United States v. Wetherald

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MARCH 28, 2011
No. 09-11687
JOHN LEY
CLERK

D. C. Docket No. 06-80199-CR-KAM

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

TIMOTHY WETHERALD,
MARC SHINER,
LEON SWICHKOW,

Defendants-Appellants.

Appeals from the United States District Court
for the Southern District of Florida

(March 28, 2011)

Before DUBINA, Chief Judge, BLACK, Circuit Judge, and GOLDBERG,* Judge.

*
Honorable Richard W. Goldberg, United States Court of International Trade Judge, sitting
by designation.
DUBINA, Chief Judge:

Appellants Timothy Wetherald, Marc Shiner, and Leon Swichkow

(collectively “Appellants”) appeal their convictions and sentences resulting from a

thirty-one count indictment for their involvement in a scheme—running from

approximately 2000 to 2003—to defraud investors in telecommunication

companies, known as competitive local exchange carriers (“CLECs”), operated by

Appellants. Counts 1–3, 7–8, and 10–18 charged Shiner and Swichkow with wire

fraud in violation of 18 U.S.C. § 1343. Counts 4–6 and 9 charged Wetherald with

wire fraud. Counts 19–22 charged Shiner and Swichkow with mail fraud in

violation of 18 U.S.C. § 1341. Count 23 charged all three men with securities

fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff. Finally, counts 24–31 charged

Shiner and Swichkow with money laundering in violation of 18 U.S.C. § 1957. A

jury found Appellants guilty on all counts.

Appellants appeal their convictions on a number of grounds. Appellants

argue the district court should have dismissed the case for pre-indictment delay,

the evidence was insufficient to support their convictions, the securities fraud

statute is unconstitutional, the district court’s trial rulings resulted in reversible

error, application of the Sentencing Guidelines in effect at the time of sentencing

violated the Ex Post Facto Clause of the U.S. Constitution, and the district court

2
imposed unreasonable sentences. With the benefit of the parties’ briefs and oral

argument, we find no merit in the bulk of Appellants’ contentions. But

Appellants’ argument that the district court violated the Ex Post Facto Clause by

applying a different Guideline range than that in effect at the time of the offense

raises questions that this court has not squarely addressed in the wake of the

Supreme Court’s decision in United States v. Booker, 543 U.S. 220, 125 S. Ct. 738

(2005). Because the use of the Sentencing Guidelines in effect at the time of

sentencing did not raise a substantial risk of a harsher punishment for the

Appellants, we conclude that the district court’s failure to apply the Guidelines in

effect at the time of the offense did not violate the Ex Post Facto Clause.

I.

Appellants’ convictions stem from a scheme by the three men to create and

sell partnerships in CLECs operating in Colorado, Arizona, Washington,

Minnesota, Oregon, and one serving both Iowa and Nebraska. The underlying

business model—buying wholesale telecommunications services for resale—was

not itself unsound. Due to an effort to prevent the monopolization of local

telephone service by national outfits, Congress enacted the Federal

Telecommunications Act of 1996. As a part of this legislation, the so-called

3
“Regional” or “Baby Bells” that dominated the telecommunications industry at the

time are required to offer local retail telecommunications services for resale at a

wholesale discount to any CLECs that possess the proper state licenses. These

CLECs are then able to offer communications services without any infrastructure

of their own. Thus, the business of the CLECs consists only of acquiring

customers and reselling to those customers at a retail price services purchased

from the Regional Bell at a wholesale cost.

In 2000, Wetherald created ON Systems, a company intended to establish

and manage CLECs. His plan was to purchase services from Qwest, a large

western telecommunications company, and then resell those services around the

western United States. After Wetherald had difficulty finding investors for his

venture, he met with Shiner who, with Swichkow, ran a telemarketing company

known as Telecom Advisory Services (“Telecom”). Working together, ON

Systems and Telecom eventually gathered 250 investors for six limited-liability

partnerships: Mile High Telecom Partners, LLP in Colorado (“Mile High”); The

Phone Company of Arizona, LLP; The Washington Phone Company, LLP; The

Minnesota Phone Company Financial Group, LLP; The Iowa/Nebraska Phone

Company, LLP; and The Oregon Phone Company Financial Group, LLP.

