# Appendix — Stewart v. United States (No. 06-1508)

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_0465%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 2006

## Text

ORIGINAL
FILED
MAR 2, 2004
L. Larry Propes, Clerk
Columbia, SC

UNITED STATES DiSTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION

UNITED STATES OF AMERICA) CRIMINAL
NUMBER 3.03-1088
) 18 U.S.C. § 1343

) 18 U.S.C. §

11950(h)

v. ) 18U.S.C. §2

)

WILLIAM LUTHER STEWART, | )

a/k/a Luke Stewart, and )
EDWIN G. BLAIR ) :
SUPERSEDING INDICTMENT

MAXIMUM SENTENCE THIS COUNT
FINE OF $250,000.00 (18 U.S. C. § 3571)
AND/OR IMPRISONMENT FOR 5 YEARS
AND A TERM OF SUPERVISED RELEASE
OF 3 YEARS (18 U.S. C. § 3583)

SPECIAL ASSESSMENT $100.00

(18 U.S. C. § 3013)

COUNT |

THE GRAND JURY CHARGES:

~

28

. Onor before February 1999, in the District of
South Carolina and elsewhere, WILLIAM
LUTHER STEWART, also know as Luke
Stewart, and EDWIN G. BLAIR did devise and
intend to devise a scheme and artifice to defraud
and obtain money be means of false and
fraudulent pretenses, representations, and
promises.

BACKGROUND

. On or about November 13, 1998 Media Fusion,

Corp. was converted to Media Fusion, LLC, a
Texas limited liability company. WILLIAM
LUTHER STEWART was Chairman and Chief
Scientist. EDWIN G. BLAIR was President.

. On April 23, 1999, an account was opened at
Compass Bank, Dallas, Texas, in the name of
Media Fusion, LLC.

SCHEME TO DEFRAUD

It was part of the scheme to defraud that
WILLIAM LUTHER STEWART and EDWIN
G. BLAIR falsely represented that Media Fusion
had developed a method of power line
communication technology to provide voice,
video, and data communications over the electric
power grid.

. It was a further part of the scheme to defraud that
WILLIAM LUTHER STEWART and EDWIN
G. BLAIR falsely represented that Media Fusion
had completed the design and laboratory testing
stages of its proprietary network system and was

29

well positioned to finalize the const™iction and
installation of its first system.

. It was a further part of the scheme to defraud that

WILLIAM LUTHER STEWART and EDWIN
G. BLAIR falsely represented WILLIAM
LUTHER STEWARTSs’ background and
experience with the Massachusetts Institution of
Technology (MIT), the Defense Advanced
Research Projects Agency (DARPA), Microsoft,
and San Diego Gas and Electric.

. It was a further part of the scheme to defraud that
WILLIAM LUTHER STEWART and EDWIN
G. BLAIR falsely represented WILLIAM
LUTHER STEWART was a nominee for the
Nobel Peace Prize.

. It was a further part of the scheme to defraud that

WILLIAM ;
LUTHER STEWART and EDWIN G. BLAIR
falsely represented that Media Fusion was
associated with, and had a laboratory at the
Stennis Space Center, National Aeronautics and
Space Administration (NASA).

. It was a further part of the scheme to defraud that

WILLIAM LUTHER STEWART and EDWIN
G. BLAIR falsely represented that money
received from SCANA would be spent testing the
power line communication technology.
Specifically, transmitting a continuous tone over
the electrical grid in excess of 500 miles without
regeneration by November 30, 1999.

30

10. On or about March 5, 1999, in the District of
South Carolina and elsewhere EDWIN G. BLAIR
and WILLIAM LUTHER STEWART, for the
purpose of executing the aforesaid scheme to
defraud, did cause to be transmitted by means of
wire in interstate commerce from Dallas, Texas,
to Columbia, South Carolina, to Texas, a fax
containing monthly milestones and budget for
Media Fusion; in violation of Title 18, United
States Code, Sections 1343 and 2.

MAXIMUM SENTENCE THIS COUNT
FINE OF $250,000.00 (18 U.S. C. § 3571)
AND/OR IMPRISONMENT FOR 5 YEARS
AND A TERM OF SUPERVISED RELEASE
OF 3 YEARS (18 U.S. C. § 3583)

SPECIAL ASSESSMENT $100.00

(18 U.S. C. § 3013)

31

COUNT 2 |
THE GRAND JURY FURTHER CHARGES:

1. The Grand Jury realleges and incorporates
by reference four through nine of Count
One as constituting a scheme to defraud.

2. On or about March 19, 1999, in the
District of South Carolina and elsewhere,
EDWIN G. BLAIR and WILLIAM
LUTHER STEWART, for the purpose of
executing the aforesaid scheme to
defraud, did cause to be transmitted by
means of wire in Interstate commerce
from Dallas, Texas, to Columbia, South
Carolina, a letter addressed to Jim
Burwell, General manager, representing
that media Fusion was “setting up our first
control center at Stennis and will have
offices as NASA working with the
Mississippi Enterprise for Technology”
with two proposals attached; In violation
of Title 18, United States Code, Sections
1343 and 2.

MAXIMUM SENTENCE THIS COUNT
FINE OF $250,000.00 (18 U.S. C. § 3571)
AND/OR IMPRISONMENT FOR 5 YEARS
AND A TERM OF SUPERVISED RELEASE
OF 3 YEARS (18 U.S. C. § 3583)

SPECIAL ASSESSMENT $100.00

(18 US. C. § 3013)

COUNT 3

THE GRAND JURY FURTHER CHARGES:

l.

The Grand Jury realleges and incorporates
by reference four through nine of Count
One as constituting a scheme to defraud.

On or about April 7, 1999, in the District
of South Carolina and elsewhere, EDWIN
G. BLAIR and WILLIAM LUTHER
STEWART, for the purpose of executing
the aforesaid scheme to defraud, did cause
to be transmitted by wire in interstate
commerce from Dallas, Texas, to
Columbia, South Carolina, a letter
addressed to Robert E. Long, General
manager, representing that “based on the
investment proposals submitted to
SCANA, Media Fusion technology will
be ready for commercialization at the end
of twelve months from date of funding;”
In violation of Title 18, United States
Code, Sections 1343 and 2.

MAXIMUM SENTENCE THIS COUNT
FINE OF $250,000.00 (18 U.S. C. § 3571)
AND/OR IMPRISONMENT FOR 5 YEARS
AND A TERM OF SUPERVISED RELEASE
OF 3 YEARS (18 U.S. C. § 3583)

SPECIAL ASSESSMENT $100.00

(18 USS. C. § 3013)

33

COUNT 4 |

THE GRAND JURY FURTHER CHARGES:

1. The Grand Jury realleges and incorporates
by reference four through nine of Count
One as constituting a scheme to defraud.

2. On or about April 23, 1999, in the District
of South Carolina and elsewhere, EDWIN
G. BLAIR and WILLIAM LUTHER
STEWART, for the purpose of executing
the aforesaid scheme to defraud, did cause
to be transmitted by wire in interstate
commerce from Dallas, Texas, to
Columbia, South Carolina, an e-mail
message identifying Media Fusion’s bank
and account number so money could be
sent by wire; In violation of Title 18,
United States Code, Sections 1343 and 2.

