United States v. Tarallo ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,  No. 02-50252
Plaintiff-Appellee, D.C. No.
v. CR-00-00186-ABC
ALDO TARALLO, ORDER
Defendant-Appellant. AMENDING
OPINION AND
 DENYING
PETITION FOR
REHEARING AND
PETITION FOR
REHEARING EN
BANC AND
AMENDED
 OPINION
Appeal from the United States District Court
for the Central District of California
Audrey B. Collins, District Judge, Presiding
Argued and Submitted
June 9, 2004—Pasadena, California
Filed August 20, 2004
Amended June 29, 2005
Before: Dorothy W. Nelson, John R. Gibson,* and
Susan P. Graber, Circuit Judges.
Opinion by Judge Graber
*The Honorable John R. Gibson, Senior Circuit Judge for the United
States Court of Appeals for the Eighth Circuit, sitting by designation.
7683
7686 UNITED STATES v. TARALLO
COUNSEL
Barry Tarlow and Tarik S. Adlai, Tarlow & Berk, Los Ange-
les, California, for the defendant-appellant.
UNITED STATES v. TARALLO 7687
Steven J. Olson, Assistant United States Attorney, Major
Frauds Section, Los Angeles, California, for the plaintiff-
appellee.
ORDER
The opinion filed August 20, 2004, is amended as follows:
On slip opinion page 11814, and published at 380 F.3d
1174, 1196 (9th Cir. 2004), delete footnote 9 and add the fol-
lowing sentence to the conclusion at the end of the opinion:
“The remainder of the sentence is REMANDED to the district
court for proceedings consistent with United States v. Ame-
line, No. 02-30326, 2005 WL 1291977 (9th Cir. June 1, 2005)
(en banc).”
With this amendment, the panel has voted to deny the peti-
tion for rehearing. Judge Graber has voted to deny the petition
for rehearing en banc, and Judges D.W. Nelson and Gibson
have so recommended.
The full court has been advised of the petition for rehearing
en banc and no judge of the court has requested a vote on it.
The petition for rehearing and petition for rehearing en
banc are DENIED. No further petitions for rehearing or peti-
tions for rehearing en banc may be filed.
OPINION
GRABER, Circuit Judge:
Defendant Aldo Tarallo appeals his convictions on six
counts of securities fraud, in violation of 15 U.S.C. §§ 78j(b)
and 78ff and 17 C.F.R. § 240.10b-5; and four counts of mail
7688 UNITED STATES v. TARALLO
fraud, in violation of 18 U.S.C. § 1341. We reverse his con-
victions with respect to three vicarious liability counts for
lack of evidence. In affirming the remaining seven counts, we
hold that a defendant may commit securities fraud “willfully”
in violation of 15 U.S.C. § 78ff and 17 C.F.R. § 240.10b-5
even if the defendant did not know at the time of the acts that
the conduct violated the law. We further hold that a defendant
may commit securities fraud “willfully” by intentionally act-
ing with reckless disregard for the truth of material mislead-
ing statements. Finally, we hold that 15 U.S.C. § 78ff is not
facially unconstitutional as a violation of Apprendi v. New
Jersey, 530 U.S. 466 (2000).
FACTUAL AND PROCEDURAL BACKGROUND
Defendant and two co-defendants, David Colvin and John
Larson, together participated in a fraudulent telemarketing
scheme. Colvin owned several companies used in the scheme,
including Intellinet, Inc., and Larson was Intellinet’s sales
manager. Defendant was hired by Intellinet as a telemarketer,
and he participated in the fraud from April 1997 until Febru-
ary 20, 1998. Defendant and others solicited those called to
invest in various businesses whose value and operations were
fictitious. These purported businesses included Medical
Advantage, Inc. (“Medical Advantage”), Lamelli Medical
Technology, Inc. (“Lamelli”), and R.A.C. International, Inc.
(“R.A.C.”).
Defendant and his co-defendants falsely represented to
potential investors that Medical Advantage operated indepen-
dent weight loss clinics around the country and had a pro-
jected 1997 revenue of $8.2 million, and that C. Everett Koop
and Tom Brokaw supported or were affiliated with the com-
pany. Defendant and his co-defendants falsely represented to
potential investors that Lamelli had developed a detoxifica-
tion system that could detoxify a person of all alcohol or
drugs in 15 minutes, that the system had won FDA approval,
and that $187 million in revenue was expected to be generated
UNITED STATES v. TARALLO 7689
by this alleged invention in 1998. Defendant and his co-
defendants falsely represented to potential investors that
R.A.C. had generated $2.3 million in revenue in 1997 from
sales of motor oil, car batteries, and tools, and that the com-
pany projected for 1998 revenues of approximately $3.5 mil-
lion.
Defendant and his co-defendants told potential investors
that they would be investing by means of promissory notes,
which would be held in a “trust” for a fixed term of between
90 and 180 days. In return, the investors would receive 12
percent interest per annum and shares of “restricted stock” in
the company. Defendant told investors that the company’s
Initial Public Offering (“IPO”) would occur on or before the
date on which the promissory note was to mature, at which
point investors could (at their option) either receive back their
invested principal or use it to purchase shares offered in the
IPO. Instead of holding the invested funds in trust as prom-
ised, however, Colvin and others used those funds for the ben-
efit of Colvin, Larson, Defendant, and their associates, and
the investors never saw their money again.
After a nine-day trial, a jury convicted Defendant on six
counts of securities fraud and four counts of mail fraud. The
district court sentenced him to 37 months’ imprisonment on
each count, with the sentences to run concurrently. Defendant
timely appealed.
DISCUSSION
Defendant presents four arguments on appeal: (A) there
was insufficient evidence to support the fraud convictions; (B)
there was insufficient evidence to support the convictions on
counts arising from acts committed by other telemarketers;
(C) the district court erred in instructing the jury; and (D) the
prosecution engaged in misconduct that prejudiced Defen-
dant. We will address each of these arguments in turn, but
agree with Defendant only as to the second argument.
7690 UNITED STATES v. TARALLO
A. Evidence Supporting the Fraud Convictions
1. Standard of Review.
We review de novo the question whether sufficient evi-
dence was adduced at trial to support a conviction. United
States v. Diaz-Cardenas, 351 F.3d 404, 407 (9th Cir. 2003).
We view the evidence in the light most favorable to the gov-
ernment, and it is sufficient if any rational trier of fact could
have found the essential elements of the crime beyond a rea-
sonable doubt. United States v. Plache, 913 F.2d 1375, 1381
(9th Cir. 1990).
2. Defendant knowingly made false statements.
[1] A defendant may be convicted of committing mail fraud
in violation of 18 U.S.C. § 1341 only if the government
proves beyond a reasonable doubt that the defendant had the
specific intent to defraud. United States v. Sayakhom, 186
F.3d 928, 941 (9th Cir.), amended by 197 F.3d 959 (9th Cir.
1999). Likewise, a defendant may be convicted of committing
securities fraud only if the government proves specific intent
to defraud, mislead, or deceive. United States v. Brown, 578
F.2d 1280, 1284 (9th Cir. 1978).
