United States v. Svete: Fraud Requires Scheme Calculated to Deceive "Reasonable Person"
The Eleventh Circuit Court of Appeals has issued a ruling which confirms one more element which the government must prove, and which the jury must be instructed on, in order to convict a defendant of fraud. In United States v. Brown, 79 F.3d 1550, 1557 (11th Cir. 1996), the Eleventh Circuit held (or re-confirmed) that, in order to prove the crime of mail fraud, in violation of 18 U.S.C. § 1341, “the government must show the defendant intended to create a scheme ‘reasonably calculated to deceive persons of ordinary prudence and comprehension.”’ (Quoting Pelletier v. Zweifel, 921 F.2d 1465, 1498-99 (11th Cir.1991)). Last week, in United States v. Svete, NO. 05-13809, 2008 WL 788407, *7 (11th Cir. March 26, 2008), the holding of Brown was finally applied to Eleventh Circuit Pattern Jury Instruction (Criminal Cases) 50.1, which, as the Court noted, “does not include the reasonable person standard as articulated in Brown…” id.
In Svete, the defendants were convicted of conspiracy, money laundering and mail fraud for allegedly defrauding investors in “viaticals,” in which persons (“viators”) sell the right to receive benefits under their life insurance policies to purchasers in exchange for tax-free cash. Id. at *1-2. The government alleged that the defendants defrauded purchasers of viaticals by misrepresenting the life expectancies of the viators, the status of the life insurance policies and the risks associated with purchasing certain viatical contracts. Id. at *2. The defendants appealed, arguing that the district court erred in failing to instruct the jury consistent with the language of Brown, and the Eleventh Circuit reversed, stating that:
The inaccuracy of the definition of “scheme to defraud” in the jury instruction seriously impaired defendants' ability to conduct their defense on the substantive counts of mail fraud. Defendants did not have the opportunity to argue in connection with charged law that the contracts, signed by the investors, made it unreasonable for any prudent investor to have relied upon contrary statements by sales agents or [the Defendants’] promotional literature. Defendants did not have the opportunity to argue in connection with charged law that investors should have sought independent advice on investing in viaticals. Such arguments are clearly contemplated by controlling law in this Circuit. Therefore, the district court abused its discretion when it did not include the Brown, [cit.]., language in the jury instruction. [Defendants] are entitled to a new trial on the substantive counts of mail fraud.
Id. at *7 (citing Brown at 1557).
