NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 24 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 16-10363
Plaintiff-Appellee, D.C. No. 2:13-cr-00439-KJD-VCF-1 v.
ANTHONY B. BRANDEL, MEMORANDUM*
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 19-10177
Plaintiff-Appellee, D.C. No. v. 2:13-cr-00439-KJD-VCF-3
JAMES WARRAS,
Appeal from the United States District Court for the District of Nevada Kent J. Dawson, District Judge, Presiding
Argued and Submitted March 8, 2021 Las Vegas, Nevada
Before: CLIFTON, NGUYEN, and BENNETT, Circuit Judges.
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. In this consolidated appeal, Anthony B. Brandel (“Brandel”) and James
Warras (“Warras”) challenge their convictions for conspiracy, 18 U.S.C. § 371,
wire fraud, 18 U.S.C. § 1343, and securities fraud, 15 U.S.C. § 78j(b). We have
jurisdiction under 28 U.S.C. § 1291, and we affirm.
1. Brandel argues that the jury instruction on securities fraud was fatally
flawed because it failed to mention the disjunctive three factor test in Hocking v.
Dubois, 885 F.2d 1449, 1460-61 (9th Cir. 1989) (adopting the test from
Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981)). Brandel concedes that plain
error review applies because he failed to raise this issue below. See United States
v. Armstrong, 909 F.2d 1238, 1244 (9th Cir. 1990) (applying plain error review
where the defendant fails to object before district court).
Here, the district court correctly provided the three-prong definition of an
“investment contract,” the relevant security type, from SEC v. W.J. Howey Co.
(Howey), 328 U.S. 293, 298-99 (1946). Hocking’s disjunctive three-factor test is
an elaboration of the third Howey prong and was not plainly required. The
Hocking factors are needed when, “[o]n the face of a partnership agreement,” the
investor maintains control, but the reality is different. Koch v. Hankins, 928 F.2d
1471, 1477 (9th Cir. 1991) (quoting Williamson, 645 F.2d at 424). The joint
venture agreements in this case were not facially partnership agreements, despite
their label. In fact, the agreements included a “No Partnership Relationship”
2 clause.
Even assuming the district court erred in failing to explain the Hocking
factors, the absence of that instruction did not affect Brandel’s substantial rights.
United States v. Marcus, 560 U.S. 258, 262 (2010). The joint venture agreements
would clearly satisfy the first disjunctive Hocking factor: that the agreement
“leaves so little power in the hands of the partner or venturer that the arrangement
in fact distributes power as would a limited partnership.” Hocking, 885 F.2d at
1460 (quoting Williamson, 645 F.2d at 424). Again, under the terms of the joint
venture agreements here, the victims were not partners. Nor does Brandel dispute
that in fact Malom Group AG (“Malom”) had the unilateral authority to decline,
and always did decline, the victims’ investment proposals.
2. The evidence was sufficient for a rational juror to find the existence of
an investment contract supporting Brandel and Warras’s securities fraud
convictions. See United States v. Nevils, 598 F.3d 1158, 1163-64 (9th Cir. 2010)
(en banc) (citing Jackson v. Virginia, 443 U.S. 307, 319 (1979)). Both the joint
venture agreements and the funding commitments satisfy the three Howey prongs
for the existence of an investment contract.
As to the joint venture agreements, each victim “invest[ed] . . . money” with
the expectation of financial gain. Howey, 328 U.S. at 298-99. To the extent the
joint venture agreement terms were confusing or contradictory as to whether the
3 funds were a “fee” or an investment, the standard of review compels resolution of
these conflicts in the prosecution’s favor. Nevils, 598 F.3d at 1163-64; McDaniel
v. Brown, 558 U.S. 120, 133 (2010). The evidence was also sufficient for the
jurors to find that the victims who invested in the joint venture agreements
expected to profit from the efforts of others. Howey, 328 U.S. at 298-99. A
rational juror could conclude beyond a reasonable doubt that the victims were
dependent on Brandel, Warras, or a “third party,” id. at 299, for the investment
ideas and that the victims’ ability to present investment ideas was not tantamount
to exercising the full powers of a general partner or joint venturer.
The evidence was also sufficient for a juror to conclude the funding
commitments were investment contracts. Gianopoulos expected to be reimbursed
for his $1.2 million “underwriting fee,” plus either $600,000 if the loan succeeded
or $50,000 if it failed. Thus, the jury could have concluded he expected to profit,
Warfield v. Alaniz, 569 F.3d 1015, 1024 (9th Cir. 2009), even if he also had other
motivations to secure the loan. We need not analyze Glazebrook’s funding
commitment because he signed a joint venture agreement that contemplated
sharing profits.
