Artemus E. Ward, Jr. appeals his conviction and a sixty-month prison sentence for mail and wire fraud related to a fraudulent Ponzi scheme. He and his partner, Jeffrey Pipher, solicited millions from investors under false pretenses, claiming funds would finance loans to used car dealers, offering high interest rates and insurance through liens on the inventory. Ward's appeal argues insufficient evidence linking him to the mailings and wire transfers in the indictment, a "constructive amendment" of the indictment by the jury instructions allowing conviction on substantive offenses despite a hung jury on the conspiracy charge, and a violation of the Ex Post Facto Clause concerning his sentence. The case began with a grand jury indictment in March 2004, charging both men with conspiracy, mail fraud, and wire fraud. Pipher pled guilty before trial and testified against Ward, who was subsequently found guilty on two mail fraud counts and one wire fraud count after a week-long trial. The evidence presented indicated that Ward and Pipher established Collateral Equities Corporation (CEC) in 1999 to solicit investments, misleading investors about the use of their funds in the auto floor planning business, with promises of collateralized loans to car dealerships. The jury was unable to reach a verdict on the conspiracy charge. The court affirmed the conviction and sentence following a thorough review.
Ward and Pipher operated a fraudulent investment scheme through advertisements in various newspapers and a telemarketing operation called One Trade, promising investors annual returns of 28% to 50% with secured loans. Despite these enticing offers, the scheme was deceptive from its inception. Pipher unlawfully copied documents from his previous employer, Secured Assets Incorporated, to create fraudulent materials for their new venture, CEC. They misrepresented CEC's operational history, claiming it had been in business for three-and-a-half years, despite being newly formed. Approximately 90 to 100 investors were deceived, contributing around $5 million, with $3.2 million remaining unaccounted for and only $90,000 actually loaned to car dealerships. Ward and Pipher provided a list of 17 dealerships but only did business with two and one wholesaler. They falsely claimed to hold titles to cars valued at $900,000, while most investor funds were used for personal expenses and interest payments to earlier investors. During the trial, Ward acknowledged his role in soliciting investments and managing funds. Count Two of the charges pertained to mail fraud involving a promissory note sent to investor Richard Rabenstein, which was signed by Pipher alone, promising a 42% annual return on Rabenstein's $155,000 investment. While Ward did not mail this specific note, he was heavily involved in other related fraudulent activities.
Richard Rabenstein became involved with CEC and Ward in June 1999 after responding to a classified ad in Investor’s Business Daily. Following his inquiry, he received a brochure featuring a misleading introductory letter dated July 15, 1999, which falsely claimed that CEC had been successfully operating for three and a half years and promised a 42% return on a minimum $10,000 investment. The accompanying Executive Summary inaccurately stated that CEC serviced twelve dealers in San Diego and two in Los Angeles, and the brochure falsely listed seventeen car dealerships, including fabricated financial data.
To further convince Rabenstein of CEC’s legitimacy, he was provided with references from satisfied investors. On July 27, 1999, Ward sent Rabenstein a handwritten investment invitation, emphasizing the urgency of investing due to high interest rates. Rabenstein subsequently made an initial investment of $25,000 via a personal check to Pipher, receiving an investor agreement signed by both Ward and Pipher. He initially received timely interest payments and later invested an additional $70,000, bringing his total investment, including unfulfilled interest payments, to $155,000.
A promissory note dated September 1, 2000, documented Rabenstein’s total investment. In a letter dated November 25, 2000, CEC clarified the process for rolling interest payments. In March 2002, Ward assured Rabenstein during a phone call that all funds were secure and announced an upcoming investor meeting. However, Rabenstein later saw a new ad in Investor’s Business Daily promising guaranteed income, and when he inquired, Ward affirmed that CEC was operational. As bounced checks and missed payments became frequent, Rabenstein contacted FBI Agent Michael DeLeon in March 2002 to report CEC’s misconduct.
