United States v. August C. Ghilarducci and Ronald J. Richardson

480 F.3d 542, 2007 U.S. App. LEXIS 5900
CourtCourt of Appeals for the Seventh Circuit
DecidedMarch 14, 2007
Docket05-2836, 05-3165
StatusPublished
Cited by17 cases

This text of 480 F.3d 542 (United States v. August C. Ghilarducci and Ronald J. Richardson) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. August C. Ghilarducci and Ronald J. Richardson, 480 F.3d 542, 2007 U.S. App. LEXIS 5900 (7th Cir. 2007).

Opinion

WILLIAMS, Circuit Judge.

This case concerns dozens of failed investment deals orchestrated by August C. Ghilardueci, president and owner of West-chester Financial Associates, Inc. (“WFA”), at times with the assistance of his co-defendant Ronald J. Richardson. Ghilardueci and Richardson executed a series of deals in which they charged WFA clients fees for procuring Confirmation of Funds (“COF”) letters from financial institutions. The letters purported to show that financial institutions were capable of leasing large sums of money to WFA clients for a short time. Despite the defendants’ representations, the COF letters proved worthless and WFA clients sustained huge financial losses. Ghilardueci executed a second class of investment deals in which he sold historic railroad bonds issued in the late 1800s to clients at enormous mark-ups. WFA clients reaped none of the benefits Ghilardueci promised.

For his role in both schemes, Ghilarduc-ei was convicted by a jury of racketeering, wire fraud, money laundering, making false statements to banks, and filing false tax returns, and received a 190-month sentence. A jury convicted Richardson of racketeering, wire fraud, money laundering, and tax evasion, and he received 140 months for his participation in the COF scheme.

On appeal, Richardson contends that his convictions for racketeering, wire fraud, and money laundering are invalid, because they are premised on false representations that could not have been material to the investors’ decision-making. Ghilardueci, whose counsel filed a brief and moved to withdraw pursuant to Anders v. California, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493 (1967), asked to adopt Richardson’s brief (and, by extension, Richardson’s sole argument) on appeal. We granted that request. The defendants’ joint argument fails, however, because they confuse materiality — a genuine element of criminal fraud' — -for reliance, a concept without bearing in criminal fraud prosecutions. In his Seventh Circuit Rule 51 statement in opposition to his counsel’s Anders brief, Ghilardueci proposes several potential arguments for appeal. Each of those arguments would be frivolous.

I. BACKGROUND

A. Confirmation of Funds Scheme

The defendants engaged in the COF scheme between March 1996 and June 2001. As part of the scheme, they charged WFA clients fees between $200,000 and $1.95 million to procure COF letters that *544 committed financial institutions to “lease” funds to WFA clients for a limited time. The leased funds could then be used in trading programs to generate high profits. Richardson marketed the COF letters and Ghilarducci executed contractual agreements with WFA clients. Altogether, several dozen clients paid over $22 million in fees for the COF letters.

The contracts entered into between WFA and its clients contained a number of warranties, including the following provision indicating that WFA had not made any extra-contractual representations to its clients:

Applicant acknowledges and agrees that “WFA” has not made any promises or representations other than those contained herein ... or promised to provide assistance of any kind in obtaining a loan or extension thereto or soliciting any investment or security. Applicant further acknowledges that “WFA” and its, [sic] agents, assigns, brokers and related parties hereby specifically disclaim that any financial benefit of any kind will be realized by Applicant from any payments of any kind made in furtherance or promotion of same or that any debt instrument, as defined above will be available to Applicant.

At trial, WFA clients testified that despite the contractual language, they had relied on oral representations made by the defendants. According to witnesses, both Richardson and Ghilarducci represented that COF deals had been successful in the past, and that future COF deals would also yield high returns. At least one client was made to believe that the COF deals were “a slam dunk.” To further alleviate any fears, Richardson promised to introduce WFA clients to trading programs that he had found reliable in the past. Clients also thought any risks were minimized by representations that their fees would be deposited into, and remain in, an attorney’s escrow account until a COF letter issued and trading began.

In fact, however, a WFA attorney testified that there were many instances in which he wired money out of the escrow account at Ghilarducci’s direction before a COF letter had issued (and, by implication, before any trading could have begun). The COF letters were issued by foreign banks of questionable repute. One such bank, Maximum Finance Corporation (MFC), although located in Australia, had no license to conduct business in Australia. Its only legitimate basis for claiming itself a bank was its purchase of a banking license for $1000 from the Republic of Nauru. Not surprisingly, the COF letters proved worthless.

In 1997, the Illinois Attorney General’s (“LAG”) office initiated a civil investigation into WFA’s activities after an individual who had purchased a COF letter complained. During the course of the investigation, Ghilarducci conceded that none of his COF deals had been successful, and said he had stopped doing those deals and would not perform any in the future. The defendants did not tell their clients about the investigation and continued to engage in COF deals despite Ghilarducci’s representations to the IAG.

B. Railroad Bond Scheme

Between September and December 1996, Ghilarducci sold historic railroad bonds issued in the late 1800s to WFA clients, who sought to use the bonds as collateral to secure financing for high-yielding deals. The bonds had a face value of $1000, and WFA paid between $1800 and $5000 per bond. WFA thereafter resold the bonds for as much as $302,000 each, and collected more than $2.5 million in total for the bonds.

*545 To induce sales, Ghilarducci made a series of representations about the railroad bonds. For instance, Albert Ichelson, the largest single bond investor, testified that Ghilarducci said he had paid $151,000 for a particular type of bond and was doing Ichelson a favor by reselling those bonds at the same price. Ghilarducci told Ichel-son that although the railroad companies were now bankrupt, “the government’s part of the guarantee still existed.” And, Ghilarducci provided Ichelson and others with high appraisals of the bonds. During the course of his interactions with clients, however, Ghilarducci learned that the bonds were only valued as collectors’ items.

Although Ghilarducci testified that he acted in good faith when selling the bonds, the jury had reason to disbelieve him. Not only did the jury hear that Ghilarducci misrepresented what he paid for the bonds, they were also told that Ghilarducci sold bonds when he had reason to believe they were worthless, and placated suspicious clients through deceit. In August 1996, Ghilarducci obtained an article explaining that one class of railroad bonds, Saginaw railroad bonds, were sold by a now-bankrupt company and that the bonds were mere collectors’ items.

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Bluebook (online)
480 F.3d 542, 2007 U.S. App. LEXIS 5900, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-august-c-ghilarducci-and-ronald-j-richardson-ca7-2007.