Opinion ID: 168590
Heading Depth: 3
Heading Rank: 2

Heading: Conspiracy to Circumvent

Text: 84 The defendants have not argued that there was insufficient evidence to support the conspiracy verdict, so we need not consider whether a new trial is barred by the Double Jeopardy Clause. They do, however, contend that portions of the conspiracy charges are legally unsound. If that contention were correct, we would need not only to set aside the convictions on those charges but also to prohibit retrial. We therefore address that contention. 85 The defendants assert that (1) conspiracy to circumvent is not a crime and (2) a conviction for circumvention cannot be predicated on coconspirator liability. (Each was convicted on some counts of circumvention based on the other's failure to report personal travel on a D & O form.) They rely on the language of 15 U.S.C. § 78m(b), whose pertinent provisions are: 86 (2) Every issuer which has a class of securities registered pursuant to section 78l of this title and every issuer which is required to file reports pursuant to section 78o(d) of this title shall— 87 (A) make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; 88 (B) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that— 89 (I) transactions are executed in accordance with management's general or specific authorization; 90 (ii) transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets; 91 (iii) access to assets is permitted only in accordance with management's general or specific authorization; and 92 (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and 93 (C) notwithstanding any other provision of law, pay the allocable share of such issuer of a reasonable annual accounting support fee or fees, determined in accordance with section 7219 of this title. 94 . . . . 95 (4) No criminal liability shall be imposed for failing to comply with the requirements of paragraph (2) of this subsection except as provided in paragraph (5) of this subsection. 96 (5) No person shall knowingly circumvent or knowingly fail to implement a system of internal accounting controls or knowingly falsify any book, record, or account described in paragraph (2). 97 They argue that conspiracy to circumvent is not a crime because paragraph (4) limits criminal liability to that specified in paragraph (5), and paragraph (5) does not include liability for coconspirators. 98 We disagree. The criminal-penalty provision for the Securities Exchange Act of 1934 is 15 U.S.C. § 78ff, which states: 99
100 Any person who willfully violates any provision of this chapter . . . or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report or document required to be filed under this chapter or any rule or regulation thereunder . . . which statement was false or misleading with respect to any material fact, shall upon conviction be fined not more than $5,000,000, or imprisoned not more than 20 years, or both . . . but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation. 101 Under 18 U.S.C. § 371, [i]f two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both. Moreover, a conspiracy participant is legally liable for all reasonably foreseeable acts of his or her coconspirators in furtherance of the conspiracy. United States v. Brewer, 983 F.2d 181, 185 (10th Cir.1993) (citing Pinkerton v. United States, 328 U.S. 640, 66 S.Ct. 1180, 90 L.Ed. 1489 (1946) and United States v. Kissel, 218 U.S. 601, 608, 31 S.Ct. 124, 54 L.Ed. 1168 (1910)). 102 Criminal liability for coconspirators is entrenched in federal law. The defendants, however, would have us carve out an exception to this traditional rule for circumvention violations. To be sure, on rare occasions it is apparent that a coconspirator should not be criminally liable because of the statutory description of the substantive offense. For example, in Gebardi v. United States, 287 U.S. 112, 53 S.Ct. 35, 77 L.Ed. 206 (1932), the Supreme Court considered whether a woman who consented to be transported across state lines for immoral purposes in violation of the Mann Act could be found guilty of conspiring to violate the Act, which imposed a criminal penalty on one who transported a woman in interstate commerce for immoral purposes. See id. at 118-23, 53 S.Ct. 35. In holding that she could not, the Court determined that the failure of the Mann Act to condemn the woman's participation in those transportations which are effected with her mere consent showed an affirmative legislative policy to leave her acquiescence unpunished. Id. at 123, 53 S.Ct. 35. Similarly, in United States v. Castle, 925 F.2d 831 (5th Cir. 1991) (per curiam), the court found that foreign officials could not be charged with conspiracy to pay bribes under the Foreign Corrupt Practices Act because Congress had excluded from prosecution for the substantive offense such officials, who are the very individuals whose participation was required in every case. Id. at 835. The defendants in Gebardi and Castle had clearly conspired to commit a substantive offense; the woman in Gebardi had agreed to be transported between states for immoral purposes, and the foreign official in Castle had agreed to be paid a bribe. But in both cases the role of the defendant coconspirator was so central to the commission of the substantive offense that the failure of the statute defining the substantive offense to prohibit that role explicitly was a compelling indication of legislative intent not to punish such a coconspirator. The defendants here, however, have not argued, and could not argue, that their alleged roles in criminal violations of 15 U.S.C. § 78m(b)(2) are of that nature. The involvement of one defendant as a coconspirator was hardly essential for the other defendant to commit the substantive circumvention offense. 