Source: https://caselaw.findlaw.com/us-1st-circuit/1702648.html
Timestamp: 2019-04-22 18:58:01+00:00

Document:
UNITED STATES of America, Appellee, v. Albert REDA, Defendant–Appellant.
Before HOWARD, Chief Judge, SOUTER,* Associate Justice, and LIPEZ, Circuit Judge. William J. Kopeny for appellant. Mark T. Quinlivan, Assistant United States Attorney, with whom Carmen M. Ortiz, United States Attorney, was on brief, for appellee.
Albert Reda was caught in an FBI sting targeting the market for penny stocks and was convicted of wire and mail fraud. See 18 U .S.C. §§ 1343, 1341. His appeal raises two claims of trial error (evidentiary rulings with respect to a key witness and purportedly improper vouching by the government) and two of sentencing error (application of an enhancement for violating securities laws and the loss calculation). We affirm as to both trial error claims and the sentencing enhancement. As to the loss calculation, the government has confessed error, and we remand for resentencing.
Details of this FBI sting, titled “Operation Penny Pincher,” were set out in United States v. Prange, 771 F.3d 17, 21–25 (1st Cir.2014). We will assume familiarity with that case, and describe here only those details necessary for resolving this one.
In Operation Penny Pincher, the FBI created a fictitious hedge fund and designated an undercover agent as its pretended, corrupt manager. Well-connected people (some of whom were FBI cooperators) typically arranged meetings between the manager and executives of penny stock companies. These latter individuals were identified in advance as likely to be interested in proposals by the manager to invest the fund's money in the executives' penny stocks at premium prices in return for 50% kickbacks concealed through phony consulting agreements solely for the manager's benefit.
Reda was one such executive, being chairman of the board of 1st Global Financial Corporation, which was in the business of purchasing distressed real estate. Arrangements were made for him to meet with the agent on June 29, 2011.
[T]he other advantage is I don't, because, because this is the type of deal that this is, I don't get into your business. I don't, I don't really, I won't run, help run your business[.] I don't wanna help run your business[.] I don't want to have a say[.] I don't want a say[.][Y]our business is your business [.][I]f you're successful, then I win, my fund wins[.][I]f you're unsuccessful, then, well, I win anyway and, you win to an extent, because [y]ou've got that working capital that you need.
At no point during this meeting did Reda express any reservations or indicate anything but agreement. When the agent emphasized that the deal had to be kept secret from his fund, Reda said that was “[f]ine with me.” His only question during the conversation was logistical, about the address to which he should send the 1st Global stock certificates.
The deal was to be done through tranches of increasing dollar value. The first tranche was one of $32,000, for 320,000 restricted shares at 10 cents each (even though the common shares were trading at 4 to 5 cents). Shortly after the June 29th meeting, Reda and the agent executed the stock purchase and consulting agreements, and Reda mailed, through Federal Express, a stock certificate for the 320,000 restricted shares. The FBI responded with a wire transfer of $32,000 to Reda, who later wired $16,000 to the bank account of the agent's fake consulting company.
The agent and Reda next planned for a second tranche of $75,000, this time for 500,000 restricted shares at 15 cents each. Reda sent the agent a stock purchase agreement for these shares as well as a modified invoice for $37,500 in consulting services (prepared by Reda on behalf of the agent). These were promptly followed by Reda's mailing, again through Federal Express, of a stock certificate for the 500,000 restricted shares. This transaction, however, was never completed, owing to Reda's arrest sometime later on charges of wire and mail fraud.
Reda's defense was that he did not understand the deal to be illegitimate, but the jury convicted him on both the wire and mail fraud counts. The district court calculated Reda's sentencing range under the Sentencing Guidelines at 30–37 months, but imposed a below-Guidelines prison sentence of 26 months.
Reda raises a host of evidentiary objections to the undercover agent's testimony. He contends that it was improper expert opinion testimony under Federal Rules of Evidence 702 and 704; that it was improper lay opinion testimony under Rule 701, because it was lacking foundation, unhelpful to the jury, and improperly called for a legal conclusion; and that it was unduly prejudicial under Rule 403. He further says that these errors cumulatively violated his due process right to a fair trial.
The district court did not abuse its discretion in permitting the undercover agent to testify under Rule 701 as a lay, and not expert, witness, a conclusion dictated by Prange, in which the same undercover agent also testified, and quite similarly. The defendants there raised this very objection, and we rejected it, explaining at length why the lay designation was correct. Here, as in Prange, the agent used prefatory language appropriate to avoid any undue suggestion of expert character (e.g., “This is my attempt to make clear that ․”), and we too “fail to see why we should treat the agent's interpretation of his own conversations as expert testimony.” Prange, 771 F.3d at 27. Indeed, far from offering an expert opinion about the functioning of the financial industry, the agent was explaining, as the district judge put it, “why the deal ․ was structured [this] way.” As we explained in Prange, the agent's own explanation of his objectives in such fact-bound circumstances mitigated the risk of investing his testimony with the persuasive premium of an expert's conclusion. Id.
