10-48 19-cr

Unite d Sta tes v . Lew is



### U N I TED S TATE S COURT O F AP PEA L S FOR T HE S E CO

ND C I R CU I T



## S UM M ARY ORD E R

R UL I NGS BY SU

M M A R Y OR DER DO NOT H

A V E PR E CEDENT IA

L E FFE C T

. C I T

A T I O N TO A SU

M M A R Y OR DER F I LED O N OR AFTER J

A N U A R Y 1, 2007, I S PER MI T TED A

N D IS GO

V ER NED BY FEDER

A L R ULE OF AP PE LL

A TE PR OCEDUR E 32.1 A

N D TH I S COUR

T ’ S L OC

A L R ULE 32

. 1

. 1

. WHEN CI T I NG A SU M M A R Y OR DER I N A DOCU M ENT F I LED WI TH TH I S COUR T , A P

A R TY M US T C I TE E I THER THE FEDER A L AP PEN

D I X OR A

N E LE C TR O N I C D A T A B AS E ( WI TH THE NOT

A T I O N “ SU M M A R Y OR DER ”). A P

A R TY C I T I NG A SU

M M A R Y OR DER M US T S ER V E A CO PY OF I T O

N A NY P A R TY NOT R

E PR E S ENTED BY COU

NS E L

.

1 At a state d term of the United Stat es Co urt o f App eals 2 for the Se cond Circu it, h eld a t the Dani el Pa trickMoyn ihan 3 Unite d Sta tes C ourth ouse, 500 Pearl Stre et, i n the Cityof 4 New Y ork, on th e 18 day of Ju ly, two th ousan d twe lve. th 5 6 PRESENT: 7 DENNI S JAC OBS, 8 ChiefJudge, 9 DENNYCHIN , 10 CHRIS TOPHE R F. DRONE Y 11 Circu it Ju dges. 12 13 - - - - - - - - - - - - - - - - - - - -X 14 UNITE D STATES, 15 Appel lee, 16 17 -v.- 10-48 19-cr 18 19 MARIOS. L EVIS, 20 Defen dant- Appel lant. 21 - - - - - - - - - - - - - - - - - - - -X 22 23 FOR D EFENDANT-APPELLANT: Ellio t H. Scher ker ( Jeffr ey B. 24 Sklar off a nd Br igid F. Ce ch 25 Samol e, on the brief ), Gr eenbe rg 26 Traur ig, P .A., Miami , FL. 27 28 FOR APPELL EE : Brent S. W ible (Kath erine Polk 29 Faill a, on the brief ), As sista nt 30 Unite d Sta tes A ttorn eys, for 31 Preet Bhar ara, Unite d Sta tes 32 Attor ney f or th e Sou thern 33 Distr ict o f NewYork , NewYork , 34 NY.

11 Appea l fro m a j udgme nt of the Unite d Sta tes D istri ct 2 Court for the S outhe rn Di stric t of New Y ork ( Gries a, J. ).

3 UPON DUE C ONSID ERATI ON, I T IS HEREB Y ORD ERED, ADJUDGED, 4 AND D ECREE D that the judgm ent o f the dist rict court is 5 AFFIR

MED i n par t, VACATED in p art, AND REMAND ED.

6 Defen dant- Appel lant Mario S. L evis appea ls hi s 7 convi ction and sente nce f or on e cou nt of secu ritie s fra ud, 8 15 U. S.C. § 78j (b), and t wo co unts of wi re fr aud, 18 U. S.C. 9 § 134 3. H e rai ses s ix is sues on ap peal. We assum e the 10 parti es’ f amili aritywith the under lyingfact s, th e 11 proce dural hist ory o f the case , andthe issue s on appea l.

12 [1] Levis was the S enior Exec utive Vice Pres ident and 13 Treas urer of Do ral F inanc ial C orpor ation (“Do ral”) at t he 14 time he as suredinve stors that cert ain r isks were cappe d. 15 Altho ugh n ot al l con tract s hadembe dded caps, he s ought to 16 defen d aga inst these char ges o n the grou nd th at tr ansac tions 17 invol ving hedgi ng af forde d the same assu rance , or (at l east) 18 he re asona bly t hough t so. On appea l he argue s tha t the 19 distr ict c ourt erron eousl y bar red h im fr om pr esent ing h is 20 hedgi ng de fense

.

