kickbacks in order to avoid serious constitutional problems and in that case the supreme court also held that mere undisclosed self dealing or undisclosed financial conflicts of interest are not honest services fraud in bribes and kickbacks and the core of what was left what was meant by that and so i guess my question is you know what was there any other any contours to paradise or with the language of the court used in that case well i think that where one would look to find that core is in the cases that the supreme court referred to in the opinion and they they refer to a series of cases  in the united states as brief in that case and if you look and examine those cases what they typically involve is sit in the commercial context the situations where an individual is steering business to further his own undisclosed financial interest such as to receive kickbacks of commissions for that business so i think that's what what we believe skilling is referring to as a as a parent matic case and the situation in this case is extremely unusual for a number of reasons one of them is that valiant the alleged victim was already steering business you fell it over well before mr tanner had any any interest and indeed indeed was either was there not evidence that now was standing everything that you said mr davenport and mr tanner took the law took a step further that is there were u ndisclosed payments and as a result of that the evidence to show that mr tanner provided information and engage in certain conduct that was not in valiant's interests but appeared to be in fill those interests so not in his employer's interest but in the interests of the person who was making these on the sloes payments well certainly viewing the evidence in the light was favorable to the government is the court must we're not disputing that there was an undisclosed financial interest that mr tanner took acts that one could construe as helping fill it or i think we have responses to those some of them my co counsel would deal with in terms of evidence that wasn't admitted but the very nature of an undisclosed financial interest is exactly that that is to say  to the extent that one has an interest in another company and it may be in a particular case and we think in most cases the interests were aligned but to the extent the entrust wanna wind and mr tanner did something he thought would benefit phil and or that's not inconsistent with what you would think someone who merely had an undisclosed financial if it's difference do tween mr tanner purchasing seven point five percent of the stock  a door if it were training on the open market and being given that that looks more like a prize well your i respectfully i disagree i think the evidence here is quite  where what you have in those cases the public officials but there's a consulting arrangement and there's no worked on the only work that's done is for example steering government grants to the company or something like that in this case it's very different because it's undisputed and indisputable on the record here that mr tanner was you know traveling every week across the country spending all his time working at philadelphia offices to benefit it or so it may seem like the the ultimate payment that he received after the transaction a year and a half waiter is a large amount but he was working you know day in and day out to grow the fi company it's not as if he was just it was a no show job and his only job was to be some kind of double agent or something that's a right that at a certain point he said there was evidence that i might be wrong about this that val wanted to develop relationships with other pharmacies so that they would be less dependent on filled or there is evidence that and the government relies on an argument that mr tanner was asked by his boss to try to develop relationships with other pharmacies i believe there's evidence that we weren't allowed to admit to show that what happened there was wasn't what it appears to be but putting that aside i think that still fits within the context of what i'm arguing here which is that a person with an undisclosed financial interest might well take steps to conceal have financial interest might well take steps in furtherance of that interest even if they conflict with his employer's interests but that's the death by definition what anyone with an undisclosed financial interest might well do and what skilling very clearly rejects as honest services  it may well violate company policies but the question here is is this a federal crime that can deprive someone of his liberty or is it at best you know a breach of fiduciary duty some type of civil civil claim that it could give rise to here is there a civil claim valiant has brought here i'm not sure the answer to that i believe actually the investigation here started as an investigation of val papers which makes clear that when value came to mr davenport purporting to represent their discussions and said one hundred and twenty five he wrote back and said it should be one hundred and twenty seven remember that's what we discuss so that's two million the remaining six million we believe there is simply that the government didn't carry its burden of proving that the difference is attributable to anything that mr tanner did there's no evidence in the record that mr tanner was but why isn't the difference a reasonable effort to get at that number because if you actually look at the evidence that consists of the following things like there's an email that tanner sent to point to anything specific that changed as a result of any information and in fact but there was evidence that he was receiving advice from mr tanner throughout that period of time well but there's no evidence that any term change and indeed the government relies heavily in its brief on an e mail in which the government had stated in