Opinion ID: 3040457
Heading Depth: 2
Heading Rank: 2

Heading: Berger’s Constitutional Right to Be Present

Text: Berger next argues that his right to be present at every stage of the proceedings was violated when the judge made the challenged informal comments to the jury outside the presence of Berger and his counsel. We conclude that Berger waived his right to be present but that the scope of the waiver did not include the full range of comments made by the judge during the informal meeting with the jury. Consequently, even though the so-called Allen instruction was not coercive, the challenged language was spoken by the court without Berger’s knowledge and consent, and thus impinged his due process right to be present at every critical stage of trial. We nevertheless hold that the error, if any, was harmless beyond a reasonable doubt and therefore not a ground for reversal. This court has stated that the “Constitution, the fundamental principles of jury trial, and the Federal Rules of Criminal Procedure guarantee a defendant the right to be present at 732 UNITED STATES v. BERGER every stage of trial.” United States v. Frazin, 780 F.2d 1461, 1469 (9th Cir. 1986) (citing Illinois v. Allen, 397 U.S. 337, 338 (1970) (holding right of presence secured by the confrontation clause)). In United States v. Gagnon, 470 U.S. 522 (1985), in discussing a defendant’s right to be present at critical stages of trial, the Supreme Court explained: [A] defendant has a due process right to be present at a proceeding whenever his presence has a relation, reasonably substantial, to the fulness of his opportunity to defend against the charge. The presence of a defendant is a condition of due process to the extent that a fair and just hearing would be thwarted by his absence, and to that extent only. Id. at 526 (quoting Snyder v. Massachusetts, 291 U.S. 97, 105-06, 108 (1934)) (internal quotations and alterations omitted). Such an error, however, is not a basis for automatic reversal. If an ex parte communication “rises to the level of a constitutional violation, then the burden is on the prosecution to prove that the error was harmless beyond a reasonable doubt.” United States v. Rosales-Rodriguez, 289 F.3d 1106, 1109 (9th Cir. 2002).2 2 Federal Rule of Criminal Procedure 43(a) provides a similar but broader right: a defendant is entitled to be present “at every stage of the trial including the impaneling of the jury and the return of the verdict.” See Rosales-Rodriguez, 289 F.3d at 1109. A violation of Rule 43 is harmless if “there is no reasonable possibility that prejudice resulted from the absence.” Id. As this court has recognized, the constitutional harmless error standard is “more stringent” than the harmless error standard applicable to a Rule 43 violation. Frazin, 780 F.2d at 1469 n.8 (“The reasons supporting our determination that the constitutional error was harmless . . . would necessarily satisfy the more lenient standard for nonconstitutional error . . . .”). Because we ultimately conclude that the constitutional violation in this case was harmless beyond a reasonable doubt, we need not decide whether Berger’s statutory right to be present was also violated. See id. UNITED STATES v. BERGER 733 [10] Our case law is clear that communication between the judge and jury outside of counsel’s presence, without a proper waiver, violates a defendant’s right to due process of law. See Frazin, 780 F.2d at 1469; see also Rosales-Rodriguez, 289 F.3d at 1110 (noting that delivery of a supplemental jury instruction is a “critical” stage of a trial that requires a defendant’s or defense counsel’s presence). A defendant, however, may waive his or her constitutional right to be present at all critical stages of the proceedings “provided such waiver is voluntary, knowing, and intelligent.” Campbell v. Wood, 18 F.3d 662, 671-72 (9th Cir. 1994) (citing Johnson v. Zerbst, 304 U.S. 458, 464 (1938)). Below, we consider the scope of Berger’s waiver of his right to be present during the court’s informal meeting with the jury. We then discuss whether the constitutional error, if any, was harmless beyond a reasonable doubt. B. Berger Did Not Waive His Right to Be Present During the So-Called Allen Instruction The parties do not dispute that Berger knowingly, intelligently, and voluntarily waived his right to be present during the judge’s informal communication with the jury. They do, however, disagree as to the scope of his waiver. We agree with Berger that he only