Court Opinion

ID: 4116439
Source: CourtListenerOpinion
Date Created: 2017-01-18 16:01:14.996808+00
Date Added: 2024-06-11T14:19:27.985469
License: Public Domain

Case: 14-15621       Date Filed: 01/18/2017      Page: 1 of 47

                                                                                 [PUBLISH]

                 IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                              ________________________

                                    No. 14-15621
                              ________________________

                        D.C. Docket No. 9:11-cr-80205-KAM-1

UNITED STATES OF AMERICA,

                                                                         Plaintiff-Appellee,

                                            versus

MITCHELL J. STEIN,

                                                                      Defendant-Appellant.

                              ________________________

                      Appeal from the United States District Court
                          for the Southern District of Florida
                            ________________________

                                     (January 18, 2017)

Before WILLIAM PRYOR and JILL PRYOR, Circuit Judges, and STORY, *
District Judge.

       *
        Honorable Richard W. Story, United States District Judge for the Northern District of
Georgia, sitting by designation.
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JILL PRYOR, Circuit Judge:

      After a two-week trial, Mitchell Stein, a lawyer, was convicted of mail, wire,

and securities fraud based on evidence that he fabricated press releases and

purchase orders to inflate the stock price of his client Signalife, Inc., a publicly-

traded manufacturer of medical devices. The district court sentenced Mr. Stein to

204 months’ imprisonment, over $5 million in forfeiture, and over $13 million in

restitution. Mr. Stein appeals his conviction and sentence.

      Regarding his conviction, Mr. Stein argues, among other points, that the

government failed to disclose Brady material1 to the defense before trial and

knowingly relied on false testimony to make its case. As regards his sentence, Mr.

Stein argues that the district court erred in calculating actual loss for the purposes

of the Mandatory Victims Restitution Act of 1996 (“MVRA”), 18 U.S.C. § 3663A,

and § 2B1.1 of the United States Sentencing Guidelines. In particular, he argues

that in estimating actual loss the district court erroneously presumed that all

purchasers of Signalife stock during the period when the fraud was ongoing relied

on false information Mr. Stein promulgated. He also argues that the district court

failed to take into account other market forces that likely contributed to the

      1
          Brady v. Maryland, 373 U.S. 83 (1963).

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investors’ losses. After careful consideration of the parties’ briefs and with the

benefit of oral argument, we affirm Mr. Stein’s conviction but vacate his sentence.

       This opinion proceeds in three parts. We first provide background

regarding Mr. Stein’s fraudulent scheme, his subsequent indictment, his pretrial

and post-trial motions, and his sentencing. Second, we address and reject Mr.

Stein’s challenges to his conviction. Mr. Stein identified only one potential Brady

document, and it contained no information favorable to him and was accessible

through reasonable diligence before trial. And, he failed to identify any suppressed

material or any materially false testimony on which the government relied,

purportedly in violation of Giglio. 2

      Third, with respect to sentencing, we review the district court’s actual loss

calculation. We agree with Mr. Stein that to establish an actual loss figure under

the guidelines or the MVRA based on investors’ losses, the government must

prove that, in deciding to purchase Signalife stock, investors relied on the

fraudulent information Mr. Stein disseminated. The district court found that more

than 2,000 investors relied on Mr. Stein’s fraudulent information, but the only

evidence supporting this finding was the testimony of two individuals that they

relied on Mr. Stein’s false press releases and generalized evidence that some

investors may rely on some public information. This evidence was insufficient to

      2
          Giglio v. United States, 405 U.S. 150 (1972).

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permit reliance to be inferred for over 2,000 investors. Accordingly, the district

court erred in calculating an actual loss figure based on the losses of all these

investors. The district court also failed to determine whether intervening events

caused the Signalife stock price to drop and, if so, whether these events were

unforeseeable such that their effects should be subtracted from the actual loss

figure. We remand so that the district court can remedy these errors.

                                    I. BACKGROUND
A.     The Fraudulent Scheme
       The evidence adduced at trial—including the testimony of Mr. Stein’s two

co-conspirators, Martin Carter and Ajay Anand—supported the following facts. In

an effort to inflate artificially the value of Signalife stock, Mr. Stein drafted three

press releases and three corresponding purchase orders touting more than $5

million in bogus Signalife sales. 3 The fraudulent period began on September 20,

2007, when Mr. Stein sent the first false press release to John Woodbury,

Signalife’s securities lawyer, with instructions to publish it. The press release

reported that Signalife had sold $1.98 million worth of its products. Mr. Stein

represented that the press release was “backed up by a purchase order.” Trial Tr.,

       3
         Signalife was formerly known as Recom Managed Systems, Inc., and later known as
Heart Tronics, Inc. Mr. Stein’s wife at the time of the false purchase orders, Tracey Hampton-
Stein, was the founder of Signalife and the largest single Signalife shareholder. Thus, Mr. Stein
stood to gain directly from the stock’s inflated price.

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Doc. 240 at 59.4 Mr. Woodbury lacked any independent knowledge of the truth of

the statements in the press release. He published it that day anyway, though,

because Mr. Stein had told him that he and Signalife’s Chief Executive Officer,

Lowell T. Harmison, were traveling together visiting potential clients, and Mr.

Woodbury believed that this sale was the fruit of those efforts.

       A few days later, Mr. Stein emailed Mr. Woodbury a second press release

about an additional $3.3 million in sales and represented that Mr. Harmison had

approved the press release. Mr. Woodbury published the release the next day

despite lacking any supporting documentation.

       Mr. Stein emailed Mr. Woodbury a third press release about two weeks later.

The press release reported an additional $551,500 in sales orders. Mr. Woodbury

issued the release early the next morning, again without supporting documentation.

       Mr. Woodbury later asked Mr. Stein for additional information regarding the

sales that were described in the press releases. In response, Mr. Stein sent Mr.

Woodbury three purchase orders. None of these purchase orders provided an

address for shipment. Tracey Jones, Mr. Harmison’s assistant, maintained that she

“never received any backup or anything on” the purchase orders, and thus she

considered them “phantom purchase orders.” Doc. 241 at 117.

       4
          “Doc.” refers to the numbered entry onto the district court’s docket in this case. The
trial transcript is found at Doc. 239 through Doc. 248.

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      The first purchase order, dated September 14, 2007, reflected an order by a

company called Cardiac Hospital Management (“CHM”). The order reflected a

sale of $1.93 million worth of product and noted a $50,000 deposit. The signature

block showed “Cardiac Hospital Management” and an illegible signature without a

name. A week after the date of the purchase order, Thomas Tribou, a consultant

who had worked with Signalife, paid Signalife $50,000 for goods he expected to

receive.

      The second and third purchase orders, dated September 24, 2007 and

October 4, 2007, respectively, reflected sales to a company called IT Healthcare.

One order reflected a sale of products at a cost of $3.3 million and noted a $30,000

deposit. The other reflected a sale with a “net due” amount of $551,500.

      The facts of these purchase orders resurfaced several times. Mr. Harmison

incorporated information about them in a March 2008 memorandum to Signalife’s

auditors. Likewise, Signalife filed reports with the Securities and Exchange

Commission (“SEC”) that detailed these orders. According to Mr. Woodbury, who

oversaw the drafting of the SEC filings, Mr. Stein was the sole source of

information about the purchase orders and was intimately involved in the drafting

process.

      Mr. Stein used the help of his personal assistant, Mr. Carter, and a Signalife

contractor, Mr. Anand, to make the fake purchase orders appear legitimate. For

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example, Mr. Stein gave Mr. Carter a template to create bogus letters requesting a

change of shipment address, one for IT Healthcare and another for CHM. Mr.

Carter drafted a letter ostensibly from a man named Yossie Keret of IT Healthcare

requesting that products be delivered to an address in Israel that Mr. Carter made

up. Mr. Carter also prepared a letter appearing to come from CHM that asked for

products to be delivered to an address in Tokyo, Japan. This letter purportedly was

signed by “Toni Nonoy.” Mr. Carter never spoke with Yossie Keret, Toni Nonoy,

or anyone at IT Healthcare or CHM; indeed, he had no idea whether the companies

or the individuals actually existed. He believed, however, that Mr. Stein had

fabricated these names.

