United States v. Lewis

10-4819-cr
United States v. Lewis
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals
2 for the Second Circuit, held at the Daniel Patrick Moynihan
3 United States Courthouse, 500 Pearl Street, in the City of
4 New York, on the 18th day of July, two thousand twelve.
5
6 PRESENT:
7 DENNIS JACOBS,
8 Chief Judge,
9 DENNY CHIN,
10 CHRISTOPHER F. DRONEY
11 Circuit Judges.
12
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14 UNITED STATES,
15 Appellee,
16
17 -v.- 10-4819-cr
18
19 MARIO S. LEVIS,
20 Defendant-Appellant.
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22
23 FOR DEFENDANT-APPELLANT: Elliot H. Scherker (Jeffrey B.
24 Sklaroff and Brigid F. Cech
25 Samole, on the brief), Greenberg
26 Traurig, P.A., Miami, FL.
27
28 FOR APPELLEE: Brent S. Wible (Katherine Polk
29 Failla, on the brief), Assistant
30 United States Attorneys, for
31 Preet Bharara, United States
32 Attorney for the Southern
33 District of New York, New York,
34 NY.
1
1 Appeal from a judgment of the United States District
2 Court for the Southern District of New York (Griesa, J.).
3 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
4 AND DECREED that the judgment of the district court is
5 AFFIRMED in part, VACATED in part, AND REMANDED.
6 Defendant-Appellant Mario S. Levis appeals his
7 conviction and sentence for one count of securities fraud,
8 15 U.S.C. § 78j(b), and two counts of wire fraud, 18 U.S.C.
9 § 1343. He raises six issues on appeal. We assume the
10 parties’ familiarity with the underlying facts, the
11 procedural history of the case, and the issues on appeal.
12 [1] Levis was the Senior Executive Vice President and
13 Treasurer of Doral Financial Corporation (“Doral”) at the
14 time he assured investors that certain risks were capped.
15 Although not all contracts had embedded caps, he sought to
16 defend against these charges on the ground that transactions
17 involving hedging afforded the same assurance, or (at least)
18 he reasonably thought so. On appeal he argues that the
19 district court erroneously barred him from presenting his
20 hedging defense.
21 “A district court abuses its discretion when . . . its
22 evidentiary rulings are arbitrary, irrational, or simply
23 erroneous as a matter of law.” United States v. Cadet, 664
24 F.3d 27, 32 (2d Cir. 2011).
25 The district court erred in barring Levis from
26 presenting a hedging defense as to Count Three: the wire
27 fraud count predicated on Levis’s misstatements regarding
28 contractual caps on the pass-through rates of the mortgage
29 pools. Doral’s hedges took various forms, such as
30 derivative financial instruments, futures and options,
31 forward sale commitments, interest rate swaps, interest rate
32 collars, and options to repurchase the mortgage pools.
33 These measures were not contractual caps, which would have
34 guaranteed a minimum pass-through rate for Doral, and
35 therefore would have been the safest measure. But these
36 hedges might have functioned as effective caps that
37 minimized the overall financial risk to Doral in the event
38 that a rise in interest rates impaired Doral’s income from
39 the mortgage sales.
2
1 One element of wire fraud is “a scheme to defraud.”
2 United States v. Pierce, 224 F.3d 158, 165 (2d Cir. 2000);
3 accord 18 U.S.C. § 1343. “To establish [that] . . .
4 element, the government must prove (i) the existence of a
5 scheme to defraud, (ii) the requisite scienter (or
6 fraudulent intent) on the part of the defendant, and (iii)
7 the materiality of the misrepresentations.” Pierce, 224
8 F.3d at 165 (internal citations omitted). Evidence that the
9 hedges functioned as a cap could have raised doubts as to
10 materiality. The district court therefore erred in
11 excluding Levis from presenting such evidence, including lay
12 and expert testimony involving the existence of hedges and
13 their effectiveness. Accordingly, Levis’s conviction as to
14 the third count must be vacated and the matter remanded for
15 re-trial.
