stand that everyone is here we have some motions which are on submission so we'll proceed to the first case united states versus  in the when his attorney in the grove a matter tom and zuko failed to comply with his obligations under frye to advise him regarding this joint plea agreement that was for the grove and the  dispositions together and particular he failed to advise him regarding the fact that that in not taking that disposition she would have consequences to his criminal history score for a couple reasons your honor first of all as numerous cases of this court have held and after all the records not complete here we don't know what counsel is thinking well to  things first of all i as i can get into later in the argument i think i think that there is a compelling basis to find that in fact the record does demonstrate that mizuki of failed to provide this and that there's hell do we choose between them i presume we can do either way yes so the case law is clear that either re man or twenty to fifty five are available and i have cited some cases but the my question is as a matter of reason why should we do one of the three reasons your honor first because trying to handle these things in two separate piecemeal twenty two fifty five things in two separate cases would be extraordinarily inefficient but the pleadings would be controlled by the federal rules of civil procedure well i think it would still need to go up he would need a remedy ordinarily the twenty to fifty five is referred to the particular judge who handled the criminal conviction but in this case there are two separate judges in two separate occasions and are you saying that if it went to the first judge that the judge  while i i i don't think well i don't know if this court said that that he could if this if this court were to read this and have jurisdiction over judge abrams case that's that's what that's what i don't think here a mechanism for us to send both cases back and and we can't direct them to transfer one case so that one judge has both which you know what should have been done in the first instance but what i think with this court can do is read simply remained for further fact finding and again the leo no in the rodriguez cases both suggest that this is a situation all we can do it yes and this is which should we do as there are there's a there's a rule thirty three motion pending in front of in front of judge castello which already presents mr galanter says issues in evidence in this case including we re man to have that motion decided yes and that's and that's that's what we are ineffective assistance yet if nothing else everything else would be barred by the appeal waiver we believe you are understand what you create when you when you when you draft your petition you i mean the federal rules contemplate joining disparate parties they join rather generous in terms of joining related claims in addition the southern district has rules about related well again for several reasons one there is the rule thirty three already pending second this court's cases suggest that remained rather than twenty two fifty five is the better option where  or for him to decide whatever he decides how do we get how does that somehow have an effect on judge abrams court it's not before that how does that have an effect on persons because  judge sac if this if this court retains jurisdiction over the matter then i think this court can simultaneously order the remedy that we've asked for would mean post cases over both appeal yes and simply you're asking us to retain jurisdiction over both appeals re man judge cast case to allow them to sign the rule thirty three yes then it would come back up and then we would look at both cases again at that point is that is that the you know what you're suggesting then yes and then either be able to order that joint remedy is that better than affirming without prejudice to filing a twenty two fifty five well both cases assuming that you could  single twenty two fifty five involving both cases with respect to both judges but again i think of a believe your honor that the that the leo no and the rodriguez cases speak to that matter the rodriguez case in both talk about the idea or no in particular when there is not a factually complex issue that can be one what is the bar to  i i suppose there are i think it just complicates the issue of what of the realm of the procedural bar would be how to try to plead this so that he could plead an argument that would be able to provide a remedy from the court when you find i mean we can read it for you know but again and a reason why you couldn't file a twenty two fifty five a covers both cases i mean you may not prefer to but is there a procedural bar to or that's our court acutely i don't i don't think that there is a procedural bar i think it would just be i don't think there would be a procedural bar to the to in the two different cases one of the problems right now is you've got two different district judges and it it's hard to to get what you want unless unless the two judges coordinate if you file a twenty two fifty five to covers both cases but it's one proceeding it seems to mean that you you've got a better chance of getting it in front of your heel and to take it with you in that case i pathetically with our order in hand or opinion or decision what what judge parker has you're just talking it's just talk because what we did what what judge chan did with you a minute ago is run through the the the the down the you know the back to the district here back to the district court one judgement to review another judgment to review on your preferred manner of proceeding and i can't speak for my colleagues but i'm far from convinced that what you are proposing makes a great deal of sense well you can respectfully judge parker sending it back to the district court where the rule thirty three proceed in the proceeding when it goes back down there may be complications or maybe additional fact finding maybe a hearing etc etc we