Court Opinion

ID: 4656869
Source: CourtListenerOpinion
Date Created: 2021-02-03 02:00:27.532585+00
Date Added: 2024-06-11T08:01:04.978417
License: Public Domain

Case: 20-50141      Document: 00515730510         Page: 1     Date Filed: 02/02/2021

              United States Court of Appeals
                   for the Fifth Circuit                        United States Court of Appeals
                                                                         Fifth Circuit

                                                                       FILED
                                                                February 2, 2021
                                   No. 20-50141                   Lyle W. Cayce
                                                                       Clerk

   United States of America,

                                                              Plaintiff—Appellee,

                                       versus

   Charles McAllister,

                                                           Defendant—Appellant.

                   Appeal from the United States District Court
                        for the Western District of Texas
                             USDC No. 1:18-CR-16-1

   Before Haynes, Duncan, and Engelhardt, Circuit Judges.
   Per Curiam:*
          Charles McAllister was unanimously convicted following a five-day
   jury trial of aiding and abetting wire fraud in violation of 18 U.S.C. § 2 and §
   1343 and unlawfully engaging in a monetary transaction in violation of 18
   U.S.C. § 1957 arising out of his online precious metals trading business.
   McAllister appeals his conviction, challenging the sufficiency of the evidence

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-50141      Document: 00515730510           Page: 2   Date Filed: 02/02/2021

                                     No. 20-50141

   of his intent to defraud, and contends that the district court erred in denying
   his motions for judgment of acquittal. We AFFIRM.
                                          I.
          Charles McAllister was the CEO and majority shareholder of Bullion
   Direct, Inc. (“BDI”), the company he founded in 1999. BDI was an online
   platform that facilitated the trading of precious metals. “Nucleo” was BDI’s
   trademarked exchange sale, allowing a buyer and a seller of bullion to remain
   anonymous while using the proprietary platform, with BDI acting as
   intermediary, to buy/sell precious metals. BDI earned a one-percent
   commission after allegedly verifying the legitimacy of metals before
   completing the sale. BDI also offered its customers storage for precious
   metals in its vault for no additional charge.
          The FBI opened an investigation into BDI in July 2015 after receiving
   a complaint from a former customer who had wired almost $100,000 to BDI
   to obtain precious metals, but received nothing in return. Shortly thereafter,
   BDI declared bankruptcy. The FBI investigation ultimately concluded there
   were over 6,000 victims and approximately $25 million in lost funds.
   McAllister was indicted in January 2018 for creating and using companies
   between January 2009 and July 2015 to devise a scheme to defraud and obtain
   money and property by means of false and fraudulent pretenses,
   representations, or promises.
          During McAllister’s trial, the jury heard from a dozen witnesses who
   described in detail the FBI investigation, the origins of BDI, BDI’s inner
   workings as a company, inadequate accounting procedures, the lack of proper
   vault inventory, misappropriation of customer funds, and personal stories of
   customers being defrauded by BDI.
          FBI Agent David Hall described how BDI operated, and how the case
   against McAllister originated based on a complaint. Hall detailed how

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                                    No. 20-50141

   customers made an account, the various fund transfers utilized by BDI, and
   the precious metals represented as available to customers.
          Julie Mayfield, who was hired by BDI in 2000 to assist with
   accounting, provided testimony regarding the inner workings and problems
   at BDI. Specifically, she testified that shortly after her hire, she noted
   company accounting software was ill-equipped to handle business demands,
   and that the nucleo platform inaccurately recorded all user transactions as
   sales, whether they came from catalog sales or through the exchange.
   Mayfield testified that McAllister was the sole decision making authority at
   BDI.
          Mayfield further testified that no operating expenses were recorded in
   accounting at BDI until 2009 and that BDI never filed income tax returns
   from the time of her hire in 2000 until 2012, a concern that she raised with
   McAllister via email. Tax returns ultimately revealed that BDI was $14
   million in debt and that McAllister had not only reimbursed himself for
   company expenses used on his personal credit card, but he had over-
   reimbursed himself by more than $500,000. Mayfield also discovered that
   McAllister wired funds to himself from BDI accounts to purchase a home for
   $925,000.
          Mayfield, along with McAllister and other BDI representatives, met
   with tax attorneys in October 2012. On the same day, she met with a criminal
   defense attorney. Mayfield testified that, upon receiving advice from criminal
   defense counsel, she told McAllister and BDI counsel that they needed to
   inform customers that their metal was not in fact in BDI vaults, and to stop
   vaulting customer metal. Mayfield resigned after BDI Counsel, Joe Cain,
   stated they would not notify customers and any customer disclosure would
   likely be met with lawsuits.

