UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
January 6, 2012
UNITED STATES OF AMERICA,
KAMAL A BDALLAH, DEFENDANT.
The opinion of the court was delivered by: Judge Joseph F. Bianco United States District Judge
MEMORANDUM AND ORDER
January 6, 2012
JOSEPH F. BIANCO, District Judge: claims that there was insufficient evidence to support the wire fraud charge. In his On March 7, 2011, defendant Kamal motion for a new trial, defendant seeks to Abdallah (hereinafter "Abdallah" or overturn his conviction on the following "defendant") was convicted following a jury four grounds: (1) there was a constructive trial of one count of conspiracy to commit amendment or prejudicial variance to the securities and wire fraud, 18 U.S.C. superseding indictment; (2) the government §§ 1343, 1348 and 1349, one count of withheld witness statements in violation of securities fraud, 18 U.S.C. § 1348, and one Brady v. Maryland, 373 U.S. 83 (1963); (3) count of wire fraud, 18 U.S.C. § 1343. the government improperly introduced evidence of the defendant's prior bad acts in On July 1, 2011, defendant moved for a violation of Federal Rule of Evidence judgment of acquittal, pursuant to Federal 404(b); and (4) the government misled the Rule of Criminal Procedure 29, and for a jury during its rebuttal summation. new trial, pursuant to Federal Rule of Criminal Procedure 33(a). In his motion for For the reasons set forth below, the a judgment of acquittal, defendant argues Court denies defendant's motion for that venue in the Eastern District of New judgment of acquittal and defendant's York ("EDNY") was not proper for the motion for a new trial in their entirety. conspiracy charge, the securities fraud charge, or the wire fraud charge, and contends that the government manufactured venue as to each count. Defendant also
B. The Trial
A. Superseding Indictment Familiarity with the trial record is presumed. However, the Court briefly
The grand jury returned a superseding summarizes below the evidence relevant to indictment ("Superseding Indictment") the instant motions. The evidence is against the defendant on August 17, 2010 in construed in the light most favorable to the seven counts, including conspiracy to government, as required under Rule 29 of commit securities and wire fraud, the Federal Rules of Criminal Procedure. substantive securities fraud, and five counts of wire fraud. The Superseding Indictment 1. Relevant Companies and Loans charged that between June 2009 and August 2009, the defendant paid Eric T. Seiden to The defendant was the CEO and create false demand for stock in Universal Chairman of the Board of UPDV, an oil and Property Development and Acquisition gas services company. (Tr. 671, 1013-14.)*fn1
Corporation ("UPDV"), which inflated The defendant was also Chairman of the UPDV's share price. (Sup. Ind., ¶¶ 4-9.) Board of Continental Fuels ("Continental"), Defendant and an individual named Roger an oil products-related company in which Kainth then allegedly sold their UPDV stock UPDV owned a controlling interest. (Tr. at these artificially high prices. (Sup. Ind., 677-78.) ¶¶ 5, 9.) The indictment also alleged that, during a phone call that Seiden made to the In April 2007, Sheridan Asset defendant on July 28, 2009, while Seiden Management, LLC ("Sheridan"), a was in the EDNY, the defendant and Seiden commercial finance and investment discussed a scheme to manipulate the stock management company, lent UPDV about price of UPDV and another company called $3.6 million. (Tr. 671-72.) In August 2007, Alphatrade. (Sup. Ind., ¶ 11.) During that Sheridan extended an additional $3.25 discussion, the defendant allegedly asked million to UPDV. (Tr. 675-77.) In Seiden to place fraudulent trades for December 2007, Sheridan lent Continental Alphatrade at a certain price in order to $5.5 million so that Continental could artificially inflate the price and allow acquire Geer Tank Trucks, Inc. ("Geer"). defendant and Kainth to sell their stock. (Tr. 677-79.) That same month, Sheridan (Sup. Ind., ¶ 11.) extended Continental a $3 million line of credit. UPDV guaranteed the loan and the Before the trial began, the government line of credit. (Tr. 680.) voluntarily dismissed three counts of wire fraud on venue grounds, and proceeded at In October 2008, UPDV stopped making trial on Count One charging conspiracy to payments to Sheridan on the $3.6 and $3.25 commit wire fraud, Count Two charging million loans and went into default on both. substantive securities fraud, and Count (Tr. 684-87.) That month, Continental Seven charging wire fraud on or about July stopped producing collateral reports to 28, 2009 (which was re-numbered as Count Sheridan. (Tr. 688.) Bank statements for Three for purposes of the jury's Continental and UPDV show that $4 million consideration). The trial began on February was transferred on October 14, 2008 from 14, 2011 with the selection of the jury. Geer to Continental, then to UPDV. (Tr. 693-94, 695-97; Gvt. Ex. 166.) On the same artificially increase trading volume in day, $3.5 million was transferred from UPDV stock. (Tr. 877-882; Gvt. Exs. 213, UPDV to the defendant's personal bank 214.) Between June 1 and June 19, 2009, account. (Tr. 699; Gvt. Ex. 165.) Defendant defendant and Kainth bought or sold UPDV later acknowledged that he lost $3 million stock every day that the stock market was out of the $3.5 million that was transferred open, buying a total of over 30 million to his account by engaging in currency shares, and selling 28.5 million shares. (Tr. trading. (Tr. 699-700.) Because of 881; Gvt. Ex. 215.) Moreover, their trading defendant's actions, Geer was unable to pay activity was very similar. For example, on its suppliers and began to bounce checks. June 4, 2009, defendant bought 3,921,500 (Tr. 701-02.) UPDV shares in his Fidelity brokerage account, and sold 1,206,953 UPDV shares in In December 2008, defendant resigned his Ameritrade account. (Tr. 878; Gvt. Ex. from UPDV, Continental, and all related 213.) Similarly, on June 1, 2009, Kainth companies. At that point, UPDV owed bought a total of 424,999 UPDV shares in Sheridan more than $14 million. (Tr. 704- his E*Trade and Schwab accounts and sold 06.) 5,999,994 shares in his Schwab account. (Gvt. Ex. 214.) In addition, Kainth, who sold 2. Issuance of 600 Million UPDV Shares more shares than he bought, sent some of the proceeds of such sales to the defendant.
On October 27, 2008, after the defendant (Tr. 893-97.) Finally, once the defendant had already taken the above-referenced was introduced to Seiden on June 18, 2009, money from Geer, he sent an email to and Seiden began fraudulently inflating the UPDV's transfer agent asking the transfer demand in the UPDV shares, defendant and agent to issue 600 million UPDV shares in Kainth ceased their pattern of buying and the name of Mohamed Abdellatif Yassine. selling UPDV shares between their (Tr. 304-05, 1120; Gvt. Ex. 98.) The accounts, and began to almost exclusively defendant asserted that the 600 million sell their UPDV shares. (Gvt. Exs. 215, shares could be properly issued because he 218.) had converted into common stock some 15,000 shares of Preferred B stock that 4. Defendant and Eric Seiden UPDV had issued to him on December 27, 2007. (Gvt. Ex. 98.) The defendant also Defendant first spoke to Seiden during a requested that the stock certificates be sent phone conference on June 18, 2009. (Tr. by the transfer agent overseas to Al 394-95.) Seiden told the defendant that he Mawarid Financial Services ("AM had a lot of relationships with people and Financials") in Beirut, Lebanon. (Id.) The could buy a lot of stock. (Tr. 398-99.) The stock certificates were issued and sent defendant agreed to wire Seiden money if overseas as instructed by the defendant. Seiden successfully procured buy orders for (Id.) UPDV shares. Defendant also agreed to pay
Seiden 25 percent of the purchase price of
3. Defendant and Roger Kainth any of the UPDV shares that Seiden bought. (Tr. 400-01.) That same day, Seiden bought
Beginning in June 2009, defendant and a few million UPDV shares, and defendant Roger Kainth used different brokerage wired him $3,500. (Tr. 402-04; Gvt. Ex. 18.) accounts to buy and sell UPDV shares between their respective accounts in order to After June 18, 2009, Seiden continued to defendant wired Seiden $3,500 on that day. place buy orders in UPDV stock on the (Tr. 425-46; Gvt. Ex. 18.) defendant's behalf. (Tr. 407-08.) To do so, Seiden called brokerage firms pretending to On June 25 and 26, 2009, which were be various individuals from institutional the days Seiden placed false buy orders with investors who had existing accounts at the Dinosaur Securities for a total of 38 million brokerage firms. (Tr. 408.) During these UPDV shares, the defendant sold about 8.2 phone calls, Seiden would place buy orders million UPDV shares in his personal into the accounts of the investors he was brokerage accounts. (Gvt. Ex. 216.) On June impersonating. Seiden placed fake buy 25, 2009, the defendant exchanged forty-orders on June 22, June 25, June 26, July 7, five telephone calls and text messages with and July 8, 2009 at brokerage firms such as Seiden and, on June 26, 2009, they Cantor Fitzgerald, Dinosaur Securities, Roth exchanged nineteen telephone calls and text Capital Partners, and Royal Bank of Canada messages. (Gvt. Ex. 211.) Moreover, Capital Markets. (Tr. 41-43, 70-74, 119-125, defendant deposited $2,000 into Seiden's 134-35, 155-56.) bank account on June 25, 2009, and Seiden received a payment of $9,800 on June 26, Between June 19 and July 10, 2009, 2009, from one of defendant's companies. defendant and Seiden communicated several (Tr. 426-28.) Seiden also received another times per day by phone and through text wire from the defendant in the amount of messages. (Tr. 404-05.) Through these $5,000 on July 1, 2009. (Tr. 431.) communications, defendant told Seiden how many shares to buy, the price that UPDV On July 7, 2009, which was the day shares were selling for at the time, and the Seiden put in a false buy order with Roth price at which defendant wanted to sell the Capital Partners, defendant sold about 2.4 shares, which was "always above where the million UPDV shares in his personal market was trading." (Tr. 405, 407, 411.) brokerage accounts. (Gvt. Ex. 216.) On that day, Seiden and the defendant exchanged On days that Seiden successfully placed twenty-five telephone calls and text a fake buy order, the defendant sold or messages. (Gvt. Ex. 211.) attempted to sell UPDV stock. (Gvt. Ex. 216.) He also made multiple phone calls or On July 8, 2009, which was the day that text messages on those days, and wired Royal Bank of Canada Capital Markets money to Seiden on or around the days bought 95 million shares for Seiden based when Seiden placed the buy orders. (Gvt. upon a false buy order, defendant tried to Ex. 211; Tr. 287-88, 425-28, 431.) sell 30 million UPDV shares through an account at AM Financials in Lebanon. In For example, on June 22, 2009, which particular, at 3:39 p.m., the defendant made was the day Seiden placed fraudulent buy a twelve minute call to AM Financials. (Tr. orders with Cantor Fitzgerald for 10 million 852; Gvt. Ex. 212.) While the defendant was UPDV shares, defendant sold about 5.3 on the telephone with AM Financials, an million UPDV shares in his personal order was placed by AM Financials to sell brokerage accounts. (Gvt. Ex. 216.) On that 30 million UPDV shares through another day, there were twenty-eight phone calls and brokerage firm called Pinnacle. (Tr. 848-49; text messages between the defendant and Gvt. Ex. 95.) Moreover, while the defendant Seiden. (Gvt. Ex. 211.) In addition, the was on the telephone with AM Financials, he also received two calls from Seiden, and appeared to place AM Financials on hold to 2009, Kainth sold more than 10 million speak to Seiden. (Tr. 852; Gvt. Ex. 212.) UPDV shares; (c) on June 26, 2009, Kainth AM Financials subsequently reported to sold 4.47 million UPDV shares; and (d) on Pinnacle that the sell order for 30 million July 7, 2009, Kainth sold approximately 8 shares was an unsolicited trade that was million UPDV shares. (Gvt. Ex. 217.) placed by one of its clients. (Tr. 620; Gvt. Kainth also wired a portion of the proceeds Ex. 96.) AM Financials described its client from the UPDV shares to the defendant. (Tr. as a "heavy trader" who "work[ed] a lot on 893-96.) penny stocks" and who "also trades futures, currencies, oil, natural gas, et cetera." (Tr. 6. In-Person Meeting in Texas Between 622; Gvt. Ex. 96.) In addition, AM Seiden and the Defendant Financials reported that its client was "a big shareholder in UPDV and [had] been trading On July 15, 2009, Seiden flew to San the stock for more than a year." (Tr. 622; Antonio, Texas, where defendant resided, to Gvt. Ex. 96.) The 30 million share trade was meet with defendant. (Tr. 436, 441, 998-99.) subsequently "busted," or cancelled, at the The defendant paid for Seiden's flight. (Tr. request of RBC, who had bought the AM 437.) During the visit, the defendant and Financials shares. (Tr. 614-16.) During his Seiden discussed putting in buy orders for trial testimony, Seiden recalled that the UPDV and another company defendant defendant had told him that he received a owned shares in called Alphatrade. (Tr. 442-call from one of his overseas traders about a 43, 445.) Later that day, Seiden told cancelled trade, which had resulted from the defendant his particular fraudulent technique compliance department of the brokerage for securing the buy orders. Specifically, firm stating there was a problem on the buy Seiden told the defendant that he (Seiden) side of defendant's trade.*fn2 (Tr. 432-33.) was telling brokerage firms that he had accounts there, when in fact he did not. (Tr. 5. Kainth's Trades Between June 22, 2009 446.) Seiden explained to the defendant that and July 8, 2009 some buy orders failed because the firms figured out that Seiden did not have an
The evidence at trial demonstrated that account and refused to place the buy order. Roger Kainth sold UPDV shares in his (Id.) brokerage accounts on days that Seiden made the false buy orders, including on June The next day, defendant asked Seiden to 22, June 25, June 26, and July 7, 2009. (Gvt. buy more stock for him. (Tr. 447-48.) Ex. 217.) For example, Kainth made the Seiden said he was running out of firms to following trades: (a) on June 22, 2009, call, but the defendant agreed to provide Kainth sold 999,999 UPDV shares in his Seiden with more names of people to call. personal brokerage account; (b) on June 25, (Tr. 448.)