waived his right to be present during the court’s informal meeting with the jury, so long as the discussion involved the setting of future deliberation dates that would not conflict with the child care, vacation, and travel arrangements of some of the jurors. He did not waive his right to be present during the administration of the so-called Allen instruction. We narrowly construe Berger’s waiver and only read it to include whatever Berger explicitly waived. See Gete v. INS, 121 F.3d 1285, 1293 (9th Cir. 1997) (“[A] waiver of constitutional right is not to be implied and is not lightly to be found.” (internal quotations omitted)); see also Johnson, 304 U.S. at 734 UNITED STATES v. BERGER 464. Before accepting Berger’s waiver of his right to be present, the judge explained to the parties what he planned to say to the jury at the informal meeting. The judge stated, “If there had been any suggestions about an Allen instruction I want the record to indicate that I do not believe in the Allen instruction, I will not give it, never have given it.” When asked what he was specifically planning to say, the judge narrowed his plan to two specific points: first, he would “address the issue . . . regarding the jury[’s] request for days off”; second, he would “make certain that [he could] convey to them the thought that a rush to judgment is probably the worst form of verdict you could receive.” Berger expressly waived his “right to be present for the particular communication that [the court] anticipate[d] having with the jury.” [11] The record shows that the court intended to (1) discuss the scheduling conflicts some of the jurors were having, and (2) explain to the jurors that a rush to judgment would not be appropriate. More importantly, the court emphatically stated that it would not give an Allen instruction. Because Berger’s waiver only encompassed the “particular communication” that was “anticipated” by the district court, the waiver was restricted to the court’s two planned topics of discussion. [12] The jurors’ comments, however, led the judge away from his stated plan. Juror Roux stated that some jurors were “dead set” on their verdicts. In response to that comment the judge noted that “[i]t wouldn’t be wrong for you to reconsider your position if you can be convinced that perhaps your position was not accurate, that it could be wrong.” Berger argues that he did not waive his right to be present when that comment was uttered, which was, at worst, the mildest form of a mild Allen instruction. See Mason, 658 F.2d at 1265 n.1 (“In their mildest form, [Allen] instructions carry reminders of the importance of securing a verdict and ask jurors to reconsider potentially unreasonable positions.”). UNITED STATES v. BERGER 735 C. The Constitutional Error Was Harmless [13] A violation of a defendant’s due process right to be present at critical stages of trial is subject to harmless error analysis. See Frazin, 780 F.2d at 1469. Constitutional error is harmless if a court concludes “beyond a reasonable doubt that the error complained of did not contribute to the verdict obtained.” Id. at 1469-70 (quoting Chapman v. California, 386 U.S. 18, 24 (1967)). As we have thoroughly discussed, the portion of the judge’s comments that arguably exceeded the scope of Berger’s waiver did not coerce the jury into reaching a verdict. The comments were, at worst, the mildest form of an Allen instruction. Further, the jury deliberated a substantial amount of time — seven hours — after the comments at issue; and the jury did not reach unanimous verdicts on all counts. All of the factors that we considered above demonstrate that the district court’s statements were not coercive and did not affect the jury’s verdict. See RosalesRodriguez, 289 F.3d at 1111 (holding that district court’s delivery of supplemental instruction without consulting parties was harmless error because “[t]he instruction . . . was not coercive and did not cause the jury to rush to judgment”); Frazin, 780 F.2d at 1469-71 (finding that the judge’s failure to consult parties when responding to a jury note was harmless error because jury reached its own conclusion and “not as the result of actual or perceived judicial pressure”). Moreover, the defendants had an immediate opportunity to review the transcript of the meeting. The same afternoon, the court provided an ameliorative corrective instruction. Looking at the totality of the circumstances, we are convinced beyond a reasonable doubt that the jury’s verdict was not affected by any part of the court’s informal meeting with the jurors and any perceived error was harmless. Frazin, 780 F.2d at 1471. 