Gupta Conviction Affirmed
In United States v. Gupta the U.S. Court
of Appeals for the Second Circuit affirmed the conviction of Rajat
Gupta for his participation in the Raj Rajaratnam insider-trading
scheme. The court broke no new ground in affirming the conviction.
One error Gupta claimed was that his conviction relied on hearsay
evidence gained from wiretaps on Rajaratnam's cell phone that
Gupta was not a party to. The court rejected that claim,
reaffirming that "[a] finding as to whether or not a proffered
statement was made in furtherance of the conspiracy should be
supported by a preponderance of the evidence." Next stop for
Gupta . . . a potential petition to the U.S. Supreme Court.
Confession of Error Out West
After argument to the en banc Ninth Circuit in United States v. Maloney, the U.S.
Attorney for the Southern District of California confessed error in
a motion to the court, asking that the conviction be vacated and
the case remanded for retrial. The underlying appeal came from a
defendant who had been convicted for drug trafficking in a trial in
which the prosecutor is alleged to have relied on new facts in the
rebuttal summation - facts that had never been introduced during
the trial - to support the prosecution's challenge to the
credibility of the defendant. After reviewing the tape of the oral
argument to the court, the U.S. Attorney confessed error. The court
commended the U.S. Attorney for recognizing that federal
prosecutors must "make every effort to stay well within"
the rules.
A Reversal of Fortune
Unfortunately for Ray Shoemaker and Lee Garner, the Fifth Circuit,
in United States v. Shoemaker, reversed
the Rule 29 judgments of acquittal and Rule 33 order for a new
trial entered by the district court after the jury convicted the
two for violating "various federal crimes arising from a bribe
and kickback scheme involving a community hospital." The case
involved a purported bribery and kickback scheme between a
community hospital in Mississippi and a nurse-staffing business
that had contracted with it. The district court found that there
was insufficient evidence to support the convictions and entered
judgments of acquittal. It ordered a new trial in the alternative
in case the court of appeals disagreed with its rulings. The Fifth
Circuit did disagree, reinstating the jury's verdict, vacating
the alternative order for a new trial and remanding the case for
resentencing.
The Rules (for Reg D Offerings), They Are
A-Changin'
Securities and Exchange Commission Chair Mary Jo White said that the SEC is currently formulating new
rules to govern the solicitation regime under the Securities Act
Regulation D. The proposed rules were reported in September 2013.
They called for direct issuers to file Form D notices with the SEC
15 days before advertising the private offerings and to update the
form 30 days after the offering is finished. The proposed rules
also disqualified issuers for one year if they filed defective Form
D notices. White said, "Completion of this rulemaking is a top
priority" in 2014. She also said, "Our ultimate goal is
to craft rules that provide effective, workable paths for companies
to raise capital that also protect investors."
No Immediate Appeal for Bad Advice
The Tenth Circuit, in United States v. Tucker, ruled that
the collateral-order doctrine does not allow an interlocutory
appeal from an order denying the defendants' motion to quash an
indictment and suppress a co-defendant's grand-jury testimony.
In the case, William Tucker was indicted along with Michael Calhoun
and Tommy Davis of wire fraud, mail fraud and conspiracy to commit
both. The indictment rested in large part on Calhoun's
grand-jury testimony, which he gave upon the advice of his
then-counsel and in which he incriminated himself and the others.
Upon securing new counsel, the defendants moved to quash the
indictment and suppress the testimony, blaming the prior lawyer for
ineffective assistance. The motion was denied, and the defendants
sought interlocutory appeal. Mindful of the "Supreme
Court's increasing reluctance to expand the collateral-order
doctrine," the court concluded this case did not fall within
it and dismissed the appeal for lack of jurisdiction.
There's No Comfort in the Court's Admonition That
Jurors Not Penalize a Defendant for Exercising His Right to Remain
Silent
The Seventh Circuit, in United States v. Torres-Chavez,
refused to overturn Alfonso Torres-Chavez's drug-trafficking
conviction for the district court's refusal to consider
post-verdict statements made by several jurors regarding their
ability to follow the court's instructions about his right to
remain silent. In the case, several jurors in Torres-Chavez's
trial were put back into the jury pool in the U.S. District Court
for the Northern District of Illinois. During subsequent voir dire,
three of them said they "could not help but draw an adverse
inference" from the defendant's failure to testify in the
case. The prosecution alerted Torres-Chavez's counsel, who
added that issue to his motion for judgment of acquittal. The
district judge found that evidence inadmissible under Federal Rule
of Evidence 606(b) and denied the motion. Torres-Chavez appealed.
The Seventh Circuit ruled that "[i]t was not an abuse of
discretion for the district court to refuse to admit the juror
statements into evidence, and without those statements there is no
support for Torres-Chavez's claim." The court joined other
circuits in adhering to the strict limits imposed by Rule
606.
More Mortgage Fraud Prosecutions!
The Office of the Inspector General of the U.S. Department of
Justice issued an audit of the agency's efforts to address
mortgage fraud. The audit found that "DOJ did not uniformly
ensure that mortgage fraud was prioritized at a level commensurate
with its public statements" and that it was "a high
priority" of the department. As a result, Senator Elizabeth
Warren, D-Massachusetts; Representative Elijah E. Cummings,
D-Maryland; and Representative Maxine Waters, D-California, wrote Attorney General Eric Holder expressing
their "deep concern" with the audit's findings. They
also asked Attorney General Holder to meet with them to
"review" the findings and to explain "the steps that
will be taken to ensure that the Department's efforts to
identify and prosecute those responsible for fraudulent mortgage
practices are equal to the harms such crimes have caused [their]
constituents."
The One Upside to Forfeiture
According to the Court of Federal Claims, Joseph Nacchio is allowed
to claim a tax refund for money he forfeited as a result of his
insider-trading conviction. In the case, Nacchio v. United States, the
Internal Revenue Service sought to prevent Nacchio from seeking a
refund of some $17 million in taxes paid on gain he realized in
2001 but forfeited in 2007. In ruling that the refund would be
allowed, the court said, "Allowing the deduction would not
increase the odds in favor of insider trading or destroy the
effectiveness of the securities laws" as the IRS claimed.
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