Count Three charges Ellen and Randy Johns with wire fraud related to a scheme orchestrated by Artemus E. Ward, Jr. and Jeffrey Pipher. On April 24, 2000, the defendants transmitted a wire transfer of $45,000 from the Johnses' South Trust Bank account in Charlotte Harbor, Florida, to a Union Bank of California account in the name of Collateral Equities Corporation (CEC). This transaction was part of a conspiracy to defraud and was executed through false pretenses, in violation of 18 U.S.C. §§ 1343 and 2. Randy Johns became aware of CEC through a newspaper ad in 1999 and subsequently contacted Ward, who promised high investment returns. After a visit to California, Johns invested $75,000 and continued to invest additional amounts totaling $143,000, culminating in the wire transfer of $45,000. Following October 2001, CEC ceased interest payments, and Ellen Johns was unable to reach Ward for clarification.
Count Four involves mail fraud against Larry Baldwin, alleging that on January 7, 2002, Artemus E. Ward, Jr. mailed CEC investment documents to Baldwin in Sarasota, Florida, via Federal Express. Baldwin learned of CEC through advertisements in prominent business publications in 1999. During a call with Ward, he was misled about CEC's operational duration and promised a 48% annual return on investments, along with a finder’s fee for bringing in additional investors. Following this conversation, Ward sent Baldwin a brochure and a cover letter containing further false claims about CEC’s history, signed by both Ward and Pipher. This act also violated 18 U.S.C. §§ 1341 and 2.
Baldwin contacted references Rabenstein and Johns, both of whom expressed satisfaction with their investments, leading Baldwin to invest $50,000 in December 1999. Initially, this amount was to be picked up by Ward or Pipher, but it was ultimately collected by a third party after Pipher reassured Baldwin. A receipt for the investment, dated March 1, 2000, bore signatures of both Ward and Pipher, which Baldwin, a handwriting expert, claimed appeared identical, suggesting Pipher signed both names. Baldwin made a second investment of $48,000, which included a $2,000 rebate, sending a cashier's check on March 31, 2000, and received a collateralized promissory note on April 1, 2000, with verified signatures. In December 2001, Baldwin inquired about investing $30,000 on behalf of his cousin, Joseph Blus, who lacked a bank account. Ward suggested sending the cash via Federal Express and assured Baldwin he would cover any loss during transit. Following their conversation, Baldwin received a contract for the $30,000 investment dated December 15, 2001, with Ward’s and Pipher’s signatures. During an FBI investigation, Ward admitted to sending an investment document on January 7, 2002, acknowledging that funds would not be used as promised. Though the related contract was not included in government exhibits, an air bill confirming the package's dispatch was presented as evidence. Concerned about the investment's risks, Baldwin opted not to invest his cousin's money and sought to convert a $9,000 cashier’s check back into cash, which would take thirty days. After discussing this with Ward, he was advised to send the check to CEC, which would deposit it and return the funds in cash.
Ward provided Baldwin with CEC’s bank routing number, assuring him he would quickly return $9,000 sent via a Bank of America cashier’s check for CEC, but failed to do so. After multiple unsuccessful attempts to contact Ward, Baldwin received a letter from Pipher on February 7, 2002, attributing the delay to a "mixup" and promising the return of the funds. The jury, during deliberations, expressed an impasse regarding the conspiracy charge and inquired if they could still reach a verdict on other counts. The district court instructed the jury that they could find guilt or innocence on Counts Two, Three, and Four without a conspiracy conviction if they unanimously determined that the conduct was aimed at obtaining money through false pretenses. The court also clarified that without a conspiracy conviction, they could not apply vicarious liability principles. Ultimately, the jury could not reach a consensus on the conspiracy charge but convicted Ward on the mail and wire fraud counts. He was sentenced to sixty months in prison for each substantive count, served concurrently, along with a $300 assessment, and three years of supervised release, while fines and restitution were waived. Ward appealed, claiming insufficient evidence for his guilt on the mailings and wire fraud, and argued that the district court improperly amended the indictment. He also contended that his post-Booker sentence should not exceed the U.S. Sentencing Guidelines maximum applicable at the time of his offenses. The standards of review include de novo for the denial of a motion for judgment of acquittal and constitutional law questions, with plain error review for unraised challenges to the application of the guidelines.
