On March 26, 2008, following oral argument conducted in late November 2007, the 11th Circuit Court of Appeals issued its opinion in USA v. Svete, et al., 521 F.3d 1302 (11th Cir. 2008). The Court of Appeals affirmed Mr. Svete’s convictions on all counts for which he was tried and convicted by a jury of his peers, with the exception of the four mail fraud counts. The rationale of the Court of Appeals for reversing the mail fraud counts was the failure of the trial court to give a jury instruction on the definition of mail fraud that had been requested by Defendants. Specifically, the issue was whether the convictions for mail fraud required proof by the Government that the defrauded investors had exercised ordinary prudence in their dealings with LifeTime and Mr. Svete. The trial court had declined to give the requested instruction because it was contrary to the Appellate Court’s pattern jury instruction on mail fraud.
The Court of Appeals’ decision was rendered by a panel of three judges, which is typically how these appeals are handled. Any party who takes issue with the Court of Appeals’ opinion may seek a rehearing en banc or, in other words, before the judges within a particular Circuit Court of Appeals. In this case, both the Government and Mr. Svete filed Petitions for Rehearing. The Government sought clarification of the impact of the reversal of the mail fraud counts because, as stated above, the Court’s decision was seemingly inconsistent with its prior rulings on this subject. Mr. Svete sought rehearing on the basis that the Court should have reversed as to all counts and not just the mail fraud counts.
While the Petitions for Rehearing were pending, the United States Supreme Court, as the highest court in the land, issued an opinion in a case involving racketeering and influenced corruption organization (RICO) civil claims, which dealt with a number of issues including mail fraud. In Bridge v. Phoenix Bond & Indemnity Co., decided June 4, 2008, the Supreme Court, among other things, held that mail fraud as an element of a RICO claim need not include proof of reliance by a defrauded party with respect to any misrepresentation by the defendant. As a result, it is believed that this decision may be motivating the Court of Appeals to rethink the reversal of the mail fraud counts against Mr. Svete and Ron Girardot. Further, it is believed that the Court of Appeals desires further clarification of the scope of its decision in Svete in light of the latest expression of the U.S. Supreme Court on this subject.
On July 1, 2008, the 11th Circuit Court of Appeals issued a summary order granting both parties’ Petitions for Rehearing. This does not necessarily mean that the Court will change the results of the prior opinionÃƒÂ³merely that the Court as a whole (i.e., twelve judges) wants to rehear at least some of the issues on appeal. A new briefing schedule has just been set by the 11th Circuit Court of Appeals regarding the Petitions for Rehearing and additional oral argument. The Government’s brief is due September 17, 2008, and oral argument will be conducted during the week of October 20, 2008.
The procedural effect of the granting of the Petitions for Rehearing by the Circuit Court is that the previous opinion is vacated. As a result, from a legal standpoint, while Mr. Svete and Mr. Girardot were convicted by a jury, their convictions are not yet final, as their appeals of the convictions are still considered pending.
The problem or issue is believed to be the prior decision of the Circuit Court in U.S. v. Brown, 79 F.3d 1550 (11th Cir. 1996), a mail fraud case. There is apparently concern that the decision in U.S. v. Brown may be inconsistent with that of other Courts of Appeal, and now perhaps even the U.S. Supreme Court. As stated above, the primary legal question is whether conviction for mail fraud requires proof of certain elements. Specifically, whether the defrauded investors acted as persons of ordinary prudence when relying upon the fraudulent misrepresentations of the Defendants. The Government did not have to prove all of the elements of mail fraud, however, with respect to the counts for criminal conspiracy and money laundering. In other words, the criminal conspiracy and money laundering counts should not be impacted by the issues related to the mail fraud counts. These are the counts that support the most significant part of Mr. Svete’s judicially imposed sentence of 16-2/3 years.
The 11th Circuit has now requested briefs on whether the trial court erred in giving the pattern instruction instead of the instruction requested by the Defendants, and whether, in light of the Bridge case, the Brown case should be overruled.
The Receiver recognizes that this is both confusing and frustrating to investors who were defrauded by Mr. Svete. We hope this information has in some way been helpful to you in terms of understanding the current dynamic of Mr. Svete’s appeal. The Receiver will update this posting as new developments warrant.