its brief that it said that mr tanner was going to get concessions when in fact if you look at the e mail it's mr davenport who's sending the agreement to mr tanner and saying this is a typical i think he uses a phrase eight hundred pound gorilla will get concessions were necessary so mr davenport is is actually informing mr tanner about what's belabor this but what are we to make of these emails where mr davis who's negotiating on behalf of valiant asked mr tanner for his views because mr davis thinks that these numbers are too high that are being proposed by phil door and this tennis is no no no there they're actually good numbers well if you look at that e mail chain i believe and the version that's actually in our appendix  has the response from davis on the top and what it indicates is that mr davis forwards this to tanner and says what do you think of this tanner says it seems about right and then mr davis actually responds and says you're right like i was making there was a math error and there's actually no evidence in the record whatsoever that mr tanner ever provided any incorrect information to mr davis when mr davis asked him other evidence and it's not our burden obviously it was the government's burden and they failed to carry it but other evidence in the record demonstrates that the real reason that the price increase was had to do with this these milestone payments which were based on more importantly to conclude that a valiant had known that mr tanner was giving the conflict advice about the thought or acquisition it would of either heavily discounted the price that a paid or not engaged in the acquisition at all so why isn't one dollar way of looking at this that mr davenport must have actually got a one hundred and twenty five million dollars restitution break well i think that's because the government did propose  may please the court daniel walczak for gary turner judge park value has not brought a civil claim against either defendant a series of erroneous evidentiary rulings here left the jury with a highly distorted picture regarding the key issue at trial i like to begin by explaining why the government has not carried its burden to show that the errors were harmless put simply the errors were not harmless because the excluded evidence was directly responsive to the government's central arguments on the key issue a trial key issue a trial was whether the defendants had the specific intent to defraud valient pursuant to a quid pro quo agreement to show that the government sought to prove that tanner acted contrary to valiance interests that was really the crux of it the government tried to throw in a trial and tries to throw in again here on appeal all sorts of other things most of which fall under the umbrella of undisclosed self dealings we know from skilling that that is a matter of law is not honest services fraud that's just a bright line supreme court drew so the government's evidence of undisclosed dealing and i'm talking here about payments from davenport to tanner deception concealment conflicts of interest undisclosed self dealing all that evidence could get the government up to that bright line which we know is short of a conviction and hence short of overwhelming evidence of a conviction to get over that line it had to show something more and again it was tanner acting contrary to valiance interests to have the government's leading points on that were the option agreement and what came to be called diversification i'd like to go through each of them but as to each critical defense evidence was excluded starting with the option agreement the government told the jurors that they should in st pacific intent to defraud from the government argument and the defense sought to answer it by introducing an e mail in which tanner acted to protect valiance interests by advising valiant's negotiator to include in the agreement a penalty provision a provision more protective of values interests than what was actually agreed to that was excluded and the government here makes no argument that that exclusion was correct the header to that section of his briefs page eighty just says any error in excluding the email was harmless but so they're conceding that error and had that evidence come in the jury would have had a significantly different picture regarding this key prosecution argument any evidence on that argument was thin to begin with you look at page thirteen of their brief and they catalog what they you started with number one page eight thousand five hundred and eighty the email in which the government twice tells the court that ten are said to davenport will get concessions were needed when in fact it was the other way around davenport was saying i'll get concessions for valient so if anything that email was showed ten or acting to protect valiance interest not contrary to it the nd thing they say is tanner advised mr davis the negotiator at value without telling him that he had this ownership interest that's the nd thing they list on page thirteen that is undisclosed self dealing so that is not acting contrary to valiance interests in any way say the way the supreme court specifically said in skilling is not enough to constitute honest services  drugs from now two responses judge make up the nd one is going to be more direct i think the st one is more important i am making a harmlessness argument i am not making a sufficiency challenge so if they have some evidence that a jury could accept that  excluded evidence regarding that by itself is not enough you look at the sean stewart case from last year we cited in our opening brief key is key evidence was excluded answering the government's intent argument the dissent catalogue eight other points that the dissenting judge said were sufficient to show intent in the majority said what was in light of what was excluded it was important evan