MAXIMUM SENTENCE THIS COUNT
FINE OF $250,000.00 (18 U.S. C. § 3571)
AND/OR IMPRISONMENT FOR 5 YEARS
AND A TERM OF SUPERVISED RELEASE
OF 3 YEARS (18 U.S. C. § 3583)

SPECIAL ASSESSMENT $100.00

(18 U.S. C. § 3013)

34

COUNT 5

THE GRAND JURY FURTHER CHARGES:

1. The Grand Jury realleges and incorporates
by reference four through nine of Count
One as constituting a scheme to defraud.

2. On or about April 26, 1999, in the District
of South Carolina and elsewhere, EDWIN
G. BLAIR and WILLIAM LUTHER
STEWART, for the purpose of executing
the aforesaid scheme to defraud, did cause
to be transmitted by wire in interstate
commerce from Columbia, South
Carolina, to Texas $1,000,000.00;
In violation of Title 18, United States
Code, Sections 1343 and 2.

MAXIMUM SENTENCE THIS COUNT
FINE OF $250,000.00 (18 U.S. C. § 3571)
AND/OR IMPRISONMENT FOR 5 YEARS
AND A TERM OF SUPERVISED RELEASE
OF 5 YEARS (18 USS. C. § 3583)

SPECIAL ASSESSMENT $100.00

(18 U.S. C. § 3013)

Bs

COUNT 6

THE GRAND JURY FURTHER CHARGES:

1. The Grand Jury realleges and incorporates
by reference four through nine of Count
One as constituting a scheme to defraud.

2. On or about June 27, 1999, in the District
of South Carolina and elsewhere, EDWIN
G. BLAIR and WILLIAM LUTHER
STEWART, for the purpose of executing
the aforesaid scheme to defraud, did cause
to be transmitted by wire in interstate
commerce from Dallas, Texas, to
Columbia, South Carolina, an e-mail
message asking for an additional
$1,000,000.00 before July 1, 1999; In
violation of Title 18, United States Code,
Sections 1343 and 2.

MAXIMUM SENTENCE THIS COUNT
FINE OF $250,000.00 (18 U.S. C. § 3571)
AND/OR IMPRISONMENT FOR 5 YEARS
AND A TERM OF SUPERVISED RELEASE
OF 3 YEARS (18 U.S. C. § 3583)

SPECIAL ASSESSMENT $100.00

(18 U.S. C. § 3013)

36

COUNT 7

THE GRAND JURY FURTHER CHARGES:

l.

From on or about April 28, 1999, though
on or about July 30, 1999, in the District
of South Carolina and elsewhere,
WILLIAM LUTHER STEWART, and
EDWIN G. BLAIR unlawfully,
knowingly, and willfully did conspire to
conduct and attempt to conduct a financial
transaction effecting interstate commerce
which involved the proceeds of some
form of specified unlawful activity, that
is, wire fraud in violation of Title 18,
United States Code, Section 1343, with
the intent to promote the carrying on of
the specified unlawful activity; In
violation of Title 18, United States Code,
Section 1956(h).

A True BILL

s/Marie W. Carter
FOREMAN

S/ J. Strom Thurmond, Jr.

J. STROM THURMOND, JR. (EWR)
UNITED STATES ATTORNEY

37

COUNT 7, DROPPED AT TRIAL.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION

UNITED STATES OF AMERICA ) CRIMINAL NO.

) 3:03-1088
v. )
)
) VERDICT
WILLIAM LUTHER STEWART, _)
a/k/a Luke Stewart )
DEFENDANT. ) FEB && 2005
) LARRY W.
PROPES
CLERK

COLUMBIA, SC

38

, As to Count 1, we, the jury, unanimously find
Defendant William Luther Stewart

Not Guilty
__x__ Guilty
2. As to Count 2, we, the jury, unanimously find

Defendant William Luther Stewart

___x__ Not Guilty
Guilty
2. As to Count 3, we, the jury, unanimously find

Defendant William Luther Stewart

__x__Not Guilty
Guilty
4. As to Count 4, we, the jury, unanimously find

Defendant William Luther Stewart

__x_ Not Guilty
Guilty
2 As to Count 5, we, the jury, unanimously find

Defendant William Luther Stewart

___x__ Not Guilty

Guilty

6. As to Count 6, we, the jury, unanimously find
Defendant William Luther Stewart

__x__ Not Guilty

Guilty

United States District Court
DISTRICT OF SOUTH CAROLINA

UNITED STATES OF AMERICA
JUDGMENT OF ACQUITTAL
CASE NUMBER
3:03cr1088(02)
¥.

EDWIN G. BLAIR

The Defendant was found not guilty. IT IS ORDERED that
the defendant is acquitted, discharged, and any bond
exonerated.

s/Cameron McGowan Currie
Signature of Judicial Officer

4]

1.
Petitioner’s Appeal to the United States Court of Appeals,
Fourth Circuit
JURISDICTIONAL STATEMENT

This appeal is properly before this Court pursuant to 28
U.S.C. § 1291, which gives the Court jurisdiction over

appeals from criminal convictions in the United States

District Courts.

STATEMENT OF THE ISSUES

I. Was there sufficient evidence from which a reasonable
jury could find Defendant Stewart guilty on the charges
contained in Count I alleging wire fraud

II. Did the District Court err by admitting evidence of
correspondence written on behalf of NASA and the United
States Attorney for the Southern District of Mississippi to a
co-defendant regarding statements contained in a Web page
allegedly misrepresenting a relationship between NASA and
Media Fusion for the limited purpose of notice when there
was no evidence that Stewart made any alleged
misrepresentations after the date of the letters

III. Did the District Court err in finding that the amount of
loss for purpose of calculating the Sentencing Guidelines

was $1 million, when Stewart was acquitted of the count
alleging wire fraud pertaining to the $1 million.

STATEMENT OF THE CASE

Stewart and a co-defendant Ed Blair were indicted on
March 2, 2004, in a Superseding Indictment alleging Six
Counts of wire fraud in violation of 18 U.S.C. § 1343 and
One Count of Money Laundering in violation of U.S.C. §
1956(h). Prior to trial, the money laundering count was
dismissed and Stewart and Blair were tried on the six wire
fraud counts. The jury acquitted Ed Blair on all counts and
found Stewart not guilty on Counts II through VI. The jury
returned a verdict of guilty on Count I. Stewart filed a post-
trial motion for judgment of acquittal under Rule 29, Fed. R.
Crim. P., or in the alternative for a new trial under Rule 33,
Fed. R. Crim. P. The district court denied both motions and
sentenced Stewart to a term of imprisonment of 30 months.
Judgment was entered on May 6, 2005 and on this same date
the Clerk of Court filed a Notice of Appeal on behalf of
Stewart at the direction of the district court. The District
Court allowed Stewart to remain on bond pending this
appeal.

STATEMENT OF THE FACTS

Appellant Luke Stewart was a shareholder and the
chief scientist of Media Fusion, LLC, a Texas limited
liability corporation (hereinafter “Media Fusion”). Media
Fusion had an impressive cast on its board of directors,
including Terry McCauliff, former Chairman of the
Democratic National Committee, Bob Livingston, former
Chairman of the House Ways and Means Committee and
retired Rear Admiral James J. Carey. In addition, Media
Fusion had also assenibled a powerful cadre of lobbyists,
many inside the Washington Beltway, to work with Stewart

43

and Blair. (JA 102, Il. 16-25 to 108, Il. 1-19; 122, Il. 7-25 to
123, ll. 1-15).

Their goal was to commercialize Stewart’s patented
technology that enables electrical power grids to transmit
voice and data communications. Such power line
communication faces a number of technical obstacles, the
most significant being the interference of transformers that
prevent a communication signal from being transmitted from
a power grid to an individual’s home or business without
disturbance. The Media Fusion technology solved the typical
problems with power line communications by inscribing data
into the magnetic wave surrounding the electrical grid. (JA
516, Il. $22).