16 However, the district court did not abuse its
17 discretion in barring testimony and evidence involving
18 hedges with regard to Count Five (wire fraud) and Count One
19 (securities fraud), which are based on Levis’s
20 misrepresentation that Doral had been the subject of two
21 independent evaluations. As to each of those counts, the
22 Government presented substantial evidence that neither of
23 the two valuations was independent. Although the
24 Government’s evidence that hedging was ineffective may have
25 been used to corroborate the impact of Levis’s
26 misrepresentations, the existence and effectiveness of
27 hedging is irrelevant to whether there were, in fact, two
28 independent evaluations. Because hedging was legally
29 irrelevant to whether Levis committed securities and wire
30 fraud on that basis, the district court did not err in
31 excluding Levis’s hedging defense as to those counts.1
32 There is also no danger that the now-vacated wire-fraud
33 conviction involving contractual caps spilled over to
1
The jury convicted Levis as to Count One based on
misrepresentations regarding caps and misrepresentations
regarding the two independent valuations. A-1785 (jury
verdict form). Even if the verdict as to caps must be
vacated due to the exclusion of Levis’s hedging defense, his
misrepresentation involving the valuations is an independent
basis that supports the verdict of conviction on Count One.
Our decision with regard to Count Three therefore does not
require us to vacate Levis’s conviction as to Count One
(securities fraud).
3
1 Levis’s convictions for misrepresentations involving
2 independent valuations. “A defendant bears an extremely
3 heavy burden when claiming prejudicial spillover.” United
4 States v. Griffith, 284 F.3d 338, 351 (2d Cir. 2002).
5 Prejudicial spillover requires, inter alia, an evaluation of
6 “the strength of the government’s case” as to the counts in
7 question. Id. The evidence that Levis misrepresented that
8 Doral had been subject to two independent evaluations is so
9 overwhelming that there is no danger of spillover and no
10 “‘prejudice so substantial as to amount to a miscarriage of
11 justice.’” Id. (quoting United States v. Friedman, 854 F.2d
12 535, 563 (2d Cir. 1988)). In any event, Levis has forfeited
13 any such argument by failing to raise it on appeal. See
14 United States v. Pereira, 465 F.3d 515, 520 n.5 (2d Cir.
15 2006).
16 [2] Levis contends that his trial did not commence within
17 70 days of the public filing of his indictment, as required
18 by the Speedy Trial Act, and that no exception to the Speedy
19 Trial Act was satisfied. See 18 U.S.C. § 3161(h)(1)-(7).
20 In May 2009, the district court granted Levis’s
21 unopposed motion for a lengthy adjournment of the September
22 2009 trial date because Levis anticipated receiving
23 substantial discovery from the Government. In March 2010,
24 just prior to trial, Levis moved to dismiss the indictment
25 because the district court had not made the findings
26 necessary to satisfy the ends-of-justice exception to the
27 Speedy Trial Act when it granted Levis’s motion for
28 adjournment. See 18 U.S.C. § 3161(h)(7)(A).
29 The Speedy Trial Act requires that the findings
30 necessary for the ends-of-justice exception “be made, if
31 only in the judge’s mind, before granting the continuance,”
32 and that those findings need only “be put on the record by
33 the time a district court rules on a defendant’s motion to
34 dismiss.” Zedner v. United States, 547 U.S. 489, 506-07
35 (2006).
36 There was no violation of the Speedy Trial Act because,
37 before the district court formally denied Levis’s motion to
38 dismiss, it ratified a letter lodged by the Government,
39 confirming that the district court “ha[d] made the requisite
40 finding that the ends of justice warranted the continuance
41 . . . for the reasons stated in” Levis’s motion for
42 adjournment. A-130-31.
4
1 [3] Levis contends that venue in the Southern District of
2 New York was improper as to Count Five because there was no
3 direct evidence that he caused Doral’s 10-K report
4 (containing the misrepresentation regarding the independent
5 valuations) to be transmitted to that district. The
6 Government bears the burden of proving venue by a
7 preponderance of the evidence. United States v. Magassouba,
8 619 F.3d 202, 204 (2d Cir. 2010). We review de novo the
9 sufficiency of the evidence supporting the jury’s finding
10 that venue was proper. United States v. Tzolov, 642 F.3d
11 314, 318 (2d Cir. 2011).
