Court Opinion

ID: 804583
Source: CourtListenerOpinion
Date Created: 2012-07-18 14:28:59+00
Date Added: 2024-06-11T09:15:49.448924
License: Public Domain

10-4819-cr
     United States v. Lewis

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER
     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
     ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
     PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
     DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
     ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
     SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Daniel Patrick Moynihan
 3       United States Courthouse, 500 Pearl Street, in the City of
 4       New York, on the 18th day of July, two thousand twelve.
 5
 6       PRESENT:
 7                    DENNIS JACOBS,
 8                         Chief Judge,
 9                    DENNY CHIN,
10                    CHRISTOPHER F. DRONEY
11                         Circuit Judges.
12
13       - - - - - - - - - - - - - - - - - - - -X
14       UNITED STATES,
15                Appellee,
16
17                    -v.-                                               10-4819-cr
18
19       MARIO S. LEVIS,
20                Defendant-Appellant.
21       - - - - - - - - - - - - - - - - - - - -X
22
23       FOR DEFENDANT-APPELLANT:              Elliot H. Scherker (Jeffrey B.
24                                             Sklaroff and Brigid F. Cech
25                                             Samole, on the brief), Greenberg
26                                             Traurig, P.A., Miami, FL.
27
28       FOR APPELLEE:                         Brent S. Wible (Katherine Polk
29                                             Failla, on the brief), Assistant
30                                             United States Attorneys, for
31                                             Preet Bharara, United States
32                                             Attorney for the Southern
33                                             District of New York, New York,
34                                             NY.

                                                  1
 1        Appeal from a judgment of the United States District
 2   Court for the Southern District of New York (Griesa, J.).

 3        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
 4   AND DECREED that the judgment of the district court is
 5   AFFIRMED in part, VACATED in part, AND REMANDED.

 6        Defendant-Appellant Mario S. Levis appeals his
 7   conviction and sentence for one count of securities fraud,
 8   15 U.S.C. § 78j(b), and two counts of wire fraud, 18 U.S.C.
 9   § 1343. He raises six issues on appeal. We assume the
10   parties’ familiarity with the underlying facts, the
11   procedural history of the case, and the issues on appeal.

12   [1] Levis was the Senior Executive Vice President and
13   Treasurer of Doral Financial Corporation (“Doral”) at the
14   time he assured investors that certain risks were capped.
15   Although not all contracts had embedded caps, he sought to
16   defend against these charges on the ground that transactions
17   involving hedging afforded the same assurance, or (at least)
18   he reasonably thought so. On appeal he argues that the
19   district court erroneously barred him from presenting his
20   hedging defense.

21        “A district court abuses its discretion when . . . its
22   evidentiary rulings are arbitrary, irrational, or simply
23   erroneous as a matter of law.” United States v. Cadet, 664
24   F.3d 27, 32 (2d Cir. 2011).

25        The district court erred in barring Levis from
26   presenting a hedging defense as to Count Three: the wire
27   fraud count predicated on Levis’s misstatements regarding
28   contractual caps on the pass-through rates of the mortgage
29   pools. Doral’s hedges took various forms, such as
30   derivative financial instruments, futures and options,
31   forward sale commitments, interest rate swaps, interest rate
32   collars, and options to repurchase the mortgage pools.
33   These measures were not contractual caps, which would have
34   guaranteed a minimum pass-through rate for Doral, and
35   therefore would have been the safest measure. But these
36   hedges might have functioned as effective caps that
37   minimized the overall financial risk to Doral in the event
38   that a rise in interest rates impaired Doral’s income from
39   the mortgage sales.

                                  2
 1        One element of wire fraud is “a scheme to defraud.”
 2   United States v. Pierce, 224 F.3d 158, 165 (2d Cir. 2000);
 3   accord 18 U.S.C. § 1343. “To establish [that] . . .
 4   element, the government must prove (i) the existence of a
 5   scheme to defraud, (ii) the requisite scienter (or
 6   fraudulent intent) on the part of the defendant, and (iii)
 7   the materiality of the misrepresentations.” Pierce, 224
 8   F.3d at 165 (internal citations omitted). Evidence that the
 9   hedges functioned as a cap could have raised doubts as to
10   materiality. The district court therefore erred in
11   excluding Levis from presenting such evidence, including lay
12   and expert testimony involving the existence of hedges and
13   their effectiveness. Accordingly, Levis’s conviction as to
14   the third count must be vacated and the matter remanded for
15   re-trial.