This advanced sub-carrier modulation technology
(ASCM), as Stewart named it, is protected by a patent issued
by the United States Patent Office that was ultimately
obtained by Media Fusion. (JA 446, ll. 6-16; 795 to 813).
Power line communication technology has been a passion
for Stewart. He has spent years analyzing, developing and
testing various technical approaches to solving the problems
facing power line communication. Stewart conducted testing
of his revolutionary approach to solving the well known
problems created by transformer interference in Guatemala.
(JA 580, ll. 2-25 to 582, Il. 1-16; 589, ll. 2-19). However,
Stewart had never successfully integrated all components of
his solution to power line communication. Stewart’s solution
though integrated various components that had been
previously tested and proven in various applications. (JA
582, Il. 24-25 to 585, Il. 1-20).

in an effort to bring this technology to market,
Stewart, Ed Blair and Stewart’s former fiancé Kathryn

44

‘
a eel

Scoggins Travis, met with a venture capital firm in Dallas,
Texas. This firm, MG Capital, first sent Stewart to the
Massachusetts Institute of Technology (“MIT”) to meet with
scientist to have his technology “vetted” for a determination
of whether it was commercially feasible before deciding to
devote its resources toward raising capital for Stewart and
Blair. Following this “vetting,” MG Capital representatives
agreed to raise capital on behalf of Stewart and Blair’s start-
up company. Scoggins Travis in a collaborative effort with
MG Capital representatives and Stewart and Blair prepared a
Power Point presentation to be used to introduce Stewart’s
technology to prospective investors. (JA 586, ll. 6-25 to 588,
ll. 1-20).

In addition, retired Rear Admiral Carey, who had in
1997 provided Stewart and Scoggins Travis with an entre’ to
an international symposium on power line communication,
began a government relations effort in Washington to obtain
federal funding and other support for Stewart’s technology.
Carey assembled a total of 17 lobbyists who assisted with
this effort. (JA 102, 1. 25 to 108, Il. 1-22; 113, Il. 15-25 to
116, tl. 1-20).

Jim Johnson, a former high level staff member of
Senator Trent Lott of Mississippi, was one of the members
of this lobbying team and worked with Media Fusion and
their efforts to obtain coveted administrative and research
space at NASA’s Stennis Space Center, in Gulfport
Mississippi. Senator Lott was instrumental in having a
business incubator established at Stennis for start up
companies like Media Fusion to receive technological
assistance from NASA scientist. Media Fusion leased
administrative office space through a corporation named

Mississippi Enterprises for Technology at the Stennis Space
Center (MET). In addition, Media Fusion identified
additional space for the construction of a $25 million a
research laboratory (JA 108, Il. 23-25 to 109, Il. 1-12; 86, Il.
3-25 to 87, ll. 1-25). Jim Johnson, the former Lott staffer,
was also a lobbyist with SCANA, a South Carolina based
electric, gas and nuclear utility holding company. Johnson
introduced Stewart, Blair and Admiral Carey to SCANA’s
government relations executives in Washington, D.C. The
purpose of this initial meeting was to expose SCANA to the
Media Fusion business opportunity. In this initial meeting,
SCANA’s Jim Burwell and George Bullwinkle met with
Luke Stewart, Ed Blair and Admiral Carey. (JA 117, ll. 6-25
to 120, Il. 1-7).

At this meeting, Stewart wore the security clearance
badge issued to him for access to the Stennis Space Center.
(JA 141, ll. 16-21; 786). In addition, Mr. Bullwinkle claims
to have received a draft document that contained the content
of Media Fusion’s website at either this initial meeting or at
another meeting prior to SCANA loaning money to Media
Fusion. This document states that Media Fusion “has
completed the design, laboratory testing stages of its
proprietary network system and is well positioned to finalize
the construction, installation testing its first system by the
end of 1999. A first generation prototype is being
constructed at the John C. Stennis Space Center in Gulfport,
Mississippi with the cooperation of NASA. ..The cost of the
build-out is about 15 to 25 million.” (JA 692, ll. 13-25 to
703, ll. 1-3) Bullwinkle could not recall who provided a
copy of this draft content of Media Fusion’s web page and
specifically could not state whether Stewart in fact had given

46

this draft document to him. (JA 714, Il. 18-25 to 715, Il. 1-6).
However, the document differed significantly from the final
version that was ultimately posted on the Media Fusion web
site. (JA 711-714, ll. 1-17).

After the initial meeting with Messrs. Burwell and
Bullwinkle, Stewart and Blair traveled to Columbia, South
Carolina and met with Bob Long, head of business
development at SCANA, Burwell and Oscie Brown, who at
the time was a general manager in charge of
telecommunications at SCANA. (JA 300, Il. 14-25).

Again, during this meeting, Stewart wore his Stennis
security badge issued to him on behalf of Media Fusion for
access to the NASA Stennis Space Center. (JA 301, Il. 2-9).
In addition, Blair made a comment during this meeting that
Stewart “would be a Nobel peace prize winner by this
discovery in the technology that he had.” (JA 301, Il. 3-9).

Prior to the meeting, Long had also printed out a
number of pages from the Media Fusion web page which
included statements that “Media Fusion has completed the
design and lab testing stages of its proprietary network
system.” (JA 298, Il. 9-25 to 300, Il. 1-16). The printed web
page also stated that “The power grid contains line noise
which degrades signals, load and balances which disrupt
communications and transformers which screw up
harmonics and make signals difficult to control. Media
Fusion’s technology overcomes these obstacles.” (JA 299, II.
18-23).

After the February 22 meeting, Blair continued to
have communications with Bob Long and other
representatives from SCANA regarding SCANA’;s interest in
participating financially with Media Fusion’s efforts to

47

commercialize its technology. As part of this process, an
attorney from SCANA, Randolph Mahan, drafted and had
executed a Mutual Non-Obligation and Non-Disclosure
Agreement. (JA 405, Il. 17-25 to 407, Il. 1-15).

The mutual Non-Disclosure and Non-Obligation
Agreement provided that either party may disclose
confidential information and that any such disclosure shall
not obligate Media Fusion or SCANA to pay any money or
to enter into any business relationship. (JA 424, Il. 5-25 to
429, ll. 1-18). In addition, the Agreement provides
“communications of any kind should not be relied upon as a
basis for taking any action, foregoing any opportunity or
incurring costs.” (JA 426, il. 1-6). The effective date of this
Agreement was March 4, 1999. (JA 422, Il. 24-25).

Following the execution of this Agreement on March
6, 1999, Ed Blair forwarded a faxed transmission to Bob
Long setting forth monthly technology milestones for Media
Fusion along with a science budget. (JA 772-785). The
Monthly Milestones clearly indicated that Media Fusion was
seeking funding in order to begin the construction of the
primary lab at the Stennis Space Center, fund government
relations efforts, purchase server and switching equipment,
hire senior engineers and begin construction of a control
center.” Id.

After receiving the Monthly Milestone and Budget
information, SCANA representatives met with Luke Stewart
and Ed Blair on April 15, 1999, at SCANA’s headquarters in
Columbia, South Carolina.

During this meeting, Stewart again wore his security
clearance badge issued to him on behalf of Media Fusion by
NASA security at Stennis Space Center. Stewart and Blair

48

met with senior management at SCANA to further explore
SCANA’s interest in Media Fusion.