Both before and after Seiden's trip to brokerage account at a cost of $1,555. (Tr. In the two weeks or so after the July 31 903; Gvt. Ex. 36.) phone calls, defendant sent multiple text messages to Seiden imploring him to contact 7. Seiden's Cooperation and Subsequent him so they could keep working together. Phone Calls (Gvt. Ex. 10.) For example, on July 31, 2009, at 1:57 p.m., defendant sent a text The FBI arrested Seiden on July 21, message to Seiden stating: "Eric U wanna 2009. (Tr. 448.) On July 21, July 28, and do 20 or 25 and let's see what happens." (Tr. July 31, 2009, Seiden made consensually 214; Gvt. Ex. 10.) On August 2, 2009, recorded phone calls to the defendant. (Gvt. defendant sent Seiden the following text Exs. 4, 5, 6.) Seiden was located in the message: "Eric Let's chat to prepare for the EDNY when he made the July 28, 2009 week!?" (Id.) On August 3, 2009, defendant phone call. (Gvt. Ex. 5.) During these calls, sent the following text message to Seiden: defendant requested that Seiden continue "Good morning eric, hope all is well call me placing fake buy orders for UPDV and for let's put a strategy together." (Tr. 215; Gvt. Alphatrade. In the July 21, 2009 call, for Ex. 10.) On August 6, 2009, defendant sent example, defendant told Seiden to buy 25 to Seiden the following text message: "Young 50 million shares of UPDV every other day man, call me let's make some money." (Tr. and to try to raise the price of UPDV. (Gvt. 219; Gvt. Ex. 10.) On August 10, 2009, Ex. 4.) In exchange, the defendant agreed to defendant sent the following text to Seiden: provide a kickback to Seiden of 25 percent "What's going young man please call me, of whatever shares they were able to sell. let's do something here." (Tr. 221; Gvt. Ex. (Id.) 10.)
In the July 28, 2009 call, during which 8. Defendant's Testimony
Seiden told the defendant that he was "still in New York," defendant told Seiden to put At trial, defendant testified on his own in buy orders for UPDV at up to $0.0045 per behalf. (Tr. 998-1383.) During that share, even though UPDV was trading testimony, the defendant testified in detail as between $0.0024 and $0.0028 per share. to the circumstances that led to his (Gvt. Ex. 5.) The defendant again mentioned transactions with Seiden and denied any that he would pay Seiden a kickback of 25 knowledge that Seiden was fraudulently percent on all shares that were sold. (Id.) inflating the price of stocks.
In calls on July 31, 2009, the defendant 9. The Verdict and Seiden again discussed the UPDV buy orders. (Gvt. Ex. 6-9.) Seiden said "you On March 7, 2011, the jury found the know how I'm doing it" and agreed that if defendant guilty on all three remaining the brokerage firms realized how Seiden was counts of the Superseding Indictment -- buying the stock, defendant would not tell namely, Counts One, Two, and Seven. them that he knew Seiden. (Gvt. Ex. 6.)
Seiden told the defendant that he had to be C. The Post-Trial Motions "cautious because of what I do." (Gvt. Ex. 8.) Seiden explained that he was talking By letter filed May 10, 2011, defendant "outta my, my butt when I tell them who I Abdallah requested that he be allowed to am and everything," and that he had to proceed pro se. On July 1, 2011, following a "pretend who I am." (Id. at 2, 3.) hearing pursuant to Faretta v. California, 422 U.S. 806 (1975), the Court granted 1. Legal Standard Abdallah's application to proceed pro se and, with the consent of Abdallah, his Motions under Rule 29(c) are governed former counsel was appointed to be his legal by the same standard as motions under Rule advisor. 29(a). Pursuant to Rule 29(a), a district court shall enter a judgment of acquittal as to "any On July 1, 2011, Abdallah filed a motion offense for which the evidence is for judgment of acquittal, pursuant to Rule insufficient to sustain a conviction." Fed. R. 29 of the Federal Rules of Criminal Crim. P. 29(a). Rule 29(c) permits a Procedure, and a motion for a new trial, defendant to "move for a judgment of pursuant to Rule 33 of the Federal Rules of acquittal, or renew such a motion, within 14 Civil Procedure. On August 11, 2011, the days after a guilty verdict or after the court government filed its opposition to discharges the jury, whichever is later." Fed. Abdallah's motions. On August 26, 2011, R. Crim. P. 29(c). However, as set forth Abdallah filed his reply. On September 15, below, "'[a] defendant bears a heavy burden and 21, 2011, the Court heard oral argument in seeking to overturn a conviction on on the motions. At oral argument on grounds that the evidence was insufficient.'" September 21, 2011, the Court permitted United States v. Lorenzo, 534 F.3d 153, 159 Abdallah to file a supplemental document (2d Cir. 2008) (quoting United States v. containing a chronology of events in Cruz, 363 F.3d 187, 197 (2d Cir. 2004)); connection with his motions. Abdallah also accord United States v. Pipola, 83 F.3d 556, made additional submissions following the 564 (2d Cir. 1996) (citing Glasser v. United argument. The Court has fully considered States, 315 U.S. 60, 80 (1942)); see also the arguments and submissions of the United States v. Tillem, 906 F.2d 814, 821 parties. (2d Cir. 1990) (stating that motions to challenge sufficiency of evidence "rarely
II. DISCUSSION carry the day").
A. Motion for Judgment of Acquittal The standard under Rule 29, as articulated by the United States Supreme
Defendant Abdallah filed a Rule 29(c) Court, is "whether, after viewing the motion requesting a judgment of acquittal on evidence in the light most favorable to the the following grounds: (1) venue was prosecution, any rational trier of fact could improper on each of the three counts; and have found the essential elements of the (2) there was insufficient evidence to crime beyond a reasonable doubt.'" Jackson support a conviction on the wire fraud*fn3 v. Virginia, 443 U.S. 307 (1979); accord count. As discussed below, the Court finds United States v. Finnerty, 533 F.3d 143, 148 each of these arguments to be without merit. (2d Cir. 2008); Lorenzo, 534 F.3d at 159; United States v. Irving, 452 F.3d 110, 117 defendant committed the crime alleged is evidence in its totality. See United States v. nonexistent or so meager that no reasonable Rosenthal, 9 F.3d 1016, 1024 (2d Cir. jury could find guilt beyond a reasonable 1993); see also Guadagna, 183 F.3d at 130 doubt.'" Temple, 447 F.3d at 136 (quoting (holding that sufficiency test must be United States v. Guadagna, 183 F.3d 122, applied "to the totality of the government's 130 (2d Cir. 1999) (internal quotation marks case and not to each element, as each fact omitted)). may gain color from others"). Finally, "[d]irect evidence is not required; '[i]n fact, It is important to emphasize that, in the government is entitled to prove its case evaluating the evidence under this standard, solely through circumstantial evidence, "courts must be careful to avoid usurping provided, of course, that the government still the role of the jury when confronted with a demonstrates each element of the charged motion for acquittal." United States v. offense beyond a reasonable doubt.'" Jackson, 335 F.3d 170, 180 (2d Cir. 2003); Lorenzo, 534 F.3d at 159 (quoting United see also United States v. Florez, 447 F.3d States v. Rodriguez, 392 F.3d 539, 544 (2d 145, 154-55 (2d Cir. 2006) ("In assessing Cir. 2004)); see also Irving, 452 F.3d at 117 sufficiency, we are obliged to view the ("A jury may convict on circumstantial evidence in its totality and in the light most evidence alone."); accord Jackson, 335 F.3d favorable to the prosecution, mindful that at 180; United States v. Martinez, 54 F.3d the task of choosing among permissible 1040, 1043 (2d Cir. 1995). However, "if the competing inferences is for the jury, not a evidence viewed in the light most favorable reviewing court."); Guadagna, 183 F.3d at to the prosecution gives equal or nearly 130 (holding that a court must bear in mind equal circumstantial support to a theory of that Rule 29 "does not provide [it] with an guilt and a theory of innocence, then a opportunity to substitute its own reasonable jury must necessarily entertain a determination of . . . the weight of the reasonable doubt." United States v. Glenn, evidence and the reasonable inferences to be 312 F.3d 58, 70 (2d Cir. 2002) (internal drawn for that of the jury") (citations and quotation marks omitted); accord United internal quotation marks omitted). States v. Cassese, 428 F.3d 92, 99 (2d Cir. 2005).
Therefore, viewing the evidence in the light most favorable to the government In short, "'[w]here a court concludes means "drawing all inferences in the after a full analysis of the evidence in government's favor and deferring to the connection with a Rule 29 motion that jury's assessments of the witnesses' 'either of the two results, a reasonable doubt credibility." United States v. Arena, 180 or no reasonable doubt, is fairly possible, F.3d 380, 391 (2d Cir. 1999) (citation and [the court] must let the jury decide the internal quotation marks omitted); accord matter.'" Temple, 447 F.3d at 137 (quoting United States v. James, 239 F.3d 120, 124 United States v. Autuori, 212 F.3d 105, 114 (2d Cir. 2000) ("[T]he credibility of (2d Cir. 2000)) (internal quotation marks witnesses is the province of the jury, and [a omitted; alteration in original). On the other court] simply cannot replace the jury's hand, "'in passing upon a motion for credibility determinations with [its] own.") directed verdict of acquittal, . . . if there is (quotation omitted). In examining the no evidence upon which a reasonable mind sufficiency of the evidence, the Court also might fairly conclude guilt beyond a should not analyze pieces of evidence in reasonable doubt, the motion must be isolation, but rather must consider the granted.'" Temple, 447 F.3d at 137 (quoting United States v. Taylor, 464 F.2d 240, 243 number of factors -- the site of the (2d Cir. 1972)). defendant's acts, the elements and nature of the crime, the locus of the
2. Challenges to Venue effect of the criminal conduct, and the suitability of each district for
Defendant Abdallah challenges venue on accurate factfinding . . .
each of the counts. As discussed below, the .