Defendant argues that there was insufficient evidence that
he knew that the statements he made to potential investors
were false. If he did not even know that the statements were
false, of course, he could not have had the specific intent to
defraud. He points out that Colvin and Larson distributed
typewritten scripts for salespeople to use during sales calls,
and he asserts that the investment materials they provided to
Defendant (and passed along to investors) were sophisticated
and were not recognizably false. In essence, Defendant claims
that no evidence at trial established that he was anything other
than an innocent who was duped right along with the inves-
tors.
UNITED STATES v. TARALLO 7691
The record does not support Defendant’s claim. A reason-
able factfinder could have found beyond a reasonable doubt
that Defendant knew of the fraudulent nature of the scheme
in which he was participating.
[2] For example, the jury was presented with evidence that
Defendant knew that it was a lie to assure investors that their
money was guaranteed and risk-free because it was held in a
“trust” until the IPO occurred. For example, Crew testified
that Defendant told him that his investment would be held in
a trust and that, after the IPO, he could receive his principal
back with interest, or else receive shares in the company.
However, Defendant received paychecks from Sierra Ridge
Management Trust, which was one of the trusts for which
Defendant solicited investors. Agent Goldman testified that,
after being arrested and Mirandized, Defendant admitted that
he knew he was being paid out of the same “trust” companies
that investors’ money was being deposited. Paul Coynes, who
worked with Defendant as a telemarketer, also testified for the
prosecution. Coynes explained that he realized after a time
that it was impossible for the money he was soliciting to be
held safely in a trust:
[W]e told people that all the money went into the
trust company. And at some point it became clear to
me how ridiculous that was because we were getting
paid a commission, the sales manager was getting
paid a commission, and the owner of the company
was obviously living a decent life-style and that
money had to come from somewhere.
A juror could reasonably conclude from this evidence that
Defendant knew that the “trusts” were not actually safe, but
were being raided for payroll.
The jury also heard evidence that Defendant lied to poten-
tial investors about where he was located, telling them during
telephone conversations that he was in a different office from
7692 UNITED STATES v. TARALLO
Colvin, an office that did not exist. Investor-victim John
Wiedmer testified that Defendant told him that he was in a
Washington, D.C., office, while Colvin was in California.
Wiedmer testified that this statement influenced his decision
to invest because it made the publishing company Defendant
was pitching sound like “a pretty big operation,” and that rep-
resentation added some credence to the legitimacy of the
enterprise. Likewise, investor-victim Keith Crew testified that
Defendant sometimes claimed to be in Washington, D.C.,
when they spoke on the telephone and that Defendant pro-
vided him with a business card from Al Tarall (Defendant’s
alias) in Washington, D.C. However, Agent Steven Goldman
of the FBI testified that, in the course of his investigation into
the telemarketing scheme, he learned that the “Washington
office” was only a “virtual office” that consisted simply of a
service that answered the telephones and forwarded mail.
[3] The foregoing evidence supported the jury’s finding
beyond a reasonable doubt that Defendant knew of the fraud-
ulent nature of the telemarketing scheme and that he acted
with the intent to defraud.
3. The false statements were material.
[4] A misrepresentation must be material to form the basis
of a conviction for mail or securities fraud. Neder v. United
States, 527 U.S. 1, 25 (1999) (mail fraud); United States v.
Smith, 155 F.3d 1051, 1064 (9th Cir. 1998) (securities fraud
under 17 C.F.R. § 240.10b-5). For mail fraud, the test is
whether the statement has a natural tendency to influence, or
is capable of influencing, the addressee’s decision. United
States v. LeVeque, 283 F.3d 1098, 1103-04 (9th Cir. 2002).
For securities fraud, a statement is material if there is a sub-
stantial likelihood that a reasonable investor would consider
it important in making a decision. No. 84 Employer-Teamster
Joint Council Pension Trust Fund v. Am. W. Holding Corp.,
320 F.3d 920, 934 (9th Cir.), cert. denied, 124 S. Ct. 433(2003).
UNITED STATES v. TARALLO 7693
Defendant’s false statement that the invested funds would
be placed in a trust and would be safe there was material
under both the mail fraud and securities fraud standards. Such
a statement has a natural tendency to influence a potential
investor’s decision to invest, and a reasonable investor would
find the level of risk to be important in deciding whether to
invest.
The materiality of Defendant’s false statements that he was
in an office in Washington, D.C., is a closer question, but we
conclude that these statements also were material. By making
the business appear to be a “pretty big operation,” these state-
ments had a natural tendency to influence a potential inves-
tor’s decision. Similarly, a potential investor might consider
multiple office locations, and travel to them, to be indices of
sophistication, prosperity, or business savvy, which would be
important in making a decision whether to invest.
Defendant cites LeVeque, 283 F.3d at 1104, in support of
his argument that his lies regarding his location were not
material. In LeVeque, we distinguished the Second Circuit’s
decision in United States v. Regent Office Supply Co., 421
F.2d 1174, 1178 (2d Cir. 1970). We explained that a fraud
conviction could be maintained in LeVeque because the “de-
fendants materially misrepresented the advantages of their
offer.” 283 F.3d at 1104. This had not been true in Regent,
where the false statements were made only in order to gain
access to make their sales pitch, and did not misrepresent “the
price or quality of the product being sold.” LeVeque, 283 F.3d
at 1104. The Second Circuit therefore determined in Regent
that the statements were not material. Id. Defendant relies on
LeVeque to argue that only direct misrepresentations of the
price, quality, or advantages of the transaction are material.
We disagree. The standards we cite above clearly allow for a
broader class of conduct to be considered material. Here,
Defendant’s misrepresentations were designed to give a false
impression as to the size and nature of his own company as
well as the businesses in which victims were being asked to
7694 UNITED STATES v. TARALLO
invest. LeVeque was merely distinguishing the facts of that
case with a case in which the only misrepresentations were
related to gaining access to customers in order to pitch an oth-
erwise honest product.
[5] In short, Defendant’s misrepresentations were material,
and there was sufficient evidence of them presented to the
jury. We therefore affirm the jury’s convictions on the “direct
liability” counts.
B. The “Vicarious Liability” Convictions
Defendant was convicted on counts 7, 23, and 24 of the
indictment, all of which charged him with mail fraud and
securities fraud arising out of sales made by other employees
of the telemarketing firm. The district court instructed the jury
on two theories for these counts: an aiding-and-abetting the-
ory, and a causing-another-to-commit-a-crime theory. The
court did not instruct the jury on a “coschemer liability” the-
ory.
With respect to aiding and abetting, the court instructed that
whoever “aids, abets, counsels, commands, induces or pro-
cures the commission of a crime against the United States is
as guilty as a principal.” The court explained that, to prove a
defendant guilty under 18 U.S.C. § 2(a), the government must
prove beyond a reasonable doubt: (1) that a crime was com-
mitted by someone; (2) that the defendant knowingly and
intentionally aided, counseled, commanded, induced, or pro-
cured that person to commit the crime; and (3) that the defen-
dant acted before completion of the crime. The defendant
must have acted with the knowledge and intention of helping
the actor commit the crime.