736 UNITED STATES v. BERGER III. Materiality in Indictment Counts 34, 35, and 36 A. Indictment Counts 34, 35, and 36 — The Materiality Element Counts 34, 35, and 36 charged that, in three SEC filings, Berger knowingly omitted material facts about Craig Electronics’ (1) fraudulent accounting practices, (2) default of the Credit Agreement, and (3) overdrawn status on its line of credit. At trial, the government gave notice of its intention to call a victim investor and an SEC expert witness to testify about the materiality of omissions in the SEC filings. Berger objected on the ground that Kungys v. United States, 485 U.S. 759 (1988), required the government to prove that the false statements were material to the SEC. Berger argued that the investor had no relevant testimony concerning the effect of the falsehoods on the SEC and that expert testimony on the materiality of omissions would invade the province of the jury. The government responded that Kungys governs false statements to government agencies was not controlling because the relevant materiality standard in securities fraud cases is whether a misrepresentation or omission would influence a reasonable investor, not the SEC. The district court agreed but concluded that under the reasonable investor standard, the proposed testimony of the investor and of the SEC expert witness were unnecessary. In a motion for judgment of acquittal at the close of the government’s case-in-chief, Berger asserted that there was insufficient evidence that the falsehoods were material to the SEC. Berger also contended that the indictment charged that the false statements were material to the lending banks, not to individual investors. In a post-verdict motion for judgment of acquittal, Berger repeated these claims and also argued that UNITED STATES v. BERGER 737 there was a fatal variance between the indictment — which alleged that the false statements were material to the lending banks — and the proof — which established that the false statements were material to reasonable investors. The court denied both motions.
The materiality standard to be applied is a question of law reviewed de novo. See, e.g., United States v. Rosenthal, 445 F.3d 1239, 1244 (9th Cir. 2006). The sufficiency of an indictment is reviewed de novo. See United States v. PernilloFuentes, 252 F.3d 1030, 1032 (9th Cir. 2001). C. Counts 35 and 36 — Materiality Under Section 32(a) of the Securities Exchange Act of 1934 Assessed from the Reasonable Investor’s Perspective [14] Counts 35 and 36 of the indictment alleged that Berger made material omissions in mandatory filings with the SEC, in violation of section 13(a) of the Securities Exchange Act of 1934 (“1934 Act”), 15 U.S.C. § 78m(a), and section 32(a) of the 1934 Act, 15 U.S.C. § 78ff(a).3 Section 13(a) is a mandatory filing provision, that requires certain companies to file with the SEC “information and documents . . . as the Commission shall require to keep reasonably current the information and documents required to be included in or filed with an application or registration statement” as well as “annual reports . . . and . . . quarterly reports.” 15 U.S.C. § 78m(a)(1)- (2). Section 32(a) provides criminal penalties for “any person who willfully and knowingly makes . . . any statement in any application, report, or document required to be filed under this 3 We refer to the relevant statutory provisions according to their Sections under the 1934 Act, rather than the United States Code section. In other words, we refer to Section 13(a) for 15 U.S.C. § 78m(a), Section 32(a) for 15 U.S.C. § 78ff(a), Section 14(a) for 15 U.S.C. § 78n(a), and Section 10(b) for 15 U.S.C. § 78j(b). 738 UNITED STATES v. BERGER chapter or any rule or regulation thereunder . . . which statement was false or misleading with respect to any material fact . . . .” 15 U.S.C. § 78ff(a) (emphasis added). Berger contends that when applying section 32(a), courts should assess materiality from the perspective of the SEC. Berger primarily bases his argument on Kungys v. United States, 485 U.S. 759 (1988). In Kungys, the Supreme Court interpreted a statute that penalized the “concealment of a material fact” from the Immigration and Naturalization Service. Id. at 767-72. The Supreme Court looked to the federal courts of appeals, which had a “uniform understanding” of “materiality” under a similar statute, 18 U.S.C. § 1001. Kungys, 485 U.S. at 769-70. Section 1001 is a general statute that criminalizes acts of material misrepresentation in “any matter within the jurisdiction of the executive, legislative or judicial branch of the Government of the United States.” 