United States v. Chen ( 2021 )

United States Court of Appeals
For the First Circuit
No. 19-1962
UNITED STATES OF AMERICA,
Appellee,
v.
CHARLIE JINAN CHEN, a/k/a Charlie Chen,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Lynch and Kayatta, Circuit Judges,
and McElroy, District Judge.
_____________________
Valerie S. Carter, with whom Dennis C. Carter and Carter &
Doyle LLP were on brief, for appellant.
Donald C. Lockhart, Assistant United States Attorney, with
whom Andrew E. Lelling, United States Attorney, was on brief, for
appellee.
May 17, 2021
 Of the District of Rhode Island, sitting by designation.
MCELROY, District Judge. Charlie Jinan Chen was charged
in a four-count indictment with three counts of insider trading,
in violation of 15 U.S.C. §§ 78j(b) and 78ff(a) (counts 1-3), and
with one count of making a materially false statement to the
Federal Bureau of Investigation (FBI), in violation of 18 U.S.C.
§ 1001(a)(2) (count 4). The government alleged Mr. Chen made the
false statement during an interview the FBI conducted of him while
investigating insider trading. At trial, he was acquitted of all
three insider trading counts but convicted of making a false
statement. He was sentenced to two years of probation plus a
$4,000 fine.
The crux of the appeal involves the content of the
allegedly false statement and related claims of prosecutorial
misconduct and judicial mishandling of count 4. Also material to
the appeal is the content of a second statement which, while
alleged by the government to have been false, was not charged.
The two statements – one referred to as the Recall Allegation and
the other as the Friends Allegation - are elucidated below.
We affirm.
Background.
The insider trading charges pertained to Mr. Chen's
stock trading in Vistaprint, an international printing company
with offices in Lexington, Massachusetts. The government
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contended that just prior to the release of eight consecutive
quarterly earnings statements, Mr. Chen exercised options to
purchase Vistaprint stock. In each of these quarters, Mr. Chen
correctly predicted the rise in share prices that would follow the
announcements. After the bump in the stock value, he sold shares,
realizing a profit of more than $800,000. The government alleged
that this pattern of purchasing and selling Vistaprint stock was
facilitated by insider information obtained from a Vistaprint
executive, Zhen (Jenny) Ye, or her husband, Kun (Kevin) Xu, or
both. According to the prosecution, the Ye-Xu family and the Chen
family were close friends, living near each other, sending their
children to the same language school, and socializing and
vacationing together.
During the FBI interview, Mr. Chen made two statements
that are relevant here. He told the FBI that he could not recall
options trading in Vistaprint. It was that answer, which we refer
to as the "Recall Allegation", that count 4 of the indictment
alleged was untrue. Mr. Chen made a second statement to the FBI
which the government also challenged as false, albeit not in a
formal charge. In the FBI interview, Mr. Chen denied that he and
the executive's husband, Kun or Kevin Xu, were "close friends."
He said they were mere acquaintances who did not speak often and
had never spoken about Vistaprint. He claimed not to know what
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Jenny did for a living. The accusation that this denial was untrue
is referred to here as the "Friends Allegation." The untruth of
the Friends Allegation was highly relevant to the prosecution. The
relationship between Mr. Chen and the Xu couple would make more
plausible his having received an insider "tip" from one or both of
them that could be used in insider trading. Further, it would
also make more probable that his trading in Vistaprint options
would be memorable.
This appeal sends our attention in two directions.
First, in a series of arguments all complaining in various ways of
the same thing, Mr. Chen contends that even though only the Recall
Allegation was charged as materially false, the jury might have
convicted him instead based on the uncharged Friends Allegation.
Second, in an argument not raised during trial but preserved in
his motion for new trial, Mr. Chen contends that the evidence was
insufficient to prove the materiality of the false statement, an
element of count 4. As discussed below, all of his arguments lack
merit.
The Preservation Requirement.
"It is a bedrock principle of our adversarial system
that ostensible errors arising before and during trial must be
properly raised and preserved in order to be reviewable on appeal."
United States v. Holmquist, 36 F.3d 154, 163 (1st Cir. 1994).
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Subject to the very limited "plain error" exception discussed
below, a party dissatisfied with something occurring at trial must
request some remedy from the trial judge to ensure that he or she
can carry that complaint to an appeals court if necessary. It is
from such rulings that appellate claims may arise.