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          Greg Russell, who was involved with the company from 2011 to 2012
   as a consultant to help BDI financially diversify through hedging, testified the
   only way to fix the financial issues for BDI was through an acquisition of the
   company. He explained that discussions for financial solutions with
   McAllister, the sole authority at BDI, never materialized because McAlister
   was unwilling to disclose financial information.
          Paul Carmona, director of the Regulatory Integrity Division at the
   Texas Workforce Commission, testified that he recommended BDI consult
   criminal defense counsel after estimating BDI’s operation was likely illegal.
   When Carmona pressed if BDI had enough metal to satisfy its customer
   obligations, he was told that it did not.
          Joseph Martinec, a Texas bankruptcy attorney, testified that he had
   been retained by McAllister in 2012. In 2015, McAllister informed him that
   he had to do something after being unable to return to the office because of
   frustrated customers and process servers. Martinec recommended that
   McAllister hire a chief restructuring officer after concluding that BDI
   operations could not continue due to lack of money. He noted McAllister
   retained sole authority over BDI, that BDI operated a net loss of $17 million
   over its first ten years of existence, and customers repeatedly stated they
   believed bullion was in the vault because McAllister told them it was.
   Martinec testified that at the time of bankruptcy, the estimated vault
   inventory was worth $700,000, and BDI had $25 million in obligations.
          Greg Milligan investigated litigation claims on behalf of the creditor’s
   trust, and as such, described his investigation into BDI. He testified that in
   BDI’s fifteen years of operation, it funded operating losses, including
   salaries, software development, and primary operating expenses through the
   use of customer metals. He noted that prior to filing the bankruptcy petition,
   McAllister paid himself $35,874 in severance, used company funds to

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   purchase a home, and after Mayfield left BDI, never hired another
   credentialed Certified Public Accountant.
          Agent Michael Fernald, a special agent with the Criminal
   Investigation Division of the IRS, described his investigation of McAllister
   and BDI. He testified to the lack of financial records between 2012 and 2015,
   that BDI misappropriated $16 million in customer funds between 2009 and
   2015, and that between 2010 and 2015, McAllister paid himself $1.7 million
   and over-reimbursed himself $514,000.
          At the conclusion of the five-day trial, the jury unanimously found
   McAllister guilty of wire fraud and engaging in monetary transactions in
   criminally derived property. McAllister moved unsuccessfully for acquittal.
   The district court imposed a concurrent, below-guidelines sentence of 120
   months and restitution in the amount of $16,186,212.56. McAllister timely
   appealed.
                                         II.
          McAllister argues that the district erred in denying his motions for
   acquittal as there is insufficient evidence of intent to convict of the charged
   offenses. We review the sufficiency of the evidence de novo, but our review
   is “highly deferential to the verdict.” United States v. Carbins, 882 F.3d 557,
   563 (5th Cir. 2018) (quoting United States v. Chapman, 851 F.3d 363, 376 (5th
   Cir. 2017)). We must “determine whether, viewing all the evidence in the
   light most favorable to the verdict, a rational jury could have found that the
   evidence established the elements of the offense beyond a reasonable doubt.”
   Id. (quoting United States v. Mahmood, 820 F.3d 177, 187 (5th Cir. 2016)). We
   must affirm his convictions if any rational trier of fact could have found the
   essential elements of the crimes proven beyond a reasonable doubt. See
   United States v. del Carpio Frescas, 932 F.3d 324, 328 (5th Cir. 2019).