18 U.S.C. § 1001. The courts of appeals had, in § 1001 cases, assessed materiality from the perspective of the government agency. See Kungys, 485 U.S. at 769-70. The Supreme Court agreed with that interpretation and held that a false statement made to a government agency is “material” if it “has a natural tendency to influence, or was capable of influencing, the decision of the decisionmaking body to which it was addressed.” Id. at 770 (internal quotations omitted). Berger identifies cases that apply the Kungys materiality standard to a number of different agencies, including the Environmental Protection Agency, see United States v. Self, 2 F.3d 1071, 1083-84 (10th Cir. 1993), and the Food and Drug Administration, see United States v. Diaz, 690 F.2d 1352, 1357 (11th Cir. 1982). Each of those cases dealt with the materiality of false statements made in the context of specific agency decisions. See, e.g., Self, 2 F.3d at 1084 (noting false statements “had a tendency to forestall any regulatory agency investigation”); Diaz, 690 F.2d at 1358 (explaining that false records could “impair the FDA in carrying out its responsibility for protection of the public health”). Berger UNITED STATES v. BERGER 739 contends that the SEC, as a regulatory body, makes decisions based on the information contained in a company’s mandatory filings. Thus, Berger argues that the materiality of false statements made to the SEC under section 32(a) must also be assessed not from the reasonable investor’s perspective, but from the SEC’s perspective, in the context of its own regulatory decisions. [15] We disagree with Berger. The purpose of the 1934 Act was to benefit and protect investors, with proper agency decisionmaking as a secondary concern. “The 1934 Act was designed to protect investors against manipulation of stock prices.” Basic Inc. v. Levinson, 485 U.S. 224, 230 (1988) (citing S. Rep. No. 73-792, at 1-5 (1934)). Furthermore, the Court “repeatedly has described the ‘fundamental purpose’ of the Act as implementing a ‘philosophy of full disclosure.’ ” Id. (quoting Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 477-78 (1977)). Accordingly, the Supreme Court has established a specific materiality standard to be used when assessing fraudulent statements filed with the SEC. In TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976), the Supreme Court explained in the proxy-solicitation context that “[a]n omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.” Id. at 449. In formulating that standard, the Court noted the broad remedial purpose of Rule 14a-9 of the 1934 Act: That purpose is not merely to ensure by judicial means that the transaction, when judged by its real terms, is fair and otherwise adequate, but to ensure disclosures by corporate management in order to enable the shareholders to make an informed choice. TSC Indus., 426 U.S. at 448. Thus, the Court held that under section 14(a) and Rule 14a-9, materiality should be assessed, not from the SEC’s perspective, but from the investor’s perspective. See id. at 449. The Court later expanded the reach 740 UNITED STATES v. BERGER of the TSC Industries materiality standard to section 10(b) and Rule 10b-5, which prohibit fraud in connection with the purchase or sale of securities. See Basic Inc., 485 U.S. at 231-32; see also United States v. Tarallo, 380 F.3d 1174, 1182 (9th Cir. 2004) (assessing materiality under Section 10(b) from reasonable investor’s perspective). [16] Applying the “reasonable investor” materiality standard to Section 32(a) is consistent with the goals of the SEC. As amicus curiae, the SEC noted that the agency itself commences actions on filings it considers materially misleading to investors. Cf. Touche Ross & Co. v. Redington, 442 U.S. 560, 570 (1979) (“The information contained in the [mandatory] reports is intended to provide the [SEC], [the New York Stock Exchange], and other authorities with a sufficiently early warning to enable them to take appropriate action to protect investors . . . .”). In addition to being a regulatory body, the SEC acts as a repository of information intended to be disseminated to and used by the public. See United States v. Bilzerian, 926 F.2d 1285, 1301 (2d Cir. 1991) (“The securities laws are designed to make accurate information available to the investing public . . . .”). The mandatory filings at issue in this case, for example, were meant for investors’ use. Craig Electronics’ Form 10-K and Form 10-Q, which were periodic reports, were filed under Section 13(a) “as necessary or appropriate for the proper protection of investors and to insure fair dealing in the security.” 