Court Opinion

ID: 2754155
Source: CourtListenerOpinion
Date Created: 2014-11-21 20:00:52.666125+00
Date Added: 2024-06-11T10:24:56.360786
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 12-5037

UNITED STATES OF AMERICA,

               Plaintiff - Appellee,

          v.

JOHN ROBERT GRAVES,

               Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond.    James R. Spencer, Senior
District Judge. (3:11-cr-00246-JRS-1)

Argued:   October 30, 2014                 Decided:   November 21, 2014

Before WILKINSON, MOTZ, and FLOYD, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: Patrick L. Bryant, OFFICE OF THE FEDERAL PUBLIC
DEFENDER, Alexandria, Virginia, for Appellant.         Kevin Brian
Muhlendorf, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellee.     ON BRIEF: Michael S. Nachmanoff, Federal
Public   Defender,   Alexandria,   Virginia,   Carolyn  V.   Grady,
Assistant Federal Public Defender, OFFICE OF THE FEDERAL PUBLIC
DEFENDER, Richmond, Virginia, for Appellant.      Jeffrey H. Knox,
Chief,   Criminal    Division,   Fraud   Section,   UNITED   STATES
DEPARTMENT OF JUSTICE, Washington, D.C.; Neil H. MacBride,
United   States    Attorney,   Alexandria,   Virginia,   Jamie   L.
Mickelson, Assistant United States Attorney, OFFICE OF THE
UNITED STATES ATTORNEY, Atlanta, Georgia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

       John Robert Graves and his wife engaged in an elaborate

scheme to swindle at least eleven clients out of approximately

$1.3    million.    On   appeal,     he     challenges        his    convictions            for

making    a    false     statement    in       the      course      of    a    government

investigation      and      committing         fraud        while    serving       as        an

investment      adviser,      as     well        as     a     two-level        sentencing

enhancement applied for conducting fraud through sophisticated

means. We find no merit in his contentions, and hereby affirm.

                                          I.

       After    resigning    from    the       FBI,     Graves      registered         as   an

investment adviser and broker to offer tax advice and estate

planning services through his company, Brook Point Management,

Inc. (“BPM”). He was also employed by, and served for a time as

president of, an Indiana-based investment company called Compass

Financial Advisors (“Compass”). His wife, Sara Graves, served as

the    managing    member    of    another       company,       Dupont        Auburn    Real

Estate (“DARE”), which was created to facilitate the purchase of

an office building in Indiana in which Compass could rent office

space. In time, the couple used these three entities, along with

several       personal    accounts,         to        further       their      fraudulent

transactions.

       Graves’s    victims    were   generally          elderly      or   inexperienced

investors seeking a safe haven for large sums of money they had

                                           3
acquired,        often    through       inheritance       or     insurance      payments.

Graves would pitch investments in BPM or DARE to them, while

neglecting to mention that DARE was nominally owned by his wife.

For example, Graves became Janice Robinson’s investment adviser

for funds she inherited from her late husband. He advised her to

invest $200,000 in BPM and DARE, which she did. She later gave

Graves another $23,000 to hold in escrow, which he and his wife

instead put into the DARE account to use for other purposes. Of

the $223,000 she invested, Robinson was only able to recover

$9,000.

         In 2008, Barbara Wren sent Graves $150,000 to invest from

money     inherited       from   her      mother.      Graves    used    the    funds    to

purchase and offer for rent a house in Partlow, Virginia --

where Wren herself lived. When Wren raised questions in 2009

about the lack of paperwork, he offered her $150,000 in AIC

stock -- another company associated with the defendant -- which

turned out to be virtually worthless.

         Around the same time, Christine Taugher and her two sons

contacted        Graves     to     invest      money    they     had     obtained       from

retirement        savings    and    life      insurance       funds    after    Taugher’s

husband passed away. Graves recommended investing in real estate

as   a    safe    investment       with      reasonable      returns     and   eventually

received     $578,000       from       the    family     to     invest    in    DARE.     He

neglected        to   mention    his    connection      to     DARE,    and    the   family

                                               4
never recovered its investment. Other victims recounted similar

experiences, also resulting in a complete loss of their savings.

     In the fall of 2008, Graves and his business partner, John

Lauer, arranged to acquire a controlling ownership interest in

Compass by making several significant payments in 2009 and 2010.

Several of these payments, including one for $200,000 due June

30, 2009, were personally guaranteed by Graves and his partner.

