well good morning all of our first case for argument here this morning is the united states versus for a rookie mr gable had a client marcus field who was disgruntled about the results of that investment mr fyshe field with a portfolio manager of over four hundred million dollars he had worked for the federal reserve bank of new york and worked in the financial industry for over twenty five years he was a highly sophisticated investor knew that this was a risky investment and this case only got to court because he lost money at trial the government failed to prove that mr faruqi committed while for a start  is opposed to simply a disagreement between you govern in a nutshell the government's case was that mr fruity falsely said that he had five million dollars in other people's money invested the government never proved at all that they were able to prove is that mr prove he did not have five million dollars and i believe three accounts and from those three accounts they extrapolated that to say to mr proved he didn't have five million dollars in any other accounts so that was not a disagreement about credibility or the evidence it was the government's utter failure to show that mr ruby did not have five mean dollars and other people's money invested and walk me through how does that how does that a institution in evidence on charges that the government allege that mr faruqi lied about having five million dollars in other people's money but they presented no insufficient evidence that that was a false statement so all they presented was evidence about three bank accounts they never looked at other bank accounts there was nothing about anything from fidelity or schwab or t d ameritrade there was no forensic accountant that testified what do you think the government had to do i think they could've they were able to get tax returns from the i r s they could have gotten brokerage statements from other accounts they could have had a forensic accountant look at the financials that they had they could have had the f agent testify why you only look at three accounts and he could have testified also about why he chose not to look at other accounts summit meeting him to lie about investing other wealthy person money was not the only lie and were many others he lied about investing his own money to tremendous success he lied about the train station accounts team lied about his college degree he lied about a whole lot of things that is not just a single lie the the other alleged lies about he did invest his own money believe it was one hundred fifty thousand the government claims that he lied and said it was two hundred thousand or two hundred fifty thousand but the evidence was that mr frooty didn't vest his own money and the government didn't have any other evidence that mr p didn't have money in other accounts as for the the lies about trade station and auditors and accountants those were al statements of future intent mr faruqi was very clear that this was a new fund and in the p p m the private place memorandum signed by the alleged victim it laid out that there was no money in this fund and this was a new fund going forward so there is no place to trade there is no reason to have a train station account until there is money in that account and i believe about the university was some vague testimony at trial that mr fruit he said either went to be you  c and there was evidence that he didn't go to boss university or boston college but there is no evidence that he didn't go to a different school in boston and there is no evidence that that really mattered to anyone he didn't disclose  prove duty to disclose or reliance in a criminal fraud case but i think they have to show that there's some sort of intent to defraud by not disclosing it i don't think that mr he was under any kind of obligation to tell anyone about that and secondly he did tell the alleged victim in this in the private placement memorandum which the ledge victim signed before he sent in his money so he was well aware that there was a dishpan as well as the other civil actions against mr for before he sent in any of his money and e mails and this was on a day where the market was going up and down in the recent large losses and the alleged victim here was constantly asking questions why is this happening why is this happening and i think that is more just an expression of exasperating about it doesn't matter what the money went down it was five million reopens five million simulated or one hundred fifty thousand of them and that was in essence that was the only evidence that the government is able to produce at trial through company the money was in transferred to a bank account of the hedge fund which then was transferred to the actual trading account and so mr for he was convicted on two additional counts of just those later transfers of money at that time any alleged scheme not everything that comes after is irrelevant however everything done to perpetuate the scheme to lull him into thinking that this is a real hedge fund when it was fictitious none of that counts but this i don't believe this was an effort to low anybody this was  judge ripple pointed out i believe this was this money was invested exactly as promised and mr if you would have just taken the money out of the bank account and spent it on anything you would have faced lesser criminal liability than if you invested the money exactly as you promised in a private placement memorandum  touched briefly on the the trade station tapes which were the false statements that mr frooty made to the brokerage account these lies on the train station tapes were almost the exact same th government allege against mr for they were unable to prove mr p actually made the false statements to titchfield so they were both introduced the trade station tapes it was highly prejudicial the street station tape said little if any relevance scheme and they were unduly prejudiced what do they what what it's like you think you're on the jury that the jury heard mr pease own words making almost the exact same false statements that he was charged with almost train station tapes he said he had five million dollars of other people's money that he had fifty million dollars of this and he was a success a traitor the jury never heard it so your argument is attempt to get lower commissions and i believe the trade strafing people said that whatever you say doesn't really matter it's the actual amount of money that you invest was unnecessary for any scheme mr the alleged scheme was that he he lied