21 “A di stric t cou rt ab uses its d iscre tion when

. . . its 22 evide ntiar y rul ings are a rbitr ary, irrat ional , or simpl y 23 erron eous as a matte r of law.” Uni ted S tates v. C adet, 664 24 F.3d 27, 3 2 (2dCir. 2011 ).

25 The d istri ct co urt e rred in ba rringLevi s fro m 26 prese ntinga he dgingdefe nse a s to Count Thre e: th e wir e 27 fraudcoun t pre dicat ed on Levi s’s m issta temen ts re gardi ng 28 contr actua l cap s on the p ass-t hroug h rat es of the mortg age 29 pools . Do ral’s hedg es to ok va rious form s, su ch as 30 deriv ative fina ncial inst rumen ts, f uture s andopti ons, 31 forwa rd sa le co mmitm ents, inte rest rate swaps , int erest rate 32 colla rs, a nd op tions to r epurc hase the m ortga ge po ols. 33 These meas ures were not c ontra ctual caps , whi ch wo uld h ave 34 guara nteeda mi nimumpass -thro ugh r ate f or Do ral, and 35 there fore wouldhave been the safes t mea sure. But thes e 36 hedge s mig ht ha ve fu nctio ned a s eff ectiv e cap s tha t 37 minim ized the o veral l fin ancia l ris k to Doral in t he ev ent 38 that a ris e in inter est r ates impai red D oral’ s inc ome f rom 39 the m ortga ge sa les.

21 One e lemen t of wire fraudis “ a sch eme t o def raud. ” 2 Unite d Sta tes v . Pie rce, 224 F .3d 1 58, 1 65 (2 d Cir . 200 0); 3 accor d 18 U.S.C . § 1 343. “To estab lish [that ] . .

. 4 eleme nt, t he go vernm ent m ust p rove (i) t he ex isten ce of a 5 schem e to defra ud, ( ii) t he re quisi te sc iente r (or 6 fraud ulent inte nt) o n the part of t he de fenda nt, a nd (i ii) 7 the m ateri alityof t he mi srepr esent ation s.” Pierc e, 22 4 8 F.3d at 16 5 (in terna l cit ation s omi tted) . Ev idenc e tha t the 9 hedge s fun ction ed as a ca p cou ld ha ve ra ised doubt s as to 10 mater ialit y. T he di stric t cou rt th erefo re er red i n 11 exclu ding Levis frompres entin g suc h evi dence , inc ludin g lay 12 and e xpert test imonyinvo lvingthe exist ence of he dges and 13 their effe ctive ness. Acc ordin gly, Levis ’s co nvict ion a s to 14 the t hird count must be v acate d andthe matte r rem andedfor 15 re-tr ial.

16 Howev er, t he di stric t cou rt di d not abus e its 17 discr etion in b arrin g tes timon y andevid ence invol ving 18 hedge s wit h reg ard t o Cou nt Fi ve (w ire f raud) and Count One 19 (secu ritie s fra ud), which are basedon L evis’ s 20 misre prese ntati on th at Do ral h ad be en th e sub ject of tw o 21 indep enden t eva luati ons. As t o eac h of those coun ts, t he 22 Gover nment pres entedsubs tanti al ev idenc e tha t nei ther of 23 the t wo va luati ons w as in depen dent. Alt hough the 24 Gover nment ’s ev idenc e tha t hed ging was i neffe ctive may have 25 been used to co rrobo rate the i mpact of L evis’ s 26 misre prese ntati ons, the e xiste nce a nd ef fecti venes s of 27 hedgi ng is irre levan t to wheth er th ere w ere, in fa ct, t wo 28 indep enden t eva luati ons. Beca use h edgin g was lega lly 29 irrel evant to w hethe r Lev is co mmitt ed se curit ies a nd wi re 30 fraudon t hat b asis, the distr ict c ourt did n ot er r in 31 exclu ding Levis ’s he dgingdefe nse a s to those coun ts. 1