16        However, the district court did not abuse its
17   discretion in barring testimony and evidence involving
18   hedges with regard to Count Five (wire fraud) and Count One
19   (securities fraud), which are based on Levis’s
20   misrepresentation that Doral had been the subject of two
21   independent evaluations. As to each of those counts, the
22   Government presented substantial evidence that neither of
23   the two valuations was independent. Although the
24   Government’s evidence that hedging was ineffective may have
25   been used to corroborate the impact of Levis’s
26   misrepresentations, the existence and effectiveness of
27   hedging is irrelevant to whether there were, in fact, two
28   independent evaluations. Because hedging was legally
29   irrelevant to whether Levis committed securities and wire
30   fraud on that basis, the district court did not err in
31   excluding Levis’s hedging defense as to those counts.1

32        There is also no danger that the now-vacated wire-fraud
33   conviction involving contractual caps spilled over to

         1
           The jury convicted Levis as to Count One based on
     misrepresentations regarding caps and misrepresentations
     regarding the two independent valuations. A-1785 (jury
     verdict form). Even if the verdict as to caps must be
     vacated due to the exclusion of Levis’s hedging defense, his
     misrepresentation involving the valuations is an independent
     basis that supports the verdict of conviction on Count One.
     Our decision with regard to Count Three therefore does not
     require us to vacate Levis’s conviction as to Count One
     (securities fraud).
                                  3
 1   Levis’s convictions for misrepresentations involving
 2   independent valuations. “A defendant bears an extremely
 3   heavy burden when claiming prejudicial spillover.” United
 4   States v. Griffith, 284 F.3d 338, 351 (2d Cir. 2002).
 5   Prejudicial spillover requires, inter alia, an evaluation of
 6   “the strength of the government’s case” as to the counts in
 7   question. Id. The evidence that Levis misrepresented that
 8   Doral had been subject to two independent evaluations is so
 9   overwhelming that there is no danger of spillover and no
10   “‘prejudice so substantial as to amount to a miscarriage of
11   justice.’” Id. (quoting United States v. Friedman, 854 F.2d
12   535, 563 (2d Cir. 1988)). In any event, Levis has forfeited
13   any such argument by failing to raise it on appeal. See
14   United States v. Pereira, 465 F.3d 515, 520 n.5 (2d Cir.
15   2006).

16   [2] Levis contends that his trial did not commence within
17   70 days of the public filing of his indictment, as required
18   by the Speedy Trial Act, and that no exception to the Speedy
19   Trial Act was satisfied. See 18 U.S.C. § 3161(h)(1)-(7).

20        In May 2009, the district court granted Levis’s
21   unopposed motion for a lengthy adjournment of the September
22   2009 trial date because Levis anticipated receiving
23   substantial discovery from the Government. In March 2010,
24   just prior to trial, Levis moved to dismiss the indictment
25   because the district court had not made the findings
26   necessary to satisfy the ends-of-justice exception to the
27   Speedy Trial Act when it granted Levis’s motion for
28   adjournment. See 18 U.S.C. § 3161(h)(7)(A).

29        The Speedy Trial Act requires that the findings
30   necessary for the ends-of-justice exception “be made, if
31   only in the judge’s mind, before granting the continuance,”
32   and that those findings need only “be put on the record by
33   the time a district court rules on a defendant’s motion to
34   dismiss.” Zedner v. United States, 547 U.S. 489, 506-07
35   (2006).

36        There was no violation of the Speedy Trial Act because,
37   before the district court formally denied Levis’s motion to
38   dismiss, it ratified a letter lodged by the Government,
39   confirming that the district court “ha[d] made the requisite
40   finding that the ends of justice warranted the continuance
41   . . . for the reasons stated in” Levis’s motion for
42   adjournment. A-130-31.