know what you would prefer to have happen but unfortunately that and i understand that but but that's just not necessarily what is what will inevitably but respectfully your other you're right that it's impossible to entirely foresee what could happen but it's extraordinarily difficult to to imagine that the hideous issue the twenty to fifty five would involve any less of this to proceeding in that fashion going by twenty t appeal but not necessarily the counsel he views the exe exactly and especially in this case where again i would suggest it requires very little additional things requiring him and especially when the whole overarching aspect is that he has not had counsel representing him effectively i think that you know i mean and again irony isn't a legal argument so much but it would certainly be somewhat ironic to then send him back to have to do this without further counsel actually you are right you have some time for a bottle of your from your colleague the question for the jury at trial was whether gary hurst failed to disclose the issuance of shares to a foreign person emir shaheen and whether he did so with fraudulent intent to conceal that the true beneficial owner of those shares sheeny was he's a resident of kosovo and canada and during the relevant period he was in either kosovo or the czech republic so the evidence on that question was close it was hotly contested and vigorously defended at trial mr hurst was denied his right to have a jury fairly decide that question because the government was allowed to introduce extraneous prejudicial evidence of a separate unforeseeable fraud that overwhelmed the evidence of mr hurst's guilt or innocence i'd like to focus my argument this morning on that issue and explain how it worked to deny mr hurst a fair trial and a reasonable sentence now on the core question of whether mr hurst transferred the shares to with fraudulent intent as i said the evidence was highly equivocal and highly debatable and i want to point out two reasons first of all mr hurst actions in this case were actions he was obligated to take as president of the company and that the company was obligated to do under its contractual obligations in fact of mr hurst had not authorized the issuance of the shares in accordance with the w agreement separate scheme that you are referring to is the monetization of the sheen issue here it's the pump and dump scheme that single honest undertook with corrupt investment advisors and brokers why do you say that's a separate scheme and why isn't that part  of the overall scheme it's a separate scheme because it was totally unforeseeable and not within the scope of the conspiracy that the government alleged mr hurst agreed to join why would mr hurst have done the things he did if he didn't foresee that the shares were going to be pumped and dumped well there was no evidence to suggest that he knew there was going to be a pump and dump the government argues that the shares would have to be monetized in some way but that's not true for a couple of reasons and there are other ways to monetize it for the jury yes they didn't believe well they didn't they were not given an opportunity to to consider that question because there was overwhelming evidence of the separate pump and dump and that evidence was powerful because it included cooperator testimony it included emotional victim testimony from individuals whose parents lost their life savings because of jason g error and it's a rule for a three year we argued both of those in a motion in limine a we moved to strike the evidence of the separate fraud and we moved for a new trial on rule thirty three at the as of the government's evidence because of the introduction of that evidence how are they going to get that money so that the evidence showed that everyone in the company was contemplating that a registration statement was going to be filed and all of the shares would have become free trading that would have created a robust market for these shares and shares that were held in the hands of a nominee to jesus and colonists once the regulation s restriction was lifted could be sold so in the same way that anyone receives shares and and has own something of value and then can share them on the open market they could be so that way and that's in fact why distance of the theoretical possibility ipso facto issue which we vigorously disputed that mr hurst received and we vigorously disputed that it was a debt that he owed but that money came from a margin loan from the depositing of the shaking the shares in a us brokerage accounts was an issue was also argued to the jury that issue was issue argued to the jury but the and accepted that the jury was that was not called upon to decide whether motive to receive money was not an element so we don't know what the jury decided about that the evidence on the two point six million was that it came from a margin loan which is a perfectly legitimate thing to do with shares that are held by a foreign person and that jason go about the source of those funds he told mr hurst that two point six million was coming from a separate investment venture and there is no evidence in the record that mr hurst would have known any different so the evidence that that tied mr hurst to the pump and dump in any way was completely lacking i want to mention also the reason that the registration statement and the fact that all the shares would be registered was a more plausible way to monetize the shares is that explains why the board ratified the issuance of the shares to sheeny everyone on the board of directors acting as the company understood that the purpose of transferring the shares  a single honest for his investment banking work for the company with all of the relevant documents in hand the board ratified that issuance and they would not have done that if they believed that it was not a legitimate transfer that mr hurst concealed any material information and that that was in any way a problem i mean and our understand why you did