      Mr. Stein directed Mr. Carter to help him with the fraud in other ways as

well. Mr. Stein asked Mr. Carter for two numbers he could use as fax numbers for

purchase confirmation letters from Yossie Keret and Toni Nonoy. Mr. Carter

provided Mr. Stein with two numbers unaffiliated with either company or person.

Then, in June 2008, Mr. Stein told Mr. Carter to fabricate a letter from Yossie

Keret purporting to cancel IT Healthcare’s orders. Mr. Carter did as he was told

and sent the letter to Mr. Woodbury. At one point, Mr. Stein arranged for Mr.

Carter to travel to Israel ostensibly to find customers for Signalife even though Mr.

Carter had no business contacts there. On another occasion, Mr. Stein sent Mr.

Carter to Japan with a sealed envelope in a plastic bag, instructing him to mail the

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envelope back to the United States while wearing gloves and then return home the

same day.

      Mr. Stein similarly relied on Mr. Anand for help in perpetrating the fraud.

Once Mr. Stein asked Mr. Anand to travel to Texas to mail two IT Healthcare

purchase orders to Signalife. When Mr. Anand asked whether the purchase orders

were real, Mr. Stein responded that it did not matter. Mr. Anand declined to help,

but later, on Mr. Stein’s request, he agreed to draft two letters that would appear to

come from Yossie Keret on behalf of IT Healthcare. The first letter requested a

shipping address change to an Israeli address. The second letter cancelled the

Signalife order. Mr. Anand sent these letters to Mr. Stein and Mr. Harmison.

      Mr. Stein also used Carter and Anand to take money or stock from Signalife.

At Mr. Stein’s direction, in January 2008, Mr. Carter executed an agreement with

Signalife to provide consulting services, none of which he actually provided or was

capable of providing. Pursuant to this agreement, Mr. Stein funneled money and

Signalife stock from Signalife through Mr. Carter to himself. Mr. Stein also

directed Mr. Carter to buy and sell Signalife stock and transfer most of the

proceeds to him. Likewise, at Mr. Stein’s direction, Mr. Anand established “The

Silve Group,” ostensibly to sell Signalife products in India. But Mr. Anand sold

only one unit (in Mexico). Mr. Stein nonetheless arranged for Signalife to pay Mr.

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Anand more than one million shares for his work. Mr. Anand then gave Mr. Stein

a “kickback . . . [f]or the sweet deal [he] got from Mr. Stein.” Doc. 243 at 71.

       On August 15, 2008, Signalife filed a Form 10-Q for the second quarter of

2008, which described the cancellation of an IT Healthcare purchase order. (GX

159 at 22.) This was the first public disclosure arguably signaling to stock market

participants that Signalife’s stock was overvalued based on the IT Healthcare

purchase order, and thus, as the district court found, marked the end of the

fraudulent period.

B.     Procedural Background

       1.     The Investigation and Indictment
       The SEC began investigating Signalife in 2009. During its investigation, the

SEC amassed a database of about 200 million records produced by Signalife. In

2010, the United States Department of Justice (“DOJ”) began a criminal

investigation of Mr. Stein. As a result of the DOJ’s investigation, a grand jury

indicted Mr. Stein on charges of money laundering; mail, wire and securities fraud;

conspiracy to commit mail and wire fraud; and conspiracy to obstruct justice. The

indictment also charged that Mr. Stein obstructed justice by giving false testimony

to SEC investigators. Mr. Stein’s two co-conspirators, Mr. Carter and Mr. Anand,

also were indicted. Both pled guilty to conspiracy charges and testified against Mr.

Stein at trial.

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      2.       The Motion to Compel
      Before trial, Mr. Stein sent the government nine letters requesting over 100

categories of documents, including documents in the SEC’s files. The DOJ

refused to produce information that was “not in the possession of or known to the

prosecution,” which included the documents in the SEC’s files. Mot. Compel Ex.

B, Doc. 41-2 at 3. Mr. Stein responded with a motion to compel. The government

opposed the motion, arguing that the DOJ lacked control over the SEC and that the

DOJ and the SEC conducted no joint investigation. The magistrate judge denied

the motion to compel as to documents “in the sole custody of the SEC, and which

the DOJ is unaware of.” Doc. 63 at 2.

      3.       The Pretrial Motion to Dismiss the Indictment
      About two months before trial, at Mr. Stein’s direction, his attorney filed a

motion to withdraw as counsel, which was granted. Mr. Stein then filed a motion

to proceed pro se. The court held a Faretta 5 hearing and then granted Mr. Stein’s

motion. During the hearing, Mr. Stein learned that in the course of its investigation

the DOJ had accessed a “very small subset” of documents in the SEC’s database,

which the DOJ had then provided to him. Tr. of Faretta Hrg. Proceedings, Doc.

146 at 41. Based on this revelation, Mr. Stein promptly filed a pro se motion to

dismiss the indictment, alleging the suppression of unidentified “Brady material”

      5
          Faretta v. California, 422 U.S. 806 (1975).

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in the SEC database. Mot. to Dismiss, Doc. 150 at 17-22. Mr. Stein also requested

an evidentiary hearing. The district court denied the motion, concluding, among

other things, that the motion was untimely and failed to identify any exculpatory

Brady material.

      4.     The Trial and Post-Trial Motions
      The trial lasted two weeks. The jury returned guilty verdicts against Mr.

Stein on all charges.

      Mr. Stein filed several post-trial motions, including two motions for new

trial based on newly discovered evidence. The newly discovered evidence

included, among other documents, a publicly-filed SEC Form 8-K (“Exhibit X”)

regarding an unrelated company whose Chief Financial Officer was named “Yossi

Keret.” Mot. for New Trial Ex. J, Doc. 264-10. Mr. Stein alleged that Exhibit X

was on the “SEC website.” See Mot. for New Trial, Doc. 264 at 9. Mr. Stein

argued this document proved that Yossie (with an “e”) Keret, the man who

purportedly signed the IT Healthcare purchase orders, was a real person, contrary

to the government’s representation at trial. He contended that his conviction thus

“was based on the perjured testimony of key Government witnesses and exclusion

of crucial exculpatory and impeachment evidence as a result of prosecutorial

misconduct.” Id. at 1; see also 2d Mot. for New Trial, Doc. 312 at 2, 8-9. Mr.

Stein also filed a motion for an evidentiary hearing on his motions for new trial and

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a motion to compel documents from the SEC database. The district court

summarily denied these motions.

      A little more than a year after the trial, in an SEC enforcement action against

Signalife’s successor company, the SEC produced about two million documents

from its database. Within this collection, Mr. Stein found a copy of Exhibit X, the

publicly-available SEC document containing the name “Yossi Keret.” Based on

this document, Mr. Stein filed a third motion for new trial and accompanying

motion for a hearing, arguing that the document was exculpatory and had been

withheld in violation of Brady.

      The district court denied the third motion for a new trial and the

corresponding motion for an evidentiary hearing. The court found that there had

been “no showing that the person named ‘Yossi Keret’ in [Exhibit X was] the same

person connected to the [IT Healthcare purchase order confirmation and purchase

order cancellation] upon which [Defendant’s convictions] . . . are based.” Doc.

388 at 2. The court further found there was no evidence showing that the

prosecution team possessed this document and knowingly withheld it.

      5.    The Sentencing
      Before Mr. Stein’s sentencing, the probation office issued a presentence

investigation report (“PSI”). Under the applicable Sentencing Guidelines, the PSI

calculated a base offense level of 7 and recommended several enhancements and

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one reduction. Relevant to this appeal, the PSI recommended a 24-level increase

under U.S.S.G. § 2B1.1(b)(1)(M) based on a loss calculation of more than $50

million but less than $100 million. Mr. Stein objected to this proposed calculation

of loss, contending that there was no actual loss to any investor.

