United States v. James Smith ( 2022 )

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 21-4126
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
JAMES MICHAEL JOHNSON,
Defendant - Appellant.
No. 21-4484
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
JAMES LEONARD SMITH,
Defendant - Appellant.
Appeals from the United States District Court for the Eastern District of Virginia, at
Richmond. Henry E. Hudson, Senior District Judge. (3:19-cr-00117-HEH-2; 3:19-cr-
00117-HEH-3)
Submitted: August 26, 2022 Decided: September 22, 2022
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Before NIEMEYER and DIAZ, Circuit Judges, and KEENAN, Senior Circuit Judge.
Affirmed by unpublished per curiam opinion.
ON BRIEF: Peter L. Goldman, SABOURA, GOLDMAN & COLOMBO, P.C.,
Alexandria, Virginia; Elliott M. Harding, HARDING COUNSEL, PLLC, Charlottesville,
Virginia, for Appellants. Kenneth A. Polite, Jr., Assistant Attorney General, Lisa H.
Miller, Deputy Assistant Attorney General, Javier A. Sinha, Vasanth Sridharan,
Christopher D. Jackson, Acting Assistant Chief, Fraud Section, Criminal Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Jessica D. Aber,
United States Attorney, Michael C. Moore, Assistant United States Attorney, OFFICE OF
THE UNITED STATES ATTORNEY, Richmond, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
James Michael Johnson and James Leonard Smith appeal from their convictions for
conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and conspiracy to
commit money laundering, in violation of 18 U.S.C. § 1956(h). Johnson and Smith
additionally appeal their convictions for multiple counts of wire fraud, in violation of 18
U.S.C. § 1343. On appeal, Johnson challenges the sufficiency of the evidence supporting
his convictions, and Smith argues that evidence was improperly admitted under Fed. R.
Evid. 404(b). We affirm.
Johnson first contends that the evidence did not support his wire fraud and wire
fraud conspiracy convictions. We review the sufficiency of the evidence de novo but view
the evidence and reasonable inferences that may be drawn from it in the light most
favorable to the Government. We will uphold a guilty verdict as long as a rational
factfinder could have found the elements of the crime established beyond a reasonable
doubt. United States v. Palin, 874 F.3d 418, 424 (4th Cir. 2017).
To convict Johnson of conspiracy to commit wire fraud under 18 U.S.C. § 1349, the
Government had to establish that (1) two or more people agreed to commit wire fraud, and
that (2) Johnson willfully joined the conspiracy intending to further its unlawful purpose.
See United States v. Burfoot, 899 F.3d 326, 335 (4th Cir. 2018). Wire fraud, the underlying
offense, required evidence that Johnson (1) devised or intended to devise a scheme to
defraud, and (2) used or caused the use of wire communications to further the scheme. See
id. at 335. We have explained that, “[t]o establish a scheme to defraud, the government
must prove that the defendant[s] acted with the specific intent to defraud.” United States v.
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Wynn, 684 F.3d 473, 478 (2012) (cleaned up). “Thus, the . . . wire fraud statute[] ha[s] as
an element the specific intent to deprive one of something of value through a
misrepresentation or other similar dishonest method, which indeed would cause him harm.”
Id. Therefore, “to convict a person of defrauding another, more must be shown than simply
an intent to lie to the victim or to make a false statement to him.” Id. As the Supreme
Court has explained, a scheme to defraud “must be one to deceive the [victim] and deprive
[him or her] of something of value.” Shaw v. United States, 580 U.S. 63, 72 (2016).
However, specific intent may be “inferred from the totality of the circumstances and need
not be proven by direct evidence.” United States v. Godwin, 272 F.3d 659, 666 (4th Cir.
2001).