An appellate court may only correct an error not raised in the district court under plain error review if three conditions are met: 1) there is an error, 2) it is plain, and 3) it affects substantial rights. If these conditions are satisfied, the court can then consider whether the error undermines the fairness, integrity, or public reputation of judicial proceedings. Ward challenges the sufficiency of evidence for three substantive counts, arguing that he cannot be vicariously liable under a conspiracy theory due to a mistrial on Count One. He claims that without the conspiracy, the evidence does not support his convictions for the mailings in Counts Two and Four or the wire transfer in Count Three. A conviction can be sustained if, viewing the evidence favorably to the prosecution, any rational jury could find the crime's essential elements beyond a reasonable doubt, with all reasonable inferences drawn in favor of the verdict.
Mail fraud (18 U.S.C. § 1341) and wire fraud (18 U.S.C. § 1343) share identical elements: 1) intentional participation in a scheme to defraud, and 2) use or causation of the use of mails or wires to execute the scheme. The scheme involves misrepresentations meant to deceive ordinary people, and a person "causes" the use of mails or wires if they know it will occur in the ordinary course of business or can reasonably foresee it. Although Ward admits to participating in the fraudulent scheme, he contends the government failed to prove he caused the specific mailings or wire transfers associated with Counts Two, Three, and Four. He argues that a defendant must personally commit each element of mail and wire fraud or aid another in doing so, asserting that mere participation in the scheme is insufficient. This understanding is flawed; case law in the Circuit establishes that a defendant can be convicted of mail fraud without personally committing every element, as long as they knowingly joined the scheme and a co-schemer utilized the mails for its execution. Historical precedent as early as 1932 supports this interpretation, affirming that involvement in the scheme can suffice for liability.
In Belt v. United States, the Fifth Circuit established that a defendant's lack of direct involvement in mailing fraudulent letters does not absolve them of liability if they are part of the fraudulent scheme. This principle was reiterated in United States v. Bright, emphasizing that as long as there is sufficient evidence connecting a defendant to a fraudulent scheme utilizing the mails, direct mailing is unnecessary for liability. This precedent was echoed in United States v. Funt, where a defendant’s acquittal on conspiracy charges did not negate the jury’s finding of guilt on mail fraud counts, indicating that participation in the scheme suffices for liability under mail fraud statutes.
In the current case, the jury found Ward guilty of mail and wire fraud despite being unable to reach a verdict on the conspiracy count, suggesting they recognized his involvement in the fraudulent scheme. The evidence demonstrated that Ward knowingly participated in a deceptive operation that misled investors, including fabricating the duration of CEC's business existence in marketing materials. Ward acknowledged that the technical documents he used were largely copied from his previous employer's work, which he later deemed risky yet continued to utilize. The jury was entitled to disregard Ward's claims of innocence, interpreting them as incriminating evidence of his guilt. The government provided sufficient proof of Ward's intentional participation in the fraudulent activities, fulfilling the legal requirements for mail fraud liability.
Artemus E. Ward was aware by November 2001 that the funds he was involved with were not being invested as promised and that the operation was a Ponzi scheme. He provided a statement to FBI Agent Michael DeLeon on April 30, 2002, admitting his concerns regarding the investment practices and acknowledging that he continued to raise capital for CEC despite knowing little was going to car dealers. Ward claimed his girlfriend, Amy Beth Davis, acted on his instructions in financial transactions related to CEC, and he utilized the U.S. Postal Service in furtherance of the fraudulent scheme.
Regarding Count Two of his conviction, which involved the mailing of a CEC promissory note to Richard Rabenstein, the government conceded that Ward did not directly participate in the mailing. However, legal precedent indicates that it is sufficient for the government to demonstrate that a participant in the scheme caused the use of the mails, which Ward acknowledged was done by his co-schemer, Pipher. The evidence showed that mailing was a common practice in CEC's operations and that Ward could foresee the mailing of the note.
