United States v. Gent

UNITED STATES OF AMERICA,

v.IAN CAMPBELL GENT and JAMES LAGONA, Defendants.

10-CR-90S

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

Dated: May 19, 2012

DECISION AND ORDER

I. INTRODUCTION

On February 23, 2011, after an eleven-day trial, the jury returned a guilty verdict against Defendant Ian Campbell Gent on counts 5 through 27 of a 27-count redacted indictment, which charged him with violating 18 U.S.C. §§ 2, 1341 (mail fraud and aiding and abetting mail fraud) and 18 U.S.C. § 1349 (conspiracy to commit mail fraud). The jury also returned a guilty verdict against Defendant James Lagona on all 27 counts of the redacted indictment, with counts 1-4 of that indictment also being for violations of 18 U.S.C. §§ 2, 1341.

Defendants now each move this Court to grant a judgment of acquittal pursuant to Rule 29 of the Federal Rules of Criminal Procedure or, alternatively, a new trial pursuant to Rule 33. For the reasons discussed below, Defendants' motions for judgments of acquittal and new trials are denied.

II. BACKGROUND

The charges of mail fraud and conspiracy to commit mail fraud relate to Defendants' involvement in the sale of debentures under the names Watermark Financial ServicesGroup or Watermark M-One Holdings, Inc. (Tr. 60-61; Gov't Exs. 4.04, 5.21, 11.19, 12.11, 12.25, 12.39, 22.20, 22.22, 22.23, 28, 30, 64). Starting in January 2006, sales staff, originally hired by M-One Financial prior to the formation of Watermark Financial Services in 2005, would offer clients investment opportunities in one- or two-year debentures that promised 10% annual interest. (Tr. 53, 59-62; Deposition of Lorenzo Altadonna, Gov't Ex. 201, at 23). The prospective investments pitched to clients included real estate development in Maine and a health insurance network for religious institutions. (T. 60, 397398, 403-404, 643; Altadonna Dep. at 91-93; Gov't Ex. 29). Sales staff had interested clients sign paperwork opening self-directed individual retirement accounts ("IRA"s) with PENSCO Trust Company, a custodian for such accounts,¹ into which client funds were either directly deposited or rolled-over from an existent IRA. (Tr. 173, 397-398, 636). This same paperwork also authorized transfer of funds from the newly created PENSCO account back to Watermark for the debentures. (See e.g. Gov't Ex. 5.13). Clients who invested did not understand that the "convertible debentures" they were purchasing were unsecured loans to Watermark which, prior to the due date for repayment, could be converted into shares of common stock in the company. (Tr. 398; Altadonna Dep at 132; see e.g. Gov't Ex. 30 at 1, 3). The clients that testified at trial explained that, based on representations made to them, they believed that they were making a safe, guaranteed investment with little to no risk. (Tr. 387-389, 402-403, 413, 555, 585, 592-595, 693, 704-705). Between January 2006 and May 2008, $6,758,027 was solicited from clients,however, only $241,000 was actually invested, and only $545,064 in principal and/or interest was returned to clients. Tr. 1018-1026; Gov't Ex. 100.25.

Defendants Ian Campbell Gent and James Lagona were originally indicted along with Guy W. Gane, Jr., for mail fraud and conspiracy. Docket No. 1. Gane subsequently pleaded guilty to one count of mail fraud in violation of 18 U.S.C. § 1341 and one count of money laundering in violation of 18 U.S.C. § 1957. (Docket No. 35). A jury trial commenced before this Court on the charges against the remaining Defendants, at which Gane testified as part of the Government's case in chief. After the close of the Government's proof, this Court dismissed Counts 25, 28, 29 and 31 of the original indictment upon the Government's motion. (Tr. 1030-1031). Defendants Gent and Lagona each moved for a judgment of acquittal pursuant to Rule 29. (Tr. 1041-1043, 1047). Defendant Gent's motion was granted insofar as Counts 1, 2, 3, and 4 were dismissed against him, but otherwise denied. (Tr. 1054-1055). Defendant Lagona's motion was denied in its entirety. (Id.).

Following this Court's ruling, each Defendant testified in his own behalf, and the Government presented one rebuttal witness. The jury returned a guilty verdict against Defendant Gent on counts 5 through 27 of the redacted indictment, and a guilty verdict against Defendant Lagona on all 27 counts of the redacted indictment. Following the verdict, Defendants each moved for a judgment of acquittal and, alternatively, for a new trial.