32 There is a lso n o dan ger t hat t he no w-vac ated wire- fraud 33 convi ction invo lvingcont ractu al ca ps sp illedover to

The jury convi cted Levis as t o Cou nt On e bas ed on 1 misre prese ntati ons r egard ing c aps and misr epres entat ions regar ding the t wo in depen dent valua tions . A- 1785 (jury verdi ct fo rm). Even if t he ve rdict as t o cap s mus t be vacat ed du e to the e xclus ion o f Lev is’s hedgi ng de fense , his misre prese ntati on in volvi ng th e val uatio ns is an i ndepe ndent basis that supp orts the v erdic t of convi ction on C ount One. Our d ecisi on wi th re gard to Co unt T hree there fore does not requi re us to v acate Levi s’s c onvic tion as to Coun t One (secu ritie s fra ud).

31 Levis ’s co nvict ions for m isrep resen tatio ns in volvi ng 2 indep enden t val uatio ns. “A de fenda nt be ars a n ext remel y 3 heavyburd en wh en cl aimin g pre judic ial s pillo ver.” Uni ted 4 State s v. Griff ith, 284 F .3d 3 38, 3 51 (2 d Cir . 200 2). 5 Preju dicia l spi llove r req uires , int er al ia, a n eva luati on of 6 “the stren gth o f the gove rnmen t’s c ase” as to the count s in 7 quest ion. Id. The evide nce t hat L evis misre prese nted that 8 Doral had been subje ct to two indep enden t eva luati ons i s so 9 overw helmi ng th at th ere i s no dange r of spill over and n o 10 “‘pre judic e so subst antia l as to am ount to a misca rriag e of 11 justi ce.’” Id. (quo ting Unite d Sta tes v . Fri edman , 854 F.2d 12 535, 563 ( 2d Ci r. 19 88)). In any e vent, Levi s has forf eited 13 any s uch a rgume nt byfail ing t o rai se it on a ppeal . Se e 14 Unite d Sta tes v . Per eira, 465 F.3d 515, 520 n .5 (2 d Cir

. 15 2006)

.

16 [2] Levis cont ends that his t rial did n ot co mmenc e wit hin 17 70 da ys of the publi c fil ing o f his indi ctmen t, as requ ired 18 by th e Spe edy T rial Act, and t hat n o exc eptio n to the S peedy 19 Trial Act was s atisf ied. See 18 U. S.C. § 316 1(h)( 1)-(7 ).

20 In Ma y 200 9, th e dis trict cour t gra nted Levis ’s 21 unopp osed motio n for a le ngthyadjo urnme nt of the Septe mber 22 2009 trial date beca use L evis antic ipate d rec eivin g 23 subst antia l dis cover y fro m the Gove rnmen t. I n Mar ch 20 10, 24 just prior to t rial, Levi s mov ed to dism iss t he in dictm ent 25 becau se th e dis trict cour t hadnot made the f indin gs 26 neces sary to sa tisfythe ends- of-ju stice exce ption to t he 27 Speed y Tri al Ac t whe n it grant ed Le vis’s moti on fo r 28 adjou rnmen t. S ee 18 U.S. C. § 3161( h)(7) (A).

29 The S peedyTria l Act requ ires that the f indin gs 30 neces sary for t he en ds-of -just ice e xcept ion “ be ma de, i f 31 only in th e jud ge’s mind, befo re gr antin g the cont inuan ce,” 32 and t hat t hose findi ngs n eed o nly “ be pu t on the r ecordby 33 the t ime a dist rict court rule s on a def endan t’s m otion to 34 dismi ss.” Zedn er v. Unit ed St ates, 547 U.S. 489, 506-0 7 35 (2006 ).

36 There was no vi olati on of the Speed y Tri al Ac t bec ause, 37 befor e the dist rict court form ally denie d Lev is’s motio n to 38 dismi ss, i t rat ifieda le tter lodge d by the G overn ment, 39 confi rmingthat the distr ict c ourt “ha[d ] mad e the requ isite 40 findi ng th at th e end s of justi ce wa rrant ed th e con tinua nce 41

. . . for the r eason s sta ted i n” Le vis’s moti on fo r 42 adjou rnmen t. A-130 -31.