instead it was directly responsive the jury might have reached a different conclusion so that's my st answer to your question judge a good argument is  was a close call so this is a close call that's your argument my argument is if the excluded evidence had come in the jury would not the government cannot tell convince the court it is highly probable that is the key language highly probable that they still would have found intent to defraud as i said they told them just the purchase option agreement was enough we don't know if the jury agreed with that convicted just based on that just because i want to get to the nd answer to your question the more direct response this was you look at you look at the e mail whatever you do but what and tender says i think we can get to four percent this is somebody who at that time this is before he gotten any instructions about diversification which i still hope to get to this was someone who was under direct instructions from his supervisors build up fill a door and he knew the o of his company valiant had given fillin or two million dollars advance on fees so this was this was in the vein of that this was somebody who was thinking we're trying to establish a long term relationship with a partner and it's doesn't make sense to try to milk every last dollar we want to build a good relationship and to be clear jacobs even with the four percent and there's evidence on this in the record i think it's one thousand six hundred and ninety six in the appendix even the four percent was a better deal for valiant than it had with other distributors so it's not like tender was in any sense giving away the store but the st answer as i said i think is the more important one i do want to talk if i may about diversification this was the government's other pillar on intent and it was the argument that tender supposedly acted contrary to valiance interest by disregarding his boss's instructions to mitigate pay or risk a certain type of risk by entering into relationships with pharmacies other then fill a door the fence that to be clear let's step back everyone agree that ten are initially looked into diversification did some initial due diligence that's a five hundred and sixty five in the appendix and told his bosses about it cited on page nine of the government's brief the question for the jury was why didn't he finish going down that path the government's answer which the district court allowed to present to the jury was that because of the fraud he was trying to defraud by it mislead him that was the government's answer the defense had a two part response number one his initial due diligence tanner's led him to believe that diversification was not a viable option for fill it or there were no for value there were no other good partners and number two he pursued an alternate strategy known as hub and spoke to mitigate pay or risk three rulings by the district court prevented the defense from putting in that answer the exclusion of michael h it was one answer that was given did you mention the possibility and he said yes there were dozens of other questions or many other questions i should say doesn't that were objected to that was so much more to the story the real issue was why did the record show that after approximately april two thousand and fourteen no more instructions were forthcoming to tanner to continue down the diversification path was it because kuan washer had come to believe what tanner believed which was that diversification was not an option we were not allowed to explore that we were not allowed to explore what else korn washer knew or didn't know and when he knew it this was the government's star witness and we were not allowed to cross examine him about the topics he had addressed on direct examination so ok we come in and say we'll put in our witnesses instead michael has would have fully answered the government's diversification argument he was not allowed to do so he was kept out on relevance grounds even though he had he was going to address precisely the same things that corn wasser had addressed and think about that for just a moment your honor as i said this is one of the government's keep killers on intent the crucial issue at trial we were not allowed to cross examine the government's star witness fully and we were not allowed to put in our own witnesses what else does a party the court assistant united states attorney richard cooper i represent the united states below and here on appeal i'd like to go st to judge parks question that kicked off the argument about what is parodic matic in light of skilling and i believe the answer can be bribe in kickback case talked about a case where a defendant has or seeks a business relationship with the victim and makes a secret payment in exchange for favor treatment and that is precisely what happened here so in terms of the the presence of a rd party as the supreme court noted in skilling and as this court noted in that distinguishes a bing kickback case on one hand from an undisclosed dealing case on the other hand in fact in skilling the supreme court noted that the went out and purchased an interest in fill it or this was given to tanner by andrew davenport so davenport was the rd party here and that places this case squarely within the paradigmatic driving kickback case is the government's position value under the statute that was given by davenport to tender the agreement the seven five percent interest not the money because the way i read the record i didn't see that in the record that the government's emphasis at trial was that was the ten million dollars financial interest indeed tendered c p a who testified at trial testified that he had tried he had asked repeatedly to get any sort of agreements or contracts evidencing this alleged ownership agreement and then the c p a the tax preparer was  rd iran or tanner and that