15 U.S.C. § 78m(a). Furthermore, Congress has explained the purpose of the mandatory reporting provisions of the 1934 Act: It is anticipated that the information filed by a corporation [under the 1934 Act] will be so complete as to present to the stockholder, or the prospective stockholder, a picture of the corporation’s financial condition which will enable him intelligently to evaluate its securities. . . . The reporting provisions of the act will fill a long-felt need by aiding the exchanges to secure proper information for the investor. UNITED STATES v. BERGER 741 S. Rep. No. 73-1455, at 74 (1934) (emphasis added). It is clear that the reporting requirements under the 1934 Act are intended to protect investors, and that materiality should be assessed from the reasonable investor’s perspective. The SEC concedes that the mandatory filings here satisfy a related but separate purpose specific to the agency — the SEC reviews the documents to determine whether to investigate a particular transaction. False filings that relate to specific agency decisions, however, are criminalized by a separate statute, 18 U.S.C. § 1001. Indeed, in Bilzerian, the Second Circuit held that the government can institute two separate counts against an individual for the same false filing. In that case a false filing could be charged under both (1) section 10(b), the 1934 Act provision relating to the purchase or sale of securities, and (2) § 1001, the general statute criminalizing false statements made to government agencies. See Bilzerian, 926 F.2d at 1299-1301 (“The securities laws are designed to make accurate information available to the investing public; the SEC’s authority to regulate disclosure required under those laws brings the securities filings at issue within its jurisdiction for purposes of § 1001.”). Here, the government could have charged Berger with making false statements that related to the SEC’s regulatory decisionmaking under § 1001 in addition to charging him with filing false statements that were material to investors under Section 32(a).4 As to the hypothetical § 1001 charge, the Kungys case’s interpretation of materiality — examining 4 Berger contends that Congress already has provisions such as Sections 10(b) and 14(a) in place to protect investors from false statements. He implies that interpreting Section 32(a) as we do today would be duplicative of those provisions. This is inconsequential, however, because “when an act violates more than one criminal statute, the Government may prosecute[ ] under either so long as it does not discriminate against any class of defendants.” United States v. Batchelder, 442 U.S. 114, 123-24 (1979); see also United States v. Pope, 189 F. Supp. 12, 21-22 (S.D.N.Y. 1960) (holding permissible charges under both Section 14(a) and Section 32(a)). 742 UNITED STATES v. BERGER the misstatement’s ability to influence the SEC’s decisionmaking — would be appropriate. However, under Section 32(a), which was promulgated under an act specifically intended to benefit the investing public, misstated or omitted facts should be evaluated for materiality as to those investors. Finally, Berger argues that “materiality must be assessed in the context of a decision.” He points to Sections 10(b) and 14(a) for comparison. In the Section 10(b) context, courts assess materiality by examining a fact’s potential to influence an investor’s particular decision — the decision to buy or sell a security. See Ganino v. Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir. 2000). Similarly, in Section 14(a), the false statement must have a tendency to influence a decision — how an investor will vote. See TSC Indus., 426 U.S. at 449. Section 32(a), however, only criminalizes the filing of false information and does not expressly implicate any specific type of investment decision. Thus, Berger argues that the materiality standard we adopt today is “unworkable and incoherent.” We disagree. In Sections 10(b) and 14(a), affected investment decisions — the decision to buy or sell shares and the decision to vote a particular way — are enumerated as elements of the statutes. The language of Section 32(a) is distinct; it criminalizes the mere filing of a material false statement without requiring that the statement affect a particular investment decision. It thus appears that Congress intended Section 32(a) to act as a catch-all provision to punish those who file a false statement, whether or not the filing can be shown to affect a specific investment decision, as long as the false statement could affect a reasonable investor. See Pope, 189 F. Supp. at 21 (“Section 32(a) is a catch all provision . . . .”). [17] We recognize the materiality standard set forth in TSC Industries as the materiality standard for Section 32(a) of the 1934 Act. Materiality must be assessed from the perspective UNITED STATES v. BERGER 743 of the reasonable investor. Accordingly, we affirm the district court’s interpretation of Section 32(a). D. Materiality Element in Count 34 Under the Securities Act of 1933
Reversed for an Error in Citation [18] In Berger’s reply brief, he contends that his conviction on Count 34 must be reversed.5 Count 34 alleged that Berger violated Section 32(a) when he filed false statements on Craig Electronics’ Amended S-1 Registration Statement. Berger points out that Section 32(a) applies to false statements made on any application, report, or document filed under the 1934 Act. See 15 U.S.C. § 78ff. S-1 Registration Statements, however, are required under the Securities Act of 1933 (“1933 Act”), 15 U.S.C. §§ 77a-77bbbb, not the 1934 Act. See Section 6, 1933 Act, 15 U.S.C. § 77f; see also FORM S-1 Registration Statement Under the Securities Act of 1933, available at http://www.sec.gov/about/forms/forms-1.pdf (“This Form shall be used for the registration under the Securities Act of 1933 . . . .”). Thus, Berger argues that the government did not prove an essential element of Section 32(a) — that he made a materially false statement on an application, report, or document required under the 1934 Act — and accordingly, that his conviction under Count 34 must be reversed. 5 Berger did not raise this issue in his opening brief. “Generally, an issue is waived when the appellant does not specifically and distinctly argue the issue in his or her opening brief.” United States v. Kama, 394 F.3d 1236, 1238 (9th Cir. 2005). Nevertheless, we have the discretion to review issues not previously raised if “the issue presented is purely one of law and either does not depend on the factual record developed below, or the pertinent record has been fully developed.” Pfingston v. Ronan Eng’g Co., 284 F.3d 999, 1004 (9th Cir. 2002). Because this is a pure question of law and the relevant record has been fully developed, we exercise our discretion to consider this issue. 744 UNITED STATES v. BERGER [19] We begin by noting that the government could have properly charged Berger with making a materially false statement on an S-1 Registration Statement under Section 24 of the 1933 Act, 15 U.S.C. § 77x. Section 24 of the 1933 Act criminalizes the filing of materially false statements made on a registration statement filed under the 1933 Act. See 15 U.S.C. § 77x. Thus, both Section 24 of the 1933 Act and Section 32(a) of the 1934 Act criminalize the filing of material false statements on documents required under their respective acts. [20] Berger does not contest that Section 24 of the 1933 Act criminalizes the conduct alleged in Count 34. Accordingly, the error alleged by Berger here is one of improper statutory citation, rather than one of substantive error in the indictment. Such an error is not a proper basis for reversal. The Federal Rules of Criminal Procedure counsel that “[u]nless the defendant was misled and thereby prejudiced, neither an error in a citation nor a citation’s omission is a ground to dismiss the indictment or information or to reverse a conviction.” Fed. R. Crim. P. 7(c)(3). Here, the language of the indictment clearly constitutes a satisfactory enumeration of the elements of Section 24 of the 1933 Act. Accordingly, Berger was not “misled to his prejudice,” nor did “defects or irregularities in the indictment affect[ his] substantial rights.” Hockenberry v. United States, 422 F.2d 171, 174 (9th Cir. 1970). We hold that Count 34 here “describes the activities forming the basis of the charge [under Section 24 of the 1933 Act] with sufficient particularity to assure that the Grand Jury deliberated on the elements of the crime.” Echavarria-Olarte