                                  4
 1   [3] Levis contends that venue in the Southern District of
 2   New York was improper as to Count Five because there was no
 3   direct evidence that he caused Doral’s 10-K report
 4   (containing the misrepresentation regarding the independent
 5   valuations) to be transmitted to that district. The
 6   Government bears the burden of proving venue by a
 7   preponderance of the evidence. United States v. Magassouba,
 8   619 F.3d 202, 204 (2d Cir. 2010). We review de novo the
 9   sufficiency of the evidence supporting the jury’s finding
10   that venue was proper. United States v. Tzolov, 642 F.3d
11   314, 318 (2d Cir. 2011).

12        “[V]enue is proper in a district where (1) the
13   defendant intentionally or knowingly causes an act in
14   furtherance of the charged offense to occur . . . or (2) it
15   is foreseeable that such an act would occur in the district
16   of venue [and it does].” United States v. Royer, 549 F.3d
17   886, 894 (2d Cir. 2008) (second alteration in original)
18   (internal quotation marks omitted). When the case involves
19   publication on the internet, venue is proper in any district
20   where it is reasonably foreseeable that the material will be
21   accessed. See id. at 895; United States v. Rowe, 414 F.3d
22   271, 279 (2d Cir. 2005).

23        It was reasonably foreseeable that Doral’s 10-K, which
24   is available on the internet through the Securities and
25   Exchange Commission’s website, would be accessed by someone
26   in the Southern District of New York. Levis knew that at
27   least one of the analysts reporting on Doral (Omotayo
28   Okusanya, a research analyst at UBS) was based in New York
29   and would review the report. Levis informed Okusanya that
30   the 10-K would be released soon and that soon afterward
31   there would be a conference call with Doral’s management--a
32   call in which Okusanya participated from his office in
33   Manhattan. Venue in the Southern District of New York was
34   proper.

35   [4] Levis contends that he is entitled to a new trial based
36   on improper jury instructions. The propriety of a jury
37   instruction is a question of law that we review de novo.
38   United States v. George, 386 F.3d 383, 397 (2d Cir. 2004).
39   “To secure reversal based on a flawed jury instruction, a
40   defendant must demonstrate both error and ensuing
41   prejudice.” United States v. White, 552 F.3d 240, 246 (2d
42   Cir. 2009). “A jury instruction is erroneous if it misleads
43   the jury as to the correct legal standard or does not

                                  5
 1   adequately inform the jury on the law.” United States v.
 2   Walsh, 194 F.3d 37, 52 (2d Cir.1999) (internal quotation
 3   marks omitted).

 4        A defendant engages in wire fraud when he intentionally
 5   deprives a victim of “potentially valuable economic
 6   information . . . that could impact on economic decisions”
 7   made by the victim. United States v. Wallach, 935 F.2d 445,
 8   463 (2d Cir. 1991); accord United States v. Dinome, 86 F.3d
 9   277, 283 (2d Cir. 1996); United States v. D’Amato, 39 F.3d
10   1249, 1257 (2d Cir. 1994). Levis deprived investors of
11   information that could impact their investment decisions by
12   falsely claiming that Doral had been subject to two
13   independent evaluations that confirmed Doral’s own internal
14   valuations.

15        Levis argues that the district court erred by failing
16   to instruct the jury that the information withheld from
17   investors must have some independent value or must bear on
18   the ultimate value of the transaction. See United States v.
19   Mittelstaedt, 31 F.3d 1208, 1217 (2d Cir. 1994). Even if
20   this was an appropriate statement of the law,2 Levis cannot
21   show prejudice. By misrepresenting that Doral had been
22   valued by two independent evaluators, Levis deprived Doral’s
23   actual and potential investors of information that had
24   independent value and that had bearing on the ultimate value
25   of Doral stock. Even if Doral’s internal evaluations were
26   correct, independent valuations would be of far greater
27   significance to possible investors and would substantially
28   affect the market value of Doral’s stock.

29   [5] Levis also contends that the district court erred by
30   failing to properly instruct the jury that he is not guilty
31   of wire fraud if he acted with a good faith belief that no
32   harm would befall Doral’s investors.

         2
           Mittelstaedt involved the failure of a government
     employee to reveal a conflict of interest and fulfill one’s
     fiduciary obligation to the local government. 31 F.3d at
     1217. Because the mail and wire fraud statutes do not
     criminalize government ethics law, we concluded there was no
     fraud. Id. The cases since Mittelstaedt, have limited it
     to its compelling factual setting. See, e.g., Dinome, 86
     F.3d at 284.