The court also provided an instruction for causing another
to commit a crime under 18 U.S.C. § 2(b). This instruction
explained that whoever “willfully causes an act to be done
UNITED STATES v. TARALLO 7695
which if directly performed by him . . . would be an offense
against the United States is guilty as a principal.”
Defendant argues that insufficient evidence was adduced to
prove beyond a reasonable doubt that the telemarketers who
were involved in the charged transactions committed any
crimes, or to prove that Defendant either aided or abetted any
crimes or caused the other telemarketers to commit any
crimes. The government responds primarily that sufficient
evidence existed for the jury to convict Defendant on the
vicarious liability charges under a “coschemer liability” the-
ory.
[6] Under “coschemer liability,” a defendant who commits
mail fraud is vicariously liable for all the acts of his
coschemers in furtherance of the scheme, if the acts were rea-
sonably foreseeable to the defendant. United States v. Staple-
ton, 293 F.3d 1111, 1116-17 (9th Cir. 2002). The government
concedes that it did not request, and that the district court did
not give, a jury instruction on coschemer liability. Neverthe-
less, the government argues, the jury was entitled to convict
Defendant on the vicarious liability counts under a coschemer
theory because it was instructed that the government can
prove that a defendant is guilty of securities fraud if the evi-
dence proved that he took part in a “scheme . . . to defraud”
or “engaged in a course of business which operated as a
deceit,” and that the jury could convict Defendant for mail
fraud if the government proved that he “knowingly partici-
pated in a scheme or plan to defraud.”
The government correctly notes that the victim investors in
the transactions at issue in counts 7, 23, and 24 testified to
experiencing the same type of fraud as did the witnesses with
whom Defendant had dealt directly. Therefore, the govern-
ment posits, there was sufficient evidence before the jury that
these transactions were criminal and that Defendant reason-
ably could have foreseen the solicitation of these victims.
7696 UNITED STATES v. TARALLO
[7] The problem with this argument is that, in order to con-
vict Defendant under a “coschemer” theory, the jury would
have had to find beyond a reasonable doubt that Defendant’s
fellow telemarketers were, in fact, coschemers acting in fur-
therance of the scheme. See Stapleton, 293 F.3d at 1118
(explaining that jury instructions were adequate because they
“required the jury to find that the co-schemers’ acts were in
furtherance of the unlawful scheme”). However, the jury was
never instructed on coschemer liability, and so it was not
informed that this fact was a necessary predicate to a convic-
tion. Neither of the vicarious liability theories on which the
jury was instructed required it to find beyond a reasonable
doubt that Defendant’s fellow telemarketers were coschemers.
Because the jury was not instructed that it had to find beyond
a reasonable doubt all elements of coschemer vicarious liabil-
ity, on appeal the government may not rely on this new the-
ory. See McCormick v. United States, 500 U.S. 257, 270 n.8
(1991) (“[T]he Court of Appeals affirmed [defendant’s] con-
viction on legal and factual theories never tried before the jury
. . . . [F]or that reason alone . . . the judgment must be
reversed.”).
The government argues, in the alternative, that there was
sufficient evidence to convict Defendant on the aiding and
abetting theory, because he aided the transactions at issue by
taking a 20 percent commission on his sales, while the bal-
ance of the “invested” money was available (and in part used)
for paying expenses of the telemarketing operations. The gov-
ernment reasons that, merely by bringing money into the
shop, Defendant aided the actions of his fellow telemarketers.
[8] We disagree. There was no evidence that Defendant,
when generating revenues, intentionally aided any of his co-
workers in committing their own frauds, as distinct from mak-
ing money for himself. Nor did the government present evi-
dence that the money brought in by Defendant was used
specifically to support the frauds charged in counts 7, 23, and
24. In the circumstances, there was insufficient evidence for
UNITED STATES v. TARALLO 7697
the jury to convict Defendant on these counts based on an aid-
ing and abetting theory.
The government no longer argues that the convictions can
be sustained under 18 U.S.C. § 2(b).
[9] Because there was insufficient evidence to support the
jury’s convictions for vicarious liability under the theories on
which the district court instructed the jury, we reverse Defen-
dant’s convictions on counts 7, 23, and 24.
C. Jury Instructions
Defendant claims several errors in the jury instructions
relating to the fraud counts as to which there was sufficient
evidence.
1. Standards of Review.
We review de novo the question whether a trial court’s jury
instruction accurately states the law. United States v. Hopper,
177 F.3d 824, 831 (9th Cir. 1999). By contrast, we review for
abuse of discretion a district court’s formulation of jury
instructions. United States v. Franklin, 321 F.3d 1231, 1240-
41 (9th Cir.), cert. denied, 124 S. Ct. 161 (2003). Finally, we
review for plain error challenges to jury instructions that were
not objected to before the district court. United States v. Del-
gado, 357 F.3d 1061, 1065 (9th Cir. 2004).
2. Instructions equating “willfully” and “knowingly.”
Defendant was charged with, and convicted of, securities
fraud under 15 U.S.C. § 78ff and under 17 C.F.R. § 240.10b-
5, which was promulgated under the authority of 15 U.S.C.
§ 78j. Section 78ff(a) states:
(a) Willful violations; false and misleading state-
ments
7698 UNITED STATES v. TARALLO
Any person who willfully violates any provision of
this chapter (other than section 78dd-1 of this title),
or any rule or regulation thereunder the violation of
which is made unlawful or the observance of which
is required under the terms of this chapter, or any
person who willfully and knowingly makes, or causes
to be made, any statement in any application, report,
or document required to be filed under this chapter
or any rule or regulation thereunder or any undertak-
ing contained in a registration statement as provided
in subsection (d) of section 78o of this title, or by
any self-regulatory organization in connection with
an application for membership or participation
therein or to become associated with a member
thereof, which statement was false or misleading
with respect to any material fact, shall upon convic-
tion be fined not more than $5,000,000, or impris-
oned not more than 20 years, or both, except that
when such person is a person other than a natural
person, a fine not exceeding $25,000,000 may be
imposed; but no person shall be subject to imprison-
ment under this section for the violation of any rule
or regulation if he proves that he had no knowledge
of such rule or regulation.
15 U.S.C. § 78ff(a) (2003) (emphases added).
The district court instructed the jury on “knowingly” and
“willfully” as follows:
Each of the crimes charged in the indictment
requires proof beyond a reasonable doubt that the
defendant acted knowingly. An act is done know-
ingly if the defendant is aware of the act and does
not act or fail to act through ignorance, mistake, or
accident.
