FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, 

No. 03-10029 Plaintiff-Appellee,

D.C. No.

v.  CR-01-20173-RMW

ATUL BHAGAT,

OPINION Defendant-Appellant. 

Appeal from the United States District Court

for the Northern District of California

Ronald M. Whyte, District Judge, Presiding

Argued and Submitted

April 12, 2004—San Francisco, California

Submission Withdrawn September 1, 2004

Resubmitted July 6, 2005

Filed February 8, 2006

Before: Mary M. Schroeder, Chief Judge,

A. Wallace Tashima, and Johnnie B. Rawlinson,

Circuit Judges.

Opinion by Judge Rawlinson;

Dissent by Judge Tashima

1415
COUNSEL

Mary McNamara, Swanson & McNamara LLP, San Francisco, California, for the defendant-appellant. 

Amber S. Rosen, Assistant United States Attorney, San Jose,

California, for the plaintiff-appellee. 

1418 UNITED STATES v. BHAGAT
OPINION

RAWLINSON, Circuit Judge: 

Appellant Atul Bhagat (Bhagat) challenges his convictions

for insider trading; for securities tipping; and for obstructing

the course of an SEC investigation.1

Because any new factual theory referenced by the government during closing arguments was introduced for the proper

purpose of impeaching Bhagat’s credibility, and did not effect

a constructive amendment or material variance of the indictment; the instructions conveyed all of the elements needed to

obtain a conviction on the obstruction charge; and sufficient

evidence supports Bhagat’s conviction, we affirm the judgment of conviction. 

Because the court determined the amount of profit under a

mandatory guidelines system, we remand the sentence pursuant to United States v. Ameline, 409 F.3d 1073 (9th Cir. 2005)

(en banc). 

I. FACTUAL and PROCEDURAL BACKGROUND

Bhagat’s employer, Nvidia Corporation (Nvidia), successfully competed for a multi-million dollar contract to develop

a video game console (the X-Box) for the Microsoft Corporation. Upon receiving the contract, Nvidia’s Chief Executive

Officer (CEO) sent a company-wide e-mail late Sunday night

announcing the contract award. The next morning, Nvidia

sent a number of follow-up e-mails. The first e-mail advised

Nvidia employees that the X-Box information should be kept

confidential. The other e-mails imposed a trading blackout on

the purchase of Nvidia stock for several days, and required

1The government has withdrawn its cross-appeal challenging the sentence imposed. 

UNITED STATES v. BHAGAT 1419
Nvidia’s employees to cancel any open or outstanding orders

for Nvidia stock. 

A. Insider Trading Allegations Against Bhagat

The government’s theory of prosecution was that Bhagat

read the CEO’s Sunday night e-mail prior to purchasing

Nvidia stock. To support this theory, the government introduced evidence that Bhagat arrived at work on Monday midmorning, and that all of the company-wide e-mails were on

his computer. The government also introduced evidence that

roughly twenty minutes after the final company-wide e-mail

was sent, Bhagat purchased a large quantity of Nvidia stock

— his largest purchase in nearly three years. There was no

direct evidence that Bhagat read any of the e-mail prior to

executing his purchase. Instead, the government asked the

jury to infer Bhagat’s knowledge by virtue of the fact that he

had probably read the original e-mail upon entering the office

as a “normal, reasonable person” would. 

Evidence was also presented that rumors about Nvidia and

the X-Box contract began leaking in the industry the day after

Bhagat purchased his stock, and the price of the stock rose

sharply. Three days later, the news was made public and the

price of Nvidia stock skyrocketed. Another four days later,

Bhagat sold his stock, reaping a substantial profit. 

Bhagat offered a different interpretation of the facts. He

testified to conducting personal business for several hours

upon reaching the office, and reading the company-wide emails at 1:00 p.m. — roughly forty minutes after he purchased

the stock. Upon learning of the trading blackout, Bhagat

attempted to cancel his trade by contacting his broker, who

advised him that it was too late. However, Bhagat could not

remember which branch of the trading company he contacted,

nor the name, or even the gender, of the representative to

whom he spoke. Bhagat made no further attempt to divest

himself of the stock. He concluded that to do so would further

1420 UNITED STATES v. BHAGAT
violate the trading blackout, although he sought no guidance

from any Nvidia executive regarding his failure to cancel his

pending trade. 