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                                         III.
          To prove wire fraud, the Government must establish both a scheme
   to defraud and a specific intent to defraud. United States v. Spalding, 894 F.3d
   173, 181 (5th Cir. 2018). Conspiracy to commit wire fraud likewise requires
   that the defendant join the conspiracy with the “specific intent to defraud.”
   United States v. Brooks, 681 F.3d 678, 700 (5th Cir. 2012).
          The elements of wire fraud are: (1) a scheme to defraud; (2) the use
   of, or causing the use of, wire communications in furtherance of the scheme;
   and (3) a specific intent to defraud. Spalding 894 F.3d at 181 (5th Cir. 2018).
   The elements of money laundering, specifically, engaging in a monetary
   transaction in criminally derived property in violation of 18 U.S.C. § 1957 are:
   (1) engaging in or attempting to engage in a monetary transaction; (2) in
   criminally-derived property that is of a value greater than $10,000; (3)
   knowing that the property is derived from unlawful activity; and that (4) the
   property is in fact derived from specified unlawful activity. United States v.
   Loe, 248 F.3d 449, 468 (5th Cir. 2001). Aiding and abetting occurs when the
   defendant “aids, abets, counsels, commands, induces[,] or procures” the
   commission of a federal offense. 18 U.S.C. § 2(a).
          To establish that McAllister engaged in a scheme to defraud, the
   Government must prove that he “made some kind of a false or fraudulent
   material misrepresentation.” Spalding, 894 F.3d at 181. Misleading
   omissions qualify as false representations. See Pasquantino v. United States,
   544 U.S. 349, 357 (2005). As for intent to defraud, this element is satisfied
   “when [a defendant] acts knowingly with the specific intent to deceive for
   the purpose of causing pecuniary loss to another or bringing about some
   financial gain to himself.” United States v. Evans, 892 F.3d 692, 712 (5th Cir.
   2018) (quoting United States v. Umawa Oke Imo, 739 F.3d 226, 236 (5th Cir.

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   2014)). A jury can infer intent from the facts and circumstances. United States
   v. Rivera, 295 F.3d 461, 466-67 (5th Cir. 2002).
          Viewing the evidence and drawing all reasonable inferences in the
   light most favorable to the verdict, we conclude that the evidence was
   sufficient to support McAllister’s convictions for aiding and abetting wire
   fraud and unlawfully engaging in a monetary transaction.
          First, a reasonable jury could conclude that McAllister engaged in a
   scheme to defraud. Multiple witnesses testified that McAllister was the sole
   decision maker at BDI and was using BDI funds for personal use, including
   purchasing a home. Mayfield testified that McAllister was aware that BDI
   software was ill-equipped to handle business demands and BDI wasn’t
   keeping proper records or filing tax returns for ten years. She also testified
   that after consulting with a criminal defense lawyer and recommending to
   McAllister and others the need to notify customers, she was threatened with
   legal action. Russell testified that McAllister was aware of financial trouble,
   but refused to share financial information about BDI. And Agent Fernald
   testified that BDI had misappropriated customer funds.
          McAllister argues that he was only trying to accomplish his intent to
   create an “eBay for coins,” but lacked financial and accounting skills, so he
   hired experts and relied upon them to his detriment. Even assuming his
   explanation somehow refutes the Government’s evidence and testimony
   presented at trial, a jury was entitled to reject that explanation. See Spalding,
   894 F.3d at 181.
          Second, a jury could reasonably infer McAllister’s intent to defraud
   from the facts and circumstances. See Rivera, 295 F.3d at 469. McAllister was
   the sole authority at BDI until he relinquished control after the company
   declared bankruptcy. Viewing the evidence most favorably to the verdict,
   McAllister was aware of serious financial issues at BDI, didn’t file tax returns

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                                         No. 20-50141

   as decision maker at BDI, purchased a home with company funds, and over-
   reimbursed himself by $500,000 from company funds. McAllister also
   informed his retained bankruptcy counsel that he couldn’t go into the office
   because of frustrated process servers and customers. Lastly, after Mayfield
   resigned, McAllister never hired another qualified, credentialed accountant
   to help with addressing the financial issues at BDI. Considerable evidence
   supports the jury’s conclusion that McAllister was not merely negligent or
   naïve, as he suggests,1 but rather that he intended to commit the offenses
   alleged.
           Viewing the evidence in the light most favorable to the verdict, any
   rational trier of fact could have found the essential elements of the crimes
   have proven beyond a reasonable doubt. Accordingly, there was sufficient
   evidence to convict McAllister of aiding and abetting wire fraud and
   unlawfully engaging in a monetary transaction.
                                              IV.
           For the foregoing reasons, the judgment of the district court is
   AFFIRMED.

           1
             McAllister argues that he was just trying to keep his business going. But that is
   also true of all Ponzi scheme overseers: they would like the scheme to continue as long as
   possible.

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