4
 A Securities and Exchange Commission investigation later revealed that

these investors were enticed by misleading and in some cases patently false claims

made by Appellants. They also were not informed that Shriner was a convicted

felon who had been a defendant in previous regulatory actions or that Wetherald,

in addition to steering several telecommunications companies into bankruptcy,

was the subject of a permanent injunction in Washington and Oregon regarding his

actions in the telecommunications industry in those states. By the time the

Securities and Exchange Commission stepped in—filing an enforcement action

against Appellants that later became the basis of this criminal action—the CLECs

had collapsed, losing investors in excess of $8 million.

At sentencing, the district judge sentenced Appellants according to the 2008

U.S. Sentencing Guidelines rather than the 2002 Guidelines in effect at the time

the Appellants committed the offenses. Departing downward for each Appellant,

the court sentenced Wetherald to 144 months, Shiner to 168 months, and

Swichkow to 108 months. Appellants filed timely notices of appeal and are

presently incarcerated.

II.

Preserved constitutional challenges to the district court’s application of the

sentencing guidelines are reviewed de novo. United States v. Paz, 405 F.3d 946,

5
948 (11th Cir. 2005). This court reviews a district court’s denial of a motion to

dismiss an indictment for abuse of discretion, but will review the court’s choice of

legal standard de novo. United States v. Robison, 505 F.3d 1208, 1225 n.24 (11th

Cir. 2007). Sufficiency of the evidence is reviewed de novo in the light most

favorable to the government to determine whether any rational trier of fact could

have reached a verdict of guilty. Jackson v. Virginia, 443 U.S. 307, 318–19, 99 S.

Ct. 2781, 2789–90 (1979). Evidentiary rulings are reviewed for abuse of

discretion. United States v. Baker, 432 F.3d 1189, 1202 (11th Cir. 2005). When a

party claims evidentiary error for the first time on appeal, the court applies a plain

error standard of review. Id. If the cumulative effect of evidentiary errors is

prejudicial, the court will reverse, even if each individual error is harmless. Id. at

1203. We review sentences for procedural and substantive reasonableness under

an abuse of discretion standard. United States v. Livesay, 587 F.3d 1274, 1278

(11th Cir. 2009).

III.

Prior to the Supreme Court’s decision in Booker, this court had repeatedly

held that although the district courts should “presumptively apply the Guidelines

as they exist at the time of sentencing, they may not do so where those Guidelines

would lead to imposition of a harsher penalty than that to which the defendant was

6
subject at the time of the offense.” United States v. Simmons, 368 F.3d 1335, 1338

(11th Cir. 2004). The court based this holding on long-established precedent,

citing the 1798 case of Calder v. Bull, 3 U.S. 386, 390 (1798), for the proposition

that “every law that changes the punishment, and inflicts a greater punishment,

than the law annexed to the crime, when committed” is an ex post facto law.

Simmons, 368 F.3d at 1338.

This court has yet to directly address the ex post facto implications of

Booker on the Guidelines. In United States v. Masferrer, the court, citing our pre-

Booker decision in Simmons, wrote, “However, if a more lenient guidelines

sentence was in effect at the time of the offense, the Guidelines Manual applicable

at the time of the offense must be applied to avoid an Ex Post Facto Clause

violation.” 514 F.3d 1158, 1163 (11th Cir. 2008); see also United States v.

Kapordelis, 569 F.3d 1291, 1314 (11th Cir. 2009) (“Pursuant to the Ex Post Facto

Clause, if applying the Guidelines in effect at the time of sentencing would result

in a harsher penalty, a defendant must be sentenced under the Guidelines in effect

at the time when he committed the offense.”). Masferrer, however, did not require

us to address the ex post facto implications of Booker. Nevertheless, while we

have not addressed the question as presented in this case, we have affirmed the

7
underlying principles that led to the application of the Ex Post Facto Clause in our

pre-Booker opinions.

