Court Opinion

ID: 4452197
Source: CourtListenerOpinion
Date Created: 2019-11-01 00:00:17.106002+00
Date Added: 2024-06-11T13:33:33.269247
License: Public Domain

Case: 18-31299     Document: 00515182773        Page: 1    Date Filed: 10/31/2019

          IN THE UNITED STATES COURT OF APPEALS
                   FOR THE FIFTH CIRCUIT
                                                                        United States Court of Appeals
                                                                                 Fifth Circuit

                                                                               FILED
                                     No. 18-31299                        October 31, 2019
                                                                          Lyle W. Cayce
UNITED STATES OF AMERICA,                                                      Clerk

              Plaintiff - Appellee

v.

TINGHUI XIE, also known as Kelly Xie, also known as Kelly Liu,

              Defendant - Appellant

                  Appeal from the United States District Court
                      for the Middle District of Louisiana

Before DAVIS, GRAVES, and HIGGINSON, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
      In this insider trading case, defendant-appellant Kelly Liu 1 was
convicted of one count of conspiracy to commit securities fraud in violation of
18 U.S.C. §§ 2 and 371 and two counts of securities fraud in violation of 15
U.S.C. §§ 78j(b) and 78(ff). On appeal, Liu challenges the sufficiency of the
evidence supporting her conviction. She also contends the district court abused
its discretion in denying her a severance. Concluding that the evidence was

      1 Defendant-appellant Tinghui Xie has been referred to as “Kelly Liu,” the name by
which she is generally known, throughout these proceedings.
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sufficient and that the district court did not abuse its discretion in denying a
severance, we AFFIRM.
      I. FACTUAL AND PROCEDURAL BACKGROUND
      Viewed in the light most favorable to the verdict, the relevant facts are
as follows. 2 In March 2012, Chicago Bridge and Iron, N.C. (“CB&I”) expressed
interest in acquiring The Shaw Group (“Shaw”). Both companies were publicly
traded, and both had approximately $6 billion in revenue. By May 2012,
Toshiba Corporation (“Toshiba”) became interested in joining CB&I, and the
two companies approached Shaw to discuss an acquisition. The next two
months saw both sides hurriedly conduct their due diligence to obtain
information in preparation for the possible acquisition. At some point prior to
July 4, 2012, Toshiba dropped out, but CB&I never wavered in its negotiations
to acquire Shaw. On July 4, 2012, Shaw and CB&I reached a tentative deal,
and after final due diligence, CB&I on July 30, 2012 announced its agreement
to acquire Shaw.
      Defendant-appellant Kelly Liu (“Liu”) took an active role in obtaining
Shaw’s financial information to satisfy CB&I’s due diligence requests. Liu had
been in Shaw’s five-person Financial Planning & Analysis Group (FP&A) since
2011. As such, Liu was no stranger to due diligence; she had worked on several
of Shaw’s acquisitions of smaller companies. Her group regularly assisted with
market analysis and due diligence for these acquisitions, and thus became
familiar with the high level of secrecy involved in handling this information.
Because of her access to restricted information, Shaw considered her an
“insider” and provided her and others in her department the company’s policy
on insider trading.

