First Circuit Overturns New Trial in Fraud Case

, The National Law Journal


Marty Weinberg
Attorney Marty Weinberg

A federal appeals court this week, rejecting a judge's ruling about alleged prosecution errors, has blocked a new trial for a businessman on mail and wire fraud charges.

The U.S. Court of Appeals for the First Circuit on Nov. 25 reversed U.S. District Judge George O'Toole Jr.'s decision in September 2011 to grant Daniel Carpenter a new trial in Massachusetts federal district court.

The appellate panel also reinstated the jury’s 2008 conviction of Carpenter on 14 counts of wire fraud and five counts of mail fraud. The First Circuit remanded the case for "prompt" sentencing.

The prosecution was rooted in tax-deferred real estate exchange deals Carpenter performed through his company, Benistar Property Exchange Trust Co. Inc., between August and December 2000. Prosecutors said Carpenter misused the exchangors' investment money to trade in high-risk options.

Carpenter did not speak directly with the investors but he did execute many of Benistar’s contracts with them. Also, he did not create the marketing materials, but he approved them.

At issue in the appeal was the propriety of the government's closing argument in the case against Carpenter.

First Circuit Chief Judge Sandra Lynch said in the court's ruling that none of the three features of the government's closing argument—that O'Toole raised on his own—were improper. Judge Jeffrey Howard and Senior Judge Norman Stahl joined Lynch.

O’Toole’s new-trial order recited three alleged improprieties: overstatements of Carpenter’s promises of "safety and security;" arguments that Benistar described its business as "parking" money in "escrows;" and repeated references to Carpenter's profit motive.

“Because the district court committed an error of law in determining that the closing argument was improper, it necessarily abused its discretion in granting the new trial, and we reverse,” Lynch wrote.

On the issue of Carpenter’s intent, Lynch wrote that “had there been full disclosure, especially after Carpenter knew his risky investment strategy had failed, the exchangors would never have made the investments to begin with or maintained them with Benistar.”

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