Appeals from the United States District Court for the No. 08-1085 District of Minnesota.
The opinion of the court was delivered by: Smith, Circuit Judge.
Submitted: October 15, 2008
Before BYE, JOHN R. GIBSON, and SMITH, Circuit Judges.
Following a jury trial, appellants Cameron Lewis and J. Tyron Lewis were convicted of 31 counts and 30 counts, respectively, of mail fraud, wire fraud, bank fraud, conspiracy, and money laundering. Cameron Lewis moved for a new trial, and Tyron Lewis moved for judgment of acquittal or, in the alternative, a new trial. The district court*fn1 denied appellants' motions.
On appeal, Cameron Lewis argues that we should either reverse his convictions and remand for a separate trial or remand his case for resentencing. Tyron Lewis argues that we should either reverse his convictions outright or reverse his convictions and remand for a separate trial at which a willful blindness instruction is not given. We reject appellants' arguments and affirm the judgment of the district court.
In April 2000, Cameron Lewis formed the National School Fitness Foundation ("the Foundation") "to educate the general public relative to physical fitness and well-being and to fund and support school-based fitness programs that will provide maximum opportunity to improve national fitness levels and reduce disease." The Foundation's application for an exemption under 26 U.S.C. § 501(c)(3) stated that the organization would provide schools "a complete fitness system . . . at no cost," which would be accomplished by obtaining private contributions and government grants. Cameron Lewis served as the Foundation's president, and his father, Tyron Lewis, served as chairman of the Foundation's board of directors. Tyron Lewis pledged some of his farmland as collateral for loans funding the Foundation's start-up expenses.
The Foundation solicited schools to purchase its "Leadership in Fitness Training" ("L.I.F.T. America") Program. Schools purchasing the L.I.F.T. America Program received fitness equipment, staff training, and a physical fitness curriculum. Some schools also received a computer kiosk with which students could track their fitness progress. The cost of the L.I.F.T. America Program to participating schools ranged from approximately $112,000 to approximately $220,000.
Initially, Cameron Lewis and the Foundation's board of directors intended to donate the program to schools by obtaining sufficient contributions from public and private donors. But when fundraising efforts proved largely unsuccessful, the Foundation implemented a lease model so that the organization could continue to operate. The lease model, as proposed by the Foundation, would still provide the program to schools at little or no cost. Under the lease model, schools obtained their own financing for the cost of the program; the Foundation, in turn, promised to reimburse the schools for their loan payments so long as the schools reported student fitness data to the Foundation. The Foundation representatives assured school district personnel that the Foundation was financially stable and could fulfill its obligations, emphasizing that the organization received funding from governments and private donors. But by signing the Foundation-drafted contract, participating school districts acknowledged the risk that the Foundation might not be able to perform its contractual obligations.
The Foundation contracted with vendors for the provision of components and services for the L.I.F.T. America Program. For example, Alpha CIT supplied electronic components for the program, Compass Charitable Development provided fundraising services to the Foundation, and Canyon Creek Medical provided training and a medical safety bag to the schools. But these contractors were not entirely independent. Appellants had ownership interests in Alpha CIT and Compass Charitable Development, and Cameron Lewis received consulting fees from Canyon Creek.
Between December 2000 and April 2004, 625 schools from 20 states participated in the L.I.F.T. America Program. Because of its failed fundraising efforts, the Foundation relied on payments received from schools that had recently purchased the L.I.F.T. America Program to reimburse schools that had previously purchased the program. Bruce Olson, the Foundation's outside counsel, wrote a letter to Cameron Lewis in June 2001 in which Olson expressed concern that the operations of the Foundation were not consistent with the purposes and activities as set forth in the Foundation's § 501(c)(3) exemption application and recommended that the Foundation disclose to the IRS the nature of its operations. Olson also complained that he felt "very much in the dark" regarding the Foundation's operations, its status with the IRS, and its relationship with participating schools.
At the April 2002 meeting of the Foundation's board of directors, Olson questioned whether the Foundation's reimbursement obligations were reflected as liabilities in the Foundation's financial statements. The Foundation's CFO testified at trial that the reimbursement obligations were not included as liabilities in the financial statements because Cameron Lewis had told him that the obligations were not an actual liability but merely a promise to pay. Subsequently, in June 2002, appellants presided over a meeting of the National Scientific Advisory Board (NSAB), an advisory panel established by the Foundation to provide advice regarding relevant scientific issues. Explaining why the Foundation did not simply donate the L.I.F.T. America Program to schools, Cameron Lewis emphasized that the reimbursement model was necessary to ensure that the schools were financially responsible and reported their students' fitness data to the Foundation. Cameron Lewis informed the members of the NSAB that the program was ultimately provided free of charge so long as the schools complied with these requirements.
