Category: Trials and Evidentiary Rulings

In United States v. Mendlowitz, the Second Circuit (Kearse, Pooler, and Menashi) issued a summary order in which the panel affirmed the defendant-appellant’s conviction for wire fraud and conspiracy to commit wire fraud. In so doing, the Court determined that the district court had not erred when it failed to ask specifically about potential antisemitic bias during voir dire. The Court also rejected Mendlowitz’s other arguments regarding the exclusion of expert witness testimony as well as the exclusion of a recording of Mendlowitz during trial, finding those to be harmless error individually and cumulatively. While this is a non-precedential summary order, the Court’s ruling sheds light on how the Court of Appeals views voir dire challenges. This is especially notable in the immediate aftermath of the Court’s recent decision in United States v. Nieves, where the Second Circuit reversed for the first time a conviction for the failure to ask a particular question of prospective jurors.

In United States v. Wedd, the Second Circuit (Cabranes, Park, Nardini), affirmed the defendant’s 2018 convictions for aggravated identity theft (among other offenses), which arose from a scheme to auto-subscribe customers to pricey premium text messaging services.  In the process, the Second Circuit—enhancing a circuit split—rejected Wedd’s argument that the scheme involved no “use[]” of a means of identification of another person, a requisite for conviction under the aggravated identity theft statute.  The panel also rejected Wedd’s contentions that the district court erred in giving a conscious avoidance instruction and in failing to recuse itself from his (third) trial.

In United States v. Napout, the Second Circuit (Sack, Hall and Bianco) affirmed the 2017 convictions of Juan Ángel Napout and José Maria Marin in the Eastern District of New York on charges arising out of commercial bribery related to the International Federation of Association Football (“FIFA”) scandal.  The Circuit rejected all of the defendants’ arguments:  the Circuit held that (i) that there had not been an impermissible extraterritorial application of the wire fraud statute, and (ii) the honest service wire fraud statute was not unconstitutionally vague as applied to them.  The Circuit also denied challenges to the sufficiency of the evidence and several trial rulings.  Judge Hall wrote a short concurring opinion that addressed one aspect of the parties’ contentions relating to their vagueness challenge.

On July 31, the Second Circuit issued a decision in United States v. Iverson (Kearse, Calabresi, Livingston) and affirmed the conviction of a defendant who had challenged the district court’s denial of his suppression motion and the district court’s mid-trial decision to excuse one of two black persons on the jury for cause right before summations based on an interview of the juror conducted in camera.  The decision presents an interesting set of facts and applies established law in the Second Circuit.

Earlier this year, in Collins v. Virginia, the U.S. Supreme Court held that the “automobile exception” to the warrant requirement does not authorize “a police officer, uninvited and without a warrant, to enter the curtilage of a home in order to search a vehicle parked therein.”  138 S.Ct. 1663, 1668 (2018).  Earlier this week, in United States v. Jones, No. 16-87 (Jacobs, Cabranes, Raggi) (June 19, 2018), the Circuit had its first opportunity to grapple with the import of Collins.  But it had little difficulty finding that a vehicle parked in a common lot shared by multi-family apartment buildings is not entitled to the same expectation of privacy as a vehicle parked “within the curtilage of one’s home,” and in a published opinion, affirmed the district court’s denial of a motion to suppress.  In a separate summary order, the Circuit addressed and disposed of the defendant’s other arguments, and affirmed his conviction and sentence in full.  

In United States v. Litvak, the Second Circuit (Winter, Chin, Korman D.J.) reversed the conviction of Jesse Litvak, a securities trader at investment bank Jefferies & Co., for securities fraud premised on Litvak’s misrepresentations to trading counterparties about Jefferies’ profits on the transaction. The Court held that the district court improperly admitted testimony that Litvak’s counterparty believed that Litvak was acting as his fiduciary agent—even though in fact no such relation existed.  The Court explained that the counterparty’s erroneous, subjective belief was irrelevant as to the objective materiality of the misstatement, but likely swayed the jury in convicting.  The decision also raises interesting questions about expectations between traders and their customers, and the Government’s role in policing that relationship. For our discussion and commentary on this decision, please see our article on Law 360.

In United States v. Ballard, 17-427-cr, the Second Circuit reversed a sex trafficking conviction by summary order (JAC, RR, Villardo, J. by designation) due to improper argument by the government during rebuttal summation.

The Court rejected the defendant’s arguments that some of the rhetoric in the government’s main summation amounted to error.  Defense counsel did not object to these comments, which included calling the defendant a “dead beat,” a “pimp,” and similar to “Genghis Khan or some other Wall Street person.”

