Source: https://law.justia.com/cases/federal/appellate-courts/F3/58/961/574628/
Timestamp: 2019-07-23 13:19:59
Document Index: 322739529

Matched Legal Cases: ['§ 1343', '§ 78', '§ 1343', '§ 78', '§ 78', '§ 1343', '§ 1346', '§ 78', '§ 1341', '§ 1341', '§ 1346']

Fed. Sec. L. Rep. P 98,794united States of America, Plaintiff-appellee, v. William Edward Rebrook, Iii, Defendant-appellant, 58 F.3d 961 (4th Cir. 1995) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fourth Circuit › 1995 › Fed. Sec. L. Rep. P 98,794united States of America, Plaintiff-appellee, v. William Edward Rebrook, I...
Fed. Sec. L. Rep. P 98,794united States of America, Plaintiff-appellee, v. William Edward Rebrook, Iii, Defendant-appellant, 58 F.3d 961 (4th Cir. 1995)
US Court of Appeals for the Fourth Circuit - 58 F.3d 961 (4th Cir. 1995)
Argued Nov. 3, 1994. Decided June 30, 1995
William Edward ReBrook, III, appeals his convictions and sentence for wire fraud, 18 U.S.C. §§ 1343, 1346, and securities fraud, 15 U.S.C. §§ 78ff, 78j(b). ReBrook presents four issues on appeal. First, he argues that both of the counts as charged against him are legally infirm and should not have been allowed to go to the jury. Second, ReBrook argues that the district court erred in excluding certain newspaper articles as inadmissible hearsay. Third, because he had been the target of pervasive adverse publicity unrelated to the case, ReBrook argues that the district court erred in failing to grant him individual voir dire. Fourth, ReBrook argues that the district court erred in enhancing his sentence pursuant to U.S.S.G. Sec. 2C1.7(b) (1) (B) (1993) as an "official holding a high-level decision-making or sensitive position." We reverse ReBrook's conviction for securities fraud, but affirm his conviction and sentence for wire fraud.
On June 17, 1993, a federal grand jury in Charleston, West Virginia, returned a two-count indictment against ReBrook. Count 1 of the indictment charged ReBrook with wire fraud in violation of 18 U.S.C. §§ 1343 and 1346. Count 2 of the indictment charged him with securities fraud in violation of 15 U.S.C. §§ 78ff and 78j(b), and 17 C.F.R. Sec. 240.10b-5.
Before proceeding to trial, ReBrook filed a motion to dismiss the indictment, challenging the validity of both counts for wire fraud and securities fraud. The district court denied the motion. United States v. ReBrook, 837 F. Supp. 162 (S.D. W. Va.1993). On November 5, 1993, a jury convicted ReBrook on both counts. ReBrook filed a posttrial motion challenging the jury's verdict on a number of grounds, including the manner in which the district court conducted voir dire of the jury and certain evidentiary rulings, which the district court denied. United States v. ReBrook, 842 F. Supp. 891 (S.D. W. Va.1994). On February 7, 1994, the district court sentenced ReBrook under the federal sentencing guidelines to 27-month sentences on each count, to run concurrently.
Count 2 charges ReBrook with securities fraud in violation of Sec. 10(b) of the Securities Exchange Act of 1934, codified at 15 U.S.C. §§ 78j(b) and 78ff, and Rule 10b-5, 17 C.F.R. Sec. 240.10b-5.2 As in the companion case of United States v. Bryan, 58 F.3d 933 (4th Cir. 1995), the Government bases the securities fraud count upon what is commonly referred to as the "misappropriation theory" of insider trading, not on any theory of tippee liability. See United States v. Chestman, 947 F.2d 551 (2d Cir. 1991) (en banc), cert. denied, 503 U.S. 1004, 112 S. Ct. 1759, 118 L. Ed. 2d 422 (1992); SEC v. Cherif, 933 F.2d 403 (7th Cir. 1991), cert. denied, 502 U.S. 1071, 112 S. Ct. 966, 117 L. Ed. 2d 131 (1992); SEC v. Clark, 915 F.2d 439 (9th Cir. 1990); United States v. Newman, 664 F.2d 12 (2d Cir. 1981), aff'd after remand, 722 F.2d 729 (2d Cir. 1983), cert. denied, 464 U.S. 863, 104 S. Ct. 193, 78 L. Ed. 2d 170 (1983).3 "Under this theory, a person violates Rule 10b-5 when he misappropriates material nonpublic information in breach of a fiduciary duty or similar relationship of trust and confidence and uses that information in a securities transaction." Chestman, 947 F.2d at 566. ReBrook maintains that this Circuit should not adopt the misappropriation theory in this case.