Our sister circuits have split on the impact of Booker in regards to the Ex

Post Facto Clause. The Seventh Circuit has taken the view that the Ex Post Facto

Clause no longer poses a problem, as it applies “only to laws and regulations that

bind rather than advise.” United States v. Demaree, 459 F.3d 791, 795 (7th Cir.

2006); see also United States v. Barton, 455 F.3d 649, 655 n.4 (6th Cir. 2006)

(“Now that the Guidelines are advisory, the Guidelines calculation provides no

such guarantee of an increased sentence, which means that the Guidelines are no

longer akin to statutes in their authoritativeness. As such, the Ex Post Facto Clause

itself is not implicated.”). The Seventh Circuit noted that after Booker the district

judge’s sentence, “whether inside or outside the guideline range, is discretionary

and subject therefore to only light appellate review.” Demaree, 459 F.3d at 795.

The court further opined that a district judge who wants to apply the sentence

suggested in a new Guidelines provision would simply “say that in picking a

sentence consistent with section 3553(a) he had used the information embodied in

the new guideline.” Id.

The D.C. Circuit has squarely rejected this position, finding that the

application of a harsher Guidelines range in place at sentencing presents a

8
constitutional problem. United States v. Turner, 548 F.3d 1094, 1099–1100 (D.C.

Cir. 2008). The court declined to adopt the Seventh Circuit’s implication that

“district judges will misrepresent the true basis for their actions” if not allowed to

overtly employ recently implemented Guidelines. Id. at 1099. The D.C. Circuit

then enumerated the ways in which the Guidelines continue to bind, even though

they are now advisory. Id. at 1099–1100. The court concluded the “proper

approach is therefore to conduct an ‘as applied’ constitutional analysis,” finding

that a party need only show that the district court’s failure to employ the

Guidelines in effect at the time the offense was committed resulted in “a

substantial risk” of a more severe sentence. Id. at 1100; see also United States v.

Ortiz, 621 F.3d 82, 87 (2d Cir. 2010) (“We think the ‘substantial risk’ standard

adopted by the D.C. Circuit appropriately implements the Ex Post Facto Clause in

the context of sentencing under the advisory Guidelines regime, and is faithful to

Supreme Court jurisprudence explaining that the Clause protects against a

post-offense change that ‘create[s] a significant risk of increas[ing] [the]

punishment.’”) (citing Garner v. Jones, 529 U.S. 244, 255, 120 S. Ct. 1362, 1370

(2000) (alterations in original)).

Because it is consistent both with our interpretation of Supreme Court

precedent and this circuit’s jurisprudence, we find the approach taken by the D.C.

9
Circuit more compelling than that of the Seventh Circuit. It is true that the

Guidelines are no longer mandatory, but neither are they without force. The

simple reality of sentencing is that a “sentencing judge, as a matter of process, will

normally begin by considering the presentence report and its interpretation of the

Guidelines.” Rita v. United States, 551 U.S. 338, 351, 127 S. Ct. 2456, 2465

(2007). As the D.C. Circuit noted, “Practically speaking, applicable Sentencing

Guidelines provide a starting point or ‘anchor’ for judges and are likely to

influence the sentences judges impose.” Turner, 548 F.3d at 1099. This starting

point serves to cabin the potential sentence that may be imposed, and the Supreme

Court has recognized that the appeals courts may presume the reasonableness of a

sentence that reflects the district court’s proper application of the Sentencing

Guidelines. Rita, 551 U.S. at 347, 127 S. Ct. at 2462. We also have

acknowledged that “ordinarily we would expect a sentence within the Guidelines

range to be reasonable.” United States v. Talley, 431 F.3d 784, 788 (11th Cir.

2005). Although we have declined to find that a sentence within the Guidelines

range is reasonable per se, we have noted that the Guidelines remain “central to

the sentencing process” and that “our ordinary expectation still has to be measured

against the record, and the party who challenges the sentence bears the burden of

establishing that the sentence is unreasonable in the light of both that record and

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the factors in section 3553(a).” Id. at 787, 788; United States v. Irey, 612 F.3d

1160, 1191 (11th Cir. 2010) (“Section 3553(a) plays a critical role in appellate

review of sentences, just as it does in the initial sentencing decision.”). And once

a sentencing judge correctly applies the Guidelines range, the defendant’s relief is

greatly limited. This court will disturb the finding of the district court “if, but only

if, we ‘are left with the definite and firm conviction that the district court

committed a clear error of judgment in weighing the § 3553(a) factors by arriving

at a sentence that lies outside the range of reasonable sentences dictated by the

facts of the case.’” Irey, 612 F.3d at 1190 (quoting United States v. Pugh, 515 F.3d

1179, 1191 (11th Cir. 2008)).

