UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,

v.

CHARLES PHILLIP ELLIOTT, WILLIAM MELHORN, DEFENDANTS-APPELLANTS

BIRCH, Circuit Judge: In this appeal, we decide the first-impression issue for our circuit of the requirements for qualification as an investment adviser under the Investment Advisers Act of 1940, 15 U.S.C. §§ 80b-2(a)(ll) and 80b-6.

Because we conclude that managers of a number of investment companies were investment advisers who violated the anti-fraud provisions of the Investment Advisers Act, we AFFIRM their convictions.

The district court, however, erred in formulating the restitution ordered.

We VACATE the previous restitution orders and REMAND for the district court to order restitution consistent with this opinion. I.

BACKGROUND From 1980 to 1987, defendants-appellants Charles Phillip Elliott and William H.

Mel-horn managed a collection of investment companies that included Elliott Real Estate, Inc., Elliott Securities, Elliott Mortgage Company, Inc., and Elliott Group, Inc. (collectively, “Elliott Enterprises”).

During the relevant period, Elliott was president and owner of Elliott Enterprises; Melhorn began as a special assistant to Elliott and was promoted to chief executive officer of Elliott Enterprises.

While Elliott Securities operated as a securities broker, the rest of Elliott Enterprises marketed a range of investment vehicles created and managed by Elliott Enterprises.

Elliott Enterprises lost millions of dollars each year between 1980 and 1987.

Nevertheless, Elliott and Melhorn retained their current investors and attracted new ones by making false claims regarding the safety and performance of Elliott Enterprises investments.

For example, Elliott and Melhorn represented to current and prospective investors that Elliott Enterprises had a good track record and was financially sound.

The two men also falsely represented Elliott Enterprises as being a regulated bank.

They assured investors that particular investments were insured or secured when, in fact, the investments often were backed with insufficient, worthless or nonexistent collateral.

In several instances, Elliott and Melhorn falsely told investors that income from investments was tax-free.

The two also stated that Elliott Enterprises had “ ‘always received a clean bill of health by periodic audits by the Florida Department of Professional Regulation,’ ” when no such audits were performed. R11-230-660.

Significantly, Elliott Enterprises “lulled” its investors by sending regular, competitive interest payments at rates just above the market rate.

Elliott Enterprises was able to maintain these payments, despite huge, mounting losses, by the use of a Ponzi, or pyramid, scheme: interest payments were funded not only by returns from underlying investments, but also by the principal from newer investor funds.

On some occasions, Elliott and Melhorn and their employees solicited new investments in Elliott Enterprises in order to cover interest payments that were coming due.

Both Elliott and Melhorn profited enormously from this arrangement.

Elliott’s extravagant lifestyle included multimillion dollar residences, resort homes, and luxury automobiles.

Although Elliott’s sole employment during this period was as president of Elliott Enterprises, he did not receive a salary.

Instead, he compensated himself by commingling investor funds with personal funds.

Melhorn’s compensation came from commissions on sales of Elliott Enterprises investment products; in some years, income from those commissions exceeded one million dollars.

In 1987, following an investigation by the Securities Exchange Commission (“SEC”), a receiver took control of Elliott Enterprises.

An audit taken at that time revealed liabilities exceeding assets by more than twenty million dollars.

As a result, Elliott and Mel-horn were no longer able to attract new investments; the Ponzi scheme collapsed, and interest payments ceased.

Following the failure of Elliott Enterprises, investors and creditors have recovered from the receiver ten-and-a-half cents on the dollar. Elliott and Melhorn were indicted on twenty-two counts of fraud under the Investment Advisers Act,¹⁵ U.S.C. §§ 80b-3(d) and 80b-6 and¹⁸ U.S.C. § 2, six counts of securities fraud under the Securities Act,¹⁵ U.S.C. § 77q(a) and¹⁸ U.S.C. § 2, ten counts of mail fraud,¹⁸ U.S.C. §§ 2 and 1341, and one count of conspiracy,¹⁸ U.S.C. § 371.