To rebut the government’s contention that his purchase of

Nvidia stock was motivated by insider information, Bhagat

testified that he purchased the stock after considering the general strength of the stock, and with the expectation that the

company would win the X-Box contract. Bhagat introduced

evidence that he was a consistent purchaser of technologybased stock. To counter the inference that he read the X-Box

e-mail before executing his trades, Bhagat introduced evidence that, in a one-month period, he often did not send emails until after 1:00 p.m. 

B. Tipping Allegations Against Bhagat 

The prosecution sought to prove that Bhagat advised two

friends to buy Nvidia stock before the X-Box information was

officially released to the public. Less than one-half hour after

Bhagat made his purchase, two of his friends, Puneet

Mehrotra (Mehrotra) and Mamat Gill (Gill), purchased Nvidia

stock. There was no direct evidence that Bhagat contacted

Mehrotra or Gill prior to their purchases. However, Bhagat

did send Gill an e-mail during the blackout period, the day

after Gill purchased the Nvidia stock, containing a link to an

internet article discussing Nvidia and the X-Box. Evidence

was also introduced that Bhagat provided his real estate agent

with the X-Box information before it was made public.

Finally, Gill’s purchase was his largest purchase of the year.

Bhagat denied telling anyone about the X-Box contract

before it was made public. He countered the prosecution’s

evidence with the argument that a friend of Gill’s, who

worked for one of Nvidia’s competitors, may have informed

Gill of the X-Box contract award. 

UNITED STATES v. BHAGAT 1421
C. Reasons for the Increase in Nvidia’s Stock Price

The parties disagree as to the reasons Nvidia’s stock price

increased between the time of Bhagat’s purchase and the time

the contract award was officially announced. The government’s expert opined that the increase was primarily caused

by rumors regarding Nvidia and the X-Box contract. Bhagat

countered that the value of Nvidia’s stock rose during this

period primarily because Standard & Poor’s (S&P) issued a

listing announcement indicating that Nvidia was now part of

an S&P stock index. 

A number of witnesses, including Nvidia’s CEO and a

financial analyst, testified that stock prices generally rise after

a listing announcement. The government’s expert confirmed

the existence of studies showing that technology-based stocks

increase in value by ten percent after becoming listed. However, the expert qualified this observation by noting that the

ten percent increase represented the aggregate increase over

the course of several days to a few weeks. In light of Nvidia’s

past performances upon becoming listed in other indices, the

expert opined that it was highly unlikely that the listing

announcement in this case had such an immediate impact on

the market. Thus, according to the expert, any price increases

during this time were more likely attributable to the X-Box

rumors, and not to the listing announcement. 

D. Trial Proceedings

Bhagat was charged with insider trading, tipping, and

obstructing an SEC investigation. The most hotly contested

issue was whether the government adequately proved that

Bhagat possessed prior knowledge of the X-Box contract

award. The key provisions of the indictment are as follows:

5. On . . . March 5 . . . NVIDIA entered into a

contract with Mircrosoft to develop . . . a . . . processor for . . . the “X-Box.” 

1422 UNITED STATES v. BHAGAT
6. On Sunday, March 5 . . . NVIDIA’s president

. . . sent an e-mail message to all NVIDIA employees, including BHAGAT, announcing the contract.

The e-mail . . . predicted that “[i]f Xbox becomes as

big as Sony Playstation, we generate about $2B in

sales over 5 years.” 

7. On Monday, March 6 . . . , at 9:15 . . .

NVIDIA’s Vice President of Marketing sent an email to all NVIDIA employees. The e-mail was entitled “xbox shhhhhh . . .” and said: 

. . . keep the xbox news quiet . . . . Mircrosoft plans to make the news public this Friday . . . [L]ets don’t jinx it! 

8. On March 6 . . . at . . . 12:23 . . . BHAGAT

placed a market order to purchase 1000 shares of

NVIDIA stock. 

The principal theory of the prosecution during the trial was

that Bhagat knew about the contract from reading his own email. During cross-examination, however, the prosecutor also

questioned Bhagat about conversations among his co-workers

that he had heard that morning concerning the X-Box contract. This line of questioning set the stage for what the parties

refer to as the “office ‘abuzz’ theory.” 