Next, we turn to ReBrook's challenge to Count 1 of the indictment for committing wire fraud in violation of 18 U.S.C. §§ 1343, 1346. In order to convict ReBrook for wire fraud in violation of 18 U.S.C.A. Sec. 1343 (West Supp.1995),4 the Government must prove: "1) a scheme to defraud and 2) the use of a wire communication in furtherance of that scheme." United States v. Brandon, 50 F.3d 464, 467 (7th Cir. 1995). Additionally, under 18 U.S.C. § 1346 (1988), "the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services." In this case, the Government alleged that ReBrook schemed to defraud the citizens of the State of West Virginia of his honest and faithful services as the attorney for the Lottery Commission, and that he traded on confidential information.5
We disagree with ReBrook's interpretation of the wire fraud statute and its relation to securities fraud statutes. Granted, a number of the underlying facts used to prove the securities fraud were also used to prove the wire fraud. However, the two crimes are distinct and require the government to prove different elements in order to secure a conviction. See Carpenter v. United States, 484 U.S. 19, 28, 108 S. Ct. 316, 321-22, 98 L. Ed. 2d 275 (1987) (while dividing evenly on the misappropriation theory, the Court independently held that confidential information is "property," the deprivation of which can constitute both mail and wire fraud). Furthermore, a distinction between the two counts is also supported by the holdings of various courts that there is no multiplicity issue when prosecuting the same purchase or sale of securities under both the securities fraud statute and the wire fraud statute. United States v. Faulhaber, 929 F.2d 16, 19 (1st Cir. 1991); United States v. Reed, 639 F.2d 896, 905 (2d Cir. 1981). Because the wire fraud count stands independently of the securities fraud count in this case, we conclude that ReBrook's conviction for wire fraud must be affirmed.7
ReBrook argues next that the district court erred in refusing to admit into evidence a variety of newspaper articles. We review the district court's evidentiary ruling with substantial deference and will not disturb that decision absent a clear abuse of discretion. United States v. Russell, 971 F.2d 1098, 1104 (4th Cir. 1992), cert. denied, --- U.S. ----, 113 S. Ct. 1013, 122 L. Ed. 2d 161 (1993). At trial, counsel for ReBrook indicated that he had approximately 455 newspaper articles which would demonstrate that plans for expansion of the video lottery system were not confidential. ReBrook argues that the district court abused its discretion by ruling that the newspaper articles were inadmissible hearsay when, in fact, he was attempting to use the articles solely to establish what information was available in the public domain. ReBrook theorizes that the district court's exclusion of the newspaper articles in question made it impossible for trial counsel to make an effective argument concerning (1) a lack of "materiality" required for a securities fraud prosecution or (2) a lack of a plan to defraud the state of his honest governmental services.8
ReBrook next argues that the district court erred in denying his motion to allow his counsel individually to voir dire potential jurors. This Court has repeatedly made clear that the district court has broad discretion in the conduct of voir dire and will be reversed only for an abuse of discretion. United States v. Bakker, 925 F.2d 728, 733 (4th Cir. 1991). Where the defendant fails specifically to object to the manner in which the district court conducted voir dire, as here, we review the issue for plain error affecting substantial rights. United States v. LaRouche, 896 F.2d 815, 829 (4th Cir.), cert. denied 496 U.S. 927, 110 S. Ct. 2621, 110 L. Ed. 2d 642 (1990); see also United States v. Koon, 34 F.3d 1416, 1442-43 (9th Cir. 1994) (citing United States v. Olano, --- U.S. ----, ----, 113 S. Ct. 1770, 1779, 123 L. Ed. 2d 508 (1993)), petition for cert. filed, 63 U.S.L.W. 3756 (U.S. Apr. 10, 1995) (No. 94-1664).
ReBrook, 842 F. Supp. at 893. We fully agree with the district court and discern no errors in the court's handling of voir dire. Therefore, we affirm the district court on this issue.
Finally, ReBrook appeals the district court's decision to increase his sentence for wire fraud because he was an "official holding a high-level decision-making or sensitive position," pursuant to U.S.S.G. Sec. 2C1.7(b) (1) (B). Because this question turns primarily on fact, we review the district court's application of Sec. 2C1.7(b) (1) (B) under the clearly erroneous standard. United States v. Daughtrey, 874 F.2d 213, 217-18 (4th Cir. 1989) (where issue turns primarily on factual determinations, the appellate court should apply "clearly erroneous" standard); see also United States v. Matzkin, 14 F.3d 1014, 1021 (4th Cir. 1994) (applying clearly erroneous standard to application of U.S.S.G. Sec. 2C1.1(b) (2) (B), which provides offense level increase for payment made to influence any official in a high level decisionmaking or sensitive position).
