*A sufficient basis exists for a conscious avoidance instruction in a criminal trial for securities fraud where the evidence would permit a rational juror to conclude beyond a reasonable doubt that the defendant was aware of a high probability of the fact in dispute and consciously avoided confirming that fact. **In calculating the amount of criminal forfeiture, the court need not deduct the costs of doing business when a criminal conspiracy does not conduct lawful business.
USA vs. Bonventre, Nos. 14-4714-cr, -4715-cr, -4716-cr, -4719-cr & 15-50-cr (2nd Cir., 4/20/16).
A Slew of Convictions
Former employees of Bernard L. Madoff Investment Securities were convicted after trial of multiple counts of conspiratorial and substantive securities fraud, bank fraud, records falsification, making false SEC and IRS filings, obstructing enforcement of tax laws and tax evasion, for their participation in a notorious and widespread scheme to defraud thousands of investors. On appeal from the denial of their post-trial motions (SLA 2014-31), Defendants challenge various trial court rulings.
One defendant convicted of records falsification argued that he was entitled to a bill of particulars as to the records alleged to be false, why they were false and how he knew of their falsity. The Court replies that particulars are only necessary when indictment charges are so general that they do not advise the defendant of the specific acts of which he is accused; here, none of these concerns applies. Nor was the defendant prejudiced by the government’s failure to particularize whether he was charged with knowingly participating in Madoff’s Ponzi scheme or merely with securities fraud generally, because such knowledge was not a required element of the charged crime.
Evidence of Securities Fraud
Three defendants challenged the sufficiency of the evidence presented at trial. The Court must affirm if the evidence, in light most favorable to the government, is such that any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Here, it concludes, there was sufficient evidence to allow a reasonable juror to infer both defendants’ awareness of the securities, tax and bank frauds and their intent that they succeed.
One defendant challenged her securities fraud conviction on the ground that the trial evidence did not provide a sufficient factual basis for a conscious avoidance instruction. A sufficient basis exists when the evidence would permit a rational juror to conclude beyond a reasonable doubt that the defendant was aware of a high probability of the fact in dispute and consciously avoided confirming that fact. Here, the re-writing of three years’ worth of account statements in connection with an SEC investigation and the backdating of trades in clients’ accounts (including her own) was sufficient for a reasonable jury to find that her professed ignorance was a purposeful contrivance to avoid guilty knowledge.
Finally, the Court rejects Defendants’ argument that the trial court’s forfeiture order violates the Eighth Amendment’s prohibition of excessive fines. Defendants argued that the forfeiture should have been based on net proceeds and not gross proceeds, but the Court finds that the criminal conspiracy at issue did not sell or provide lawful services (in just an illegal manner) so as to require a deduction of direct costs. Nor was the ordered forfeiture grossly disproportional to the gravity of the crimes of conviction.
(P. Michaels: The Court also rejects defendants’ arguments that tax fraud charges should have been severed from the securities fraud charges because they were insufficiently related; that that the government violated Brady v. Maryland and Giglio v. USA by failing to disclose a summary of its interview of a retired FBI agent; and that the prosecutor committed prosecutorial misconduct in his addresses to the jury.)
(SLC Ref. No. 2016-20-05)
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