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UNITED STATES v. SHKOLIR

August 24, 1998

UNITED STATES OF AMERICA, against MARK SHKOLIR, and ERIC VAINER, a/k/a "Eric Cohen", Defendants.


The opinion of the court was delivered by: LEISURE

OPINION AND ORDER

 LEISURE, District Judge :

 On May 21, 1998, following a two-and-one-half-week jury trial, defendants Mark Shkolir and Eric Vainer, a/k/a "Eric Cohen", each were convicted of one count of conspiracy to commit securities fraud, mail fraud, and wire fraud, in violation of 18 U.S.C. § 371. Both defendants now move for judgment of acquittal pursuant to Rule 29 of the Federal Rules of Criminal Procedure, or in the alternative for a new trial pursuant to Fed. R. Crim. P. 33. For the reasons stated in this Opinion, the motions are denied.

 BACKGROUND

 Defendants' convictions relate to their participation in a conspiracy to sell stock in Millennium Software Solutions, Inc. ("Millennium"). In unsolicited telephone calls and in a purported private placement offering memorandum, potential investors were informed that Millennium was a computer company developing a solution to the "millennium bug" or "Year 2000 problem" that has gained much notoriety in the recent past. Potential investors also were led to believe that Charles Schwab & Co. ("Schwab"), a large brokerage firm, was involved in the private placement. See Trial Transcript (hereinafter, "Tr.") 36-39, 68, 340-43, 494-95; see also Government Exhibit ("GX") 1. During the trial, the Government produced evidence tending to show that Millennium was a shell company with no on-going business and no promise of future activity. For instance, the address designated as Millennium's Wall Street headquarters was a mail drop and its main phone number was connected to a business answering service. See Tr. 206, 219. Despite efforts to do so, the Government was unable to uncover any evidence that Millennium engaged in any business operations beyond raising funds. See Tr. 749-51. Influenced by misrepresentations by the cold-callers and in the offering memorandum, over forty people attempted to invest a total of approximately $ 360,000 in Millennium in the last months of 1997.

 Shkolir and Vainer undertook certain activities on Millennium's behalf. On or about November 1, 1997, they executed the paperwork needed to obtain for Millennium a mailing address at Mail Boxes Etc., with Shkolir signing a contract that identified Millennium as a computer consulting company. See Tr. 179-93; see also GX 640. Defendants later procured a Wall Street mailing address for Millennium by executing an agreement with Service Resource Industries, Inc. ("SRI"), another company that provides mail and phone services to businesses. Shkolir and Vainer completed and signed a rental form in connection with this transaction, remitting $ 207.84 to open the account. See Tr. 208-216; see also GX 620, 622.

 On November 12, 1997, Shkolir opened an account in Millennium's name at Republic National Bank in New York. See Tr. 559-64; see also GX 550. Shkolir subsequently attempted to deposit additional funds into the Republic account. See Tr. 930-31; see also GX 427. One day after opening the account at Republic, Vainer and Shkolir used a starter check from that account to open an account in Millennium's name at the World Trade Center branch of Schwab. See Tr. 239-42; see also GX 104. Vainer attempted to deposit checks from investors into Millennium's Schwab account and sought to obtain information about withdrawing funds from the account. See Tr. 247-51; see also GX 101, 102. Vainer and Shkolir later visited the Schwab branch at the World Trade Center together and met with a Schwab employee in order to inquire about the status of funds deposited into Millennium's account. See Tr. 609-11.

 On December 5, 1997, defendants returned to Schwab to inquire again about the status of Millennium's account. While defendants believed they were conversing with a Schwab compliance officer, they actually met with Special Agent Bill McGrogan of the Federal Bureau of Investigation ("FBI"), acting in an undercover capacity. See Tr. 757-62. This meeting was recorded. Finally, defendants returned to Schwab's World Trade Center branch on December 8, 1997, at which time they were arrested. See Tr. 802-05. Defendants subsequently were indicted and convicted on one count each of criminal conspiracy.

