Individuals accused of fraud must be deemed not guilty if they acted in good faith, as good faith is contrary to fraud.
Hosseinipour found herself in a vulnerable position because her attorney was not aware of his responsibilities regarding jury instructions and objections. He did not understand that he needed to submit objections to government exhibits or charts. Furthermore, he was unaware that he should contest the opinions of the government’s expert witnesses or submit his own expert testimony and opinions. He also lacked familiarity with the Federal Rules of Evidence. The only reason she had grounds for her appeal was that Judge Stivers ruled that an objection from one defendant applied to all defendants. As a result, she was able to adopt the objections raised by the other defense attorneys representing her co-defendants.
A federal jury in California recently acquitted two former executives of the British software company Autonomy of conspiracy and wire fraud charges. This was a notable outcome, particularly given that the company’s CFO had been convicted of the same charges a few years prior. The defense successfully advocated for a good-faith jury instruction, which played a crucial role in their victory at trial. This particular jury instruction is fundamental in defending white-collar criminal cases, which is why “Good faith” has dubbed it the unofficial “Greatest of All Time.”
So why was Hosseinipour not automatically acquitted when the prosecution told the jury that she joined the company with good intentions or “good faith.?” Why were the defendants not acquitted when even the judge stated that the defendants had a strong good-faith argument?
It was because the i2G Good Faith jury instruction stripped the “good faith” from the instruction.
The judge recognized that the defendants presented a compelling argument for acting in good faith. However, the instructions given contradicted this perspective, particularly in relation to a multi-level marketing (MLM) model that was accused of being a pyramid scheme. In this case, the government’s theory did not require proof of mens rea (the intention to commit a crime); rather, it focused solely on participation in a pyramid scheme. By nature, pyramid schemes are destined to collapse due to market saturation, meaning that it would be impossible to genuinely act in good faith while being aware of the scheme’s nature. This reasoning undermined the potential for a good-faith defense.
Multi-level marketing fundamentally relies on “good faith” as its core principle. Thus, participation in such a model is not feasible without good faith in joining. In fact, the government conceded that Hosseinipour joined with good intent.
The government agreed that Hosseinipour was entitled to a “good faith” defense instruction but claimed that the Court did not abuse its discretion with its “conditional” good faith instruction that stripped good faith out of the instruction.”
The Court provided an initial instruction regarding “good faith,” affirming that it serves as a complete defense against fraud (R.554:#5271) and can excuse mistakes in judgment. However, the Court later added a sentence that essentially undermined the “complete good faith” defense. It stated that “[g]ood faith does not include the defendant’s belief or faith that the venture will eventually meet his or her expectations” (R.554:#5271). This second sentence negated the first, which had recognized good faith as a complete defense.
In the context of multi-level marketing (MLM), it raises the question: why would any distributor join an MLM if they did not genuinely believe that the opportunity would meet their expectations? This contradiction seems illogical within the MLM framework.
The commentary referred to was not part of the standard 6th Circuit pattern instructions but rather an exception noted in the “Stull” commentary. This exception could be included if deemed relevant (Doc 692 #10025). However, there was no relevance to the MLM framework, and in fact, the addition of this sentence effectively denied the defendants a good-faith defense.
Maike explained to the Court that the entire business model was based on “belief in the venture,” and that is exactly “what they did.”(doc 692 #10029)
The government also neglected to consider the cumulative effect of errors in the jury instructions. Each mistake acted like a domino, leading to an outcome that denied a fair trial. Additionally, it failed to address the effect of the conflicting instruction that automatically defined a pyramid scheme as a “scheme to defraud,” thereby undermining Hosseinipour’s mens rea.
The Court first acknowledged that the additional instruction might be too broad or inappropriate (Doc 69210025) The Court then acknowledged that the defendants had a great “good faith argument” and had “belief in the ‘venture. ” (Doc 692 10026, 27)
“Well, he believed Songstargram was going to make everybody a ton of money. He believed that these other things… he thought that the casino royalties were going to blossom”.(Doc 692 10026,27)
TThe Court acknowledged that the multi-level marketing (MLM) business model depended heavily on good faith and recognized its potential for success (doc 692 #10026, 27). The Court also noted that the “good faith defense” was a significant part of the defendant’s argument and that “the jury might understand that too” (doc 692 #10026, 27). However, the Court expressed the opinion that, despite good faith, it found no evidence to support that Maike’s plan was “realistic” (doc 692 #10027, 10028). This subjective opinion from the judge resulted in flawed jury instructions that limited the concept of good faith or made it “conditional.” Ultimately, even though the Court disagreed with the “conditional” good faith instruction, it felt compelled to adhere to it (R.702, #11078-79). In reality, the Court was not obligated to follow that instruction and should not have done so.
The Court’s decision to limit the “good faith” defense based on the subjective “belief” that the plan was not realistic was a significant error (Doc 692 #10027). This mistake was compounded by the instruction that defined the “pyramid scheme” as a “scheme to defraud,” which eliminated Hosseinipour’s good faith defense. The convoluted “good faith” instruction harmed the defendants, preventing them from claiming a “good faith” defense.