## Facts

- Wilford R. Gibson founded Gibson Marketing International, Inc. (GMI), serving as president, chairman, and sole shareholder.
- GMI sold fast-food franchise interests and “area distributorships” for outlets branded “Burgher Haus” and “Kelly’s Basket.”
- GMI advertised widely, invited prospects to Phoenix for “personal interviews,” and used sales presentations to steer buyers toward more expensive area distributorships.
- Salespeople (sometimes including Gibson) made representations about extensive support services GMI would provide (e.g., training, advertising, site selection/approval, and purchasing accounts) and suggested the chain would become a major national brand.
- Investors were induced to pay an initial deposit and later remit the balance.
- Evidence showed GMI frequently failed to provide promised services, including approving an obviously unsuitable “test” location, limited purchasing accounts, little or no local advertising, and a short training program.
- Additional evidence indicated financial instability at GMI and Gibson’s personal use of corporate funds, supporting an inference that investor money was diverted rather than used to build a legitimate franchise system.
- Gibson was indicted for mail fraud (18 U.S.C. § 1341), wire fraud (18 U.S.C. § 1343), and inducing interstate travel in execution of a fraud (18 U.S.C. § 2314); after a mistrial, he was convicted on 14 of 15 counts.
- On appeal, Gibson challenged (among other things) admission of investor testimony recounting what salespeople told them, the sufficiency of the evidence, alleged prosecutorial misconduct, and the effectiveness of trial counsel.

## Issues

1. Whether investor testimony recounting salespeople’s representations and promises was inadmissible hearsay.
2. Whether the evidence was sufficient to prove Gibson’s knowing participation and intent to defraud for convictions under 18 U.S.C. §§ 1341, 1343, and 2314.
3. Whether alleged prosecutorial misconduct in argument or evidentiary presentation required reversal.
4. Whether Gibson received constitutionally ineffective assistance of counsel.

## Decision

- The Ninth Circuit affirmed Gibson’s convictions.
- The court held that the investor testimony about sales presentations was properly admitted as nonhearsay to show the existence and operation of the fraudulent scheme, not to prove the truth of the promises.
- The court further held that, even if treated as hearsay, the statements were admissible as statements of an agent within the scope of employment and/or as co-conspirator statements.
- The court found the evidence sufficient for a rational jury to conclude Gibson authorized and participated in a scheme to defraud and that the scheme used the mails, wires, and induced interstate travel.
- The court rejected claims of prosecutorial misconduct, finding no plain or reversible error.
- The court rejected the ineffective-assistance claim for lack of a showing of constitutionally deficient performance and resulting prejudice under the governing standard.

## Legal Principles

- Out-of-court statements are not hearsay when offered to prove that representations were made as part of a fraudulent scheme, rather than to prove the truth of the representations.
- In fraud prosecutions, victim testimony about sales pitches may be admissible to establish the scheme’s existence, scope, and method of operation.
- Statements by corporate sales agents made within the scope of their duties may be admitted against the defendant as admissions of a party-opponent under Federal Rule of Evidence 801(d)(2)(D).
- Statements made during and in furtherance of a common fraudulent design may be admitted under Federal Rule of Evidence 801(d)(2)(E).
- A conviction is supported by sufficient evidence if, viewing the record favorably to the verdict, a rational jury could find the elements beyond a reasonable doubt, including specific intent to defraud for mail and wire fraud and inducement of interstate travel in execution of the scheme for § 2314.

## Conclusion

The Ninth Circuit affirmed Gibson’s fraud convictions, holding that investor testimony recounting sales representations was admissible to prove the scheme (and alternatively as agent or co-conspirator statements), that the evidence supported findings of Gibson’s knowing participation and intent, and that neither alleged prosecutorial misconduct nor claimed ineffective assistance warranted reversal.


United States v. Gibson, 690 F.2d 697 (9th Cir. 1982)