not do that that you or arguing to us that you would have been in a much the evidence on the pump and dump was all based on happenstance things that happened totally out of the control of individuals in the conspiracy there was a separate s e c freeze of assef and separate investment venture and then a match scheme that took place after all of the relevant action related to mr hurst that made it clear that that evidence was not forseeable and that bringing that evidence into the conspiracy with which mr hurst was charged was wrong on the law of and may please the court my name is brian blaze i'm an assistant united states attorney in the southern district of new york i represent the united states on appeal and i also represented the government in the proceedings below i'd like to first address mr hurst argument and particularly the reasonably reasonable foreseeability argument with respect to the disposition of the sheeny shares a minute like to make three points which i'll highlight first and then discuss in turn first the indictment in this matter  alleged a single unified scheme to issue fraudulently the shares to a foreign nominee and to dispose of those shares for the benefit of the conspirators and that's relevant under this court's precedents to as a practical matter the scheme foreseeable to him that those shares would be monetized so to address those points in turn point one under this court has decided in the united states versus solomon ease that when a when economic benefit economic profit is the object of a conspiracy that that conspiracy exists until the profit is realized and so many also held that in part one looks to the indictment to determine the nature and object of the conspiracy at question as in sol many's the indictment in this matter specifically paragraph thirteen of the indictment alleged that the object of the conspiracy in question was to both issue shares to a foreign nominee and dispose of those shares for the benefit of the conspirators so under the teaching of solomon e s this was a single conspiracy and it was rela and the the evidence of both the issuance of the shares of sheeny and the subsequent disposition was relevant the effort here to parse into two separate conspiracies a share issuance conspiracy and here disposition conspiracy is just simply contrary to the teaching of salmen ease and i think the facts of solomon as are actually relevant to this case and many points there on par with this case now to be clear solomon is not a reasonable foreseeability case it's a statute of limitations case but the nature of that case was the defense in that case were alleged to have fraudulent we obtained securities in that case warrants that had been stripped from shares that were later temptin down pump and dumped and the defendants in that case argued that the conspiracy was over at the time that they received the security is very similar to the argument that's being advanced here and has concluded with this court in so many has concluded was no in fact the conspiracy extended to the point where those shares were in fact disposed and that's exactly a can to the situation here now i think that the upshot of salmon is from a reasonable foreseeability perspective although it's as i said not a reasonable for civility case is that in a conspiracy where the object is to economically profit which was in fact alleged here it is reasonably foreseeable that a member of the conspiracy would in fact take steps to realize that profit which is in fact what happened here so that that's point number one point over to is as a practical conspiracy would not award a couple of responses your honor regulation ass which is the f c c exempted provision that you're referring to exempts from registration so no requirement to file a registration statement shares that will be sold to non us persons and disposed of outside of the us market now that resale restriction in there was testimony at trials on transcripted one eighty one that  exempted period apply it ranges depending on the nature of the security from forty days to a year so it's not a permanent ban on sales into the united states it is a temporary ban so it is not the case that this scheme could not have six the very essence of the scheme was not to sell those shares offshore that the essence of the scheme was to sell them here in the united states which is in fact what happened does that does that answer your honest question i'm the essence of the scheme the purpose of issuing these schemes via issuing the shares via regulation s is that they are issued without restriction so there is no restriction other than this resale restriction under under regulation  after a period of time unlike the other shares that were being issued by drove which because they were not being issued pursuant to a registration statement were restricted and could not be resold in the united states at all which is in fact the shares that the insiders honest mr hurst held shares and drove what they were fully restricted and couldn't be sold so that dating here as well well i was going to get to that your honor there is contrary to what mr beale argued about the evidence of mr hurst fraudulent intent being equivocal or sort of close to a line that's not true our brief on pages sixty two and sixty three actually outlines in a fair amount of detail the evidence presented at trial about mr hurst fraudulent intent in connection with this scheme which includes things like documents being back to you there was significant substantial evidence at trial that mr shaheen either a foreign nominee was in fact not recruited into the scheme until days before the shares were issued to him and then in fact there were documents a consulting agreement any warren agreement that were dated months before mr sheen is recruitment in the scheme now those documents purported to compensate mr sheen either for a nominee for purportedly making an introduction substance of the company that mr sheehy supposedly introduced in that e mail went after mr xi he