41 [3] Levis cont ends that venue in t he So uther n Dis trict of 2 New Y ork w as imprope r as to Co unt F ive b ecaus e the re wa s no 3 direc t evi dence that he c ausedDora l’s 1 0-K r eport 4 (cont ainin g the misr epres entat ion r egard ing t he in depen dent 5 valua tions ) to be tr ansmi tted to th at di stric t. T he 6 Gover nment bear s the burd en of prov ing v enue by a 7 prepo ndera nce o f the evid ence. Uni ted S tates v. M agass ouba, 8 619 F .3d 2 02, 2 04 (2 d Cir . 201 0). We re view de no vo th e 9 suffi cienc y of the e viden ce su pport ing t he ju ry’s findi ng 10 that venue was prope r. U nitedStat es v. Tzol ov, 6 42 F. 3d 11 314, 318 ( 2d Ci r. 20 11).

12 “[V]e nue i s pro per i n a d istri ct wh ere ( 1) th e 13 defen dant inten tiona lly o r kno wingl y cau ses a n act in 14 furth eranc e of the c harge d off ense to oc cur .
. . or (2 ) it 15 is fo resee able that such an ac t wou ld oc cur i n the dist rict 16 of ve nue [ and i t doe s].” Unit ed St ates v. Ro yer, 549 F .3d 17 886, 894 ( 2d Ci r. 20 08) ( secon d alt erati on in orig inal) 18 (inte rnal quota tion marks omit ted). Whe n the case invo lves 19 publi catio n on the i ntern et, v enue is pr oper in an y dis trict 20 where it i s rea sonab ly fo resee able that the m ateri al wi ll be 21 acces sed. See id. a t 895 ; Uni ted S tates v. R owe, 414 F .3d 22 271, 279 ( 2d Ci r. 20 05).

23 It wa s rea sonab ly fo resee able that Doral ’s 10 -K, w hich 24 is av ailab le on the inter net t hroug h the Secu ritie s and 25 Excha nge C ommis sion’ s web site, woul d be acces sed b y som eone 26 in th e Sou thern Dist rict of Ne w Yor k. L evis knew that at 27 least one of th e ana lysts repo rtingon D oral (Omot ayo 28 Okusa nya, a res earch anal yst a t UBS ) was base d in New Y ork 29 and w ould revie w the repo rt. Levis info rmed Okusa nya t hat 30 the 1 0-K w ould be re lease d soo n andthat soon afte rward 31 there woul d be a con feren ce ca ll wi th Do ral’s mana gemen t--a 32 call in wh ich O kusan ya pa rtici patedfromhis offic e in 33 Manha ttan. Ven ue in the South ern D istri ct of New York was 34 prope r.

35 [4] Levis cont ends that he is enti tled to a new t rial based 36 on imprope r jur y ins truct ions. The prop rietyof a jury 37 instr uctio n is a que stion of l aw th at we revi ew de novo
. 38 Unite d Sta tes v . Geo rge, 386 F .3d 3 83, 3 97 (2 d Cir . 200 4). 39 “To s ecure reve rsal basedon a flaw ed ju ry in struc tion, a 40 defen dant must demon strat e bot h err or an d ens uing 41 preju dice. ” Un ited State s v. White , 552 F.3d240, 246 (2d 42 Cir. 2009) . “Ajuryinst ructi on is erro neous if i t mis leads 43 the j ury a s to the c orrec t leg al st andar d or does not

51 adequ atelyinfo rm th e jur y on the l aw.” Unit ed St ates v. 2 Walsh , 194 F.3d37, 52 (2 d Cir .1999 ) (in terna l quo tatio n 3 marks omit ted).