At this meeting, Stewart and Blair presented a Power
Point presentation stating that Media Fusion has “completed
proprietary system design and lab testing.” In addition, the
Power Point presentation provides some background
information on Stewart. Under this section the power point
has a category called “Related Experience” and simply lists
the following: Massachusetts Institute of Technology,
DARPA (which is the think tank for the United States
Department of Defense), Microsoft, San Diego Gas and
Electric and Claritek. Other than listing this information,
there is no evidence that Stewart or Blair expanded upon
Stewart’s related experience. (JA 32, Il. 12-25 to 34, Il. 1-
10). However, in a subsequent deposition given by Stewart
to SCANA attorneys in Texas, Stewart explained his
connections with these entities. (JA 450-452, 458-459).
Also, on or about April 12, 1999, just days prior to the
meeting, order begin the construction of the primary lab at
the Stennis Space Center, fund government relations efforts,
purchase server and switching equipment, hire senior
engineers and begin construction of a control center.” Id.

SCANA received a resume of Stewart from Media
Fusion which listed under the heading “Honorable
Mentions” Nobel Nominee List for Medicine 1990. (JA 308,
ll. 19-25).

During these initial meetings, SCANA through its
point person Bob Long, was aware that the individual
components of the Media Fusion technology had previously
been tested but that a complete integration had never before

49

been proven. (JA 355, ll. 14-19). In order to prove or roll-out
the Media Fusion technology, Media Fusion was seeking to
raise $145 million broken down into three phases: phase one
required $25 million to “prove a tone” within 180 days;
phase two would require $45 million to complete a system
integration with in-home testing and phase three would
require $80 million to employ the technology to one million
customers. (JA 357, Il. 8-20).

SCANA was unwilling to invest the total $145
million needed for the three phases of the project. However,
SCANA did agree to loan Media Fusion one million dollars
pursuant to an unsecured note for a period of 120 days dated
April 26, 1999. (JA 315, ll. 14-25). SCANA would then
conduct a due diligence science review of the technology
before deciding to invest additional funds. In addition,
SCANA and Media Fusion executed a letter of intent
simultaneously with the note wherein SCANA agreed to
raise approximately $65 million to complete phases one and
two of the project if the due diligence science review was
satisfactory. (JA 316-324, 322, Il. 8-21).

SCANA wired one million dollars to Media Fusion
on or about April 26, 1999. Two days following the wire
transfer, on April 28, 1999, Stewart and Blair met with
executives from ITC Delta Com, a telecommunications
company in which SCANA had a substantial investment and
on whose board SCANA’s chairman also served. The
meeting was arranged at SCANA’s request. Following the
April 28 meeting with ITC Delta Com, SCANA executives
internally decided to walk away or abort the Media Fusion
venture, without telling Media Fusion. (JA 326, Il. 2-7; Il.
23-25, 327, ll. 1-3, Il. 15-22). However, rather than

50

immediately walking away from this venture SCANA
purported to go forward with its “due diligence” examination
of the Media Fusion technology by retaining an expert to
briefly vet Stewart’s technology. In addition, SCANA
officials traveled to Stennis Space Center to inspect the site
at Stennis.

George Bullwinkle testified that there was nothing at
Stennis that raised any “red flags” as to Media Fusion’s prior
representations about their relationship with NASA or
presence at Stennis. (JA 720 Il 13-25; 721 11 1-5). SCANA
however refused to fund the additional $24 million needed
for the phase one tone test set forth in the original letter of
intent. SCANA however, agreed to remain a strategic partner
with Media Fusion and assist Media Fusion with in-kind
contributions of services as well as government relations
lobbying work in an effort to obtain additional funding for
the initial tone test. (JA 788, 789).

Ultimately, Media Fusion was unable to raise the
additional money required to do the tone test. When
SCANA’s note initially came due, SCANA renewed the note
for an additional time. (JA 790). When SCANA demanded
payment on the note, Stewart had been ousted from Media
Fusion and Blair, Carey and others were attempting to
license the ASM patent. (JA 507, Il. 23-25 to 509, Il. 1-15;
793). Media Fusion did not re-pay SCANA and SCANA
sued Media Fusion and obtained a judgment in United States
District Court in South Carolina. During post-judgment
collection efforts, SCANA’s lawyers deposed Stewart in
supplemental proceedings. During this deposition, Stewart
was questioned about prior statements he had made
pertaining to his patented technology to transmit voice and

51

data over an electrical grid. In this deposition, Stewart stated
that “his technology works up to the point of the transformer,
and we’re still working on how to grid it.” (JA 461, Il. 6-11).
Subsequently, Stewart was confronted by an FBI agent
unannounced and asked about this deposition testimony.
Stewart explained to the agent that he misspoke; that he was
supposed to have been afforded an opportunity to proof the
deposition and make changes but that had not occurred. Had
that occurred he would have changed that statement. (JA
733, ll. 2-19). Stewart also told the agent that “the
technology should work and the math and physics were

sound.” (JA 732, ll. 4-6).
SUMMARY OF ARGUMENT

There was insufficient evidence presented at trial
from which a reasonable jury could find Stewart guilty on
Count I beyond a reasonable doubt, when the jury acquitted
Stewart of the remaining five counts based upon the same
allegations 1n the Indictment. In addition, the District Court
abused its discretion by admitting correspondence by NASA
officials claiming that Stewart misrepresented Media
Fusion’s relationship with NASA. This evidence was
admitted solely for the purpose of notice, yet there was no
evidence that Stewart continued to make the alleged
misrepresentations after receipt of the letter. Lastly, the
District Court erred by finding that the loss amount for
purposes of the sentencing guidelines is $1 million, when

Stewart was acquitted of the $1 million fraud claim.
ARGUMENTS

I. THE DISTRICT COURT ERRED IN FINDING THAT

52

THERE WAS SUFFICIENT EVIDENCE FROM WHICH
A REASONABLE JURY COULD FIND THAT STEWART
IS GUILTY BEYOND A REASONABLE DOUBT

A. Standard of Review

_ This Court reviews, de novo,a denial of a Rule 29
motion for judgment of acquittal. United States v. Alerre,
430 F.3d 681 (4 Cir.2005); United States v. Rvan-Webster,
353 F.3d 353, 359 (4th Cir.2003). In so doing, the Court is
obliged to sustain a guilty verdict if, viewing the evidence in
the light most favorable to the Government, it is supported
by "substantial evidence." United States v. Burgos, 94 F.3d
849, 862 (4th Cir.1996) (en banc) (citing. Glasser v. United
States, 315 U.S. 60, 80, 62 S. Ct. 457, 86 L. Ed. 680 (1942)).
"Substantial evidence" is “evidence that a reasonable finder
of fact could accept as adequate and sufficient to support a
conclusion of a defendant's guilt beyond a reasonable
doubt." Jd.

B. Argument

Count I of the Indictment, for which Stewart was
convicted, referenced the fax transmission dated March 3,
1999, and transmitted from Ed Blair to Bob Long containing
the Media Fusion technology Monthly Milestones and
Science Budget on March 6, 1999. (JA 302, Il. 17-25 to 303,
1. 1). The jury acquitted Stewart of Counts II through VI.
Count II referenced a letter dated March 19, 1999, addressed
to Jim Burwell representing that Media Fusion was “setting
up our first control center at Stennis and we will have offices

at NASA working with the Mississippi Enterprise for
Technology” with two proposals attached. Count III
referenced a letter addressed to Robert E. Long, General
Manager, representing that “based on the investment
proposal submitted to SCANA, Media Fusion technology
will be ready for commercialization at the end of 12 months
from date of funding.” Count IV is an e-mail message
identifying Media Fusion’s bank account and numbers so
money could be sent by wire. Count V is the actual one
million dollar wire transfer from SCANA’s bank account to
Media Fusion’s account and Count VI references an e-mail
message asking for an additional one million dollars before
July 1, 1999, sent from Media Fusion to SCANA.