What remains are Reda's unpreserved objections, listed above. Under plain error review, we believe they are foreclosed by Prange, which discussed and rejected the same arguments. 771 F.3d at 25–30.2 While Reda correctly observes that the factual details of his case and Prange are not identical, we think he rests his argument on details that fail to distinguish the cases. The circumstances revealed in the two cases are sufficiently similar to conclude with ease that the district court committed no obvious error in admitting the undercover agent's testimony. And having concluded that none of Reda's evidentiary challenges has any merit, we reach the same result with respect to his related due process claims.
Reda levels a different sort of objection at the portion of the undercover agent's testimony that explained that Reda had been vetted or “predicated” in advance of the June 29th meeting. Reda argues that, by presenting evidence to the jury that it had already identified Reda as a likely criminal, the government improperly “vouched” for its case and its witnesses, in violation of due process.
This argument is remarkable because it was Reda himself whose cross-examination of the agent elicited the testimony to which he now objects. In this circuit, “[o]rdinarily, a party who elicits evidence would waive any claim that its admission was error.” United States v. Harris, 660 F.3d 47, 52 (1st Cir.2011); see also United States v. Etienne, 772 F.3d 907, 918 (1st Cir.2014) (“We will not now suffer to hear Etienne complain of a purported error for which he alone was responsible.”). Reda's counsel failed to request to withdraw the questions that elicited this information or to move that the damaging evidence be stricken. Accordingly, we see no reason to make an exception to the general rule here. See Harris, 660 F.3d at 52. Thus, Reda has waived the argument.
As to sentencing, Reda first says that the district court procedurally erred in calculating his sentencing range under the Sentencing Guidelines when it applied a four-level enhancement for “a violation of securities law” under U.S.S.G. § 2B1.1(b)(19)(A), even though his company's stock was unregistered. As before, Reda failed to raise this point below, so we review for plain error.
Reda's implicit premise, that the enhancement applies only when a defendant dealt in registered securities, is unsound. The term “securities law” includes Section 10(b) of the Securities Act of 1934 and Rule 10b–5,3 neither of which is limited to registered securities. See 15 U.S.C. § 78c(a)(10) (defining “security” broadly, with no exclusion for unregistered securities). Because Reda's conduct here violated Rule 10b–5 by employing a fraudulent scheme relating to the sale of unregistered securities, 17 C.F.R. § 240.10b–5, the district court committed no error, plain or otherwise, in applying the enhancement.
Finally, Reda contends that the district court erred in calculating the relevant sentencing fact of loss under U.S.S.G. § 2B1.1(b)(1)(E). Because he did make this objection below, the district court's interpretation and application of the Guidelines receives de novo review and its factual findings are reviewed for clear error. United States v. Jones, 778 F.3d 375, 383 (1st Cir.2015).
Reda set up two specific transactions with the undercover agent, the first for $32,000 and the second for $75,000, in which half of each payment was to be kicked back to the agent. There is no dispute that, in such a scheme, the loss calculation properly includes the kickbacks, here $53,500. See Prange, 771 F.3d at 35.5 The disagreement now is over how much of the balance should be accounted as loss. Reda argued below that he should not be charged with whatever value the restricted shares had, but the district court accepted an opaque argument from the government, that the whole dollar amount of each transaction should be treated as actual or intended loss because “any impact on the value of the stock was a result of the criminal conduct.” The district court consequently calculated the loss as $107,000.
On appeal, the government confesses error. It now agrees that the district court's categorical refusal to credit the restricted shares with any demonstrable fair market value because Reda knew the transactions to be fraudulent was wrong under our reasoning in Prange. 771 F.3d at 35 (“[I]f the shares received carry any fair market value, the district court should have reduced its loss calculation by that amount.”); id. at 36 (stating that Probation was incorrect to “hold[ ] Defendants responsible for the full amount of the fraudulent transactions simply because they knew the transactions were fraudulent”). There we remanded for the district court to find the value of the shares acquired by the government, id., at 36–37, and a similar remand is called for here, see United States v. McGhee, 651 F.3d 153, 158 (1st Cir.2011) (stating that a remand is the ordinary disposition if the district court misapplied the Guidelines).
The government urges otherwise, arguing that the error is harmless because any credit due for the value of the restricted shares (based on evidence of the value of common shares in the record) is insufficient to push the loss calculation below the $70,000 threshold under U.S.S.G. § 2B1.1(b)(1)(E), and thus the Guidelines calculation would not change.6 But the factual determination of the value of the shares is not so straightforward, and, in any event, fact-finding should generally be done by districts courts, not appellate courts in the first instance. And even if the government's factual response is correct, the error may still matter. The district court here imposed a below-Guidelines sentence; if the loss calculation turns out to be lower, even if greater than $70,000, the district court may choose in its discretion to impose a different below-Guidelines sentence. In short, the case is “not certain enough to find harmless error,” McGhee, 651 F.3d at 158, and thus a remand is required.
The convictions are affirmed. The sentence is vacated and the case remanded for resentencing consistent with this opinion.

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