Defense counsel informed the court that because the indictment did not include an allegation that Bhagat learned about

the X-Box contract through office conversation, that theory

should not be permitted as part of the government’s case. In

the alternative, defense counsel requested an instruction

informing the jury that the mere existence of an open cubicle

environment may not, standing alone, give rise to an inference

that Bhagat possessed insider information. Ultimately, the

court authorized the government to present the argument, and

declined to give the requested instruction. 

UNITED STATES v. BHAGAT 1423
During closing arguments, the government referenced the

“office abuzz” theory in passing, stating that the jury should

consider the fact that the office was “abuzz” with the news of

the X-Box contract, and that Bhagat had to walk through the

office to reach his cubicle. The government also repeatedly

informed the jury that in order to find Bhagat guilty, the government would have to prove that he read the company-wide

e-mails prior to purchasing the stock. 

The jury convicted Bhagat of insider trading, of tipping

Gill, and of obstructing an SEC investigation by making false

statements to SEC investigators. 

E. Sentencing Proceedings

The district court calculated the “total increase in value”

attributable to Bhagat and his tippee. See U.S.S.G. § 2F1.2,

Background Note (1998).2 The district court measured Bhagat’s profit by finding the difference between the price Bhagat

and Gill paid for the stock, and the price at which they sold

it. When combined, the pair’s profits exceeded sixty thousand

dollars, thereby triggering a five-level sentencing enhancement. U.S.S.G. § 2Fl.1(b)(1). 

F. Post-trial Motions

Bhagat moved for acquittal on the basis of insufficient evidence. In the alternative, he sought a new trial on the same

grounds he asserts in this appeal. The district court denied

Bhagat’s motions and Bhagat timely appealed. 

2Although Bhagat was sentenced in 2003, the district court applied the

1998 version of the Sentencing Guidelines to avoid any ex post facto problems. 

1424 UNITED STATES v. BHAGAT
II. DISCUSSION 

A. Standards of Review

The district court’s decision to deny a motion for a new

trial is reviewed for an abuse of discretion. United States v.

Peterson, 140 F.3d 819, 821 (9th Cir. 1998). The decision to

deny a motion for acquittal is reviewed de novo. United States

v. Johnson, 357 F.3d 980, 983 (9th Cir. 2004). Allegations of

constructive amendment or material variance are also

reviewed de novo. United States v. Adamson, 291 F.3d 606,

612, 616 (9th Cir. 2002). 

B. Constructive Amendment or Material Variance 

A constructive amendment mandates per se reversal, however, a variance warrants reversal only if the defendant’s

“substantial rights” were affected. Id. at 615. 

1. Constructive Amendment 

[1] A constructive amendment exists if “there is a complex

of facts presented at trial distinctly different from those set

forth in the [indictment],” or if “the crime charged in the

indictment was substantially altered at trial, so that it was

impossible to know whether the grand jury would have

indicted for the crime actually proved.” Id. at 615 (citations

and alterations omitted). 

Bhagat contends that the government’s reference to the “office abuzz” theory introduced an alternative theory by which

the jury could infer Bhagat’s knowledge of the X-Box contract prior to the stock transaction. The government counters

that it invoked the “office abuzz” theory for the limited purpose of impeaching Bhagat’s credibility when he testified that

he had not heard anyone mention the X-Box contract upon

entering the office on Monday morning. 

UNITED STATES v. BHAGAT 1425
The government’s conduct throughout the trial is consistent

with its contention. The government repeatedly informed the

jury that conviction should be based upon a determination that

Bhagat had read the company-wide e-mails prior to executing

his trades. It was only during cross-examination, after Bhagat

denied reading the pertinent e-mails, that the government

questioned Bhagat about whether he had heard any office

chatter regarding the X-Box contract. 

The district court judge, who heard the testimony at issue,

denied the defense request to give an instruction regarding an

“open cubicle” environment. The district court also permitted

the government to include in its closing argument reference to

Bhagat’s work environment for the purpose of challenging

Bhagat’s credibility.3 After the prosecutor expressly mentioned credibility, he immediately segued into the “office

abuzz” reference. The district court overruled the defense

objection, stating that “one can argue inferences. Whether

they’re reasonable inferences, that’s up to the jury.” 