The government is not required to prove that the
defendant knew that his acts or omissions were
UNITED STATES v. TARALLO 7699
unlawful. Thus, for example, to prove a defendant
guilty of securities fraud or mail fraud based on
making a false or misleading representation, the gov-
ernment must prove beyond a reasonable doubt that
the defendant knew the representation was false or
was made with reckless indifference to its truth or
falsity, but it need not prove that in making the rep-
resentation the defendant knew he was committing
securities fraud, mail fraud, or any other criminal
offense.
In these statutes, willfully has the same meaning
as knowingly.
Defendant argues that the court erred by instructing that
“willfully” and “knowingly” mean the same thing, and by
instructing that the government did not have to prove that
defendant knew that his conduct was unlawful. He argues that
the “willful” instruction runs afoul of Bryan v. United States,
524 U.S. 184, 191-92 (1998), in which the Supreme Court
stated:
As a general matter, when used in the criminal con-
text, a “willful” act is one undertaken with a “bad
purpose.” In other words, in order to establish a
“willful” violation of a statute, “the Government
must prove that the defendant acted with knowledge
that his conduct was unlawful.” Ratzlaf v. United
States, 510 U.S. 135, 137 (1994).
(Footnote omitted.) Because 15 U.S.C. § 78ff requires a
showing of “willfulness,” Defendant argues, it was error to
instruct the jury that Defendant could be convicted even if the
jury found that he did not know that his conduct was unlaw-
ful.
[10] As an initial matter, we note that the district court did
err in this instruction, although not in the way that Defendant
7700 UNITED STATES v. TARALLO
claims.1 As quoted above, the district court instructed that
“[e]ach of the crimes charged in the indictment requires proof
beyond a reasonable doubt that the defendant acted knowing-
ly.” (Emphasis added.) However, § 78ff(a) states that a person
who “willfully” violates any provision of the chapter or any
rule or regulation promulgated thereunder is subject to crimi-
nal penalty. 15 U.S.C. § 78ff. “Knowingly” is not a required
element. Id. “Knowingly” is an element for the conviction of
any individual who “makes, or causes to be made, any state-
ment in any application, report, or document required to be
filed under this chapter or any rule or regulation thereunder or
any undertaking contained in a registration statement as pro-
vided in subsection (d) of section 78o of this title.” Id. As
§ 78ff makes clear, such a person must be found to have
engaged in the proscribed conduct “willfully and knowingly.”
[11] The conduct for which Defendant was indicted, tried,
and convicted did not involve the filing of an application,
report, or document required by the securities laws. Instead,
his conduct was covered by 17 C.F.R. § 240.10b-5.2 That con-
duct clearly falls under the first provision of § 78ff, which
requires only that the act be done “willfully,” but does not
require that the act be done “knowingly.” Therefore, the dis-
1
Although Defendant did not point to the error we are about to discuss,
we mention it to put into context our discussion of the claim he does raise.
2
Rule 10b-5 states:
It shall be unlawful for any person, directly or indirectly, by the
use of any means or instrumentality of interstate commerce, or of
the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to
state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were
made, not misleading, or
(c) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security.
UNITED STATES v. TARALLO 7701
trict court’s instruction that “[e]ach of the crimes charged in
the indictment requires proof beyond a reasonable doubt that
the defendant acted knowingly” was erroneous.
However, the district court then went on to equate “willful-
ly” with “knowingly.” The district court’s error in including
“knowingly” in the instructions is therefore harmless so long
as the definition the court provided for knowingly and will-
fully satisfies the statutory definition of “willfully.” We turn
now to that question.
The Supreme Court has taken pains to observe that the
word “willful” “is a word of many meanings” and that “its
construction is often influenced by its context.” Ratzlaf, 510
U.S. at 141 (alterations omitted) (internal quotation marks
omitted); see also Bryan, 524 U.S. at 191 (internal quotation
marks omitted). We must consider, then, the context in which
“willfully” is found in the securities fraud statutes. The ques-
tion is whether the securities fraud statutes’ use of the term
“willfully” means that a defendant can be convicted of securi-
ties fraud only if he or she knows that the charged conduct is
unlawful, or whether “willfully” simply means what the dis-
trict court instructed it means: “knowingly” in the sense that
the defendant intends those actions and that they are not the
product of accident or mistake.
Defendant’s argument—that willfullness requires that he
knew that he was breaking the law at the time he made his
false statements—has been previously rejected by this and
other courts. In United States v. Charnay, 537 F.2d 341, 351-
52 (9th Cir. 1976), we cited with approval the Second Cir-
cuit’s interpretation of § 78ff in United States v. Pelz, 433
F.2d 48, 54 (2d Cir. 1970). The Second Circuit explained
there that “[t]he language makes one point entirely clear. A
person can willfully violate an SEC rule even if he does not
know of its existence. This conclusion follows from the dif-
ference between the standard for violation of the statute or a
rule or regulation, to wit, ‘willfully,’ and that for false or mis-
7702 UNITED STATES v. TARALLO
leading statements, namely ‘willfully and knowingly.’ ” Id. at
54. We quoted a law review article cited in Pelz, 433 F.2d at
55, which “concluded it was necessary only that the prosecu-
tion establishes a realization on the defendant’s part that he
was doing a wrongful act.” Charnay, 537 F.2d at 352 (quoting
William B. Herlands, Criminal Law Aspects of the Securities
Exchange Act of 1934, 21 Va. L. Rev. 139, 149 (1934)) (inter-
nal quotation marks omitted). Adopting the reasoning of the
Second Circuit, we “accept[ed] this with the qualifications,
doubtless intended by the author, that the act be wrongful
under the securities laws and that the knowingly wrongful act
involve a significant risk of effecting the violation that has
occurred.” Id. (internal quotation marks omitted).3
We also addressed an argument very similar to Defendant’s
in United States v. English, 92 F.3d 909 (9th Cir. 1996). In
English, the defendant was convicted of securities fraud under
15 U.S.C. §§ 77q(a) and 77x. “Section 77q(a) makes it illegal
to use instruments of interstate commerce to defraud or
deceive purchasers of securities. Section 77x, a general pen-
alty provision covering § 77q(a) and other 15 U.S.C. § 77offenses, provides that ‘[a]ny person who willfully violates’
§ 77q(a) is subject to fines and incarceration. 15 U.S.C. § 77x
(emphasis added).” Id. at 914. Section 77x is therefore sub-
stantively similar to the willfullness provision of § 78ff(a). In
English, we rejected the defendant’s argument that § 77x’s
willfullness requirement required that the government prove
that the defendant knew that his conduct was illegal. We dis-
tinguished Ratzlaf and explained that “our cases . . . support
the conclusion that §§ 77q(a) and . . . 77x do not require proof
of knowledge of illegality.” Id. at 915.
3
The Eighth Circuit has expressed its agreement with Charnay, explain-
ing that “[c]ourts that have interpreted ‘willfully’ in § [78ff] have reached
the same conclusion that we reach in this case: ‘willfully’ simply requires
the intentional doing of the wrongful acts—no knowledge of the rule or
regulation is required. United States v. O’Hagan, 139 F.3d 641, 647 (8th
Cir. 1998) (citing Charnay).