       The government proposed a method for calculating actual loss coined the

“buyer’s only” method, which was based on actual purchase and sales data. Tr. of

Sentencing Proceedings, Doc. 429 at 30. Under this method, the court would

consider only “those customers who only purchased Signalife shares during the

fraudulent period,” defined as September 20, 2007 (the date of the first false press

release) through August 15, 2008 (the date of Signalife’s SEC filing noting that IT

Healthcare had cancelled its purchase order). Tr. of Sentencing Proceedings, Doc.

428 at 25. The court would then “value the amount of those purchases . . . [and]

subsequently subtract the value of those shares as of the end of the fraudulent

period.” Id. at 42. The government identified 2,415 unique investors who bought

Signalife stock during the fraudulent period and subsequently lost a total of

$13,186,025.85. 6

       Mr. Stein objected to this method, contending that the government needed to

show both “but for” causation (reliance) and proximate causation (“that the causal

       6
         The government proposed other methods for calculating actual loss, but the district
court declined to adopt them.

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connection between the conduct and the loss is not too attenuated”). Doc. 428 at

220. As regards “but for” causation, Mr. Stein argued there was no evidence that

the 2,415 investors actually relied on false press releases or other fraudulent

information promulgated by Mr. Stein. He noted that only one investor testified at

trial that he had relied on one of Mr. Stein’s false press releases and only one

investor provided a victim impact statement to the same effect. Although Mr.

Stein acknowledged that a number of other investors provided victim impact

statements, he emphasized that none of these investors specified that he or she

relied on the false information he released.

      The government responded that many of the victims’ impact statements

showed they relied on press releases generally (albeit not necessarily the specific

press releases Mr. Stein disseminated) in purchasing Signalife stock. The

government urged that this evidence was enough to infer reliance for all 2,415

investors identified. The government also relied on testimony that the only source

for information about Signalife stock was press releases and public filings, and at

least some investors probably relied on this type of information.

      Regarding proximate cause, Mr. Stein argued that the government needed to

“take into account . . . extrinsic market factors.” Doc. 428 at 221. He noted that

other circuits require this and that the Sentencing Guidelines specifically

contemplate it. He identified specific events unrelated to the fraud that he

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contended caused the stock price to decline during the fraudulent period, including

the 2008 financial crisis and the rampant short selling of Signalife stock. Mr. Stein

urged the district court to reject the government’s actual loss calculation because it

failed to tease out these external market factors. The government responded

simply, “The offense [Mr. Stein committed] was luring people in to invest in this

stock. . . . Did they then lose money? Of course. Was that reasonably foreseeable

to Mr. Stein? Of course, it was. That’s the Government’s position here, Your

Honor.” Id. at 242.

       The district court adopted the buyer’s only method over Mr. Stein’s

objections. It concluded that there was “sufficient evidence to demonstrate both

reliance and causation of damage to the shareholders.” Doc. 429 at 30. Based on

over $13 million in actual loss, the court applied a 20-level increase to Mr. Stein’s

base offense level. See U.S.S.G. § 2B1.1(b)(1)(K). 7 The court also imposed a 6-

level enhancement because there were more than 250 victims. See id.

§ 2B1.1(b)(2)(C). With other enhancements and reductions not at issue here, Mr.

Stein’s total offense level was 45, resulting in an advisory guidelines sentence of

life imprisonment. The district court found that this range was “certainly way

above what would be sufficient but not greater than necessary to comply with the

       7
         Under the applicable 2012 Sentencing Guidelines, a loss of more than $7 million but
less than $20 million resulted in a 20-level enhancement. U.S.S.G. § 2B1.1(b)(1)(K).

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requirements of [18 U.S.C. §] 3553,” Doc. 429 at 70, and varied downward,

sentencing Mr. Stein to 204 months’ imprisonment.

      The government then filed a motion for judgment of restitution, asking the

district court to use the same actual loss figure to award $13,186,025.85 to 2,415

Signalife investors. Mr. Stein waived his right to a hearing but filed a response

arguing, again, that the government failed to prove reliance and proximate cause.

The district court rejected this argument and granted the government’s motion.

This appeal followed.

                                II. DISCUSSION

A.    The Conviction Issues
      Mr. Stein argues that the government violated Brady and Giglio, and thus

the district court erred in denying his motions for a new trial. We review de novo

alleged Brady or Giglio violations. United States v. Brester, 786 F.3d 1335, 1339

(11th Cir. 2015); United States v. Jones, 601 F.3d 1247, 1266 (11th Cir. 2010).

We review the district court’s denial of a motion for new trial for an abuse of

discretion. United States v. Vallejo, 297 F.3d 1154, 1163 (11th Cir. 2002). As

explained below, we find no basis for vacating Mr. Stein’s convictions.

      1.     The Brady Claims
      Mr. Stein first argues that the government’s failure to produce material,

exculpatory evidence contained in the SEC’s database violated Brady. “[T]he

burden to show a Brady violation lies with the defendant, not the government . . . .”
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United States v. Esquenazi, 752 F.3d 912, 933 (11th Cir. 2014). To establish a

Brady violation, Mr. Stein must show that:

       (1) the government possessed favorable evidence to the defendant; (2)
       the defendant does not possess the evidence and could not obtain the
       evidence with any reasonable diligence; (3) the prosecution
       suppressed the favorable evidence; and (4) had the evidence been
       disclosed to the defendant, there is a reasonable probability that the
       outcome would have been different.

Vallejo, 297 F.3d at 1164.

       Mr. Stein argues that the government violated Brady by failing to disclose

Exhibit X, a document filed with the SEC showing that a person named “Yossi

Keret” (not Yossie with an “e”) was an officer of a company unrelated to any of

the players in this case. According to Mr. Stein, this document suggests that

Yossie Keret, the man who purportedly signed the IT Healthcare purchase orders,

was a real person.8

       Mr. Stein’s argument fails for two reasons. First, Exhibit X contains no

information favorable to Mr. Stein. Evidence is favorable to the accused for Brady

purposes if “‘it is either exculpatory or impeaching.’” United States v. Naranjo,

634 F.3d 1198, 1212 (11th Cir. 2011) (quoting Stephens v. Hall, 407 F.3d 1195,

       8
         The only other document Mr. Stein identifies as supporting a Brady claim is a CHM
change of address letter that Mr. Carter purportedly created. Oddly, this letter showed Mr.
Carter’s wife’s uncle as the sender on behalf of CHM. It is unclear how this document could be
considered exculpatory, but in any event it cannot support a Brady violation because the
government produced the letter to Mr. Stein before trial.

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1203 (11th Cir. 2005)). Exhibit X is neither. Contrary to Mr. Stein’s contention,

Exhibit X does not contradict Mr. Carter’s testimony that Yossie Keret was a

fabricated name and not an officer of IT Healthcare. Not only is the name Yossi

Keret on Exhibit X spelled differently from the name Yossie Keret on some of Mr.

Stein’s fabricated documents, but also Exhibit X indicates that Yossi Keret is

affiliated with a different company, not IT Healthcare. Thus, the district court’s

conclusion that Mr. Stein had made “no showing that the person [referenced in

Exhibit X was] the same person connected to the wires upon which [Defendant’s

convictions] . . . are based,” Doc. 388 at 2, was not erroneous. Mr. Stein failed to

prove that Exhibit X was exculpatory or impeaching; thus, this document cannot be

the basis of a Brady violation.

      Second, even if Exhibit X were favorable to Mr. Stein, he failed to show that

he was unable to locate it with reasonable diligence. “‘[T]he government is not

obliged under Brady to furnish a defendant with information which he already has

or, with any reasonable diligence, he can obtain himself.’” United States v. Valera,

845 F.2d 923, 928 (11th Cir. 1988) (quoting United States v. Prior, 546 F.2d 1254,

1259 (5th Cir. 1977)); see, e.g., United States v. Hansen, 262 F.3d 1217, 1235

(11th Cir. 2001) (holding that the government’s failure to disclose court opinions,

which “were all available through legal research,” does not violate Brady). Mr.