[2] We have previously held that evidence not referenced

in the indictment may be admitted for “impeachment or other

legitimate purposes,” without effecting any changes to the

indictment. United States v. Kahan & Lessin Co., 695 F.2d

1122, 1125 (9th Cir. 1982). The record in this case reflects

that the reference to the “office abuzz” theory was not

intended to and did not amend the indictment. The facts pre3

“It is the province of the trier of fact ‘to determine the credibility of

witnesses, resolve evidentiary conflicts, and draw reasonable inferences

from proven facts.’ ” United States v. Magallon-Jimenez, 219 F.3d 1109,

1114 (9th Cir. 2000) (citation omitted). A reasonable inference could be

drawn that Bhagat was not credible when he denied hearing about the XBox contract despite the “cubicle configuration” of his workplace. And, of

course, if Bhagat was not credible on that point, the jury could also find

a lack of credibility as to his testimony regarding reading the e-mails. See,

e.g., Sea Hawk Seafoods, Inc. v. Alyeska Pipeline Serv. Co., 206 F.3d 900,

912 (9th Cir. 2000) (“It is logical to disbelieve even a plausible allegation

if a witness makes it in the course of a generally implausible account.”).

1426 UNITED STATES v. BHAGAT
sented were not “distinctly different” from those in the indictment. Neither was “the crime charged in the indictment . . .

substantially altered at trial.” Adamson, 291 F.3d at 615 (citations and alterations omitted). That being so, no constructive

amendment of the indictment occurred. Rather, the evidence

was admitted for impeachment purposes, a practice we

expressly approved in Kahan & Lessin Co., 695 F.2d at 1125.

2. Material Variance 

[3] A material variance exists if a materially different set of

facts from those alleged in the indictment is presented at trial,

and if that variance affects the defendant’s “substantial

rights.” Adamson, 291 F.3d at 615-16. 

In Adamson, we concluded that there was a variance

between the indictment and the proof at trial because the

“misrepresentation specified in the indictment and the misrepresentation shown at trial” differed. Id. at 615. The misrepresentation charged in the indictment was the fact that computer

servers had been upgraded. The court’s instructions, however,

allowed the jury to find the defendant guilty based on a misrepresentation regarding how the servers were upgraded. Id.

We concluded that there was a variance because there was

“but one set of facts with a single divergence, namely, the

content of the misrepresentation that the defendant made.” Id.

(alteration, internal quotation marks and citation omitted). 

[4] No similar situation exists in this case. At all times, the

pertinent fact was that Bhagat was aware of the e-mails notifying employees of the X-Box contract award. Not only was

there no jury instruction given regarding the “office abuzz”

notion, the district court judge expressly declined to give a

related instruction requested by defense counsel. The record

does not support a claim of variance. 

Bhagat’s reliance on United States v. Choy, 309 F.3d 602

(9th Cir. 2002), is misplaced. In Choy, the defendant was

UNITED STATES v. BHAGAT 1427
indicted for giving $5,000 to a public official. However, he

was convicted “on the theory that giving the $5,000 to a private individual indirectly conferred value — the opportunity

to receive bribes in the future — on a public official.” Choy,

309 F.3d at 607. We found a fatal variance because the “facts

upon which Choy was convicted cannot constitute the crime

[of bribery].” Id. n.5. We concluded that the jury instructions

and clarification enabled the jury to base a finding of guilt on

a fact other than the element stated in the indictment. Id. at

607. As in Adamson, in Choy we focused on the extent to

which the jury was steered toward a finding at variance with

the indictment. See Choy, 309 F.3d at 607, see also Adamson,

291 F.3d at 615-16. Nothing of the sort occurred in this case,

and the verdict reflected no material variance from the

charges in the indictment. 

C. Jury Instruction for Obstructing an Agency

Proceeding

[5] Bhagat was convicted under 18 U.S.C. § 1505 for the

crime of obstructing an SEC investigative proceeding by making false statements to SEC investigators. The government

was required to prove three elements: (1) that there was an

agency proceeding; (2) that the defendant was aware of that

proceeding; and (3) that the defendant “intentionally endeavored corruptly to influence, obstruct or impede the pending

proceeding.” United States v. Price, 951 F.2d 1028, 1031 (9th

Cir. 1991) (citation omitted). Because Bhagat failed to object

to the instructions as given, we review for plain error. United

States v. Delgado, 357 F.3d 1061, 1065 (9th Cir. 2004). 

