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United States v. Phillips

United States Court of Appeals, Sixth Circuit

October 10, 2017

United States of America, Plaintiff-Appellee,
v.
Johnny D. Phillips, Defendant-Appellant.

          Argued: October 5, 2017

         Appeal from the United States District Court for the Eastern District of Tennessee at Greeneville. No. 2:14-cr-00076-11-J. Ronnie Greer, District Judge.

         ARGUED

          J. Alex Little, BONE MCALLESTER NORTON PLLC, Nashville, Tennessee, for Appellant.

          Debra A. Breneman, UNITED STATES ATTORNEY'S OFFICE, Knoxville, Tennessee, for Appellee.

         ON BRIEF

          J. Alex Little, BONE MCALLESTER NORTON PLLC, Nashville, Tennessee, for Appellant.

          Debra A. Breneman, UNITED STATES ATTORNEY'S OFFICE, Knoxville, Tennessee, for Appellee.

          Before: SUTTON, DONALD, and THAPAR, Circuit Judges.

          OPINION

          SUTTON, Circuit Judge.

         Johnny Phillips makes his living as a "land man." Land men scout rural property for coal mining potential and negotiate leases with the landowners to mine it. When the government found out that Phillips performed work for New Century Coal, a company that swindled millions of dollars from investors, it charged him with several crimes. A jury convicted him of conspiracy to commit mail and wire fraud. We affirm.

         I.

         Blue gem coal burns hotter and cleaner than traditional thermal coal, making it useful for producing silicon, a critical ingredient of computer chips and solar panels. Federal and state environmental regulations make it difficult to mine, however, and demand for the coal outstrips its supply as a result. Blue gem coal commands premium prices.

         New Century Coal advertised itself as one of the largest blue gem coal companies in the country. Not only did it purport to own land with valuable deposits of blue gem coal, it also claimed to have the much sought after permits to mine it. The company had little trouble convincing individuals to invest in it.

         As it turns out, New Century Coal did not possess a lot of the land and permits it claimed to have. By the time law enforcement caught on, the company had swindled more than $14 million from more than 160 investors.

         The government accused twelve people of being in on the scheme. Most of them, including the mastermind, Brian Rose, pleaded guilty. Only Johnny Phillips went to trial. The government charged him with three crimes: conspiring to commit mail and wire fraud, conspiring to launder money, and laundering money.

         The government's case against Phillips consisted mainly of the testimony of several conspirators, some investors, and a government investigator. Evidence showed that Phillips, in his role as a land man, helped Rose, a NASCAR driver with little experience in the coal industry, identify land with coal-mining potential. He introduced Rose to a property dubbed "Thacklight, " which New Century Coal eventually pitched to unwitting investors despite never owning the rights to mine it. R. 584 at 118-22. And he introduced Rose to the benefits of blue gem coal, which New Century Coal eventually claimed to mine.

         The evidence portrayed Phillips as a coal-industry expert who helped New Century Coal convince investors that it was legitimate. The testimony placed Phillips at a pitch meeting in Missouri where Rose and two other New Century Coal representatives (Ray Spears and Bobby McGregor) used fake names. One investor at the meeting testified that he never would have invested in Thacklight without Phillips' presence at the meeting and the expertise he conveyed.

         Phillips testified in his own defense, claiming to be more gullible than the investors. He had no idea, he said, that the company defrauded investors. He was not aware, he said, that the company never secured the rights to mine Thacklight, which he helped pitch to investors. And he found nothing suspicious, he said, about Rose, Spears, and McGregor's use of fake names.

         The jury convicted Phillips of conspiracy to commit mail and wire fraud but acquitted him of the two money-laundering charges. ...


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