good morning artemy think the court i'm elizabeth human representing the appellant here marshall's not i as i like to focus on the last issue today could you help me with something on the last issue that was actually my focus evidence that it had no value you know he would subtract zero and i looked at a kind of mysterious chart of values that showed that it had value but i couldn't tell whether the suckers could sell the stock or whether this was just a couple of trades between insiders to trade around the incidence of the lawsuit or and basically buy a lawsuit risqu i couldn't tell what it meant  and the people that just bought the stock without being insiders get any money by selling it to anyone or does the f c c suspension prevent them from the selling stuff i'm really happy to hear the court's question because i do think that questions like that are exactly at the center of this appeal your honor the court's question really points to the larger issue in the case i think when preparing this argument and rereading our briefs i think that both sides perhaps focused on some details in the case but the larger issue in the case is given that the chart this mysterious chart which begins at a point and ends at a point and we don't know what happened afterwards shows that stocks were trading for money well i chose the day after the critical time in february two thousand and two there were three days for money but very little volume and i can't tell whether the suckers could created for money right and the district court i don't think could tell either and that's the larger point your honor that this is a very undeveloped record well ordinarily i would infer from and as he suspension of trading that they could not so it has no value to  them sometimes it's possible for somebody to have a stock that he cannot trade it has no value to him but it may have value to somebody else that not just stock all kinds and i love pet rock for example which might have no value you know true to any person except the person who buys it in once it first but it's time marketing a tiny way unlocked parcel of a few square yards no value to anyone except the adjacent gas station exactly so could these people sell the stock for anything you know your honor i would like to know the answer to that question i don't know the and they never allow them to particularly if you're trying to show that the judge made a mistake in a clear and convincing finding  then we have to find that he was clearly erroneous don't you have a burden to show us some evidence that he was well i don't think with respect your honor i don't think that as that as a matter of answering the court's specific question could the investors who bought on the open market sell on the open market after february first i think that that question is a little bit separate from what's our burden to show anything on appeal because i think the question on appeal is huge here you have the district court who made a very clear finding in very uncompromising language these stocks are worthless that was a word the court used and so the question on misunderstood it because i don't know enough about securities law but i understood that to mean that one of the suckers who bought the stock i was now left with a worthless piece of paper because it was against the law to sell of permanent suspension or temporary at the time it looked like well it was at the time of trial was the day that presented it was a permanent injunction the permanent injunction was issue so the stock has this stock has you know there's no trading but your honor i think the question is what do you think what did the evidence that the government presented to the district court show about the value of the stock was i trying to understand what the record shows about suspension of if if there were permanent suspension i mean i don't understand since there were trades or somebody was trading  suspension my understanding of the record it was a temporary suspension pending whatever further proceedings right happens so while it may be interrupting the current ability to trade right it's not clear that that would the stock would regain some value as i think we pointed out at one point in our briefs there is evidence and that in the record that it does suggest that at least megawatt was doing what it said it was doing that is to say manufacturing solar generators in the in the papers below is a gray market excuse me i'm sorry that's a very broad term of communal kinds of things can't you can buy gray market film that's fine it's perfectly legal to praise it just means that i don't know i know only what's in the record your honor because i'm not an expert either and you're going to show me that the district judge clearly error to be a real help to show me what it means well i appreciate that your honor but i think that that the question  the government submitted in discovery according to something that the party said in open court below so this is part of the government's evidence that it submitted as part of its case against mr salt show that trading all through the pendency of the litigation in the district court you know your honor i really apologize because i don't know the answer to that question but i think again the question before the district court  have value did it have value but at any rate you're mistaking something i believe counsel all of us are are trying to understand where the value comes from me but it uber client  if nothing was said in the lower court and all the district court had to look at was what the government put in then the clear and convincing evidence standards a little easier to meet on the other hand if there is in evidence that we can take notice of or there are something on the record has not been pointed out then maybe we can do something different because we realize it has a significant impact on the length of the sentence if your client receives very much but we can't just conjure this stuff out of thin air  chairs if you is me being traded is in itself evidence of value that the court failed to take into account is that your concept that's on one side and on the other side the government was saying well the chart doesn't mean what you might think it means by pointing to other things of counsel opposing counsel give me her c you start with just since you've now assumed responsibilities to the notion that the government doesn't fact bear the burden of showing that this stock is worthless your honor certainly in the  below the government for the burden of proving don't last beyond well what the government is