3. The evidence was also sufficient to establish that Brandel and Warras
possessed the requisite specific intent to defraud. See United States v. Kaplan, 836
F.3d 1199, 1212 (9th Cir. 2016) (conspiracy); United States v. Miller, 953 F.3d
4 1095, 1101 (9th Cir. 2020) (wire fraud); United States v. Tarallo, 380 F.3d 1174,
1181 (9th Cir. 2004) (securities fraud). Brandel and Warras argue that they had a
good-faith belief in the legitimacy of their activities, but a rational jury could have
concluded otherwise. Again, reasonable inferences must be drawn in the
government’s favor. McDaniel, 558 U.S. at 133. For instance, a rational jury
could reasonably infer intent to defraud one victim from Appellants’ activities in
nearly identical setups with other victims. See United States v. Sullivan, 522 F.3d
967, 974 (9th Cir. 2008).
The evidence was also sufficient for the jury to conclude Warras was part of
the conspiracy from the beginning. He received funds in his account as early as
January 2010, the same day a victim’s funds were released from escrow, and in
March 2010, he sent a suspicious email voicing his concern about “someone
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NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 24 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 16-10363
Plaintiff-Appellee, D.C. No. 2:13-cr-00439-KJD-VCF-1 v.
ANTHONY B. BRANDEL, MEMORANDUM*
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 19-10177
Plaintiff-Appellee, D.C. No. v. 2:13-cr-00439-KJD-VCF-3
JAMES WARRAS,
Appeal from the United States District Court for the District of Nevada Kent J. Dawson, District Judge, Presiding
Argued and Submitted March 8, 2021 Las Vegas, Nevada
Before: CLIFTON, NGUYEN, and BENNETT, Circuit Judges.
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. In this consolidated appeal, Anthony B. Brandel (“Brandel”) and James
Warras (“Warras”) challenge their convictions for conspiracy, 18 U.S.C. § 371,
wire fraud, 18 U.S.C. § 1343, and securities fraud, 15 U.S.C. § 78j(b). We have
jurisdiction under 28 U.S.C. § 1291, and we affirm.
1. Brandel argues that the jury instruction on securities fraud was fatally
flawed because it failed to mention the disjunctive three factor test in Hocking v.
Dubois, 885 F.2d 1449, 1460-61 (9th Cir. 1989) (adopting the test from
Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981)). Brandel concedes that plain
error review applies because he failed to raise this issue below. See United States
v. Armstrong, 909 F.2d 1238, 1244 (9th Cir. 1990) (applying plain error review
where the defendant fails to object before district court).
Here, the district court correctly provided the three-prong definition of an
“investment contract,” the relevant security type, from SEC v. W.J. Howey Co.
(Howey), 328 U.S. 293, 298-99 (1946). Hocking’s disjunctive three-factor test is
an elaboration of the third Howey prong and was not plainly required. The
Hocking factors are needed when, “[o]n the face of a partnership agreement,” the
investor maintains control, but the reality is different. Koch v. Hankins, 928 F.2d
1471, 1477 (9th Cir. 1991) (quoting Williamson, 645 F.2d at 424). The joint
venture agreements in this case were not facially partnership agreements, despite
their label. In fact, the agreements included a “No Partnership Relationship”
2 clause.
Even assuming the district court erred in failing to explain the Hocking
factors, the absence of that instruction did not affect Brandel’s substantial rights.
United States v. Marcus, 560 U.S. 258, 262 (2010). The joint venture agreements
would clearly satisfy the first disjunctive Hocking factor: that the agreement
“leaves so little power in the hands of the partner or venturer that the arrangement
in fact distributes power as would a limited partnership.” Hocking, 885 F.2d at
1460 (quoting Williamson, 645 F.2d at 424). Again, under the terms of the joint
venture agreements here, the victims were not partners. Nor does Brandel dispute
that in fact Malom Group AG (“Malom”) had the unilateral authority to decline,
and always did decline, the victims’ investment proposals.
2. The evidence was sufficient for a rational juror to find the existence of
an investment contract supporting Brandel and Warras’s securities fraud
convictions. See United States v. Nevils, 598 F.3d 1158, 1163-64 (9th Cir. 2010)
(en banc) (citing Jackson v. Virginia, 443 U.S. 307, 319 (1979)). Both the joint
venture agreements and the funding commitments satisfy the three Howey prongs
for the existence of an investment contract.
As to the joint venture agreements, each victim “invest[ed] . . . money” with
the expectation of financial gain. Howey, 328 U.S. at 298-99. To the extent the
joint venture agreement terms were confusing or contradictory as to whether the
3 funds were a “fee” or an investment, the standard of review compels resolution of
these conflicts in the prosecution’s favor. Nevils, 598 F.3d at 1163-64; McDaniel
v. Brown, 558 U.S. 120, 133 (2010). The evidence was also sufficient for the
jurors to find that the victims who invested in the joint venture agreements
expected to profit from the efforts of others. Howey, 328 U.S. at 298-99. A
rational juror could conclude beyond a reasonable doubt that the victims were
dependent on Brandel, Warras, or a “third party,” id. at 299, for the investment
ideas and that the victims’ ability to present investment ideas was not tantamount
to exercising the full powers of a general partner or joint venturer.
