Opinion ID: 711056
Heading Depth: 3
Heading Rank: 2

Heading: Argument of Mr. Nash

Text: 93 Mr. Nash challenges virtually every element of the crimes of which he has been convicted. We address his claims in turn. 94
95 The essence of Mr. Nash's argument is that an accountant's opinion letter can never give rise to liability for false statement. This premise is simply incorrect and may be rejected out-of-hand. See United States v. Weiner, 578 F.2d 757, 785-86 (9th Cir.) (analyzing defenses to criminal liability for false statements in audits), cert. denied, 439 U.S. 981, 99 S.Ct. 568, 58 L.Ed.2d 651 (1978); United States v. Simon, 425 F.2d 796, 805 (2d Cir.1969) (same), cert. denied, 397 U.S. 1006, 90 S.Ct. 1235, 25 L.Ed.2d 420 (1970). 96 Mr. Nash has likewise failed to demonstrate that the opinion letter prepared by him contained no representations that could be judged false. The audit letter made the following statements: We have audited the accompanying combined balance sheet; [w]e conducted our audit in accordance with generally accepted auditing standards; [w]e believe that our audit provides a reasonable basis for our opinion; [i]n our opinion, the financial statements referred to above present fairly, in all material respects, [Trafalgar's financial status] in conformity with generally accepted accounting principles. Gov't Nash Appendix Vol. I, at 128. Even the last of these statements, which is plainly labeled an opinion, could be considered false if the evidence were to show that Mr. Nash had issued the opinion letter with knowledge that GAAP had not been followed. The remaining statements are even more easily held to an objective standard of falsehood. Construing these statements in the light most favorable to the Government, a reasonable juror could have found them to be representations of fact within the meaning of 18 U.S.C. Sec. 1014. 97
98 Knowledge of this Fact? 99 Mr. Nash contends, first, that the audit was completed in conformity with GAAP, and, second, that he had no knowledge of any inaccuracies that may have existed. Each contention falls far short of meeting the standard set by Jackson v. Virginia, 443 U.S. 307, 318, 99 S.Ct. 2781, 2788, 61 L.Ed.2d 560, reh'g denied, 444 U.S. 890, 100 S.Ct. 195, 62 L.Ed.2d 126 (1979). 100 Mr. Neely, an associate of Mr. Nash who worked with him on the audit, testified that he consulted with Mr. Nash about the Trafalgar audit on a daily basis throughout July 1988. He testified that the auditors never received acceptable substantiation for several material entries in Trafalgar's financial records; that Mr. Nash knew that these items had not been properly documented; that Mr. Nash was in almost constant contact with Messrs. Knapp and Sarno in an attempt to produce appropriate records; and that the effort to substantiate the information contained in the audit continued well into the fall of 1988. Mr. Neely also testified that, in his professional opinion, the audit was incomplete. Mr. Neely's testimony is largely corroborated by that of Mr. Schumann and Mr. O'Brien, both of whom worked with Messrs. Knapp and Sarno on this scheme and both of whom testified under a grant of immunity. Mr. Morgan likewise testified as to the elaborate measures taken to create a paper trail that would justify the figures contained in the audit. All four witnesses portrayed Mr. Nash as a man trying to gather or create pieces of paper to support a foregone conclusion; when in the end his efforts at fabrication failed, Mr. Nash simply delivered the opinion anyway.
101 Mr. Nash's argument that the audit was not material to the full finding of the loan fails for the reasons given supra. 102
103 Mr. Nash, as did Messrs. Sarno and Knapp before him, contends that the evidence does not lend itself to a conclusion that the worth attributed to the Circle C or to the stock swaps was fictitious. Mr. Nash's argument as to the Circle C fails for the reasons given earlier. Mr. Nash's claims as to the stock swaps are similarly unpersuasive. At trial, representatives of the companies with whom Trafalgar was supposedly swapping stock testified that the audit figures were wildly inflated. These same representatives also testified that the stock swaps had not in fact occurred--a circumstance that would hardly support their inclusion as assets on Trafalgar's balance sheet. 104 Mr. Nash also argues that there was insufficient evidence for the jury to find that he knew of the financial hyperbole. We do not agree. Mr. Nash was a major stockholder in three of the companies with which Trafalgar allegedly swapped stock; the evidence supports the conclusion that these companies were worth far less than was indicated by the audit; and the jury could therefore have reasonably inferred that Mr. Nash knew of this discrepancy. The record further indicates that Mr. Nash knew of and participated in the restructuring of the Circle C deal. The jury could thus have reasonably concluded that he was familiar with the inappropriate step-up in value. Lastly, the testimony of Mr. Neely and Mr. O'Brien places Mr. Nash in the middle of the ongoing efforts to substantiate the fictitious entries in Trafalgar's financial records.
105 Abundant evidence suggests the existence of an agreement and an overt act sufficient to underpin the conspiracy conviction. Messrs. Nash and Sarno together prepared the audit and fabricated the documentation necessary to give it an illusion of propriety; they restructured the Circle C deal to substitute retroactively an allegedly independent party as the vital middle link of the Circle C step-up deal; they created a paper trail that would support the addition of fictitious fees to Trafalgar's otherwise negligible income stream; and they attempted to cover up the fact that the stock swaps had in fact never occurred. It could reasonably be inferred that all of these steps were taken with the knowledge and approval of Mr. Knapp, who retained final decision-making authority over the workings of Trafalgar. Any of these acts could stand as the overt act of the conspiracy. Taken together, they easily justify the inference that an agreement existed. See United States v. Cloud, 872 F.2d 846, 852 (9th Cir.), cert. denied, 493 U.S. 1002, 110 S.Ct. 561, 107 L.Ed.2d 556 (1989).