The opinion of the court was delivered by: John Gleeson, United States District Judge:
ELECTRONIC PUBLICATION ONLY
On remand from the United States Court of Appeals for the Second Circuit, the defendant Darin DeMizio moves for a judgment of acquittal or, in the alternative, a new trial on a charge of conspiracy to commit securities fraud or wire fraud, in violation of 18 U.S.C. §§ 1343, 1346 & 1348--49, in light of the Supreme Court's decision in Skilling v. United States, 130 S. Ct. 2896 (2010), which narrowed the scope of fraud premised on the deprivation of "honest services." DeMizio also seeks a new trial on a charge that he made a false statement in a matter within federal jurisdiction, in violation of 18 U.S.C. § 1001(a)(2), on the ground of prejudicial spillover. For the reasons stated below, DeMizio's motion is denied. DeMizio shall report to the facility designated by the Bureau of Prisons on May 25, 2012, to begin serving his sentence.
DeMizio worked for Morgan Stanley & Co., Inc. ("Morgan Stanley") for several years beginning in 1991 and eventually rose to the position of running its domestic securities lending business. Morgan Stanley used various companies to act as "finders," matching borrowers and lenders in order to effect its clients' stock-loan transactions. In exchange for these finder services, the companies received a portion of Morgan Stanley's revenue from the transaction. Through his position at Morgan Stanley, DeMizio was able to steer transactions to particular finders. Over a period of several years, four of these companies regularly paid "finder's fees" to either DeMizio's father, Robert, or brother, Craig, in connection with Morgan Stanley transactions.
At trial, the government presented evidence showing that these "finder's fees" were, in fact, kickbacks. The evidence showed that each company paid substantial fees to Robert or Craig for little or no work. They were willing to do so because DeMizio had agreed to provide a steady stream of business from Morgan Stanley in return.
An employee of Garban Corporates LLC ("Garban") testified that her company paid Robert and Craig in connection with Morgan Stanley transactions even though they performed work on no more than "ten percent" of the trades for which they were paid. Trial Tr. 853, 862--65, 873--75, 898--900. Moreover, with respect to the trades Robert and Craig worked on, they did nothing more than provide a list of securities that Morgan Stanley wanted to trade. Id. Garban paid them in order to keep Morgan Stanley's business. Id. at 851.
DeMizio approached an employee of another company, Freeman Securities Company, Inc. ("Freeman"), and offered to increase Freeman's business with Morgan Stanley. Id. at 317. In exchange, Freeman would pay finder's fees to Craig even though Craig "wasn't going to participate in the day-to-day business that much." Id. at 318. Freeman thereafter paid Craig $30,000 to $50,000 a month even though Craig performed no more than 20 percent of the actual work on the trades for which he was paid. Id. at 332, 329, 403. DeMizio said he "would deny the whole thing" if anybody at Morgan Stanley found out about Freeman's payments to Craig. Id. at 339.
DeMizio and another Morgan Stanley employee, Peter Sherlock, set up a similar kickback scheme with Clinton Management Ltd. ("Clinton"). Clinton obtained Morgan Stanley's business and, in return, Clinton paid a portion of its fees on Morgan Stanley transactions to Craig, even though he did not do any work. See id. at 635, 637, 726.
DeMizio also steered Morgan Stanley's business to a fourth company, Tyde, Inc. ("Tyde"), founded by DeMizio's best friend, Robert Johnson. DeMizio directed Johnson to pay half of Tyde's fees from trades involving Morgan Stanley to his father, even though he would visit Tyde only "sporadically," and spent his time there socializing on the telephone. Id. at 76-- 78; see also id. at 75, 82, 90--91, 138, 140, 228, 236--39, 266--68. Johnson agreed to this arrangement so that Tyde would continue to receive business from Morgan Stanley. Id. at 77, 266. Subsequently, DeMizio told Johnson to pay Craig for Morgan Stanley transactions, even though Johnson was doing all of the finder work. Id. at 97--99. At the time, Craig was in need of financial help and "was incapable of doing the transactions himself." Id. at 98.
In addition to this kickback scheme, DeMizio and Johnson also contemplated several legitimate joint business ventures. See id. at 118--19. For example, they formed a modeling agency, Eon Model Management ("Eon"), in 2004. Id. at 122--24. DeMizio directed Johnson to use some of the fees that had been going to Robert or Craig to fund Eon. Id. at 118-- 19, 123--24, 144--45, 271. DeMizio was entitled half of any profits earned by Eon. Id. at 125.