In order for Stewart to be found guilty of wire fraud
in violation of 18 U.S.C. § 1343, the government was
required to prove the following elements beyond a
reasonabie doubt:

0 (1) A scheme to defraud;
0 (2) Use of an interstate wire in furtherance of the
scheme; and

}

0 (3) A material statement or omission in furtherance
of the scheme.

At trial, the government failed to present substantial
evidence from which a jury could find the existence of all
three elements of the wire fraud charges alleged in Count I
of the Indictment beyond a reasonable doubt. A scheme to
defraud includes any plan or course of action intended to
deceive or cheat someone out of money or property by
means of false or fraudulent pretenses, representations or
promises. Furthermore, the government was required to

54

prove beyond a reasonable doubt that Stewart intended to
defraud, that is Stewart acted knowingly and with the
specific intent to deceive someone, ordinarily for the purpose
of causing some financial loss to another or bringing about
some financial gain to oneself at the expense of another. The
evidence presented at trial established that Defendant
Stewart had designed patented technology to allow the
transmission of voice, data and other communications over
the power line grid. The witnesses uniformly agreed that this
technology was a passion of the Defendant Stewart and that
his purpose was to fully develop this technology and to make
it a commercial success.

At trial, the government conceded the existence of
the technology, but charged that Stewart overstated the status
of the development of the technology in an effort to obtain
funds for further research. However, the evidence
contradicted this theory. In fact, the single count that the jury
returned a verdict of guilty alleged that a document entitled
“Monthly Milestones and Budget for Media Fusion.” was
faxed from Texas to South Carolina. This document clearly
establishes that significant research remained to be done.

The government also failed to prove that the wire
transmission charged in Count I of the Indictment was in
furtherance of the scheme to defraud that involved the
specific material misrepresentations alleged in Paragraphs 4
through 9 of the Indictment. The government further failed
to prove that the representations in Paragraphs 4 through 9
were both material and false.

As an initial matter, the wire transmission charged in
Count I was faxed from Texas to South Carolina on March
6, 1999. The alleged representations contained in Paragraphs

55

6, 7 and 9 of the Indictment were made after March 6, 1999,
and would therefore have been unrelated to the wire
transmission charged in Count I.

Paragraph 4 of the Indictment alleges that Defendant
Stewart “falsely represented that Media Fusion had
developed a method of power line communication
technology to provide voice, video and data communications
over the electric power grid.” This statement was proven to
be utterly true at trial. Defendant Stewart introduced into
evidence the patent that was issued by the United States
Patent Office for this technology. (JA 795-812). This
patented technology is for a method to transmit voice, data,
and video over the power grid. In fact, no one claimed that
Stewart did not develop a method of power line
communication. The question raised at trial was whether this
method had previously been proven to work. However,
SCANA witnesses acknowledged that Stewart’s power line
communication solution had never been fully integrated and
operated. Burwell acknowledged that Stewart stated that the
technology needed to be tested on a power grid for full scale
operations. Long conceded that Stewart represented that
components of the technology had been tested but that the
system had never been integrated. (JA 355, Il. 14-19). Again,
the evidence established that the allegation of paragraph 4
was a true statement.

Paragraph 5 of the Indictment alleges that Defendant
Stewart falsely represented that Media Fusion had completed
the design and laboratory testing stages of its “proprietary
network system” and “was well positioned to finalize the
construction and installation of its first system.” There was
no evidence submitted at the trial that Stewart had not

56

completed the design and laboratory testing stages of its
proprietary network system. First, the government did not
produce any testimony about what the “proprietary network
system” referenced in paragraph was. Government witness
Kate Scoggins Travis testified that Stewart had a working
computer model of a routing system. (JA 583, Il. 5-22). This
was the only testimony about the existence or non-existence
of a proprietary network system. Furthermore, Bob Long
testified that Stewart told him that elements of the overall
technology had been tested, but that the system had never
been integrated. (JA 355, ll. 14-19). Therefore, the
“proprietary network system” could not have been the fully
integrated functioning transmission of communications over
a power grid. There was simply no evidence that the
representation pertaining to a proprietary network system
was false. In addition, the statement that Media Fusion was
“well positioned to finalize the construction and installation
of its first system” was not proven to be false. In fact,
George Bullwinkle admitted that Media Fusion’s lack of a
laboratory facility at Stennis did not raise any “red flags”
following their visit to Stennis. (JA 720, Il. 13-25 to 721, ll.
15).

Paragraph 6 of the Indictment alleges that Stewart
falsely represented his background and experience with
MIT, DARPA, Microsoft and San Diego Gas & Electric.
These references are set forth in the Power Point
presentation presented to SCANA on April 15, 1999. There
were no witnesses who testified that this Power Point
presentation was made to anyone prior to April 15, 1999, or
that the statements about Stewart’s related experience were
made to anyone at SCANA prior to March 6, 1999. In

57

——
———

addition, there was no evidence presented as to exactly what |
Stewart claimed his affiliation with MIT, DARPA, Microsoft .
and/or San Diego Gas & Electric was other than the

references contained in the power point presentation.

Subsequently, in Stewart’s civil deposition, he explained his
experience with the entities listed. (JA 450-452; 458-459).

There were no witnesses who testified that Stewart

contradicted the explanation given in the civil deposition at

any point in time. Again, the government did not prove that

these representations were false nor did the government

prove that the representations were material.

Paragraph 7 of the Indictment alleges that Stewart
falsely represented that he was a nominee for the Nobel
Peace Prize. Stewart’s resume contains a reference under
“Honorable Mentions” that he was on the nominee list for
the Nobel Prize in medicine. Stewart’s resume was faxed to
SCANA on April 12, 1999. There was no evidence presented
that this resume was even prepared prior to March 6, 1999.
The only SCANA witness to testify about any comments
pertaining to a Nobel prize prior to March 6 was Bob Long
who stated that Blair made “a comment that Luke would be a
Nobel Peace Prize winner by this discovery in this
technology that he had.” (JA 301, Il 2-9) Clearly, this was
not a statement of fact, but a prediction of a future event.
Moreover, there was further evidence that Stewart traveled
to Europe for the purpose of attending a meeting to be
considered for the Nobel Prize. (JA 94, Il. 23-25 to 95, Il. 1-
10; 508, ll. 5-13). Again, the government’s burden was to
prove that this representation was false and there was no
evidence presented to establish such falsity or materiality.

Paragraph 8 of the Indictment charges that Stewart

58

falsely represented that Media Fusion was associated with,
and had a laboratory at Stennis Space Center. These
statements are referenced in the draft marketing document
that Bullwinkle testified that obtained prior to SCANA
making the loan on April 26, 1999. Bullwinkle did not,
however, testify that he obtained the prior to March 6, 1999.
Moreover, the only SCANA representatives that Stewart met
with prior to March 6 1999, were Bullwinkle, Long and
Burwell. Bullwinkle and Long visited Stennis Space Center
and testified that there observations as to Media Fusions
presence there matched their expectations.