UNITED STATES v. TARALLO 7703
Even were we not bound by our existing precedent, we
would reach the same result. The final clause of § 78ff(a) pro-
vides that “no person shall be subject to imprisonment under
this section for the violation of any rule or regulation if he
proves that he had no knowledge of such rule or regulation.”
15 U.S.C. § 78ff(a). The opening sentence of subsection (a)
explains that “[a]ny person who willfully violates any provi-
sion of this chapter . . . or any rule or regulation thereunder
the violation of which is made unlawful or the observance of
which is required under the terms of this chapter” commits a
crime. Id. (emphasis added). If “willfully” meant “with
knowledge that one’s conduct violates a rule or regulation,”
the last clause proscribing imprisonment—but not a fine—in
cases where a defendant did not know of the rule or regulation
would be nonsensical: If willfully meant “with knowledge
that one is breaking the law,” there would be no need to pro-
scribe imprisonment (but permit imposition of a fine) for
someone who acted without knowing that he or she was vio-
lating a rule or regulation. Such a person could not have been
convicted in the first place.
[12] Under our jurisprudence, then, “willfully” as it is used
in § 78ff(a) means intentionally undertaking an act that one
knows to be wrongful; “willfully” in this context does not
require that the actor know specifically that the conduct was
unlawful. The district court’s instructions correctly informed
the jury that it had to find that defendant intentionally under-
took such an act:
[T]o prove a defendant guilty of securities fraud or
mail fraud based on making a false or misleading
representation, the government must prove beyond a
reasonable doubt that the defendant knew the repre-
sentation was false or was made with reckless indif-
ference to its truth or falsity, but it need not prove
that in making the representation the defendant knew
he was committing securities fraud, mail fraud, or
any other criminal offense.
7704 UNITED STATES v. TARALLO
[13] The district court’s instructions thus required the jury
to find that Defendant had made statements that he knew at
the time were false, or else made them with a reckless disre-
gard for whether they were false.4 The district court therefore
required the jury to find that Defendant undertook acts that he
knew at the time to be wrongful, meeting the standard for
defining “willfully” in this circuit. The district court’s impor-
tation of the term “knowingly” into the jury instructions was
harmless beyond a reasonable doubt, because the court
equated “knowingly” with “willfully,” and the court’s defini-
tion properly explained “willfully.”
3. Recklessness standard for securities fraud.
As discussed above, the district court instructed the jury
that it could convict Defendant of both mail fraud and securi-
ties fraud if it found that he had made a false statement, which
was a representation that either “(a) was then known to be
untrue by the person making or causing it to be made or (b)
was made or caused to be made with reckless indifference as
to its truth or falsity.” Defendant argues that the recklessness
portion of the instruction was error as to the securities fraud
counts.
The comment to Ninth Circuit Model Jury Instruction 9.7
(2000) states that reckless disregard for truth or falsity is suf-
ficient to sustain a conviction for securities fraud. The com-
ment cites United States v. Farris, 614 F.2d 634, 638 (9th Cir.
1979), for this proposition. Defendant argues that the com-
ment incorrectly describes the law to be applied in this case,
because Farris was not a 15 U.S.C. §§ 78j(b) or a 78ff prose-
cution, because Farris relied on a civil securities fraud case,
and because the Supreme Court’s decision in United States v.
O’Hagan, 521 U.S. 642 (1997), stands for the proposition that
recklessness is insufficient to sustain a criminal conviction for
securities fraud. In O’Hagan, the Supreme Court said that, in
4
We discuss the recklessness instruction in the next section.
UNITED STATES v. TARALLO 7705
order to convict a defendant of securities fraud, the govern-
ment must prove that the defendant “willfully” violated Rule
10b-5. 521 U.S. at 665-66 (citing 15 U.S.C. § 78ff(a)).5
Defendant again cites Bryan, 524 U.S. at 191-93, for the prop-
osition that willfullness requires actual knowledge and argues
that recklessness cannot satisfy this requirement.
[14] Defendant’s argument fails. Farris explicitly holds
that recklessness is adequate to support a conviction for secur-
ities fraud. Defendant’s attempt to distinguish Farris on the
ground that Farris involved a fraud charge under 15 U.S.C.
§ 77q(a), and not under § 78j(b), is unpersuasive. As we
explained above, “willfully” in the context of § 78ff is best
understood to mean “voluntarily and knowingly wrongful,”
not “with the intent to violate the law.” Therefore, its absence
in § 77q(a) does not render Farris distinguishable. We find no
error in the recklessness instruction.
4. Intent to harm.
Defendant asked the district court to instruct the jury that,
in order to convict Defendant of fraud, it had to find not only
that he intended to deceive investors, but also that he intended
5
On remand from the Supreme Court, the Eighth Circuit in O’Hagan,
139 F.3d at 647, interpreted the Supreme Court’s O’Hagan opinion as
“simply explaining that the statute provides that a negligent or reckless
violation of the securities law cannot result in criminal liability; instead,
the defendant must act willfully.” That statement might be read as contrary
to our holding here. In context, however, the Eighth Circuit’s statement is
consistent with our holding that the “willful” requirement of § 78ff does
not preclude a conviction arising out of recklessness. The Eighth Circuit
held, as we do, that § 78ff “simply requires the intentional doing of the
wrongful acts—no knowledge of the rule or regulation is required.” Id.
Given that definition of “willful,” the Eighth Circuit’s formulation appears
to be consistent with the view that a defendant could “willfully” violate
§ 78ff by willfully acting with reckless indifference to the truth of state-
ments made in the course of the fraud. We therefore do not believe that
our continued adherence to Farris creates a circuit split on this question.
7706 UNITED STATES v. TARALLO
to harm investors. The district court declined to give Defen-
dant’s requested instruction.
Defendant cites McNally v. United States, 483 U.S. 350,
358 (1987), for the proposition that “ ‘to defraud’ ” means
“ ‘to wrong[ ] one in his property rights by dishonest methods
or schemes.’ ” Id. (quoting Hammerschmidt v. United States,
265 U.S. 182, 188 (1924)). Defendant reasons that the instruc-
tion was defective because it failed to convey that meaning.
[15] Even assuming that McNally’s definition of “defraud”
is the only proper one, Defendant’s argument is unavailing.
He was charged with knowingly taking the investor-victims’
money through deceit. The court instructed that “to defraud”
means “to deceive.” In this context, the jury necessarily
understood the instruction to mean that it had to find that
Defendant deceived investors by taking their money under
false pretenses. An additional “intent to harm” instruction
would have been redundant because intending to take some-
one’s money is an intent to harm. The district court’s decision
not to give Defendant’s requested instruction was therefore
not an abuse of discretion.
5. Materiality element of mail fraud.
The district court instructed the jury on the materiality ele-
ment of mail fraud as follows: “[Statements are material if]
they would reasonably influence a person to part with money
or property.” Citing Neder, Defendant argues that this instruc-
tion was insufficient because a materiality instruction in a
fraud case must make clear that the statement at issue was
“important” to the decision-making process of the victim.