Stein conceded that Exhibit X was a publicly available document filed with a

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public agency. Although in some cases a publicly available document practically

may be unobtainable with reasonable diligence, see, e.g., Milke v. Ryan, 711 F.3d
998, 1017-18 (9th Cir. 2013),9 Mr. Stein made no effort to establish that this is

such a case. In fact, Mr. Stein represented that he located the document on the

“SEC website.” See Mot. for New Trial, Doc. 264 at 9. For these reasons, Mr.

Stein failed to satisfy his burden of proving a Brady violation based on Exhibit X.10

       2.      The Giglio Claims
       Mr. Stein next argues that the government violated Giglio by knowingly

relying on false testimony. “Giglio error, a species of Brady error, occurs when the

undisclosed evidence demonstrates that the prosecution’s case included perjured

testimony and that the prosecution knew, or should have known, of the perjury.”

Ford v. Hall, 546 F.3d 1326, 1331 (11th Cir. 2008) (internal quotation marks

omitted). Giglio also applies where the prosecutor herself made “explicit factual

representations” to the court or “implicit factual representations to the jury,”

       9
         In Milke, the defendant’s postconviction team of “approximately ten researchers . . .
spent nearly 7000 hours sifting through court records.” Milke, 711 F.3d at 1018. “The team
worked eight hours a day for three and a half months, turning up 100 [relevant] cases . . . .
Another researcher then spent a month reading motions and transcripts from those cases to find
[the Brady material].” Id. The court held that no reasonably diligent lawyer could have found
this material in time to use at trial. Id.; see also United States v. Payne, 63 F.3d 1200, 1209 (2d
Cir. 1995) (rejecting the argument that “the government’s duty to produce [an exculpatory
document in its possession] was eliminated by that document’s availability in a public court
file”).
       10
         The government also argued that Exhibit X was not in its possession for Brady
purposes. Because we reject Mr. Stein’s Brady argument on other grounds, we do not reach this
issue.

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knowing that those representations were false. United States v. Alzate, 47 F.3d
1103, 1110 (11th Cir. 1995).

      “To prevail on a Giglio claim, a [defendant] must establish that (1) the

prosecutor knowingly used perjured testimony or failed to correct what he

subsequently learned was false testimony; and (2) such use was material i.e., that

there is any reasonable likelihood that the false testimony could have affected the

judgment.” Ford, 546 F.3d at 1331-32 (internal quotation marks and ellipses

omitted); accord Guzman v. Sec’y, Dep’t of Corr., 663 F.3d 1336, 1348 (11th Cir.

2011). “‘The could have standard requires a new trial unless the prosecution

persuades the court that the false testimony was harmless beyond a reasonable

doubt.’” Guzman, 663 F.3d at 1348 (quoting Smith v. Sec’y, Dep’t of Corr., 572
F.3d 1327, 1333-34 (11th Cir. 2009)). Thus, “Giglio’s materiality standard is more

defense-friendly than Brady’s.” Id. (internal quotation marks omitted).

      In addition, because Giglio error is a type of Brady violation, the defendant

generally must identify evidence the government withheld that would have

revealed the falsity of the testimony. See, e.g., Ford, 546 F.3d at 1331

(emphasizing that Giglio error “occurs when the undisclosed evidence

demonstrates that the prosecutor’s case included perjured testimony” (emphasis

added) (internal quotation marks omitted)). In other words, “[t]here is no violation

of due process resulting from prosecutorial non-disclosure of false testimony if

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defense counsel is aware of it and fails to object.” Routly v. Singletary, 33 F.3d
1279, 1286 (11th Cir. 1994) (holding that because defense counsel was aware that

a false statement was subject to impeachment and yet failed to object to the

statement, there was no due process violation under Giglio). But where the

government not only fails to correct materially false testimony but also

affirmatively capitalizes on it, the defendant’s due process rights are violated

despite the government’s timely disclosure of evidence showing the falsity. See

DeMarco v. United States, 928 F.2d 1074, 1076-77 (11th Cir. 1991) (finding

prosecutorial misconduct warranting a new trial despite no suppression of evidence

where the prosecutor not only failed to correct false testimony, but also capitalized

on the false testimony in closing argument); United States v. Sanfilippo, 564 F.2d
176, 178-79 (5th Cir. 1977) (same).

      Mr. Stein identifies several categories of statements he contends were false,

but none of them supports a Giglio violation, and only two merit discussion: (1)

statements the prosecutor made to the court and during his closing argument

regarding Thomas Tribou and (2) testimony of Ms. Jones and Mr. Woodbury about

the bogus purchase orders.

             a.     Thomas Tribou

      Mr. Stein first argues that the government knowingly made false

representations to the court about Thomas Tribou—a Signalife consultant who paid

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the company $50,000 shortly after the date of the CHM purchase order—and then

relied on that false representation in its closing argument in violation of Giglio.

Specifically, Mr. Stein points us to two allegedly false representations the

government made to the district court and one made to the jury. This argument

fails because the government made no material false representations.

      Mr. Stein’s argument as it pertains to all three representations arises out of

his attempt near the end of trial to admit into evidence a copy of an October 24,

2007 email from Signalife’s CEO’s administrative assistant, Ms. Jones, to

Signalife’s certified public accountant, Norma Provencio, which was forwarded to

Signalife’s corporate counsel, Mr. Woodbury. The subject line of the email said,

“[Fwd: Emailing: Tribou Payment],” and in the body, Ms. Provencio noted,

“Attached is the $50K deposit on the 9-14 purchase order.” Am. Resp. in Opp. to

Def.’s Mots. for New Trial Ex. 1, Doc. 298-1 at 37. The exhibit also included a

copy of the referenced September 27, 2007 check for $50,000 to Signalife,

apparently signed by Delores Tribou out of an account shared with her husband,

Thomas. The check displayed the CHM purchase order number on the memo line,

along with the words “Tribou & Assoc.” Doc. 298-1 at 38.

      Mr. Stein sought to use this exhibit to support the inference that the

September 14, 2007 CHM purchase order, which called for a $50,000 deposit, was

legitimate. The government objected on the ground that the email’s contents were

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hearsay. The district court sustained the objection and noted that Mr. Stein failed

to authenticate the document. The court ultimately brokered the following

stipulation: “On or about September 27th, 2007, an individual named Thomas

Tribou paid Signalife $50,000 for goods he expected to receive.” Mr. Stein,

through counsel, accepted this stipulation, which was presented to the jury. Mr.

Stein did not call Mr. Tribou as a witness.

       After the district court sustained the government’s hearsay objection, the

government made two representations to the court that Mr. Stein argues were false.

First, the government represented that, based on interviews Mr. Tribou previously

had given to SEC investigators, if Mr. Tribou were called to testify he would say

that although he paid $50,000 to Signalife, he never received any product and was

not a Signalife reseller. 11 Mr. Stein argues that this representation is inconsistent

with statements Mr. Tribou made to SEC investigators admitting that he signed the

CHM purchase order.

       We reject this argument. Mr. Tribou’s statement to SEC investigators that

he signed the CHM purchase order in no way indicates he would have testified that

he actually received Signalife products. Nor does it show that Mr. Tribou

considered himself a Signalife reseller. And, in any case, Mr. Tribou’s SEC

       11
         The government also told the district court that Mr. Tribou likely would testify that he
had no connection with CHM and that he agreed to Mr. Stein’s request to sign a blank purchase
order. Mr. Stein does not challenge these representations on appeal.

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testimony was, as Mr. Stein himself characterized it, “extremely inconsistent.”

Doc. 247 at 55. On this record, we cannot conclude that the prosecutor spoke

falsely when he told the district court how he believed Mr. Tribou would testify at

trial.

         Second, on the district court’s request, the government privately telephoned

Mr. Tribou and then relayed to the court and the defense the contents of that

telephone call, which, according to Mr. Stein, included a false statement. The

government told the court that during the call Mr. Tribou never denied giving

Signalife a $50,000 check, but he said that he was unfamiliar with Tribou &

Associates and that he doubted he wrote the purchase order number on the check.