Thus, the application of the correct Guidelines range is of critical

importance, and it cannot be said that the Ex Post Facto Clause is never implicated

when a more recent, harsher, set of Guidelines is employed.1 But it is equally

1
While the government attempts to analogize to cases involving the grant of discretionary
parole, we do not find sentencing and parole to be perfectly analogous. While several ex post facto
cases have revolved around parole procedures, there is a distinction between how the court treats the
granting of parole—what amounts to an act of undeserved mercy—and the imposition of criminal
sentence. Justice Scalia recognized this aspect of parole, writing, “Any sensible application of the
Ex Post Facto Clause, and any application faithful to its historical meaning, must draw a distinction
between the penalty that a person can anticipate for the commission of a particular crime, and
opportunities for mercy or clemency that may go to the reduction of the penalty . . . . In Georgia
parole, like pardon (which is granted or denied by the same Board), is—and was at the time
respondent committed his offense—a matter of grace.” Garner v. Jones, 529 U.S. 244, 258, 120 S.
Ct. 1362, 1372–73 (2000) (Scalia, J., concurring). Thus, the force of the Ex Post Facto Clause may
not be as great when applied to parole as it would be in a sentencing context.

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clear that we need not “invalidate every sentence imposed after a Guidelines range

has been increased after the date of the offense.” Ortiz, 621 F.3d at 87. Rather,

we will look to the sentence as applied to determine whether the change created

“‘a sufficient risk of increasing the measure of punishment attached to the covered

crimes.’” Garner, 529 U.S. at 250, 120 S. Ct. at 1367 (quoting Cal. Dep’t of Corr.

v. Morales, 514 U.S. 499, 509, 115 S. Ct. 1597, 1603 (1995)). This standard is

consistent with our precedent. As we said in Kapordelis, “While we have held

that the district court must correctly calculate the Guidelines before imposing a

sentence, we are not required to vacate a sentence if it is likely that, under the

correctly calculated Guidelines, the district court would have imposed the same

sentence.” 569 F.3d at 1314. Therefore, we will only find an Ex Post Facto

Clause violation when a district judge’s selection of a Guidelines range in effect at

the time of sentencing rather than that at the time of the offense results in a

substantial risk of harsher punishment. This standard recognizes the ongoing

importance of the Sentencing Guidelines while maintaining the district court’s

broad discretion to consider relevant information in formulating an appropriate

sentence.

Although the district court should have applied the more lenient Guidelines

sentence in effect at the time of the Appellants’ offense, they have failed to show a

12
substantial risk that the application of the 2008 Guidelines resulted in the

imposition of a harsher sentence. In Kapordelis, we refused to overturn a sentence

based on incorrectly calculated Guidelines because the district court made it clear

it would have imposed the same sentence regardless. Id. Here the sentencing

judge explicitly stated that he was aware of the conflict between the Guidelines

and that although he applied the more recent version, he believed the totality of the

circumstances called for a significantly lower sentence. He explained,

So I’m going to agree with the Government that the current guideline
manual should be used in this case, because it does not have an ex
post facto effect, because the guidelines are discretionary, I’m free to
disregard them. And I can tell you right now I’m going to. I’m not
going to apply the guideline—I’m not going to impose a 360-month
sentence on any of these Defendants, but I think that’s the guidelines
where we have to start. . . . But, again, I’m giving everybody advance
notice that I think those guidelines are—I’m going to deviate from
them and vary from them when I do impose sentence.

(R.296 at 52:12–19, 22–25.)