In United States v. Crawford, 16-4261-cr (Kearse, Cabranes, Wesley), the Second Circuit affirmed via summary order the terrorism-related conviction and sentence of a Klansman in upstate New York. This case represented the first conviction under the 2004 law barring the acquisition and use of so-called “dirty bombs” and provided a rare opportunity for the Circuit to interpret several terrorism statutes. It is most notable, however, for its bizarre fact pattern—involving Ku Klux Klan business cards, a modified x-ray machine, and a plot to kill President Barack Obama and an unknown number of Muslims. In August 2015, Glendon Scott Crawford—a Navy veteran and an avowed member of the Ku Klux Klan—was convicted of several counts of domestic terrorism and was subsequently sentenced to 30 years’ imprisonment for his crimes.

United States v. Gill, No. 15-4444-cr(L) (Livingston, Chin, Carney), a decision in a drug trafficking and murder conspiracy appeal, offers several interesting rulings on evidentiary and trial practice issues that arose out of a 4-week trial.  As we often see, these decisions may originate in the world of violence crime and narcotics, but the legal rules established in these cases will also apply in the world of business crimes.

In a highly anticipated decision, a divided Second Circuit panel (Katzmann, Pooler (dissenting), Chin) today upheld the insider trading conviction of former SAC Capital portfolio manager Mathew Martoma, ruling that the “meaningfully close personal relationship” requirement set out by the Court in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), does not survive the Supreme Court’s decision in Salman v. United States, 137 S. Ct. 420 (2016). See United States v. Martoma, 14-3599 (2d Cir. Aug. 23, 2017).

The Second Circuit joined its sister circuits and upheld the constitutionality Federal Rule of Evidence 413, which renders admissible propensity evidence about the defendant in sexual assault cases.  In United States v. Schaffer, 15-2516-cr (Walker, Cabranes, Berman[1]) the Circuit rejected as a matter of first impression the defendant’s argument that Rule 413 violates the Due Process Clause of the Fifth Amendment.  The Court also reviewed its jurisprudence on “custodial” interrogation in the course of affirming the admissibility of incriminating statements the defendant made to law enforcement agents prior to his arrest.

In a summary order on March 8, 2017, the Second Circuit (Katzmann, C.J. and Pooler and Lynch, J.) affirmed the conviction and sentence for wire fraud in United States v. Frenkel. The case attracted some public attention because Frenkel’s co-conspirator, Mark Stern, was a cooperating witness in a number of public corruption cases brought by the U.S. Attorney for the Southern District of New York. The underlying facts involved Frenkel’s fraudulent inducement of Citigroup to lend $126 million to finance the purchase of shopping malls. Although the decision has no precedential value, it presented four interesting issues.

Aéropostale is known by many as a staple of adolescent wardrobes and shopping-mall standard.  But as a patsy for kickback schemes?  In United States v. Finazzo, 14-3213-cr, 14-3330-cr (Droney, J., joined by Judges Sack and Chin), issued March 7, 2017, the Circuit affirmed the mail and wire fraud convictions of an Aéropostale executive who, over the course of a decade, steered hundreds of millions of dollars in business to a vendor that cut him in on the profits.  In affirming his convictions, the Court held that the defendant’s deprivation of Aéropostale’s right to control its assets was injury sufficient under the mail and wire fraud statutes, and that the district court had adequately instructed the jury that such deprivation must be able to cause tangible economic harm.  However, the panel vacated and remanded the district court’s restitution order on the grounds that the calculations presumed that any financial gain to defendant through the scheme was a loss to Aéropostale.  With little more direction than to “try again,” the court instructed the district court to develop a new methodology for computing a restitutionary award that subtracts any legitimate value that Aéropostale derived through its dealing with the vendor.  The Circuit has long stressed the need for precision in restitution calculations, and it can be difficult to make such calculations in a kickback case prosecuted under a theory based on the deprivation of the right to control assets.

The line that separates lawful tax shelters from unlawful ones is notoriously hazy, particularly at the margins.  There is little question, however, that a transaction that serves no meaningful business purpose other than to reduce one’s tax liability will be treated as an illegitimate tax shelter.

In United States v. Bonventre, 14-4714-cr (April. 20, 2016) (JMW, RR, CFD), the Court affirmed by summary order the convictions of five former employees of Bernard L. Madoff Investment Securities (the “Appellants”) convicted in the Southern District of New York (Swain, J.)  for multiple counts of conspiratorial and substantive securities fraud, bank fraud, and records falsification; making false SEC and IRS filings; obstructing enforcement of tax laws; and tax evasion.