The thirty-nine charges in the indictment stemmed from misrepresentations allegedly made by Elliott and Melhorn to nineteen individuals.

In March, 1990, a jury returned a verdict of guilty on all but two charges of mail fraud.

In July, 1990, the district court sentenced Elliott and Melhorn to prison terms and ordered each defendant “to make full restitution as determined by U.S. Probation.” R5-209-1; R5-210-1.

On first appeal, this court determined that the original restitution orders were imper-missibly vague.

Consequently, we remanded the case for further proceedings on the restitution issue and retained jurisdiction over the remainder of the appeal.

The district court referred the case to a magistrate judge solely to calculate the amount of loss to the victims.

After two status conferences, the magistrate judge recommended that the district court accept the government’s estimate of victim loss, which was based on claims made to the receiver by approximately 940 Elliott Enterprises investors.

The district court adopted the magistrate judge’s report and recommendation without vacating the original restitution orders, setting an actual restitution amount, or making any other findings of fact.

Elliott and Melhorn now appeal from this order. At the government’s request, we consolidated this new appeal with the remainder of their original appeals pending before this court.

II.

DISCUSSION A.

Exclusion of Relevant Evidence Elliott and Melhorn contend that the district court erred by excluding proffered testimony from satisfied Elliott Enterprises customers.

These customers, none of whom was named in the indictment, were to have testified to their belief that Elliott and Mel-horn had committed no wrongdoing; they also would have testified that the two defendants had kept them promise to secure these particular investments with collateral.

We review evidentiary rulings by the district court for abuse of discretion.

Adair, 951 F. 2d 316, 320 (11th Cir.1992).

Although the admission and exclusion of evidence falls within the broad realm of judicial discretion, such discretion “does not extend to the exclusion of crucial relevant evidence necessary to establish a valid defense.”

Williams, 954 F. 2d 668, 671 (11th Cir.1992).

Relevant evidence is evidence that has “any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.”

Fed.R.Evid. 401.

To the extent that Elliott and Melhorn proffered the witnesses to show that these investors did not believe that they had been defrauded, that they had received a portion of their money back upon request, that Elliott had told these investors to testify truthfully before the SEC, or that Elliott had backed these investors with the appropriate collateral as he had promised, the district court properly excluded this testimony as irrelevant.

See Fed.R.Evid. 402.

The fact that Elliott and Melhorn avoided wrongdoing in their dealings with five customers not named in the indictment is inconsequential in determining whether both made fraudulent representations to the nineteen victims listed in the indictment.

Elliott and Melhorn’s main contention, however, is that the testimony of satisfied customers is relevant to the issue of their intent to defraud.

In support of this proposition, they rely on the Ninth Circuit’s decision in Thomas, 32 F. 3d 418 (9th Cir.1994).

In Thomas, the defendant was charged with mail fraud for implementing an “averaging scheme.”

Id. at 419.

Under the scheme, the defendant quoted false prices to fruit growers to even out fluctuations in the market.

The growers affected by this scheme collectively came out ahead by approximately $175,980, but the trial court in Thomas excluded testimony from growers, who had benefitted under the scheme but were not named in the indictment.

The Ninth Circuit reversed the district court and held that the testimony of all growers impacted by the scheme was relevant to the defendant’s intent in devising the scheme.

The court further noted that there was “no basis for concluding that the scheme defendant had devised was intended to impact unnamed individuals any differently than those the government chose to name.”

Id. at 420.

While Elliott and Melhorn proffered the same type of testimony as that excluded in Thomas, we note that the scheme and intent at issue in Thomas differ significantly from the scheme and intent at issue in this ease.

In Thomas, the defendant made two, distinct misrepresentations: when fruit prices rose above an “average” price, the defendant falsely quoted a lower price to growers; when fruit prices dropped below average, the defendant falsely quoted a higher price.

Overall, the growers impacted by the averaging scheme actually came out ahead by approximately $175,980; thus, testimony from “satisfied” growers could have helped the defendant establish that he did not intend to profit from his admittedly fraudulent representations.

Proving intent in this case, however, is not a simple matter of accounting for economic surplus.