The preservation requirement embodies the policy that
trial judges be given an opportunity to take corrective action if
some inappropriate or impermissible activity has occurred at the
trial. "In our adversarial system of justice, litigants must
alert trial courts to [an] 'error-in-the-making.'" United States
v. Kinsella, 622 F.3d 75, 83 (1st Cir. 2010) (quoting United States
v. Griffin, 818 F.2d 97, 100 (1st Cir. 1987)). Only if the trial
judge has had that opportunity and has, in the appellant's opinion,
failed to take appropriate action, may the appellant in the
ordinary course press the issue to the appeals court. "A timely
objection lets the trial judge correct any errors to avoid needless
reversals and remands." Id.Framing of the Issues.
Mr. Chen's trial counsel seemed to understand the
problem that might arise from the fact that only one of the
accusations of false statements underlay count 4 of the indictment.
At various points in the trial, she pointed out that the government
seemed to be stressing the Friends Allegation at the expense of
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the Recall Allegation and that she was afraid the jury would either
be confused or tempted to convict on count 4 based on the knowing
falsity of the former instead of the latter. At no time, however,
as will be seen in the following discussion, did she make any
request of the trial judge to do or not do something because of
this concern, to preserve any claim of error.
In this Court, Mr. Chen frames his arguments in a
somewhat curious way. Rather than claim discrete errors committed
by the trial judge, he describes various incidents of prosecution
and judicial conduct or inaction. We discern from his narrative
seven discrete points of challenge:
1. That an improper variance occurred between the
indictment and the proof at trial and that this variance
violated Mr. Chen's right under Amendment VI of the United
States Constitution "to be informed of the nature and cause
of the accusation."
2. That the government "changed up" its theory between
indictment and trial and, although the indictment stemmed
from the Recall Allegation, the prosecution conducted itself
as if the indictment charged the Friends Allegation. Br. of
Defendant-Appellant at 9.
3. That the government committed prosecutorial
misconduct by referring only to the Friends Allegation in its
opening statement, and not to the Recall Allegation.
4. That the government "usurp[ed] Count Four" by
arguing the Friends Allegation in its closing statement. Br.
of Defendant-Appellant at 16.
5. That neither the trial judge's preliminary
instruction nor her final instruction clearly informed the
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jury that it must find proof of the Recall Allegation – and
not the Friends Allegation – to convict on count 4.
6. That the indictment – which charged the Recall
Allegation as the allegedly false statement – was not sent to
the jury room.
7. That the verdict form did not clearly inform the
jury that to convict it must find the Recall Allegation – and
not the Friends Allegation – to have been proven.
These several claims amount to the same complaint: that
the prosecution and judge contributed, in different ways, to the
possibility that the jury convicted on proof of the uncharged
Friends Allegation instead of on proof of the charged Recall
Allegation. No matter how many different ways he finds to frame
this assertion, however, Mr. Chen's problem is that none of these
arguments was preserved in the trial court by an objection, a
motion, or any other unsuccessful request or protest to the trial
judge.1 Mr. Chen's attempt to find satisfaction in this Court is
therefore contingent on his carrying the burden of demonstrating
that the events at trial he complains of were "plain error []
affect[ing] substantial rights." Fed. R. Crim. P. 52(b).
1 The only possible exception to this failure was a colloquy
concerning the prosecution's opening statement. As will be
discussed below, however, Mr. Chen's protest was quickly withdrawn,
and he pronounced himself satisfied with the government's opening
statement. See infra p. 13.
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Waiver and Plain Error.
We discuss waiver and plain error at the outset to avoid
repetition as we proceed through Mr. Chen's arguments because all
but one of his arguments was either waived at trial or forfeited
below. An issue may be waived when a party purposefully abandons
it, either expressly or by taking a contrary position at trial.
United States v. Olano, 507 U.S. 725, 733 (1993) (defining waiver
as "the 'intentional relinquishment or abandonment of a known
right'" (quoting Johnson v. Zerbst, 304 U.S. 458, 464 (1938)). An
issue may also be waived if counsel's own conduct invited the trial
judge's ruling. E.g., United States v. Kakley, 741 F.2d 1, 3 (1st
Cir. 1984) (explaining that counsel "invited" whatever error may
have occurred by requesting the challenged instruction). A party
who waives an issue at trial cannot later complain on appeal by
pressing a position that was not taken at trial.