there was testimony about this never provided his tax preparer with a k one tax return a k one partnership statement to reflect the legitimacy of this interest what defense relies on now i should note for  the st time on appeal this was never an argument below they had always argued it was a gift but now they argue want to appeal that it was a self serving statement by tanner to his financial advisor to explain where this new money was coming from that was the basis for that ownership interest argument but if i could get to the legal response all so under this court's precedent thing a value is widely construed means anything of value and in fact in the middle miss case from two thousand that this court decided that was a bribe and kickback case the thing of value there was an undisclosed twelve percent ownership interest in the bribers company so this court has never decided which has never said that type of interchangeably a trial by defense yeah but what does it mean that we don't know what it is well certainly the the promise of the payment in advance of actually making the payment would be the bribe and the kickback is the payment of the money after the fa as this court noted in rows in the crux of the quid pro quo is a receipt of a benefit in exchange for an act the defendant performed or promised to perform so either one qualifies under the statute as the quid in a qui and it doesn't mention the membership interest or the equity stake in the company and they strike me as different things conceptually and i guess it goes to a good question one was money coming at the tail end of something in the other is a a promise and so i guess i'm still i'm not clear what the government's position is as to what the quid pro quo was the our position was that those are really two sides of the same event in other words it would be promise had risen earlier includes among other things evidence that gary tanner had taken actions in andrew davenport's interest and against valiance interest as early as the summer of two thousand and thirteen a year and a half before the payment was made when tanner secured more favorable payment terms for davenport than davenport was willing to pay and the tenor didn't disclose that to a supervisor lazar cornwallis or who testified at trial he would have wanted to know that he expected his employees and the people who reported to him to describe to him accurately and faithfully the other side's negotiating position that something very tender didn't do instead the evidence showed that he altered the the arrangement to reflect a more favorable discount to andr because the indictment describes that as one of the means of the conspiracy and in addition the the government did not argue below that this was a legitimate ownership stake that was evidenced by any kind of writing or documentary unless the court has questions on that piece i'd like to turn to tennis counsel argued that the court excluded quite a bit of evidence suggest option agreement contained a penalty provision that would operate against thought or what was the basis for excluding that and why would that be an important and influential in the jury's consideration of whether  it contained in it in order to get to the purpose the defense said it stood for which is gary tanner is faithful existence is a value employee there are factual statements in that e mail like a certain statistics for the purchase option agreement and how ten or a certain valiant should calculate the value of the purchase option agreement was it being offered for that or was it being offered instead to suggest that he was making a proposal that was decided and taiji is to fill a door that requires an acceptance of the truth of the contents of the e mail if i could just a penalty provision is unambiguous lee does that fantasia's to ever have to pay the penalty and that you are owners precisely the truth content of the e mail but in terms of harmlessness if if i may there was ample testimony about gary tanner's involvement in the due diligence process on behalf of valiant i prefer the court to the transcript at  interest so there was ample evidence in the record from which the defense could have made the argument that they now claim they were barred from doing but by virtue of the sustained objection to that one particular piece of evidence furthermore that evidence and that argument is more in line of the other good acts type of argument that this court has regularly affirmed objections to like i said the government's argument was never that every act tanner took was against  indeed we conceded that that he was a hard working employee who got up and flew across the country to go to work many weeks and that hard work or loafing off from work on occasion was not what the crux of this crime was wasn't even part of this crime so on one hand it wasn't the government's theory but also there was ample evidence from which the defense could have made that argument including those transcript it is i cited tirana on judge restitution end with forfeiture understood on that restitution st we're here on an abuse of discretion standards of the question is based on the evidence the judge prescott had before her whether heard her ruling that the eight million dollars increase in the purchase price of the option was harm to valient resulting from this offense whether that was an abuse of discretion and has to reflect a sound methodology right correct your honor and can you explain what that methodology was and why that sound so  and that shown in a couple of trial documents that judge prescott had before her and they were in the record early on in the option negotiation process and i mean you're right that it did the process was and acted does that just then allow the entire amount of the difference to be the methodology itself and that doesn't seem to be a methodology to me that just