we're still reserving the right to say that it's just preponderance but under the law as it is now clear and convincing  what is very difficult in this case i believe and i think judge smith's religion on this and that is what record was before the judge personally i think the record now demonstrates that the well i i'm glad you're not one of my jurors anyway this saying as the way the record came out the way it is is that the defense raised all kinds of different challenges to the last calculation and and on appeal only challenges that one little thing which is whether the stock was worthless or not after the fraud was discovered so the low what the defendant did was say it's not worthless and the reason it's not worth place is because of this chart that shows that there was all this this is value up trade right well it's not what it means ok i don't know what this is right if i can explain it in just a second what happened below was that the government responded chart shows all this volume here i mean all this value but the volume is extremely low when you're talking about look at the bumps there look at that bump around april fifteenth the least if i'm reading it right which i don't know that's why i'm asking right it means around forty thousand shares and then you go up from there to see the price and it looks like around seven and a half that's that's correct your honor but we're talking about three point six three point hold on on the gamble that they'll get out of the woods and it will go back up into the forty fifty sixty seventy where he's at that can explain low volume on a legitimate stock so you're not showing me that it's worthless by showing me that if trades at a low price in a low volume if trading is prohibited that's different all right well below what we did was we there were there were not declarations but there were memorandums of interview from the defendant who explained that well defendant raised the issue that the stock was worthless after the fraud was discovered the government and cited only this chart the government responded by citing to the defendant's own statement that the fine was extremely low and the only people who were able to trade at that time were these into your understanding of the record indicated that it was only the insiders who were trading which would explain the low volume but some value suggested in this like either this is s t r one twenty and twenty five yes exactly and and b love the defendant did not contest that he never raised the issue again when i think i'm understanding something here in a pump and dump scheme it would be really smart for the insiders to self short when they know they're going to make the top and then buy back after the stock crashes to start with shorts are you saying that the purchases after february are short sellers covering their released the critics i'm sorry i didn't bring that right away just yes and you can see it here on the chart because there's this very high volume of trading and suddenly there's nothing and then it starts up again but stock right and it hung around two or three for a while and then it got up for a short time maybe eight dollars say fifty a share and then it settled around  see that i think is exaggerated and it was explained below in the record that the reason it was so high is that people needed to cover their shorts and the only people who were available to sell the stock were these insiders namely lynn stratford that was a state of the record the defendant did not contest that when stratford was an insider he did not contest so i would think you would need something more here if it's legal to trade the stock and if it's being traded on the nasdaq and trades are going forward people are covering their shorts then there's nothing stops people that bought the stock for fifty calling up their brokers and saying so to market and if of a few thousand shares quickly to depress the market to back down to two dollars a share or less at that's still not worthless it just means worth not very much worth very little compared to what i paid for right well let me explain that in a couple of a couple of ways the first oh he's a he's a someone out there are trading there's nothing illegal about what he's doing well i'm i would say that your honor because if you're talking about somebody who was able to see these press releases before the public saw the press releases get my my my point here counselor simply due to this issue of what is worthless the reality is you're saying that len stratford and perhaps others was trading admittedly low volume low price but not worthless perhaps even listed on the pink slips pink sheets rather right well then let me say that that first of all defendant below never gave provided any evidence of what value it might have to victims suckers as if as opposed to insiders and the he did not present any evidence what i what i would have expected frankly is a declaration by a specialist saying there is no market whatsoever in any price for the stock except to a few insiders covering their shorts and they've already done that well what we submitted your honor was the statement of the defendant and then he did not contest at the low so once we answered with you actually this chart shows that there was very little volume and defendant himself says the only trading there was as a result of insiders able to cover short error that there was a huge amount of wiggle room here because the guideline the guideline cutoffs are seven million up to twenty million and the court found the last to be eighteen million some odd so we're talking about like eleven million dollars leeway that the court had for any small tell you that the stock may have had before the next twenty million dollars range was it was if it was six dollars per share after no there wouldn't be any loss because the average last year the average stock price during the fraud when it was pumped up was five five zero three that was the defendant's figure that the government adopted so so that supports also that these numbers are very inflated by insiders who are holding back shares and just selling to people who had to cover shorts and therefore had to pay this one of the major i understand something you mentioned counseled did i understand you correctly that there is an eleven million dollar delta if you will which if not exceeded would not affect the sentence of the defendant is that correct yes the guideline cut off is seven million it's seven million to twenty million and the court found that it was eighteen million  so it's really a huge disparity it's