Failing to pay on time would cost both of them their shares in

the company and any investment made to date. Graves used his

fraudulent transactions to pay off these debt obligations, as

well as to fund other personal expenses for himself and his

wife.

     FBI    Special     Agent     Tyler     Kennedy,        who   investigated      the

Graveses’     scheme,     traced      the       Taughers’     money    through      the

defendants’     various         accounts.        Graves       received      Christine

Taugher’s   money     June    29,   2009,       the   day    before   the     $200,000

payment was due for Compass. After only a few days in the DARE

account, Taugher’s money was transferred to a joint personal

savings account on July 1, 2009. That day, Sara Graves closed

the joint account and opened a new account in her name only with

Taugher’s   funds.      The   money    was      disbursed     from    there    to   pay

various personal debts, including the funds owed to Compass.

Taugher’s sons’ investment was likewise only in the DARE account

a few weeks before being moved to other accounts. A portion of

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it was used to fund the purchase of the AIC stock given to Wren

for her investment. However, when Graves was specifically asked

about       the   repayment   to    Wren       during   the     investigation,    he

represented that she had been paid using money his wife had

inherited from her mother.

       On     October    4,   2011,    the      Graveses      were    indicted    for

conspiracy to commit mail and wire fraud in violation of 18

U.S.C. § 1349, mail fraud in violation of 18 U.S.C. § 1341, and

four counts of wire fraud in violation of 18 U.S.C. § 1343. In

addition, John Graves was indicted for three counts of fraud in

violation of the Investment Advisers Act, 15 U.S.C. §§ 80b-6 and

80b-17, and one count of making false statements in a “matter

within the jurisdiction of the executive . . . branch of the

Government” in violation of 18 U.S.C. § 1001. After a four-day

jury    trial,     the   Graveses   were       convicted   on   all   counts.    John

Graves was sentenced to 135 months of imprisonment and three

years of supervised release, and was ordered to pay nearly $1.3

million in restitution. The 135 months of imprisonment was the

minimum amount of time recommended by the Sentencing Guidelines

range, which included a two-level enhancement for sophisticated

means.

       On     appeal,    Graves     challenges      the    sufficiency     of    the

evidence supporting the false statement conviction. He claims

that the FBI agent’s question was ambiguous and that his answer

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was also ambiguous and in fact true, and therefore could not

constitute a false statement. He also challenges the sufficiency

of the evidence for the Investment Advisers Act conviction by

arguing that the government failed to prove that he was serving

as an investment adviser rather than a broker-dealer -- which is

an   exception    under     the   Act   --    when   he   committed    the     fraud.

Finally, he challenges the two-level sentencing enhancement for

sophisticated means. Because we find that there was more than

sufficient evidence to support the convictions and sentencing

enhancement, we affirm.

                                        II.

       Graves first contends that there was insufficient evidence

to support the false statement conviction. A jury verdict must

be upheld on appeal if a reasonable factfinder could “accept

[the    evidence]      as    adequate     and    sufficient      to    support       a

conclusion of a defendant’s guilt beyond a reasonable doubt.”

United States v. Burgos, 94 F.3d 849, 862 (4th Cir. 1996) (en

banc). The evidence must be viewed in the light most favorable

to   the   government       and   “in   cumulative        context”    rather    than

piecemeal. Id. at 862-63.

       Graves claims the government failed to introduce sufficient

evidence to prove that he knowingly made a “materially false,

fictitious,      or   fraudulent    statement        or   representation”       in   a

matter within the jurisdiction of the federal government. 18

                                         7
U.S.C. § 1001(a). He singles out the following exchange as the

“false statement” he is alleged to have made:

            Agent Kennedy: And that’s where the $150,000

            went, came from to go to Barbara Wren?

            Graves: I guess.

J.A. 924. Graves argues that both the question and answer were

ambiguous and that, in part owing to the ambiguity, the answer

was factually correct. Though literal truth and ambiguity are

both defenses to false statement claims, see United States v.

Good, 326 F.3d 589, 592 (4th Cir. 2003); cf. Bronston v. United

States,     409   U.S.   352,     360-62    (1973)   (overturning    perjury

conviction), these exceptions are narrow, and must account for

the context of the statement and the intention of the witness.

United States v. Sarwari, 669 F.3d 401, 406 (4th Cir. 2012); see

also United States v. Strohm, 671 F.3d 1173, 1179-80 (10th Cir.

2011).

