 185, 189 (7th Cir. 1996)
(“Questions of witness credibility are reserved for the jury, and its assessment will not be
second-guessed by an appellate panel.”).

        Webb’s attempt to draw an analogy between his facts and those of Durham fails at
the most basic level. It is clear to us that the government did not try a Durham “Hail
Mary” to secure Webb’s conviction. Instead, the government utilized a methodical,
compelling offense to secure his guilt. Webb’s intent to participate in his scheme to
defraud average investors is amply supported by the record. The jury was presented
with hours and hours of testimony from investors who described in detail the
misrepresentations made by Webb. The government corroborated this testimony with
tape recordings of Webb himself boldly and without abandon making false claim upon
false claim about the contracts and the status of the devices in various cities. The
government introduced offering memoranda and executive summaries that included the
same false and misleading information that Webb discussed during the investor
conference calls. Finally, the government brought in city officials, scientists and even
Donald Wamhof to prove that Webb knew he was lying to potential investors about
nearly every aspect of his business.

       III.   Conclusion

     The record before us contains ample evidence to support the verdict in this case.
Having found no reversible error, we AFFIRM the defendant's conviction and sentence.