In challenging his conspiracy conviction, Johnson contends that the Government
did not prove the specific intent required. Specifically, Johnson avers that the evidence
supported the conclusion that he did not intend to deprive the victims of anything of value
and instead wanted them to make money and receive their capital. However, to the
contrary, the evidence showed that, in order to induce investments, Johnson made a series
of promises to investors that their loans would be “risk free,” guaranteed, and would earn
high rates of interest. However, none of these promises were fulfilled. Johnson was aware
that previous promises and representations were not honored, yet he continued to induce
new investments with identical promises. Regardless of whether Johnson hoped that the
investors he recruited would be made whole, he was still aware that their investments had
been disbursed to the Defendants and others and could only be returned with money from
new, equally fraudulent investments. This evidence was sufficient to show Johnson’s
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specific intent. See id. at 666-67 (holding that evidence that defendants repeatedly
appropriated investors’ money, even in the face of promises to past investors not fulfilled,
was sufficient to show specific intent to defraud). Accordingly, there was sufficient
evidence to support Johnson’s wire fraud and conspiracy to commit wire fraud
convictions. 1
Next, Johnson challenges the sufficiency of the evidence supporting his conviction
for conspiracy to commit money laundering. To prove Johnson participated in a conspiracy
to launder money, the Government must “prove that (1) a conspiracy to commit . . . money
laundering was in existence, and (2) that during the conspiracy, the defendant knew that
the proceeds . . . had been derived from an illegal activity, and knowingly joined in the
conspiracy.” United States v. Alerre, 430 F.3d 681, 693-94 (4th Cir. 2005). On appeal,
Johnson argues only that there was no evidence that he personally handled any money.
However, such is not an element of the crime. In any event, contrary to Johnson’s
contention, the record contains evidence that Johnson personally accepted checks from
1
Johnson very briefly raises two related claims. First, he asserts that the evidence
was insufficient to show that he knew about the unlawful activity and that he knowingly
joined the conspiracy. However, as discussed above, there was more than sufficient
evidence that Johnson was aware that investors were being defrauded and that, even after
promises were not fulfilled to current investors, he continued to recruit new investors by
providing false information. As such, the Government provided sufficient evidence of
Johnson’s knowledge of and participation in the scheme. Second, he asserts that the district
court did not properly define and use the words “specific intent” in its instructions.
However, the district court did use the words “specific intent to defraud.” (J.A. 952).
Moreover, our review of the record reveals that there was no plain error in the intent
instruction.
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victims of the scheme and forwarded them to codefendants. As such, this claim is without
merit.
Before trial, the Government moved to admit evidence of Smith’s other acts under
Fed. R. Evid. 404(b). In particular, the Government sought to introduce evidence that, in
2008, Smith was involved in two financial operations. First, Smith worked with a company
that, according to Smith during his interview with law enforcement, he later learned was
“a ‘Ponzi scheme.’” (J.A. 65). 2 Second, Smith had operated a company that traded
“‘[m]edium [t]erm [n]otes’” and promised investors “‘risk-less principal’ transactions” and
a high rate of return (5% per month, which would eventually increase to 8% per month).
(J.A. 63). The Government also sought to introduce evidence that Smith had been
interviewed by the FBI in 2013 regarding his involvement in these two financial operations
and that an FBI agent at that time warned Smith “that any investment program purporting
to provide low- or no-risk returns that are above normal rates (such as 3% per month) is,
in all likelihood, a fraudulent investment.” (J.A. 65). In response, Smith informed the
agent that he was not responsible for the investments and also stated that he believed the
investors received all their funds. The district court granted the motion, permitting the
evidence to be submitted to the jury and ruling that the evidence was relevant to Smith’s
knowledge and intent.
We review a district court’s determination of the admissibility of evidence under
Rule 404(b) for abuse of discretion. United States v. Queen, 132 F.3d 991, 995 (4th Cir.
2
This opinion cites to the electronic page number of the joint appendix.
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1997). A district court will not be found to have abused its discretion unless its decision
to admit evidence under Rule 404(b) was arbitrary or irrational. See United States v.
Haney, 914 F.2d 602, 607 (4th Cir. 1990). Evidence of prior acts is admissible under Rule
404(b) if the evidence is: (1) relevant to an issue other than the general character of the
defendant; (2) necessary, in that it is probative of an element of the offense; and (3) reliable.