III. DISCUSSION

A. Rule 29

Pursuant to Rule 29, a court must, upon a defendant's motion,² "enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction." A defendant challenging the sufficiency of the evidence bears a heavy burden. United States v. Finley, 245 F.3d 199, 202 (2d Cir. 2001), cert denied 534 U.S. 1144 (2002). "In evaluating whether the evidence was sufficient to convict a defendant, [a reviewing court] consider[s] all of the evidence, both direct and circumstantial, 'in the light most favorable to the government, crediting every inference that the jury might have drawn in favor of the government.'" United States v. Velasquez, 271 F.3d 364, 370 (2d Cir. 2001), cert denied 535 U.S. 965 (2002), quoting United States v. Walker, 191 F.3d 326, 333 (2d Cir. 1999), cert denied 529 U.S. 1080 (2000). When considering the trial evidence, "the court must be careful to avoid usurping the role of the jury." United States v. Jackson, 335 F.3d 170, 180 (2d Cir. 2003). The court may not "substitute its own determination of . . . the weight of the evidence and the reasonable inferences to be drawn for that of the jury." United States v. Guadagna, 183 F.3d 122, 130 (2d Cir. 1999)(internal quotation marks and citations omitted). The credibility of the witnesses falls strictly within the province of thejury. Guadagna, 183 F.3d at 129 (noting that the court must defer to the jury even if the evidence would also support, in the court's opinion, a different result). A judgment of acquittal is warranted only if the court concludes that the evidence that the defendant committed the crime is non-existent or so meager no rational trier of fact could have found the defendant guilty beyond a reasonable doubt. Velasquez, 271 F.3d at 270; Guadagna, 183 F.3d at 130.

In determining whether a defendant is entitled to an acquittal, the evidence is considered "in its totality, not in isolation, and the government need not negate every possible theory of innocence." United States v. Cote, 544 F.3d 88, 98 (2d Cir. 2008); see Guadagna, 183 F.3d at 130 ("each fact may gain color from the others"). "[W]hen a motion for judgment of acquittal made at the close of the government's case-in-chief is denied and a defendant presents a case, then the evidence put in by the defense will also be considered in deciding a Fed.R.Crim.P. 29(c) motion made after the trial ends." United States v. Truman, 762 F.Supp.2d 437, 445 (N.D.N.Y. 2011); Velasquez, 271 F.3d at 371. Here, each Defendant moved for acquittal at the close of the Government's case-in-chief, Tr. 1041-1047, and each decided to testify on his own behalf following this Court's denial, in whole or in part, of his motion. Tr. 1054-1055, 1062, 1278. Defendants have therefore waived any claim as to the sufficiency of the Government's cases considered alone. Velasquez, 271 F.3d at 371. "A defendant's testimony may thus add weight to the government's case. To put it another way, a jury may 'use its disbelief [of a defendant's testimony] to supplement the other evidence against him.' " Velasquez, 271 F.3d at 371, quoting United States v. Stanley, 928 F.2d 575, 577 (2d Cir.1991).

Defendants were convicted of violating 18 U.S.C. §§ 2, 1341, and 1349 for acts ofmail fraud, aiding and abetting mail fraud, and conspiracy to commit mail fraud. The substantive counts of mail fraud have "three elements: (1) use of the mails to further (2) a scheme to defraud with (3) money or property as the object of the scheme." United States v. Kinney, 211 F.3d 13, 17 (2d Cir. 2000), cert denied 531 U.S. 1079 (2001)(quotation marks omitted); see United States v. Somerstein, 971 F.Supp. 736, 741 (E.D.N.Y. 1997)(a conviction requires a specific intent to defraud). To establish the 'use of the mails' element, the Government must show either that the use of the mails would follow in the ordinary course of business, or that such use could reasonably be foreseen, even if not actually intended. United States v. Alkins, 925 F.2d 541, 549 (2d Cir. 1991); see United States v. Naiman, 211 F.3d 40, 49 (2d Cir. 2000). Because good faith is a complete defense to mail fraud, the government is also required to prove a lack of good faith beyond a reasonable doubt. Alkins, 925 F.2d at 549-550.

"Conspiracy constitutes a crime, separate and distinct from the substantive offense." Somerstein, 971 F.Supp at 746; see 18 U.S.C. § 1349; United States v. Pinckney, 85 F.3d 4, 8 (2d Cir. 1996). "Conspiracy requires proof of: (1) an agreement among the conspirators to commit an offense; (2) specific intent to achieve the objective of the conspiracy; and (3) usually, an overt act to effect the object of the conspiracy." Pinckney, 85 F.3d at 8. "[I]n order to prove a defendant guilty of conspiracy, the government need not show that he knew all of the details of the conspiracy, so long as he knew its general nature and extent." United States v. Rosa, 17 F.3d 1531, 1543 (2d Cir. 1994), cert denied 513 U.S. 879 (1994). Circumstantial evidence may be sufficient to establish that a defendant knowingly joined and participated in the charged conspiracy. Rosa, 17 F.3d at 1543-1544. "The deference accorded to the jury's verdict 'is especially important whenreviewing a conviction of conspiracy ... because a conspiracy by its very nature is a secretive operation, and it is a rare case where all aspects of a conspiracy can be laid bare in court with the precision of a surgeon's scalpel.' " United States v. Guerrero, ...