seems to be it's infected and therefore the end you just take the difference and reflect any kind of  attempt to approximate what the impact of this infection was on the company i believe it is a methodology that could allow the district court to get there but here there's more because there was a particular type of secret assistance the tanner was providing to davenport and it shows that the process was infected and before getting to a few exhibits i would know that there would be a basis to hold that the entire one hundred and thirty three million was one hundred and thirty three million what kind of sound methodology could produce this kind of wild swings in terms of valuation let me describe what judge prescott found which was not a wild swing judge press corps rejected the argument that one hundred and thirty three dollars would be an appropriate measure of the law so let me focus on the eight million dollars it was to do so so your honor on the eight million dollars the evidence shows that the assistance that tanner was providing to davenport dealt with and reflected the rising purchase price so if i could just walk the court through a couple of particular documents that illustrate this point on october th of two thousand and fourteen that's when value communicated the option that the letter of intent to davenport that included a one hundred and twenty five million dollars purchase price one hundred million dollars up front and a twenty five million dollars milestone pay me that's the appendix  that's up to over twenty seven dollars later that same day on october th andrew davenport sent to gary tanner an only to gary tanner a proposed response to that initial offer from valiant including proposed language pushing back two were disk in fact it's direct evidence i should say that the two were discussing davenport's proposed pushback and davenport's attempt to get the purchase price higher that was october th why why why would somebody need to be corrupted in order to seek a better deal argument is the kerry tender was corrupt a tender was representing valiance interests and values side of the table and here we have tanner we have value making an initial proposal we have andrew davenport who's supposed to be on the other side of  table previewing arguments in trying to get a better foot forward against valen who was no evidence of mr tennis response to this email was that there was not your honor there was not but there is this is  sense for what it's worth of a correspondence about these two million dollar difference before mr davenport then says i think you made a mistake to miss just to mr smooth  that's absolutely right and in fact over a week passes then until november th and that's an appendix six hundred and fifty four dollars where andrew davis writes back it increases the purchase price by two million dollars so if there's if this was truly error that they had agreed on something and andrew davies just wrote it down wrong the judge was certainly within her discretion to look at that eight day or nine day gap and all the e mails that occurred in between and take from that that tanner's influence on the process assisted davenport in raising the purchase price by two million dollars but there were also other e mails in that interim period of time between davenport and gary tanner's brian wilson e mail allianz including davenport have that they suffered a loss that that certainly could have been one way of getting to loss but this was another way the judge pressed the adopted and the question is whether she was within her discretion in adopting this method where you have a scheme a criminal scheme that was targeted at among other things ten or secretly giving davenport advice on getting a better deal from ten years on employer without telling and you devious what was going on and you davis valiantly think it was you know dejection to this two million dollars increase posed no your honor it's been argued for the st time on appeal here this particular two million dollars issue of course the defense objected to the imposition of restitution argue that it was zero loss but this two million dollars issue arises for the st time on a acquires or obtains proceeds of a crime that are that another coconspirator obtains it's a you know for example where there is a drug mule was part of a larger drug conspiracy who only has a small piece of the overall government can can obtain from the defendants in total so it may in the end in certain circumstances operate similar to how the joint and several liability to this is the not a i'm sorry they were each that thank you so the forfeiture orders don't operate as money judgments where the government can take them go out and levy against individual assets the government has to bring a substitute assets motion in court  using the forfeiture judgment still to levy against the defendants assets in connection with that subsequent forfeiture litigation it is a defense that that these defendants can raise to say that some portion of the nine dollars has already been paid so the government cannot double collect there is that the nine dollars seven cents ceiling isn't it better i mean as a minister of matter isn't the better course to then mean you seem to acknowledge that for future for nine million seven hundred thousand dollars i can't speak to which administrative approach would be best the question for this court i believe is whether it was plainer for the judge to have done what she did and certainly well the question for me seems like  appears that your your answer is trust the government we're going to we're not going to we're not going to make sure that each defendant is liable for no more than nine point well that together they're to claim that some portion of that nine dollars has been paid by the other defendants so in that litigated context it's a defense that they can