Neder quoted the Restatement (Second) of Torts § 538 (1977)
for the proposition that a matter is material if:
“(a) a reasonable man would attach importance to its
existence or nonexistence in determining his choice
of action in the transaction in question; or
UNITED STATES v. TARALLO 7707
“(b) the maker of the representation knows or has
reason to know that its recipient regards or is likely
to regard the matter as important in determining his
choice of action, although a reasonable man would
not so regard it.”
527 U.S. at 22 n.5 (emphasis added). Defendant argues that
Neder requires that a jury be instructed in a fraud case that,
for a statement to be material, it must be “important” to a rea-
sonable person.
Defendant’s argument is contrary to our holding in United
States v. Johnson, 297 F.3d 845, 866 (9th Cir. 2002), that the
Supreme Court in Neder did not intend to supplant the previ-
ously existing definition of materiality provided by the Court
in United States v. Gaudin, 515 U.S. 506, 509 (1995). The
Gaudin Court reaffirmed its definition of materiality as a
requirement that the statement have “a natural tendency to
influence, or [be] capable of influencing, the decision of the
decisionmaking body to which it was addressed.” Id. (alter-
ation in original) (internal quotation marks omitted). In John-
son, we held that Gaudin’s definition survived Neder:
At no point in the relevant passage from Neder did
the Court indicate that it was abandoning Gaudin or
adopting the Restatement’s view as the exclusive
definition of materiality. Indeed, in an earlier pas-
sage in Neder, the Court favorably cited Gaudin as
providing the general definition of materiality. See
Neder, 527 U.S. at 16. Therefore, at most, Neder
stands for the proposition that alternative meanings
of materiality are permissible. Because Gaudin is
one such permissible alternative, and because
Instruction 8.26.1 is substantially similar to it, the
instruction in this case was not plainly erroneous.
Johnson, 297 F.3d at 866 n.21. Although in Johnson we
reviewed for plain error, we unequivocally held that Gaudin
7708 UNITED STATES v. TARALLO
is a permissible instruction for “materiality,” even after
Neder, and only then held that the instruction was not plainly
erroneous.
[16] The district court’s instruction, which followed
Gaudin and Johnson, was not an abuse of discretion.
6. Absence of a “puffing” instruction.
Defendant proposed two “puffing” instructions. The district
court rejected both. The district court did give a good-faith
instruction, telling the jury:
The good faith of Defendant [ ] is a complete
defense to the charges of the indictment because
good faith on the part of the defendant, is, simply,
inconsistent with the intent to defraud alleged in that
charge. Actually, that should be “in those charges.”
A person who acts, or causes another person to
act, on a belief or an opinion honestly held is not
punishable under this statute merely because the
belief or opinion turns out to be inaccurate, incorrect,
or wrong.
And again, that should be is not punishable under
these statutes. This does apply to all of the charges.
An honest mistake in judgment or an error in man-
agement does not rise to the level of intent to
defraud.
A defendant does not act in “good faith” if, even
though he honestly holds a certain opinion or belief,
that defendant also knowingly makes material false
or fraudulent pretenses, representations, or promises
to others.
UNITED STATES v. TARALLO 7709
While the term “good faith” has no precise defini-
tion, it means, among other things, a belief or opin-
ion honestly held, an absence of malice or ill will,
and an intention to avoid taking unfair advantage of
another.
The burden of proving good faith does not rest
with the defendant because the defendant does not
have any obligation to prove anything in this case.
In determining whether or not the government has
proven beyond a reasonable doubt that the defendant
acted with an intent to obtain money or property by
means of false or fraudulent pretenses, representa-
tions, or promises, or whether the defendant acted in
good faith, the jury must consider all of the evidence
in the case bearing on the defendant’s state of mind.
A belief that a victim will be repaid and will sus-
tain no loss, even if that belief is held in good faith,
is not a defense to a charge of securities or mail
fraud.
It is also not a defense to charges of securities
fraud and mail fraud that the victim may have been
gullible or negligent. The laws against fraud are
designed to protect the naive and careless as well as
the experienced and careful.
While good faith is a defense to securities fraud
and mail fraud, an honest belief in the ultimate suc-
cess of the enterprise is not, in itself, a defense.
Defendant argues that a separate “puffing” instruction was
necessary, because he could have made “misrepresentations”
that fell outside the definition of good faith but qualified as
puffery rather than fraud.
7710 UNITED STATES v. TARALLO
We held in United States v. Amlani, 111 F.3d 705, 718 (9th
Cir. 1997), that a very similar good faith instruction in a fraud
case adequately instructed the jury about the gist of a “puff-
ing” defense. We based our holding on United States v. Gay,
967 F.2d 322, 329 (9th Cir. 1992), in which we explained that
“ ‘[p]uffing’ concerns expressions of opinion, as opposed to
the knowingly false statements of fact which the law pro-
scribes.” Thus, no “puffing” instruction is required if the dis-
trict court gives an instruction that good faith constitutes a
complete defense, that one who acts with honest intention
does not possess fraudulent intent, that one who expresses an
opinion honestly held by him is not chargeable with fraudu-
lent intent even though such opinion is erroneous and such
belief is a mistaken belief, and that evidence establishing only
that a person made a mistake of judgment or an error in man-
agement, or was careless, does not establish fraudulent intent.
Id. Such a good faith instruction “adequately convey[s] the
defendant’s message. ‘Puffing,’ enthusiasm, and even over-
zealous selling all fall under the umbrella of the good faith
and honest intention instructions.” Id.[17] The same is true here. The district court’s refusal to
give Defendant’s proposed “puffing” instruction was not erro-
neous.
D. Constitutionality of 15 U.S.C. § 78ff
1. Standard of Review.
We review de novo the question whether a statute is
facially unconstitutional. Lind v. Grimmer, 30 F.3d 1115,
1121 (9th Cir. 1994).
2. Knowledge of the rule or regulation.
Defendant argues that § 78ff(a)’s final clause renders the
statute facially unconstitutional, because it violates the rule
announced in Apprendi, that any fact other than a prior con-
UNITED STATES v. TARALLO 7711
viction which increases the penalty for a defendant’s crime
beyond the statutory maximum must be submitted to the
finder of fact and proved beyond a reasonable doubt.
Apprendi, 530 U.S. at 490. The final clause of subsection (a)
states that “no person shall be subject to imprisonment under
this section for the violation of any rule or regulation if he
proves that he had no knowledge of such rule or regulation.”