12 “[V]enue is proper in a district where (1) the
13 defendant intentionally or knowingly causes an act in
14 furtherance of the charged offense to occur . . . or (2) it
15 is foreseeable that such an act would occur in the district
16 of venue [and it does].” United States v. Royer, 549 F.3d
17 886, 894 (2d Cir. 2008) (second alteration in original)
18 (internal quotation marks omitted). When the case involves
19 publication on the internet, venue is proper in any district
20 where it is reasonably foreseeable that the material will be
21 accessed. See id. at 895; United States v. Rowe, 414 F.3d
22 271, 279 (2d Cir. 2005).
23 It was reasonably foreseeable that Doral’s 10-K, which
24 is available on the internet through the Securities and
25 Exchange Commission’s website, would be accessed by someone
26 in the Southern District of New York. Levis knew that at
27 least one of the analysts reporting on Doral (Omotayo
28 Okusanya, a research analyst at UBS) was based in New York
29 and would review the report. Levis informed Okusanya that
30 the 10-K would be released soon and that soon afterward
31 there would be a conference call with Doral’s management--a
32 call in which Okusanya participated from his office in
33 Manhattan. Venue in the Southern District of New York was
34 proper.
35 [4] Levis contends that he is entitled to a new trial based
36 on improper jury instructions. The propriety of a jury
37 instruction is a question of law that we review de novo.
38 United States v. George, 386 F.3d 383, 397 (2d Cir. 2004).
39 “To secure reversal based on a flawed jury instruction, a
40 defendant must demonstrate both error and ensuing
41 prejudice.” United States v. White, 552 F.3d 240, 246 (2d
42 Cir. 2009). “A jury instruction is erroneous if it misleads
43 the jury as to the correct legal standard or does not
5
1 adequately inform the jury on the law.” United States v.
2 Walsh, 194 F.3d 37, 52 (2d Cir.1999) (internal quotation
3 marks omitted).
4 A defendant engages in wire fraud when he intentionally
5 deprives a victim of “potentially valuable economic
6 information . . . that could impact on economic decisions”
7 made by the victim. United States v. Wallach, 935 F.2d 445,
8 463 (2d Cir. 1991); accord United States v. Dinome, 86 F.3d
9 277, 283 (2d Cir. 1996); United States v. D’Amato, 39 F.3d
10 1249, 1257 (2d Cir. 1994). Levis deprived investors of
11 information that could impact their investment decisions by
12 falsely claiming that Doral had been subject to two
13 independent evaluations that confirmed Doral’s own internal
14 valuations.
15 Levis argues that the district court erred by failing
16 to instruct the jury that the information withheld from
17 investors must have some independent value or must bear on
18 the ultimate value of the transaction. See United States v.
19 Mittelstaedt, 31 F.3d 1208, 1217 (2d Cir. 1994). Even if
20 this was an appropriate statement of the law,2 Levis cannot
21 show prejudice. By misrepresenting that Doral had been
22 valued by two independent evaluators, Levis deprived Doral’s
23 actual and potential investors of information that had
24 independent value and that had bearing on the ultimate value
25 of Doral stock. Even if Doral’s internal evaluations were
26 correct, independent valuations would be of far greater
27 significance to possible investors and would substantially
28 affect the market value of Doral’s stock.
29 [5] Levis also contends that the district court erred by
30 failing to properly instruct the jury that he is not guilty
31 of wire fraud if he acted with a good faith belief that no
32 harm would befall Doral’s investors.
2
Mittelstaedt involved the failure of a government
employee to reveal a conflict of interest and fulfill one’s
fiduciary obligation to the local government. 31 F.3d at
1217. Because the mail and wire fraud statutes do not
criminalize government ethics law, we concluded there was no
fraud. Id. The cases since Mittelstaedt, have limited it
to its compelling factual setting. See, e.g., Dinome, 86
F.3d at 284.