Court concludes that venue existed in the United States v. Reed, 773 F.2d 477, 481 (2d Eastern District of New York for each of the Cir. 1985); accord United States v. Royer, counts based upon an interstate telephone 549 F.3d 886, 893 (2d Cir. 2008). call between the defendant and Seiden on July 28, 2009, while Seiden was in this The government bears the burden of District, during which the fraudulent scheme proving venue by a preponderance of the was discussed and Abdallah directed that evidence. United States v. Smith, 198 F.3d Seiden make fraudulent purchases of 377, 382 (2d Cir. 1999); United States v. Alphatrade and UPDV stock in exchange for Naranjo, 14 F.3d 145, 146 (2d. Cir. 1994). a 25 percent kickback, so that Abdallah Courts "review the sufficiency of the could sell his stock at the artificially inflated evidence as to venue in the light most price caused by the fraudulent purchase. favorable to the government, crediting every
a. Applicable Law inference that could have been drawn in its favor." Smith, 198 F.3d at 382 (quotations
Two provisions of the U.S. Constitution omitted). guarantee that the defendant must be tried in the place where the crime was committed. Under 18 U.S.C. § 3237(a), venue Article III, section 2, states, in relevant part, properly lies in "any district in which such that criminal trials "shall be held in the State offense was begun, continued, or where the said Crimes shall have been completed." The Second Circuit, "[a]pplying committed." U.S. Const. art. III, § 2, cl. 3. this rule to the continuing crime of The Sixth Amendment guarantees that a conspiracy[,] . . . has held that venue may lie criminal defendant shall be tried "by an in any district in which the conspiracy was impartial jury of the State and district formed or in any district in which a wherein the crime shall have been conspirator committed an overt act in committed." U.S. Const. amend. VI. In furtherance of the criminal scheme." United furtherance of these provisions, Rule 18 of States v. Rommy, 506 F.3d 108, 119 (2d Cir. the Federal Rules of Criminal Procedure 2007). Any "act performed by any requires that, "[u]nless a statute or these conspirator for the purpose of accomplishing rules permit otherwise, the government must the objectives of the conspiracy" is an overt prosecute an offense in a district where the act, whether it is "innocent or illegal." offense was committed." Fed. R. Crim. P. United States v. Tzolov, 642 F.3d 314, 320 18. Moreover, in this Circuit, (2d Cir. 2011).
[T]here is no single defined policy or Phone calls can constitute overt acts in mechanical test to determine furtherance of a conspiracy. See Rommy, constitutional venue. Rather, the test 506 F.3d at 120 ("It is beyond question that is best described as a substantial telephone calls can constitute overt acts in contacts rule that takes into account a furtherance of a conspiracy."); Smith, 198 F.3d at 382; United States v. Naranjo, 14 18 U.S.C. § 3237(a) states that "[a]ny F.3d 145, 147 (2d. Cir. 1994); see also offense involving the use of the mails [or] United States v. Christo, 413 Fed. App'x transportation in interstate or foreign 375, 376 (2d Cir. 2011) ("the overt act can commerce . . . may be inquired of and be something as simple as a phone call in prosecuted in any district from, through, or furtherance of the conspiracy"). Moreover, into which such commerce [or] mail it is not legally significant whether the matter . . . moves." 18 U.S.C. § 3237(a). defendant is the conspirator in the district The Second Circuit has held that this statute where venue is being sought, or whether the applies when determining the appropriate defendant initiated or received the call; venue for wire fraud offenses. United States rather, phone calls into or out of a district v. Kim, 246 F.3d 186, 191-92 (2d. Cir. 2001) can establish venue in that district so long as district they further the ends of the conspiracy.*fn4 (affirming court conclusion that
See venue was proper in district where wires Rommy, 506 F.3d at 120 (venue proper were sent and received because "the act of based on calls from undercover government causing a wire to be transmitted in agent inside the venue to out-of-venue furtherance of a fraud is criminalized by the defendant); Smith, 198 F.3d at 382 (venue statute, and . . . a wire is 'transmitted' both proper based on co-conspirator's calls from where it was sent and where it was inside venue to victim outside of venue); received"); United States v. Gilboe, 684 Naranjo, 14 F.3d at 147 (venue proper F.2d 235, 239 (2d. Cir. 1982) (telexes and where defendant's out-of-venue co- phone calls to and from New York that conspirator made calls to inside-venue defendant "caused," as well as transfer of government informant); United States v. proceeds of fraud through New York so that Friedman, 998 F.2d 53, 57 (2d Cir. 1993) "such commerce" moved "from, through, or (venue proper based on out-of-venue into" New York pursuant to 18 U.S.C. § conspirator's phone call to inside-venue 3237(a) properly conveyed venue). conspirator, even though charges against inside-venue co-conspirator were later Because "venue must be proper with dropped). respect to each count," the Court reviews each count separately. Tzolov, 642 F.3d at With respect to the offense of wire fraud, 318 (quoting United States v. Beech-Nut (and also a new stock called Alphatrade) in a criminal enterprise of substantial scope at order to inflate the value of the stock and least if the act is of a nature justifying an allow Seiden to sell his shares at the inference of knowledge of the broader artificially inflated price. Defendant conspiracy.'" Huezo, 546 F.3d at 180 contends that the conspiracy ended when (quoting United States v. Tramunti, 513 F.2d Seiden was arrested in Florida by the FBI on 1087, 1112 (2d Cir. 1975)).
July 21, 2009 and became a government cooperator, and therefore
Seiden's post- Construing the evidence in the light most arrest phone
call to the defendant, at the favorable to the government, there was
direction of law enforcement, was not an sufficient evidence to
support the "overt act in furtherance of the conspiracy." continuation
of the conspiracy after Seiden's The government counters that the
arrest, based upon the ongoing efforts of the conspiracy continued
because Roger Kainth defendant and Kainth to pay Seiden to was still a
conspirator. Additionally, the fraudulently inflate the stock value of
UPDV government argues, the defendant's phone shares through fake
purchases of the stock, call urging Seiden to buy shares in order to
which would allow the defendant and Kainth drive up the stock price
was in furtherance to sell the UPDV stock at the fraudulently of the
conspiracy. As set forth below, the inflated stock. Although the
government had Court agrees with the government and no evidence that
Seiden spoke directly to concludes that there was sufficient evidence
Kainth, the government introduced to support a finding, beyond a
reasonable compelling evidence of Kainth's doubt, that the conspiracy
continued with involvement in the scheme with the the defendant and
Kainth after Seiden's defendant based upon the timing of Kainth's
arrest, and that the July 28 telephone call trading activities, and
the wiring of the between the defendant and Seiden was in proceeds of
those sales by Kainth back to furtherance of that conspiracy.
the defendant. In other words, the
evidence admitted at trial shows that Kainth and It is axiomatic that
the continuation of a defendant worked closely together to unload
conspiracy can be proven by circumstantial UPDV shares into Seiden's
false buy orders evidence. See United States v. Ortiz, 394 between
June 22 and July 8, 2009. (Gvt. Fed. App'x 722, 724-25 (2d Cir. 2010)
Exs. 216, 217.) In particular, on nearly all of (circumstantial
evidence sufficient for a the same days that Seiden entered his
rational jury to infer defendant's illegitimate buy orders, the
defendant and participation in full duration of conspiracy); Kainth
sold UPDV shares from their United States v. Stewart, 485 F.3d 666,
671 respective brokerage accounts. (Id.) (2d Cir. 2007) ("Both the
existence of a Moreover, Kainth wired the proceeds of his conspiracy
and a given defendant's UPDV sales to the defendant while the stock
participation in it with the requisite fraud scheme was ongoing. (Tr.
893-96.) knowledge and criminal intent may be The timing of these
trades and payments to established through circumstantial the
defendant certainly would allow a jury to evidence."); accord United
States v. Huezo, rationally infer that Kainth was a knowing 546 F.3d
174, 180 (2d Cir. 2008); United participant in the scheme.*fn5
States v. Morrison, 153 F.3d 34, 49 (2d Cir. 1998). In fact, the Second Circuit has pointed out that "'a single act may be Viewed in the light most favorable to the contradicted by binding Second Circuit government, there was sufficient evidence precedent. In particular, in Rommy, the for a jury to rationally conclude beyond a Second Circuit explicitly held that "a reasonable doubt that the conspiracy telephone call placed by a government actor continued through July 28, 2009, the date within a district to a conspirator outside the that Seiden called the defendant. See, e.g.,district can establish venue within the United States v. McDermott, 245 F.3d 133, district provided the conspirator uses the call 139 (2d Cir. 2001) ("Circumstantial to further the conspiracy." 506 F.3d at 122. evidence is a legitimate form of evidence in In Rommy, the telephone call at issue this Circuit, and in fact-intensive cases such involved calls to and from a government as this, requiring careful examination of actor in Manhattan to the defendant in the trading records and a myriad of public Netherlands. The Second Circuit explained: information, the jury is the appropriate body to determine a defendant's guilt or [W]e conclude that the critical factor innocence."). Accordingly, defendant's in conspiracy venue analysis is not venue challenge based upon purported whether it is a conspirator or a termination of the conspiracy on July 21, government actor who initiates the 2011 is without merit. call; nor does it matter whether the conspirator is communicating with Similarly, the Court concludes that the someone who is a knowing July 28, 2009 phone call was certainly in confederate, an undercover agent, or furtherance of the ongoing conspiracy. See an unwitting third party. What is Rommy, 506 F.3d at 120; Smith, 198 F.3d at determinative of venue -- as the 382. During the call, defendant told Seiden district court emphasized to the jury how many shares of UPDV and Alphatrade -- is whether the conspirator used the to buy, and told Seiden how high he wanted telephone call to further the him to drive up the stock price. (See Gvt. objectives of the conspiracy. Ex. 5.) The defendant also discussed paying
Seiden a kickback for helping him [ . . . ] manipulate the stock prices of UPDV and Alphatrade. (Id.)Thus, defendant clearly What matters is that the conspirator used the phone call with Seiden on July 28, speaks, not to hear the sound of his 2009 as a means to further the conspiracy, own voice, but to communicate to albeit unsuccessfully. his listener because he thinks that, by doing so, he furthers a conspiratorial To the extent that defendant argues that goal. Thus, the overt act may venue is insufficient because Seiden was a properly be understood to have government informant in this District at the occurred at the site where the listener time of the call while defendant was never in receives the conspirator's message. the district, that argument is flatly That an instrument of commerce or technology permits the conspirator to with Seiden. For example, in the July 28, 2011 communicate with his listener while conversation, when referring to trades that would be physically removed from him does made following the fraudulent inflation of the stock share by Seiden, defendant uses the plural term "we," not alter the fact that the conspirator rather than "I": "If we can sell this between fifteen has committed an overt act at the and twenty cents, then we'll, we'll have some cash." recipient's location. It means simply (Gvt. Ex. 5, line 41.)
that his communication is a scheme. (Gvt. Exs. 10, 11, 12A and 12B.) In continuing act, supporting venue in fact, on July 28, defendant sent as many as the district of its initiation as well as six text messages to Seiden before Seiden the district of its receipt. called him back. (Tr. 846; Gvt. Exs. 10, 12B.) Moreover, at the beginning of the Id.; see also United States v. Gonzalez, No. telephone call at issue on July 28, 2009, CR 10-00834 WHA, 2011 WL 500502, at Seiden explicitly told the defendant that he *3 (N.D. Cal. Feb. 9, 2011) ("The holding in was "still in New York." (Gvt. Ex. 5, line 4.) Rommy is also consistent with myriad After being told that Seiden was in New decisions from other circuits that have found York, defendant continued the conversation venue to be proper even if a defendant never and sought to have Seiden make fraudulent set foot in the district in question but instead purchases of stock, in exchange for a made telephone calls to and/or from one or kickback.*fn6 Thus, defendant clearly knew more individuals in that district as a part of that Seiden was in New York when the conspiracy.") (collecting cases). defendant tried to contact Seiden by Therefore, because the July 28 telephone telephone and then, when Seiden eventually call in the instant case was clearly in did contact defendant on July 28, defendant furtherance of the Abdallah/Kainth used the telephone call to try to further the conspiracy based upon defendant's attempt objective of his ongoing conspiracy with to get Seiden to fraudulently inflate the Kainth.
