United States v. Richard Wiley, Elizabeth Wiley Becht, Brian Bink, Ray Gardner, George Keleshian, Edward Larson, Sherrin Larson, Don Mullaney, William Peterson, Karen Radovanovitch, Delmar Reynolds, Donald Rue, Mitchell Shecter, Erna Shecter Wiley, Karen Radovanovitch, Delmar Reynolds, Raymond Gardner
Docket: 754
Court: Court of Appeals for the Second Circuit; May 6, 1988; Federal Appellate Court
Karen Radovanovitch, Delmar Reynolds, and Raymond Gardner appeal their convictions for involvement in a fraudulent scheme targeting prospective independent distributors of home security and energy efficiency devices. This organized scam, masterminded by Richard Wiley and aided by Thomas Stone, deceived numerous individuals nationwide, resulting in substantial financial losses. Of the 15 defendants, only six were convicted. The scheme involved attracting distributors to invest in Advance Technology Systems (ATS) and Security Control Systems (SCS), where obtaining a distributorship required an investment of approximately $31,000. Wiley and Stone misled potential distributors by falsely claiming wholesale pricing and the success of existing distributors, hiring individuals like Radovanovitch to provide fraudulent testimonials. When distributors faced challenges in selling the products, Gardner and Reynolds were brought in to develop a sales training program and serve as fake references. By March 1983, both ATS and SCS went out of business.
The grand jury indicted two conspiracies involving ATS and SCS, each consisting of four counts. Wiley pled guilty and became a key witness. Following a six-week trial in the U.S. District Court for the Northern District of New York, Radovanovitch was convicted for participating in both conspiracies and for wire fraud related to each, receiving a sentence of one year and one day (suspended), three years of probation, and $800 in restitution. Reynolds was convicted for his role in the ATS conspiracy and for aiding SCS wire fraud, sentenced to six months (suspended), three years of probation, and $2,500 in restitution. Gardner was convicted for aiding ATS wire fraud and travel fraud, also receiving a one-year and one-day sentence (suspended), two years of probation, and $2,000 in restitution.
All three appellants appealed their convictions, citing various arguments for reversal, though most claims were seen as lacking merit. Notable arguments included Reynolds' sufficiency and evidentiary claims, Gardner's assertion of improper government questioning of Wiley, and Radovanovitch's request for severance of her case. Additionally, they claimed the district court erred in not granting a mistrial when the jury accessed the government's exhibit list during deliberations.
Reynolds specifically challenged the sufficiency of the evidence for his conviction, emphasizing the heavy burden on defendants in such appeals. The appellate standard requires sustaining a jury's verdict if substantial evidence supports it. For the ATS conspiracy conviction, the government needed to demonstrate that Reynolds knowingly participated in an illegal scheme, but was not required to prove knowledge of every objective or detail of the conspiracy.
Evidence supports the jury's finding that Reynolds participated in a conspiracy to defraud distributors of home energy conservation devices through ATS. At trial, it was demonstrated that Reynolds misrepresented the successes of ATS distributors during sales training sessions and falsely claimed to have achieved great success in selling ATS products while acting as a reference for potential distributors. He knew that distributors were charged retail prices for ATS products and was aware of doubts regarding a key figure's integrity.
Reynolds contested the sufficiency of evidence for his conviction related to ATS wire fraud, but it was established that a member of a conspiracy can be held responsible for foreseeable offenses committed by co-conspirators. As Reynolds’ conspiracy conviction was upheld, so too was his wire fraud conviction, as telephone fraud was deemed a foreseeable consequence of the conspiracy.
Regarding the aiding and abetting conviction for the SCS wire fraud scheme, the court found that the government failed to provide sufficient evidence to support Reynolds' conviction. Under 18 U.S.C. § 2(a), to convict for aiding and abetting, the government must prove the commission of an underlying crime by another, a voluntary act by the defendant, and specific intent to facilitate the crime. The court concluded that the evidence did not demonstrate that Reynolds joined the SCS scheme or intended to contribute to its success, as general suspicion or knowledge of illegality is insufficient for conviction.
