United States v. Gow

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. KAY F. GOW, JOHN G. WILLIAMS, JR. Defendants-Appellants.

No. 19-12053

United States Court of Appeals, Eleventh Circuit

September 16, 2021

DO NOT PUBLISH

Appeals from the United States District Court for the Middle District of Florida D.C. Docket No. 2:17-cr-00016-JES-UAM-1

Before NEWSOM, BRANCH, and LAGOA, Circuit Judges.

PER CURIAM

Kay Gow and John Williams appeal their convictions for wire fraud and conspiracy to commit wire fraud.^[1][2] Relevant here, they were convicted of a scheme to defraud Lee County, Florida and private investors in funding a startup dietary supplement company. Both defendants assert that the government failed to prove that they had the intent to defraud. Viewing the evidence in the light most favorable to the government, we conclude that the government offered ample evidence from which a reasonable jury could convict the defendants beyond a reasonable doubt. Accordingly, and with the benefit of oral argument, we affirm the defendants' convictions.

I. Background

A. Factual Background

We write primarily for the parties who are familiar with the record. Sometime around 2001, Robert Gow founded an herbal extract company called HerbalScience, LLC. In an effort to develop HerbalScience into a market leader in dietary supplements, Robert Gow recruited investors including his friend, John Williams, whom he had known for over 25 years. Williams invested almost $1 million in HerbalScience. However, the company failed to live up to its potential and was on the verge of bankruptcy.

In 2010, Robert Gow founded VR Laboratories, LLC, and his wife Kay Gow, later founded VR Labs, Inc. (collectively "VR Labs"). The Gows intended to build a facility for the company that would be large enough to house both HerbalScience's extraction of chemicals from plants and VR Labs's manufacturing of products with those chemicals. Around the same time VR Labs was founded, Jeffrey Kottkamp had completed his time as the Lieutenant Governor of Florida. Robert Gow persuaded Kottkamp to represent VR Labs and assist the company in securing public and private funding in exchange for a 5% interest in the stock of the company.

When other efforts to obtain funding were unsuccessful, VR Labs shifted focus to its "fallback" plan to build a production facility in Lee County, Florida. In February 2011, Kay Gow, on behalf of VR Labs, applied for a $5 million grant from Lee County's Economic Development Office, whose task it was to "[w]ork[] with both the private sector and the public sector" "to energize business growth and attract new business to the area." The application implied that VR Labs was already operating as a successful company and claimed that VR Labs was a "multinational business enterprise" that was projected to create 208 high-wage jobs between 2012 and 2016. The application also stated that VR Labs planned to contribute approximately $9 million in capital for the project over three years.

Ultimately, Lee County approved VR Labs's $5 million grant application. Then, as VR Labs's secretary, Kay Gow signed a contract governing the administration of the grant. Among other things, the agreement required Lee County to reimburse VR Labs for any "qualified capital investment," which the agreement defined as "investments made by or on behalf of [VR Labs] for purchasing manufacturing and research and development equipment for Project facility, constructing improvements to real property on Project Site . . ., and acquiring or leasing furniture, fixtures, and equipment for the project facility." The agreement provided further that VR Labs would employ at least 208 people by no later than the end of 2016 and have an annual payroll of approximately $13.5 million. Finally, as noted, VR Labs was obligated to invest $9 million in the project within three years. Lee County included this investment provision in the agreement because VR Labs had failed to provide financial information in its grant application, so the county wanted some assurance that the company had funds of its own to invest in the project-in other words, that it had "skin in the game."

With the county's grant funds in hand, the Gows began implementing their plans for VR Labs's production facility. They recruited Williams to procure and manage the bottling equipment that VR Labs would need to package the company's products even though he had no experience in the bottling industry. Williams then used a company he owned, Fast Response Maintenance, to do business as "Williams Specialty Bottling Equipment" ("Williams Bottling"). Williams signed a subscription agreement, stating that he would invest $1.3 million in VR Labs in exchange for a 1.3% percent interest in the company. That same day, the subscription agreement was amended to name "Hong Kong Associates," rather than Williams's company Fast Response Maintenance, as the investor even though Williams had no connection to Hong Kong. =Kay Gow then directed Williams to work with a real bottle production company, A Packaging Systems ("APACKS"), to obtain the necessary equipment.

