DENVER — An appeals court Tuesday overturned the conviction of a Bethany man who was sentenced to more than 21 years in prison for defrauding 115 investors of more than $4.5 million in a Ponzi scheme.
The 10th U.S. Circuit Court of Appeals ruled 3-0 that Brian William McKye's conviction cannot stand because the trial judge improperly instructed jurors on what proof was required to convict him.
McKye, 49, was sentenced last year in U.S. District Court in Oklahoma City to 262 months in prison after he was convicted of securities fraud and conspiracy to commit money laundering.
He ran investment businesses between 2006 and 2009, guaranteeing investors monthly returns of up to 19 percent on notes issued by some of his companies known as Global West, according to prosecutors and Tuesday's 20-page decision.
The Oklahoma Department of Securities shut down McKye's operations in 2009. The U.S. Attorney for Western Oklahoma obtained an indictment against him in 2011.
An Internal Revenue Service investigator testified that McKye used some of investors' funds for his personal and business expenses. The IRS agent also testified McKye used other investor funds in a Ponzi scheme that employed principal from newer investors to make interest payments to earlier investors.
The court-appointed receiver who liquidated McKye's businesses said victims received about 2 cents for every dollar they invested with McKye. That attorney said most of McKye's business was related to payday loan shops.
The trial judge, David Russell, refused a request of McKye's attorney to give jurors an instruction that would have permitted them to decide whether the investment notes were securities as defined by federal securities laws.
Instead, Russell instructed jurors that the “term ‘security' includes a note.”
That instruction is contrary to U.S. Supreme Court precedent, the appellate judges stated as their reason for reversing the conviction.
Russell's instruction permitted jurors to convict McKye without prosecutors having to prove the notes were securities, he argued in his appeal.
The appellate judges said Russell accepted the argument of a prosecutor that notes are presumed to be securities.
The U.S. attorney's office did not respond immediately to a request for comment about what it plans to do in view of the decision.
Federal Bureau of Prisons records state McKye is serving his term at a prison near Dallas.
Co-defendant Joe Don Johnson was sentenced to nearly 10 years in prison for his roles in the crimes. Russell ordered the two men jointly to pay $4.6 million in restitution to their victims.