United States v. Dennis L. Roberts, Also Known as Douglas Campbell, Also Known as Robert Murphy, Douglas R. Jones, Pamela J. Faught, and Bryan L. Huff

22 F.3d 744
CourtCourt of Appeals for the Seventh Circuit
DecidedJuly 6, 1994
Docket92-3542, 92-3821, 92-3829, 92-3866 and 92-3914
StatusPublished
Cited by21 cases

This text of 22 F.3d 744 (United States v. Dennis L. Roberts, Also Known as Douglas Campbell, Also Known as Robert Murphy, Douglas R. Jones, Pamela J. Faught, and Bryan L. Huff) 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. Dennis L. Roberts, Also Known as Douglas Campbell, Also Known as Robert Murphy, Douglas R. Jones, Pamela J. Faught, and Bryan L. Huff, 22 F.3d 744 (7th Cir. 1994).

Opinion

BAUER, Circuit Judge.

Dennis Roberts, Douglas Jones, Pamela Faught, and Bryan Huff were convicted under 18 U.S.C. § 2314 of devising and conspiring to devise a fraudulent scheme which in its execution induced persons to travel in interstate commerce and to spend $5,000 or more. Roberts was also convicted of evading and conspiring to evade taxes as well as willfully filing a false tax return in violation of 26 U.S.C. §§ 7201 and 7206(1). Their convictions stem from a series of transactions in which members of the scheme fraudulently *747 sold lottery device distributorships. They all appeal their convictions; Roberts also appeals his sentence, and we affirm.

I.

Lucky Lotto and Old Doc’s Lucky Number Hotbox are coin operated devices designed to assist participants in a state lottery game. Customers who are somehow incapable of selecting numbers in the lottery may, for twenty-five cents, enlist the aid of these machines. The machines dispense tickets containing purportedly lucky numbers which the customer can then use to play the lottery. In the fall of 1984, Eugene Hill and Michael Ellis acquired the rights to sell distributorships for these machines through their own Indianapolis-based sales organization, Hiawatha, Inc. Depending on the number of machines ordered, the price of a distributorship ranged between $10,000 and $65,000. For three years, Hiawatha marketed the machines nationwide until May of 1987 when a fire destroyed its offices.

Hiawatha typically promoted its distributorships as follows. A prospective buyer would be located either through advertisements in local newspapers or at trade shows. An introductory meeting would then be scheduled at which Hiawatha’s salespersons would make a detailed presentation about the business. In these introductory meetings, Hiawatha made several representations. First, the salespersons maintained that revenues from the machines were correlated to the number of machines purchased and that as a general rule the machines would pay for themselves within three to six months of their installation. Second, Hiawatha told prospective buyers that a chain of nationwide convenience stores had agreed to allow Hiawatha distributors to install the machines in their stores. Third, to allay fears concerning the venture’s riskiness, Hiawatha’s salespersons promised to provide extensive post-purchase marketing assistance to distributors. Finally, as an incentive to lottery participants, Hiawatha offered an additional cash prize to winners who used Lucky Lotto or the Hotbox to choose their number. Hiawatha’s representatives assured prospective distributors that Lloyd’s of London had written an insurance policy which would cover the bonus prize.

To further promote the machines, Hiawatha salespersons would put potential distributors in contact with persons alleged to be successful and satisfied distributors. These persons, referred to by Hiawatha as “singers,” would provide testimonials confirming the profitability of the business.

The marketing of distributorships in California was handled more carefully because it was seen as a particularly lucrative opportunity. Prospective buyers were invited to attend presentations in various California hotel suites, and if they were still interested, they were required to make an initial deposit of $5,000 and sign a commitment to purchase. Hiawatha then flew the interested persons to Chicago to meet a singer who Hiawatha claimed was the distributor for the Chicago area. The singer provided the prospective buyer with a tour of their operations which typically included the opportunity to see all the vending equipment full of money.

Hiawatha then flew the prospective buyer to Indianapolis where they were given another presentation followed by a tour of Hiawatha’s warehouse. The prospective buyers were shown a computer screen detailing the large volume of tickets being sold through Hiawatha’s equipment. After the wining and dining was complete, buyers were asked to sign a contract and to pay at least half of the $65,000 price for which 100-maehine packages were sold. California distributors were promised that their distributorships would be regionally exclusive of one another.

Once a distributorship was sold, Hiawatha would dispatch to the distributor a purportedly independent consultant, called a “locator,” who, based on his or her claimed special expertise, would select the most desirable store locations for the distributor’s machines. The locator would then approach the store owners about allowing the distributor to install a Hotbox in their store. Representations made in the discussions with store owners were similar to those made in the introductory meetings between salespersons and potential distributors.

*748 Several of the representations made to prospective distributors by Hiawatha’s salespersons were revealed to be either false or misleading. For instance, Hiawatha never had an insurance policy covering the bonus prize for lottery winners who used the Hiawatha machines. Nor did Hiawatha have an agreement with any convenience store chain governing access for its machines. And despite promises to the contrary, distributorships in California were not territorially exclusive. Little, if any marketing assistance was provided to distributors once the machines were installed. Finally and most importantly, the revenues represented as typical by the salespersons were never close to the revenues realized by any distributors. The computer screen figures which were shown to California distributors and were alleged to represent machine revenues were bogus.

Claims made by the singers and locators were also fraudulent. The singers were not authorized distributors, but rather Hiawatha employees who had been paid to pose as distributors and to confirm falsely the profit figures which the salespersons had projected. For example, the singer introduced to California buyers as the Chicago distributor of the Hotbox was in fact the wife of Dennis Roberts, a principal in the operation and a defendant in this case. At trial, she admitted that she was never a real distributor and that she filled the machines with money to impress the prospective buyers. The locators had no expertise on selecting stores for the distributors nor were they independent. Like the singers, they were all Hiawatha employees.

The appellants in this case played various roles in the venture. Dennis Roberts, a long-time associate of Eugene Hill’s, was officially designated Hiawatha’s customer relations manager but his duties were more diverse. He served on occasion as either a salesperson or as a singer, and along with his wife, was responsible for setting up the fraudulent Chicago distributorship used to deceive the buyers from California. Together with Hill and Ellis, Roberts received a third of Hiawatha’s profits disguised as corporate expenses so as to avoid taxation. Pamela Faught started out as a salesperson and later became a locator for Hiawatha. Bryan Huff was a singer and later a locator for the business. Douglas Jones was one of Hiawatha’s most successful salespersons. His talents led Hiawatha to include him in the lucrative California sales effort.

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