US v. Shields et al, No. 14-10561 (12-21-16) (M. Smith w/Wallace & Korman). The 9th affirms convictions in a wire fraud scheme despite an erroneous jury instruction. The prosecution argued that the defendants' investment scheme bilked clients out of millions. The defendants, the prosecution argued, omitted relevant facts, such that the properties to be purchased (assisted living facilities) could not be. Purchased. The funds were used for other investments, which went bad. In instructing the jury, the court failed to give an instruction that the defendants had a duty to disclose. This was error. The 9th holds that "in order for an omission to support a wire fraud charge, the jury must be instructed that it must first find that the defendant and the defrauded party had a 'trusting relationship in which [the defendant] act[ed] for the benefit of another and induce[d] the trusting party to relax the care and vigilance which it would ordinarily exercise." Milovanovic, 678 F.3d 713, 723-24 (9th Cir. 2012). Milovanovic was extended to allegations of fraudulent omissions in wire fraud, where a fiduciary duty, formal or informal, must be found by the jury which creates a disclosure duty.
Although this was error, the 9th still affirmed the convictions. The error was not plain. It was based on Model Instruction 8.124 which did not include a duty to disclose instruction. There was no objection. Further, any error was harmless in light of the evidence and other affirmative acts of the defendants.
The decision is here: