Securities & Exchange Commission v. Kokesh

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS August 23, 2016
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff - Appellee,
v. No. 15-2087
CHARLES R. KOKESH,
Defendant - Appellant.
_________________________________
Appeal from the United States District Court
for the District of New Mexico
(D.C. No. 1:09-CV-01021-SMV-LAM)
_________________________________
Clinton W. Marrs, Marrs Griebel Law, Ltd., Albuquerque, New Mexico for Defendant-
Appellant.
Sarah R. Prins, Attorney (Anne K. Small, General Counsel, Sanket J. Bulsara, Deputy
General Counsel, Michael A. Conley, Solicitor, and Benjamin L. Schiffrin, Senior
Litigation Counsel, with her on the brief), Securities and Exchange Commission,
Washington, D.C., for Plaintiff-Appellee.
_________________________________
Before HARTZ, PHILLIPS, and McHUGH, Circuit Judges.
_________________________________
HARTZ, Circuit Judge.
_________________________________
The Securities and Exchange Commission (SEC) brought an enforcement action
against Defendant Charles Kokesh for misappropriating funds from four SEC-registered
business development companies (BDCs) in violation of federal securities laws. After a
jury returned a verdict in favor of the SEC, the United States District Court for the
District of New Mexico entered a final judgment permanently enjoining Defendant from
violating certain provisions of federal securities laws, ordering disgorgement of $34.9
million plus prejudgment interest of $18.1 million, and imposing a civil penalty of $2.4
million. Defendant appeals, asserting that the court’s imposition of the disgorgement and
permanent injunction was barred by 28 U.S.C. § 2462, which sets a five-year limitations
period for suits “for the enforcement of any civil fine, penalty, or forfeiture.” He also
argues that the district court erred by precluding him from presenting evidence of
attorney and accountant participation to show his lack of knowledge of the misconduct.
Exercising jurisdiction under 28 U.S.C. § 1291, we affirm. We hold that both the
permanent injunction and the disgorgement order are remedial and not subject to § 2462.
And we reject the evidentiary claim.
I. BACKGROUND
The BDCs from which Defendant misappropriated funds were Technology
Funding Medical Partners I, L.P.; Technology Funding Partners III, L.P.; Technology
Funding Venture Partners IV, An Aggressive Growth Fund, L.P.; and Technology
Funding Venture Partners V, An Aggressive Growth Fund, L.P. (collectively, the Funds).
The Funds raised money from investors through public securities offerings and invested
in private start-up companies that focused on technology, biotechnology, and medical
diagnostics.
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As a limited partnership, each Fund was governed by a written agreement. Each
agreement provided for the election of three individual general partners and two
managing general partners. The managing general partners conducted day-to-day
operations and made investment recommendations, subject to supervision by the
governance committee of each Fund, which was composed of the individual general
partners or the individual general partners and two representatives of the managing
general partners.
Technology Funding Ltd. and Technology Funding, Inc. (collectively, the
Advisers), which were SEC-registered investment advisers, were the managing general
partners for each Fund. The Advisers were owned and controlled by Defendant. They
had contracts with the Funds—which were signed by Defendant—that described how
they would be compensated. The contracts prohibited any payments to the Advisers that
were not expressly specified.
From 1995 through 2006, Defendant directed the Advisers’ treasurer to take $23.8
million from the Funds to pay salaries and bonuses to officers of the Advisers (which
included Defendant himself) and to take $5 million to cover the Advisers’ office rent. In
2000 he also caused the Advisers to take $6.1 million in payments described as “tax
distributions” in SEC reports that he signed. Defendant received over 90% of these “tax
distributions,” despite paying only $10,304 in federal taxes that year.
These payments violated the contracts between the Advisers and the Funds. First,
until 2000 the contracts prohibited payments for salaries of the Advisers’ controlling
persons, including Defendant and other officers. Although the contracts were amended in
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2000 to permit reimbursement for controlling-person salaries, the amendment was based
on a misleading proxy statement (signed by Defendant) which falsely identified him as
the only controlling person and grossly underreported his annual salary. Second, the
contracts did not provide for bonus payments and Defendant did not disclose the bonuses
to the Funds’ directors or in SEC filings that he signed on the Funds’ behalf. Third, the
contracts specifically prohibited rent reimbursement, yet he failed to disclose the rent
payments to the Funds’ directors. Fourth, although the contracts allowed for payment of
tax obligations if certain conditions were met, the 2000 payment did not satisfy these
conditions.
Before trial the SEC filed a motion in limine to preclude Defendant from offering
evidence that he reasonably relied on the advice of his counsel and his accountants. The
district court granted this motion under Fed. R. Evid. 403, finding that any probative
value of such evidence was outweighed by the danger of confusing the issues and
misleading the jury. The court acknowledged, however, that such evidence could be
presented if Defendant met the test for an advice-of-counsel defense under United States
v. Wenger, 427 F.3d 840 (10th Cir. 2005).
The case was tried to a jury, which found (1) that Defendant knowingly and
willfully converted the Funds’ assets to his own use or to the use of another and (2) that
he knowingly and substantially assisted the Advisers in defrauding the Funds, in filing
false and misleading reports with the SEC, and in soliciting proxies using false and
misleading proxy statements. The court found that disgorgement of $34.9 million
“reasonably approximates the ill-gotten gains causally connected to Defendant’s
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violations,” Aplt. App., Vol. 2 at 1880 (order granting SEC’s motion for entry of final
judgment), and that an order enjoining him from violating certain provisions of federal
securities laws was warranted because “there is a reasonable and substantial likelihood
that Defendant will again violate the securities laws,” id. at 1876.
II. DISCUSSION
Defendant appeals on two grounds: (1) that the injunction and disgorgement
order, obtained under 15 U.S.C. § 78u(d)(1), (5), must be set aside because the claims
accrued more than five years before the SEC brought its action and are therefore barred
under the five-year statute of limitations in 28 U.S.C. § 2462 for government suits
seeking penalties or forfeitures; and (2) that the district court erred in disallowing
evidence of attorney and accountant participation to show his lack of knowledge of the
misconduct. We address each in turn.
A. Section 2462
Unless another statute specifies otherwise, § 2462 sets a five-year limitations
period for claims seeking certain sanctions. It states:
Except as otherwise provided by Act of Congress, an action, suit or
proceeding for the enforcement of any civil fine, penalty, or forfeiture,
pecuniary or otherwise, shall not be entertained unless commenced within
five years from the date when the claim first accrued if, within the same
period, the offender or the property is found within the United States in
order that proper service may be made thereon.
Id. (emphasis added). “The construction and applicability of a federal statute of
limitation is a question of law we review de novo.” United States v. Telluride Co., 146
F.3d 1241, 1244 (10th Cir. 1998). Statutes of limitation are interpreted narrowly in the
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government’s favor “to protect the public from the negligence of public officers in failing
to timely file claims in favor of the public’s interests.” Id. at 1246 n.7; see also Guar.
Trust Co. of New York v. United States, 304 U.S. 126, 132–33 (1938) (public policy
generally supports not imposing laches or statutes of limitations on the government).
And we have also recognized that equitable claims are usually not subject to statutes of
limitations. See Telluride, 146 F.3d at 1245.
Defendant argues that the injunction (an order to refrain from future violations of
certain provisions of federal securities laws) is a penalty and the disgorgement order is a
penalty or forfeiture within the meaning of § 2462. We first discuss the injunction.
1. Injunction
The district court’s final judgment ordered “that Defendant is permanently
enjoined from directly or indirectly violating Section 206(1) and (2) of the Investment
Advisers Act; Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1,
and 13a-13; Section 14(a) of the Exchange Act and Exchange Act Rule 14a-9; Section 37
of the Investment Company Act, and Section 205(a) of the Investment Advisers Act.”
Aplt. App., Vol. 2 at 1883 (final judgment). We fail to see how an order to obey the law
is a penalty. Its purpose is not to penalize Defendant; after all, everyone has a duty to
obey the law. It is to protect the public by giving Defendant an added incentive to
conduct himself in accordance with the securities laws: violating the injunction would
subject him to the court’s contempt power, see 18 U.S.C. § 401(3) (authorizing courts to
punish disobedience of a lawful order). It has been recognized for some time that such an
order is “purely remedial and preventative,” and not a penalty or forfeiture. Drath v.
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F.T.C., 239 F.2d 452, 454 (D.C. Cir. 1956) (internal quotation marks omitted); see id.(“One is not prosecuted by being told to desist from illegal conduct, nor does he thereby
suffer the imposition of a penalty or the forfeiture of any legally-protected right or
property.”); Welch Sci. Co. v. N.L.R.B., 340 F.2d 199, 202–03 (2d Cir. 1965) (NLRB’s
order that “the company should cease and desist from interrogating the New York
employees concerning their [union] membership” (a violation of the National Labor
Relations Act) was “purely remedial”); cf. Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944)
(“The historic injunctive process was designed to deter, not to punish.”). More recently,
the D.C. Circuit applied that proposition to hold that § 2462 does not apply to an SEC
cease-and-desist order to refrain from violating securities laws. See Riordan v. S.E.C.,
627 F.3d 1230, 1234–35 (D.C. Cir. 2010); In the Matter of Guy P. Riordan, Release No.
9085, 2009 WL 4731397 (Dec. 11, 2009) (ordering “that Guy P. Riordan cease and desist
from committing or causing any violations or future violations of Section 17(a) of the
Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and
Exchange Act Rule 10b-5”). We fully agree with the D.C. Circuit.
Defendant relies on another decision by that circuit, Johnson v. S.E.C., 87 F.3d
484, 491–92 (D.C. Cir. 1996), holding that the SEC injunction in that case did impose a
penalty. But in Johnson the injunction censured the violator and imposed a six-month
disciplinary suspension “from acting in a supervisory capacity with any broker or dealer.”
Id. at 486. The court held that on the facts of record “it is evident that the sanctions here
were not based on any . . . showing of the risk she posed to the public, but rather were
based on [her] alleged failure reasonably to supervise [a subordinate].” Id. at 489. The
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court rejected the SEC’s contention that “the sanctions were imposed not as punishment
for past dereliction, but primarily because of [her] present danger to the public.” Id. at
490. We need not assess whether we agree with that opinion. We need only point out
that there is a qualitative difference between a disciplinary suspension and being ordered
to comply with the law. There is no inconsistency between the circuit’s decision in
Johnson and its later decision in Riordan holding that § 2462 does not apply to an order
requiring compliance with the securities laws.
Finally, Defendant argues that in light of his age, insolvency (and meager
prospects of recovering from it), and the passage of time since his unlawful conduct, he is
unlikely to engage in the conduct for which he is liable here, so the injunction must be
intended solely to punish him. He further argues that the SEC did not allege any
wrongdoing by him after the Funds and the Advisers were dissolved, so he is being
punished for past conduct, as in Johnson. We are not persuaded. If Defendant is not
going to engage in securities-related activity, the order does not punish him. And the
absence of SEC allegations of recent misconduct did not preclude the district court from
finding that he still poses a risk to the public. The court found that Defendant’s
occupation would “present opportunities for future violations” because of his extensive
experience with owning and controlling investment-adviser firms and operating
investment companies. Also, noting Defendant’s work history, his extravagant lifestyle,
and his demeanor, the court expressly rejected his statement that he would not engage in
business activity that could present opportunities for future securities-laws violations.
These are factual matters and the court did not clearly err in its findings. See Att’y. Gen.
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of Oklahoma v. Tyson Foods, Inc., 565 F.3d 769, 775–76 (10th Cir. 2009) (factual
findings underlying injunction are reviewed for clear error).
2. Disgorgement
Disgorgement “consists of factfinding by a district court to determine the amount
of money acquired through wrongdoing—a process sometimes called ‘accounting’—and
an order compelling the wrongdoer to pay that amount plus interest to the court.” United
States v. Badger, 818 F.3d 563, 566 (10th Cir. 2016) (internal quotation marks omitted).
The amount of the disgorgement is essentially the same whether the relief is sought in a
private cause of action or, as in this case, by the government. See 15 U.S.C. § 78u(d)(5)
(authorizing court to grant equitable relief sought by SEC); F.T.C. v. Bronson Partners,
LLC, 654 F.3d 359, 369–70 (2d Cir. 2011) (affirming district court’s award because it
“satisfies the requirements of equitable disgorgement”).
Defendant, who owned and controlled the Advisers, misappropriated $34.9 million
from the Funds between 1995 and 2006 to pay salaries and bonuses to officers of the
Advisers (including himself), to pay the Advisers’ office rent, and to pay phony “tax
distributions.” The district court ordered him to disgorge this money that went to him
and his subordinate cohorts, finding that the sum “reasonably approximates the ill-gotten
gains causally connected to [his] violations.” Aplt. App., Vol. 2 at 1880. Defendant
claims that the disgorgement order is a penalty or forfeiture. We disagree. We first
address the claim that it is a penalty.
We have previously said that disgorgement is not a penalty under § 2462 because
it is remedial. See Telluride, 146 F.3d at 1247 (“[O]ther equitable remedies, such as
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disgorgement, which sanction past conduct, are remedial [rather than punitive].”
(emphasis added)). Other circuits have similarly held that it is not. See Riordan, 627
F.3d at 1234 (“[D]isgorgement orders are not penalties, at least so long as the disgorged
amount is causally related to the wrongdoing.”); S.E.C. v. Tambone, 550 F.3d 106, 148
(1st Cir. 2008) (“[T]he applicable five-year statute of limitations period [the defendant]
invokes applies only to penalties sought by the SEC, not its request for injunctive relief or
the disgorgement of ill-gotten gains.”), withdrawn, 573 F.3d 54 (1st Cir. 2009), reinstated
in relevant part, 597 F.3d 436, 450 (1st Cir. 2010).
The reasons for this view are clear. Properly applied, the disgorgement remedy
does not inflict punishment. “The object of restitution [in the disgorgement context] . . .
is to eliminate profit from wrongdoing while avoiding, so far as possible, the imposition
of a penalty.” Restatement (Third) of Restitution and Unjust Enrichment § 51(4) (Am.
Law Inst. 2010). Disgorgement just leaves the wrongdoer “in the position he would have
occupied had there been no misconduct.” Id. § 51 cmt. k; see id. (“Disgorgement of
wrongful gain is not a punitive remedy.”). To be sure, disgorgement serves a deterrent
purpose, but it does so only by depriving the wrongdoer of the benefits of wrongdoing.
See S.E.C. v. Contorinis, 743 F.3d 296, 301 (2d Cir. 2014) (“[D]isgorgement does not
serve a punitive function . . . . [Its] underlying purpose is to make lawbreaking
unprofitable for the law-breaker . . . .”); S.E.C. v. First City Fin. Corp., 890 F.2d 1215,
1231 (D.C. Cir. 1989) (“[D]isgorgement primarily serves to prevent unjust
enrichment . . . .”). Indeed, if punishment is required, disgorgement can be supplemented
with exemplary damages. See Restatement (Third) § 51 cmt. k.
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Defendant complains that the disgorgement order is punitive because he is being
required to disgorge more than he actually gained himself (some of the misappropriated
money went to others). But there is nothing punitive about requiring a wrongdoer to pay
for all the funds he caused to be improperly diverted to others as well as to himself. See
Contorinis, 743 F.3d at 307 (“[W]hen third parties have benefitted from illegal activity, it
is possible to seek disgorgement from the violator, even if that violator never controlled
the funds. The logic of this . . . is that to fail to impose disgorgement on such violators
would allow them to unjustly enrich their affiliates.”); S.E.C. v. Platforms Wireless Int’l
Corp., 617 F.3d 1072, 1098 (9th Cir. 2010) (“A person who controls the distribution of
illegally obtained funds is liable for the funds he or she dissipated as well as the funds he
or she retained.”); S.E.C. v. JT Wallenbrock & Assocs., 440 F.3d 1109, 1114–15 (9th Cir.
2006) (defendant was not entitled to deduct business and operating expenses from the
amount of his disgorgement because “it would be unjust to permit the defendants to offset
against the investor dollars they received the expenses of running the very business they
created to defraud those investors into giving the defendants the money in the first
place”); S.E.C. v. Banner Fund Int’l, 211 F.3d 602, 617 (D.C. Cir. 2000) (“[A]n order to
disgorge establishes a personal liability, which the defendant must satisfy regardless
whether he retains the selfsame proceeds of his wrongdoing.”). After all, we do not
consider it punitive to require a personal-injury tortfeasor to pay for all damages caused
by his tort (say, a motor-vehicle accident) even if he gained nothing thereby.
Defendant also argues that the disgorgement order is punitive because in light of
his age (late sixties) and insolvency, there is no prospect of his restoring the gains he
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received. But the likelihood of the government’s recovery is irrelevant to determining
whether his disgorgement order is punitive or remedial because it does not change the
nature of the sanction. The disgorgement order does not require Defendant to do more
than he is capable of.
Defendant next contends that disgorgement is a “forfeiture.” To be sure, in
common English the words forfeit and disgorge (as well as relinquish) capture similar
concepts; one subject to formal forfeiture could be said to “disgorge” what is forfeited.
The definitions in the leading legal dictionary, although different, also have similarities.
See Black’s Law Dictionary 568, 765 (10th ed. 2014) (defining disgorgement as “[t]he
act of giving up something (such as profits illegally obtained) on demand or by legal
compulsion,” and forfeiture as “[t]he loss of a right, privilege, or property because of a
crime, breach of obligation, or neglect of duty”). Because of these similarities the
Eleventh Circuit recently held that disgorgement is a forfeiture under § 2462. See S.E.C.
v. Graham, 823 F.3d 1357, 1363–64 (11th Cir. 2016).
Other circuits have a different view. See Riordan, 627 F.3d at 1234; Tambone,
550 F.3d at 148 (§ 2462 does not apply to disgorgement); see also S.E.C. v. Saltsman,
No. 07-CV-4370 (NGG) (RML), 2016 WL 4136829, at *25–29 (E.D.N.Y. Aug. 2, 2016)
(rejecting Graham and citing three other district courts sharing that view). Respectfully,
we also see things a bit differently. The word forfeiture in § 2462 must be read in the
context of government causes of action—“an action, suit or proceeding,” 28 U.S.C. §
2462. Government forfeiture actions date back to the early days of the Republic, and for
most of the time since then have had a narrow focus. Forfeiture was an in rem procedure
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to take “tangible property used in criminal activity.” United States v. 92 Buena Vista
Ave., 507 U.S. 111, 118 (1993). Indeed, Black’s Law Dictionary defines civil
forfeiture— which, in our view, is the relevant definition here—as “[a]n in rem
proceeding brought by the government against property that either facilitated a crime or
was acquired as a result of criminal activity.” As the Supreme Court has summarized:
“The First Congress enacted legislation authorizing the seizure and forfeiture of ships and
cargos involved in customs offenses. Other statutes authorized the seizure of ships
engaged in piracy . . . . Later statutes involved the seizure and forfeiture of distilleries
and other property used to defraud the United States of tax revenues from the sale of
alcoholic beverages.” Id. at 119–20. The owner of the seized property could be
completely innocent of any wrongdoing, and the value of the property taken have no
necessary relation to any loss to others or gain to the owner. A modern-day example
makes the point. In Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663 (1974),
the Supreme Court affirmed a forfeiture proceeding in which a yacht was seized from an
innocent owner after government officers apparently found only one marijuana cigarette
on the yacht while it was under the control of the lessee, see id. at 693 (Douglas, J.,
dissenting).
When the term forfeiture is linked in § 2462 to the undoubtedly punitive actions
for a civil fine or penalty, it seems apparent that Congress was contemplating the meaning
of forfeiture in this historical sense. The nonpunitive remedy of disgorgement does not fit
in that company. See Antonin Scalia & Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts ch. 31, 195–98 (2012) (“Associated words bear on one
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another's meaning (noscitur a sociis).”). In fact, construing a predecessor to § 2462,
which imposed a five-year limitations period for a “suit or prosecution for any penalty or
forfeiture,” the Supreme Court said that “[t]he words ‘penalty or forfeiture’ in this section
refer to something imposed in a punitive way for an infraction of a public law.” Meeker
v. Lehigh Valley R.R. Co., 236 U.S. 412, 423 (1915).
We recognize that in recent years some federal forfeiture statutes have been
expanded to include disgorgement-type remedies, see 18 U.S.C. § 1963(a)(3)
(authorizing forfeiture of proceeds from racketeering activity); 21 U.S.C. § 881(a)(6)
(authorizing forfeiture of the proceeds of illegal drug transactions). But this is a recent
development, occurring decades after § 2462 was enacted in 1948. The Supreme Court
recently discussed the development in United States v. 92 Buena Vista Ave., 507 U.S. 111(1993) (addressing scope of innocent-owner exception to federal forfeiture statute). The
introduction of “disgorgement” features in the forfeiture laws began with the 1978
amendment to the Comprehensive Drug Abuse Prevention and Control Act of 1970,
which “authorize[d] the seizure and forfeiture of proceeds of illegal drug transactions”
and continued with the 1984 amendment to the Racketeer Influenced and Corrupt
Organizations Act, which likewise authorized “forfeiture of ‘proceeds’” from
racketeering activity. Id. at 121 & n.16. These changes in the forfeiture statutes “marked
an important expansion of governmental power.” Id. at 121 (emphasis added). But this
expansion should not expand the meaning of the word forfeiture in § 2462 to encompass
traditional disgorgement remedies outside those forfeiture statutes. We have said that
when interpreting statutory language, “words will be interpreted as taking their ordinary,
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contemporary, common meaning at the time Congress enacted the statute.” Hackwell v.
