This is not a particularly exciting case, but it is an issue of first impression and a new rule in the Eleventh Circuit.
Sirtaj "Tosh" Mathauda was running a fake franchise scam. His pop-up companies would advertise franchises for businesses opportunities, such as vending machines and greeting card displays. They'd collect the fees using a Costa Rican call center, then shut down and keep the money. The operation netted millions in fraudulently obtained cash.
Mathauda was convicted on a handful of fraud charges, and he received a sentence enhancement for violating a court order (to stop scamming people) from a related civil proceeding brought by the FTC. The problem is, he never knew about that order.
The court cites, with approval, the D.C. Circuit's treatment of willful blindness of a court order for the purposes of a U.S.S.G. § 2B1.1(b)(9)(C), formerly (8)(C), enhancement.
In the D.C. Circuit case, a defendant showed up to an administrative hearing, got an extension, then never showed up again. An order was issued prohibiting his illegal conduct in his absence. He violated the order.
The D.C. Circuit set its standard that there are "two predominant formulations of 'willful blindness': when a defendant purposely contrived to avoid learning all the facts, or the defendant was aware of a high probability of the fact in dispute and consciously avoided confirming that fact."
The Eleventh Circuit adopted this standard, which worked out quite well for Mathauda.
Not So Much
In the D.C. case, the defendant knew about the proceedings, represented himself, rescheduled those proceedings, and then disappeared. In other words, he tried really, really hard to remain ignorant of the order.
Here, it was a very different scenario. While Mathauda knew of the FTC proceedings, and lost via default judgment, he was represented by an unnamed and apparently incompetent counsel, who failed to such much as enter an appearance in the FTC case. No order, or default, or judgment was mailed to him. The first he heard about the order was during sentencing for the criminal case.
He wasn't willfully blind. He was blind-sided.
Did Mathauda know about the proceedings? Sure. One might even argue that it would've been reasonable to follow a pending civil/FTC case against you and your scam business, even if you have retained counsel.
But the government has the burden of proof, by a preponderance of evidence, to show that either of the two aforementioned formulations of willful blindness applied.
- United States v. Mathauda (Eleventh Circuit Court of Appeals)
- Collection 'Fees' or 'Costs'? Contractual Language Nails Debt Collector (FindLaw's U.S. Eleventh Circuit Blog)
- Deference Dooms Dubious Murder for Hire Conviction: Brady or Lazy? (FindLaw's U.S. Eleventh Circuit Blog)