took the money and put it in a risky investment trade station had little of anything to do with that house so it didn't matter if his first his lies to train station were irrelevant he could have if he would said nothing to train station he'd be in the same situation and it wasn't necessary to the scheme that he actually have a train station again he could have had a trip at an account anywhere else well it may be true that he could have taken the money and run and not done anything afterwards but that doesn't mean that what happened afterwards was not part of the fraudulent scheme the government's theory is that this was a fictitious hedge fund he took it's he took the victim's money and as you know went to trade station to try to get an account and try to build this in this fictitious hedge fund on false pretenses so what happened after he had the money and hand is highly relevant to the overall fraudulent scheme here but the train station there was nothing fraudulent about that the the alleged fraud was that he lied about his investing history and all the money that he's making it was irrelevant really what he did with the money and with trade station he could have invested it with other brokerage account the trade station wasn't going to give him an account because of the ban and the regulatory ban right that was later on  that there was an allegation that he didn't disclose that to trade station but that wasn't what the trade station tapes or the trade station tapes were mr ruby saying i'm a successful investor and i have five million dollars in this other account which was in essence the same allegation the criminal allegation against mr for it so it sounds like part of the same fraud at the government's theory was the very back end of the scheme and even if it were part of that scheme it is still unduly prejudicial because the statements for almost the exact same as the government's allegations against mr for lies about his knowledge experience and book of business in an effort to obtain trade and retain more than a million dollars from victim investors or the government prove the fenske even involved lying to first  pain investors funds the evidence included that the defendant falsely representatives feel and shot and felt that he had five million dollar investor bonds already under management and that he actively traded those funds using his proprietary trading model when in fact he had only a simulated trading history defend a falsely representatives feel that he had obtained significant positive returns of as much as two hundred percent from trading actual investor funds since march two thousand and nine in accounts at trade station and j p morgan the defendant falsely represented the to fields that he had active accounts at two established brokerage institutions trade station and j p morgan chase which would be used to trade fishville spawn's when in fact he had no institutional accounts at these brokerage firms that could be used to trade went to school expressed concern that the fence trading strategy would incur substantial commissions because it involved the frequent purchase and sale securities defendant mis represented that street station gave him rebates for all the commissions and fees because he was a preferred cli that there are no question in this you are on this issue all of the move to the next issue the next issue is the if the mission of the trade station tapes on the district court did not abuses discretion admitting the train station tapes because the court correctly ruled the managing five million dollars for investors and accounts a new edge in an effort to open counts and get rebates on fees when trading just feels investments at trade station that shot and sell had signed a contract to invest fifty million dollars with the defense headphones that he wasn't under an order of prohibition stating that the order was quote not an issue i have nothing against the whatsoever the fed and then misrepresented that if trade station agreed to open a new account despite their misgivings about the order prohibition defendant wouldn't trade any of the funds in the account because he had relinquished his control over the companies and the hedge fund the tapes were also evidence of defendant scheme in which you can steal from to steal the fact that tra had rejected the application for an institution institutional account and the defendant's further concealment that he had ultimately use nominees to open the trade station t here was something and other acts argument raised in the defendant's opening brief in this case as an argument against the  but i don't recall you argued forfeiture waiver your honor i've had the record i believe reflects that there was a motion in limine eighty on the train station tapes wasn't raised at the time the tapes were admitted and yet the judge ruled on for three crowns that's correct your honor so far as i could tell that sometimes and i took from that the understanding that a for defendant's statements to trade station were part and parcel with the scheme and not some other unrelated act something separate from his right that that's what you're arguing now but i it wasn't clear to me the extent to which other acts argument was litigated in the district court but you're telling me there was a motion in limine on this there was a motion in limine a on the on the trades on the admission of the trade station tapes and that was your motion it was yes to admit it other acts grounds motion and lemonade to admit it and the government dress to argue that the evidence was not other acts evidence should be considered part of the scheme and in the alternative in the event that the judge the court caution in the event that the court considered this other acceptance exactly we we will the government wanted to address this just in the event that the court had any concerns and the judge said it wasn't then resolve the matter on for a three crowns that's exactly right ok thank you scheme as well to demonstrate that if it wasn't investing his own money to wild success is that right that's correct your honor the government offered the tax returns as evidence regarding  us suggesting that the defendant was not in fact running a legitimate hedge fund business the government's evidence regarding friends tax returns was limited to the f b i agents testimony and it was to show that the defendant had not made had not  made a legitimate tax the auction business tax deductions that you would and technically filed the german tax returns that you would have filed