The evidence was also sufficient for a juror to conclude the funding
commitments were investment contracts. Gianopoulos expected to be reimbursed
for his $1.2 million “underwriting fee,” plus either $600,000 if the loan succeeded
or $50,000 if it failed. Thus, the jury could have concluded he expected to profit,
Warfield v. Alaniz, 569 F.3d 1015, 1024 (9th Cir. 2009), even if he also had other
motivations to secure the loan. We need not analyze Glazebrook’s funding
commitment because he signed a joint venture agreement that contemplated
sharing profits.
3. The evidence was also sufficient to establish that Brandel and Warras
possessed the requisite specific intent to defraud. See United States v. Kaplan, 836
F.3d 1199, 1212 (9th Cir. 2016) (conspiracy); United States v. Miller, 953 F.3d
4 1095, 1101 (9th Cir. 2020) (wire fraud); United States v. Tarallo, 380 F.3d 1174,
1181 (9th Cir. 2004) (securities fraud). Brandel and Warras argue that they had a
good-faith belief in the legitimacy of their activities, but a rational jury could have
concluded otherwise. Again, reasonable inferences must be drawn in the
government’s favor. McDaniel, 558 U.S. at 133. For instance, a rational jury
could reasonably infer intent to defraud one victim from Appellants’ activities in
nearly identical setups with other victims. See United States v. Sullivan, 522 F.3d
967, 974 (9th Cir. 2008).
The evidence was also sufficient for the jury to conclude Warras was part of
the conspiracy from the beginning. He received funds in his account as early as
January 2010, the same day a victim’s funds were released from escrow, and in
March 2010, he sent a suspicious email voicing his concern about “someone
fronting for some investigative agency.” And, although Warras did not meet with
victims before they transferred funds, conspirators pursuing the “same criminal
objective” need not agree “to commit or facilitate each and every part of the
substantive offense.” Salinas v. United States, 522 U.S. 52, 63 (1997). In several
emails, Warras and the codefendants discuss proof of funds letters that proved to
be fraudulent. The jury could also have concluded beyond a reasonable doubt that
Warras thought the “Brazilian bonds” were valueless. For instance, in a July 2011
email, Warras instructed an attorney about the need to come up with a “story”
5 about the Brazilian bonds and explained the joint venture agreement was a “file
stuffer” with “meaningless” percentages. The jury was free to disregard Warras’s
explanations and could have reasonably concluded beyond a reasonable doubt that
he possessed the requisite intent.
4. The government did not violate Warras’s Fifth Amendment Due
Process and Sixth Amendment rights to a fair trial by improperly shifting the
burden of proof on the value of the Brazilian bonds. We review this question de
novo, United States v. Coutchavlis, 260 F.3d 1149, 1156 (9th Cir. 2001), and
conclude any constitutional mistake was harmless, Washington v. Recuenco, 548
U.S. 212, 218-19 (2006). The jury could infer from Warras’s suspicious behavior
that he thought the bonds were of questionable value. Warras ignores that his
suspicious conduct is itself highly suggestive of the bonds’ worthlessness, as was
his apparent doctoring of a receipt to make the bonds appear legitimate, and his
failure to explain persuasively why Malom’s bonds would be an exception to his
general impression that 95 or 99% of old Brazilian bonds were fraudulent. The
government thus satisfied its initial burden to provide evidence permitting the jury
to conclude beyond a reasonable doubt that the bonds were worthless.
5. The district court also properly denied Warras an instruction that the
jury had to unanimously find the overt act element of conspiracy and unanimously
find that Warras did not have a good faith belief his actions were lawful. While the
6 jury must agree the overt act element is satisfied, it does not have to agree on the
factual basis for that element. United States v. Gonzalez, 786 F.3d 714, 718-19
(9th Cir. 2015). The district court properly instructed the jury that it had to agree
on the crime underlying the conspiracy—either wire or securities fraud. As noted
above, the district court also correctly instructed the jury that good faith is a
complete defense, and the government bears the burden of proving the lack of
good faith.
6. The district court’s forfeiture order did not violate Brandel or
Warras’s Eighth Amendment rights under the Excessive Fines Clause. We review
whether a fine is unconstitutionally excessive de novo. United States v.
Bajakajian, 524 U.S. 321, 336 n.10 (1998). We assume, along with the parties,
that the Eighth Amendment applies to the orders in this matter and that the in
personam forfeiture orders here are punitive. See United States v. Beecroft, 825
F.3d 991, 999-1000, 999 n.8 (9th Cir. 2016). The district court imposed forfeiture
amounts well below the U.S. Sentencing Guidelines recommended penalties, and
the sums were not “grossly disproportional to the gravity of [the] defendant’s
offense,” United States v. $100,348.00 in U.S. Currency, 354 F.3d 1110, 1121 (9th
Cir. 2004) (citing Bajakajian, 524 U.S. at 334), given the severity of the offenses
and the extent of harm to victims. Id. at 1121-22. Although the district court did
not consider the extent of Brandel and Warras’s roles in the overall scheme relative
7 to others, no “rigid” set of factors is required, and the district court properly
analyzed the three other considerations often used to measure proportionality.
United States v. Mackby, 339 F.3d 1013, 1016 (9th Cir. 2003).
AFFIRMED.