The material misrepresentations here center on the purported financial health of the Elliott Enterprises businesses and the performance and safety of its investments.

No amount of testimony from satisfied customers could “average out” Elliott and Mel-horn’s intent to defraud when they continued to solicit new investments and reassure old investors while concealing millions of dollars in losses per year with fictitious audits and phantom collateral.

To a much greater degree than was the case in Thomas, the proof of Elliott and Melhorn’s intent to defraud lies in the substance of them misrepresentations, not in the cumulative impact of those misrepresentations on all of their customers.

Thus, the district court did not err by excluding the proffered testimony as irrelevant. B.

Applicability of the Investment Advisers Act of 1U0 Elliott and Melhorn contend that the evidence was insufficient to support their convictions for investment adviser fraud.

They argue that a defendant and his alleged victim must be in an adviser-client relationship before the antifraud provisions of the Investment Adviser Act can apply.

The standard of review for assessing the sufficiency of evidence is whether any reasonable inference of the evidence, considered in the light most favorable to the government, is sufficient to allow a jury to find guilt beyond a reasonable doubt.

Bush, 28 F. 3d 1084, 1087 (11th Cir.1994). 1.

Definition of “Investment Advisers” We first decide the threshold issue of whether Elliott and Melhorn qualify as investment advisers for the purposes of the Investment Advisers Act.

This is a question of first impression in this circuit.

Under section 80b-2(a)(ll) an investment adviser is any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular ■ business, issues or promulgates analyses or reports concerning securities; but does not include ... (C) any broker or dealer whose performance of such services is solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation therefor ...; or (F) such other persons not within the intent of this paragraph, as the Commission may designate by rules and regulations or order.¹⁵ U.S.C. § 80b-2(a)(ll) (emphasis added).

The SEC has published an interpretive release to clarify its position on the applicability of the Investment Advisor Act to financial planners, pensions consultants, and other financial service providers.

The SEC advises: Whether a person providing financially related services of the type discussed in this release is an investment adviser within the meaning of the Advisers Act depends upon all the relevant facts and circumstances _ A determination as to whether a person providing financial planning, pension consulting, or other integrated advisory services is an investment adviser will depend upon whether such person: (1) Provides advice, or issues reports or analy-ses, regarding securities; (2) is in the business of providing such services; and (3) provides such services for compensation.

Applicability of the Investment Advisers Act to Financial Planners, Pension Consultants, and Other Persons Who Provide Investment Advisory Services as a Component of Other Financial Services, Investment Advisers Act Release No. IA-1092, 52 Fed.Reg. 38400, 38401-02 (Oct. 8,1987) [hereinafter SEC Release] (emphasis added).

Elliott and Melhorn clearly have provided investment advice to their customers, both by advising them in their choice among Elliott Enterprise investment vehicles and by controlling the investments underlying those investment vehicles.

See Abrahamson v. Fleschner, 568 F. 2d 862, 871 (2d Cir.1977) (“These provisions [of the Investment Advisers Act] reflect the fact that many investment advisers ‘advise’ their customers by exercising control over what purchases and sales are made with their clients’ funds.”), cert. denied, 436 U.S. 905, 98 S.Ct. 2236, 56 L.Ed.2d 403, and cert. denied, 436 U.S. 913, 98 S.Ct. 2253, 56 L.Ed.2d 414 (1978).

The only remaining questions, therefore, are whether Elliott and Melhorn were “in the business of advising others” and whether they did so “for compensation.”¹⁵ U.S.C. § 80b-2(a)(ll).

In defining the “business” standard for investment advisers, the SEC Release notes: The giving of advice need not constitute the principal business activity or any particular portion of the business activities of a person in order for the person to be an investment adviser under section [80b-2(a)(ll) ].

The giving of advice need only be done on such a basis that it constitutes a business activity occurring with some regularity....

Whether a person giving advice about securities for compensation would be “in the business” of doing so, depends upon all relevant facts and circumstances.