     Graves distorts the issue here by extracting the slightest

snippet of the exchange between himself and Agent Kennedy. The

brief     exchange   cited   by    Graves    followed   a   more    extensive

discussion that began with questions about where the defendant

had obtained the money to repay Wren. In response to questions

about the $150,000, Graves stated falsely that Sara Graves paid

the $150,000 to Wren out of the $714,000 Sara received from her

mother’s estate. Discussions about the inheritance followed and

                                      8
eventually      resulted      in    the     tidbit     quoted    by     the    defendant.

Graves had recorded this entire exchange, unbeknownst to Agent

Kennedy, and the recording was played at trial for the jury. The

jury   thus     had   the    opportunity         to   gauge     for   itself,       in   the

context   of    the   full     conversation,          whether    Graves       had   made    a

false statement in the course of a government investigation. It

determined beyond a reasonable doubt that he had.

       The jury had the chance to observe firsthand and weigh in

its totality all witness testimony and other evidence. We will

not disturb its verdict when, taken in context, the evidence

reasonably supports the conclusion that Graves falsely stated

and intentionally concealed the origins of the funds given to

Wren. As that was clearly the case here, we affirm the false

statement conviction.

                                            III.

       Graves also contends that his convictions on Counts Seven,

Eight,    and    Nine,      charging      violations      of    the     criminal     fraud

provisions of the Investment Advisers Act, were not supported by

sufficient      evidence      and     must       therefore      be    overturned.        The

Investment      Advisers       Act     prohibits        investment       advisers,         as

defined    by     the       Act,     from     defrauding        their     clients        and

prospective clients. See 15 U.S.C. § 80b-6. Graves argues that

the government failed to prove that he was in fact acting as an

                                             9
investment adviser rather than a broker-dealer when he committed

the fraudulent acts.

       Graves’s contention fails for several reasons. First, he

stipulated at trial that “for purposes of 15 U.S.C. Sections

80(b)(6) and 80(b)(17), Section 206 of the Investment Advisers

Act, John Robert Graves was an Investment Adviser from 2006 to

2010.” J.A. 144. The broker-dealer exception is contained within

the definition of an “investment adviser” and prevents brokers

and    dealers   from   being    drawn    into    the   Act’s    prohibitions     by

their incidental investment advising activities; the exception

cannot rescue someone who has already stipulated that he meets

the Act’s definition of an investment adviser. See 15 U.S.C.

§ 80b-2(11).     Furthermore,      he    did     not,   and    indeed   could    not

because of the stipulation, object to the proof of that element

of the crime at trial, raising the whole matter for the first

time    on   appeal.    Finally,    as   a     practical      matter,   Graves   was

registered as an investment adviser during the relevant time

period, and providing investment advice for a fee to his victims

to prompt them to invest in his and his wife’s companies was

essential to his fraudulent scheme. For the foregoing reasons,

we affirm the conviction.

                                         IV.

       Finally, Graves disputes the two-level sophisticated means

enhancement      applied    to     his    advisory      Sentencing      Guidelines

                                         10
calculation. Whether a defendant used sophisticated means is a

finding of fact that we review for clear error. United States v.

Adepoju, 756 F.3d 250, 256 (4th Cir. 2014).

      Defendants are subject to a two-level enhancement under the

Sentencing      Guidelines      if   they     perpetrate       their    fraudulent

schemes    using    “sophisticated      means.”      U.S.S.G.    § 2B1.1(b)(10).

The   Guidelines     describe    this   term    as     “especially      complex    or

especially intricate offense conduct pertaining to the execution

or concealment of an offense.” U.S.S.G. § 2B1.1 cmt. n.9(B).

Though    the    Guidelines    identify      conduct    that    would    merit    the

enhancement, these examples are merely illustrative. Any given

element of the scheme need not itself be particularly complex or

intricate; rather, the scheme should be viewed as a whole. See

United States v. Jinwright, 683 F.3d 471, 486 (4th Cir. 2012).

      The district court had ample basis for its finding that the

Graveses’       scheme   was    sophisticated.         Graves    and     his     wife

transferred the funds multiple times through multiple accounts,

in one case channeling Taugher’s money through four accounts in

a matter of days. J.A. 662-66. Defendants did not merely move

money from one account to another; they engaged in a veritable

shell game, switching money here and there between personal and

business accounts, to conceal the source of the funds and hide

their fraud. The district court did not clearly err in applying

the two-level sophisticated means enhancement.

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The judgment is in all respects affirmed.

                                            AFFIRMED

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