The court also commented specifically on each defendant, stating as to

Shriner,

I don’t think it would have made a difference. I think—and, as a
matter of fact, if I was operating under the 2002 guidelines versus the
2008 guidelines, I don’t think it would have made a difference. I
tried to impose the sentence that I thought was appropriate based
upon the facts of the case without regard to the guidelines, and I think
this is where I—I’m pretty certain this is where I would have come

13
 out, regardless of whether I would have had that two-level increase or
not.

(R.296 at 245:5–13.)

Turning to Swichkow, the court stated that it would “impose a sentence

below the advisory guideline range because the Court believes the sentence it will

impose will reflect the seriousness of the offense and provide just punishment.”

(R.296 at 247:9–11.) The district court made a similar statement regarding

Wetherald’s sentence, reiterating that it would depart from the Guidelines and

impose a sentence that was appropriate. (R.296 at 209:4–210:11.)

The district court is not required to utter a set of magic words in order to

come within Kapordelis. We find the statements of the district court more than

sufficient to show that the improper application of the Guidelines did not create a

substantial risk of a harsher sentence. The sentences imposed bolster this position.

Under the 2008 Guidelines, all three defendants were subject to a Guidelines range

of 210–262 months. The 2002 Guidelines range was significantly lower at

151–188 months for all three defendants. Nevertheless, only Shiner’s sentence of

168 months even fell within the 2002 Guidelines range. Wetherald’s sentence of

144 months was below the range, and Swichkow’s sentence of 108 months

represented a significant downward departure, 43 months below the minimum

14
sentence recommended by the 2002 Guidelines. Appellants have presented no

evidence that these sentences were affected by the district court’s reference to the

2008 Guidelines, and their speculation that the judge might have departed even

further had he employed the 2002 Guidelines is not sufficient to show a substantial

risk of harsher punishment. Therefore, we conclude that the district court did not

violate the Ex Post Facto Clause in sentencing Appellants.

Appellants’ other arguments do not merit relief. Turning first to Appellants’

claims of pre-indictment delay, we have found that pre-indictment delay may raise

due process concerns in certain circumstances. In United States v. Solomon, we

held, “To establish that a pre-indictment delay violated his due process rights, a

defendant must show (1) that he was actually prejudiced by the delay in preparing

his defense, and (2) that the delay was unreasonable.” 686 F.2d 863, 871 (11th

Cir. 1982). We look at unreasonableness in pre-indictment delay cases through

the lens of tactical advantage, and the court “has said that the motivations behind

the delay must violate ‘fundamental conceptions of justice’, or a sense of ‘fair

play’ or ‘decency’.” Id. (quoting United States v. Parker, 586 F.2d 422, 431 (5th

Cir. 1978); United States v. Shaw, 555 F.2d 1295, 1299 (5th Cir. 1977)).

Applying this standard, the Solomon court found, “Even if [the defendant] had

made the necessary showing of prejudice . . . he has not demonstrated that the

15
delay was for the purpose of giving the government a tactical advantage.” Id. at

872. Tactical advantage is the touchstone in pre-indictment delay cases, and in

United States v. Lindstrom the court explicitly held an appellant must show “(1)

that the delay caused actual prejudice to the conduct of his defense, and (2) that

the delay was the product of deliberate action by the government designed to gain

a tactical advantage.” 698 F.2d 1154, 1157 (11th Cir. 1983); see also United

States v. Benson, 846 F.2d 1338, 1342–43 (11th Cir. 1988) (“Under the standard

first used in [Solomon] and since used consistently in this circuit, to prevail on a

due process claim, the defendant must show that any delay by the government not

only caused actual prejudice, but that the prosecution ‘deliberately caused the

delay to gain any tactical advantage.’”) (citation omitted).

There is simply no evidence that the government intentionally delayed this

action in an effort to gain a tactical advantage over Appellants. Therefore,

Appellants cannot prevail on their due process claim.

Turning to Appellants’ argument that the government failed to show an

intent to defraud, the evidence shows otherwise. Intent may be found when “the

defendant believed that he could deceive the person to whom he made the material

misrepresentation out of money or property of some value.” United States v.