UPDV stock price, it establishes venue on the conspiracy count even though Seiden Finally, defendant's argument that the (not defendant) was the one in this District government failed to demonstrate and was working for the government at the "substantial contacts" with the district, time he initiated the call. pursuant to United States v. Reed, 773 F.2d 477, 481 (2d Cir. 1985), also fails. See In addition, the Court concludes that Tzolov, 642 F.3d at 321 (describing defendant knew that the overt act (namely, "substantial contacts" rule). In the instant the telephone call) was taking place in New case, given the particular facts -- where the York or, at the very least, it was reasonably defendant knew that Seiden was in New foreseeable to him. See Rommy, 506 F.3d at York, attempted to contact him, and then 123 ("[T]he law does not require a chose to engage in a telephone conversation defendant to have actual knowledge that an with Seiden that was clearly in furtherance overt act will occur in a particular district to of the conspiracy to commit mail and wire support venue at that location. At most, it fraud -- the "substantial contacts" rule is asks that the overt act's occurrence in the satisfied. Under these circumstances, it was district of venue have been reasonably not unfair or prejudicial for the defendant to Count Two did not lie in the EDNY because be tried for this conspiracy in this District. only Manhattan and California based See, e.g., Tzolov, 642 F.3d at 321 (rejecting brokerage firms were victimized by the argument that defendant's flights out of JFK stock fraud scheme, and there was no buying Airport did not satisfy Reed's "substantial or selling of UPDV shares in the EDNY. In contacts" rule); Rommy, 506 F.3d at 120 response, the government asserts that, (venue proper based on calls from although Seiden did place calls to brokerage undercover government agent inside the firms in Manhattan and California for venue to out-of-venue defendant); Smith, fraudulent purchases of stock in connection 198 F.3d at 382 (venue proper based on co- with his scheme with Abdallah, those earlier conspirator's calls from inside venue to acts are not the basis of the securities fraud victim outside of venue); Naranjo, 14 F.3d charge in Count Two; instead, the defendant at 147 (telephone calls in furtherance of the was charged in Count Two with securities conspiracy satisfied "substantial contacts" fraud in connection with the telephone call rule). In short, based on the particular overt Seiden made to the defendant on July 28, act that occurred in the District during the 2009, from the EDNY, during which the July 28, 2009 telephone call, the defendant's defendant directed Seiden to make venue challenge on the conspiracy count additional fraudulent purchases of certain under Reed fails.*fn7 stocks in exchange for a 25 percent kickback to Seiden. As discussed below, the Court In sum, the Court concludes that venue agrees with the government and concludes was proper as to the conspiracy count. that the July 28, 2009 telephone call was certainly an attempt by the defendant to
c. Venue on Count Two: Securities Fraud engage in securities fraud and, because that call was made from the EDNY, venue lies in
Count Two charged the defendant with this District for Count Two. securities fraud pursuant to 18 U.S.C. § 1348. Specifically, the Superseding As noted supra Part II.A.2.a., under 18 Indictment alleges that "between June 2009 U.S.C. § 3237, venue properly lies in "any and August 2009, both dates being district in which such offense was begun, approximate and inclusive . . . the defendant continued, or completed." 18 U.S.C. § 3237. . . . did knowingly and intentionally execute In this case, the attempted securities fraud and attempt to execute a scheme and artifice began in Texas, but involved the EDNY
(a) to defraud . . ." (Sup. Ind., ¶ 15.) because the defendant, knowing that Seiden was in New York at the time, gave specific The defendant argues that venue for directions to Seiden during the July 28, 2009 telephone call to fraudulently purchase stock 642 F.3d 314, 319 (2d Cir. 2011).*fn8 In then we'll, we'll have some cash. Tzolov, the only basis for venue by the government on the substantive securities SEIDEN: Okay, so what do you fraud count was that the defendant and an want me to do? accomplice traveled through JFK airport on their way to meeting with investors. Id. at ABDALLAH: Uh, say that again um? 318. The Second Circuit concluded that "going to Kennedy airport and boarding SEIDEN: What exactly do you want flights to meetings with investors were not a me to do so at least I know? constitutive part of the substantive securities fraud offense with which [the defendant] ABDALLAH: If you, you know, if was charged," and thus this preparatory act you could buy um anywhere from did not create venue in the EDNY for the seven hundred thousand to a million substantive securities fraud count. Id. at 319. shares of it, that should that should that should go with wherever we Here, in contrast, the telephone call want to move it. between Seiden and the defendant was not a mere passing through EDNY at an airport or SEIDEN: Like what -- like, no, a preparatory act; rather, it was the very core specifically, like how do you want to act of the attempted securities fraud by do it? I want to make sure that I defendant -- namely, an attempt by the can -- defendant to place a fraudulent trade through
Seiden, as he had done many times prior to ABDALLAH: Yeah. that date. For example, during the call, the defendant discussed the need to have Seiden SEIDEN: -- you know say yes to it. place a fraudulent trade in Alphatrade to artificially inflate the price so Seiden could ABDALLAH: Yeah. A million sell his stock, and then specifically directed shares at twenty cents.
Seiden to purchase a million shares of
Alphatrade at twenty cents per share: SEIDEN: What is it?
SEIDEN: Wha What do you say -- ABDALLAH: A million shares at what do you want me to do with twenty cents if you could put the Alphatrade exactly? maximum order [UI] for twenty cents.
ABDALLAH: With Alphatrade you see now it's offered at two and a half (Gvt. Ex. 5, at 3-4.) cents. When it goes back to ten, it goes up to ten cents, fifteen cents. I The defendant then gave Seiden similar have, I have uh two hundred directions with respect to UPDV, in that thousand shares. If we can sell this Abdallah asked Seiden to put in buy orders between fifteen and twenty cents, for UPDV at up to $0.0045 per share, even though it was trading at between $0.0024 only relevant contact to the venue was that ABDALLAH: U-P-D-V, if you -- various trades were executed in the whatever orders you can put in district.") (collecting cases). between -- up to forty-five cents.
Zero zero four five, not forty-five In sum, the July 28, 2009 call constitutes cents. Zero zero four five. an attempt to engage in securities fraud. The defendant gave specific directions about SEIDEN: Okay. Where is that at? I how to manipulate the price of UPDV and haven't, I haven't even been confirmed that he would pay Seiden a watching it. kickback from his sale proceeds. By directing Seiden during the July 28, 2009 ABDALLAH: It's at twenty-four by telephone call from Brooklyn to Texas to twenty-eight. Yeah [UI]. place these fraudulent purchases of stock, defendant engaged in attempted securities (Gvt. Ex. 5, at 4.) Defendant told Seiden fraud and venue lies for that fraud in this later in the conversation that he wanted to District. have Seiden do forty, fifty or sixty million shares of these purchases of UPDV stock. d. Venue on Count Seven: Wire Fraud (Gvt. Ex. 5, at 6.) Moreover, the defendant told Seiden that his percentage, or kickback, Count Seven (which was re-numbered for these fraudulent purchases would be for trial as Count Three) charged the "[t]weny-five percent . . . . Twenty-five on defendant with wire fraud pursuant to 18 whatever I sell, um, um." (Gvt. Ex. 5, at 5.) U.S.C. § 1343.*fn9 The defendant asserts that venue was not proper for this charge. Thus, having given Seiden the name of Defendant's arguments regarding Count the companies, the price for the fraudulent Seven are very similar to his arguments purchases by Seiden, and the number of concerning Count Two. See Defendant's shares, the only remaining act was for Motion for Judgment of Acquittal, at 4 Seiden to turn around and place the ("The defendant never travelled to the fraudulent purchases in order to artificially Eastern [D]istrict of New York; Defendant inflate the prices of those stocks for never telephoned anyone in the Eastern defendant's later sales. In short, by District of New York except the government attempting to execute these fraudulent trades through Seiden, who defendant knew was in informant Eric Seiden who initiated the call clear in the context of the mail fraud statute on July 28, 2009 to the defendant in San where it stated that venue may Antonio, Texas. This is the only contact that constitutionally exist "in the district where defendant had with the Eastern District of [a defendant] sent the goods, or in the New York. This one telephone call on July district of their arrival, or in any intervening 28, 2009 is not sufficient to establish Venue district." United States v. Johnson, 323 U.S. for the crime alleged in Count Three of the 273, 275 (1944). indictment."). As set forth below, defendant's venue challenge to the wire In the instant case, the July 28, 2009 fraud offense, like the challenge to Count telephone call was clearly an interstate wire Two, fails because venue lies for the wire for the purpose of executing the fraudulent fraud in the districts that are at either end of scheme that was transmitted from the EDNY the call regardless of whether defendant is in to Texas. As such, venue was proper in the the district or whether defendant initiated the EDNY for the wire fraud charge. call.
To the extent that defendant argues that It is axiomatic that an interstate he must be present in this District for venue telephone call, during which defendant to exist for the wire fraud, the Second discusses the fraudulent scheme and directs Circuit has rejected that argument. See Kim, his accomplice to place fraudulent stock 246 F.3d at 192 ("Here, [the defendant] orders to further the scheme, constitutes the caused communications to be transmitted crime of wire fraud. It is equally well settled into and out of the Southern District when that venue lies for that crime at either end of he approved fraudulent invoices knowing the telephone call -- namely, the district that [the customer] paid its vendors from where the call originated or the district New York banks. The fact that he was not in where it was received. See, e.g., United Manhattan when he caused the wire States v. Kim, 246 F.3d 186, 191, 192-93 (2d transmissions does not eliminate the Cir. 2001) (affirming district court's connection between [the defendant's] acts conclusion that a wire is "transmitted" for and the Southern District for the purposes of purposes of the wire fraud statute both venue."); accord United States v. Gilboe, where it was sent and where it was received, 684 F.2d 235, 239 (2d Cir. 1982); see also and noting that "we reject the notion that the United States v. Martin, 411 F.Supp.2d 370, very wires which caused the fraud to bear 376 (S.D.N.Y. 2006) ("venue for the fruit through payment by Chase Manhattan substantive wire fraud charge also lies in can be characterized as just passing through this district based on the acts of the [cothe Southern District"); see also United conspirator,]" even where defendant was not States v. Ebersole, 411 F.3d 517, 527 (4th present in venue and there was no evidence Cir. 2005) ("wire fraud [is] a 'continuing defendant knew that co-conspirator was offense,' as defined in § 3237(a), properly engaging in activity in furtherance of the tried in any district where a . . . wire conspiracy in the venue). communication was transmitted in furtherance of [the] fraud scheme," and Accordingly, because defendant caused "[e]ach of [the] transmittals occurred both Seiden to call him (by texting him prior to where it was sent and where it was the call), and because Seiden was in the received") (citations and quotations EDNY at the time of his telephone call with omitted). The Supreme Court made this the defendant, venue was proper on the wire fraud offense in Count Seven.*fn10 The Second Circuit has never vacated a conviction on the basis of manufactured
e. Manufacturing Venue Claim venue. See Rommy, 506 F.3d at 127. Similarly, other circuits have rejected or at
The defendant argues that the least questioned the doctrine of "government artificially created [v]enue" as manufactured venue. See United States v. to each count by having Seiden place a call Rodriguez-Rodriguez, 453 F.3d 458, 462 from the EDNY on July 28, 2009 to the (7th Cir. 2006) (rejecting both manufactured defendant, who was in San Antonio, Texas. venue and manufactured jurisdiction); As set forth below, assuming arguendo that United States v. Al-Talib, 55 F.3d 923, 929 a doctrine of manufactured venue exists, (4th Cir. 1995) ("There is no such thing as there is no basis for such a finding here manufactured venue or venue entrapment." because (1) Seiden was in New York at the (internal quotation marks omitted)); United time of the telephone call because his lawyer States v. Spriggs, 102 F.3d 1245, 1250 (D.C. was here; (2) defendant reached out to Cir. 1996) (expressing reservations as to Seiden prior to the telephone call knowing "manufactured venue"); Andrews v. United that Seiden was in New York; and (3) States, 817 F.2d 1277, 1279-80 (7th Cir. Seiden told the defendant at the beginning of 1987) (observing that appropriate way to the call that he was in New York and the address prosecution venue shopping is defendant proceeded to discuss the scheme through transfer pursuant to Fed. R. Crim. P. and give directions regarding fraudulent 21). trades to Seiden.