"Plain error," on the other hand, is a doctrine that
enables appellate review of forfeited issues that, while not
deliberately abandoned at trial, were not pressed by way of an
objection or request for ruling. See, United States v. McPhail,
831 F.3d 1, 8-9 (1st Cir. 2016) (distinguishing between waived and
forfeited issues). Reversal may occur in the absence of
preservation at trial when "(1) . . . an error occurred (2) which
was clear or obvious and which not only (3) affected the
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defendant's substantial rights, but also (4) seriously impaired
the fairness, integrity, or public reputation of judicial
proceedings." United States v. Salley, 651 F.3d 159, 164 (1st
Cir. 2011) (quoting United States v. Landry, 631 F.3d 597, 606
(1st Cir. 2011)). "Plain error reversals are limited to
blockbuster errors and not ordinary backfires." Id. Not only
must the error be a blockbuster, but the prejudice must also be so
substantial that it creates a "reasonable probability" that the
outcome of the trial would have been different had it not occurred.
United States v. Padilla, 415 F.3d 211, 221 (1st Cir. 2005)
(quoting United States v. Dominguez Benitez, 542 U.S. 74, 82
(2004)).
In this case, except for the materiality argument raised
at his motion for new trial, all of Mr. Chen's arguments on appeal
were either waived or forfeited. We discuss each below.
1. Variance between the indictment and the proof, and
the Sixth Amendment violation.
At its heart, Mr. Chen's argument is that multiple
circumstances may have caused the jury to convict him of the
Friends Allegation instead of the Recall Allegation, essentially
causing a mismatch – or variance – between the indictment and the
proof. He contends that both the trial judge and the prosecutor
furthered this alleged error. As a result, he argues, he did not
receive adequate notice that the charge he had to defend against
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concerned the Friends Allegation. At trial, however, he raised
neither the argument of variance nor of a Sixth Amendment "notice"
violation, so plain error review is required.2 See United States
v. Rodríguez-Milián, 820 F.3d 26, 32 (1st Cir. 2016) (reviewing
for plain error where appellant did not raise variance issue in
the district court).
As to his Sixth Amendment claim, Mr. Chen received
adequate notice of the conduct charged as criminal and so there
was no error, plain or otherwise. The indictment specifically
alleged the knowing falsity of his statement that he "could not
recall his options trading in [Vistaprint], when in fact CHEN then
and there knew he had bought and sold options in [Vistaprint] as
part of the insider trading scheme alleged herein." Mr. Chen
acknowledges in his brief that at various points the government
stressed it was relying on that allegation to convict. See, e.g.,
Br. of Defendant-Appellant at 5-6, 11-12, 15, 17-19. Indeed, the
record reflects that. That the government also introduced
evidence of a second false statement does not detract from the
notice Mr. Chen was indisputably given as to the Recall Allegation.
2 We note that Mr. Chen's presentation to this Court is spare.
He cites but one case in support of his eight-and-one-half page
argument, United States v. Dowdell, 595 F.3d 50 (1st Cir. 2010),
a case which dealt with neither a variance nor a Sixth Amendment
claim. Dowdell involved a "ministerial correction to a clerical
error" in the indictment. Id. at 66.
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"Convictions may be reversed based on variance only upon
a showing of prejudice to the defendant's substantial rights,"
such as "when lack of notice regarding the charges deprives the
defendant of his ability to prepare an effective defense and to
avoid surprise at trial." United States v. Soto-Beníquez, 356
F.3d 1, 27 (1st Cir. 2003); see also United States v. Tavares, 705
F.3d 4, 16–17 (1st Cir. 2013) (finding no plain error where there
was no prejudicial variance). As discussed above, Mr. Chen had
ample notice that the government intended to introduce evidence of
the Friends Allegation in addition to the Recall Allegation, and
ample opportunity to request a jury instruction clarifying that
count 4 was based on the Recall Allegation alone.
Mr. Chen suggests that he has established prejudice
because there was "evidentiary spillover" that could have led the
jury to convict him of count 4 based on the Friends Allegation,
even if it believed that he was telling the truth when he stated
that he could not recall his options trading with Vistaprint. But
we have only recognized such spillover prejudice in cases involving
multiple conspiracies and/or multiple defendants, see United
States v. Flaherty, 668 F.2d 566, 582 (1st Cir. 2017), "so that in
cases with multiple defendants proof that one defendant was
involved in one conspiracy does not lead the jury to believe that
another defendant was involved in a separate conspiracy." United
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States v. Tormos-Vega, 959 F.2d 1103, 1115 (1st Cir. 1992). Mr.
Chen points to no case in which we have applied this doctrine to
find a prejudicial variance with respect to a false statement
charge against a single defendant. In short, we see no plain
error.
2. Alleged prosecutorial misconduct in the opening and
closing statements.
