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United States v. Hatfield

July 7, 2010

UNITED STATES OF AMERICA,
v.
SANDRA HATFIELD, DAVID H. BROOKS, PATRICIA LENNEX, DEFENDANTS.



The opinion of the court was delivered by: Seybert, District Judge

MEMORANDUM AND ORDER

Pending before the Court is Sandra Hatfield's Fed R. Crim. P. 29(a) motion for a judgment of acquittal. For the foregoing reasons, that motion is GRANTED IN PART AND DENIED IN PART.

BACKGROUND

Ms. Hatfield is on trial for: (1) securities fraud and conspiracy to commit securities fraud (Counts 1 and 2); (2) mail fraud, wire fraud, and conspiracy to commit mail fraud and wire fraud (Counts 3-5); (3) insider trading (Counts 12-14); and (4) obstruction of justice and conspiracy to obstruct justice (Counts 15-16). The Government has rested. Filing this motion, Ms. Hatfield contends that the Government's evidence is insufficient to convict her.

DISCUSSION

I. Standard Of Review

Federal Rule of Criminal Procedure 29 provides that, on a defendant's motion, the trial court "must enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction." A Rule 29(a) motion focuses upon the sufficiency of the Government's evidence in its case in chief. "Under Rule 29, a district court will grant a motion to enter a judgment of acquittal on grounds of insufficient evidence if it concludes that no rational trier of fact could have found the defendant guilty beyond a reasonable doubt." United States v. Jackson, 335 F.3d 170, 180 (2d Cir. 2003). Thus, "the court may enter a judgment of acquittal only if the evidence that the defendant committed the crime is nonexistent or so meager that no reasonable jury could find guilt beyond a reasonable doubt." United States v. Guadagna, 183 F.3d 122, 130 (2d Cir. 1999) (internal citations and quotations omitted). The Court must view the evidence "in the light most favorable to the Government and all permissible inferences drawn in the Government's favor." Jackson, 335 F.3d at 180.

II. The Obstruction Of Justice Counts

Although Ms. Hatfield moves for acquittal on all counts, her brief devotes most of its attention to Counts 15 and 16, which charge her with obstructing justice and conspiring to obstruct justice. So the Court considers these counts first. Having done so, the Court finds that a rational jury could convict Ms. Hatfield of these charges on at least two grounds.*fn1

First, the evidence supports a finding that Ms. Hatfield sought to mislead FTI, the independent auditor DHB hired to respond to a pending SEC investigation, with respect to the gross profit margin ("margin") that DHB and TAP earned. Specifically, the jury could find that Ms. Hatfield determined that TAP earned a 39% margin, while DHB earned only an 8% margin. Tr. 5621-5624. The jury could further find that, after FTI began its investigation, Ms. Hatfield realized that it was "bad" that TAP's profit "was greater than the profit made by Point Blank." Tr. 5621. The jury could then find that Ms. Hatfield, along with her co-conspirators, gave FTI inaccurate numbers "[s]o TAP would make less money on paper." Tr. 5626-27; see also Tr. 6132-6133. In so doing, the jury could find that Ms. Hatfield sought to falsely make it appear that DHB's profit "was the same or similar to the profit on Tactical Armor Products. So it would appear to be at arm's length." Tr. 5629; see also Tr. 6133. And the jury could find that Ms. Hatfield's conduct included altering DHB's financial data, "to bring up... DHB's percent to a more reasonable level," so "it would appear that the transactions between the companies were at arm's length and reasonable." Tr. 5630-31. And, because DHB hired FTI to respond to an SEC investigation, the jury could find that -- in misleading FTI -- Ms. Hatfield sought to obstruct the SEC. See U.S. v. MacPherson, 424 F.3d 183, 193 (2d Cir. 2005) (the jury can draw "reasonable inferences" regarding a defendant's mens rea).

Second, the jury could find that Ms. Hatfield obstructed justice, and conspired to obstruct justice, by signing a backdated lease agreement with TAP. Specifically, the jury could find that although dated in 2001, Ms. Hatfield actually signed the lease in 2003, and created this document to manufacture the false appearance that TAP used DHB's space on an "arm's length" basis. Tr. 5918. And the jury could reasonably infer that Ms. Hatfield did so in response to UNITE's letter to the SEC, which accused DHB of failing to report its related party transactions with TAP. Among other things, this backdated lease was prepared as part of a binder DHB created to respond to UNITE's letter. Tr. 5889-5890. And DHB gave this binder to its auditors, "various attorneys, anybody and everybody." Tr. 5890. Given these facts, the jury can reasonably infer that Ms. Hatfield executed this backdated contract as part of a conspiracy to frustrate any inquiry the SEC might make into UNITE's allegations. See MacPherson, 424 F.3d at 193.

III. The Remaining Counts

Ms. Hatfield's Rule 29 motion does not seek to dismiss the Superseding Indictment's remaining counts on a count-by-count basis. Instead, Ms. Hatfield seeks to strike certain narrative portions of the Superseding Indictment. Ms. Hatfield then argues that, if these narrative portions are struck, the Superseding Indictment's remaining counts cannot ...


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