The staff considers a person to be “in the business” of providing advice if the person: (i) Holds himself out as an investment adviser or as one who provides investment advice, (ii) receives any separate or additional compensation that represents a clearly definable charge for providing advice about securities, regardless of whether the compensation is separate from or included within any overall compensation, or receives transaction-based compensation if the client implements ... the investment advice, or (iii) on anything other than rare, isolated and non-periodic instances, provides specific investment advice.

SEC Release at 38402 (emphasis added).

We note initially that, “[although [an] SEC release is entitled to great weight, it is not dispositive.” SEC v. Continental Commodities Corp., 497 F. 2d 516, 525 (5th Cir.1974).

Nevertheless, we are persuaded that both Elliott and Melhorn are “in the business” of advising others because they satisfy all three of the disjunctive factors given by the SEC.

From 1975 to 1987, Elliott was registered with the SEC as an investment adviser. In letters and brochures, Elliott and Melhorn held Elliott out to the public as a registered investment adviser. Both also received “transaction-based compensation” whenever a customer implemented their advice by purchasing an Elliott Enterprises investment product: Melhorn received a commission, and Elliott received the investment principal, which he commingled with his personal funds.

The record additionally indicates that Elliott and Melhorn provided investment advice on more than rare, isolated occasions.

Both regularly gave advice regarding the safety and appropriateness of specific Elliott Enterprises investment vehicles based upon the personal circumstances of individual investors.

Additionally, they were responsible for selecting, purchasing, and selling the underlying investments for Elliott Enterprises.

See Abrahamson, 568 F. 2d at 870-71.

Thus, Elliott and Melhorn were “in the business” of advising others.

Elliott and Melhorn argue that they were not compensated for providing advice because their customers did not pay a discrete fee specifically earmarked as payment for investment advice.

They contend that the customers named in the indictment came to Elliott Enterprises, not for investment advice, but to invest in Elliott Enterprises.

In other words, Elliott and Melhorn analogize their situation to that of the defendant in Wang v. Gordon, 715 F. 2d 1187, 1192-93 (7th Cir.1983), who received his commission for selling an apartment building, not for providing investment advice.

See supra note 6.

This analogy is flawed, however, because investment advice in this case constitutes a significant component of the “product” sold.

Customers investing with Elliott Enterprises first relied on Elliott and Melhorn to assist them in choosing individually tailored investment vehicles, such as tax-exempt repurchase agreements, stock income agreements, or collateral loan agreements.

After each customer chose an investment vehicle, Elliott and Melhorn continued to advise him by managing the underlying investments.

The ongoing investment advice and management provided by Elliott and Melhorn were primary, rather than incidental, reasons for investing in Elliott Enterprises.

Although Elliott and Melhorn did not receive a separate investment adviser’s fee, they did receive compensation for providing investment advice.

Because Elliott and Melhorn were also “in the business of advising others,” they qualify as investment advisers under section 80b — 2(a)(ll).

Consequently, the antifraud provisions of the Investment Advisers Act are applicable to them. 2.

Necessity of Adviser-Client Kelationship Elliott and Melhorn maintain that, even if they were investment advisers, they were not in an adviser-client relationship with any of the customers named in the indictment.

They cite not only the lack of a clearly identified investment advisory fee, but also lack of an investment adviser contract as proof that no such relationship existed.

In the absence of an adviser-client relationship, they argue that they cannot be convicted under the antifraud provisions of the Investment Advisers Act.

The act in relevant part provides: It shall be unlawful for any investment adviser, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly— (1) to employ any device, scheme, or artifice to defraud any client or prospective client; (2) to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client ... (4) to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative.

Subsections (1) and (2) describe offenses specifically affecting a “client or prospective client.”

In contrast, subsection (4) requires the government to prove only that the defendant was an investment adviser and that the defendant “engage[d] in any act, practice, or course of business which is fraudulent, deceptive, or manipulative.”

Id. § 80b-6(4).