In any event, even assuming arguendo In the Second Circuit, the concept of that the doctrine exists, there is no evidence "manufactured venue" appears to have in this case that the prosecution, "preferring originated in a footnote in United States v. trial" in the EDNY, "lure[d]" the individual Myers, 692 F.2d 823, 847 n.21 (2d Cir. to the EDNY "for some minor event simply 1982). In that case, the court addressed a to establish venue." Myers, 692 F.2d at 847 claim by appellants that the government n.21. Seiden was in the EDNY for reasons manufactured venue for "ulterior reasons, independent of any purported attempt to primarily to enable the Eastern District manufacture venue. In particular, Special prosecutors to handle the trials." Id. The Agent Samantha Lockery, the agent who court rejected the argument, but noted that it arrested Seiden, testified at trial that Seiden did not "preclude the possibility of similar appeared in New York for a July 24, 2009 concerns if a case should arise in which key court appearance before a magistrate judge events occur in one district, but the in the EDNY. (Tr. 262.) At that time, he was prosecution, preferring trial elsewhere, lures appointed counsel whose office was located a defendant to a distant district for some in Brooklyn. (Tr. 290-91.) The FBI agent minor event simply to establish venue." Id.*fn11 could no longer meet with Seiden unless
Seiden's counsel was present, so the government and Seiden's counsel agreed that Seiden would make the trip to the Seiden was in New York, defendant EDNY on July 28, 2009. (Tr. 264-65, 290.) continued the telephone conversation in an Additionally, by July 28, the phone effort to further his fraudulent scheme and company had not yet set up Seiden's phone then repeatedly texted and attempted to to automatically record calls, so the FBI contact Seiden after that telephone call needed to use its own devices to record the (while being told Seiden was still in New call. (Tr. 292.) York) to continue the scheme. Under such circumstances, any claim for manufactured Moreover, it was the defendant who venue must fail. sought out Seiden in order to speak with him. See Naranjo, 14 F.3d at 147 (no 3. Insufficiency Claim on Count Seven: manufactured venue where co-conspirator Wire Fraud "sought out" the government agent who was located in district by calling the agent Defendant challenges his conviction repeatedly, and agent did not go to the under Count Three, which charged the district to create venue there). On July 28, defendant with wire fraud pursuant to 18 2009, defendant sent as many as six text U.S.C. § 1343. Defendant argues that he is messages to Seiden before Seiden called him "actually innocent" of wire fraud because back. (Tr. 846; Gvt. Exs. 10, 12B.) Seiden's phone call from the EDNY on July 28, 2009 was not made "for the purpose of Finally, when Seiden did call the executing such scheme or artifice," but was defendant back, he informed the defendant rather made to "gain incriminating at the beginning of the call that he was in information" about the defendant, since New York. See Gvt. Ex. 5; Rommy, 506 Seiden was cooperating with the FBI at the F.3d at 124 (government agent's remark to time he made the phone call. As set forth defendant that agent was in New York when below, this argument has no merit. he called out-of-venue defendant alleviated concern that venue was "the product of A defendant challenging a conviction on some 'chance use of a telephone' by a the basis of insufficient evidence bears a government agent"). Defendant continued heavy burden. United States v. Thomas, 377 the conversation in an effort to further his F.3d 232, 237 (2d Cir. 2004) (citation ongoing conspiratorial goals. Moreover, as omitted). The court must view the evidence noted supra, defendant continued to try to in the light most favorable to the contact Seiden by text message after the government and draw all permissible telephone call, still being told that Seiden inferences in the government's favor. See was in New York. See supra note 6. United States v. Irving, 452 F.3d 110, 117 (2d Cir. 2006).
In sum, there is no evidence of manufactured venue in this case. The calls The wire fraud statute makes it a crime were made from EDNY because Seiden to use wires in furtherance of a "scheme or could only meet with the government with artifice to defraud, or for obtaining money or his counsel present. In any event, defendant property by means of false or fraudulent tried to contact Seiden, knowing Seiden was pretenses, representations, or promises." 18 in New York (purportedly to visit his sick U.S.C. § 1343."The essential elements of a mother), and then was told at the beginning mail [or wire] fraud violation are (1) a of the critical July 28, 2009 conversation scheme to defraud, (2) money or property that Seiden was in New York. Knowing that [as the object of the scheme], and (3) use of the mails [or wires] to further the scheme.'" evidence to support his conviction for wire United States v. Dinome, 86 F.3d 277, 283 fraud because Seiden called him to "gain (2d Cir. 1996) (quoting United States v. incriminating information" and not to Miller, 997 F.2d 1010, 1017 (2d Cir. 1993)) further the scheme, fails. The case defendant (all alterations in Dinome and some cites, Victor Teicher & Co., L.P., 726 F. alterations in Miller). The government does Supp. at 1435, is inapposite. In that case, a not need to prove that "the scheme defendant, aware that the SEC was successfully defrauded the intended victim," investigating him, called an employee and but "the government must show that some asked him to destroy evidence. The court actual harm or injury was contemplated by held that the defendant did not make the the schemer." Dinome, 86 F.3d at 283 phone call for the purpose of executing a (quotations omitted). scheme to defraud because he placed it after the scheme had ended. Id. Here, by contrast, In this case, the evidence clearly the defendant intended to continue the satisfied each of the three elements of wire scheme to defraud, and believed he was fraud -- namely, the defendant engaged in a using the wires to further that scheme. scheme to defraud others of money or property, and he used the interstate wires to In fact, this specific argument asserted further that scheme. During the July 28, by defendant -- that is, that the use of a 2009 phone call, the defendant gave Seiden government agent in a telephone call with specific directions about how to manipulate the defendant makes the offense of wire the prices of UPDV and Alphatrade and fraud legally impossible -- has been flatly confirmed that he would pay Seiden a rejected in several cases. For example, in kickback. See Gvt. Ex. 5. As a consequence United States v. Hammond, 598 F.2d 1008, of the defendant's scheme, buyers would 1010 (5th Cir. 1979), the Fifth Circuit purchase shares at artificially inflated prices upheld wire fraud convictions where "the so that defendant could sell his shares at a wire fraud convictions were based on greater profit than he would otherwise have telephone calls between the defendant and received. Such a consequence demonstrates [FBI] agent Pesiner in which they discussed defendant's intent to harm the buyers of the plans for defrauding the brokerage UPDV and Alphatrade stock. As to the third house." In reaching this decision, the Fifth element, no one disputes that the defendant Circuit rejected the defendant's argument used the interstate "wires" to discuss this that an individual who attempts a fraud with scheme. a government agent over the interstate wires is not guilty of wire fraud because it cannot In satisfying each of these elements, it is be in furtherance of the scheme: the defendant's intent that is relevant, not
Seiden's intent. See United States v. Victor The defendant's interpretation of Teicher & Co., L.P., 726 F. Supp. 1424, § 1343 is incorrect. Section 1343 1435 (S.D.N.Y. 1989) ("The relevant does not provide that the interstate or inquiry is whether the [communication] is foreign communication must be "in part of the execution of the scheme as furtherance of" the scheme to conceived by the perpetrator at the time' of defraud. It only provides that the the communication.") (citations omitted) communication must be made "for (alteration in original). Thus, the defendant's the purpose of executing such argument that there was insufficient scheme." 18 U.S.C. § 1343. And one can certainly make a communication pursuant to the fraudulent scheme prior to for the purpose of executing a July 28, 2009; (3) during a trip to Texas on scheme, even when that July 15, 2009, Seiden explained to defendant communication does not actually all the details of his fraudulent technique (by further the scheme . . . . When the pretending to be a customer of the brokerage defendant in this case talked on the firm when making trades and then placing phone with agent Peisner, the unauthorized trades), and defendant tried to defendant was unaware that Peisner provide Seiden with more brokerage firms to was an FBI agent. He thought of call and make additional trades; (4) during Peisner as his accomplice in the the July 28, 2009 interstate telephone call, scheme, and in these phone calls, the defendant discussed the scheme with Seiden defendant explained to Peisner and gave Seiden specific trade instructions exactly what he was supposed to do. regarding additional fraudulent purchases. Clearly, then, the defendant made This evidence was unquestionably sufficient these phone calls [i]ntending that to find the defendant guilty of wire fraud in they would help execute the scheme connection with the July 28, 2009 telephone to defraud the brokerage house.. call.*fn12
[T]his is sufficient to bring the calls within § 1343. Defendant's main defense at trial (including during defendant's own 598 F.2d at 1010-11; accord United States v. testimony) was that he was not aware that Patterson, 528 F.2d 1037, 1041 (5th Cir. Seiden was fraudulently inflating the price 1976); see also United States v. Sanders, of UPDV; rather, according to defendant, he 893 F.2d 133, 138 (7th Cir. 1990) honestly believed that Seiden was creating ("[Defendant] maintains that a violation of demand in the stock, so that defendant could the wire fraud statute necessarily requires sell his shares at higher prices, through proof that someone actually lost money or legitimate means. However, there was property as a result of the scheme. This overwhelming evidence in the record that position is untenable. The aim of the mail defendant knew that Seiden was using and wire fraud statutes is to punish the fraudulent means to inflate the stock price of scheme to defraud rather than the end result. UPDV.
The scheme developed by [the defendant] put the risk of loss on the brokers; such a First, although Seiden testified that he plan is an actionable fraud under the wire did not initially inform the defendant as to fraud statute." (citations omitted)). the precise fraudulent means he was utilizing to create the demand in the stock, it Here, construed most favorably to the was abundantly clear from the government, the evidence established that: circumstances surrounding the transaction (1) prior to July 28, 2009, defendant had that a fraudulent scheme was being used to agreed with Seiden to have Seiden place buy orders on the defendant's behalf. fraudulently purchase UPDV stock at For example, although defendant claimed artificially inflated prices so that defendant that he thought Seiden was placing buy alone offered devastating and overwhelming orders in UPDV for the benefit of Seiden's proof of the defendant's participation in the clients, defendant knew the following: (1) scheme and an awareness of its fraudulent Seiden was placing these buy orders for nature.
UPDV without any knowledge about UPDV or its operations (Tr. 399); (2) the defendant Accordingly, defendant's challenge to was instructing Seiden as to how many the sufficiency of the evidence on the wire shares of the stock to buy and at what prices fraud offense contained in Count Seven is (Tr. 405, 407, 411); (3) at defendant's denied.*fn13
direction, Seiden would purchase the stock at a price higher than the price at which the B. Motion for a New Trial stock was currently trading (Tr. 421-22); and (4) the defendant paid Seiden a 25 The defendant asserts four grounds on percent, secret kickback for placing the buy which he seeks a new trial pursuant to orders in UPDV, which totaled about Federal Rule of Criminal Procedure 33: (1) $40,000 (Tr. 287-88, 401). there was a constructive amendment or prejudicial variance to the Superseding Second, not only was the fraudulent Indictment; (2) the government withheld nature apparent from the circumstances witness statements in violation of Brady v. surrounding the transactions, but Seiden also Maryland, 373 U.S. 83 (1963); (3) the testified that he explicitly told the defendant government improperly introduced evidence during a trip to Texas on July 15 that he was of the defendant's prior bad acts in violation placing the buy orders by falsely of Federal Rule of Evidence 404(b); and (4) impersonating clients in calls to brokerage the government misled the jury during its houses. (Tr. 445-46.) Seiden testified that rebuttal summation. As set forth below, the the defendant was not surprised when he Court finds these arguments to be without told him the details of the scheme, and merit. offered the next day to try to find some new brokerage firms that could be victimized by
1. Legal Standard with Seiden prior to June 2009; in fact, it was undisputed that Seiden did not meet
Rule 33 states, in relevant part, that with the defendant prior to June 2009. "[u]pon the defendant's motion, the court Instead, the evidence of Seiden's criminality may vacate any judgment and grant a new prior to June 2009 was introduced to trial if the interest of justice so requires." impeach the credibility of Seiden by Fed. R. Crim. P. 33(a). A district court may showing that he had been involved in similar grant a Rule 33 motion only in schemes long before even meeting with the "extraordinary circumstances," United defendant. In fact, not only was there no States v. McCourty, 562 F.3d 458, 475 (2d defense objection to this evidence being Cir. 2009) (internal quotation marks offered by the government, but defendant's omitted), and only if there exists "'a real counsel made extensive reference to this concern that an innocent person may have evidence in his opening and closing been convicted.'" United States v. Parkes, statements, and during his cross-497 F.3d 220, 232 (2d Cir. 2007) (quoting examination of Seiden, to try to demonstrate United States v. Ferguson, 246 F.3d 129, that Seiden, as a habitual fraudster, had 134 (2d. Cir. 2001)); accord United States v. duped the defendant as well.