                                  6
 1       The district court charged the jury that

 2            [G]ood faith is a defense to a charge of
 3            fraud. . . . An honest belief in the truth of a
 4            representation is a good defense no matter how
 5            inaccurate the statement may turn out to be. In
 6            considering whether or not the defendant acted in
 7            good faith, you are instructed that a belief by
 8            the defendant, if such a belief existed, that
 9            ultimately everything would work out favorably for
10            investors does not require a finding by you that
11            the person acted in good faith.

12   T:3719-20. The district court also instructed the jury that
13   the Government must prove that Levis “intended to deceive
14   and to thereby cause harm to the victims of this scheme,”
15   T:3727, and that Levis “would be guilty of intending to
16   inflict harm on investors if he intended to put false
17   information before them which would deprive them of the
18   ability to make investment decisions based on actual facts,”
19   T:3728.

20        A jury instruction is considered in combination with
21   other instructions to determine whether the instructions, as
22   a whole, correctly describe the law in this Circuit. See
23   United States v. Mitchell, 328 F.3d 77, 82 (2d Cir. 2003).
24   Taken together, these instructions accurately state the law
25   of this Circuit: even if Levis meant to cause no ultimate
26   harm to investors because he honestly believed Doral to be
27   properly valuated, he intended to cause them “immediate
28   harm” by denying them the “right ‘to control [their] assets
29   by depriving [them] of the information necessary to make
30   discretionary economic decisions.’” See United States v.
31   Ferguson, 676 F.3d 260, 280 (2d Cir. 2011) (as amended)
32   (quoting United States v. Rossomando, 144 F.3d 197, 201 n.5
33   (2d Cir. 1998)); accord United States v. Leonard, 529 F.3d
34   83, 91-92 (2d Cir. 2008).3

         3
           Levis’s reliance on Rossomando is misplaced. In
     Rossomando, the defendant believed that he was causing no
     harm (immediate or otherwise), whereas Levis intentionally
     deprived Doral’s investors of important information even if
     he may have believed that his misrepresentation would cause
     no ultimate harm because he thought Doral was a wise
     investment. See Ferguson, 676 F.3d at 280 (discussing

                                  7
 1        The district court did not err in its instruction to
 2   the jury regarding Levis’s good-faith defense.

 3   [6] Levis argues that this is one of the “rare case[s]” in
 4   which an improper statement in the Government’s summation
 5   was so prejudicial as to warrant a new trial. See United
 6   States v. Rodriguez, 968 F.2d 130, 142 (2d Cir. 1992). A
 7   defendant who seeks to overturn a conviction based on a
 8   prosecutor’s comment in summation must sustain the “heavy
 9   burden” of showing that “the comment, when viewed against
10   the entire argument to the jury, and in the context of the
11   entire trial, was so severe and significant as to have
12   substantially prejudiced [the defendant], depriving him of a
13   fair trial.” United States v. Farhane, 634 F.3d 127, 167
14   (2d Cir. 2011) (internal citation and quotation marks
15   omitted).

16        The Government’s summation seemed to intimate that the
17   defense’s strategy was dishonest. When alerted, the
18   Government apologized to the jury and disavowed any such
19   inference. In that light, it cannot be said that the
20   statement was so severe and significant as to prejudice
21   Levis at all--much less deprive him of his right to a fair
22   trial.

23        Levis also claims that the Government unfairly
24   exploited the exclusion of the hedging defense. This
25   argument is obviated by our ruling that it was not error to
26   exclude the hedging defense (as to the surviving counts).

27        We have considered all of Levis’s additional arguments
28   and find them to be without merit. Accordingly, the
29   judgment of the district court is AFFIRMED in part, and
30   VACATED in part. The matter is REMANDED for further
31   proceedings consistent with this decision.

32                              FOR THE COURT:
33                              Catherine O’Hagan Wolfe, Clerk

     Rossomando, 144 F.3d at 200-03 & n.5). Rossomando has been
     “limited to the quite peculiar facts that compelled [its]
     result.” Ferguson, 676 F.3d at 280 (alteration in original)
     (internal quotation marks omitted).

                                  8