will began with united states first call was made please the court my name is victoria calvert and i represent mr gillespie mr coveleski should not have been convicted of wire fraud because there was insufficient evidence that he had the intent to defraud s t k the investors coveleski trial the government presented the testimony of several institutional investors who had invested into the absolute return funds all but one of those investors were long term investors who had invested who had coveleski for years before he had started as j k investment management these investors followed him because they were pleased with the returns they were getting mr koppel esky provided each investor with the private placement memorandum or p p m for the absolute return fund they were investing in the p p m defines the agreement between k and the investors including a case obligations to the investors that p p m stated that substantially all of its assets would be invested in investment funds sponsored by an affiliated investment managers in calculating the net asset value of the fund the p p s p p m stated that it would rely on that valuation information including estimates provided by third parties but that the fund had the right to deviate from such valuation information when deemed appropriate wasn't the monthly statements among others yes them the monthly statements did have valuations for which there was no third party appraisal however they did state that they were estimates the p p m stated that estimates would be provided and mr cover left he had planned to have the special opportunities fund thought it as well as the absolute returns fund audited in two thousand and eleven but i mean some of the valuations are estimates if you want to give the word world wildly off the mark were they not so that a reasonable jury might be able to infer intent to defraud in other words if you have a property or an asset that a third party might independently value at three million and you're a little more optimistic and you valued at three and a half or four you know ok but if you've got something and i'm not saying these are the numbers in mr cole us case but if you've got an asset that's a million and you're valuing it at nine then you know alarm bells start to go off board the numbers closer to the latter than the former hypothetical yes your honor but even with that concession i think the court's ruling in tackle off states that false information does not necessarily equate to an intent to deceive into intent to defraud right i agree with that i mean it's not enough but it is part of the whole nucleus of f a jury is allowed to take into account right right bad but i also think in this situation we were dealing with very sophisticated investors who were given a document that stated in numerous places this is risky investment  not rely on this as your entire investment strategy only invest if you are prepared to lose all of your money and so it is different from a situation where someone was guaranteed specific returns there was nothing here no guarantees not i agree with that too but there were other there were other indicia fraud or lease it looks like there was for example he sold one of his houses for a million dollars more than he bought it at a time when the real estate market was more down than up right now it's not something that one would expect to see from someone who's handling other people's money when you're self dealing well i think mr coveleski was optimistic in terms of believing the properties were distressed that in the long run they were going to bounce back as the market has bounced back since and they would make money for the investors however i he has acknowledged that it was wrong and that is why he repurchase the homes from special opportunities button to make it right because  personal homes is not something he should have done and this cover besides being way off the mark didn't have the appraiser brian coble testify that he told your client that the market tanked and rather than three point three million dollars valuation he was placing on the home that was worth about one million dollars yes that was mr cupples testimony is that pretty good indication that he's told by the appraiser who is someone who knows about real estate that is grossly plan was to have these on the properties the special opportunities on the absolute return funds audited in two thousand and eleven once the fiscal year ended and then the investors would have been told  client told mr munford i think it was that his funds would not be reinvesting in affiliated funds only an affiliated fund and yet representation to mr montfort i believe it was before the special opportunities fund was created but he says i'm not going to invest in affiliated funds and then sometime thereafter invest in affiliated funds isn't that a misrepresentation a serious one not if he didn't contemplate investing in affiliated funds at the time he made the statement so to question his intent yes and juries entitle to hear all everything that he dead invest a portion of investor money into an affiliated fund to estimate the valuations to there he disclosed that there that conflicts of interest existed so all of these things the investors were on notice and that's your basic defense in this case that the doctors themselves give him some discretion and he's discloser and things but all to do that would have found that if he's entirely due any feels comfortable in his discretion that he would disclose all these things which were some what someone would say questionable i don't see the p p m is giving him discretion  at i see the p p m as being the agreement the investors knew were told what the parameters were so it's not like a disclaimer i mean this is the agreement that the investors reviewed in determining whether they think there was no obligation for him to disclose any of this to the investors at that time none of the investors were able to name the underlying funds and i know words focusing on the special opportunities fund but there were at least fifteen other underlying funds that their money went into and for which at trial they could not name where their money was going into and so the his belief was that i'm treating it as i am all the other underlying funds but when he was questioned by the f c c by the auditors he did disclose the existence of the special opportunities fun please the court my name is steve maclean i represent the united states in this matter i'm here with russell phillips and he and i tried the case together in the district court in terms of the sufficiency of the evidence your honour's this court has made clear that  defraud can be based and proven and a jury can find such a scheme if there are material misrepresentations affirmative