103 Instead, the defendants rely on the language of paragraphs (4) and (5) of § 78m(b), which states that criminal liability for violations of paragraph (2) can be imposed only if a person knowingly circumvent[s] or knowingly fail[s] to implement a system of internal accounting controls or knowingly falsif[ies] any book, record, or account described in paragraph (2). Paragraph (5) certainly limits criminal liability in two respects. First, only certain types of violations of paragraph (2) can be the basis of criminal prosecution— namely, circumvention of or failure to implement a system of internal accounting and falsifying a book, record, or account. Second, paragraph (5) imposes an additional scienter requirement for criminal liability. In addition to the willfulness required by § 78ff, the violation must be knowing. We recognize that § 78ff provides that a defendant cannot be imprisoned if he proves that he had no knowledge of [the violated] rule or regulation. But this provision does not perform the same work as the knowingly requirement of paragraph (5): Paragraph (5), unlike the lack-of-knowledge provision in § 78ff, applies to lack of knowledge of a statutory provision; paragraph (5) shifts the burden of persuasion regarding knowledge from the defendant to the government; paragraph (5) makes lack of knowledge a complete defense, not just a barrier to imprisonment; and the knowingly requirement of paragraph (5) may not be congruent with a requirement of knowledge of the rule. Although it may be unclear what a knowing requirement adds to the willfulness required by § 78ff, there is little doubt that Congress has thought it adds something. See United States v. Dixon, 536 F.2d 1388, 1395 (2d Cir.1976) (Friendly, J.) (commenting on use of willfully in one provision of § 78ff and use of willfully and knowingly in another). 104 What the defendants contend is that § 78m(b)(4) and (5) also impose a third limit on criminal liability—namely, limiting liability to only the actual perpetrator of the deed, excusing any coconspirator (or aider or abettor, for that matter). They read the statutory language as implicitly overriding 18 U.S.C. § 371 and the hoary doctrine that holds coconspirators liable for commission of a reasonably foreseeable substantive offense. We disagree. Traditionally there is no need for the statute setting forth the substantive offense to make any reference to liability for conspiracy. That job is performed by 18 U.S.C. § 371. To say, as § 78m(b)(4) does, that criminal liability shall be imposed only in certain circumstances would ordinarily be understood as only a restriction on the scope of the substantive offense, not as an implied repeal of traditional liability for partners in crime. Perhaps one could be tempted to construe § 78m(b)(4) as having the purpose of limiting such liability if there were no other apparent purpose for the provision. But there is such an apparent purpose—limiting the criminal liability of all persons (principals as well as aiders, abettors, and coconspirators) who violate a highly technical statutory requirement by adding a scienter requirement and confining criminal liability to only a subset of statutory violations. 105 Supporting our view is the absence of any apparent reason why Congress would want to single out § 78m(b)(2) by excluding coconspirator liability. The limitations on criminal liability in § 78m(b)(4) and (5) protect the coconspirator as well as the principal. The coconspirator must act willfully and knowingly and is criminally liable only for a subset of violations of paragraph (2). It escapes us why a coconspirator would then need greater protection than would the principal perpetrator. 106 In sum, the liability of coconspirators is a well-entrenched feature of federal criminal law. If Congress wishes to limit it in certain circumstances, we would expect it to be explicit about what it is doing. See Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 88, 102 S.Ct. 851, 70 L.Ed.2d 833 (1982) (repeals by implication are disfavored (internal quotation marks omitted)); United States v. Hahn, 359 F.3d 1315, 1321-22 (10th Cir.2004) (en banc) (same). Moreover, we see no reason why Congress would wish to eliminate the liability of coconspirators with respect to violations of § 78m(b)(2). Accordingly, we reject the defendants' contention that they can be convicted only as principals. Cf. United States v. O'Hara, 960 F.2d 11, 13 (2d Cir. 1992) (upholding guilty plea to aiding and abetting violation of § 78m(b)(2), but no argument made concerning effect of § 78m(b)(4), (5).) D. Recusal of Judge on Retrial 107 Finally, the defendants contend that the trial judge displayed such bias in the first two trials that she should not be permitted to preside at any trial on remand. We are not persuaded. Certainly the defendants disagreed with a number of her rulings, and we have held that several of the defendants' contentions were correct. But those rulings did not display a disqualifying bias. See Liteky v. United States, 510 U.S. 540, 555, 114 S.Ct. 1147, 127 L.Ed.2d 474 (1994) (judicial rulings alone almost never constitute a valid basis for a bias or partiality motion).