4 A def endan t eng ages in wi re fr aud w hen h e int entio nally 5 depri ves a vict im of “pot entia lly v aluab le ec onomi c 6 infor matio n . . . th at co uld i mpact on e conom ic de cisio ns” 7 made by th e vic tim. Unit ed St ates v. Wa llach , 935 F.2d445, 8 463 ( 2d Ci r. 19 91); accor d Uni ted S tates v. D inome , 86 F.3d 9 277, 283 ( 2d Ci r. 19 96); Unite d Sta tes v . D’Amato, 39 F .3d 10 1249, 1257 (2d Cir. 1994) . Le vis d epriv ed in vesto rs of 11 infor matio n tha t cou ld impact their inve stmen t dec ision s by 12 false ly cl aimin g tha t Dor al ha d bee n sub ject to tw o 13 indep enden t eva luati ons t hat c onfir med D oral’ s own inte rnal 14 valua tions

.

15 Levis argu es th at th e dis trict cour t err ed byfail ing 16 to in struc t the jurythat the infor matio n wit hheldfrom 17 inves tors must have some indep enden t val ue or must bear on 18 the u ltima te va lue o f the tran sacti on. See U nitedStat es v. 19 Mitte lstae dt, 3 1 F.3 d 120 8, 12 17 (2 d Cir . 199 4). Even if 20 this was a n app ropri ate s tatem ent o f the law, Levi s can not 2 21 show preju dice. By misre prese ntingthat Dora l hadbeen 22 value d by two i ndepe ndent eval uator s, Le vis d epriv ed Do ral’s 23 actua l andpote ntial inve stors of i nform ation that had 24 indep enden t val ue an d tha t hadbear ing o n the ulti mate value 25 of Do ral s tock. Eve n if Doral ’s in terna l eva luati ons w ere 26 corre ct, i ndepe ndent valu ation s wou ld be of f ar gr eater 27 signi fican ce to poss ible inves tors and w ould subst antia lly 28 affec t the mark et va lue o f Dor al’s stock

.

29 [5] Levis also cont ends that the d istri ct co urt e rred by 30 faili ng to prop erly instr uct t he ju ry th at he is n ot gu ilty 31 of wi re fr aud i f he actedwith a go od fa ith b elief that no 32 harm wouldbefa ll Do ral’s inve stors

.

Mitt elsta edt i nvolv ed th e fai lure of a gover nment 2 emplo yee t o rev eal a conf lict of in teres t andfulf ill o ne’s fiduc iary oblig ation to t he lo cal g overn ment. 31 F.3d at 1217. Bec ause the m ail a nd wi re fr aud s tatut es do not crimi naliz e gov ernme nt et hics law, we co nclud ed th ere w as no fraud . Id . Th e cas es si nce M ittel staed t, ha ve li mitedit to it s compelli ng fa ctual sett ing. See, e.g. , Din ome, 86 F.3d at 28 4.

61 The d istri ct co urt c harge d the jurythat

2 [G]oo d fai th is a de fense to a char ge of 3 fraud

. . . . A n hon est b elief in t he tr uth o f a 4 repre senta tion is a good defen se no matt er ho w 5 inacc urate the state ment may t urn o ut to be. In 6 consi derin g whe ther or no t the defe ndant acte d in 7 good faith , you are instr uctedthat a be lief by 8 the d efend ant, if su ch a belie f exi sted, that 9 ultim atelyever ythin g wou ld wo rk ou t fav orabl y for 10 inves tors does not r equir e a f indin g by you t hat 11 the p erson acte d in good faith

.

12 T:371 9-20. The dist rict court also inst ructe d the jurythat 13 the G overn ment must prove that Levi s “in tende d to decei ve 14 and t o the reby cause harmto t he vi ctims of t his s cheme ,” 15 T:372 7, an d tha t Lev is “w ould be gu ilty of in tendi ng to 16 infli ct ha rm on inve stors if h e int endedto p ut fa lse 17 infor matio n bef ore t hem w hich woulddepr ive t hem o f the 18 abili ty to make inve stmen t dec ision s bas ed on actu al fa cts,” 19 T:372 8.