In August 2002, Olson wrote a letter to Cameron Lewis in which he stated that "[w]ithout infusion of new funds from new lease sources, the [Foundation's] program will implode, leaving millions of dollars of debt to hundreds of schools." Olson also recommended that if it became substantially likely that the Foundation would be unable to perform its commitments, then the Foundation "should cease operations . . . rather than incur exposure to potential claims in the future." Finally, Olson raised concerns regarding the fairness of transactions entered into between the Foundation and the Lewis family and the accuracy of representations made by the Foundation to schools. In the latter half of 2002, the Foundation received more than $7 million from the sale of the L.I.F.T. America Program but less than $85,000 in contributions.
In a February 2003 letter to Tyron Lewis, Olson noted that Tyron Lewis had previously stated that he had read Olson's August 2002 letter to Cameron Lewis and was involved in addressing various issues raised therein. Olson wrote a letter to the members of the Foundation's board of directors in October 2003, expressing concern about the Foundation's financial condition. Specifically, Olson recommended that the board cease enrollment of new schools until the Foundation became financially solvent, provide full disclosure regarding the Foundation's financial condition and fundraising progress to all schools, ensure that no Foundation representative make commitments to schools that could not be met, and investigate whether any officer or other person had received compensation in excess of fair value. Olson warned that if the Foundation were to make commitments to reimburse schools "without a basis in fact that [the Foundation] has the ability to make those payments," then the Foundation, its board, and its employees would risk allegations of misrepresentation, liability for damages, and even criminal charges.
Olson terminated his representation of the Foundation in November 2003. Also in November, with both Cameron Lewis and Tyron Lewis in attendance, the Foundation's CFO outlined the organization's troubled financial state at a meeting of the Foundation's board of directors. Cameron Lewis expressed his desire to continue contracting with new schools, and the board decided to continue operations and revisit the issue in March 2004. In the latter half of 2003, the Foundation received more than $25 million from the sale of the L.I.F.T. America Program but only $8,200 in contributions. According to the Foundation's CFO, the Foundation owed schools more than $77 million and had only slightly more than $10 million in cash by the end of 2003.
In January 2004, the Foundation's board of directors learned that the governor of Wisconsin had announced a plan under which the Foundation would contribute $5 million to implement the L.I.F.T. America Program in Wisconsin schools and the State of Wisconsin would help the Foundation raise $5 million from Wisconsin donors.
At a March 2004 meeting, the Foundation's board of directors decided to continue selling to schools under a modified model. At the meeting, the board directed the Foundation's CFO to pay $1.4 million to Lewis Farms, an entity controlled by Tyron Lewis, as partial repayment for the loans Tyron Lewis had made to the Foundation. The CFO testified that he was surprised by the board's order because Cameron Lewis had previously indicated that the loans had already been repaid. The board also ordered Cameron Lewis to repay purchases made by the Foundation on his behalf for powered parachutes, studio equipment, political contributions, a gun range lease, and an airplane, and it ordered both appellants to sell their interests in Alpha CIT and Compass Charitable Development. The Foundation stopped making reimbursement payments in March or April of 2004, and it filed for bankruptcy that year.
Appellants were charged jointly with mail fraud, wire fraud, bank fraud, conspiracy, and money laundering. They moved for severance well in advance of trial, but the district court denied their motions. Appellants renewed their severance motions shortly before the beginning of trial and throughout the trial, but the court denied these motions as well. Appellants' joint trial began on October 31, 2006, and the jury began deliberations on November 29, 2006. The jury found Cameron Lewis guilty of (1) five counts of mail fraud, in violation of 18 U.S.C. §§ 2, 1341; (2) nine counts of wire fraud, in violation of 18 U.S.C. §§ 2, 1343; (3) one count of bank fraud, in violation of 18 U.S.C. §§ 2, 1344; (4) one count of conspiracy to commit mail fraud, wire fraud, and bank fraud, in violation of 18 U.S.C. § 1349; (5) one count of conspiracy to launder funds, in violation of 18 U.S.C. § 1956(h); (6) four counts of money laundering, in violation of 18 U.S.C. §§ 2, 1956(a)(1)(A)(i); and (7) ten counts of money laundering, in violation of 18 U.S.C. §§ 2, 1957. The jury found Tyron Lewis guilty of the same offenses except that it found him not guilty of one of the ten money laundering counts under 18 U.S.C. §§ 2, 1957.
Cameron Lewis moved for a new trial, arguing that the district court erred in denying his severance motions. Tyron Lewis moved for judgment of acquittal or, in the alternative, a new trial, arguing that the court erred in denying his severance motions, that the evidence was insufficient to support the jury's verdict, and that the court erred in giving the jury a willful blindness instruction. The court denied these motions. The court sentenced Cameron Lewis to 204 months' imprisonment, followed by five years of supervised release, sentenced Tyron Lewis to 68 months' imprisonment, ...