The government presented evidence against Reynolds consisting of three checks totaling $4,400 drawn from the SCS account, purportedly for sales training sessions for SCS distributor Sandry and ATS distributor Wolverton. While Reynolds testified he conducted training for Sandry, neither Sandry nor Wolverton testified at trial, leaving a gap in evidence regarding Reynolds’ actions or statements during those sessions. The government attempted to link Reynolds’ involvement in a separate ATS conspiracy to the SCS scheme, asserting that his participation in both conspiracies demonstrated his intent to assist the SCS fraud. However, the court found that the evidence, including the checks and a single training session, was insufficient for a reasonable juror to conclude that Reynolds aided the SCS scheme, indicating that the jury's verdict relied on speculation rather than solid evidence.
Additionally, Reynolds contended that his convictions should be overturned due to the trial judge's admission of a 1980 Iowa court order as evidence. Testimony from ATS distributor Zawol indicated that Reynolds had misrepresented Wiley’s character. Although the court initially struck the related question and answer, it later allowed the exhibit to establish whether Reynolds fully disclosed Wiley's past actions. Under Federal Rule of Evidence 404(b), evidence of prior crimes is generally inadmissible to prove character but can be permissible for other purposes, such as demonstrating knowledge. The court deemed the Iowa court order relevant to show that Reynolds was aware his statement about Wiley was false.
Exhibit 17.1 was deemed appropriate as 'other crime' evidence for demonstrating Reynolds' knowledge; however, its admissibility under Rule 404(b) still necessitated evaluation under the probativeness-prejudice standard of Rule 403. The Iowa injunction posed a risk of unfair prejudice against Reynolds, as the Iowa judge's findings included charges of false and misleading conduct directly related to Reynolds' trial. Despite the district court's instruction to the jury to consider the exhibit solely for its relevance to Reynolds' knowledge, the potential for the jury to infer a propensity for fraudulent behavior outweighed its probative value, leading to an abuse of discretion by the district court in not excluding the exhibit. Nonetheless, this error was deemed harmless regarding Reynolds' conviction for ATS conspiracy and wire fraud due to the compelling evidence of guilt from other sources.
Gardner and Radovanovitch claimed insufficient evidence against them for a conviction beyond a reasonable doubt. However, the court found that the government presented adequate evidence to support their convictions, rendering further discussion unnecessary. During Wiley's redirect examination, which followed an unresponsive cross-examination by Gardner, the trial court allowed the government to treat Wiley as a 'hostile witness,' enabling the prosecutor to use leading questions to establish that Gardner was aware of misrepresentations made to distributors. Gardner contended that the trial court erred by not limiting the scope of this redirect examination more strictly, but the court disagreed, affirming that redirect can rebut misleading impressions from cross-examination, and the district court acted within its discretion in this regard.
Radovanovitch's motion for severance under Rule 14 was not ruled on by the district court, which the government argued was due to the motion's late filing without justifiable cause. The court's decision to conduct a joint trial with seven co-defendants did not constitute an abuse of discretion, and Radovanovitch was not unfairly prejudiced by this arrangement. The amount of evidence irrelevant to a defendant alone is insufficient to warrant reversing the trial judge's decision on joint prosecution.
During jury deliberations, an inadvertent exposure occurred when the government's exhibit list, which included both admitted and unadmitted exhibits, was brought into the jury room. Jurors indicated they had memorized the list, but the trial judge instructed them to focus solely on trial evidence and return the list. The defendants moved for a mistrial, claiming prejudice due to this exposure. The judge noted that the defense faced a significant burden in proving prejudice and postponed further discussion.
A presumption of prejudice arises from exposure to extra-record evidence, which the government must rebut. After hearing arguments, the court found that the exhibit list's presence was not harmful, as the characterizations were neutral and most exhibits were already part of the evidence. Jurors confirmed they had not considered the list as evidence, leading the court to conclude that the exposure did not prejudice the defendants. The trial judge is viewed as best positioned to assess any potential prejudice, and in this case, the presumption was effectively rebutted.
Judge Munson ruled that the exhibit list did not unfairly prejudice the jury, deeming it "neutral or objective" and concluding that any exposure to it was harmless. This determination was supported by precedent where juror exposure to certain information was similarly found to be non-prejudicial. The court contrasted this case with a prior ruling that reversed a conviction due to the jury receiving improper testimony, which was not an issue here due to the district court's prompt corrective measures. As a result, the trial court's decision not to grant a mistrial was upheld. Reynolds' conviction on Count VII was reversed, and the case was remanded for dismissal of that count and refund of the related fine, while other convictions were affirmed. Gardner's argument regarding the exclusion of evidence related to Wiley's statements was deemed to present minimal prejudice, thus any potential error was considered harmless.
