‘Boiler Room’ Scammers Win Some, Lose Some

     PASADENA, Calif. (CN) – The Ninth Circuit on Friday made several adjustments to five defendants’ convictions and sentences in a $23 million movie production scam run out of telemarketing “boiler rooms” in California and Florida.
     The operation, run through a company called Cinamour Entertainment, solicited investments in partnerships to finance the production and distribution of movies and victimized about 650 individuals – “including unsophisticated people who could not afford the financial loss” – who invested more than $23 million. Most lost their whole investment, according to the Circuit’s opinion.
     Defendants James Lloyd, Robert Keskemety, David Nelson, Paul Baker and Albert Greenhouse appealed their convictions or sentences, and the Circuit’s three-judge panel considered each appeal in turn.
     Lloyd was a closer for Cinamour and later operated his own boiler room that raised money for Cinamour and a company called Q Media.
     He pleaded guilty to two counts of wire fraud and received a 156-month prison sentence. He was also ordered to pay $22.2 million in restitution.
     Lloyd challenged his sentence, arguing that the district court failed to adequately explain why it did not impose lower sentencing guidelines, but the Circuit affirmed his sentence.
     Writing for the panel, U.S. District Judge Lee Rosenthal – sitting by designation from the Southern District of Texas – said that “a careful review of the record satisfies us that the sentence was procedurally sound and that the district court did not abuse its discretion.”
     Keskemety, also a closer for Cinamour, pleaded guilty to one count of mail fraud, and he was sentenced to 80 months in prison and $8.6 million in restitution.
     He appealed his sentence on grounds that he did not benefit from Lloyd’s sales made in Lloyd’s Los Angeles boiler room, and the Circuit agreed with his theory.
     “Keskemety was like the drug dealer who gets the drugs he sells from the same source as other dealers and knows about their work, but does not share drugs, customers or information with them,” Rosenthal said.
     “The record shows that Keskemety did not benefit from the solicitations and sales made in Lloyd’s Los Angeles boiler room and did not share the proceeds of his boiler-room solicitations with Lloyd.”
     Therefore, there is no evidence that Lloyd and Keskemety were acting in concert, Rosenthal said.
     “In sum, the record support for holding Keskemety accountable for Lloyd’s similar criminal activity appears limited to Keskemety’s knowledge of Lloyd’s operations,” he said. “That is not enough.”
     The Circuit reversed the district court’s judgment on the amount of fraud loss for Keskemety, vacated his restitution order and remanded for resentencing.
     Baker, a closer for Cinamour who later operated his own boiler room that raised funds for Cinamour under the name Independent Essentials, appealed his conviction for conspiracy, wire fraud, mail fraud and offering and selling unregistered securities.
     He received a sentence of 194 months in prison and a $12 million restitution order.
     The Circuit affirmed Baker’s conviction “in light of the overwhelming admissible evidence against him,” but it vacated his sentence, finding that the district court miscalculated Baker’s criminal history score.
     Nelson, who was also a closer for Cinamour, was convicted on the same charges as Baker, receiving a sentence of 84 months in prison and a $1.8 million restitution order.
     He appealed his conviction on the theory of numerous trial errors, and he also pointed to his testimony in court that he believed Cinamour was a legitimate enterprise at the time he worked for the operation.
     “There was certainly evidence against Nelson, but it was not overwhelming,” Rosenthal said.
     “There was also evidence favorable to Nelson’s defense theory that he lacked the intent to defraud necessary to show that he willfully violated the securities laws.”
     The Circuit concluded that several trial errors did occur with regard to Nelson and found them “not harmless.” The panel accordingly reversed his conviction, vacated his sentence and remanded for a retrial.
     Albert Greenhouse, who raised funds for Cinamour’s project “From Mexico with Love,” was convicted on two counts of willfully engaging in the offer and sale of unregistered securities and aiding and abetting and causing those sales.
     He was sentenced to 60 months in prison and received a $530,000 restitution order.
     Finding no problems with Greenhouse’s sentence, the Circuit affirmed it.
     Circuit Judges Marsha Berzon and Richard Clifton joined Rosenthal in the opinion.

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