had already received his shares there was also evidence at trial that mr hurst concealed from drove his chief financial officer the fact that the shares had been issued in fact the testimony at trial was that the chief financial officer michael did not in fact learn about the issuance of these shares until september of two thousand and ten which is more than four months after the sheriff's humans had in fact happened and at a point were three months after mr lobster the c f o had had a conversation with mr hurst about the consulting agreement so they had spoken about the consulting agreement that mr hurst never told the c f o that in fact that consulting agreement had been satisfied by the issuance of seventy million dollars worth of shares so among and to top it all off there was i think a very powerful question as to whether was the more i don't think there actually is a question a question about that there were five point three approximately million shares issued to mr sheeny on the day that those shares were issued the shares are trading at approximately thirteen dollars and fifty cents just doing the straight math yields a number of approximately seventy two million now there was some argument in the briefs that because of the resale restrictions the actual value of those shares was in fact less than seventy two million dollars there's no evidence at trial introduced that in fact the value was anything other than the seventy two million dollars and in fact the shares were sold at their market value in one thousand million dollars of their share monetized at their open market value so i think it is fair and i don't think it was in any respect prosecutorial misconduct to argue that the shares were worth seventy two million dollars so so that's the evidence of mr hurst's fraudulent intent it's not i think in any way equivocal and i think it was presented to the jury and the jury made their conclusion as to estimates to her fraudulent ten but to get back to the two points the set the second point  about the reasonable foreseeability is in fact the scheme makes no sense without a plan to dispose of the shares the fraudulent means and methods that i just described for the issuance of these shares make no sense to you in order for conspirators including as mr bill mentioned in which i'll get to in a moment for the benefit of the for the benefit of mr hurst so this scheme only makes sense as one in which the shares would be disposed and in fact given and this is a point we make in our brief that the the shares represented such a subsidiary issue to mr shaheen were such a substantial part of his public float i e that tradable shares that could in fact be sold without restriction there were approximately half it was reasonably foreseeable that the only way those shares could be disposed in the face of a relatively illiquid market was through fraudulent means of mechanisms now of course it's not required under this court's precedent cases like middle and it's progeny that the that the conspirator know of the specific means and methods by which the conspiracy will be carried out i e does not require that mr hurst know that a specific pump and dump scheme would be used and so you know in light of the fact that this scheme really only makes sense as as a disposition scheme i think that's the second reason why abuse his discretion in allowing that evidence and the those shares would in fact be disposed as part of the stick so he received two point six million dollars that was the proceeds of a margin loan from the shares that was used to pay down a debt that mr hurst contentions here and in mr hearst's brief that he did not and that finding is not in any way clearly erroneous the evidence at trial established that mr hurst did in fact profit the proceeds went from a sheeny brokerage account to t credit union accounts for which mr hurst was the sole signatory and then directed by mr hurst via wire transfer to a swiss bank account that was associated with the investor in his hedge fund so clearly a clear monetary trail that shows that the two point six million dollars was used to retire a debt that mr hurst owned which is certainly a mechanism for him retiring liability as a mechanism for him to profit so unless they're there for the questions from the necessary but we believe it can be accomplished through an affirmative the judgment and a twenty to fifty five proceeding at which the ineffective assistance of counsel claim is addressed now to address some of the concerns raised earlier about the appropriate procedural mechanism there certainly flexibility under both the civil rules with respect to jointer of claims and with respect to the southern districts related case procedures in civil cases for these matters to end up in front of a single judge this court has and this is this is not a case that we cited in our brief but but the i think some of the remedy arguments really were only aired for the first time in the reply brief but in united states vs which is three sixty five f third one fifty this court has said that the concern concerns of judicial economy counsel for in circumstances like this proceeding in a hay vs proceeding so that all of the collateral claims can be raised at the same time there are some prejudice in the sense that mr killen is would have to use up this one twenty two fifty five and he may not have a right to counsel that is correct your honor and we  man for the purpose of doing further fact finding in that case i think one this court would retain jurisdiction to to deal with with both matters but even if not as a practical matter  if if judge castello were to find that there were ineffective assistance with respect to the joint offer the government would certainly consent to mr golan a says withdrawal of his plea in the bond matter we would not stand on formalities if if there is a finding of ineffectiveness we would carry out the the the joint plea offer you're correct or but but again given this court's statement indo that there is a preference