Before Williams Bottling signed a contract with APACKS, Williams Bottling submitted an invoice to VR Labs for approximately $1.7 million for the "turnkey proprietary bottling line" that it was supposed to be getting from APACKS. Williams Bottling's invoice was approximately $500, 000 more than the $1, 265, 584.33 pricing estimate that APACKS sent to Williams Bottling. Using a line of credit taken out by VR Labs's contractor, GCM, Kay Gow approved a partial payment for approximately $700, 000 of Williams Bottling's invoice.^[3] VR Labs then sent its first payment request to Lee County for Williams Bottling's $1.7 million invoice, which the County paid. Thus, among other expenses, the credit that VR Labs used to pay Williams Bottling's invoice was reimbursed through the grant program.

Williams Bottling moved a portion of the funds received from VR Labs (more than $700, 000) to Williams's new personal savings account, Williams then transferred $250, 000 from his savings account back to Williams Bottling, and Williams Bottling transferred $320, 000 to VR Labs as an investment under his subscription agreement. The same day that Williams Bottling transferred that investment payment, VR Labs paid HerbalScience a $33, 333 "license fee" that was due.

Eventually, APACKS and Williams Bottling neared a final agreement for the bottling equipment. As the final proposal included several additional items to improve the efficiency of the bottling line, the initial proposal price increased by approximately $400, 000. Williams Bottling agreed to the increased price and sent a new invoice to VR Labs for an $843, 885 "change order." Kay Gow instructed GCM to pay Williams Bottling about 80% of that amount (again drawn from its credit line). After receiving that payment, Williams Bottling transferred $660, 000 back to VR Labs, which was due under Williams's subscription agreement. Then VR Labs included the change-order invoice in its second request to Lee County for reimbursement. The county approved the request and issued VR Labs a check for approximately $1.1 million.

Ultimately, Lee County reimbursed VR Labs $4, 694, 548.04. Of that amount, $2, 383, 154.90 went to reimburse payments VR Labs made to Williams Bottling using theline of credit that GCM obtained. And, in turn, Williams Bottling transferred $1, 430, 000 of the county grant money back to VR Labs.

The money that Williams Bottling transferred to VR Labs was not used for "qualified capital investments" as required by VR Labs's agreement with the county. Instead, VR Labs paid $267, 830.22 to HerbalScience for licensing fees and a technical-services contract. Another $691, 465.18 paid for employee salaries (including $135, 247.03 that went to the Gows' salaries). And $90, 587.14 of the grant money reimbursed the Gows for their "expenses," including airline tickets and expensive dinners out with each other and with Williams. Between payments to their other company, their own salaries, and reimbursed expenses, the Gows personally obtained $552, 164.39 of the county grant money that was supposed to be used only for approved capital expenditures.

Of course, the Lee County grant money was not enough to make VR Labs profitable-or even make ends meet. For example, VR Labs owed more than $900, 000 to a contractor who had completed renovating a building that was supposed to house the bottling line. VR Labs had paid APACKS only half of what it owed for the completed bottling equipment, so APACKS refused to ship the equipment to VR Labs. The only packaged drinks that VR Labs produced had been bottled by a contractor. And VR Labs fell behind on its rent.

To keep VR Labs afloat, Robert Gow tried to recruit investors, including Robert Haynes. Haynes had a background in biotechnologies and was interested in moving to Naples and finding a job at VR Labs. Robert Gow told Haynes that VR Labs was "full steam ahead" and starting to grow and had a job opportunity for him. When Haynes asked to see VR Labs's financial statements, Robert Gow refused the request on the grounds that ongoing merger negotiations were confidential. Haynes ultimately accepted an offer of employment, contingent on his investment of $500, 000. To encourage Haynes to invest, Robert Gow falsely claimed that Kottkamp had invested $1 million. Ultimately, Haynes accepted the job and invested $500, 000.

VR Labs never secured the bottling equipment, a bank foreclosed on its renovated facility, and APACKS went bankrupt.

B. Procedural History

A federal grand jury returned an indictment charging Robert and Kay Gow with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 371; four counts...