Maxwell, 579 F.3d 1282, 1301 (11th Cir. 2009) (internal quotation marks

16
omitted). “A jury may infer an intent to defraud from the defendant’s conduct.”

Id. Information is material if it has “‘a natural tendency to influence, or [is]

capable of influencing, the decision maker to whom it is addressed.’” Id. at 1299

(quoting United States v. Hasson, 333 F.3d 1264, 1271 (11th Cir. 2003) (alteration

in the original)).

The information Appellants gave investors was replete with misinformation

and key omissions, and investors testified that had they known the correct

information, they would never have invested in the CLECs. Shiner and Wetherald

neglected to inform the investors of their prior problems with the law or the

bankrupted businesses they left behind. Appellants sold non-voting shares they

had promised to retain without informing the other investors. Appellants falsely

claimed that the existing CLECs were experiencing excellent results in an effort to

draw more investors.

While Shiner and Swichkow plead ignorance, the fact that they set up

offices in ON Systems’ Colorado location and eventually became part owners of

ON Systems belies this claim. Furthermore, several witnesses testified to Shiner

and Swichkow’s knowledge of the licensing problems and billing disputes with

Qwest. Witnesses testified to Wetherald’s efforts to mislead the Colorado Public

Utilities Commission as well as the investors. The evidence repeatedly shows that

17
all Appellants were intimately involved in the scheme and that none of them can

claim ignorance. The jury evaluated this evidence, and taking it in the light most

favorable to the government, there can be no doubt that the evidence was

sufficient to support the jury verdict.2

Appellants also attempt to overcome their securities fraud conviction by

claiming that the jury improperly determined that the partnership interests were, in

fact, securities. Long-standing precedent holds, “[A]n investment contract for

purposes of the Securities Act means a contract, transaction or scheme whereby a

person invests his money in a common enterprise and is led to expect profits solely

from the efforts of the promoter or a third party, it being immaterial whether the

shares in the enterprise are evidenced by formal certificates or by nominal interests

2
Appellants challenge their money laundering convictions as well. To the extent Appellants
are guilty of mail and wire fraud, however, their challenge to their money laundering convictions
also fails. United States v. Johnson, 440 F.3d 1286, 1289 (11th Cir. 2006) (“To obtain a conviction
on a [18 U.S.C.] § 1957 [money laundering] charge, the government bears the burden of proving
beyond a reasonable doubt that [the defendant] ‘knowingly engaged or attempted to engage in a
monetary transaction in criminally derived property that is of value greater than $ 10,000 and is
derived from specified unlawful activity.’”). Appellants contend that the government must also
show the transactions were designed to conceal. Concealment, however, is an element of § 1956,
not § 1957. See United States v. Wynn, 61 F.3d 921, 926–27 (D.C. Cir. 1995) (“[Section 1957]
differs from section 1956 in two critical respects: It requires that the property have a value greater
than $ 10,000, but it does not require that the defendant know of a design to conceal aspects of the
transaction or that anyone have such a design. Due to the omission of a ‘design to conceal’ element,
section 1957 prohibits a wider range of activity than money ‘laundering,’ as traditionally
understood.”).

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in the physical assets employed in the enterprise.” S.E.C. v. W. J. Howey Co., 328

U.S. 293, 298–99, 66 S. Ct. 1100, 1103 (1946). We have held that “solely” is not

“interpreted restrictively.” S.E.C. v. Merchant Capital, LLC, 483 F.3d 747, 754

(11th Cir. 2007). Rather, the court looks to the economic reality, focusing “on the

dependency of the investor on the entrepreneurial or managerial skills of a

promoter or other party.” Id. at 755 (quoting Gordon v. Terry, 684 F.2d 736, 741

(11th Cir. 1982)). When reviewing partnerships, the Fifth Circuit set out the

following test:

A general partnership or joint venture interest can be designated a
security if the investor can establish, for example, that (1) an
agreement among the parties leaves so little power in the hands of the
partner or venturer that the arrangement in fact distributes power as
would a limited partnership; or (2) the partner or venturer is so
inexperienced and unknowledgeable in business affairs that he is
incapable of intelligently exercising his partnership or venture
powers; or (3) the partner or venturer is so dependent on some unique
entrepreneurial or managerial ability of the promoter or manager that
he cannot replace the manager of the enterprise or otherwise exercise
meaningful partnership or venture powers.