Bell, 584 F.3d 478, 483 (2d Cir. 2009); see also United States v. Middlemiss, 217 F.3d a. Applicable Law 112, 122 (2d Cir. 2000) ("Granting Rule 33 motions is not favored and is done with The Fifth Amendment grants defendants great caution."). "The ultimate test on a Rule the right to be tried only on charges 33 motion is whether letting a guilty verdict contained in an indictment returned by a stand would be a manifest injustice." grand jury. "An unconstitutional amendment Ferguson, 246 F.3d at 134. of the indictment occurs when the charging terms are altered, either literally or
2. Claim of Constructive Amendment/ constructively." United States v. Clemente, Prejudicial Variance 22 F.3d 477, 482 (2d Cir. 1994); see United States v. Mucciante, 21 F.3d 1228, 1233 (2d The defendant argues that there was a Cir. 1994) ("Even if an indictment is not constructive amendment or prejudicial actually amended, the law recognizes that variance to the Superseding Indictment there are times when the government's because, although the Superseding presentation of evidence, together with the Indictment charges a conspiracy involving trial court's jury instructions, creates an the shares of two companies between June unacceptable risk that the jury might convict and August of 2009, the government the defendant of a crime materially different presented evidence at trial that the defendant from the one alleged in the indictment."). was involved in a conspiracy as early as 2008 involving additional companies and An indictment has been constructively other conspirators. The result, defendant amended "when the government's argues, was to broaden the possible bases for presentation of evidence and the district conviction. court's jury instructions combine to 'modify essential elements of the offense charged to As set forth below, this argument is the point that there is a substantial likelihood frivolous. There was no suggestion that the defendant may have been convicted whatsoever during the trial that defendant of an offense other than the one charged by was involved in any conspiracy or scheme the grand jury.'" United States v. Vebeliunas, 76 F.3d 1283, 1290 (2d Cir. well. Thus, the issue of Seiden's bad acts 1996) (quoting Clemente, 22 F.3d at 482). and criminality prior to meeting the The constructive amendment of an defendant arose many times throughout the indictment is a "'per se violation of the trial, including during both parties' Fifth Amendment that require[s] reversal addresses to the jury and during Seiden's even without a showing of prejudice to the direct examination. defendant.'" Vebeliunas, 76 F.3d at 1290 (quoting Clemente, 22 F.3d at 482). For example, during its opening statement, the government, knowing that the An amendment of the indictment occurs defense would be focused on this issue, when the terms of the indictment are altered fronted the fact that Seiden had "engaged in -- literally, or in effect -- after the grand jury illegal activity" for much of his ten years in has passed upon them. See United States v. the brokerage industry by accepting Frank, 156 F.3d 332, 338 n.5 (2d Cir. 1997). payments in return for placing "phony buy By contrast, "[a] variance occurs when the orders at brokerage firms in other stocks" in charging terms of the indictment are left order to artificially inflate prices. (Tr. 31.) In unaltered, but the evidence offered at trial an effort to show that Seiden deceived the proves facts materially different from those defendant into participating in the fraud alleged in the indictment." Id. (quotations scheme, counsel for the defendant explained omitted). The most significant difference in his opening statement that Seiden was between a variance and a constructive defrauding brokers long before meeting the amendment is that the latter is a per se defendant: violation of the Fifth Amendment, whereas "a defendant must show prejudice in order This case is really about Eric Seiden. to prevail on a variance claim." Id. The government just outlined, very (quotations omitted). A defendant will fail to briefly, a number of years in which show that he has been prejudiced by the Mr. Seiden was not only stealing variance when "the allegation and proof money but defrauding a number of substantially correspond, where the variance individuals both privately and in the is not of a character that could have misled investment field. This case will be, the defendant at the trial, and where the as you see it develop, an individual variance is not such as to deprive the who was successful in defrauding accused of his right to be protected against not only over 20 brokerage houses another prosecution for the same offense." but hundreds of professional traders Mucciante, 21 F.3d at 1236 (internal into believ[ing] that he was quotation marks omitted). authorized to place buy orders for particular clients of those brokerage
b. Relevant Facts firms. You will find that this scheme that Mr. Seiden was involved in
A centerpiece of the defendant's defense existed long before he ever met Mr. at trial was attacking the credibility of Abdallah. Mr. Seiden himself has cooperating witness Seiden. One of the main and will tell you a record of his being ways that defense counsel sought to a thief and liar. I suggest to you that undermine Seiden's credibility was to show the evidence is going to show that that he was a habitual criminal who was the primary issue in this case is the defrauding brokers long before he ever met credibility of Eric Seiden. . . . You the defendant, and deceived the defendant as will find that Mr. Seiden was a very Name Unknown ("LNU")], and Dennis successful individual in deceiving LNU -- in April and May of 2009. (Tr. 372-these people, but the issue is and you 75.) will find that he himself deceived
Mr. Abdallah. On cross examination, Seiden was questioned extensively by defense counsel (Tr. 33-34.) Defense counsel later added: regarding his schemes to defraud brokerage houses prior to ever meeting the defendant. The evidence will show and this is (Tr. 532-539.) For example, defense counsel also important, that at the time they asked: meet around early June of 2009, Mr.
Seiden had already successfully Q. Clearly there were a number of perpetrated his scheme to defraud. victims between October 8th 
He had it down pat. He was able to, and the time you met with Mr. because of his background and Kamal. Is that correct? And by experience, deceive these "victims," I mean brokerage houses? professional brokers over the telephone. A. Yes, there were more than one.
(Tr. 38.) (Tr. 534.) In fact, defense counsel listed the companies that Seiden defrauded prior to
On Seiden's direct examination, the meeting the defendant. (Tr. 538-39.) government again sought to front the issue of Seiden's prior bad acts in light of the Finally, in his summation, defense defense's clear attack on Seiden's counsel, again in an effort to argue that credibility. Thus, Seiden testified that from Abdallah was duped by Seiden, highlighted 1996 to 2000 and from 2006 to 2008, he was the fact that Seiden was victimizing paid kickbacks in exchange for persuading brokerage houses long before any alleged his clients to purchase stock in certain conspiracy began with Abdallah. For companies. (Tr. 326-27; 345-50.) Seiden example, defense counsel argued: also testified on direct that an individual named Jason D'Olivera paid him a kickback I did tell you earlier that the scheme to create false demand for a stock so that was designed and created by who? D'Olivera and another individual named Eric Seiden. It wasn't Mr. Abdallah. Craig Sizer could sell their shares in this It wasn't Roger Kainth. Eric Seiden company at a higher price. (Tr. 362-63.) after years of deceiving people and Seiden generated this demand by calling stealing money finally finds himself brokerage houses and falsely identifying out of a job in 2008. But this himself as the representative of an account manipulator, this creative thief, he, holder who wanted to buy large blocks of he came up with a new one. He came stock. (Tr. 363-64.) Seiden would then cease up with his own idea how to defraud contact with the firm without paying for the the brokerage houses. And he did it stock he had persuaded the firm to buy. (Tr. for many months before he ever met 363-64.) Seiden subsequently perpetrated Mr. Abdallah. He couldn't even the same impersonation scheme with three remember on cross-examination all other individuals -- Ray Dias, Ottie [Last of the firms that he had victimized before meeting Mr. Abdallah. He undisputed that Seiden had not even met the had to be shown a document that defendant at the time he was involved in this said, oh, yeah, I remember that in prior fraudulent conduct. In fact, defendant November. And I remember that in did not object to this evidence being offered; September of '08. Oh, yeah, I rather, his counsel referred to this prior remember that in May of '09. I, criminal conduct by Seiden -- in his opening, yeah, I remember that in June of '09 his cross-examination of Seiden, and in his before I met Mr. Abdallah. But he closing -- to try to demonstrate that Seiden did admit that he admitted to that he was a career fraudster who had also had committed his scheme to defraud deceived the defendant. In short, it was well before he meets Mr. Abdallah. abundantly clear to the jury that there was no allegation in the indictment, or anywhere (Tr. 1502.) else, that the defendant had engaged in any
of Seiden's fraudulent activities prior to the
c. Application conspiracy alleged in the indictment, which began when Seiden first spoke to the
Defendant attempts to argue that the defendant in June 2009 and involved a evidence of Seiden's scheme to defraud particular stock, UPDV, and later expanded brokerage houses prior to meeting the to Alphatrade. defendant constituted a constructive amendment or variance from the charges in For the same reasons, there was no the indictment. That claim is utterly without As noted above, t merit.*fn14 prejudicial variance. he government offered no evidence that the defendant was involved in Seiden's previous First, there was no constructive bad acts, which occurred before Seiden ever amendment of the indictment because there met the defendant. Instead, the was no "substantial likelihood" that the government's evidence against the defendant was convicted of an offense other defendant related solely to the charges in the than the offenses charges in the Superseding indictment -- namely, beginning in June Indictment. See Vebeliunas, 76 F.3d at 1290. 2009, Seiden and defendant engaged in a Although Seiden testified as to his prior scheme to create false demand in UPDV conspiracies to defraud brokerage houses in and that the scheme later involved a second which Seiden had participated, neither stock called Alphatrade. Thus, the evidence Seiden nor the government ever suggested offered at trial did not prove facts materially that the defendant was involved in Seiden's different from those alleged in the earlier schemes. Moreover, it was indictment.
disclosure of, exculpatory information that advantage of that evidence.'" United States was in its possession and thereby violated v. Paulino, 445 F.3d 211, 225 (2d Cir. 2006) the defendant's due process rights under (quoting United States v. Gonzalez, 110 F.3d Brady v. Maryland, 373 U.S. 83 (1963) and 936, 944) (2d Cir. 1997). Moreover, "[t]he its progeny. In particular, the defendant government's duty to disclose is not limited argues that the government withheld to 'exculpatory' information, it also includes statements or reports by Jason D'Olivera, information that could be used to impeach Craig Sizer, Roger Kainth, Ray Diaz, government witnesses, so-called Giglio Dennis LNU, Ottie LNU, and others. The material." United States v. Madori, 419 F.3d defendant alleges that these individuals were 159, 169 (2d Cir. 2005) (citing Giglio v. interviewed by the FBI "on how they United States, 405 U.S. 150, 154 (1972)). became involved in the scheme with Eric Seiden and how Eric Seiden devised the However, even where the government scheme involving the selling of the stock." learns of exculpatory information during an (Defendant's Motion for a New Trial, at 12.) interview, the government satisfies its Brady As discussed below, this argument is obligations by informing the defendant that without merit. the witness may possess exculpatory evidence. United States v. Salerno, 868 F.2d
a. Applicable Law 524, 542 (2d Cir. 1989); see also United States v. Grossman, 843 F.2d 78, 85 (2d Cir.