15 U.S.C. § 78ff(a).
[18] This part of the statute does not run afoul of Apprendi
because it establishes a partial affirmative defense, not an ele-
ment of the crime. Under the rest of subsection (a), the fact-
finder must find beyond a reasonable doubt that the defendant
willfully (or for some offenses, willfully and knowingly) vio-
lated the dictates of 15 U.S.C. §§ 78(a)-78(lll) or any rule or
regulation promulgated thereunder. Id. Once a factfinder has
found those elements, the defendant stands convicted of the
crime and a verdict of guilt is complete. But if the defendant
who is convicted of violating a rule or regulation can prove
that he or she did not know that such rule or regulation
existed, the defendant may be fined but not imprisoned. This
partial affirmative defense can mitigate a defendant’s sen-
tence, but is not an additional element that can increase the
sentence. All elements that would result in incarceration (that
defendant willfully, or willfully and knowingly, violated the
securities statutes or rules or regulations) must be found by
the factfinder beyond a reasonable doubt. Apprendi is there-
fore inapplicable.6 See United States v. Brown, 276 F.3d 930,
6
For the same reason, the Supreme Court’s recent decision in Blakely
v. Washington, 124 S. Ct. 2531 (2004), does not render § 78ff(a) unconsti-
tutional. Blakely’s holding is premised on the Apprendi requirement that
any fact that increases the penalty for a crime beyond the prescribed statu-
tory maximum must be either admitted by the defendant or submitted to
a factfinder and proved beyond a reasonable doubt. Id. at 2536. As dis-
cussed above, § 78ff(a) does not run afoul of this principle: the factfinder
must find beyond a reasonable doubt that the defendant willfully (or, for
some offenses, willfully and knowingly) violated the dictates of 15 U.S.C.
§§ 78(a)-78(lll) or any rule or regulation promulgated thereunder. The
lack-of-knowledge defense only decreases the penalty for that crime.
7712 UNITED STATES v. TARALLO
932 (7th Cir. 2002) (“Apprendi leaves undisturbed the princi-
ple that while the prosecution must indeed prove all the ele-
ments of the offense charged beyond a reasonable doubt,
[Apprendi,] 530 U.S. at 477, the legislation creating the
offense can place the burden of proving affirmative defenses
on the defendant.” (citation omitted)).
E. Prosecutorial Misconduct
1. Standard of Review.
We review for abuse of discretion claims of prosecutorial
misconduct. United States v. Steele, 298 F.3d 906, 910 (9th
Cir. 2002), and review for plain error a claim of prosecutorial
misconduct not objected to before the district court. United
States v. Geston, 299 F.3d 1130, 1134 (9th Cir. 2002).
2. Ethnic bias.
Defendant argues that the prosecutor engaged in miscon-
duct when he mentioned at trial that Defendant’s true name
was not the anglicized Al Tarall he used with investors, but
was the Italian Aldo Tarallo. Defendant argues that this
“shameless display of xenophobia” was an exercise by the
prosecution that “equated assimilation with fraud.” Defendant
urges us to hold that the prosecutor’s references to the angli-
cizing of Defendant’s name “so infected the trial with unfair-
ness as to make the resulting conviction a denial of due
process.” Darden v. Wainwright, 477 U.S. 168, 181 (1986)
(internal quotation marks omitted).
[19] Defendant’s argument on this point is creative but
unavailing. The prosecutor permissibly pointed out that
Defendant used an alias when he dealt with potential investors
(as did one of the non-Italian co-defendants). The prosecutor
made no reference to Defendant’s ethnicity, but only to the
use of an alias and to the possibility that it was used so that
investor-victims would not be able to track Defendant down
UNITED STATES v. TARALLO 7713
after they learned that they had been duped. Defendant is not
entitled to prevent the government from pointing out his use
of an alias just because the alias happens to be an “anglicized”
version of Defendant’s actual name. There was no miscon-
duct.
3. Defendant’s refusal to speak with law enforcement.
Next, Defendant argues that the prosecutor violated his
Fifth Amendment right to remain silent when he questioned
Agent Goldman about a telephone call Goldman had made to
Defendant in September 1999. Goldman testified that he had
called Defendant and, “when he answered, I asked if it was
Al, and he said yes. And I explained to him—I identified
myself, and he hung up on me.” The prosecutor asked
whether that was the first time he had tried to question Defen-
dant, and Goldman said that it was. After being asked by the
prosecutor what happened next, Goldman testified that he had
called Defendant back and identified himself; when Defen-
dant said that he did not know who the caller really was,
Goldman gave him telephone numbers that would allow
Defendant to verify his identity as an FBI agent.
At this point, defense counsel objected on the grounds that
he had received no discovery about this exchange on the
phone and that it was irrelevant and prejudicial. The district
court advised the prosecutor to “[g]o now to the arrest. This
is a waste of time, if nothing else. And I can’t think of any
probative value. So it’s not relevant. Go to the arrest right
now.” The prosecutor agreed to do so, and defense counsel
requested a limiting instruction. The district court agreed to
give the instruction, over the prosecutor’s objection. The court
gave the following instruction:
All right. Ladies and gentlemen of the jury, I just
want to remind you and instruct you that nobody has
to speak to a law enforcement officer who calls on
the phone, and—we’re all perfectly free to say, “I
7714 UNITED STATES v. TARALLO
don’t want to talk to you,” or hang up, and you
should not draw any inference of guilt toward Mr.
Tarallo because of the fact that he elected to do that,
as is his right. It’s all of our rights.
[20] Notwithstanding the district court’s instruction, Defen-
dant argues that the prosecutor’s question to Agent Goldman
regarding Defendant’s hanging up during the first call violates
Defendant’s Fifth Amendment right to remain silent. We see
no prejudice to Defendant, even assuming that the prosecutor
pursued an improper line of questioning. The district court
granted counsel’s objection on relevance grounds, told the
prosecutor to move on immediately, and gave a limiting
instruction to the jury. The court thus cured any prejudice
from this passing reference.
4. Defendant’s right to remain silent and to exercise his
right to a trial.
During rebuttal argument at the end of the trial, the prose-
cutor explained to the jury that, even though government wit-
ness Paul Coynes (who testified as an “insider” who had
worked with Defendant) was a “sleazy telemarketer,” the
prosecutor had decided to call him as a witness in order to
give the jury an “inside” view of how the telemarketing oper-
ation worked. The prosecutor said that the government had
also called Coynes “to give you a view to see somebody who
has accepted responsibility for what he did, who has admitted
to you, ‘Yes, I lied. I lied. I knew these were lies, and I con-
tinued to make them.’ ”
Defendant argues that, in making the latter comments, the
prosecutor indirectly was referring to Defendant as one who
had not “accepted responsibility” the way Coynes admirably
had. A prosecutor’s statement is improper “if it is manifestly
intended to call attention to the defendant’s failure to testify,
or is of such a character that the jury would naturally and nec-
essarily take it to be a comment on the failure to testify.” Lin-
UNITED STATES v. TARALLO 7715
coln v. Sunn, 807 F.2d 805, 809 (9th Cir. 1987). Defendant
also argues that the prosecutor, by his comments, improperly
invited the jury to view Defendant disfavorably for exercising
his constitutional right to plead not guilty and have a trial. See
Bordenkircher v. Hayes, 434 U.S. 357, 363 (1978) (“To pun-
ish a person because he has done what the law plainly allows
him to do is a due process violation of the most basic sort.
. . .”).