Mr. Tribou previously had told an SEC investigator that Tribou & Associates was

his name “for consulting and everything on [his] personal taxes.” 2d Mot. for New

Trial Ex. A, Doc. 312-1 at 8. Thus, Mr. Stein argues, the government knew or

should have known that Mr. Tribou was lying about his unfamiliarity with Tribou

& Associates and yet relayed the lie to the court nonetheless.

         We reject Mr. Stein’s argument about the second representation for two

reasons. First, Mr. Stein contends not that the prosecutor misrepresented what Mr.

Tribou told him on the call, but rather that the prosecutor should have flagged for

the court the inconsistency between what Mr. Tribou said on the call and what he

had said to SEC investigators in the past. But it is well-established that “a prior

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statement that is merely inconsistent with a government witness’s testimony is

insufficient to establish prosecutorial misconduct.” United States v. McNair, 605
F.3d 1152, 1208 (11th Cir. 2010) (collecting cases); accord Hays v. Alabama, 85
F.3d 1492, 1499 (11th Cir. 1996) (holding that there was no due process violation

arising out of a witness’s inconsistent testimony where there was “no showing that

[the witness’s] later, rather than earlier, testimony was false”).

      Second, even if false, the government’s representation regarding Mr. Tribou

was immaterial. A material misrepresentation occurs when there is any reasonable

likelihood that the false testimony could have affected the judgment. Guzman, 663
F.3d at 1348. Mr. Stein argues that the representation influenced the court’s

decision to sustain the government’s objection on hearsay grounds to the admission

of the check and the email. We disagree. The court sustained the objection before

the government made the representations about Mr. Tribou. Moreover, the court

based its ruling on hearsay grounds and Mr. Stein’s failure to authenticate the

documents rather than anything Mr. Tribou might say if called to testify. Mr. Stein

fails to explain how the government’s statements had any bearing on this

evidentiary decision, which Mr. Stein expressly does not challenge on appeal.

      The third allegedly false statement occurred during the government’s closing

argument. The prosecutor told the jury that the CHM purchase order was “all

made up” and “fake,” statements Mr. Stein argues constituted misrepresentations

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because Mr. Tribou signed the purchase order and paid Signalife $50,000. Doc.

248 at 34. But the prosecutor’s statement and these facts are not mutually

exclusive. The fact that Mr. Stein obtained Mr. Tribou’s signature and check does

not rule out the possibility that he also fabricated the purchase order. Indeed, the

government made this argument in its rebuttal, stating that regardless of any

signatures Mr. Stein obtained, the purchase orders were fake. Moreover, the

record contained overwhelming evidence that Mr. Stein fabricated supporting

documentation for the purchase orders and used arbitrary names for companies and

individuals supposedly purchasing Signalife products. On this record, we cannot

conclude that the government violated Giglio with its characterization of evidence

about the CHM purchase order. 12 See Maharaj v. Sec’y for Dep’t of Corr., 432
F.3d 1292, 1313 (11th Cir. 2005) (“In the Giglio context, the suggestion that a

statement may have been false is simply insufficient; the defendant must

conclusively show that the statement was actually false.”).

       In sum, Mr. Tribou’s previous inconsistent statements to SEC investigators

and the ambiguity regarding his role in signing the CHM purchase order and

       12
           Mr. Stein also argues that the prosecutor misrepresented the evidence when he asked
the jury, “[I]f Tom Tribou, Thomas Tribou, is [CHM], [then] where’s Tom Tribou’s name,
Thomas Tribou’s name [on the purchase order]? . . . Take a look closely . . . . See if Thomas
Tribou’s name appears on there.” Doc. 248 at 114. Mr. Stein argues that Mr. Tribou’s name (in
the form of his signature) does appear on the purchase order. But that was not the point of the
government’s argument. In fact, in closing, the government conceded that Mr. Stein may have
obtained a signature on the CHM purchase order. The point—which was true—was that the
purchase order did not identify Mr. Tribou as an officer of CHM.

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paying $50,000 to Signalife provide an insufficient basis for us to conclude that the

government knowingly relied on materially false testimony.

               b.     Jones and Woodbury

       Mr. Stein next argues that (1) Mr. Harmison’s assistant, Ms. Jones, lied

when she characterized the three purchase orders as “phantom purchase orders”

simply because she lacked supporting documentation, and (2) Signalife’s securities

lawyer, Mr. Woodbury, lied when he said he got all his information about the

purchase orders from Mr. Stein. Again, Mr. Stein relies on the October 24, 2007

email and the copy of the $50,000 Tribou check, which was received by Ms. Jones

and Mr. Woodbury, as demonstrating these lies. But Mr. Stein offers no argument

that the prosecutor capitalized on the allegedly false testimony that contradicts this

evidence, which he needed to show because none of this evidence was

suppressed.13 In fact, the record shows that Mr. Stein located the email and the

check before trial and even produced them to the government. In the absence of

government suppression of the evidence, then, there can be no Giglio violation.

       13
           To be sure, the prosecutor mentioned in passing in his closing argument that Ms. Jones
referred to the purchase orders as “phantom purchase orders,” but unlike in DeMarco, the
prosecutor did not emphasize or capitalize on this statement by repeating it or making it the
centerpiece of an argument for guilt. DeMarco, 928 F.2d at 1076-77 (noting that the prosecutor
not only adopted the false statement but also emphasized it in her jury argument). Moreover, the
prosecutor never mentioned Ms. Jones’s statement that she received no backup for the purchase
orders, which was the material aspect of her testimony.

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See Ford, 546 F.3d at 1331; DeMarco, 928 F.2d at 1076. Accordingly, we reject

Mr. Stein’s Giglio argument.14

       3.      Mr. Stein’s Remaining Arguments
       Mr. Stein argues that the district court erred when it denied (1) the third

motion for new trial without considering the alleged prosecutorial misconduct

cumulatively and (2) the motions to compel discovery and for an evidentiary

hearing regarding the alleged Brady and Giglio violations. We review these

denials for an abuse of discretion. See Vallejo, 297 F.3d at 1163 (motion for new

trial); United States v. Schlei, 122 F.3d 944, 990 (11th Cir. 1997) (evidentiary

hearing); Holloman v. Mail-Well Corp., 443 F.3d 832, 837 (11th Cir. 2006)

(motion to compel discovery). Because there were no Brady or Giglio violations,

there was no cumulative reversible error. See United States v. Carter, 776 F.3d
1309, 1330 (11th Cir. 2015). And Mr. Stein has failed to show how the district

court’s decision not to hold a hearing and compel discovery was an abuse of

discretion. 15 We find no basis for vacating his conviction in Mr. Stein’s remaining

arguments. Accordingly, we affirm his conviction and move on to his sentence.

       14
          In support of his Brady and Giglio arguments, Mr. Stein filed a motion for the Court to
take judicial notice of portions of a transcript from a summary judgment hearing in the SEC
enforcement action against him, Heart Tronics, Inc., and various other defendants. We GRANT
this motion but find nothing in the transcript that changes our decision here.
       15
          In a footnote in his opening brief, buried within his Brady argument, Mr. Stein makes a
passing reference to an alleged violation of Rule 16 of the Federal Rules of Criminal Procedure.

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B.     The Sentencing Issues
       Mr. Stein raises several challenges to his sentence, only one of which

warrants discussion. Mr. Stein asserts that the district court erred in calculating

actual loss for purposes of U.S.S.G. § 2B1.1(b)(1) and for restitution under the

MVRA. The district court’s actual loss calculation was premised on an estimate of

losses suffered by 2,415 investors in Signalife stock during the fraudulent period.

