In United States v. Jesenik, et al., --- F.4th ---, No. 24-5405 (9th Cir. 2025), the Court affirmed three defendants’ convictions arising out of the failure of Aequitas Management LLC, an investment management company.
Former Aequitas executives Robert Jesenik, Andrew MacRitchie, and Brian Rice were convicted of wire fraud and conspiracy to commit wire fraud. Jesenik was also convicted of making a false statement on a loan application.
We first address all defendants’ contention that they may have been convicted on an invalid legal theory of fraud and Rice’s challenge to the sufficiency of evidence.False statements can include “misleading half-truths,” representations that are partly true but misleading “because of [the defendant’s] failure to state additional or qualifying matter,” Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 188 (2016) (cleaned up). Even in the absence of a false statement, a conviction can be based on a failure to disclose material facts. See United States v. Shields, 844 F.3d 819, 822 (9th Cir. 2016). But wire fraud can be premised on such an omissions theory only if the defendant had a special “trusting relationship” with the victim. Id. at 823. That relationship is not required in fraud cases premised on misrepresentations, including half-truths.The defendants contend that although they were charged in the operative indictment only with engaging in “material misrepresentations and misleading half-truths,” the government really presented an omissions theory at trial.9 They argue that the district court therefore erred in denying proposed instructions requiring proof of a trusting relationship.“[A] general verdict that may rest on a legally invalid theory” cannot stand unless we are convinced beyond a reasonable doubt that presentation of the invalid theory “did not contribute to the jury’s verdict.” United States v. Yates, 16 F.4th 256, 269–70 (9th Cir. 2021) (cleaned up). Such an error is not harmless even “where the verdict is supportable on [another] ground.”To the extent the defendants argue that it was error for the district court to allow the government to ask investors “would you have invested had you known” questions, or to discuss what the defendants did not disclose, we disagree. It is well-established that such evidence is probative of the materiality of a half-truth or misrepresentation.And the government did not argue that omissions alone were sufficient to prove fraud or present that theory to the jury. Rather, the government elicited extensive testimony about the relevant affirmative statements when questioning witnesses about non-disclosures, and stressed these affirmative statements in closing argument.Had the defendants been charged under an omissions theory, the government would have been required to show a relationship giving rise to a duty to disclose. See Shields, 844 F.3d at 822–23; United States v. Spanier, 744 Fed. App’x 351, 353–54 (9th Cir. 2018). But these defendants were not so charged, and the district court therefore did not err in denying the defendants’ proposed “independent duty” instruction. See United States v. Farrace, 805 Fed. App’x 470, 473 (9th Cir. 2020). For the same reason, the district court did not abuse its discretion in denying the proposed instruction that “omissions alone are not sufficient to support a charge of mail or wire fraud” and that “[a]n omission alone – absent a connection to a half-truth – does not constitute a misrepresentation.”In the context of this case, however, the defendants’ affirmative representations that Aequitas was in good financial health, made while soliciting purportedly secure investments in income-generating assets, have a plain nexus to non-disclosures about liquidity problems, difficulty paying operating expenses, and an SEC investigation concerning potential misuse of investor funds. Whether those representations were misleading half-truths was therefore properly a question for the jury.We next address the defendants’ contentions that they were precluded from presenting a complete defense. These arguments again center on disclosures in the PPMs and audited financial statements.“[T]he focus of the mail fraud statute, like any criminal statute, is on the violator.” Proof of a scheme to defraud does not require showing that a victim relied on the defendant’s falsehoods; it is sufficient that falsehoods were material. Lindsey, 850 F.3d at 1014. Materiality, as opposed to reliance, is an objective measure of a representation’s “tendency to influence” “the decisionmaker to whom [it] was addressed.”Whether a representation has a tendency to influence a decisionmaker is not the same question as whether the decisionmaker would be justified in relying on it. Justifiable reliance is relevant to civil liability for fraud, but not to criminal liability. See Neder, 527 U.S. at 24–25; see also Weaver, 860 F.3d at 95. Thus, consistent with other circuits that have addressed the issue, see, e.g., Weaver, 860 F.3d at 95–96; United States v. Lucas, 516 F.3d 316, 339–40 (5th Cir. 2008); United States v. Ghilarducci, 480 F.3d 542, 547 (7th Cir. 2007), we hold that contractual disclaimers do not render immaterial other representations in criminal wire fraud prosecutions.For the same reason, we reject the argument that the defendants’ representations in sales pitches and marketing materials were immaterial to “accredited” investors. To be sure, “materiality is judged in relation to the persons to whom the statement is addressed.” Galecki, 89 F.4th at 737 (cleaned up). But “the wire fraud statute protects the naive as well as the worldly-wise.” United States v. Ciccone, 219 F.3d 1078, 1083 (9th Cir. 2000) (cleaned up). Materiality is a question of fact for the jury, see United States v. Gaudin, 28 F.3d 943, 944 (9th Cir. 1994) (en banc), aff'd, 515 U.S. 506 (1995), and the district court properly left the materiality issue to the jury.To the extent that the defendants challenge the district court’s preclusion of evidence about investor negligence or non-reliance, their argument is foreclosed by Lindsey, a case involving mortgage fraud. We held there that “a bright-line rule against evidence of individual lender behavior to disprove materiality is both a reasonable and necessary protection” because “evidence of individual lender behavior can easily touch on lender negligence, intentional disregard, or lack of reliance—none of which is a defense to mortgage fraud.” 850 F.3d at 1017.11 We find no reason to adopt a different rule in this case, simply because the loans gave rise to promissory notes instead of mortgages.To the extent the defendants argue that “if an investor felt misled, it was because the investor . . . chose to disregard part of the complete representation,” they effectively seek to urge that Aequitas’s investors were negligent. As Lindsey emphasizes, “negligence is not a defense to wire fraud.”
