On April 26, 2018, a federal grand jury indicted Donald Watkins, Sr. and Donald Watkins, Jr. for conspiracy to commit wire fraud and bank fraud, along with multiple counts of wire fraud and bank fraud. Both defendants pled not guilty and opted to represent themselves during a two-week trial, which included over 30 witnesses and more than 200 exhibits. The Government presented evidence that the Watkins conspired to defraud investors, including Charles Barkley and others, by falsely claiming Senior owned a significant stake in Masada Resource Group and misrepresenting the use of solicited funds for personal expenses instead of business purposes. Additionally, they were accused of bank fraud for directing a friend to secure loans under false pretenses to conceal that the funds would benefit the Watkins, as Senior had maxed out his line of credit.
After the trial, the jury convicted Senior on all charges and Junior on conspiracy and one count of wire fraud. Both defendants subsequently filed motions for judgment of acquittal, which the District Court denied. Senior was sentenced to 60 months in prison, while Junior received 27 months. On appeal, Senior contends that the evidence failed to demonstrate the intent to defraud necessary for his convictions and argues that Junior lacked the requisite intent for conspiracy. He also requests a new trial due to alleged errors in jury instructions and the exclusion of critical evidence. Junior appeals on the grounds of insufficient evidence to support his conspiracy conviction and his aiding and abetting charge.
A verdict challenged for insufficient evidence is reviewed de novo, with all reasonable inferences made in favor of the verdict, meaning it can only be overturned if no reasonable trier of fact could find guilt beyond a reasonable doubt. A district court's refusal to provide a proposed jury instruction and its evidentiary rulings are reviewed for abuse of discretion. The sufficiency of evidence for wire fraud convictions requires proof that the defendant intentionally participated in a scheme to defraud and used the mails or wires to execute it. For wire fraud, intent to defraud is established if a defendant attempts to obtain something by deceptive means.
In this case, Senior contested the sufficiency of evidence for his intent to defraud. He argued that intent to harm victims must be proven, while the government only showed he misled investors into fair transactions. However, the evidence supported the required intent to defraud, as established in prior rulings. Senior's misrepresentations regarding the use of investment funds, claims about high-profile endorsements, and his ability to repay loans were deemed to affect the nature of the bargain. These lies were significant enough for a reasonable jury to infer they altered the value and nature of the investment, aligning with the legal standards set forth in earlier cases.
Counts two through four detail Senior's solicitation of a $150,000 loan from Barkley, initially represented as funding for business-related expenses. Evidence, however, revealed that Senior and Junior planned to divert the funds for personal expenses, including payments to Senior's ex-wife and for Junior's insurance business, indicating a fraudulent intent to deceive Barkley. Counts five and six involved another solicitation for $1 million, presented as necessary for a potential sale of Masada to a Saudi royal. Instead, the funds were intended for personal obligations, such as alimony. The jury could reasonably conclude that Senior intended to defraud Barkley in both instances.
Counts seven and eight pertained to stakeholder reports sent by Senior to Barkley’s financial advisor and investors, aimed at misleading them into believing their investments were being used appropriately. Testimonies indicated that these communications created a false sense of security among investors, effectively concealing the fraudulent use of their funds.
Junior's wire fraud conviction under count two was challenged on the grounds of insufficient evidence of his direct involvement in fraudulent statements. However, legal precedent supports that a defendant can be convicted of wire fraud by being part of a conspiracy, even without direct participation in every element of the fraud, provided they knowingly joined the scheme.
Substantial evidence was presented by the Government to demonstrate that Junior knowingly and intentionally participated in Senior's fraudulent scheme. Junior was included in a significant email exchange from Senior to Barkley, indicating awareness of their financial issues, and he directly communicated with Senior about the lack of funds available. Evidence included emails discussing personal expenses to be covered by Barkley’s loan. Junior's role as the office manager and bookkeeper allowed the jury to reasonably infer his understanding that the loan funds were intended for business expenses, not personal use, supporting the conclusion that he aided in the wire fraud.
