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United States v. Corsey

United States Court of Appeals, Second Circuit

July 23, 2013


Argued: March 8, 2012

Appeal from convictions for conspiracy to commit mail and wire fraud and from sentences of twenty years' imprisonment imposed on each appellant by the District Court for the Eastern District of New York (Feuerstein, J.). The conspiracy, which involved a scheme to obtain a three billion dollar loan supposedly intended to finance construction of a pipeline across Siberia, resulted in no actual loss. We affirm the convictions but vacate the sentences for procedural errors and remand for resentencings.

For Defendant-Appellant Juncal: John S. Wallenstein, Law Office of John S. Wallenstein, Garden City, N.Y.

For Defendant-Appellant Sampson: JONATHAN I. EDELSTEIN, Edelstein & Grossman, 10 New York, N.Y.

For Defendant-Appellant Campbell: JOHN A. CIRANDO (Bradley E. Keem, Elizabeth deV. Moeller, Vicki Jo Beighley, on the brief), D.J. & J.A. Cirando, Esqs., Syracuse, N.Y.

For Appellee: CHRISTOPHER C. CAFFARONE (Amy Busa, on the brief), Assistant United States Attorneys, for Loretta E. Lynch, United States Attorney for the Eastern District of New York

Before: KATZMANN and WESLEY, Circuit Judges, and UNDERHILL, District Judge.[*]


This appeal principally raises two issues: (1) whether the misrepresentations underlying these convictions were not material because no reasonable financial professional would have believed them, and (2) whether the sentences imposed on appellants are procedurally unreasonable. We affirm the District Court's denial of appellants' motions for acquittal, but vacate appellants' sentences and remand for resentencings.[1]


This appeal arises out of a conspiracy to defraud a non-existent investor of three billion dollars. In the spring of 2006, defendants John Juncal, James Campbell, Rodney Sampson, and Emerson Corsey were arrested and charged with one count of conspiracy to commit mail fraud and wire fraud in violation of 18 U.S.C. §§ 1341, 1343, and 1349. Over the preceding four months, the defendants had attempted to lure a broker, Thomas Re, into procuring financing for an imaginary Siberian oil pipeline. The two sides exchanged information about possible partners, and the best structure for a loan. But in reality each side duped the other – Juncal and his colleagues had no plans to build a pipeline across the Russian tundra, and Re never represented a hedge fund interested in lending billions to the defendants to do so.

A. The Scheme

Re was the CEO of Universal Lending Group ("ULG"), a small brokerage firm based in Garden City, New York. Re acted as a "salesperson and networker" for the company; he solicited companies looking for financing and his associate, Joseph Bianco, then matched projects with a hedge fund or bank to act as lender. Re was also an informant for the FBI: Before he worked at ULG, Re sold vending machine routes to snack-food companies. On occasion, Re sold distributors a fake route—the distributors would arrive at a location and find no machine—and the FBI eventually caught up with him. In the hopes of receiving a lighter sentence, Re agreed to turn over information to the FBI about others participating in the vending machine scam.

Re encountered the defendants seven months after he began working with the FBI. Re received a call from an acquaintance, Charles Frazier, who told him to look out for a financier named Emerson Corsey—Juncal, Campbell, and Sampson's co-defendant. Corsey called a few days later and explained that he was the Chief Operating Officer of Magnolia International Bank and Trust ("MIBT"), a bank that Corsey described as holding assets of sovereign wealth funds. Corsey said that MIBT wanted to borrow three billion dollars to build a pipeline in Siberia and could offer five billion dollars in U.S. Treasury notes ("T-notes") as collateral for the loan. Re said he would think about it.

Re told his associates about the proposal and, after a brief Google search, they told him the deal "smelled." J. App'x at 516. Re then reported the potential fraud to his FBI handler, who instructed Re to record his conversations with Corsey.

Over the next few months, Re recorded the defendants as they baited him with an escalating series of lies: Corsey explained that MIBT was the central bank for scores of Native American governments, including the Yamasee Indian tribe, a nation with trillions of dollars in assets. Corsey then said that the bank currently represented John Juncal, a "counsel extraordinaire" for the Republic of Buryatia who had been appointed "Vice Premier of Record under the Edict of the Ukase" by the Buryatian government, and the official charged with finding backers for the pipeline. When Re expressed skepticism, Corsey sent him an email with copies of "bond indentures." J. App'x at 1021-22. The indentures bore the seal of the Vice-President of Buryatia, and stated that they were valued at five billion U.S. dollars and secured by T-Notes. The certificates were assigned to "the Great Siberian Pipeline Corporation, " which was "a Republic of Wyoming Corporation." Id. The email also contained proof that Juncal controlled the T-notes: Corsey included another certificate signed by Juncal that listed CUSIP numbers for the T-notes (as an expert would later testify, CUSIP numbers are alphanumeric code created by the U.S. Treasury to identify individual bonds).

