## Facts

- Marvin Lustiger controlled Lake Mead Land and Water Company, a land-development business marketing an unincorporated subdivision called “Lake Mead City” in Mohave County, Arizona.
- The enterprise acquired ownership or options to roughly 64 sections of desert land in a checkerboard pattern with adjacent federal land, subdividing thousands of parcels for sale.
- Lustiger also organized an advertising agency to handle promotion of the project through nationwide advertising and mailings.
- Prospective purchasers received mailed “investor” materials, including brochures and photographs that suggested attractive water-related amenities and ready access to water.
- The government’s theory was that water was not readily available and the promotional materials, taken as a whole, conveyed a materially misleading picture of the land’s condition and prospects.
- Most purchasers did not inspect the property before buying and were expected to rely on the mailed materials in deciding to purchase.

## Issues

1. Whether substantial evidence supported the finding that Lustiger devised a “scheme to defraud” under 18 U.S.C. § 1341 through materially misleading advertising, including half-truths and omissions.
2. Whether the stipulated use of the mails and the charged mailings to named individuals satisfied the mailing element of 18 U.S.C. § 1341.
3. Whether the evidence permitted an inference of intent to defraud from Lustiger’s control over the enterprise and the content and structure of the promotional campaign.

## Decision

- The Ninth Circuit affirmed Lustiger’s convictions following a bench trial.
- The court held that the evidence was sufficient to support the district court’s finding of a scheme to defraud through false and misleading representations about Lake Mead City.
- The court concluded that “net impression” deception could be found even if some statements were literally true, where half-truths and omissions created a materially deceptive overall message.
- The stipulated use of the mails and the specific mailings charged in each count satisfied the mailing requirement of § 1341.
- Applying a deferential standard after a bench trial, the court upheld the district court’s factual findings because they were supported by substantial evidence.

## Legal Principles

- Mail fraud under 18 U.S.C. § 1341 is established by (1) a scheme to defraud and (2) use of the mails in furtherance of that scheme.
- A scheme to defraud may be proven by the deceptive “net impression” of promotional materials; literal truth in isolated statements does not preclude fraud where the overall presentation is materially misleading.
- Half-truths and material omissions may constitute fraudulent representations when they distort the practical realities relevant to a reasonable purchaser.
- Materiality may be shown where misstatements or omissions concern facts that would naturally influence purchasing decisions, such as water availability and development prospects in desert land sales.
- Intent to defraud may be inferred from circumstantial evidence, including the defendant’s control over the operation and the design of a sales program structured to induce reliance on mailed representations.

## Conclusion

The Ninth Circuit affirmed Lustiger’s mail-fraud convictions, holding that substantial evidence supported findings that his mailed promotional campaign for desert subdivision lots used materially misleading half-truths and omissions—especially regarding water availability—creating a deceptive overall impression intended to induce purchases.


Lustiger v. United States, 386 F.2d 132 (9th Cir. 1967)