The government introduced evidence that DeMizio's actions had a negative financial impact on Morgan Stanley. First, DeMizio decreased Morgan Stanley's revenues on particular trades involving Garban, increasing Garban's revenues and, thus, allowing it to pay greater fees to Robert and Craig. See, e.g., id. at 862--63, 876--78. Second, on at least one occasion, DeMizio loaned a stock to Tyde at a below market rate, undercutting Morgan Stanley's revenue. Id. at 649--52. Third, DeMizio arranged for Tyde to receive a "cold balance," i.e., a steady stream of trades involving easy-to-borrow stocks. Id. at 78--79. Providing a cold balance to Tyde was not in Morgan Stanley's interest, as it ordinarily supplied them to large financial institutions, not smaller firms like Tyde. Id. at 424--29. DeMizio set Morgan Stanley's portion of the fees from Tyde's cold balance at a rate lower than the industry standard. Id. at 79, 429-- 33, 460--68.
In 2007, DeMizio met with two special agents of the Federal Bureau of Investigation ("FBI") for a voluntary interview. DeMizio told the special agents that he did not have any outside business arrangements with Johnson. Id. at 947--48. The government contended that this statement was false because of, inter alia, Johnson's and DeMizio's partnership in Eon.
B. The Jury Charge and Verdict
After receiving proposed jury instructions from the parties, I held a charge conference on March 20, 2009. Discussions at the charge conference with respect to two of DeMizio's proposed jury instructions are relevant here.
DeMizio's fifth proposed instruction (relating to the element of a material misrepresentation or omission) described the sole omission at issue in the case as the failure to disclose that DeMizio "was causing finder fees to be paid to his family members in connection with stock-loan transactions involving Morgan Stanley." Def.'s Proposed Jury Instructions 13, ECF No. 105. The government objected to this proposed instruction because, inter alia, there was "a variety . . . of . . . material misrepresentations or omissions that the jury could find here." Trial Tr. 1095. DeMizio's counsel, while agreeing to some modification of the language, disagreed. According to him, "steering business to be paid for no work is the omission that . . . we should be focused on. And I'm not aware of anything else in the record that would represent another omission." Id. at 1097. In response, the government suggested that [a]nother material misrepresentation or omission that the jury could find is that Mr. DeMizio was steering business to Garban, for example, conditionally; on the condition that his brother or father be paid. And so, had his employers knew [sic] that he was controlling or conditioning order flow for Morgan business . . . on the fact that his brother and father were being put on trades, that's also a material misrepresentation or omission that the jury could find and that his employers would find significant.
Id. (paragraph break removed). DeMizio's counsel replied that the government had never raised this theory and that its position from "the outset of the case was that it was about . . . pay for no work." Id.
I declined to instruct the jury as to what particular material misrepresentations or omissions might be at issue in this case. See id. at 1099. Instead, I told the parties "I would state the general principle and let you argue it out." Id.
A second disagreement related to DeMizio's eighth proposed instruction, which related to a purported difference in the standards for two types of fraud premised on the theory that an employee had deprived his employer of the intangible right to honest services: frauds involving the payment of kickbacks and those involving undisclosed self-dealing. See Def.'s Proposed Jury Instructions 16. I declined to give this proposed instruction, explaining that "I . . . think that the jury understands, as I do, that the thrust of the Government's case is the paying money . . . to Craig and to Robert . . . for no work. Not that to the extent they actually did work it constitutes a self-dealing. So, I don't think it's an appropriate charge." Trial Tr. 1154. I later elaborated on my decision, explaining that "it seems clear to me, seeing how the case was tried, that the Government hasn't alleged that the defendant steered Morgan Stanley's business to firms in which he had an undisclosed ownership interest." Id. at 1385.
After the parties' closing arguments, I charged the jury on March 23, 2009. With respect to the nature of the conspiracy to commit honest services fraud, I simply instructed the jury that "in this case the conspirators allegedly agreed to a scheme that would deprive Morgan Stanley of its rights to the honest services of Darin DeMizio." Id. at 1365; see also id. at 1366-- 69, 1372.
The following day, March 24, 2009, the jury returned a verdict, finding DeMizio guilty on both counts of the superseding indictment: conspiracy to commit securities fraud or wire fraud and making a false statement. Id. at 1404.
C. Post-Trial Proceedings and Appeal
1. DeMizio's Post-Trial Motion
In May 2009, DeMizio moved for a judgment of acquittal or, in the alternative, a new trial.*fn1 DeMizio argued, inter alia, that I should have accepted his eighth proposed injury instruction concerning two separate types of honest services fraud -- kickbacks and undisclosed self-dealing.
In a July 20, 2009 decision, I denied DeMizio's motion for acquittal or a new trial. See United States v. DeMizio, No. 08-CR-336 (JG), 2009 WL 2163099 (E.D.N.Y. July 20, 2009). I held that the requested instruction was properly denied because "there was no evidence in the record to suggest that the defendant steered Morgan Stanley's business to firms in which he had an ...