Bhagat contends that the Supreme Court’s decision in

United States v. Aguilar, 515 U.S. 593, 599-601 (1995),

added two additional elements going to mens rea: that his

false statements must have the “natural and probable effect”

of obstructing justice, and that he was aware of that effect.

Bhagat asserts that we recognized the applicability of Aguilar

to Section 1505 proceedings in our decision in United States

1428 UNITED STATES v. BHAGAT
v. Hopper, 177 F.3d 824, 830-31 (9th Cir. 1999). We disagree. 

[6] Aguilar did not involve obstruction of agency proceedings under 18 U.S.C. § 1505. Rather, the court in Aguilar

addressed false statements made during the course of an agency’s investigative proceeding that obstructed a judicial proceeding pursuant to 18 U.S.C. § 1503’s “catchall” provision.4

The Supreme Court noted that judicial proceedings are distinct from government investigations, and that the intent to

obstruct an agency proceeding did not automatically demonstrate intent to obstruct the related judicial one. See Aguilar,

515 U.S. at 599-601. To transpose the intent to obstruct an

agency proceeding into the judicial proceeding context, the

Court held that there had to be a “nexus” between the two

proceedings. Id. at 599. The Court then held that the jury

could infer the existence of that nexus if the “natural and

probable effect” of the defendant’s conduct vis á vis the

agency proceeding would obstruct justice. Id.

[7] Because Bhagat was charged under Section 1505 with

obstructing an agency proceeding and not a judicial one, there

was no need to create a causal nexus and, consequently, no

need to supplement the Price instructions with additional elements. Cf. United States v. Gabriel, 125 F.3d 89, 103-04 (2d

Cir. 1997) (declining to incorporate a nexus requirement into

18 U.S.C. § 1512(b), the witness tampering statute); Aguilar,

515 U.S. at 601 & n.2 (distinguishing Aguilar from cases

where false statements were made directly in the relevant proceedings). 

Bhagat’s reliance on Hopper, 177 F.3d at 830-31, fails for

4

18 U.S.C. § 1503 contains a “catchall” provision prohibiting the

obstruction of “the due administration of justice.” That provision has been

interpreted as encompassing judicial proceedings. See, e.g., Aguilar, 515

U.S. at 598-99; United States v. Veal, 153 F.3d 1233, 1250 (11th Cir.

1998). 

UNITED STATES v. BHAGAT 1429
similar reasons. In Hopper, the defendants were charged with

obstructing the IRS’s attempt to collect on a tax judgment. Id.

at 830. The Hopper defendants argued that they were wrongfully charged under 18 U.S.C. § 1505, because their interference was with a court judgment, not an agency proceeding.

Id. Citing to Aguilar, we disagreed, stating that the defendants’ attempt to avoid payment of the tax would have the

“probable and natural effect” of interfering with the IRS’s

attempt to collect taxes. Id. We used Aguilar’s “natural and

probable effect” language to explain how the defendants’ conduct affected the IRS’s collection proceeding, not to add an

additional element of proof. 

[8] Because the provided jury instructions adequately

addressed the elements needed to obtain a conviction under

18 U.S.C. § 1505, Bhagat is not entitled to a new trial on this

basis. 

D. Sufficiency of the Evidence

Evidence is sufficient to support a conviction if, considering the evidence in the light most favorable to the prosecution, any reasonable juror could have found the essential

elements of the offense beyond a reasonable doubt. United

States v. Matthews, 240 F.3d 806, 814 (9th Cir. 2001). For the

following reasons, we hold that sufficient evidence supported

Bhagat’s convictions on all grounds. 

1. Insider Trading

[9] To convict Bhagat of insider trading, the government

was required to prove that he “traded stock on the basis of

material, nonpublic information.” United States v. Henke, 22

F.3d 633, 639 (9th Cir. 2000). 

[10] The government offered significant evidence to support the jury’s conclusion that Bhagat was aware of the confidential X-Box information before he executed his trades. The

1430 UNITED STATES v. BHAGAT
X-Box e-mails were sent prior to his purchase. The e-mails

were found on his computer. Bhagat was at his office for several hours prior to executing his trade, which provided him

the opportunity to read the e-mails. Finally, Bhagat took virtually no action to divest himself of the stock, or to inform his

company that he had violated the company’s trading blackout.

