Opinion ID: 32604
Heading Depth: 4
Heading Rank: 1

Heading: Definition of “invest”

Text: Held was prepared to elucidate the meaning of “invest in automobile loans” as that phrase was employed in the “specific use of proceeds” section of the PPMs. Specifically, Held would have refuted the Government’s contention that an investment in automobile loans meant only the purchase of the principal amount of the loans. Held would have urged instead that an investment in automobile loans entails not only the purchase of loans, but also the operating expenses and costs, such as payment of commissions, travel and entertainment, finder’s fees, evaluation services, and attorney’s fees. This testimony is relevant to the issue of the definition of “invest,” as the term was used in the PPMs. Thus, the district court should have allowed Held to provide the jury with the usage 19 Daubert, 509 U.S. at 591 (quoting United States v. Downing, 753 F.2d 1224, 1242 (3d Cir.1985)). 11 of the word “invest” within the securities industry. We find that the district court’s failure to allow Held to testify as to an expanded definition of “invest,” although improper, was not “manifestly erroneous.”20 While Held’s broader definition might have justified some of Tucker’s expenses outside the purchase of automobile loans, the Government offered evidence that many of Tucker’s expenditures violated even his liberal definition. For instance, Tucker, in addition to using the proceeds for the operating costs of FFAC, also dispersed the funds in payment of principal and interest on loans unrelated to FFACARC; settlement in a civil lawsuit; and interest and principal to investors in the previous trusts, perpetuating what is known as a Ponzi scheme.21 Tucker’s proposed expert testimony would have been limited to an understanding of the term “invest in auto loans” that would include various operating expenses associated with the purchase of automobile loans. Thus, even though the district court should have allowed Held to offer a definition that might have justified some of Tucker’s expenses, Tucker still deceived the investors by spending the money in other unauthorized ways. Because the expert 20 Watkins v. Telsmith, Inc., 121 F.3d at 984 (internal quotations and citations omitted). 21 The Government also presented evidence that of the proceeds raised in the third trust, less than one percent was used to purchase automobile loans. Held was not prepared to testify that the term “invest” included this kind of minimum purchase of automobile loans. 12 only addressed a fragment of the misuse of funds, and did not address substantial areas of Tucker’s other applications of those funds, any error in excluding Held’s testimony in this regard was minimal. Moreover, even if we were to conclude that the district court abused its discretion, Tucker cannot demonstrate how excluding the expert testimony affected a substantial right, that is, that Held’s testimony regarding the meaning of the word “invest” would have planted a seed of doubt in the jurors’ minds sufficient to acquit him of fraud.