or if there are material concealments either one and in this case there was abundant evidence before the jury set such that it could have found both misrepresentations affirmative and concealments the most significant one that was proved a trial where the monthly statements the receiver came in and explained that the monthly statements that were going out in two thousand ten to the investors were representing that their investments were worth over twenty four million dollars in total the receiver came in and found there was really nothing behind those numbers of real substance there's about a million in a bank account there was a beach home that was worth about three million dollars and he found that the real value of their investments was four point six million dollars and counts two through two thousand and two the indictment or these monthly statements and so every month throughout two thousand and ten there was a continuing misrepresentation affirmative being made to the investors to the tune of twenty million dollars or that their investments were worth twenty million dollars more than they really work and in fact they lost money there was over a nine million dollars restitution judgment in this case that when the receiver came and killed everything back and we had the senate saying it turns out they were owed nine million dollars even though they had been invested with mr coveleski for a long period of time another important for him at misrepresentation was that he had four hundred million dollars under management  the investors described that was important to them they wanted to be invested in a big fund said they had a small piece of it in reality as the evidence showed he only had seventy million dollars in investment and so st joseph can look for instance who had thirty million dollars with the defendant they owned almost half of this fund they thought they had a small piece of it and the risk was diversified and in fact they had a large piece of that he also represented that he invested in equities not including real estate the evidence showed that he did invest in real estate including his own homes in a beach home so his self dealings of not only was a real estate it was self dealing all state he represented that he invested in an affiliated funds he told mr montfort that that he was going to do what he always did at columbia and the evidence showed that he diverted sixteen million dollars of the seventy into an affiliated fund which he then used as a slush fund to buy his own personal homes and to engage in self dealing or where is there evidence concerning where the remainder of the money went was part of the money actually invested for example in equities or start up companies or other opportunities in the market one way or another do you mean of the sixteen million or do you mean of the no no the seventy the remainder was invested in other hedge funds as he had represented so he market himself as a fund of funds manager that would take the money and invest in other hedge funds black diamond and some others for mention at trial and the evidence is that he did do that with the with the other money other than the sixteen million the sixteen million went down to his affiliated fund the special opportunities fund which was not an affiliated find it was run by him it didn't invest in things like the other hedge funds and equity strategies and then he pulled the money off to buy his own homes his parents home his brother in law's home and the beach all so it was a little bit more than a quarter of the of the money and in all of the funds that's that's correct i think was over twenty percent is what we calculated one of the provisions of the p p m's said that he would only invest fifteen percent in any one fund and so that was in fact violated but of course the bigger representation this representation is that it went toward self dealing and toward real estate instead of toward equity and affiliated funds as he represented there was also misrepresentations about how he be compensated he was saved over four million alone in october two thousand and ten which is far more than the one percent and ten percent structure he represented to investors he misrepresent the valuations he said they'd be done according to according to gap by independent brokers and of course he is the average show just inflated for instance one bank account he had two hundred  fifty thousand in and he inflated it up to a ten million dollars valuation on the idea that he hoped to one day use that money to buy a landfill which was going to kind of hit the lottery and so the valuations were not by gap and they were by independent brokers  concealments also support the conviction he did and he concealed the existence of the special opportunities fine he concealed the existence of the self dealing he concealed the exit the fact that he had moved the sixteen million dollars down to this fund that he then used for his personal self dealing and all the investors testified that they would not have invested with the defendant if they had known of those concealments so each and every one of those concealments was material the special opportunities fun in another self was a major concealment because no one knew about it and that was to be equally used for the self dealing i just addressed to remain points we cite the cases on page thirty three of our brief that the fact that there were these contractual documents do not excuse the criminal behavior of the seventh circuit the tenth circuit the fifth circuit recently in june two thousand and seventeen the second circuit have all held that disclaimer language cannot undo a criminal conviction if there are affirmative misrepresentations the fact that they may contradict writing other may be important civil case is not in a criminal case if there's an intent to defraud and here the jury found there was those cases this court's case and spat although this court we haven't found a case that directly addresses this issue of the importance of written contractual provisions in a criminal case like we were did recently by the second circuit this course this decision inspect we believe that it doesn't logically flow from that inspect this court held that the negligent of an investor is not a defense whether an investor recently relied is not a defense in a criminal case and as these other circuits have pointed out that's really what the disclaimer language is relevant to is really an argument that the investors should not have relied on the oral representations is really an argument that the investors were negligent because they should have read the writing more carefully and not have depended on oral representations oral material concealments and in fact we were such sites this court's decision