for not doing the back and forth of man's income and coming back to this court we think there is no hurdle to properly and appropriately addressing these matters in a twenty to fifty five proceeding or proceedings as as necessary unless there are further questions for why i did have one question yes when the second case was filed in front of judge abrams the government objected to count c j counsel being appointed because in that first month when i was just curious why was there an objection i mean so at that he in essence he was without counsel for about a month in the second case when there was a plea offer pending the objection was that mr g ss refused to fill out a c j affidavit and we had reason to believe that he did not qualify for c j counsel given assets substantial assets that he that he owned and maintained i think that was that was the reason we eventually get this he did a debt eventually fell out a c j affidavit and did get c j counsel ms scolari and mr may do as co counsel so we did eventually fill out the affidavit but i think our original objection was that it was necessary for him to disclose his assets rebuttals thank you can your honour's i just want to make one additional point today regarding the remainder says twenty two fifty five and i think if you look at the fry case itself which is where this all starts i think it provides a strong argument for why remand would be preferable because in the fry case one of the concerns for the supreme court was well how do we know that you know some frivolous claim that something you know was made won't come down the line afterward and what the what the supreme court explains as well the best way to deal with this to avoid this future problem is for all the parties which includes the government at any subsequent plea hearing to make known at that time to the court the existence of any of these plea offers now it's undisputed that at the plea hearing on july twenty first no one not mazibuko not the government not anyone mentions this joint hearing in the context of colloquy where the entire purpose is to determine to ascertain whether or not my client has gotten his his right to counsel now to essentially reward the government with says here to prejudice my client even if it's not the world's greatest prejudice but still to have to file complicated civil complaint without the benefit of counsel to exhaust this twenty to fifty five even the two years of additional litigation that could have been avoided had this simply been raised at the july twenty first two thousand and sixteen hearing that would prove give a perverse incentive i suggest to the government in future cases not to raise these issues at the appropriate time if they knew they would essentially be rewarded within a firm and down the line by it so unless you have any additional questions for me i would and  argument thank you your honors we've heard a lot of argument today about the issues involving mr hurst and that's precisely what we wanted a trial on the legal issue for this court to decide is about the proper scope of conspiracy law and the government's theory of the conspiracy here essentially has no limit to address mr blazes point the fact that this conspiracy was charged in the indictment and that some means of monetizing the shares was charged in the indictment that does not allow the government to put on evidence of any way anyhow that the shares can be monetized and still is the charge crime and the jury convicted but they still must prove foreseeability and the way that the evidence came in through the testimony of  that the pump and dump scheme was based on pure happenstance that was not conceived at the time mr hurst was alleged to have joined the conspiracy and that is why men's of the pump and that was i understand but the government must put forward proof of its theory a trial and they did not prove that the pump and dump scheme was a reasonably foreseeable outcome of the conspiracy they allege mr hurst to join w ould he have engaged in the backdating of documents to project an issue of the shares if he did not anticipate that they would be monetized and there would be some pumping and dumping going on crediting the government's theory of all those issues he could have done it simply to get the shares into the hands of a nominee of jason go honest that's precisely what the evidence showed and the government could be free to argue that the jury could infer that he did it with fraudulent intent for that reason and that's why the board ratified the issuance of shares to she he made the more plausible explanation for that he did it with the expectation of some financial gain the financial gain that the government alleges he received again was from margin loans not from a pump and dump scheme there was no evidence to judge sachs point there was no evidence presented then mr hurst knew or foresaw that or could reasonably  foreseen that the regulation as shares would be sold in the us market through a pump and dump scheme and that's a problem here i want to briefly address even if the court finds that it was reasonably foreseeable there's still the problem on sentencing did not make a particular rise finding under sentencing guideline one be one point three and that this court studly decision that it was part of the jointly undertaken criminal activity and that matters because judge used the proceeds from the pump and dump as the loss amount to drive the sentencing guidelines way up if he had considered what was part of mr hurst jointly undertaken criminal activity he would have considered only the l based on the issuance of the shares to shaheen and the loss to the company related which would have been two million dollars or we we submitted with our sentencing submission a black shuls analysis that showed that the shares were actually worth one point one nine million because we could not be sure sold on the us market for those reasons the judgment of conviction and sentence should be vacated thank you we will reserve decision