20 A jur y ins truct ion i s con sider ed in comb inati on wi th 21 other inst ructi ons t o det ermin e whe ther the i nstru ction s, as 22 a who le, c orrec tly d escri be th e lawin t his C ircui t. S ee 23 Unite d Sta tes v . Mit chell , 328 F.3d77, 82 (2 d Cir . 200 3). 24 Taken toge ther, thes e ins truct ions accur atelystat e the law 25 of th is Ci rcuit : eve n if Levis mean t to cause no u ltima te 26 harm to in vesto rs be cause he h onest ly be lieve d Dor al to be 27 prope rly v aluat ed, h e int endedto c ause them “imme diate 28 harm” by d enyin g the m the “rig ht ‘t o con trol [thei r] as sets 29 by de privi ng [t hem] of th e inf ormat ion n ecess ary t o mak e 30 discr etion ary e conom ic de cisio ns.’” See Unit ed St ates v. 31 Fergu son, 676 F .3d 2 60, 2 80 (2 d Cir . 201 1) (a s ame nded) 32 (quot ing U nitedStat es v. Ross omand o, 14 4 F.3 d 197 , 201 n.5 33 (2d C ir. 1 998)) ; acc ord U nitedStat es v. Leon ard, 529 F .3d 34 83, 9 1-92 (2d C ir. 2 008). 3

Levi s’s r elian ce on Ross omand o is mispl aced. In 3
Rosso mando , the defe ndant beli eved that he wa s cau sing no harm (imme diate or o therw ise), wher eas L evis inten tiona lly depri ved D oral’ s inv estor s of impor tant infor matio n eve n if he ma y hav e bel ievedthat his misre prese ntati on wo uld c ause no ul timat e har m bec ause he th ought Dora l was a wi se inves tment . Se e Fer guson , 676 F.3dat 2 80 (d iscus sing

71 The d istri ct co urt d id no t err in i ts in struc tion to 2 the j ury r egard ing L evis’ s goo d-fai th de fense

.

3 [6] Levis argu es th at th is is one of th e “ra re ca se[s] ” in 4 which an i mprop er st ateme nt in the Gover nment ’s su mmati on 5 was s o pre judic ial a s to warra nt a new t rial. See Unit ed 6 State s v. Rodri guez, 968 F.2d 130, 142 ( 2d Ci r. 19 92). A 7 defen dant who s eeks to ov ertur n a c onvic tion basedon a 8 prose cutor ’s co mment in s ummat ion m ust s ustai n the “hea vy 9 burde n” of show ing t hat “ the c ommen t, wh en vi ewed again st 10 the e ntire argu ment to th e jur y, an d in the c ontex t of the 11 entir e tri al, w as so seve re an d sig nific ant a s to have 12 subst antia lly p rejud iced [the defen dant] , dep rivin g himof a 13 fair trial .” U nitedStat es v. Farh ane, 634 F .3d 1 27, 1 67 14 (2d C ir. 2 011) (inte rnal citat ion a nd qu otati on ma rks 15 omitt ed).

16 The G overn ment’ s summatio n see med t o int imate that the 17 defen se’s strat egy w as di shone st. When alert ed, t he 18 Gover nment apol ogize d to the j ury a nd di savow ed an y suc h 19 infer ence. In that light , it canno t be said that the 20 state ment was s o sev ere a nd si gnifi cant as to prej udice 21 Levis at a ll--m uch l ess d epriv e himof h is ri ght t o a f air 22 trial

.

23 Levis also clai ms th at th e Gov ernme nt un fairl y 24 explo ited the e xclus ion o f the hedg ing d efens e. T his 25 argum ent i s obv iatedby o ur ru ling that it wa s not erro r to 26 exclu de th e hed ging defen se (a s to the s urviv ing c ounts ).

27 We ha ve co nside red a ll of Levi s’s a dditi onal argum ents 28 and f ind t hem t o be witho ut me rit. Acco rding ly, t he 29 judgm ent o f the dist rict court is A FFIRM ED in part , and 30 VACAT ED in part . Th e mat ter i s REMANDED for furth er 31 proce eding s con siste nt wi th th is de cisio n.

32 FOR T HE CO URT: 33 Cathe rine O’Hag an Wo lfe, Clerk

Rosso mando , 144 F.3dat 2 00-03 & n. 5). Rosso mando has been “limi ted t o the quit e pec uliar fact s tha t compelle d [it s] resul t.” Fergu son, 676 F .3d a t 280 (alt erati on in orig inal) (inte rnal quota tion marks omit ted).

8