The fact that this evidence was all circumstantial does not

lessen its sufficiency to support a guilty verdict. See United

States v. Messer, 197 F.3d 330, 343 (9th Cir. 1999). 

2. Obstructing an Agency Proceeding

To convict Bhagat for obstructing an agency proceeding

pursuant to 18 U.S.C. § 1505, the government was required to

prove that an agency of the United States government was

conducting a proceeding; that the defendant was aware of that

proceeding; and that the defendant intentionally interfered

with, or obstructed the course of, that proceeding. Price, 951

F.2d at 1031. 

[11] Sufficient evidence also supports the jury’s verdict on

this charge. It is undisputed that there was an SEC investigative proceeding of which Bhagat was aware. The prosecution

also introduced evidence that Bhagat intentionally obstructed

that proceeding by providing the SEC investigators with false

information to cover up his acts of insider trading and tipping

and eliminate himself as a suspect.5 Cf. United States v.

Boone, 299 F.3d 1231, 1233-34 (9th Cir. 2000) (quoting from

Lilly v. Virginia, 527 U.S. 116, 139 (1999)) (criminal suspects

have a “natural motive to attempt to exculpate [themselves] as

much as possible” while being questioned by law enforcement). No relief is warranted on this ground. 

5This testimony included Bhagat’s denying knowing anyone who purchased Nvidia securities during the week of the X-Box contract award and

denying informing anyone outside of Nvidia of the contract award. Specific evidence to the contrary was introduced at trial by the prosecution.

UNITED STATES v. BHAGAT 1431
3. Tipping

To convict Bhagat of tipping Gill, the government was

required to prove that the tipper, Bhagat, provided the tippee,

Gill, with material, inside information, prior to the tippee’s

purchase of stock. See United States v. O’Hagan, 521 U.S.

642, 675 (1997). 

[12] Viewing the evidence in the light most favorable to the

prosecution, we cannot say that no reasonable trier of fact

could have found Bhagat guilty. Bhagat and Gill were friends;

Bhagat had provided inside information to his real estate broker, with whom he shared a more distant relationship; Gill

purchased stock shortly after Bhagat; and Gill’s purchase was

his largest purchase of the year. See United States v. Larrabee, 240 F.3d 18, 21-22 (1st Cir. 2001) (listing relevant factors). 

E. Sentencing

[13] Bhagat challenges the method used by the district

court to calculate his gains. Because the district court’s sentencing determinations were made under the then-mandatory

Sentencing Guidelines, we remand for limited reconsideration

under Ameline. See United States v. Moreno-Hernandez, No.

03-30387, 2005 WL 1560269, at *9 (9th Cir. July 5, 2005)

(“conclud[ing] that a limited remand is proper in all pending

direct criminal appeals involving unpreserved Booker error.”)

(emphasis in the original). 

III. CONCLUSION

The government’s use of the “office abuzz” theory did not

constructively amend the indictment or create a material variance between the facts alleged in the indictment and the evidence presented at trial. 

The district court provided adequate jury instructions on the

charge of obstructing an agency proceeding. 

1432 UNITED STATES v. BHAGAT
Sufficient evidence supported Bhagat’s convictions on all

counts. 

A limited remand of Bhagat’s sentence under Ameline is

appropriate.6

CONVICTION AFFIRMED, SENTENCE

REMANDED.

TASHIMA, Circuit Judge, dissenting: 

Atul Bhagat (“Defendant”) was charged in a seven-count

indictment with: (1) securities fraud (insider trading) in violation of 15 U.S.C. §§ 78j, 78ff, and 17 C.F.R. § 240.10b-5

(Counts One and Two); (2) making false statements to the

Securities and Exchange Commission (“SEC”) in violation of

18 U.S.C. § 1001 (Counts Three, Four, Five, and Six); and (3)

obstruction of justice in violation of 18 U.S.C. § 1501 by providing false information in an SEC investigation (Count

Seven). After a trial by jury, Defendant was convicted of all

counts, except Count Four. 