Prompted by his handler to record statements by more of the defendants, Re asked to speak with Sampson, the purported Chief Financial Officer of MIBT. Sampson laid out the math behind the deal: MIBT's client, John Juncal, would assign the T-notes to Re's client. The T-notes would yield a minimum of 3.9% interest per year and generate over fourteen billion dollars in profit over the course of five years. When Re asked for additional evidence of the T-notes' authenticity, Sampson sent Re an email from an AOL account for MIBT, rather than from MIBT's own domain name. Attached to the email were unformatted files containing copies of the T-notes; Re had to use Word Pad to open those files. Sampson then e-mailed Re a "Letter of Acceptance" that re-explained the financing. The letter stated that, in exchange for a loan of three billion dollars, Re's client would receive T-notes that would yield a 171% return on investment.

Re next pressed Corsey and Sampson to show him physical evidence of the T-notes' existence. And at that point, Corsey put Re in touch with James Campbell, an associate of Juncal's. Campbell explained that Juncal had hidden the bonds in Austria in order to prevent enemies from "basically steal[ing] these from him and bump[ing] him out of the corporation." J. App'x at 1109. Re pretended to buy the excuse, but later asked if he could speak with Juncal directly. Juncal agreed, and sought to assuage Re's fears by comparing his role to the historic secret mission of Christopher Columbus.

During his testimony at trial, Re admitted that much of the talk struck him as ridiculous, and that at some point he stopped believing the deal was real. But because of his relationship with the FBI, he continued working with the quartet of pipeline pipe-dreamers. In March, it came time for the deal to close, and Re arranged to meet Campbell and Sampson in New York to sign documents memorializing their agreement. On the day of the closing, the FBI arrested all four defendants; Campbell and Sampson were arrested in New York, Corsey was arrested in Atlanta, and Juncal was arrested at his home, a motel in Whitefish, Montana.

At trial, the government relied almost exclusively on Re's testimony. No defendant took the stand, and the defense attorneys focused their defense on attacking Re's testimony. After a short deliberation, the jury returned a verdict of guilty for all four defendants. The appellants' motions for judgment of acquittal were denied and the cases proceeded to sentencing.

B. The Sentences

In each case, but for the statutory maximum term of imprisonment, the appellants' Sentencing Guidelines recommended range would have been a life sentence, because the offense level was driven off the Guidelines' Sentencing Table by an intended loss amount of three billion dollars. Though each appellant argued that the intended loss grossly overestimated the seriousness of the offense, the District Court disagreed. In March of 2010, the District Court sentenced all four defendants to twenty years' incarceration, the statutory maximum and the Guidelines recommended sentence.

1. Campbell's Sentencing

The District Court gave a very brief explanation of the reasons for Campbell's sentence, and largely adopted the logic and recommendations in his Pre-Sentence Investigation Report ("PSR"). Under the Guidelines applicable in 2010, the PSR calculated Campbell's total offense level to be 47. Under U.S.S.G. § 2B1.1, his base offense level was 7. Thirty points were added because Campbell had intended to defraud an investor of over $ 400 million. The PSR then added points for four additional enhancements: Campbell received four points because he oversaw five or more co-conspirators, U.S.S.G. § 3B1.1; two levels because he offered fake CUSIPs as an "authentication feature, " U.S.S.G. § 2B1.1(b)(10)(A)(ii); two levels because Campbell misrepresented himself as a representative of a government or agency, U.S.S.G. § 2B1.1(b)(8)(A); and two levels because the scheme involved sophisticated means, U.S.S.G. § 2B1.1(b)(9)(C).

At the sentencing hearing, the government withdrew its request for a role enhancement pursuant to U.S.S.G. § 3B1.1. The District Court asked if that change affected the guideline range:

COURT: And where does it put the guidelines recommendation?
MR. MISKIEWICZ: We're not privy to the probation officer's recommendations to the Court. I believe that that is still, at least sent to ...

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