if you were the legitimate hedge fund manager he purported to be but it was a complete failure to file right issue is i think gone for purposes of this appeal for that reason but the government i assume henceforward will be very cautious about introducing actually tax return evidence and fraud cases a that the that the defendant said to someone a trade station that he did not manage other people's money there's no citation to that and the you know he never presented to the core either the site for the defendant if such a statement existed it would be hearsay in any event because it would then offer to show that he had not it was a it would be a self serving statement by the defendant to show that he in contrast to and what the defendant said attitude to trade station in regard to him having millions of dollars in assets under management it would have been something to the effect of i don't have any clients and i only witness using the transcript of all of the tapes and when cross examining the witness using that the defense the senate was allowed to ask the witness for  his interpretation of the conversations with the defendant what he was not allowed to do was to ask the friend and to us to read into the record the self explanatory purport statements by that offended yup the first misnomer i want to correct since he just finished with that is the straight station when i went to cross examine this witness i was not allowed to ask him about what was said on the tapes statements like you never been in the hedge fund business he told you he'd never taken other people's money in his life and then i asked for a sidebar and i was denied a sidebar and i was told that the only way i could get those statements then was to put m that's what the judge told me that the defendant was going to have to testify in order again and his statements that were part of the same conversation that the government had in her juiced when there was a question earlier about the hedge fund and that it was a fictitious fund business he went out and he either foley and lardner a legitimate law for me didn't go hire some guy who was operating on a storefront somewhere near a legitimate law firm he got legitimate documents he got all the disclaimer that merrill lynch would have gotten or anyone else who were starting at fund he gave these things to a man who managed four hundred million dollars on his up and the man looked at it and then want to question came up about the order prohibition in illinois he sent  the order prohibition in illinois and then the man sent the money he disclosed everything did he do it perfectly no i'm not trying to make a jury closing argument what i'm saying is that they took out of thousands of documents there was an s c c investigation there was a civil suit this man filed he lost two hundred thousand dollars he's worth tens of millions of dollars he came down like the wrath of god i mr frewen there were boxes and boxes and boxes of documents and they kept focusing on one statement one statement there were hundreds of recorded phone calls no false statement on the phone calls hundreds of other iambs no false statement on the items but one statement where he said buy million s five million real one hundred fifty in makes no difference everything's down that was the only statement and the only witnesses that they could bring in that there was any fraud were the investor and his brother but they didn't bring in all the other people who were involved venture nor did they charge those people mr perugia wasn't even a signatory on the checking account the money went into brokerage accounts checks were written money was transferred he wasn't on any of those accounts other people or those people weren't i did those people weren't brought in as witnesses nothing happened to those people this man lost his money and got mad and on time brought the wrath of god down on this guy who was operating and the guy knew he's operating from his basement in aurora that's where he was operating this you know hedge fund from and all of the material set there is no money we are not trading anything it all of this other stuff it can be smoke and that was a problem and when they introduced the tax returns and i thought i'm reasonably certain we're going to check the record that we did object to the tax returns maybe not at the moment in court but in a sidebar or at the beginning of the proceedings that they will check the transcript they brought in these tax returns that he didn't file a tax return so therefore he can't be successful lots of people don't don't file tax returns lots of people file false tax returns and i and i'm just thinking i don't know the  he filed things with this factors he's a legitimate business man i mean people do things or don't do things for all sorts of reasons you didn't raise a tax return issue on appeal i'm sorry the tax return issue is not raised on a it government filed their supplemental materials yesterday about the tax returns right but it's you're very right in all the fact what issues you want to appeal you can't aren't but it would it would but it was raised that it didn't show there's a lot of smoke here to proves nothing and that's part of the problem is what is the real evidence that was the first question that was asked by your honor what what is the real evidence of fraud in this case and the only evidence that they really have of anything between the person who claimed they were defrauded in mr fruity is a single instant message and then him claiming that there were conversations there were recorded but he doesn't have we're e mails that he doesn't have or or so on and so forth so i it i come back to what you know what what where was it what is the evidence here and i know that's an almost insurmountable burden but we had someone who did everything he said everything he said he was going to do in fact panned out the train station tapes we didn't get to get into the statements he made to trade station they cherry pick statements and we weren't allowed to get into the other stations when in fact that didn't make any difference anyway the train station if you like to treat station or not it was to get lower commissions there was a good lord which that wasn't to get somebody to invest that had nothing to do with the mcclaughry was going to audit the fun there was no fun so my gladder he had met with them so they did not it there was no fund audit at that point it was all this other stuff there was out there and he's got all this going on so we must have done something wrong