Lacking any reference to clients, subsection (4) appears to be a general prohibition against certain conduct by an investment adviser. See Jordan, 915 F. 2d 622, 628 (11th Cir.1990) (““‘[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposefully in the disparate inclusion or exclusion.” ’ ” (quoting Rodriguez v. United States, 480 U.S. 522, 525, 107 S.Ct. 1391, 1393, 94 L.Ed.2d 533 (1987) (per curiam))), cert. denied, 499 U.S. 979, 111 S.Ct. 1629, 113 L.Ed.2d 725 (1991).

The legislative history of the Investment Advisers Act does not contradict this reading of section 80b-6.

In 1960, Congress amended the Investment Advisers Act by adding subsection (4).

Act of Sept. 13, 1960, Pub.L.

No. 86-750, § 9, 74 Stat. 885, 887.

The Senate Report accompanying the 1960 amendment stated that the purpose of the new subsection was to “empower the [SEC] by rule to define and prescribe means reasonably designed to prevent fraudulent practices.” S.Rep.

No. 1760, 86th Cong., 2d Sess. (1960) (emphasis added), reprinted in 1960 U.S.C.C.A.N. 3502, 3503.

Because of the general language of the statutory antifraud provision and the absence of any express rulemaking power in connection with them, it is not clear what fraudulent and deceptive activities are prohibited by this act and as to how far the Commission is limited in this area by common-law concepts of fraud and deceit.

These include proof of a (1) false representation of; (2) a material; (3) fact; (4) the defendant must make it to induce reliance; (5) the plaintiff must rely on the false representation; (6) and suffer damage as a consequence.

In order to overcome this difficulty, section 9 of the bill would amend [15 U.S.C. § 80b — 6] to add a prohibition against engaging in conduct which is fraudulent, deceptive, or manipulative and to authorize the Commission by rules and regulations to define, and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative.

Id. (emphasis added), reprinted in 1960 U.S.C.C.A.N. at 3509.

Thus, the legislative history of the 1960 amendment also indicates an intent to prohibit fraudulent practices or conduct, without regard to whether the victim is in an adviser-client relationship with the investment adviser. Indeed, Congress’s primary concern appeared to be the possible limitations imposed by common-law concepts of fraud and deceit, which require reliance but no other relationship between the plaintiff and the defendant.

As demonstrated above, both Elliott and Melhorn were investment advisers within the meaning of section 80b-2(a)(ll).

There is ample evidence in the record to show that they both engaged in acts, practices, or courses of business in violation of section 80b-6(4).

Therefore, we conclude that the evidence was sufficient to support Elliott and Melhorn’s convictions under the Investment Advisers Act. C.

Restitution We initially remanded this case to the district court because its original restitution orders improperly delegated the determination of Elliott and Melhorn’s restitution to the probation office.

Following one status conference before the district court and two such conferences before a magistrate judge, the district court issued an order that accepted the magistrate judge’s calculation of victim loss.

The district court’s order on remand, however, contained no other findings of fact or additional instructions; additionally, the order failed to vacate the court’s original restitution orders.

Elliott and Mel-horn appealed from the order on remand, and we consolidated that appeal with their earlier, stayed appeal.

At oral argument, the government conceded the need to remand this ease again to the district court for the following, necessary proceedings: (1) vacate the original orders of restitution set forth in appellants’ judgment and commitment orders; (2) identify the statutory basis for ordering restitution; (3) make a finding regarding appellants’ ability to pay restitution; (4) provide a schedule or time period for payment of restitution; and (5) order that appellants receive credit for any future amounts paid to the victims.

Appellee’s Supplemental Brief at 1.

We agree that the district court’s order on remand was deficient in each of these respects.

Therefore, we remand the case to the district court with instructions to address each of these issues.

In addition to the restitution issues denominated by the government, there are two issues remaining before this court: (1) which of those investors affected by the Elliott Enterprises investment scheme are “victims” for the purposes of the Victim and Witness Protection Act (VWPA),¹⁸ U.S.C. § 3663, et seq.; and (2) whether the district court, in ordering restitution, must account for the value of assets already surrendered by Elliott and Melhorn to the receiver. We review de novo such questions regarding the legality of a restitution order. Cobbs, 967 F. 2d 1555, 1556 (11th Cir.1992) (per curiam).