Opinion ID: 777545
Heading Depth: 4
Heading Rank: 2

Heading: depriv[ing] a principal of the intangible right to a fiduciary's honest services;

Text: 27 (c) violat[ing] a broker's duty to disclose to the broker's customer all material facts concerning securities transactions in the customer's account; 28 (d) violat[ing] a fiduciary's duty to disclose to his principal all material facts concerning any self-interest the fiduciary might have concerning securities transactions in the principal's account; and 29 (e) mak[ing] false representations to a customer about the amount of remuneration to be received by a broker in connection with a securities transaction. 30 Indictment ¶ 63(a)-(e). 31 At trial, the district court instructed the jury that, in order to convict the defendants, it was required to find the existence of a scheme to defraud JSS customers by either (1) making fraudulent and misleading representations about the total compensation paid ... to the brokers, or (2) by failing to disclose facts that such brokers were under a duty to disclose — in this case, the alleged extraordinary compensation that such brokers were receiving to sell U.S. Asset Corp.[] stock to their customers. 32 The court then explained the circumstances under which the brokers would be under a legal duty to disclose the commissions to their clients. The district court's explanation tracked the language of our opinion in United States v. Chestman, 947 F.2d 551, 568-69 (2d Cir.1991) (en banc), in which we explained that a duty to disclose arises from a `fiduciary or other similar relation of trust and confidence between [the parties to the transaction].' Id. at 565 (quoting Chiarella v. United States, 445 U.S. 222, 228, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980)) (alterations in original). The district court instructed the jury, in pertinent part, as follows: 33 Whether a fiduciary relationship exists is a matter of fact for you, the jury, to determine. At the heart of the fiduciary relationship lies reliance and de facto control and dominance.... One acts in a fiduciary capacity when the business with which he or she transacts, or the money or property which he or she handles, is not his or her own or for his or her own benefit, but for the benefit of another person, as to whom he or she stands in a relation implying and necessitating great confidence and trust on the one part and a high degree of good faith on the other part.... I instruct you that a fiduciary owes a duty of honest services to his customer, including a duty to disclose all material facts concerning the transaction entrusted to it. The concealment by a fiduciary of material information which he or she is under a duty to disclose to another, under circumstances where the non-disclosure can or does result in harm to the other, can be a violation of the wire fraud statute, if the Government has proven beyond a reasonable doubt the other elements of th[e] offense. 34 Based on these instructions, the jury could not convict the appellants of wire fraud on any of the first four theories charged in the Indictment unless it found that the relationship between the JSS brokers and their customers was such as to give rise to a duty to disclose the commissions. 6 35 The Travel Act counts charged appellants and another co-defendant with using interstate facilities to promote commercial bribery and commercial bribe receiving in violation of New York law. 7 Under New York law, a person is guilty of commercial bribery in the second degree if he or she confers, or offers or agrees to confer, any benefit upon any employee, agent or fiduciary without the consent of the latter's employer or principal, with intent to influence his conduct in relation to his employer's or principal's affairs. N.Y. Penal Law § 180.00 (1999). New York law prohibits the receipt of commercial bribes as follows: 36 An employee, agent or fiduciary is guilty of commercial bribe receiving in the second degree when, without the consent of his employer or principal, he solicits, accepts or agrees to accept any benefit from another person upon an arrangement or understanding that such benefit will influence his conduct in relation to his employer's or principal's affairs. 37 N.Y. Penal Law § 180.05 (1999). Viewed in light of the prohibitions of the New York statute, the Travel Act counts required the existence of a fiduciary, agency, or employment relationship between JSS brokers and their customers. 38 Given that four of the five wire fraud theories presented to the jury required the existence of a duty owed by the brokers to their customers, and the Travel Act counts required the existence of a fiduciary, agency, or employment relationship, in order for appellants' convictions to stand, we must analyze the nature of the relationship between the brokers and their customers and determine whether the relationship between them gave rise to a duty to disclose the commissions as a matter of law and in fact.