U.S.S.G. Sec. 2C1.7(b) (1) (B) (emphasis added). Because ReBrook was appointed to his position as attorney for the Lottery Commission, the district court focused on whether ReBrook held "a high-level decision-making or sensitive position."
ReBrook argues that the overall nature of his job as attorney for the Lottery Commission precludes the application of Sec. 2C1.7(b) (1) (B). Specifically, ReBrook points out that he earned only $25,000 per year, he had no office or parking space at the Lottery Commission, and had no secretary serving him at the Lottery Commission. ReBrook maintains that he was simply a part-time lawyer for the Lottery Commission who advised its director as to the law and performed miscellaneous duties when asked to do so for the Lottery Commission. ReBrook reasons that the part-time nature of the job, combined with the lack of various perquisites, means that he did not hold either a high-level decision-making or sensitive position.
We disagree. At sentencing, the district court found ReBrook held a sensitive position within the meaning of Sec. 2C1.1(b) (1) (B) based upon the nature of the advice ReBrook gave to the Director of the Lottery Commission, the influence that ReBrook had with other Lottery Commission members as shown by testimony concerning a Lottery Commission report on the expansion of the video lottery system, and the fact that ReBrook was privy to confidential information as an attorney for the director.12 Other than generally denying the implication of these findings, ReBrook has done nothing on appeal to cast a different light on the findings. As ReBrook has failed to present any basis for finding the district court's decision under Sec. 2C1.7(b) (1) (B) to be clearly erroneous, we affirm the district court's sentencing of ReBrook.
(b) To use or employ, in connection with the purchase or sale of any security [,] ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
15 U.S.C. § 78j(b). Rule 10b-5, promulgated by the SEC pursuant to section 10(b), provides, in relevant part:
The Supreme Court has yet to rule on the validity of the misappropriation theory. In Carpenter v. United States, 484 U.S. 19, 24, 108 S. Ct. 316, 319-20, 98 L. Ed. 2d 275 (1987), the Court was evenly divided on the validity of a securities fraud conviction based on this doctrine and, accordingly, affirmed the lower court without further comment
We do not understand ReBrook to be making the same argument concerning his wire fraud conviction that Bryan makes concerning his mail fraud conviction in Bryan. In that case, Bryan argued that "the evidence was insufficient to support [Bryan's] convictions under these [mail fraud] provisions [18 U.S.C. §§ 1341, 1346] because 'there was no evidence that [he] violated any law, statute or binding regulation in his conduct with respect to the ... video lottery contract.' " Bryan, 58 F.3d at 940 (quoting Appellant Bryan's Brief at 11-12). After an extended discussion, we rejected this argument on the ground that " [w]e see no reason [ ] to read into the mail fraud statute an independent criminal violation requirement when the fraud conviction is based on the deprivation of the right to intangible services as opposed to the deprivation of property or money, as in Carpenter." Id. at 941
ReBrook's argument appears to be more narrow than that of Bryan, focusing on the interrelated nature of the securities fraud and wire fraud prosecutions rather than on whether a violation of the wire fraud statute requires the violation of some law or regulation other than the wire fraud statute itself. We note, however, that to the extent ReBrook puts forward the same argument as Bryan, our reasoning concerning the mail fraud statute in Bryan is equally applicable in this case for the wire fraud statute. Carpenter, 484 U.S. at 25 n. 6, 108 S. Ct. at 320 n. 6; see also Belt v. United States, 868 F.2d 1208, 1211 (11th Cir. 1989) ("The wire fraud statute tracks the language of the mail fraud statute, 18 U.S.C. § 1341 [counterfeiting]. The statutes are given a similar construction and are subject to the same substantive analysis.").
We stress that, from our reading of his brief, ReBrook's appeal concerning the wire fraud count is narrow in scope. For example, ReBrook does not challenge 18 U.S.C. § 1346, which defines a "scheme or artifice to defraud" under the wire fraud statute as including the deprivation of "another of the intangible rights of government," as being unconstitutionally vague. ReBrook, 837 F. Supp. at 171. Furthermore, ReBrook does not challenge the sufficiency of the evidence to support his conviction on the wire fraud charge
I overrule the objection of the defense to the eight point enhancement pursuant to Sec. 2C1.7(b) (1) (B). The offense, in the Court's opinion here, involved an official holding a high level sensitive position which would require the increase of eight levels.