Bass, Berry & Sims attorney Chris Lazarini commented on a case in which a defendant – convicted in a criminal proceeding of knowingly and willfully making false statements to investors, regulators, an outside accountant and government agents – appealed his conviction by claiming the government did not present evidence to the jury sufficient to support the verdict. The court denied the appeal on several grounds, affirming that the jury was correct in analyzing the evidence to find the defendant guilty beyond a reasonable doubt.
Chris provided the analysis for Securities Online Litigation Alert (SOLA). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SOLA, please visit the SOLA website to sign up for the newsletter.
USA vs. Wilson, No. 17-1076 (7th Cir., 1/12/18)
*In a criminal proceeding, it is the exclusive function of the jury to determine the credibility of witnesses, resolve evidentiary conflicts and draw reasonable inferences.
**A defendant seeking to overturn a jury conviction by claiming the Government did not present evidence sufficient to support the verdict faces a substantial burden.
From May 2010 to November 2011, Appellant was the Chairman of the Board, President and Chief Executive Officer of Imperial Petroleum. Ninety-nine percent of Imperial’s revenue came from e-Biofuels, LLC, an entity Imperial acquired that purportedly produced pure biodiesel fuel from feedstock. In reality, however, e-Biofuels was a fraud; it avoided production costs by purchasing blended biodiesel from third parties and re-selling it as though it had been produced by e-Biofuels as pure biodiesel. Following an investigation, the SEC filed a multi-count criminal action against Appellant and others. The jury convicted Appellant on all counts, finding he had knowingly and willfully made false statements to investors, regulators, an outside accountant and Government agents. The district court denied Appellant’s Fed. R. Crim. P. 29(c) motion for acquittal, sentenced him to a 10 year jail term and ordered him to make a $16 million restitution payment. Appellant appealed.
The Court reviews the denial of the Rule 29(c) motion de novo, asking whether there was relevant evidence from which the jury could reasonably find Appellant guilty beyond a reasonable doubt. Viewing the evidence in the light most favorable to the Government, the Court denies Appellant’s claim that he was unaware of the fraudulent scheme and therefore lacked the requisite mens rea necessary to have made “knowing” and “willful” misstatements of fact to others. However, there was sufficient evidence from which the jury could have found mens rea. First, testimony and documents show that Appellant knew e-Biofuels was not producing anything prior to Imperial’s acquisition of the company. Second, Appellant communicated with the other conspirators about ways to cover up the fraud by creating false invoices, removing e-Biofuel’s name from trucks and bribing drivers. Third, an outside consultant reported his suspicions about e-Biofuel’s activities to Appellant, but Appellant did not disclose those suspicions to an independent auditor who asked Appellant if there were any allegations of fraud or suspected fraud. Fourth, Appellant failed to give the auditor board minutes showing that Appellant had discussed allegations of fraudulent transactions. Finally, in view of evidence that Appellant received a spreadsheet comparing the costs of buying blended biodiesel versus producing a pure product, the Court rejects his claims that he did not recall receiving the spreadsheet and there was no proof he contemplated the comparisons. All of this, the Court concludes, is evidence from which a rational jury could conclude Appellant knew about the fraud, participated in it and knowingly and willfully misrepresented facts about it to others.