Williamson v. Tucker, 645 F.2d 404, 424 (5th Cir. 1981)3; Merchant Capital, LLC,

483 F.3d at 755 (citing Williamson, 645 F.2d at 424).

3
In Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc), the Eleventh
Circuit adopted as binding precedent the decisions of the Fifth Circuit rendered prior to October 1,
1981.

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 Appellants argue that the CLECs were partnerships and that the investors

exercised substantial control over the enterprise. Thus, they contend, securities

law does not apply. The evidence shows otherwise. The partnerships were sold as

having the advantage of ON Systems expertise as a managing company, headed by

the experienced Wetherald. Investors testified that they had no

telecommunications experience or knowledge of how to operate a company, but

they were assured that experience was not necessary. Investors testified that once

they signed the joint venture agreement, Appellants did not ask them to vote on

important decisions. The partnership committees had no power, met over the

telephone, and were largely symbolic. Time commitment was minimal. The

investors did not control disbursement of funds. Wetherald filed a petition for

bankruptcy for Mile High Joint Venture without consulting the investors. A

Colorado Public Utility Commission employee testified that Wetherald stated that

the investors merely provided funding and had no say in the operations of the

company. As the scheme began to fall apart, the investors attempted to gain

information, including financial statements of the CLECs, but found themselves

powerless to do so. The jury was aware that certain investors had moderately

more involvement in the operation of the CLECs than others, and they were also

aware that as the fraudulent nature of the scheme was revealed, some investors

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were able to organize themselves and remove On Systems as the management

company for their CLECs. But the totality of the evidence was more than

sufficient to allow the jury to conclude that, indeed, these were securities, not

partnership interests.

Shiner and Swichkow claim that 15 U.S.C. § 78j is vague and leads to

arbitrary and capricious application of the securities law. Void-for-vagueness

challenges, absent a First Amendment claim, are evaluated as applied to the facts

of each case. United States v. Fisher, 289 F.3d 1329, 1333 (11th Cir. 2002).

Statutes must “define the criminal offense with sufficient definiteness that

ordinary people can understand what conduct is prohibited and in a manner that

does not encourage arbitrary and discriminatory enforcement.” Id. Appellants

were indicted for violating 15 U.S.C. § 78j(b), which states that it will be unlawful

for any person

to use or employ, in connection with the purchase or sale of any
security registered on a national securities exchange or any security
not so registered, or any securities-based swap agreement . . . , any
manipulative or deceptive device or contrivance in contravention of
such rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest or for the protection of
investors.

Appellants claim it is impossible to determine whether partnership agreements

such as the one at issue in this case fall within the security laws. In reality,

21
however, this is not a case in which it is impossible or even difficult to classify the

partnership interests involved; they fall well within the securities statute. The

void-for-vagueness challenge is without merit.

Appellants allege a number of evidentiary errors, claiming that either

individually or cumulatively these errors should lead to a reversal of their

convictions. These arguments fail. Appellants argue extensively about admission

of their prior convictions, regulatory actions, and bankruptcies. As detailed above,

however, Appellants asked investors to trust them with their money and the

management of these companies. Their past was material to these investors and

thus relevant to the government’s case, outweighing any prejudicial effect. The

district court addressed Appellants’ other claims by sustaining objections, striking

testimony, and providing curative instructions to the jury. The strength of the

government’s evidence was sufficient to overcome any errors the Appellants

allege the district court made at trial. Thus, we conclude that any error was

harmless.

Finally, the sentences imposed upon the Appellants are neither procedurally

nor substantively unreasonable. The district courts have broad discretion to

impose sentence, and the sentencing judge exercised that discretion, departing

downward for Swichkow and Wetherald and sentencing Shiner squarely within the

22
range recommended by the 2002 Guidelines. We find no reason to disturb the

well-reasoned judgment of the district court.

V.

Because we conclude that Appellants’ challenges are without merit, we

affirm their convictions and the sentences imposed.

AFFIRMED.

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