Mr. Chen complains that the government's opening
statement recounted the evidence only of the falsity of the Friends
Allegation, and that its failure to discuss the Recall Allegation
was misconduct. The judge had set a twenty-minute time limit for
opening statements. At the eighteen-minute point, she warned the
prosecutor of the elapsed time. At the point when the trial judge
called "time," the prosecutor had just progressed in his chronology
to the FBI’s going to Mr. Chen’s restaurant to talk to him. Told
to "wrap up," the prosecutor mentioned Mr. Chen’s "not close
friends" answer, "[a]mong other things," made one concluding
remark, and then sat down. Id.The next day, Mr. Chen's counsel pointed out to the trial
judge that the prosecutor failed to discuss the Recall Allegation
in the opening statement and indicated her concern that the
government was planning to rely on the Friends Allegation to prove
count 4. The prosecutor confirmed that the government would rely
on the Recall Allegation alone and explained that he did not
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mention the Recall Allegation during his opening statement because
he had run out of time. Defense counsel replied, "with that
clarification, we're fine." We need not decide whether Mr. Chen's
prosecutorial-misconduct objection was waived or forfeited through
this colloquy with the trial judge. Even assuming plain error
review is available, Mr. Chen points to no case holding that a
prosecutor committed misconduct by failing to mention certain
evidence in an opening statement. As such, Mr. Chen has not shown
that the prosecutor committed "clear or obvious" misconduct and so
cannot satisfy the second prong of the plain error standard.
The specific complaint about the closing statement is
hard to discern, but it seems to involve the government's statement
that "[Chen] lied about many things," without reminding the jury
that count 4 charged only falsity in the Recall Allegation. 3
Nestled in this section of Mr. Chen's brief is an additional claim
that faults the trial court for not sua sponte giving a
"cautionary/clarifying" instruction. Br. of Defendant-Appellant
at 21. We cannot find anything wrong with the prosecution's
closing argument, much less misconduct. The defense conceded at
trial that the evidence was relevant to the insider trading counts
and does so again in its Brief. Br. of Defendant-Appellant at 17,
Mr. Chen describes this as "[m]erging the one material
3
statement alleged in the Indictment with the other so-called
uncharged lies." Br. of Defendant-Appellant at 20.
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35-37. Finding no clear prosecutorial misconduct, we can hardly
fault the trial judge, as Mr. Chen does, for failing to sua sponte
give a "clarifying" instruction.4
3. The indictment not going to the jury and the verdict
form.
We combine these two claims of error because our analysis
of them is the same. Both claims were waived at trial. Whether
an indictment is given to the jury is within the sound discretion
of the trial judge. United States v. Medina, 761 F.2d 12, 21-22
(1st Cir. 1985). The failure to do so can hardly be termed error.
Even more fatal to Mr. Chen's contention is yet again the fact
that he not only did not object: he affirmatively agreed. The
trial judge made clear her intention not to provide the indictment
to the jurors, and on at least two occasions, Mr. Chen indicated
4 We note that "the plain error hurdle, high in all events,
nowhere looms larger than in the context of alleged instructional
errors." United States v. Rivera-Carrasquillo, 933 F.2d 33, 49
(1st Cir. 2019)(quoting United States v. Paniagua-Ramos, 251 F.3d
242, 246 (1st Cir. 2001)). Plain error will be found only for
"glaring" mistakes, such as the failure to charge on the burden of
proof. United States v. Paniagua-Ramos, 251 F.3d at 246 (1st Cir.
2001). At several points in the trial, the defense specifically
approved the instructions given by the trial court.
Mr. Chen does not appear to make a frontal assault on the
trial court’s instructions to the jury on count 4. If he had, we
would respond that the instruction given was one he and the
government both proposed, he pointed out no problem with the
instructions the trial judge proposed, and he made no objection at
the close of the instructions.
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his preference for precisely that decision. Having agreed to
withhold the indictment from the jury, any challenge to that course
of conduct was waived. United States v. Morehead, 676 F. App'x
695, 696 (9th Cir. 2017) (finding that the defendant waived his
right to have the indictment provided to the jury where he declined
the judge's offer to read the indictment to the jury or provide
them with a copy).
In the same way, we reject Mr. Chen's challenge to the
verdict form. Not only did he not object to it, when asked if the
verdict form was acceptable to the defense, counsel replied
specifically, "We're fine with it." He cannot change direction
in this Court. He has waived this issue. United States v.