Defendant is an engineer and was employed by NVIDIA

Corporation, a Silicon Valley manufacturer of graphics processor and media communications devices. On March 5,

2000, NVIDIA entered into a contract with Microsoft to

develop and manufacture a 3-D graphics processor for Microsoft’s new video game console, the “X-Box.” As to how

Defendant obtained insider information about that contract,

paragraphs 6 and 7 of the indictment alleged:

6. On Sunday, March 5, 2000, at 11:04 p.m.

PST, NVIDIA’s president and chief executive offi6

In view of this ruling, Bhagat’s Motion for Supplemental Briefing is

denied as moot. 

UNITED STATES v. BHAGAT 1433
cer sent an e-mail message to all NVIDIA employees, including BHAGAT, announcing the contract.

The e-mail said that NVIDIA had obtained the XBox contract from Microsoft. The e-mail revealed

that Microsoft would “prepay” NVIDIA $200 million and predicted that “[i]f Xbox becomes as big as

Sony Playstation, we generate about $2B in sales

over 5 years.” 

7. On Monday, March 6, 2000, at 9:15 a.m.

PST, NVIDIA’s Vice President of Marketing sent an

e-mail to all NVIDIA employees. The e-mail was

entitled “xbox shhhhhh . . .” and said: 

[The NVIDIA CEO] called me a few minutes ago

(he is travelling) and asked that i remind everyone

to keep xbox news quiet. Not a word to anyone

outside of our walls. Lets let the news roll out in

a controlled way. Microsoft plans to make the

news public this Friday at GDC. But anything can

happen; lets don’t jinx it! 

The indictment then charged, and Defendant does not contest,

that later the same day (at 12:23 p.m.), he purchased 1,000

shares of NVIDIA stock at 61-3/4 and 61-7/8 per share. The

contract was publically announced on March 10 and NVIDIA

stock immediately and substantially increased in price. Defendant sold his shares for $110,000, reaping a profit in excess

of $48,000. 

The government’s initial theory, consistent with the indictment, was that Defendant read the e-mails when he arrived at

work that Monday morning, but there is no direct evidence

that he did so. Defendant denied that he read the e-mails

before placing his buy order and testified that he did not read

1434 UNITED STATES v. BHAGAT
them until 1:00 p.m., approximately 40 minutes after he made

his purchase.1

During its cross-examination of Defendant, the government

pursued what the parties refer to as the “office abuzz” theory.

The government’s questioning of Defendant suggested that

because of the open cubicle configuration of the office,

Defendant could not help but overhear conversations among

his co-workers regarding the exciting news of the X-Box contract — that the office was “abuzz” with the news. Defendant

denied that he overheard any X-Box office conversation. The

district court overruled Defendant’s objection that the government should not be allowed to argue the “office abuzz” theory

because “there is no evidence in the record the company was

abuzz with the news,” as indeed there was not, as a basis of

liability. It also rejected Defendant’s proffered instruction that

“the mere existence of an open cubicle environment may not,

standing alone, give rise to an inference that Bhagat possessed

insider information.” 

Given that latitude, the government argued in closing that

even if the jury could not infer that Defendant obtained

insider information from the e-mails, it could draw that inference from the fact that the office was “abuzz” with information about the X-Box contract. Specifically, the prosecutor

argued “[i]n terms of whether Bhagat possessed the information, you should consider the magnitude of this news. This

was big, big, big news. The company [was] abuzz with this

news.” The prosecutor then walked the jury through the evidence that he claimed supported the “office abuzz” theory of

liability:

He [Defendant] walked through the reception area,

he sat in a room filled with people, with cubicles

with no doors, he went to the cafeteria, and he says,

1Defendant also testified that when he learned of the trading blackout

he attempted to cancel his trade, but was unsuccessful. 

UNITED STATES v. BHAGAT 1435
you know, he walked around in a bubble and this big

news didn’t reach him over the course of three hours

with other people. 

This “office abuzz” theory of liability as to how Defendant

acquired insider information, an essential element of the

charged crime,2 is factually distinct from the theory charged

in the indictment, that Defendant acquired the insider information through reading the company-wide e-mails. Because

it is a new, uncharged theory, Defendant had no notice of it

and no opportunity to defend against it, to rebut it with his

own evidence.3

Thus, under our case law, this clearly is a case of a prejudicial variance from the indictment which requires reversal.