Paragraph 9 of the Indictment claims that Stewart
falsely represented that money received from SCANA would
be spent testing the power line communication technology.
This representation is derived from the April 26, 1999, letter
of intent and without question postdates the March 5, 1999,
facsimile transmission referenced in Count I of the
Indictment. Again, the government failed to prove the falsity
of this statement. As established through the overwhelming
evidence at trial, the April 26, 1999, letter of intent by and
between SCANA and Media Fusion stated that the money
would be spent “towards” testing. Furthermore, SCANA’s
witnesses including George Bullwinkle testified that
SCANA anticipated that the money would be used to raise
additional money. (JA 721, Il. 6-10). In-addition, the
undisputed testimony was that “Phase I” of the project
involved transmitting a continuous tone over the electrical
grid in excess of 500 miles and that this would cost $25
million. Lastly, this representation was undeniably made
after March 6, 1999.

In addition, the government cannot rely upon the

59

faxed document containing Monthly Milestones and Budget
for Media Fusion referenced in Count I of the Indictment as
the material false misrepresentation. The Indictment does not
allege that this fax transmission itself was false. Rather,
Paragraph 10 of the Indictment alleges that this fax
transmission was transmitted for the purpose of executing
the scheme to defraud.

Lastly, there was no evidence presented from which a
jury could have found that Defendant Stewart caused the fax
transmission referenced in Count I to be sent. The evidence
established that Ed Blair faxed the monthly milestones and
budget to Bob Long. No one testified that Luke Stewart
knew of the existence of such document, created such
document or caused such document to be faxed to anyone. In
fact, as to the budget information, the evidence established
that Ed Blair, in consultation with Stewart, prepared the
budget.

Furthermore, witness Jesse Hanger testified that Ed
Blair stated that he did not have “confidence” in the numbers
contained in the budget. However, no one testified about
Stewart’s state of mind or knowledge about the budget
figures or even the monthly milestone issues. (JA 480 Il 23-
25 to 482 Il 1-9)

The government cannot rely upon other alleged
misrepresentations that were not charged in the Indictment to
support the jury’s verdict on Count I. Defendant Stewart is
guaranteed the right to have the charges against him
presented to a Grand Jury. To uphold Stewart’s conviction
based upon the evidence in this record would necessarily
require this Court to broaden the charges contained in the
Indictment. This will amount to an impermissible variance in

60

violation of Stewart’s constitutional nghts. Because the
government failed to present substantial evidence from

which a reasonable jury could find Defendant Stewart guilty
~ of charges alleged in Count I, this Court should enter
judgment of acquittal.

0 Il. THE DISTRICT COURT ABUSED ITS
DISCRETION BY ADMITTING EVIDENCE OF
CORRESPONDENCE WRITTEN ON BEHALF OF NASA
AND THE UNITED STATES ATTORNEY FOR THE
SOUTHERN DISTRICT OF MISSISSIPPI TO BLAIR

O

QO a. Standard of Review

A district court's evidentiary rulings are reviewed
under the abuse of discretion standard." United States v.
Grimmond, 137 F.3d 823, 831 (4th Cir. 1998).

b. Argument

The government was allowed to introduce, over
objection, a letter dated July 23, 1999 from a NASA attorney
to Ed Blair complaining that Media Fusion 1s advertising a
working relationship with NASA that does not exist. The
letter references statements from a web site that are allegedly
“flagrantly untrue.” (JA 785 A, B). The letter states that such
statements on your web site are representative of false claims
that have been made by your company in its press releases
and in meetings, conversations with, and materials provided
to congressional offices. According to several of these
offices which have contacted NASA, your vice president of
Technology and Chief Scientist, William “Luke” Stewart,

61

'

had been the primary source of such statement.” (JA 785 A,
B) In addition, the government was allowed to introduce a
letter from the United States Attorney for the South District
of Mississippi to Blair stating that the “Attorney General of
the United States has determined that your company is
engaging 1n acts or practices which constitute conduce
prohibited by section 310 of the National Aeronautics and
Space Act by conveying the impression on your internet web
sites that your business and products have some connection
with or endorsement from the National Aeronautic and
Space Administration (NASA) that does not in fact exist.”
(JA 785 C). The district court admitted these letters with a
limited instruction that they could be used as evidence of
notice.

Stewart objected to the introduction of these letters
on three grounds. First, the letters contain references and
quoted statements from a web site which does not exist nor
were copies of the challenged statements saved or been
produced and therefore the references to such a website in
these letters violates the best evidence rule. Second, the
letters were not relevant, because they were written after
SCANA had made the loan to Media Fusion and there was
no evidence that Stewart continued to make such
representations after Media Fusion received these letters.
Third, the letters should have been excluded under
Fed.R.Evid. 403 because the probative value was
substantially outweighed by the danger of unfair prejudice.
(JA 256 II.7-25 to 343 Il 1-19)

The best evidence rule provides that "[t]o prove the
content of a writing, recording, or photograph, the original
writing, recording, or photograph is required, except as

62

otherwise provided in these rules or by Act of Congress."
Fed.R.Evid. 1002. The district court upheld Stewart’s
objection regarding testimony as to the contents of website
under the best evidence rule, but refused to redact that
language referencing the web page. Such limiting instruction
was not sufficient. Further, there was no evidence
establishing that the statements that were the subject of
NASA’s complaints to Media Fusion were ever made to or
observed by SCANA. In addition, there was no evidence that
Stewart continued to make statements similar to the ones
complained.of by NASA to SCANA or anyone else
following receipt of either the July 23, 1999 or September 2,
1999 letters. As a result the letters and testimony about the
letters were not relevant to notice as to any issue in the trial.
Moreover, to the extent that there was any probative value, it
was outweighed by the danger of unfair prejudice. See, Fed.
R. Evid. 403; Old Chief v. United States, 519 U.S. 172, 180,
117 S. Ct. 644, 136 L.Ed.2d 574 (1997) (Unfair prejudice
"speaks to the capacity of some concededly relevant
evidence to lure the fact finder into declaring guilt on a
ground different from proof specific to the offense
charged."); United States v. Mohr, 318 F.3d 613, 619-20 (4th
Cir.2003) (Rule 403 requires suppression of evidence that
results in unfair prejudice--prejudice that damages an
opponent for reasons other than its probative value). The
District Court therefore abused its discretion in admitting
this evidence.

CQ II. THE DISTRICT COURT ERRED IN FINDING
THAT THE AMOUNT OF LOSS FOR PURPOSE OF
CALCULATING THE SENTENCING GUIDELINES WAS

63

$1 MILLION
QO
0 a. Standard of Review

The District Court's interpretation of the term "loss,"
as used in the guidelines, is reviewed de novo; its calculation
of the loss under the correct interpretation 1s reviewed for
clear error. United States v. Hughes, 401 F.3d 540 (4 Cir.
2005); United States v. Miller, 316 F.3d 495, 498 (4th
Cir.2003)

b. Argument

Stewart was given an |] point enhancement for a loss
exceeding $800,000 but less than $1.5 million under
U.S.S.G. 2F1.1(b)(1)(L) because “the facts in this case
reflect that, based on the defendant’s fraudulent
representations to SCANA Corp., they agreed to loan Media
Fusion $1 million.” (JA 916) Stewart objected to this
enhancement on the basis that Stewart was acquitted of
Count V of the Indictment which alleged the $1 million loan
proceeds transfer from SCANA to Media Fusion. (JA 907).
“Offense” is defined in Section 1B1 application note 1(h) as
“the offense of conviction and all relevant conduct under
1B1.3.” The offense of conviction in this instance is Count I.
In Count I, there is no dollar amount of loss alleged. The
dollar amount for which a loss is alleged is contained in
Count V for which Stewart was acquitted. In addition, the $1
million cannot be applied to Stewart’s sentencing guideline
range under the rubric of “relevant conduct.” The alleged $1
million loss was specifically charged in Count V, considered

64

and rejected by the jury. Furthermore, the government has
not contended that any other defendant, beyond Defendant
Blair who was also acquitted of Count V, defrauded SCANA
of the $1 million. Therefore, the relevant conduct provision
pertaining to jointly undertaken criminal activity 1s simply
inapplicable.

