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11th Circuit says stock fraudsters must face penalties

A three-judge panel for the 11th Circuit ruled that thermometer stock salesmen accused of defrauding investors received a fair trial.

(CN) — The 11th Circuit on Thursday overturned judgments of acquittal granted to two sales agents who sold stock as part of a $23 million telemarketing scheme. 

U.S. Circuit Judge Charles Wilson, a Bill Clinton appointee, was joined by Donald Trump appointees Barbara Lagoa and Andrew Brasher in a unanimous ruling against five stock fraudsters on Thursday.

Following an 8-week trial in 2017, Anita Sgarro, Charles Topping and Charles Smigrod were convicted of federal fraud charges relating to an alleged boiler room operation that sold stock in  Sanomedics International Holdings Inc.

Sgarro ran a call center in California, and Topping and Smigrod worked out of a Miami call center. 

The trio, alongside William Wheeler and James Wayne Long, were accused of using false and fraudulent claims to solicit investors, many of them elderly, to buy shares of stock in the infrared-thermometer company.

“After careful review and with the benefit of oral argument, we reverse the judgments of acquittal granted to Wheeler and Long because there is a reasonable construction of the evidence that supports the jury’s verdicts as to those two defendants,” the panel stated in a 53-page opinion. 

The five salesmen engaged in a scheme, according to the Department of Justice, that defrauded about 700 investors who ended up receiving restricted Sanomedics shares they were unable to sell.  

“...although Sanomedics and FCF were real companies with real products — and investors were really issued stock in the companies — investors were misled as to how their money would be used,” the panel said on Thursday.

The panel added that the salespeople involved in the operation often falsely assured investors that their money would fund business development and expansion plans.

Urging an 11th Circuit panel to overturn their guilty convictions in February, they claimed that prosecutors at trial improperly gave the jury instructions and brought up irrelevant claims of marijuana dealing.

Sgarro’s attorney, Scott Sakin, argued on appeal that the prosecutor in 2017 wrongfully questioned a witness about a supposed marijuana dealing arrangement they had with Sgarro. 

Wheeler and Long’s bid for acquittal was eventually successful when a Florida district court found that the prosecution had acted improperly in closing arguments. They were not, however, granted a declaration of mistrial.

The district court denied a judgment of acquittal to the other three.

In a ruling on a consolidated appeal, the 11th Circuit on Thursday overturned the acquittals and found no courtroom misconduct.

“On the question of prosecutorial misconduct, we find that the prosecution’s behavior at trial did not rise to the level of misconduct,” the panel wrote, “Nor do any of the district court’s evidentiary rulings or the jury instructions warrant reversal.”

Seeing no errors in the prior sentencing, the panel on Thursday also found that “sufficient evidence” supported the convictions of Sgarro, Smigrod and Topping. 

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Categories / Appeals, Courts, Criminal

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