Cases subsequent to Brady have 1988) (government not required to turn over elucidated three requirements for "'a true grand jury testimony where government had Brady violation'": first, "'[t]he evidence at informed defense that witness may have issue must be favorable to the accused, provided exculpatory evidence to the grand either because it is exculpatory, or because it jury); United States v. LeRoy, 687 F.2d 610, is impeaching'"; second the "'evidence must 619 (2d Cir. 1982) (government not required have been suppressed by the [prosecution], to turn over grand jury testimony where either willfully or inadvertently'" and third, defendant "was on notice of the facts "'prejudice must have ensued.'" United necessary for him to take advantage of such States v. Douglas, 525 F.3d 225, 244-45 (2d [potentially] exculpatory testimony"); Cir. 2008) (quoting Strickler v. Greene, 527 United States v. Upton, 856 F. Supp. 727, U.S. 263, 281-82 (1999)) (alteration in 751 (E.D.N.Y. 1994) ("[T]he government Douglas). The third requirement is also has provided defendants with the names of sometimes labeled the "materiality" the grand jury witnesses who might have requirement and asks whether, had the given exculpatory testimony, and hence the information been disclosed, there was a government has fulfilled its Brady "reasonable probability of a different result." obligations.")
United States v. Jackson, 345 F.3d 59, 73 (2d Cir. 2003) (quotations omitted); see b. Application Strickler, 527 U.S. at 289-90.
Defendant's Brady claims have no merit. The Second Circuit "has frequently First, the government did not interview recognized [that] 'evidence is not considered Jason D'Olivera, Craig Sizer, Ray Diaz, to have been suppressed within the meaning Dennis LNU and Ottie LNU. Thus, as to of the Brady doctrine if the defendant or his these individuals, the government did not attorney either knew, or should have known, have any interview notes that it could of the essential facts permitting him to take produce to the defendant. Upton, 856 F. at 746 ("[t]he government is under no United States, 405 U.S. 150 (1972), the obligation to turn over that which it does not government hereby notifies you, in an have"). More than ten days before the trial abundance of caution, that the defendant began, however, the government gave to the may wish to speak to Roger Kainth."). The defense two FBI reports concerning Seiden government's failure to turn over any notes that disclosed Seiden's previous fraudulent that may exist concerning the government's schemes to create buying activity in various interview with Kainth does not constitute a stocks with others including D'Olivera, Brady violation. This letter, provided to Sizer, Diaz, Dennis LNU and Ottie LNU. counsel more than four months prior to trial, These disclosures, which were made was sufficient to satisfy the government's pursuant to 18 U.S.C. § 3500, satisfied the Brady obligation. See Salerno, 868 F.2d at government's Brady/Giglio obligations 542; Grossman, 843 F.2d at 85; LeRoy, 687 because they informed the defendant about F.2d at 619. In fact, as confirmed at oral Seiden's involvement with these individuals. argument with the defendant, the defense See Salerno, 868 F.2d at 542; Grossman, did interview Kainth and chose not to call 843 F.2d at 85; LeRoy, 687 F.2d at 619. him as a witness. Thus, not only was there Having received this Brady/Giglio no Brady violation, but defendant could not information, defendant was free to interview possibly demonstrate any prejudice from or call these individuals if he wished. any alleged violation. See, e.g., United Moreover, there is absolutely no evidence States v. Schledwitz, Nos. 95-5309, 95-5409, that any of these individuals had exculpatory 1995 WL 712755, at *5 (6th Cir. Dec. 4, evidence. There was no evidence at trial, or 1995) (rejecting argument that government's even an allegation, that any of these people failure to turn over FBI 302 report was a knew or interacted with the defendant, or Brady violation that constituted a denial of a even dealt with Seiden when the conspiracy fair trial, where defendant's counsel between Seiden and the defendant allegedly interviewed the witness prior to trial and began in June 2009. Thus, it is sheer chose not to call him). Accordingly, where speculation that these individuals would the government provided the Brady letter have had any testimony favorable to the and defendant interviewed the witness and defendant. In short, defendant has failed to chose not to call him, no Brady violation demonstrate that any Brady violation exists. occurred with respect to the government's possession of any information regarding Thus, the Court finds that the these individuals, or that he was prejudiced government did not violate the defendant's in any way even assuming arguendo a due process rights under Brady or its violation had occurred. progeny.
Second, with respect to Roger Kainth, 4. The 404(b) Claim the government notified defense counsel, by letter dated October 6, 2010, that the The defendant argues that the defendant may wish to interview Roger government violated Federal Rule of Kainth. See Letter from Loretta E. Lynch, Evidence 404(b) by introducing evidence of United States Attorney, to Robert P. the defendant's prior crimes for the LaRusso, Esq. (Oct. 6, 2010), ECF No. 49 impermissible purpose of demonstrating the ("Pursuant to its obligation under Brady v. defendant's criminal propensity. See Fed. R. Maryland, 373 U.S. 83 (1963), and Giglio v. Evid. 404(b). The defendant contends that, in presenting this evidence, the prosecution exceeded the bounds of pre-trial a. Applicable Law authorization it received from the Court concerning the Rule 404(b) evidence, and Rule 404(b) of the Federal Rules of that the Court failed to give a "curative" Evidence provides that "[e]vidence of a instruction as to the proper uses of the Rule crime, wrong or other act is not admissible 404(b) evidence. As discussed below, the to prove a person's character in order to Court finds these arguments to be meritless. show that on a particular occasion the As a threshold matter, the Court notes that person acted in accordance with the there was no objection by defense counsel to character." Fed. R. Evid. 404(b). However, any of these areas of cross-examination of the Rule then provides that it "may be the defendant during the trial. In any event, admissible for another purpose, such as even if there had been an objection, the proving motive, opportunity, intent, Court would have overruled the objection preparation, plan knowledge, identity, because such questioning was permissible. absence of mistake, or lack of accident." Id. First, all of this evidence was properly "The Second Circuit's 'inclusionary admitted to rebut statements made by the approach' to the admission of other act defendant during his direct testimony, as evidence 'allows such evidence to be well as under Rule 404(b) on the issues of admitted for any purpose other than to knowledge, intent, and motive.*fn15 Moreover, demonstrate criminal propensity.'" United pursuant to Rule 403 of the Federal Rules of States v. Guang, 511 F.3d 110, 121 (2d Cir. Evidence, the probative value of all of the 2007) (quoting United States v. LaFlam, 369 evidence discussed below was not F.3d 153, 156 (2d Cir. 2004) (per curiam)). substantially outweighed by the danger of Under this standard, the Second Circuit has unfair prejudice, confusion of issues, repeatedly held that such evidence is misleading the jury, or any of the other Rule admissible to demonstrate, among other 403 grounds. things, the motive and/or intent of the defendant in committing the charged crime, or that the defendant had knowledge of the crime. See, e.g., United States v. Newsom, No. 09-3406-cr, 2011 U.S. App. LEXIS
Of course, the admission of such defendant regarding mispresentations of fact evidence for these other purposes is still made by the defendant during his direct subject to the balancing of Fed. R. Evid. testimony, so as to avoid the jury being 403. See United States v. Brennan, 798 F.2d misled and to permit the jury to properly 581, 589 (2d Cir. 1986) (finding prior acts assess his credibility. In other words, as the evidence admissible for purposes other than Second Circuit has repeatedly emphasized, showing criminal propensity "as long as it is "'[w]hen a defendant takes the stand, the 'relevant to some disputed issue in the trial' [g]overnment [is] permitted proper and and satisfies the probative-prejudice effective cross-examination in an attempt to balancing test of Fed. R. Evid. 403") elicit the truth.'" United States v. Garcia, (quoting United States v. Figueroa, 618 F.2d 936 F.2d 648, 653 (2d Cir. 1991) (quoting 934, 939 (2d Cir. 1980)). Thus, in United States v. Havens, 446 U.S. 620, 627 considering the admissibility of such (1980)); accord United States v. Garcia, 900 evidence, the Court should consider whether F.2d 571, 575 (2d Cir. 1990). Thus, if a (1) the evidence is being offered for a proper defendant puts "certain activity in issue by purpose, (2) the evidence is relevant to a offering innocent explanations for or material issue in dispute, and (3) the denying wrong-doing, the government is probative value of the evidence is entitled to rebut by showing that the substantially outweighed by the danger of defendant has lied." United States v. unfair prejudice under Rule 403. See Guang, Beverly, 5 F.3d 633, 639 (2d Cir. 1993). 511 F.3d at 121; accord Huddleston v. United States, 485 U.S. 681, 691-92 (1988). b. Defendant's Conversion of Preferred B Moreover, the Court should give the jury an Shares appropriate limiting instruction concerning the proper use of that evidence, if such a Defendant contends that the Court request is made by the defendant. See improperly permitted the government to Guang, 511 F.3d at 121; Huddleston, 485 cross-examine him regarding the U.S. at 691-92; Fed. R. Evid. 105. defendant's conversion of Preferred B shares, and inconsistencies in SEC The district court also has broad documents and filings regarding that discretion in determining what issues may conversion. As discussed below, that be raised on cross-examination for the argument has no merit. The cross-purpose of impeaching the credibility of a examination was permissible to rebut witness. See, e.g., Lewis v. Baker, 526 F.2d defendant's claims in his direct testimony as 470, 475 (2d Cir. 1975) ("It is well-settled to the nature and purpose of that conversion. that the trial judge is accorded great In any event, the cross-examination was also discretion in his assessment of the matters permissible to show defendant's motive and which should properly be raised on cross- intent as to the charged offense, because it examination as bearing on the credibility of was the government's theory, inter alia, that a party or witness."). Pursuant to that the defendant misappropriated most of the discretion, there is no rule of law that 600 million shares immediately prior to his requires the prosecution to watch idly as a resignation from UPDV, and then sent them defense witness, including the defendant overseas in anticipation of trying to find a himself, affirmatively lies about a relevant way to sell the stock. fact during his direct testimony. Instead, subject to the Rule 403 balancing test, the prosecution is entitled to cross-examine the
i. Relevant Facts ii. Application
On October 27, 2008, the defendant sent This Court properly concluded that the an email to the transfer agent for UPDV government was entitled to challenge the directing him to "issue 600 million shares of defendant's credibility on cross-examination UPD[V] in 4 [c]ert[ificates] each 150 concerning the obvious discrepancies million shares to: Mohamed Abdellatif between the defendant's testimony, in which Yassine" at AM Financials in Beirut, he claimed to have rightfully owned 15,000 Lebanon. (Tr. 305; Gvt. Ex. 98.) The Preferred B shares, and the SEC filings, defendant explained that the 600 million which indicated that the defendant owned shares should be issued because the one-tenth of that number of shares. See defendant was converting the "15,000" Beverly, 5 F.3d 633 at 639; see also Garcia, Preferred B shares he had received on 936 F.2d at 653 ("where a defendant testifies December 27, 2007. On direct examination, on direct examination regarding a specific defendant claimed that the 600 million fact, the prosecution may prove on cross shares rightfully belonged to him, and that examination that [the defendant] lied as to he sent them to investors overseas in order that fact") (citations and quotations omitted) to increase liquidity in the UPDV market (emphasis in original); United States v. and to raise capital for the company. (Tr. Cuadrado, 413 F.2d 633, 635 (2d Cir. 1969) 1132, 1170-71, 1185.) ("Where a defendant in his direct testimony falsely states a specific fact, the prosecution On cross-examination, the government will not be prevented from proving, either questioned the defendant as to why the through cross-examination or by calling its UPDV Form 10K annual report for 2007, own witnesses, that he lied as to that which defendant had signed and certified to fact . . . . There is hardly justification for be accurate, indicated that defendant had letting the defendant affirmatively resort to received 1,500 shares of Series B Preferred perjurious testimony in reliance on the Shares, and also indicated that as of April Government's disability to challenge his 21, 2008, UPDV had issued a total of only credibility." (citations and quotations 8,858 shares of Series B Preferred Stock, omitted)); accord United States v. Kunkel, making it impossible for defendant to own No. 08-3769-cr, 2009 WL 39351, at *1 (2d 15,000 of these shares by December 27, Cir. Jan. 8, 2009) ("The purportedly 2007. (Tr. 1247, 1249, 1251-52.) The objectionable testimony was relevant under government also questioned the defendant Rule 401 because it tended to show that [the regarding Form 4, which defendant had defendant] testified falsely in this case. . . . signed and filed with the SEC on April 21, And given that the testimony was largely an 2008, also indicating that defendant had elaboration of other testimony admitted received 1,500 Preferred B shares on without objection, any risk of prejudice was December 27, 2007. (Tr. 1228-30.) The small."); defendant reported in Form 4 that these 1,500 Preferred B shares could be converted In any event, the evidence concerning into 20,000 shares of UPDV common stock the misappropriation of the 600 million for a total of 30 million common shares. (Tr. shares was also properly admitted under 1229-30.) Rule 404(b) because it went to the issue of the defendant's motive. In particular, based upon the government's theory of the case, the evidence that defendant moved 600 million shares to a nominee account we do not object to the introduction of the overseas was highly probative of other act evidence presented in their defendant's strong motive to boost UPDV's motion.")*fn16 In any event, as set forth below, stock price so that he could profit from this cross-examination was likewise selling these shares. properly admitted to rebut defendant's direct testimony regarding how he used the Geer Accordingly, the cross-examination of money and under Rule 404(b). the defendant as to this conversion of stock -- including the amounts, the reasons for it, On direct examination, the defendant and the discrepancies in its characterization claimed that after he took the $4 million on public filings -- was properly admitted to dollars from Geer, he put $1 million dollars rebut his testimony on direct, as well as on back into Geer, and Sheridan placed an the issues of motive and intent under Rule additional $3.5 million into Geer after he 404(b). resigned. (Tr. 1098.) The defendant then explained that "what was taken from the
c. Cross-Examination of Defendant companies was three-and-a-half. What went Regarding Bounced Checks back into the companies was four-and-a-half million. . . . So the companies, after the
Defendant also argues that the injection, they were safe and sound." (Tr. government improperly cross-examined him 1098.) regarding certain bounced checks. In October 2008, after the defendant took $4 The evidence concerning the bounced million dollars from a Geer operating checks was properly admitted as account, Geer bounced checks to its impeachment evidence to challenge the suppliers in the amount of $2.5 million. As a defendant's credibility. Defendant claimed threshold matter, the government provided that Geer was "safe and sound," when in notice to the Court and the defendant that it fact the evidence of the bounced checks intended to introduce evidence concerning demonstrated that, after defendant took the bounced check by Geer under Rule millions of dollars from Geer, Geer was 404(b), and defendant indicated that he unable to pay its suppliers. See Lewis v. would not oppose the motion. See Letter Baker, 526 F.2d at 475; Garcia, 936 F.2d at from Robert P. LaRusso, Esq. to the Hon. 653.
