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

Heading: Regulation D evidence

Text: Finally, in what would have been Tucker’s response to the Government’s presentation of evidence that Tucker had submitted various filings with the SEC pursuant to Regulation D, Held sought to testify that based on his experience, the lead underwriters of the trusts, and not Tucker, were required to comply with the regulation. To fall within the safe harbor provision of Regulation D, and therefore be immune from certain registration requirements with the Securities and Exchange Commission, there can be no more 33 Brown, 578 F.2d at 1284. 18 than thirty-five unaccredited investors in a given endeavor.34 The regulation helps to ensure that mostly “sophisticated” purchasers are investing in private placements. Tucker does not refute the Government’s contention that he in fact filed Regulation D exemptions with the SEC. Rather, Tucker contends he was not responsible for complying with Regulation D regarding the permissible number of unaccredited investors. Thus, Tucker argues that Held’s testimony was relevant as to the Regulation D information because Held “would have rebutted the prosecution’s claim that Mr. Tucker violated Regulation D.”35 The district court excluded the evidence on Rule 702 grounds, concluding that Held was improperly attempting to evaluate the evidence and render his opinion as to what the brokers should have drawn from it. At trial, the Government brought forth Joe Miller, who is the Chief Financial Officer of United Pacific Securities (“UPS”), one of the brokers offering the trust certificates. Miller testified that UPS could only monitor the number of unaccredited investors by cooperating with the issuer, since it only had the information of its own investors. Miller attested that if there were several brokers offering the same investment, it would be impossible to 34 See 17 C.F.R. § 230.501-.508. 35 Obviously, Held’s beliefs were patently unreliable insofar as he would have opined that sellers in the securities industry commonly seek Regulation D protection for investments they do not consider to be securities. Thus, Held’s speculative testimony regarding Tucker’s intent was properly excluded. 19 monitor the number of unaccredited investors without the aid of the issuer, in this case, the trusts. The Government also offered a facsimile cover sheet from Tucker to Miller containing notations from a conversation between the two. Apparently, Miller had telephoned Tucker to inquire whether Tucker was monitoring the number of unaccredited investors. Miller wrote on the cover sheet: “Tucker says no problem with non-accredited. Has monitored closely.” The Government also presented the testimony of Plunkett, who testified that she tracked the number of accredited and unaccredited investors in each trust and prepared a spreadsheet containing that information, as well as the investors’ names, the dates, and amounts of their investments. Plunkett testified that she later noticed Tucker’s assistant concealing the accreditation information when faxing the spreadsheet to the broker dealers. Plunkett also claimed that Tucker subsequently instructed her to prepare two spreadsheets, one with the accreditation information and one without. Finally, the Government offered the testimony of Adamont Georgeson, an attorney who performed legal work for FFAC, regarding the contents of a letter he prepared and sent to UPS. The letter informed UPS that, based on Georgeson’s discussions with Tucker, the investment would be limited to accredited purchasers. Georgeson also testified that he had discussed the issue of the Regulation D restrictions with Tucker who “was very clear” that 20 there would be no unaccredited investors in the investments. At the presentation of each of these witnesses, Tucker’s trial counsel objected to the testimony on the grounds that Tucker was not being charged with a violation of Regulation D. In response, the Court agreed to provide a cautionary instruction advising that jury that it could not find the Defendant guilty of any crime charged in the indictment solely because he may have violated a regulation of the Securities and Exchange Commission. However, you may but are not required to consider evidence of violations of these regulations as you would any other evidence in determining whether the Defendant had the motive or required intent to commit the crimes charged in the indictment. In response, Held proposed to testify that UPS, FFAC’s principal broker, who had the list of investors, was primarily responsible for monitoring the number of non-accredited investors. According to Held, upon reaching thirty-five unaccredited investors, it was incumbent upon UPS, rather than Tucker, not to add more unaccredited investors so as to remain within the shelter of Regulation D. We find that Held’s testimony was not helpful to the trier of fact, and therefore was properly excluded by the district court. First, in the face of direct evidence that Tucker had doctored the spreadsheets which would have demonstrated whether a particular investor was accredited or unaccredited, and thereby aided the brokers in monitoring the investors’ status, it is difficult to perceive how Held’s “specialized knowledge” of the regulation would have assisted the jury in any way. Moreover, the record reveals 21 that UPS did in fact attempt to monitor its Regulation D obligations but was thwarted from doing so by Tucker’s misrepresentations and omissions. Consequently, even accepting as true Held’s assertion that it was the broker’s responsibility, and not Tucker’s, to ensure compliance with Regulation D, the facts as developed during the course of the trial show that, at any rate, Tucker sabotaged this obligation. Thus, the district court weighed the value of Held’s testimony, not in a vacuum, but by focusing upon the particular facts and circumstances of the case, and determined that the testimony would not aid the jury.36 We concur with that conclusion.