Furthermore, to the extent the Court can consider
conduct for which Stewart was found not guilty, the
government must prove such conduct by a preponderance of
evidence. Here, the government was required to prove that
SCANA lost money as a result of the offense of conviction.
First, SCANA prior to receiving the Monthly Milestones and
Science Budget on March 6, 1999, drafted and executed a
Mutual Non-Disclosure and No Obligation Agreement. This
Agreement specifically provided that “communications of
any kind should not be relied upon as a basis for taking any
action, foregoing any opportunity or incurring costs.” (JA
426, ll. 1-6). SCANA therefore could not and did not rely on
the March 6, 1999, fax transmission to make the loan to
Media Fusion. Second, even after SCANA’s science review,
visit to Stennis and full background investigation of Media
Fusion and Stewart, SCANA continued to remain a
“strategic partner in the investigation of this technology,”
according to an internal memorandum written to George
Bullwinkle by Randy Mahan dated June 25, 1999. (JA 788).
In addition, as of August 26, 1999, SCANA extended the
payment date for the note and did not call the note due until
January 26, 2000. (JA 790-794). There was no evidence that
Defendant Stewart caused Media Fusion to fail to repay the
loan. In fact, the evidence shows that Media Fusion raised
additional capital and could have paid the note if its

65

i.

management chose to do so. Stewart had been ousted by the
Board of Directors by then. _

In addition, the evidence established that the $1
million loaned to Media Fusion, LLC was used for
legitimate business expenses, including the payment of
salaries and lobbying fees received by people who were not
even alleged to have been involved in an illegal scheme to
defraud. Pursuant to Application Note 3(E), to Section
2B1.1, Stewart was entitled to a credit against the loss for the
fair market value of services rendered by the defendant and
other persons working in concert with the defendant.
Clearly, substantial effort was put forth by the Media Fusion
government relations firm and other Media Fusion
employees in an attempt to commercialize Defendant’s
technology. As the evidence established, SCANA remained
a “strategic” partner with Media Fusion while Media Fusion
used the proceeds from the $1 million loan to further both
companies’ interests. If these efforts had been successful,
SCANA stood to reap billions from its initial loan. The fact
that these efforts failed to result in a material gain to
SCANA does not mean that these services were worthless.
The District Court erred by failing to give Stewart credit for
the value of these efforts.

CONCLUSION

Appellant Stewart respectfully requests that his
conviction be vacated and judgment of acquittal be entered
as to Count I. Alternatively, Stewart request a reversal of his
conviction based upon the District Court’s evidentiary
rulings and a remand for a new trial or for an order vacating

66

Stewart’s sentence with instructions for re-sentencing based
upon a proper application of the sentencing guidelines.

Respectfully submitted,

James M. Griffin

Law Office of James Mixon Griffin
1116 Blanding Street, Suite 200
Columbia, South Carolina 29201
(803) 744-0800

Attorney for Appellant
Columbia, South Carolina February 23, 2006

67

CERTIFICATE OF COMPLIANCE

This Brief of Appellant has been prepared using:
Microsoft Word;
Times New Roman,
14 Point Type Space.

EXCLUSIVE of the Table of Contents, Table of
Authorities, and the Certificate of Filing and Service, this
Brief contains _ pages.

[ understand that a material misrepresentation can
result in the Court’s striking the brief and imposing
sanctions. If the Court so directs, I will provide an electronic
version of the Brief and/or a copy of the word or line
printout.

/s/ James M. Griffin
Signature of Filing Party

68

CERTIFICATE OF FILING AND SERVICE

I hereby certify that on this 23 day of February
2006, | filed with the Clerk’s Office of the United States
Court of Appeals for the Fourth Circuit, via hand-delivery,
the required number of copies of the Brief of Appellant and
Joint Appendix, and I further certify that I served, UPS
Ground Transportation the required copies upon:

Dean A Eichelberger

OFFICE OF THE U.S. ATTORNEY
1441 Main Street

Suite 500

Columbia, South Carolina 29201

Counsel for Appellee —

The necessary filing and service upon Counsel were
performed in accordance with the instructions given me by
counsel in this case.

/s/

THE LEX GROUP
1108 East Main Street
Suite-1400

Richmond, VA 23209

69

Fourth Circuit Appeals Court Opinion (Unpublished)

09: 30 JUN 16, 2006 ID: US COURT OF RPF'ERLS
TEL NO: 916-2796 #48584 FRGE: 1/17

United States Court of Appeals for the
Fourth Circuit

TO: James Mixon Griffin

Office: Fax Number: $1(803) 7440805 Phone
From: Barbara Rowe Phone 804-916-2704
Description: Number of Pages: 17

Time Sent: Friday, Jun 16, 2006 0 9:2 3 A.M.

JUDGEMENT FILED:

JUDGMENT FILED: J une 1 6, 2006 UNITED
STATES COURT OF APPEALS for the Fourth
Circuit No. 05-4493 CR-03-1088-CMC

UNITED STATES OF AMERICA Plaintiff —
Appellee

v.
WILLIAM LUTHER STEWART, a/ k / a Luke
Stewart Defendant - Appellant

Appeal from the United States District Court for the
District of South Carolina at Columbia ....................

In accordance with the written opinion of this Court

filed this day, the Court affirms the judgment of the
District Court.

70

A certified copy of this judgment will be provided to
the District Court upon issuance of the mandate. The
judgment will take effect upon issuance of the
mandate.
/s/ Patricia S. Connor
CLERK

71

UNPUBLISHED UNITED STATES COURT OF
APPEALS FOR THE FOURTH CIRCUIT UNITED
STATES OF AMERICA, versus Plaintiff - Appellee,
WILLIAM LUTHER STEWART, a/k/a Luke Stewart,
Defendant - Appellant. Appeal from the United States
District Court for the District of South Carolina, at
Columbia. Cameron McGowan Curmne, District Judge. (CR-
03-1088-CMC) Submitted: May 16, 2006 Decided: June
16, 2006 Before NIEMEYER and KING, Circuit Judges,
and HAMILTON, Senior Circuit Judge. Affirmed by
unpublished per curiam opinion. James M. Griffin,
Columbia, South Carolina, for Appellant. Reginald I.
Lloyd, United States Attorney, Dean A. Eichelberger,
Assistant United States Attorney, OFFICE OF THE
UNITED STATES ATTORNEY, Columbia, South
Carolina, for Appellee. Unpublished opinions are not
binding precedent in this circuit. See Local Rule 36 (c).