raise so the government won't be able to to obtain more than the one dollar in total in statutes and under the forfeiture statutes here there is no provision for apportionment of liability and forfeiture and so following the rule of money cut the district court should not look to try to apportion for intermediary what is a mere intermediary and if he was so your honor mr davenport is not a mere intimate media for a few reasons st he engaged in forward transactions or part of the money laundering chain here equal participant in the criminal scheme which andrew davenport was here he was not a mere intermediary he was one of the two people who engage in this conspiracy so that alone i'm just going on your definition and he passed it through and  and thirty to thirty one it's clear from the defense submission that the argument was that mr davenport didn't receive any proceeds traceable to the offenses and that he didn't cite either provision and nor did the government in its submission make a specific argument about ninety two so that is plainly enough to preserve the objection with respect to the the transactions from ninety to the two of the transactions were merely mr davenport transferring from his limited partnership endgame lp which held the interest in film of the work the money to his l l c which just quickly i think my adversary pointed to an e mail from mr davenport to the brian wilson address which contains a reference to  you will see that there is no change whatsoever to that language and there's no other indication that mr tanner had any influence on mr davenport making the points that he made to two valiant in that regard but one other thing i wanted to mention about restitution quickly was your honor asked will didn't the government ask for restitution of the entire amount and i misspoke and in fact that's not the case and if you look at appendix two t footnote one which is the order below it makes clear that the government had requested fifteen million and change and so the disputed eight million is is really what we're talking about the government never suggested that it would be entitled to the entire purchase price lastly with respect to the underlying merits of the case my adversary said that there's evidence here of solicitation of a side payment and that's a parodic matic briber kickback in fact the the heart of our argument here is that there's insufficient evidence of the pro and that the government is relying entirely on evidence of acts and evidence of non disclosure of the interest and our point is that particularly in the bizarre context of this case under skilling the court should rigorously scrutinize the sufficiency of evidence of an actual exchange in agreement that the acts were being done in in respect of the the benefit that's been confirmed between this board is that there there has to be real evidence that there was such an agreement the last thing and hundred and eighteen which the focus is on the alleged ten million dollars payment that comes at the end after the sale there's only one reference to the interest that was confer which is a passing reference judgment be reversed thank you very much exchange for a payment that is undisclosed dealing we know that is not honest services fraud the key is what make what gets within the paradigm judge park is pacific intent to defraud that's why i said that is the key and on that the government's evidence was weak let me talk if i can about the three and a half or so is four percent mr cooper repeated a misstatement that is in their brief on page eleven lazar corn was or did not testify that he expected tender to tell him what the other side had and what the other side's position was they cite a three hundred and twenty one you can look at it he does not state of mind exception the easiest evidence it's true the strongest evidence of that is the language the district court used in excluding it she said eight to eighty seven the e mail quote is clearly being offered for the truth of its kind particularly the intent of tanner that's exactly right and that's why it should have come in at least under the state of mind exception and your honor i don't understand the government's argument that this is good x evidence that was never argued below it was not the basis for exclusion it was never argued in their brief because it wasn't we were trying to negate their evidence on the element of intent they sought to prove intent by saying he acted contrary to valiance interest all of the excluded evidence went to show that he acted to protect valiance interests you didn't hear anything from mr cooper this morning about diversification that alone is enough to reverse mr hess was going to be our star witness we didn't put on any witnesses the two witnesses we were ready to put on michael hasn't allison pritchett both couldn't get on because of rulings that we are now challenging so there's no way to say these exclusions were they might not have believed allison pritchard they might have believed corner officer and in that there is not i mean you contesting this notion that is being advanced by the government that there's overwhelming evidence that he acted in a way that was adverse to valiance interests wrecked and you have to dig down on that what do they show to do that that is not undisclosed dealing we know undisclosed dealing is short of the line of conviction and hence necessarily short of the line of overwhelming evidence of a conviction you have to look how did he act contrary to valiance interest they relied on  negotiation email they relied on diversification one and two they told the jury diversification alone was enough the court has to hold the skilling line insist on something more than just undisclosed feeling and really focus on the government's evidence and it is the government's burden to show pharm the court to reverse thank you very much