Joseph F. Bianco (Dec. 6, 2010), ECF No. 67 ("After receipt of the motion, we Moreover, this evidence was properly conducted a preliminary examination of the admitted as substantive evidence because it government's allegations. Though we will was relevant to the defendant's motive, be requesting additional time to acquire knowledge, and fraudulent intent. The documentation concerning the 'other act evidence that Geer, a UPDV subsidiary, was evidence' and to interview individuals bouncing checks provided highly probative knowledgeable about the alleged evidence that defendant was aware of misconduct, we have decided to not oppose financial problems at UPDV, which goes to the government's motion. This decision was made after sufficient consultation with my defendant's motive to enter the scheme to buying and selling stock. As long as you defraud and his willingness to pay Seiden to don't have inside information and I didn't create false demand for the shares. have any inside information." (Tr. 1161.) Similarly, the evidence concerning the $2.5 Because defendant testified explicitly under million shortfall at Geer provided probative oath that he "didn't have any inside evidence that defendant knew that UPDV information," the government had the right was not a good investment at the time he to cross-examine him on the veracity of that hired Seiden. The defendant's knowledge very specific statement by pointing out that UPDV was a poor investment also certain information about the financial would help demonstrate defendant's condition of the company to which only the fraudulent intent, since it undermines the defendant was privy. defendant's claim that he thought Seiden was legitimately promoting UPDV to Second, the line of questioning customers. concerning the non-disclosure of these material events was properly admitted for In sum, the cross-examination regarding the purposes of showing motive, fraudulent the bounced check was proper to rebut intent, and knowledge. Specifically, the defendant's direct testimony regarding the evidence was highly probative to show that use and impact of the Geer loan and, in any the defendant had a motive to sell as many event, was proper under Rule 404(b). of his UPDV shares as possible through the alleged fraudulent scheme before news of
d. Cross-Examination of Defendant UPDV's debt-ridden state became publicly Regarding UPDV's Disclosures known. These questions also went to the defendant's knowledge of the stock fraud
The defendant also argues that the scheme and his intent to defraud because it government improperly accused him of allowed the government to demonstrate that engaging in the crime of insider trading. On the defendant had to have known that Seiden cross-examination, the government was deceiving his clients into buying UPDV questioned the defendant as to whether he or stock, since these clients would not have anyone else at UPDV ever notified UPDV's bought the stock if they were aware of the shareholders as to certain events, such as company's financial condition. Finally, it UPDV's default on $14 million in loans. allowed the government to rebut defendant's (Tr. 1288-89.) As set forth below, this good faith argument by demonstrating that questioning was proper to rebut defendant's defendant knew, when he hired Seiden to get statement on direct, as well as on the issue others to buy UPDV shares, that fraud had of defendant's knowledge, motive, and to take place in connection with such sales intent. because of UPDV's dire financial condition.
Accordingly, defendant's contention that First, on his direct examination, this line of questioning was improper is defendant specifically testified that he did without merit. not have any inside information when making any trades. In particular, defendant e. Limiting Instruction sought to explain his innocent motive in buying and selling UPDV stock in 2009. Finally, although defendant claims that (Tr. 1160-61.) During that portion of his the Court failed to give a limiting instruction direct testimony, defendant stated, "To my with respect to Rule 404(b), the defendant is knowledge, there is no laws that prohibit simply incorrect. In fact, the Court gave such an instruction on three separate indictment relates solely to an occasions. First, during the trial testimony, alleged fraudulent scheme to create the Court gave a limiting instruction to make false demand for UPDV and clear that evidence regarding the breach of Alphatrade common stock to the loan agreements with Sheridan could increase the stock price so that the only be considered as to background to the stock could be sold at a price that crimes charged in the indictment, as well as was artificially increased due to the on the issues of motive and intent. (Tr. 822- fraudulent activity. That's the 23.) Second, immediately following the scheme that's in the indictment. government's summation (even though there You're going to get a copy of the was no objection from the defense), the indictment in the jury room. That's Court sua sponte offered to give a limiting the only scheme that's charged in instruction, regarding the government's this case and the only scheme that reference in the summation to the fact that you are considering. These other the defendant was privy to inside evidence and these arguments information about the company that others regarding what information was or were not, to ensure (in an abundance of was not given to Mr. Seiden by the caution) that the jury understood that there is defendant regarding these companies no insider trading charge and that such may only be considered on the issue evidence was only relevant on the issue of of knowledge and intent as it relates knowledge and intent. (Tr. 1481-82.) to the scheme that's charged in the Defense counsel accepted the Court's offer indictment. That's the only purpose and the Court immediately gave the jury the that you may consider it for and not following instruction: for any other purpose. And this is extremely important. I gave you, as Members of the Jury, before Mr. you'll recall, a similar instruction, as LaRusso begins his summation, I just you heard, that is during the trial, want to give you an instruction regarding the loan agreements. And regarding some evidence you heard that same instruction applies here as during the trial and a reference that well. When you hear my instructions was made during the Government's on the law in a moment, I'm going to summation. There was a reference repeat that charge to you to make both during the trial and I think in sure you understand the limited the Government's summation to purpose for which those, that insider information or insider evidence is being permitted and that trading, and I want to make sure you can't consider it for any other there's no misunderstanding purpose, okay? regarding this and it's crystal clear:
The defendant is not charged with (Tr. 1486-87.) (emphasis added). Finally, insider trading. There are no during the instructions to the jury at the end allegations in the indictment that of the case, the Court repeated the 404(b) relate to insider trading. Insider limiting instruction. Thus, given that trading is not something that you're instruction, there could not have been any considering, it's not part of this case. confusion by the jury regarding the scope of I can't be clearer on that. The the charges in the Superseding Indictment, scheme that's charged in the and the limited purpose for which they could consider this other evidence. b. Relevant Facts
5. Rebuttal Summation In its rebuttal summation, the government argued that the defendant was
The defendant argues that the aware in June 2009 of UPDV's dire prosecution, in its rebuttal summation, financial condition, which motivated him to intentionally misled the jury into thinking unload UPDV shares as quickly as possible that the defendant had insider information through the fraud scheme with Seiden. In an that UPDV was going out of business effort to demonstrate defendant's knowledge because the defendant's cell phone bill was of UPDV's financial condition, the sent to UPDV. As set forth below, that government introduced an exhibit showing argument is without merit. that the cell phone billing address for the defendant's cell phone was the same as
a. Applicable Law UPDV's corporate address, except that the suite number was different. The exhibit also
In order to prevail on a motion for a new indicated that the defendant's cell phone trial based on prosecutorial misconduct, contract had been accepted on May 17, defendants bear the "heavy burden" of 2009. (Tr. 224, Gvt. Ex. 11.) The demonstrating that the alleged misconduct is government stated in the summation that "so severe and significant as to result in the there were "some documents in evidence" denial of their right to a fair trial." United that "proved that the defendant was more States v. Locascio, 6 F.3d 924, 945 (2d Cir. involved in the company than he let on." 1993). During a jury summation, the (Tr. 1609.) At this point, the government "government has broad latitude in the showed the cell phone records to the jurors inferences it may reasonably suggest to the and pointed out that the bill had been sent to jury." United States v. Williams, 205 F.3d UPDV's corporate address, and that 23, 35 (2d Cir. 2000) (quoting United States according to the payment history, UPDV v. Casamento, 887 F.2d 1141, 1189 (2d Cir. had paid several thousand dollars for the 1989), cert. denied 493 U.S. 1081 (1990). A defendant's cell phone. (Tr. 1610.) court "'will not lightly overturn a conviction solely on the basis of a prosecutor's c. Application misstatement in summation.'" United States v. Nersesian, 824 F.2d 1294, 1327 (2d Cir. As discussed by the Court in detail on 1987) (quoting United States v. Cruz, 797 the record, the government's inference that F.2d 90, 93 n.1 (2d Cir. 1986)). Even UPDV was paying the defendant's cell summation comments found to be improper phone bill in May 2009 was reasonable and will not result in a denial of the defendant's proper argument.*fn17 (Tr. 1629-1632.) In any due process rights unless the statements event, even if the inference was improper, it caused "substantial prejudice" to the did not prejudice defendant's case in light of defendant. Casamento, 887 F.2d at 1189. To the overwhelming evidence indicating determine whether the defendant suffered defendant's knowledge in June 2009 that substantial prejudice, courts look at "the UPDV was in dire financial condition. This allegedly improper statements in the context evidence included defendant's admissions of the prosecutor's entire argument to the on cross-examination that after October jury." Id.
2008: (1) UPDV and Continental Fuels stopped making payments on their loans with Sheridan; (2) UPDV owed Sheridan $14 million dollars; (3) UPDV did not have the cash to pay back Sheridan; and (4) Sheridan had the right to foreclose on the loans. (Tr. 1277-81.) The government made all of these points during its rebuttal summation. (Tr. 1605, 1611.) Reviewing the government's statements about the defendant's cell phone "in the context of the prosecutor's entire argument to the jury" demonstrates that the inferences drawn from the cell phone bill did not prejudice the defendant's case. See Casamento, 887 F.2d at 1189. Accordingly, defendant's motion for a new trial on the grounds of prosecutorial misconduct in the rebuttal summation is denied.
For the reasons set forth above, the defendant's motion for a judgment of acquittal and motion for a new trial are denied in their entirety.