v. Reno, 35 F.3d 395, 398 (9th Cir. 1994). Because the defect here was one of form, rather than substance, we decline to reverse his conviction because of the citation error in the indictment. See id. at 399; United States v. Fekri, 650 F.2d 1044, 1046 (9th Cir. 1981) (“When there has been no prejuUNITED STATES v. BERGER 745 dice and the error is merely an error in the citation, reversal is not required.”).6 2. Materiality Under Section 24 of the Securities Act of 1933 Assessed from the Reasonable Investor’s Perspective Because we hold that Berger was properly convicted under Section 24 of the 1933 Act, we next consider the proper materiality standard applicable to that provision. We have already determined that under Section 32(a) of the 1934 Act, materiality must be assessed from the perspective of the reasonable investor. For similar reasons, we hold that materiality under Section 24 of the 1933 Act must also be assessed from the reasonable investor’s perspective. We acknowledge the subtle differences in the purposes of the 1933 and 1934 Acts. The Supreme Court has recognized that “[t]he essential purpose of the [1933 Act] is to protect investors by requiring publication of certain information concerning securities before offered for sale.” A.C. Frost & Co. v. Coeur D’Alene Mines Corp., 312 U.S. 38, 40 (1941) (emphasis added). This purpose is slightly different from the purpose of the 1934 Act, which applies to post-distribution securities exchanges. See Reader v. Hirsch & Co., 197 F. Supp. 111, 114 (S.D.N.Y. 1961) (“The Securities Exchange Act of 1934 does not overlap the 1933 Act, but rather supplements it, i.e., it deals with post distribution trading.”). 6 A person convicted under Section 24 of the 1933 Act may be fined up to $10,000 and imprisoned up to five years. See 15 U.S.C. § 77x. A person convicted under Section 32(a) of the 1934 Act faces potentially harsher penalties: up to $5,000,000 in fines and up to twenty years imprisonment. See 15 U.S.C. § 78ff. As discussed below, we remand this case for resentencing. One should be mindful of the relevant statutory maximum penalties under Section 24 of the 1933 Act when considering the appropriate sentence for Berger pursuant to his conviction under Count 34. See, e.g., Hockenberry, 422 F.2d at 174. 746 UNITED STATES v. BERGER [21] Nevertheless, as with the 1934 Act, Congress was primarily concerned with protecting the investing public when it passed the 1933 Act. In Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976), the Supreme Court noted: “The Securities Act of 1933 . . . was designed to provide investors with full disclosure of material information concerning public offerings of securities in commerce, to protect investors against fraud and, through the imposition of specified civil liabilities, to promote ethical standards of honesty and fair dealings.” Id. at 195 (citing H.R. Rep. No. 73-85, at 1-5 (1933)) (emphasis added); see also SEC v. Ralston Purina Co., 346 U.S. 119, 124 (1953) (“The design of the [1933 Act] is to protect investors by promoting full disclosure of information thought necessary to informed investment decisions.”). Furthermore, this court has recognized that “the purpose of the [1933 Act] is to compel full and fair disclosure in the issuance of securities so that investors will be adequately protected.” United States v. Carman, 577 F.2d 556, 564 (9th Cir. 1978) (emphasis added). [22] Our above discussion of the 1934 Act also applies to our interpretation of the 1933 Act. Both acts are primarily designed to protect investors: the 1934 Act protects investors with respect to post-distribution trading, and the 1933 Act protects investors at the time of issuance. It makes sense that in the penalty provisions of both acts, the materiality of a misstatement must be assessed from the reasonable investor’s perspective. As we stated above, the claim that an individual made a materially false statement that affected the SEC in its regulatory decisionmaking capacity is more appropriately charged as a violation of 18 U.S.C. § 1001.7 Accordingly, we apply the materiality standard set forth in TSC Industries as the materiality standard for Section 24 of the 1933 Act. 7 The SEC itself “is charged with the duty of enforcing the [1933 Act] in the ‘public interest.’ ” Berko v. SEC, 316 F.2d 137, 141 (2d Cir. 1963). UNITED STATES v. BERGER 747 E. The Government’s Indictment Charged the Materiality Element with Sufficient Particularity Berger next asserts that even if we address materiality from the perspective of a reasonable investor, the indictment failed to allege that the fraudulent statements were material to investors. Berger argues that the government only charged that the fraudulent statements were material to the lending banks from which the loans were obtained. Thus, Berger maintains, when the government introduced evidence pertaining to the statements’ effect on investors, that was a fatal variance requiring reversal. [23] Federal Rule of Criminal Procedure 7(c)(1) requires that an indictment be a “plain, concise and definite written statement of the essential facts constituting the offense charged.” This court has said that an indictment “should be read in its entirety, construed according to common sense, and interpreted to include facts which are necessarily implied.” United States v. King, 200 F.3d 1207, 1217 (9th Cir. 1999). Finally, if an indictment contains an error, there must be some evidence that the error misled the defendant to the defendant’s prejudice. See id. (citing Fed. R. Crim. P. 7(c)(3)). The structures of Counts 34, 35, and 36 are similar. Each count first indicates the SEC filings on which the fraudulent statement was made: Craig Electronics’ Amended S-1 Registration Statement, Amended 1996 10-K Report, and First Quarter 1997 10-Q Report. The indictments then detail Berger’s misrepresentations and omissions: (1) “the fraudulent transfers of ‘C’ inventory to ‘B’ inventory . . .”, (2) that “Craig was in default of the Credit Agreement because of the false statements it had made to Bankers Trust in the Borrowing Base Certificates”, and (3) that “Craig was substantially overdrawn on its line of credit.” All three counts conclude with the final paragraph: These omissions were material in that they would have created serious doubt about whether Craig 748 UNITED STATES v. BERGER could continue to operate as a going concern because disclosure of these facts would have alerted the lending banks to the fraud, and because Craig’s cash flow and ability to finance inventory purchases depended upon its ability to draw upon its line of credit with the lending banks. [24] The question before us is whether materiality to investors could be inferred from the indictment. We believe that although the indictment did not allege to whom the misstatements were material, such lack of specificity was not fatal in this case. It is self-evident that “the materiality [to the reasonable investor] of information relating to financial condition, solvency and profitability is not subject to serious challenge.” SEC v. Murphy, 626 F.2d 633, 653 (9th Cir. 1980). In this case, we find it beyond dispute that, before making reasonable investment decisions, a reasonable investor would consider Craig Electronics’ “cash flow and ability to finance inventory purchases” to be material information. Furthermore, that the indictment alleged materiality to investors was evident from the face of the indictment. “It is well settled, at least in this circuit, that an indictment need not allege the materiality of a false representation if the facts advanced by the pleader warrant the inference of materiality.” United States v. Oren, 893 F.2d 1057, 1063 (9th Cir. 1990). In Oren, this court upheld an indictment in a § 1001 case involving the National Park Service. See id. at 1063. Though the indictment did not specifically mention materiality, the indictment indicated that: (1) Oren had made a false statement regarding an offer for land; (2) the statement was within the jurisdiction of the Park Service, which would only purchase through a specific third-party nonprofit agency; (3) the Park Service would purchase land only if it had an appraisal; and (4) Oren had given his false statement to the third party. See id. at 1064. This court held that “[s]urely these allegations UNITED STATES v. BERGER 749 warrant the inference of materiality of Oren’s false statement.” Id. (internal quotations omitted). [25] Likewise, here, the indictment detailed the misstatements filed by Berger, each of which could have been relied upon by a reasonable investor. The S-1, 10-K, and 10-Q filings submitted to the SEC were documents upon which reasonable investors would base investment decisions. Because the indictment alleged material misstatements and omissions contained in documents upon which investors would rely, we hold that the indictment was sufficiently detailed to warrant the inference of materiality to investors.