Thomas Fairbanks was charged with two counts of securities fraud for operating an investment vehicle called SupplyLine. Count One involved investors James and RuthAnn Holloway, who invested $5,500 based on promises of a six-percent return and collateral. Count Two involved Byrna Dustin, an elderly woman who invested $98,700 after Fairbanks convinced her to open a joint bank account and transfer funds. Fairbanks used the investors' money for his own business purposes rather than the promised investments. On the eve of trial, Fairbanks moved to sever the counts under Federal Rule of Criminal Procedure 14, arguing that the evidence for each count was too different and would prejudice the jury. The district court denied the motion, and after a trial, a jury found Fairbanks guilty on both counts. Fairbanks then moved for a judgment of acquittal under Rule 29, which was also denied. He appealed, challenging both the denial of severance and the sufficiency of the evidence for Count Two.
The Tenth Circuit addressed two primary issues: whether the district court abused its discretion in denying the motion to sever, and whether the evidence was sufficient to support the conviction on Count Two. Regarding severance, the court applied an abuse of discretion standard. It reasoned that joinder is appropriate when offenses are part of a common scheme or plan. The court found that both counts stemmed from the same fraudulent operation of SupplyLine. The evidence regarding the Holloways (Count One) was intrinsic to the fraud against Dustin (Count Two) because it established the modus operandi of the scheme. The court noted that under Federal Rule of Evidence 404(b), evidence of other crimes is generally inadmissible to prove character, but intrinsic evidence essential to the context of the crime is admissible. Since the evidence for Count One would have been admissible in a separate trial for Count Two as intrinsic evidence, the joinder did not cause actual prejudice. Furthermore, the district court's limiting instruction to consider each count separately provided additional protection against prejudice. Regarding sufficiency of evidence, the court applied de novo review. It determined that a rational jury could find Fairbanks guilty beyond a reasonable doubt. The evidence showed Fairbanks guaranteed returns and collateral that he never provided, used investor funds for personal business ventures, and failed to register the securities. The court rejected the argument that the evidence was insufficient because the victims' reactions differed, noting that the jury could infer fraud from the objective conduct and the lack of returns, regardless of the victims' subjective beliefs at the time.
The decision affirms the district court's judgment, meaning Fairbanks's convictions for securities fraud stand. He remains subject to his sentence of 27 months in prison and three years of supervised release. The ruling clarifies that in securities fraud cases involving a unified scheme, evidence against one victim is often admissible against another in a joint trial, provided the scheme is common and the jury is properly instructed. No further appellate relief is available on these grounds.
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