Souffrant, 517 F. App'x 803, 718 (11th Cir. 2013) (finding that
the defendant waived any objection to the verdict form by agreeing
to it).
4. Motion for a new trial.
Mr. Chen's appellate claim under Fed. R. Crim. P. 33 is
unclear. The government interprets it as challenging the
sufficiency of the evidence on count 4. Br. for United States at
35. While Mr. Chen does specifically challenge proof of
materiality with respect to the Recall Allegation, he mounts a
broader challenge that he terms the trial court's "inexplicabl[e]
acquiescenc[ence] to the government's unilateral transformation of
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Count Four." Br. of Defendant-Appellant at 37. This is yet
another way to repackage the complaints discussed above. However,
bringing these claims in a motion for a new trial does not relieve
Mr. Chen of meeting the burden of plain error, as all but the
materiality issue discussed below remain unpreserved. See
Kinsella, 622 F.3d at 83. We do not agree that the district court
or the government "unilateral[ly] transform[ed]" count 4.
With respect to materiality, while Mr. Chen maintains
the statement had to be one that in fact affected the
investigation, we agree with the government's assertion that it
merely had to be of a type which would have a "natural tendency"
to influence an investigation in the "abstract." United States
v. Phillipos, 849 F.3d 464, 473 (1st Cir. 2017) (quoting United
States v. Mehanna, 735 F.3d 32, 55 (1st Cir. 2013); accord Mehanna
at 55 ("[W]here a defendant's statements are intended to misdirect
government investigators, they may satisfy the materiality
requirement of section 1001 even if they stand no chance of
accomplishing their objective."). Pretending to not recall the
trades can be as material as admitting or denying having made them,
as a jury could find that a feigned lack of memory was intended as
a thinly veiled deception. See, e.g., United States v. Sampson,
898 F.3d 287, 307 (2d Cir. 2018)(holding that the evidence was
sufficient to support the conclusion that the defendant's
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statement that he did not recall having seen a check register page
was intended to deceive FBI agents).
Finally, in his argument for a new trial, Mr. Chen
included a claim that the indictment was "unclear." 5 Br. of
Defendant-Appellant at 40. He argued it is ambiguous as to whether
it charges a false statement or merely a failure of memory. He
maintains this argument only by omitting language from the
indictment in a way that is misleading. He quotes the indictment
as charging "that Chen ‘could not recall his options trading in
VPRT, when in fact CHEN then and there knew he had bought and sold
options in [Vistaprint] as part of the insider trading scheme
alleged herein.'" Id. Read that way, of course, it charges him
with having a failure of memory. But that is not what the
5 Nestled in this argument in his brief, Mr. Chen appears to
question, though obliquely, the sufficiency of the evidence that
his claim not to remember options trading in Vistaprint was false.
Br. of Defendant-Appellant at pp. 42-43. We dispose of this
argument, to the extent it is made, quickly. In reviewing the
sufficiency of the evidence, we draw all inferences in favor of
the verdict. United States v. Morel, 885 F.3d 17, 22 (1st Cir.
2018) (preserved sufficiency challenges are reviewed "taking the
evidence in the light most favorable to the verdict."). Here,
Chen engaged in options trading over the course of two years no
less than eight times, his profit was approximately $830,000, and
the percentage of the Chen family retirement accounts that were
invested in Vistaprint was considerable, particularly in
comparison to Mr. Chen's other investments. Mr. Chen's
interpretation of this evidence is not the only one, and the jury
could well have drawn a reasonable inference that his professed
failure of memory was not true.
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indictment recited. Instead, with the language that Mr. Chen
omitted placed in italics by us, the indictment charged that Mr.
Chen
did knowingly and willfully make a materially
false, fictitious, and fraudulent statement
and representation . . . by stating to Special
Agents of the Federal Bureau of Investigation
that he could not recall his options trading
in [Vistaprint], when in fact CHEN then and
there knew he had bought and sold options in
[Vistaprint] as part of the insider trading
scheme alleged herein.
The full language of the indictment leaves no doubt that Mr. Chen
was charged with making a false statement about whether he
remembered options trading, not with having a faulty memory.
There was nothing ambiguous about it, no error, and certainly no
plain error.
Although Mr. Chen has made known to us his
dissatisfaction with several events at his trial, he did not make
it clear to the district judge. Indeed, he explicitly agreed to
at least two of her decisions that he now claims as error and he
failed to preserve all but one of the rest. Subject to both waiver
and the difficult standard of plain error, he has failed to make
his appellate case. Finding that Mr. Chen's arguments lack merit,
we affirm.
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