Mr. Stein argues that the actual loss calculation was too high because the court (1)

presumed, without an adequate factual basis, that each investor relied on fraudulent

information he disseminated and (2) failed to take into account intervening events

that led to a decline in the price of Signalife stock. 16

       “We review a district court’s interpretation of the Sentencing Guidelines de

novo, and the determination of the amount of loss involved in the offense for clear

error.” United States v. Maxwell, 579 F.3d 1282, 1305 (11th Cir. 2009). A district

court’s determination that a person or entity was a victim for purposes of loss

calculation is an interpretation of the guidelines, so we review it de novo. United

States v. Martin, 803 F.3d 581, 593 (11th Cir. 2015). A district court’s

Such a passing reference, without any reasoned analysis whatsoever, is insufficient to preserve
the argument on appeal. See United States v. Jernigan, 341 F.3d 1273, 1283 n.8 (11th Cir. 2003)
(deeming issue abandoned where defendant made only passing references to it in brief).
Accordingly, we do not address it. See id.
       16
           Mr. Stein also challenges the district court’s estimate of the number of victims under
U.S.S.G. § 2B1.1(b)(2)(C), which resulted in an additional 6-level enhancement. This argument
is intertwined with Mr. Stein’s § 2B1.1(b)(1) argument, and thus we do not address it separately.

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determination of proximate cause, however, is part of the court’s determination of

the amount of loss involved in the offense and, thus, is reviewed only for clear

error. Id. “We will overturn a court’s loss calculation under the clear-error

standard where we are left with a definite and firm conviction that a mistake has

been committed.” United States v. Campbell, 765 F.3d 1291, 1302 (11th Cir.

2014) (internal quotation marks omitted).

      First, we provide an overview of loss calculation principles for purposes of

the Sentencing Guidelines and restitution under the MVRA. Then we consider Mr.

Stein’s arguments regarding reliance (factual causation) and intervening events

(legal causation).

      1.     Loss Calculation under the Guidelines and the MVRA
      Section 2B1.1(b)(1) of the Sentencing Guidelines provides a table for

determining the level of enhancement based on the loss attributable to the offense.

This loss calculation “serves as a proxy for ‘the seriousness of the offense and the

defendant’s relative culpability.’” Campbell, 765 F.3d at 1301 (quoting U.S.S.G.

§ 2B1.1 cmt. background). In financial fraud cases, the loss calculation often

drives the sentence. See, e.g., United States v. Olis, 429 F.3d 540, 545 (5th Cir.

2005) (“The most significant determinant of [the defendant’s] sentence is the

guidelines loss calculation.”); United States v. Robles, No. CR 04-1594(B)SVW,

2015 WL 1383756, at *5 (C.D. Cal. Mar. 19, 2015) (“[T]he loss calculation in this

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case is the primary driver behind the Guidelines range—more than doubling the

offense level and tripling the suggested sentence . . . .”); United States v.

Faulkenberry, 759 F. Supp. 2d 915, 928 (S.D. Ohio 2010) (“[T]he harsh sentence

recommended by the Guidelines is primarily driven by the loss calculation, which

increases [the defendant’s] Base Offense Level by 30 points.”).

      There are two ways to measure loss under U.S.S.G. § 2B1.1, actual and

intended loss, and we are instructed to take the greater of the two. U.S.S.G.

§ 2B1.1, cmt. n.3(A). Here, however, the government did not argue for an

intended loss calculation; we thus focus on the calculation of actual loss.

      The government bears the burden of proving by a preponderance of the

evidence actual loss attributable to the defendant’s conduct. United States v.

Rodriguez, 751 F.3d 1244, 1255 (11th Cir. 2014). “[A] sentencing court is not

generally required to make detailed findings of individualized losses to each

victim.” United States v. Orton, 73 F.3d 331, 335 (11th Cir. 1996) (considering

the similar predecessor guideline, U.S.S.G. § 2F1.1). Instead, the court may

employ a variety of methods to derive a “reasonable estimate of the loss” to the

victims based on the information available to the district court. United States v.

Snyder, 291 F.3d 1291, 1295 (11th Cir. 2002); accord United States v. Ford, 784
F.3d 1386, 1396 (11th Cir. 2015); see also U.S.S.G. § 2B1.1 cmt. n.3(C)(iv)

(providing that district courts should “tak[e] into account, as appropriate and

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practical under the circumstances,” a variety of factors including the “approximate

number of victims multiplied by the average loss to each victim”). Although the

district court may estimate the amount of loss, it cannot “speculate about the

existence of facts and must base its estimate on reliable and specific evidence.”

Ford, 784 F.3d at 1396; accord United States v. Sepulveda, 115 F.3d 882, 890-91

(11th Cir. 1997).

      Under the guidelines, “[a]ctual loss . . . is defined as the ‘reasonably

foreseeable pecuniary harm that resulted from the offense.’” Campbell, 765 F.3d

at 1302 (quoting U.S.S.G. § 2B1.1 cmt. n.3(A)(i)). This definition “incorporates

[a] causation standard that, at a minimum, requires factual causation (often called

‘but for’ causation) and provides a rule for legal causation (i.e., guidance to courts

regarding how to draw the line as to what losses should be included and excluded

from the loss determination).” U.S.S.G. App. C, Vol. II at 178, Amend. 617 (Nov.

1, 2001); see United States v. Evans, 744 F.3d 1192, 1196 (10th Cir. 2014)

(“[Section] 2B1.1 incorporates and requires both factual or ‘but for’ causation and

legal or foreseeable causation.”); United States v. Peppel, 707 F.3d 627, 643-44

(6th Cir. 2013) (recognizing that, to establish actual loss under § 2B1.1, the

government must “establish both cause in fact and legal causation by a

preponderance of the evidence”); see also Burrage v. United States, 134 S. Ct. 881,

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887-91 (2014) (holding that the ordinary meaning of the term “results from” in a

criminal statute requires “but-for causality”).

      The MVRA requires the district court to calculate actual loss “to identifiable

victims of certain crimes, including crimes of fraud.” Martin, 803 F.3d at 592.

Under the MVRA, the district court must award restitution to such victims

“without regard to the defendant’s ability to pay.” Id. The method for calculating

actual loss, as opposed to intended loss, under the Sentencing Guidelines is

“largely the same” as the method for establishing actual loss to identifiable victims

under the MVRA. United States v. Cavallo, 790 F.3d 1202, 1239 (11th Cir. 2015).

In most cases, the amount of actual loss under the guidelines will be the same as

the restitution figure. Id. Thus, it is unsurprising that to prove a victim suffered an

actual loss under the MVRA, the government must establish both factual and legal

causation in essentially the same manner as it must show causation under the

guidelines—by proving but for and proximate causation. See, e.g., Martin, 803
F.3d at 594; United States v. Robertson, 493 F.3d 1322, 1334-35 (11th Cir. 2007).

Here the district court used the same figure for actual loss under the guidelines and

the MVRA. Thus, we analyze the two calculations together, considering first

factual and then legal causation.

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      2.     Reliance (Factual Causation)
      The parties agree that the government must show that the investors relied on

Mr. Stein’s fraudulent information to satisfy the “but for” causation requirement

under U.S.S.G. § 2B1.1. See also Currie v. Cayman Res. Corp., 835 F.2d 780, 785

(11th Cir. 1988) (“Reliance is . . . a type of ‘but for’ requirement.” (quoting

Huddleston v. Herman & MacLean, 640 F.2d 534, 549 (5th Cir. 1981), aff’d in

part and rev’d in part, 459 U.S. 375 (1983))). The government also must show

reliance to prove “but for” causation for restitution purposes. See Martin, 803 F.3d

at 594. The parties disagree on what this showing must entail.

      As we see it, the government may show reliance in a securities fraud case

either through direct evidence or specific circumstantial evidence. The

government may of course introduce individualized evidence of reliance—that is,

direct evidence that each individual investor read the false information and relied

on it when deciding to purchase stock. See United States v. Ebbers, 458 F.3d 110,

126-27 (2d Cir. 2006) (recognizing that reliance can be shown for loss calculation

purposes under § 2B1.1 by offering evidence to demonstrate “express reliance on

the accuracy of the [fraudulent] financial statements”). But, as the district court

aptly recognized, requiring individualized proof of reliance for each investor is

often infeasible or impossible. See Basic Inc. v. Levinson, 485 U.S. 224, 245

(1988) (recognizing in civil securities fraud context that requiring direct proof of

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reliance may be “an unnecessarily unrealistic evidentiary burden on the Rule 10b-5

plaintiff who has traded on an impersonal market”); Local 703, I.B. of T. Grocery

& Food Emps. Welfare Fund v. Regions Fin. Corp., 762 F.3d 1248, 1253 (11th

Cir. 2014) (same). Thus, in cases such as this one involving numerous investors,

the government may instead offer specific circumstantial evidence from which the

district court may reasonably conclude that all of the investors relied on the

defendant’s fraudulent information.