instead to bolster its holding that these sorts of written contracts will provisions a cannot excuse a criminal violation if there is intent to defraud which there was in this case well the those provisions can eliminate some of the possible bases for fraud prosecution for example if you give the investment manager unfettered discretion to invest in anything and that's and and there's proper disclosure of that investment you can't claim that the investment manager went crazy to the extent that he can be prosecuted for fraud if he invested in something that was wildly speculative right what you're saying is you can't concede you don't consent to misrepresentations being made to you whether oral or written even if you give the investment manager discretion that's correct and even your honor and that that's not this case of course but even in a case where there was that kind of language that you just hypothesized what these other circuits have said these cases that we sign a brief say is that if there were oral mint representations that notwithstanding that language what i'm going to do with your money is put in equity and not in real estate i'm going to use it for this particular purpose that a jury they acquit based on the language at this point your hypothetical but it would be permitted for them to convict because they could decide that those oral misrepresentations were part of a scheme to defraud and that the written disclaimer were actually part of the scheme that if what you intended to do is come into court and say well i have the fine print that undoes my oral misrepresentations a jury if they found there was an intent to defraud there was a scheme associated with using that disclaimer language that contradicted their almost representations a jury could convict on of those facts but i agree if that's all if there was nothing that was inconsistent with that but the writing then that would that would be a defense that if the oral representations were consistent that writing but i think these cases say when they're inconsistent you can't say the writing trumps the oral there is no pro level as a rule in a criminal case in a jury's entitled to consider everything the oral the written and then determine if there's a scheme the one thing i want to pick up just on judge hucks question about mr coble it's true that he testified about the appraisal being three point three million and that that was a misrepresentation and that and i wanted to highlight the fact that many witnesses testified that what the defendant said about him was not true whenever he tested by the f c c deposition and i believe that's important evidence of intent that the reason the defendant was lying to the c about what mr coble it said about an appraisal about what other appraisers said about what lawyers had told them about what other professionals had said and accountants is because it proves that at the time he was engaging in these transactions he in fact had an intent to defraud and that's why he was lying about them to the f c c later in two thousand and ten when he was question so again very powerful evidence of an intent to defraud that really there was no response to any evidence  trial of these witnesses testified unequivocally and there was really no counter evidence that they somehow had not said that as a final point you know i don't think tackle off the facts this case is this court made clear in tagalog if the mis representations go to the nature of the bargain or to the value of the bargain you're outside tagalog and here of course misrepresentations went to both of those things most importantly to the value of the bargain again the representation was they had twenty four million dollars they really had about four point six zero goes to the value of the bargain misrepresentations also to the nature of the bargain because they were being told equity strategies in reality was real estate they were being told on affiliated hedge funds in reality it was the affiliated self dealing hedge fund so it went to both the nature of the bargain and the value the part in which we said it would take the case outside of tackle so there's no for the questions we asked that i have a question frankly didn't occur to me got two point two level and has been based on a fraction of justice for the same act that's double dipping no you are there there is a guideline provision that says that if you are convicted of a subset of obstruction offense along with an underlying offense like wire fraud what that what the court has to do is to group all the fences together so i don't have to get just one group which is what judge story did and then you add two levels to the over over arching up its level which is you mr mclean just stated that mr coveleski misrepresentations went to the value of the bargain and the nature of the bargain and he referred to the value of their money and the fact that the funds and the special opportunities fund was an affiliated fund and i disagree with mr mclean's framing of the issue to me and mr cholesky the value of the bargain is what was in the p p m that stated that he could invest eight i left the possibility substantially meaning a portion could go to an affiliated fund that document did not make any guarantees about any money that would be made for the investors so i think  ice i think if to the extent the court is looking at that then it has to do with the obstruction a conspiracy in the obstruction count as opposed to the inten be no need to misrepresent these things to the i c c i think that's his point right but he also during that statement i mean disclose the special opportunities fund did disclose that some of the investors did not know about it so i think it's not as clear cut as mr mclean is stating i understand the witnesses testified differently at trial that they did not know that but mr coveleski admitted that some investors knew and minute that son did not know   i do think that the obstruction and i don't believe that he should have the guy and the two levels for the obstruction i don't believe they should have gotten the aggravated they roll man when it only went towards the obstruction count so the guidelines there should have been two separate groups one for the wire fraud one for the obstruction once you calculated the obstruction it would have been much lower more than eight levels lower than the fraud guideline and it should've wiped away that the of the obstruction and the aggravated role because judge jury found that the aggravated role was solely related to the obstruction i is that you need to have at least one other participant engaged in the criminal activity so i think he should not have received the role leveled two levels for the role and the obstruction  should have fallen away completely