 DISCUSSION

 I. Applicable Legal Standards

 A. Rule 29

 Both defendants move for judgment of acquittal pursuant to Rule 29 of the Federal Rules of Criminal Procedure. When a defendant moves pursuant to Rule 29, the district court must determine, based on all of the relevant evidence, whether a rational juror "might fairly conclude guilt beyond a reasonable doubt." United States v. Mariani, 725 F.2d 862, 865 (2d Cir. 1984) (quoting United States v. Taylor, 464 F.2d 240, 243 (2d Cir. 1972)). The district court must draw all reasonable inferences in the favor of the Government, see Mariani, 725 F.2d at 865, and must resolve all issues of credibility in favor of the jury's verdict. See, e.g., United States v. Weiss, 930 F.2d 185, 191 (2d Cir. 1991); United States v. Roldan-Zapata, 916 F.2d 795, 802 (2d Cir. 1990). To succeed on the motion, a defendant must persuade the court that, "viewing the evidence in the light most favorable to the government, . . . no rational trier of fact could have found the essential elements of the crime charged beyond a reasonable doubt." United States v. Leslie, 103 F.3d 1093, 1100 (2d Cir.), cert. denied, 520 U.S. 1220, 137 L. Ed. 2d 837, 117 S. Ct. 1713 (1997) (quoting United States v. Taylor, 92 F.3d 1313, 1333 (2d Cir. 1996), cert. denied, 519 U.S. 1093, 136 L. Ed. 2d 717, 117 S. Ct. 771, 117 S. Ct. 772 (1997)).

 B. Rule 33

 Both defendants also move in the alternative for a new trial pursuant to Fed. R. Crim. P. 33. Rule 33 authorizes a district court to order a new trial if one is required in the interest of justice. Rule 33 confers broad discretion upon a trial court to set aside a jury verdict and order a new trial in order to avert a perceived miscarriage of justice. See United States v. Sanchez, 969 F.2d 1409, 1413 (2d Cir. 1992). A defendant seeking a new trial bears the burden of demonstrating the "essential unfairness of the [original] trial." United States ex rel. Darcy v. Handy, 351 U.S. 454, 462, 100 L. Ed. 1331, 76 S. Ct. 965 (1956). In adjudicating a Rule 33 motion, a court is entitled to weigh the evidence and, in so doing, to evaluate the credibility of witnesses. See Sanchez, 969 F.2d at 1413. However, a court should exercise its discretion under Rule 33 sparingly, granting a new trial only in exceptional circumstances. See id. at 1414.

 C. 18 U.S.C. § 371

 Defendants were convicted for violating 18 U.S.C. § 371. To establish a violation of § 371, the Government must prove beyond a reasonable doubt that two or more persons entered into the unlawful agreement charged in the Indictment, that the defendant in question knowingly and willfully became a member of the conspiracy, that one of the members of the conspiracy knowingly committed at least one of the overt acts charged in the Indictment, and that the overt act was committed in furtherance of the conspiracy. See United States v. Wiley, 846 F.2d 150, 153-54 (2d Cir. 1988) (Cardamone, J.); see also United States v. Wallach, 935 F.2d 445, 470 (2d Cir. 1991). The Indictment in the instant case charged defendants with conspiring to commit (1) securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff; (2) securities fraud in violation of 15 U.S.C. §§ 77q(a) and 77x; (3) mail fraud in violation of 18 U.S.C. § 1341; and (4) wire fraud in violation of 18 U.S.C. § 1343. Put simply, the Government claimed that defendants conspired to sell worthless shares in a bogus company, Millennium.

 II. Shkolir's Motions

 A. Rule 29

 Shkolir moves for judgment of acquittal on the ground that the evidence adduced at trial was insufficient to prove beyond a reasonable doubt that Shkolir knowingly entered into any conspiracy. Shkolir claims that the jury should have acquitted him because the evidence equally supports the conclusions that he was a knowing conspirator and an innocent dupe. The Court ...


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