Regarding the conspiracy to commit wire fraud, both Senior and Junior contested the sufficiency of evidence for Junior's conviction, which would also affect Senior's conviction due to the requirement of at least two conspirators. To establish a conspiracy under 18 U.S.C. § 1349, the evidence must show the existence of a conspiracy, knowledge of it by the defendant, and voluntary participation. Circumstantial evidence is often necessary due to the mental nature of conspiracy crimes. The Government is not required to show that a defendant knew all details of the conspiracy or participated extensively, as even minimal involvement can lead to conviction.
At trial, evidence indicated that Junior served as Senior’s operational overseer, was privy to multiple emails with false information, and devised a plan to solicit funds from Barkley for personal expenses. An email from Junior proposing a loan from Barkley detailed the allocation of funds for personal debts, which was sufficient to support conspiracy charges against both Junior and Senior.
A jury could reasonably infer from an email that Junior conspired with Senior to solicit funds from Barkley under false pretenses, intending to use the proceeds for personal expenses. In assessing guilt, evidence does not need to exclude all other conclusions. Thus, sufficient evidence supported Junior's conviction, undermining Senior's challenge to his own conspiracy conviction.
Regarding Senior's bank fraud convictions, he argued a lack of intent to harm Alamerica Bank; however, under 18 U.S.C. § 1344, bank fraud occurs when one knowingly executes a scheme to defraud a financial institution. Evidence indicated that in September 2012, Senior sought a $750,000 loan from Dr. Richard Arrington, who, after being informed he could not provide the funds directly, was directed by Senior to apply to Alamerica Bank for Jennro, L.L.C. Senior, then Chairman of the Bank, had maxed out his credit line and was ineligible for loans. Despite the bank's emphasis on understanding loan purposes, neither Senior nor Arrington disclosed that Senior was the actual recipient.
The urgency in Senior's text to expedite the loan closing process underscores this concealment. After the loan was approved, funds were disbursed per Junior's instructions. In November, Senior again sought a $150,000 loan for Jennro, with Arrington again misrepresenting the loan's true purpose. Senior contended that no misrepresentations about the amount or terms of the loans negated the fraud claim; however, this argument is flawed, as banks have a vested interest in knowing the true recipient and intended use of loan funds.
Information regarding the nature of a loan agreement is critical, as banks selectively provide loans based on specific criteria. The court referenced Takhalov, which defines a “scheme to defraud” as one where a defendant misrepresents the nature of the bargain. Evidence presented at trial was sufficient for a jury to conclude that Senior attempted to obtain a loan from Alamerica Bank through deceptive means, thereby supporting his bank fraud convictions. Senior contended that the District Court erred by not including his requested jury instruction related to wire and bank fraud charges. A refusal to provide such an instruction is considered an abuse of discretion if it meets three criteria: the instruction is correct, the court didn’t address it in its charge, and this omission impaired the defendant’s defense. However, the District Court did not abuse its discretion because it addressed the substance of Senior’s proposed instruction, and his ability to mount an effective defense was not compromised. The court's instruction about "intent to defraud" was deemed adequate, requiring the jury to find that Senior's misrepresentations were intended to cause loss to the investors. Additionally, the District Court conveyed Senior’s defense theory, emphasizing his reliance on contractual authority regarding valid business purposes for fund expenditure.
Senior also argued that the District Court wrongly excluded evidence crucial to his case, specifically concerning the economic value of interests he sold and holdings in Masada and Nabirm, which he claimed was necessary to show investors received value. The court held broad discretion in determining evidence relevance and admissibility, which is upheld unless there is clear abuse. While defendants are entitled to present crucial evidence, this right does not extend to evidence lacking a logical connection to the offense or defense. The District Court did not abuse its discretion in this regard, affirming that the excluded evidence was not directly related to the elements of the offense or an affirmative defense.
The value and growth potential of the Masada and Nabirm entities, as well as the economic participation interests sold by Senior, were not pertinent to the charges against Senior and Junior. The Government’s case centered on allegations that they misled investors regarding the use of solicited funds, asserting that the funds would be allocated for business purposes when, in fact, they were intended for personal expenses. Demonstrating the success of Masada would not mitigate Senior’s liability for misleading investors about the allocation of their investments. Consequently, the District Court's exclusion of evidence related to the value of the economic interests and Senior's personal holdings was deemed appropriate. The District Court's judgment is upheld.