United States, 491 F.3d 1229, 1236 (10th Cir. 2007) (internal quotation marks omitted).
Further, we must not forget that we are to construe § 2462 in the government’s
favor to avoid a limitations bar. See Telluride, 146 F.3d at 1246 & n.7. We should not
strain to expand the meaning of the statute’s language to restrict the government. We
conclude that the disgorgement order in this case is not a forfeiture within the meaning of
§ 2462.
Because we hold that the disgorgement order and injunction in this case are
neither penalties nor forfeitures under § 2462, we need not decide whether (as requested
by the government) the statute is inapplicable to all equitable remedies; nor need we
decide whether disgorgement remedies in forfeiture statutes come under § 2462. And for
the same reason, we need not address Defendant’s arguments that the government’s
causes of action accrued more than five years before it filed suit and that the statute is
jurisdictional.
B. Evidence of the Participation of Lawyers and Accountants
Defendant argues that the district court erred in disallowing his proffered evidence
of attorney and accountant participation. He asserts that the evidence was proper to
“show[] that, because of his dealings with the Funds’ lawyers and accountants, he had no
contemporaneous awareness that he was ‘part of an overall activity that was improper’
and did not knowingly assist primary violation, of which he was unaware.” Aplt. Br. at
61.
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Evidence of reliance on professionals such as attorneys and accountants is,
however, significantly restricted in this circuit. Under the standard set forth in Wenger,
ordinarily “the defendant must show (1) a request for advice of [independent] counsel on
the legality of a proposed action, (2) full disclosure of the relevant facts to counsel, (3)
receipt of advice from counsel that the action to be taken will be legal, and (4) reliance in
good faith on counsel’s advice,” 427 F.3d at 853 (internal quotation marks omitted); see
C.E. Carlson, Inc. v. S.E.C., 859 F.2d 1429, 1436 (10th Cir. 1988). Defendant does not
contend that he satisfied the Wenger requirements in seeking to put on evidence
regarding his attorneys and accountants. Rather, he argues that Wenger is inapplicable.
As we understand his position, it is that restrictions on evidence of reliance on
professionals concerns only evidence offered to negate specific intent such as willfulness
or intent to defraud. Here, in contrast, he claims to be offering the evidence to negate his
knowledge of relevant facts. That may be a valid distinction. If a defendant contends
that a professional adviser failed to convey historical facts, Wenger may not apply. But if
Defendant is merely saying that a professional adviser failed to convey the “fact” that a
transaction contravened a contract or a statute (that is, failed to convey professional
advice), Wenger controls. Unfortunately for Defendant, his briefs on appeal do not
preserve the issue. Although he cites to the record, we decline to review his challenge to
the exclusion of evidence because his briefs fail to identify specific items of testimony
that would have been offered and to state why each would have been relevant. See
Reinhart v. Lincoln County, 482 F.3d 1225, 1228 n.1 (10th Cir. 2007) (citation to record
did not preserve issue). Moreover, even if Defendant’s evidence was somewhat
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probative, it could be excluded under Fed. R. Evid. 403 if “its probative value is
substantially outweighed by a danger of . . . confusing the issues.” And, as Defendant
acknowledges in his opening brief, the district court relied on that rule to exclude
evidence about his attorneys and accountants. Yet Defendant’s opening brief never
addresses this basis for excluding his evidence. This failure waives the issue on appeal.
See SCO Grp., Inc. v. Novell, Inc., 578 F.3d 1201, 1226 (10th Cir. 2009) (issue is waived
when appellant fails to challenge an “alternative, independently sufficient basis for the
district court’s ruling” in its opening brief); Bronson v. Swensen, 500 F.3d 1099, 1104
(10th Cir. 2007) (“[W]e routinely have declined to consider arguments that are not raised,
or are inadequately presented, in an appellant’s opening brief.”). We therefore affirm
exclusion of the evidence.
III. CONCLUSION
We AFFIRM the district court’s final judgment.
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