[21] In our view, the prosecutor’s comments did not call
attention to the fact that Defendant did not take the stand. The
comments came somewhat closer to implying that Defendant
was somehow dishonorable for exercising his right to a jury
trial. However, the comments are best understood as an
attempt to rehabilitate Coynes in order to increase the credi-
bility of Coynes’ testimony, and we think it most likely that
the jury understood the comments as bearing on Coynes’
credibility. So construed, the comments were not improper.
Even if the comments were improper, reversal would be
appropriate only “where such comment is extensive, where an
inference of guilt from silence is stressed to the jury as a basis
for the conviction, and where there is evidence that could
have supported acquittal.” Sunn, 807 F.2d at 809 (internal
quotation marks omitted). In this case, the comments were
isolated and not repeated, and there was no inference of guilt
from silence stressed to the jury. Furthermore, the district
court’s instructions to the jury reminded the jury that, in
reaching its verdict, it was to consider only the evidence pre-
sented during the trial, and that the arguments of counsel,
including closing arguments, “[are] intended to help you
interpret the evidence, but [they] are not evidence.”
5. The Blinkoff deposition.
Before trial, and pursuant to a stipulation signed by Defen-
dant and his counsel, the parties took the deposition of
investor-victim Brian Blinkoff via a video-phone connection.
7716 UNITED STATES v. TARALLO
Blinkoff was ill, and his medical condition prevented him
from traveling to Los Angeles, where the trial was conducted.
The stipulation stated that the deposition would be admissible
at trial as substantive evidence and that the government had
provided Defendant’s counsel with discovery pursuant to Fed-
eral Rule of Criminal Procedure 15 and 18 U.S.C. § 3500 (the
“Jencks Act”).7
The deposition lasted about two-and-a-half hours. During
cross-examination, in responding to a question, Blinkoff men-
tioned that he had contemporaneous notes of conversations
with Defendant. Blinkoff testified that he had told prosecutors
a month earlier that he had such notes, but at that time they
did not ask for copies of the notes. Blinkoff had discussed the
existence of the notes again with prosecutors the day before
his deposition, when (according to Blinkoff) the prosecutor
told him that he should make copies and forward them to the
government.
In the middle of the cross-examination, at the request of
defense counsel, the notes were faxed to the lawyers in Los
Angeles. However, not all of the pages were faxed, and Blink-
off reported that there were more notes that had not been sent.
At the close of the deposition, Defendant’s lawyer stated his
objections on the record: “[W]e are not agreeing that this
deposition is necessarily over. We may ask that it be renewed
or we may ask that his testimony be stricken.” Despite that
reservation of an option to continue the deposition at a later
7
The Jencks Act states, in part: “In any criminal prosecution brought by
the United States, no statement or report in the possession of the United
States which was made by a Government witness or prospective Govern-
ment witness (other than the defendant) shall be the subject of subpoena,
discovery, or inspection until said witness has testified on direct examina-
tion in the trial of the case.” 18 U.S.C. § 3500(a). After the witness testi-
fies on direct examination, the defendant is entitled to such statements or
reports as are relevant to the testimony. Id. § 3500(b). The stipulation in
this case called for the government to provide such documents before the
deposition.
UNITED STATES v. TARALLO 7717
date, the defense never sought to schedule a further deposition
with Blinkoff.
The government presented the stipulation to the district
court, along with a proposed order authorizing the deposition
to be received as substantive evidence, the day after the depo-
sition. When the government began to introduce the video-
taped deposition at trial a few weeks later, defense counsel
moved to have the videotape excluded on the ground that the
government had failed to live up to its agreement to provide
all Jencks Act material and Brady8 material to Defendant
before the deposition.
The district court held that there was no Brady violation (a
holding that Defendant does not challenge on appeal). The
district court held that there was a violation of the Jencks Act.
The court cited United States v. Riley, 189 F.3d 802 (9th Cir.
1999), for the proposition that a district court has discretion
to refuse to impose sanctions for a Jencks Act violation and
that the court’s decision should rest on a consideration of the
culpability of the government for the unavailability of the
material and the resulting injury to the defendant. The district
court found that it was “clearly . . . the government’s fault”
that the material had not been turned over. With respect to the
injury to Defendant, the district court observed that the notes
were often illegible, but the “gist” of them could be made out
in most cases. Some of the notes related directly to the case,
while others were “extraneous.” The district court stated that
it was a “close call,” but decided that Defendant had not
shown sufficient injury to merit striking Blinkoff’s testimony.
In so ruling, the district court also noted that defense counsel
had waited until trial to object, and had not taken advantage
of the opportunity to reopen the deposition; this fact created
8
“Brady material is any evidence material either to guilt or punishment
which is favorable to the accused, irrespective of the good faith or bad
faith of the prosecution.” United States v. Hanna, 55 F.3d 1456, 1459 (9th
Cir. 1995) (citing Brady v. Maryland, 373 U.S. 83 (1963)).
7718 UNITED STATES v. TARALLO
doubt as to how much prejudice Defendant had really suf-
fered.
On appeal Defendant argues that, because his agreement in
the stipulation to waive his right to challenge the introduction
of the deposition testimony was conditioned on the govern-
ment’s turning over certain materials, and because the govern-
ment failed to turn over those materials in time, the court
should have set aside the stipulation for lack of consent. How-
ever, Defendant did not seek that relief from the district court.
Rather, Defendant argued simply that the witness should be
excluded because of Brady and Jencks Act violations. The
district court found no Brady violation and exercised its dis-
cretion not to strike the deposition as a result of the Jencks
Act violation. The district court did not consider, because
Defendant did not raise, the argument that the stipulation
should be tossed out and that the admissibility of the deposi-
tion should therefore depend on the requirement that the wit-
ness be unavailable. Fed. R. Crim. P. 15(e) (2001). Defendant
has therefore waived this argument on appeal. See United
States v. Velasco-Medina, 305 F.3d 839, 848 n.5 (9th Cir.
2002) (“To the extent [Defendant] rest[s] his argument on dif-
ferent grounds, he waived it by failing to raise it before the
district court.”).
On appeal, Defendant also argues for the first time that
Blinkoff was not “unavailable” and that Defendant’s waiver
of his right to challenge introduction of the deposition under
the Sixth Amendment was infirm because no judicial officer
ever asked Defendant if he understood his rights and was
waiving them. These arguments were not raised below and are
therefore not properly before us. United States v. Keesee, 358
F.3d 1217, 1220 (9th Cir. 2004) (“A theory for suppression
not advanced in district court cannot be raised for the first
time on appeal.”).
CONCLUSION
We REVERSE for lack of evidence Defendant’s convic-
tions on the “vicarious liability” counts (counts 7, 23, and 24),
UNITED STATES v. TARALLO 7719
and AFFIRM Defendant’s conviction on all other counts. The
district court shall vacate the sentences pertaining to counts 7,
23, and 24. The remainder of the sentence is REMANDED to
the district court for proceedings consistent with United States
v. Ameline, No. 02-30326, 2005 WL 1291977 (9th Cir. June
1, 2005) (en banc).