      Here, though, the government failed to satisfy either of these options. As a

result, the district court’s statement that “from the record that there [was] sufficient

evidence to demonstrate . . . reliance” for 2,415 investors was erroneous. Tr. of

Sentencing Proceedings, Doc. 429 at 30. The record contains no direct,

individualized evidence of reliance for each investor. And the circumstantial

evidence in the record is far too limited to support a finding that 2,415 investors

relied on the fraudulent information Mr. Stein disseminated. The only evidence

arguably supporting the reliance finding was: (1) trial testimony from one investor

that he relied on one of Mr. Stein’s false press releases; (2) a victim impact

statement from another investor to the same effect; (3) a number of victim impact

statements suggesting that the investors relied on press releases and other publicly

available information generally, but not specifically the fraudulent information Mr.

Stein disseminated; and (4) testimony that, because the only place to get

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information about Signalife stock was from press releases and public filings, at

least some investors likely relied on this type of information. This evidence

standing alone is insufficient to support the inference that all 2,415 investors relied

on Mr. Stein’s fraudulent information when deciding to purchase Signalife stock.

On this thin record, the district court “engage[d] in the kind of speculation

forbidden by the Sentencing Guidelines.” United States v. Bradley, 644 F.3d 1213,

1292 (11th Cir. 2011); see Sepulveda, 115 F.3d at 890-91. Accordingly, the

district court’s actual loss calculation was in error.

       We therefore vacate Mr. Stein’s sentence, which was based on a guidelines

calculation founded on the erroneous actual loss figure, and remand for a

recalculation of actual losses. On remand, the government may again seek to

prove actual loss by showing losses suffered by Signalife investors. Alternatively,

the government may also seek to prove actual loss through direct losses to the

company resulting from, for example, Mr. Stein’s theft of Signalife stock. See

U.S.S.G. § 2B1.1 cmt. n.3(C)(i). And if the district court determines that the loss

“reasonably cannot be determined,” the court may use instead “the gain that

resulted from the offense.” Id. § 2B1.1 cmt. n.3(B). 17

       17
          The government raises a harmless error argument, which we reject. According to the
government, the district court could have calculated actual loss based on the value of assets Mr.
Stein stole from Signalife or, if loss “reasonably cannot be determined,” U.S.S.G. § 2B1.1 cmt.
n.3(B), by estimating Mr. Stein’s gain. Had the court used these alternative figures, the

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       3.      Intervening Events (Legal Causation)
       We next turn to the requirement of legal causation, and, in particular,

whether the district court erred in failing to take into account intervening events

that may have contributed to investors’ losses. The standard for legal causation for

purposes of the actual loss calculation is essentially the same under the guidelines

and the MVRA. See Cavallo, 790 F.3d at 1239. Under the guidelines, “‘[a]ctual

loss’ means the reasonably foreseeable pecuniary harm that resulted from the

offense.” U.S.S.G. § 2B1.1 cmt. n.3(A)(i). A reasonably foreseeable pecuniary

harm is one “that the defendant knew or, under the circumstances, reasonably

should have known, was a potential result of the offense.” Id. § 2B1.1 cmt.

n.3(A)(iv). Thus, the legal cause standard we use under § 2B1.1(b) is reasonable

foreseeability.

       We also consider reasonable foreseeability when assessing proximate cause

for purposes of actual loss under the MVRA. See, e.g., Martin, 803 F.3d at 594;

Robertson, 493 F.3d at 1334-35. In Martin, the defendant fraudulently obtained

loans that later were sold to successor lenders. Martin, 803 F.3d at 586-87. The

district court relied on losses suffered by these successor lenders when estimating

government argues, the Sentencing Guidelines range would have been the same. But the district
court made no factual findings regarding the value of stolen assets or Mr. Stein’s financial gain,
and we will not make those findings in the first instance.

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actual loss for restitution purposes. Id. at 592-93. We upheld the district court’s

loss calculation, holding that the successor lenders could recover restitution under

the MVRA because it “was entirely foreseeable to [the defendant] not only that the

original lenders would rely on the fraudulent applications, but that the mortgages

would be resold to other lenders that would rely on the applications as well.” Id. at

594. Put differently, because the intervening event—the sale of the loan to a

successor lender—was reasonably foreseeable, it did not “break the chain of

causation.” Id. (citing Robertson, 493 F.3d at 1334-35).18

       In Robertson, in contrast, we vacated a restitution award because there was

inadequate evidence to find that intervening events between the fraud and the loss

were reasonably foreseeable. 493 F.3d at 1334-35. The defendant fraudulently

obtained computer software from Novell, Inc. and then sold the software to

Network Systems Technology, Inc. Id. at 1327-28. Network Systems resold the

software at a profit. Id. at 1328. At some later point, Novell sued Network

Systems in a case involving the software purchased from the defendant. Id. The

record did not indicate the precise ground for the lawsuit. Id. Network Systems

settled the lawsuit by agreeing to pay Novell $125,000. Id.

       18
           We vacated the restitution award in Martin, however, because the district court failed
to take into account the amount the successor lenders paid to acquire the mortgages. Martin, 803
F.3d at 595-96.

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      The district court determined that Network Systems was a victim for

purposes of the MVRA, but we reversed. Id. at 1334-35. “Whether the lawsuit

and settlement were reasonably foreseeable consequences of [the defendant’s]

fraud on Novell,” we explained, “depends on the nature of the litigation.” Id. at

1335. All the government had established at sentencing, we noted, was “that the

litigation was ‘related to’ the units of software” the defendant sold, and this “vague

description” was insufficient to support the district court’s finding that the lawsuit

and settlement were reasonably foreseeable. Id. Thus, we held that the district

court erred in finding that Network Systems was a victim under the MVRA, and

we vacated the $125,000 restitution award. Id. at 1335-36.

      In sum, the causation standards for determining actual loss under the

Sentencing Guidelines and for restitution purposes are similar. When calculating

actual loss for either purpose, the district court should take into account intervening

events contributing to the loss unless those events also were reasonably foreseeable

to the defendant. See id. at 1334.

      At sentencing, Mr. Stein urged the district court in arriving at its loss and

restitution calculations to consider that Signalife stock value declined in part

because of the short selling of over 22 million shares of Signalife stock and the

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across-the-board stock market decline of 2008.19 The district court failed to

consider these factors, and Mr. Stein argues that this was error. We agree.

       Once Mr. Stein pointed to intervening events that may have affected the

stock price, the district court was obliged to make findings regarding the effects of

these intervening events, if any, and whether these events were reasonably

foreseeable to Mr. Stein. Because the court failed to do so, we vacate the

sentencing order. On remand, the district court should determine whether these

intervening events affected Signalife’s stock price during the fraudulent period

and, if so, whether they nonetheless were reasonably foreseeable to Mr. Stein. If

the district court finds that these or any other intervening event reduced the value

of Signalife stock during the fraudulent period and that the events were not

reasonably foreseeable, the district court, to the extent possible, should

approximate the effect of such intervening events and subtract this amount from its

actual loss calculation. 20

       19
          Although Mr. Stein offered expert testimony regarding the stock market decline, it is
unclear whether he offered proof that the short selling occurred or how it may have depressed
stock prices.
       20
           Mr. Stein also urges us to follow the lead of two of our sister circuits in importing the
proximate cause principles from the civil fraud context, see Dura Pharm., Inc. v. Broudo, 544
U.S. 336 (2005), into the sentencing context for purposes of calculating actual loss. See United
States v. Rutkoske, 506 F.3d 170, 179 (2d Cir. 2007); United States v. Olis, 429 F.3d 540, 545-49
(5th Cir. 2005). We decline his invitation because we believe our reasonable foreseeability test
strikes the right balance for calculating actual loss under the Sentencing Guidelines and for
purposes of restitution.