6
1 The district court charged the jury that
2 [G]ood faith is a defense to a charge of
3 fraud. . . . An honest belief in the truth of a
4 representation is a good defense no matter how
5 inaccurate the statement may turn out to be. In
6 considering whether or not the defendant acted in
7 good faith, you are instructed that a belief by
8 the defendant, if such a belief existed, that
9 ultimately everything would work out favorably for
10 investors does not require a finding by you that
11 the person acted in good faith.
12 T:3719-20. The district court also instructed the jury that
13 the Government must prove that Levis “intended to deceive
14 and to thereby cause harm to the victims of this scheme,”
15 T:3727, and that Levis “would be guilty of intending to
16 inflict harm on investors if he intended to put false
17 information before them which would deprive them of the
18 ability to make investment decisions based on actual facts,”
19 T:3728.
20 A jury instruction is considered in combination with
21 other instructions to determine whether the instructions, as
22 a whole, correctly describe the law in this Circuit. See
23 United States v. Mitchell, 328 F.3d 77, 82 (2d Cir. 2003).
24 Taken together, these instructions accurately state the law
25 of this Circuit: even if Levis meant to cause no ultimate
26 harm to investors because he honestly believed Doral to be
27 properly valuated, he intended to cause them “immediate
28 harm” by denying them the “right ‘to control [their] assets
29 by depriving [them] of the information necessary to make
30 discretionary economic decisions.’” See United States v.
31 Ferguson, 676 F.3d 260, 280 (2d Cir. 2011) (as amended)
32 (quoting United States v. Rossomando, 144 F.3d 197, 201 n.5
33 (2d Cir. 1998)); accord United States v. Leonard, 529 F.3d
34 83, 91-92 (2d Cir. 2008).3
3
Levis’s reliance on Rossomando is misplaced. In
Rossomando, the defendant believed that he was causing no
harm (immediate or otherwise), whereas Levis intentionally
deprived Doral’s investors of important information even if
he may have believed that his misrepresentation would cause
no ultimate harm because he thought Doral was a wise
investment. See Ferguson, 676 F.3d at 280 (discussing
7
1 The district court did not err in its instruction to
2 the jury regarding Levis’s good-faith defense.
3 [6] Levis argues that this is one of the “rare case[s]” in
4 which an improper statement in the Government’s summation
5 was so prejudicial as to warrant a new trial. See United
6 States v. Rodriguez, 968 F.2d 130, 142 (2d Cir. 1992). A
7 defendant who seeks to overturn a conviction based on a
8 prosecutor’s comment in summation must sustain the “heavy
9 burden” of showing that “the comment, when viewed against
10 the entire argument to the jury, and in the context of the
11 entire trial, was so severe and significant as to have
12 substantially prejudiced [the defendant], depriving him of a
13 fair trial.” United States v. Farhane, 634 F.3d 127, 167
14 (2d Cir. 2011) (internal citation and quotation marks
15 omitted).
16 The Government’s summation seemed to intimate that the
17 defense’s strategy was dishonest. When alerted, the
18 Government apologized to the jury and disavowed any such
19 inference. In that light, it cannot be said that the
20 statement was so severe and significant as to prejudice
21 Levis at all--much less deprive him of his right to a fair
22 trial.
23 Levis also claims that the Government unfairly
24 exploited the exclusion of the hedging defense. This
25 argument is obviated by our ruling that it was not error to
26 exclude the hedging defense (as to the surviving counts).
27 We have considered all of Levis’s additional arguments
28 and find them to be without merit. Accordingly, the
29 judgment of the district court is AFFIRMED in part, and
30 VACATED in part. The matter is REMANDED for further
31 proceedings consistent with this decision.
32 FOR THE COURT:
33 Catherine O’Hagan Wolfe, Clerk
Rossomando, 144 F.3d at 200-03 & n.5). Rossomando has been
“limited to the quite peculiar facts that compelled [its]
result.” Ferguson, 676 F.3d at 280 (alteration in original)
(internal quotation marks omitted).
8