PER CURIAM: William Luther Stewart was convicted of
wire fraud, in violation of 18 U.S.C. §1343 and 2, and the
district court sentenced him to 30 months' impnsonment.
The indictment charged that through a scheme and artifice
to defraud, Stewart, together with his colleague, Edwin G.
Blair, and their company, Media Fusion, LLC, obtained a
loan of $1 million from SCANA Corporation, a company
that owns South Carolina Electric and Gas, to fund
implementation of a new technology that Stewart had
allegedly developed. In particular, Stewart was charged
with misrepresenting the fact that he had successfully
developed a technology by which to transmit voice, video,
and data over the power grid, and, to make his
representations credible, with misrepresenting his
credentials and his relationships with other major
technology companies and institutions, such as MIT,
NASA, the Defense Advanced Research Projects Agency,
Microsoft, and San Diego Gas and Electric. The indictment

72

also charged that in furtherance of the scheme, Stewart and
Blair sent a fax from Texas to SCANA in South Carolina,
which contained projected monthly milestones and a budget
for implementation of the technology. The jury found
Stewart guilty of the charge, and the district court entered a
judgment of conviction and the 30-month sentence on May
6, 2005.

On appeal, Stewart contends (1) that the evidence
was insufficient to support the verdict; (2) that the district
court abused its discretion in admitting letters from NASA
and a U.S. Attorney in Mississippi, confirming, after the
loan had already been made to Stewart, the inaccuracy of
some of Stewart’s misrepresentations; and (3) that the
district court erred in $1 million-loss figure when Stewart
was acquitted of the specific count charging that his scheme
caused the transmission of $1 million from South Carolina
to Texas. For the reasons that follow, we affirm.

|

Stewart contends first that the government failed to present
evidence sufficient to convict him, arguing that there was
no evidence that he created or directed the sending of the
fax, that he participated in the misrepresentations, and that
the misrepresentations were false. Taking the evidence in a
light most favorable to the government, however, we
believe that there was substantial evidence to support
Stewart's conviction. Even though the fax was sent by
Blair, the jury could reasonably have believed that Stewart
directed Blair to send the fax or that he assisted Blair in
doing so. Stewart and Blair were the two principals of
Media Fusion and were constant companions in obtaining
the loan from SCANA. The fax furthered the scheme to
defraud SCANA because SCANA officials requested the
financial information contained in the fax before they made
their loan and testified that they would not have loaned

73

Media Fusion the $1 million if they had known that the
technology was not ready for immediate installation. The
fax implied that it was developed and ready for installation
because the fax minimized future costs for research and
development and forecasted revenue-producing consumer
use within 12 months of the loan. In addition, the jury could
reasonably have agreed with SCANA officials who testified
that Stewart constantly led them to believe that the
technology was more fully developed than it actually was,
The officials stated that Stewart had told them that the
technology was “proven technology" capable of near-term
commercialization. THe evidence showed that in actuality,
however, Stewart had never tested the technology on a
power line to prove it could pass digital signals through
transformers. Even if the jury believed Stewart that he had
done some testing, he testified that he had only tested some
individual components of the technology, and not the
technology as a whole. In light of the testimony that
SCANA officials told Stewart they only were interested in
ready-to-market technology, the jury could have inferred an
intent to defraud from Stewart's repeated
misrepresentations. From our review of the record, we
conclude that the jury had ample evidence on which to
convict Stewart on the § 1343 charge.

If

Stewart also contends that the district court abused its
discretion in admitting into evidence a 1999 letter from
NASA and a 2000 letter from the Department of Justice
because the letters were dated after SCANA had made the
$1 million loan to Media Fusion. The government,
however, offered the letters to demonstrate that part of the
scheme included Blair's misrepresentations about Media
Fusion's relationship with NASA made to forestall SCANA
from recalling the $1 million loan. We agree that these

74

letters were relevant evidence of intent to mislead SCANA
with the "design[] to lull the victims into a false sense of
security [and] postpone their ultimate complaint to the
authorities.” United States v. Lane, 474 U.S. 438, 451-52
(1986) (quoting United States v. Maze, 414 U.S. 395, 403
(1974)). We disagree with Stewart's contention that the
letters were also unduly prejudicial because they contained
indirect evidence of matters on Media Fusion's website,
The district court agreed with Stewart in noting that the
letters’ references to information found on a website failed
the best evidence rule, The court received them, however,
for a limited purpose and not for the substantive evidence
of the content of Media Fusion's website, and in order to be
sure that the documents were received for that limited
purpose, the district court gave the jury a limiting
instruction. In these circumstances, we do not believe that
the district court abused its discretion.

II]

Finally, Stewart contends that the district court
erred in calculating the amount of Joss in determining his
sentencing guidelines range. Finding that SCANA’s $1
million loan was "the value of the money, property, or
services unlawfully taken,” U.S.S.G. § 2F1.1 App. Note 8
(Nov. 1998). the district court increased Stewart’s offense
level 11 levels, resulting in a sentencing guideline range of
30-37 months’ imprisonment. Stewart argues that because
he was not convicted of Count which charged him with
wire fraud for SCANA’s $1 million loan, the court could
not consider the amount of the loan as relevant conduct.
The jury’s acquittal, however, was based on a failure of
proof under a standard of beyond-a-reasonable-doubt, and
in sentencing, the district court need only have found the
loss of the $1 million by a preponderance of the evidence.
Accordingly, in determining the appropriate sentencing

75

guideline, the court was entitled to consider acquitted
conduct as relevant conduct. See United States v. Watts,
519 U.S. 148/ 157 (1997). Moreover, the evidence
supported the finding that $1 million was the proper
amount of loss. Application Note 8 to U.S.S.G.§ 2F1.1
(Nov. 1998) explains that in determining the loss, the court
should consider the commentary to U.S.S.G. § 2B1.1, which
provides that "Where the offense involved making a
fraudulent loan or... other unlawful conduct involving a
loan, , , the loss is to be determined under the principles set
forth in the commentary to section 2F1,1," U.S.S8.G, § 2Bl.1
App. Note 2 (Nov, 1998), The commentary to § 2F1,]
describes how the nominal loss - - in this case the amount
of the loan - - can overstate the actual loss when the
defendant has repaid some of the loan or collateralized it
with property that is not worthless. See U.S.S.G. § 2F1.1
App. Note 8 ("If a defendant fraudulently obtains a loan by
misrepresenting the value of his assets, the loss is the
amount of the loan not repaid at the time the offense is
discovered, reduced by the amount the lending institution
has recovered (or can expect to recover) from any assets
pledged to secure the loan”). The district court, however,
concluded that there were no such offsets because as of
sentencing the loan remained uncollected and because
Media Fusion had provided no collateral.

Stewart argues that SCANA was effectively a
strategic’ partner” with Media Fusion and thus recovered
some value from the loan because SCANA put the money
to use in the common enterprise "in an attempt to
commercialize defendant’s technology.” The district court,
however, reasonably found that SCANA received no
offsetting value from these efforts. The technology never
became commercially viable and never provided any
benefit to SCANA.

Because there was no repayment of the loan, no
collateral to secure its repayment, or no other expectancy to

eee

76

reduce its outstanding amount, the district court did not
clearly err in finding for sentencing that the loss was $1
million.

* K *

Accordingly, we affirm the judgment of the district
court. We dispense with oral argument because the facts
and legal contentions are adequately presented in the
materials before the court) and argument would not aid in
the decisional process,

AFFIRMED

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UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

FILED
JULY 11, 2006

No. 05-4493
CR-03-1088-CMC

UNITED STATES OF AMERICA

Plaintiff — Appellee
v.

WILLIAM LUTHER STEWART,
a/k/a Luke Stewart

Defendant - Appellant

Appellant has filed a petition for
rehearing. The Court denies the petition for
rehearing. Entered for a panel composed of
Judge Niemeyer, Judge King, and Senior
Judge Hamilton

For the Court,

/s/_ Patricia S. Connor

Clerk

78

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_0465%3A2. Public record. Not legal advice.