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                                III. CONCLUSION
      We affirm Mr. Stein’s judgment of conviction because we find no Brady or

Giglio violations, but we vacate his sentence and remand to the district court with

instructions to calculate anew the amount of loss for purposes of U.S.S.G.

§ 2B1.1(b)(1) and restitution under the MVRA, consistent with this opinion. To

reiterate, this calculation may be an estimate so long as it is based “on reliable and

specific evidence” rather than mere speculation. Ford, 784 F.3d at 1396. In

particular, on remand, if the government seeks to prove an actual loss figure based

on losses suffered by Signalife investors, the government must establish by a

preponderance of the evidence that the investors relied on fraudulent information

Mr. Stein disseminated. As regards intervening events, if Mr. Stein again offers

evidence that a particular event aside from his fraud depressed the stock price

during the fraudulent period, the district court must find, based on a preponderance

of the evidence, that such intervening event was also reasonably foreseeable or,

instead, subtract from the actual loss amount the monetary effect of such

intervening event.

      AFFIRMED in part, VACATED and REMANDED in part WITH

INSTRUCTIONS.

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JILL PRYOR, Circuit Judge, concurring:

      As explained in the majority opinion, in seeking to establish loss in a

securities fraud case, the government may show that investors relied on fraudulent

information through either direct or specific circumstantial evidence. Although in

some cases proving loss by direct evidence may be practicable, in many cases—

including this one—it simply is not. This means that in most securities fraud cases

the government’s best option likely will be to establish reliance via specific

circumstantial evidence.

      In this case, the government failed to offer sufficiently specific

circumstantial evidence to support a finding that 2,415 investors relied on the false

information Mr. Stein disseminated. See United States v. Ford, 784 F.3d 1386,

1396 (11th Cir. 2015) (requiring that the district court “make a reasonable estimate

of the loss” based on available information). The government only had evidence

that two investors relied on Mr. Stein’s bogus press releases, and it presented little

specific evidence that would permit the district court to extrapolate from that tiny

two-person sample and arrive at a reasonable estimate of loss. Of course, this begs

the question: At what point has the government offered sufficient evidence from

which the district court may extrapolate a reasonable estimate? Is it purely a

numbers game, whereby at some point the sample size of direct evidence of

reliance is large enough that a district court’s inferential leap that all investors

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relied is reasonable? I write to explain one potential method of proving reliance

that could eliminate the numbers game and the speculation that, as in this case,

accompanies it.

      As two of our sister circuits have recognized, in seeking to show investors

relied on fraudulent information disseminated to the public, the government could

borrow from civil securities fraud cases and establish the so-called “Basic

presumption.” Local 703, I.B. of T. Grocery & Food Emps. Welfare Fund v.

Regions Fin. Corp., 762 F.3d 1248, 1253-54 (11th Cir. 2014) (citing Basic Inc. v.

Levinson, 485 U.S. 224, 245 (1988)); United States v. Ebbers, 458 F.3d 110, 126-

27 (2d Cir. 2006) (recognizing the Basic presumption as a means for proving

reliance for purposes of loss calculation under U.S.S.G. § 2B1.1); see also United

States v. Peppel, 707 F.3d 627, 646 (6th Cir. 2013) (same). “Under the Basic

presumption, plaintiffs may benefit from a rebuttable presumption of class-wide

reliance ‘based on what is known as the fraud-on-the-market theory.’” Local 703,
762 F.3d at 1254 (quoting Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S.
804, 811 (2011)). “Fraud-on-the-market claims derive from the so-called efficient

market hypothesis, which provides, in the words of the Supreme Court, that ‘in an

open and developed securities market, the price of a company’s stock is

determined by the available material information regarding the company and its

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business.’” FindWhat Inv’r Grp. v. FindWhat.com, 658 F.3d 1282, 1309-10 (11th

Cir. 2011) (quoting Basic Inc., 485 U.S. at 241).

      “If a market is generally efficient in incorporating publicly available

information into a security’s market price, it is reasonable to presume that a

particular public, material misrepresentation will be reflected in the security’s

price.” Amgen, Inc. v. Conn. Ret. Plans and Trust Funds, 133 S. Ct. 1184, 1192

(2013). It is also reasonable to presume “that most investors . . . will rely on the

security’s market price as an unbiased assessment of the security’s value in light of

all public information.” Id. Thus, if the Basic presumption applies, the plaintiff

may, subject to evidence in rebuttal, show reliance on a classwide basis without

resorting to individualized evidence.

      To trigger the Basic presumption, the plaintiff generally must prove that (1)

“the alleged misrepresentations were publicly known,” (2) “the stock traded in an

efficient market,” and (3) “the relevant transaction took place between the time the

misrepresentations were made and the time the truth was revealed.” Local 703,
762 F.3d at 1254 (internal quotation marks omitted); see also Amgen, Inc., 133 S.

Ct. at 1192-93; FindWhat Inv’r Grp., 658 F.3d at 1310. Of these three elements,

the second factor, known as informational efficiency, requires more explanation.

      Informational efficiency refers to “a prediction or implication about the

speed with which prices respond to information.” In re PolyMedica Corp. Sec.

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Litig., 432 F.3d 1, 14 (1st Cir. 2005). “Determining whether a market is

informationally efficient, therefore, involves analysis of the structure of the market

and the speed with which all publicly available information is impounded in price.”

Id. This determination is “fact-intensive” and demands flexibility. Local 703, 762
F.3d at 1254. Therefore, courts have not dictated “a comprehensive analytical

framework for determining whether the market for a particular stock is efficient,”

and instead have recognized “general characteristics of an efficient market”

including “high-volume trading activity facilitated by people who analyze

information about the stock or who make trades based upon that information.” Id.

at 1254-55; see, e.g., In re Scientific-Atlanta, Inc. Sec. Litig., 571 F. Supp. 2d 1315,

1339-40 (N.D. Ga. 2007) (holding that the plaintiffs in a putative class action

proved an efficient market sufficiently to trigger the Basic presumption of reliance

and support a finding of predominance for class certification under Rule 23(b)(3)

of the Federal Rules of Civil Procedure).

      The Second and Sixth Circuits have recognized that in appropriate cases the

government may employ the Basic presumption to establish actual loss under

U.S.S.G. § 2B1.1(b) or the MVRA. See Ebbers, 458 F.3d at 126-27 (recognizing

that reliance can be shown for loss calculation purposes under § 2B1.1 by offering

evidence to demonstrate “express reliance on the accuracy of the [fraudulent]

financial statements,” or “reliance on what Basic, Inc. v. Levinson described as the

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‘integrity’ of the existing market price”); Peppel, 707 F.3d at 646 (adopting the

reasoning of Ebbers). I find their reasoning persuasive. In my view, as in Peppel,

if the government chooses to arrive at a loss amount attributable to the defendant

based on the Basic presumption, it must offer evidence sufficient to establish each

of the presumption’s three elements, described above. See Peppel, 707 F.3d at

632-33, 646 (describing the government’s evidence regarding the Basic

presumption elements and holding that the evidence supported the district court’s

loss calculation). Once the government establishes these elements, the defendant

may challenge them with evidence of his own. See Basic, Inc., 485 U.S. at 248-49.

The defendant also may try to rebut the presumption with, for example, evidence

that individual investors would have purchased the stock despite knowing the

statements were false. See id.

      There surely will be cases in which it is impracticable or otherwise

inappropriate to employ the Basic presumption as a method for demonstrating

reliance. If, for example, a defendant’s fraud affected investors in an inefficient

market, the Basic presumption will be of no use to the government or the district

court. I do not mean to suggest that the government may never establish reliance

by offering other types of specific circumstantial evidence (perhaps expert

testimony) or, alternatively, a combination of direct evidence of some investors’

reliance and circumstantial evidence to show that other investors were similarly

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situated. I simply offer my view that in appropriate cases the Basic presumption

may be a feasible method for establishing reliance by specific and reliable

circumstantial evidence.

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