a little frustrating your honor because as i said the defendant did not contest what we said below and it's only here that he's now challenging for example was when stratford an insider you know could could see people not sell well we present it was basically a proffer and out of the defendant's own mouth below and you never contested it there and certainly we would have presented more evidence had to do it had the defendant not apparently accepted what we said you have to run across to start with the defendant said yes i mean i know you're looking for it while we're not very good at math teacher this is the defendant's response where he indicated that it was only the insiders who are trading these out you're looking for i'm trying to find where marshals will touch that you know as a matter of fact i think it's record but it's in my response thank you she gives me a call which gives me fight what are friends for exactly right it would be towards the bottom of that page and in our papers here he's talking about the short sellers and how how strafford was selling to the short sellers but in the papers i also explained that that that explains the very small amount of volume of trading that was going on that i still want to get back to this eleven million dollar thing because i had i had previously thought that this would make a significant difference is it because the court  itself made a downward departure a substantial downward departure is that the reason for the why this is such a insignificant thing unless you have eleven million dollars worth of losses no no it isn't your honor because we're talking about just the guideline calculation right for he made every guys are drunk right and under but to be one point one there's cut off point for the law so if you have over one point five million it's right ones and it's periodic five right and it goes from seven million to twenty million that's one whole step so in other words he would have to show that there's basically eleven million dollars that's only if you start eighteen million the paragraph that you've shown us is about lampard lampard did not have any other way of getting rid of the stock so he's happy to sell it at a dollar but lamp let me let me see if this was well what that supports your honor is that the that there was this short squeeze afterwards it's what i proffer basically in my papers at g e r one thirty and it starts at the bottom paragraph that's just an argument that's not any evidence well i think the the evidence was what defendant said about the about the trading of what the trading was and then he did not contest what i consider this to be basically a proffer saying there there was really no trading except what the insiders were doing and the defendant never contested it which would have given us the ability to then make more arguments for example this is basic supply and demand kind of economics there's really no demand for it except as we said to short sellers so there's no demand there's really no value to the stock would you agree the counsel of the judge characterized the stock as being worthless would you agree that the evidence that it was put on was very modest admittedly the defense didn't come back with anything but it was really modest it's really hard to tell what it means was rather  was under any circumstance a weak showing as to what value there was and who was trading i know that's what you're saying that's what the defendant said but the reality is that somebody was out there maybe a small small small amount of value maybe you know because what the gart what the government was saying was that it was virtually worthless even if there was time some way that these insiders who didn't even have their stock certificate i'm sorry these these victims who didn't even have their stock certificates if there's some way that they could have sold it there's a whole little demand for it here and what we said was demand was a few people out there who needed to cover their shorts that there would be so little value to the stock that it wouldn't cover that hole and i leaven million that part i suppose we probably  briefly with one thing that opposing counsel said and that is that below we never reasserted that the shares did actually have value or would go back on a profit or anything like that of course we didn't go back on anything that we had proffered but i talking in his stead the court has already commented look counsel you've submitted a very long sentence in paper outlining your theory of loss in talking about why the other theories the government's theory of the probation officers theory are you know should not be the theories that i adopt the government you know has answered i mean it's been a very full set of briefing just anyone have anything to say and so counsel is trying to accommodate the court read the court and be a little bit brief but what he does say is the best figure that i can come up with that is reasonable i defense below had suggested that the courts methodology she should be to take the stock price before the fraud the stock price over the course of the fraud and use the inflated value multiplied by the number of shares and so that was the defense methodology and when the government came back and said no do it this way the stock was absolutely worthless they defend the defense came back and is basically reasserting no your honor i really think you should do it in the way that suggested but he's not saying we agreed that the stock was worthless we agreed that the only people selling razors or anything like that and so i would take issue a little bit with with opposing counsel on that and i think that the court's questions today in the courts you know grappling with what happened in this case what happened over the course of the fraud who were these people who were trading just shows that there are some some real confusion in the record the evidence is very inconclusive and although the swing has to be big in order to get below a twenty level increase for a lost i mean there were certainly other theories and other ways to do it i mean  six even though that's the quote right because there are not a significant number of trades at six right even though it's forty thousand shares on a very small cap company i mean this was in general electric and i think that i mean when you look at what's what this case when you look at this case i mean the first thing that jumped out at me preparing was people were buying it and it's sort of a classic measure of value that people were paying money for it it's really unclear from this record