Jury members on Monday began deliberating the fate of J. Gary Sheets, who has been on trial for nearly six weeks on charges of fraud and embezzlement in U.S. District Court.
During the last long day of closing arguments, assistant U.S. attorneys Tena Campbell and Stewart Walz tried to show that Sheets was the mastermind of a criminal fraud in which investors lost $2.5 million because they believed his lies.But defense lawyer Peter Stirba insisted investments seemed secure until an independent audit in May 1985 forced the closure of Sheets' businesses, including Coordinated Financial Services and J. Gary Sheets and Associates.
Even then, Stirba said, after Sheets resigned as chairman of the board, a corporate bailout team tried to save the crumbling financial empire. But investors were permanently spooked when Mark Hofmann murdered Sheets' partner, Steve Christensen, and his wife, Kathleen Webb Sheets.
Using an overhead projector to show bank transactions, Campbell said the Working Fund I and II investments were supposed to assist JGSA. But again and again, she showed how money from these funds went into Sheets' and Christensen's pockets or for their personal projects or to help projects promoted by CFS, not JGSA.
Stirba countered that the government has given the false impression that JGSA and CFS are two totally separate entities. In reality, he said, they were interdependent. JGSA did syndication work for CFS, and relied on the larger company for its existence.
The investments were "debt offerings" of the type suggested by a New York law firm, intended to raise working capital. They converted short-term bank loans into long-term loans from investors.
Investors knew they were gambling to get the 17 percent return offered, he said.
The debt offerings were backed by Sheets' and Christensen's personal guarantees as well as 50 percent of the stock of CFS. In order for investors to lose, both men would have to go bankrupt and the company would have to fail.
If the investment was to fail, Sheets could not have avoided being dragged down with it, he said. But nobody thought the company would fail until an audit in 1985 showed it was $5 million in debt _ which suddenly shut it down.
If Sheets had been a fraud artist, he would never have called for this audit, as it was not required by any law, he said.
Citing independent audits and the company's internal quarterly reports, he insisted that until nearly the end, company officers thought they were in good shape.
If jurors think Sheets relied on bad advice, was stupid or mismanaged the affairs of JGSA, that's a reasonable doubt of his criminal guilt, Stirba said. The government has to prove its case beyond a reasonable doubt to convict him.
If this level of proof isn't met, he said, "you have a duty to acquit him."