This case is indistinguishable from United States v. Choy, 309

F.3d 602 (9th Cir. 2002). There the indictment charged that

Choy “gave, offered, and promised a thing of value (to wit,

$5,000.00) to a public official.” Id. at 605. At trial, however,

the government advanced an uncharged theory that Choy purchased computers to be used by a public official in a bribery

scheme. See id. at 606. The district court instructed the jury

that it could conclude that Choy “provided a thing of value”

under either the theory charged in the indictment or the theory

advanced at trial. Id. We reversed because the new theory was

a variance that involved “a set of facts distinctly different

2Although the acquisition of insider information is technically an element only of the Count One charge — insider trading — factually, it is

an indispensable predicate of all of the remaining counts of conviction. 

3Accepting the government’s contention, the majority asserts that the

“office abuzz” theory was permitted to be “invoked” “for the limited purpose of impeaching Bhagat’s credibility. . . .” Maj. op. at 1425. Yet, in

rejecting Defendant’s proposed instruction that this theory could not be a

basis of liability, the trial court failed to give a limiting instruction that this

theory, and any evidence in support of it, could be used only to assess

Defendant’s credibility and not as a basis of liability. Further, the government’s closing argument, summarized above, belies its contention that the

theory was invoked solely to impeach Defendant’s credibility. 

1436 UNITED STATES v. BHAGAT
from that set forth in the indictment. Id. at 607. So too here,

the “office abuzz” theory is a variance that involves “a set of

facts distinctly different from that set forth in the indictment.”

Id.

We have previously observed that “[o]ne of the primary

purposes of an indictment is to inform a defendant of ‘what

he is accused of doing in violation of the criminal law, so that

he can prepare his defense.’ ” United States v. Adamson, 291

F.3d 606, 616 (9th Cir. 2002) (quoting United States v. Tsinhnahijinnie, 112 F.3d 988, 991 (9th Cir. 1997)). As in Adamson:

This purpose was not served here. If the indictment had not specified a different particular misrepresentation, one might say the variance was benign.

Having specified a different particular misrepresentation, however, the indictment not only failed to

inform the defendant of the actual misrepresentation

that would be shown at trial, but it also affirmatively

misled the defendant and obstructed his defense at

trial. 

Id. Accordingly, I would conclude that the variance here

affected Defendant’s substantial rights and, thus, requires

reversal. See id.

While paying lip service to the rule that “[a] material variance exists if a materially different set of facts from those

alleged in the indictment is presented at trial, and if that variance affects the defendant’s ‘substantial rights’ ” (citing

Adamson, 291 F.3d at 615-16), the majority elides the analysis required by that rule and simply concludes that “[a]t all

times, the pertinent fact was that Bhagat was aware of the emails notifying employees of the X-Box contract award.”

Maj. op. at 1427. Yet, that is precisely the determinative issue

that was hotly contested in this case. While it is uncontested

that the two company-wide e-mails were transmitted, there is

UNITED STATES v. BHAGAT 1437
no direct evidence that Defendant was “aware” of them;

indeed, he denied that he read his office e-mails until 1:00

p.m. on Monday. Thus, the majority conveniently jumps to a

conclusion that is unsupported by the record. 

The majority’s discussion of this issue concludes by noting

that “[a]s in Adamson, in Choy we focused on the extent to

which the jury was steered toward a finding at variance with

the indictment.” Id. at 1428 (citing Choy, 309 F.3d at 607;

Adamson, 291 F.3d at 615-16). It then asserts that “[n]othing

of the sort occurred in this case, and the verdict reflected no

material variance from the charges in the indictment.” Id. But

what occurred in Adamson and Choy is exactly what occurred

in this case: By permitting the government to argue in closing

that insider liability could be predicated on the “office abuzz”

theory, “the jury was steered toward a finding [acquisition of

insider information] at variance with the indictment,” which

charged the acquisition of insider information solely from a

reading of the company-wide e-mails. And the majority’s

assertion that “the verdict reflected no material variance from

the charges in the indictment,” id., is a non sequiter. First, the

majority’s speculation of what the verdict may reflect is not

the test under our variance jurisprudence. Second, the very

reason for our variance jurisprudence is precisely because we

cannot know whether “the verdict reflected no material variance from the charges in the indictment.” 

I therefore respectfully dissent from the majority’s conclusion that “[t]he record does not support a claim of variance,”

id., and from its holding affirming the judgment of conviction.

1438 UNITED STATES v. BHAGAT