United States v. Robert Sproat

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 28, 2023
• Docket: 22-10249
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 28 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, No. 22-10249

Plaintiff-Appellee, D.C. No. 4:18-cr-02220-RM-EJM-3 v.

ROBERT B. SPROAT, MEMORANDUM*

Defendant-Appellant.

Appeal from the United States District Court for the District of Arizona Rosemary Márquez, District Judge, Presiding

Argued and Submitted November 14, 2023 San Jose, California

Before: GRABER, PAEZ, and FRIEDLAND, Circuit Judges.

Defendant Robert Sproat timely appeals his convictions of ten counts of

securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff, and 17 C.F.R.

§ 240.10b-5, and the resulting sentence of 30 months in prison.1 We affirm.

1. Sufficient evidence supported the securities fraud convictions. See

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. 1 In a concurrently filed opinion, we address Defendant’s jury coercion challenge. We address his remaining arguments in this disposition. United States v. Tarallo, 380 F.3d 1174, 1181 (9th Cir. 2004), as amended by 413

F.3d 928 (9th Cir. 2005) (stating that we review de novo the sufficiency of the

evidence). Viewing the evidence in the light most favorable to the government,

United States v. Tydingco, 909 F.3d 297, 301 n.1 (9th Cir. 2018), a reasonable jury

could have concluded that Defendant willfully committed securities fraud. With

respect to victims from nine of the ten counts, Defendant signed investment

contracts—memoranda of understanding or promissory notes—stating that the

Fortitude Foundation was engaged in a “joint venture,” but Defendant did not

disclose that the Fortitude Foundation had never supplied the initial $14,000,000

investment to fund that venture. Although Defendant was not a signatory to the

profit-sharing agreement that his codefendants made with the victim in the tenth

count, Defendant made other misrepresentations directly to that victim, including a

statement to the victim that a purported investment opportunity in Africa involving

diamond extraction was a “guaranteed investment.”

Additionally, the record supports that Defendant acted willfully. For

example, the fact that Defendant received thousands of dollars in rent payments

unrelated to any kind of investment undermines his claim that he was himself

deluded about how the investment funds were being used. Furthermore, the record

contains evidence that Defendant knew that he was not a director of the Fortitude

Foundation, but he held himself out to be a director anyway. Defendant also knew

2 that victims’ investment funds, which had been solicited for an ostensible gold

recovery project, would be spent for another purpose entirely: collectible Chinese

Petchili bonds.

2. The district court did not clearly err in concluding that Defendant failed to

prove by a preponderance of the evidence that he qualified for protection under the

final clause of 15 U.S.C. § 78ff(a). See United States v. Cantrell, 433 F.3d 1269,

1279 (9th Cir. 2006) (stating standard of review). A person may not be imprisoned

under 15 U.S.C. § 78ff(a) “for the violation of any rule or regulation” if the

defendant proves that “he had no knowledge of such rule or regulation.”

Defendant asserted in an affidavit that, before his indictment and arrest, he “had no

knowledge of any rule or regulation prescribed by the Securities and Exchange

Commission.” But Defendant was convicted of violating the general prohibition

on securities fraud, and his vague statement is insufficient to show that he did not

know of the substance of that general prohibition. See United States v. Reyes, 577

F.3d 1069, 1081 (9th Cir. 2009) (“Other circuits have also observed that proof of

no knowledge of the rule ‘can only mean proof of an ignorance of the substance of

the rule, proof that the defendant did not know that [his or her] conduct was

contrary to law.’” (brackets in original) (emphasis added) (citation omitted)); see

also United States v. Laurienti, 731 F.3d 967, 972 (9th Cir. 2013) (denying the

defendant’s request for an evidentiary hearing to determine lack of knowledge

3 under 15 U.S.C. § 78ff(a) because “he had ample opportunity to present

information showing he lacked knowledge of the substance of Rule 10b-5”

(emphasis added)). There also was other evidence in the record—such as emails

he sent referencing securities laws—that Defendant did know of securities rules

and regulations. Accordingly, the district court did not clearly err.

AFFIRMED.