For Count Three, which charged Ward with wire fraud, the evidence established that he played a significant role in facilitating a $45,000 wire transfer from the Johnses. Ward was the primary contact for the Johnses, promoting the investment and assuring them of high returns, and remained involved when they sought answers after payments stopped. Thus, there was sufficient evidence for a jury to conclude that Ward caused the wire transfer, and even if he had not directly caused it, he would still be liable under the law, as the use of wires was a predictable aspect of CEC's business operations.
Count Four accused Artemus Ward of causing the mailing of CEC investment documents to Larry Baldwin via Federal Express on January 7, 2002. The government did not need to prove that Ward directly caused the mailing due to his knowing involvement in a fraudulent scheme; however, evidence indicated that he did. Ward confessed to FBI Agent Michael DeLeon, stating he sent the documents to raise capital for CEC, fully aware that the funds would not be used as promised. The Federal Express airbill corroborated this mailing and was presented at trial, providing sufficient evidence for the jury’s verdict on the substantive counts.
Ward contended that the district court constructively amended the indictment by allowing the jury to convict him on mail and wire fraud charges without reaching a verdict on the conspiracy charge. He argued that this violated his Fifth Amendment rights, which protect against conviction for uncharged crimes. The Fifth Amendment mandates that a defendant can only be convicted of crimes outlined in the indictment to prevent unfairness. Constructive amendment occurs if the indictment's essential elements are altered, while a variance occurs when trial facts differ from the indictment but the essential elements remain unchanged. A variance only warrants reversal if substantial prejudice to the defendant can be shown, whereas constructive amendment is a per se reversible error.
In this case, the indictment specified that Ward or his co-defendant acted knowingly to use the mails or wires to execute the conspiracy to defraud, with all allegations in the conspiracy count being incorporated by reference into the substantive counts.
The jury was unable to reach a verdict on the conspiracy charge and inquired if they could decide on the other counts without a consensus on conspiracy. The district court instructed them to continue deliberating on conspiracy but clarified that they could find the defendant guilty on Counts Two, Three, and Four if they unanimously agreed that the conduct involved was for obtaining money and property through false pretenses. The court emphasized that conspiracy and mail fraud are separate offenses, and an acquittal on conspiracy does not contradict a conviction related to a mail fraud scheme.
Ward contended that the indictment improperly included the conspiracy language as essential to the substantive offenses, arguing this constituted an unlawful amendment of charges. The court disagreed, stating that the references to conspiracy were unnecessary surplusage that could be disregarded without error, as established in previous rulings. The instruction from the district court did not amount to a constructive amendment of the indictment. Ward's reliance on two cases, Cancelliere and Stirone, was found to be inappropriate as those situations were distinguishable, particularly because Cancelliere involved a critical element of the charge that affected the defense's strategy.
There was no modification to the mens rea requirements for mail or wire fraud or any of the elements of charges under 18 U.S.C. §§ 1341 or 1343. The defense did not solely focus on the conspiracy charge, contrary to what some may suggest. The case of Stirone is distinguished; it involved a conviction for an uncharged offense due to trial evidence that broadened the indictment's scope, which did not occur here. The indictment clearly included the substantive offenses of mail and wire fraud, tracking the statutory language and including all necessary elements. The mail and wire fraud counts were distinctly charged from the conspiracy charge, and referencing the conspiracy did not impair Ward’s defense or his notice of charges.
Ward contends that the Fifth, Sixth, Due Process, and Ex Post Facto clauses require his sentence to align with the maximum sentencing guidelines in effect at the time of his crime and trial. This argument is dismissed as meritless, as precedent established in United States v. Duncan and similar cases has already rejected such claims, affirming that the law recognizes the U.S. Code as determining maximum sentences at the time of the offense. The circuit's law mandates that only the Supreme Court or the circuit sitting en banc can overturn prior panel decisions, thus reaffirming the rejection of Ward's appeal for reconsideration. The ruling is affirmed.