Further, the probative value of the evidence must not be substantially outweighed by its
prejudicial value. Fed. R. Evid. 403; Queen, 132 F.3d at 995. Limiting jury instructions
explaining the purpose for admitting evidence of prior acts and advance notice of the intent
to introduce prior act evidence provide additional protection to defendants. Queen, 132
F.3d at 998.
Smith first argues that his actions in 2008 were not probative of his intent because
the evidence failed to show that the 2008 acts were illegal or, if they were, that Smith was
aware of this fact at the time. However, such evidence was not necessary, and the
Government recognized that it was possible that “the evidence does not constitute a crime
or wrong on Smith’s part.” (J.A. 62). The prior acts evidence at issue showed that Smith
had previously worked with or for companies that offered investments that had the
hallmarks of fraud and that Smith was specifically warned about these hallmarks. This
evidence was probative in that it made it more likely that Smith knew that the similar
charged conduct was a part of a fraudulent scheme, that Smith knew that the investment
terms were suspicious, and that Smith had the intent to join an unlawful scheme. See
United States v. Agramonte-Quezada, 30 F.4th 1, 15 (1st Cir. 2022) (admitting evidence
of prior canine alert, where current and prior alert were “highly factually similar,” because
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prior alert was relevant to show opportunity, intent, common plan, and knowledge, even
though prior alert did not result in recovery of drugs or arrest).
Next, Smith asserts that the other acts evidence was not reliable because the agent’s
testimony regarding the hallmarks of a fraudulent scheme was erroneous. Specifically, he
asserts that a riskless principal transaction can be a legitimate transaction. Smith
misunderstands the reliability requirement. “Evidence is reliable for purposes of Rule
404(b) unless it is so preposterous that it could not be believed by a rational and properly
instructed juror.” United States v. Siegel, 536 F.3d 306, 319 (4th Cir. 2006) (internal
quotation marks omitted). Thus, the question is not whether the agent correctly identified
the hallmarks of a fraudulent scheme but rather whether the agent’s recounting of his
interactions with Smith was “preposterous.” Smith does not dispute that the agent’s
testimony recounting their conversation was believable. Smith was free to cross-examine
the agent regarding his knowledge of investments, and in fact, Smith himself testified on
this issue.
Finally, Smith asserts that the admission of the agent’s testimony was unduly
prejudicial because “riskless principal transactions” can be legitimate and, therefore, would
not give Smith reason to suspect fraud either in 2008 or in the instant case. Smith contends
that the jury might have concluded that he must have known the charged scheme was
fraudulent based on the agent’s erroneous testimony that Smith was involved in a
fraudulent scheme earlier. Again, Smith misunderstands the requirements of evidentiary
rules. Evidence which is prejudicial only because it is highly probative is not the type of
prejudice that Rule 403 seeks to prevent. See Queen, 132 F.3d at 998. Instead, prejudice
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in this sense refers to evidence that “would invoke emotion in place of reason” or cause
confusion. Id.Here, any prejudice was handily outweighed by the probative value of the evidence.
Moreover, the district court mitigated the risk of prejudice with its repeated limiting
instructions. See United States v. White, 405 F.3d 208, 213 (4th Cir. 2005) (“[A]ny risk of
such prejudice was mitigated by a limiting instruction from the district court clarifying the
issues for which the jury could properly consider [Rule 404(b)] evidence.”). Further, the
evidence “did not involve conduct any more sensational or disturbing than the crimes with
which [the defendant] was charged.” United States v. Byers, 649 F.3d 197, 210 (4th Cir.
2011) (internal quotation marks omitted). Finally, Smith testified at trial, explaining his
understanding of no-risk investments and of the agent’s warning in that regard. Thus,
Smith presented evidence contradicting the agent’s testimony and further mitigated any
prejudice. The district court therefore did not abuse its discretion under Rule 404(b).
Accordingly, we affirm Johnson’s and Smith’s convictions. We dispense with oral
argument because the facts and legal contentions are adequately presented in the materials
before the court and argument would not aid the decisional process.
AFFIRMED
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