      2   Glasser v. United States, 315 U.S. 60, 80 (1942) (overruled on other grounds).
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       As Liu and her team conducted final due diligence in the weeks leading
up to the closing, Liu’s codefendants purchased Shaw stocks and call options.
The trial centered on the actions of Liu, together with Salvador “Sammy”
Russo, III (“Russo”), Diemo Ho (“Diemo”), and Victory Nam Ho (“Vic”).
Codefendant Russo was Liu’s live-in boyfriend at the time of the offense. The
two had been dating since 2006. Diemo was their neighbor and Liu’s close
friend. Codefendant Vic was Diemo’s older brother and an acquaintance of
Liu’s. 3
       From July 18 to 27, 2012, a flurry of communications occurred between
the above parties. Call records revealed a pattern: Liu and Diemo would
communicate by phone or text, Diemo would immediately thereafter phone or
text Vic, and Diemo would then quickly phone or text Liu. Conversations
peaked on the days Vic and Russo purchased stocks and options in Shaw; the
communications between the parties throughout July were strikingly high.
During some of these conversations, IP addresses 4 used by Liu and Diemo
accessed Vic’s brokerage account to investigate Shaw stock price. Russo
directed his mother to purchase stocks on July 19, 2012, and Vic purchased his
Shaw call options eight days later. When Vic purchased his options, he wrote
to a representative of optionsXpress in a recorded online chat to confirm that
he could sell the options on July 30, 2012, the day Shaw announced the
acquisition.
       Following the July 30 announcement of CB&I’s purchase of Shaw, the
price of Shaw stock rose roughly $15 per share. Within forty minutes of the
announcement, the parties again communicated back and forth. Russo held
onto the stock in his mother’s account, eventually making a $2800 cash profit.

       All three participated in a fantasy football league together.
       3

       An internet protocol address, commonly referred to as an IP address, is a unique
       4

number assigned to an internet user that identifies a device connected to the internet.
                                          3
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Vic, meanwhile, sold his Shaw call options on July 30 for a profit of $294,000
(over 3500% in gains).
       When Vic filed his 2012 tax returns, he failed to report these profits
despite receiving a 1099 tax form. After his tax preparer reminded him to pay
taxes on gains, Vic responded that he was “in trouble,” but he did not seek to
amend his 2012 return. During trial, the district court provided limiting
instructions to the jury regarding their consideration of the evidence of Vic’s
failure to report his capital gains when evaluating the charges against Liu.
       The indictment charged Liu with committing insider trading and
entering into a conspiracy with Russo and Vic to do so. Before trial, the district
court rejected Liu’s pre-trial motion for severance, and the motion was re-urged
and denied at every available opportunity. Liu filed her timely notice of appeal
a week after the court imposed her sentence of sixteen months per count to run
concurrently.
       II. DISCUSSION
       A. Insider Trading Elements
       Section 10(b) of the Securities Exchange Act of 1934 and the Securities
and Exchange Commission’s Rule 10b-5 impose civil and criminal liability for
insider trading. The Act “prohibit[s] undisclosed trading on inside corporate
information by individuals who are under a duty of trust and confidence that
prohibits them from secretly using such information for their personal
advantage.” 5 In Dirks v. SEC, the Supreme Court held that when a corporate
insider shares material, nonpublic information with someone in breach of his
or her fiduciary duty for personal gain, the corporate insider may be held liable
as a “tipper.” 6

       5 Salman v. United States, 137 S. Ct. 420, 423 (2016); see 15 U.S.C. §§ 78j, 78ff; 17
C.F.R. §§ 240.10b-5.
       6 463 U.S. 646, 659, 662 (1983).

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       Consistent with Supreme Court precedent, the district court instructed
the jury of the following six elements required to convict a tipper of insider
trading: (1) that the defendant disclosed material, nonpublic information to
another person, (2) that the disclosure was made for personal purpose in
breach of the defendant’s fiduciary duty as a corporate insider, (3) that the
defendant anticipated that the other person would trade on the basis of the
information, (4) that the other person unlawfully traded, (5) that the defendant
acted knowingly, willfully, and with the intent to defraud, and (6) that the
insider trading scheme involved the use of some instrumentality of interstate
commerce. 7
       1. Sufficiency of the Evidence
       This court reviews preserved challenges to the sufficiency of the evidence
de novo. 8 “Though de novo, this review is nevertheless highly deferential to the
verdict.” 9 Under this standard, “the relevant question is whether . . . any
rational trier of fact could have found the essential elements of the crime
beyond a reasonable doubt.” 10 This court must “view the evidence in the light
most favorable to the verdict and draw all reasonable inferences from the
evidence to support the verdict.” 11 “Determining the weight and credibility of
the evidence is within the sole province of the jury.” 12

       7  On appeal, Liu does not challenge the jury instructions, which accurately set forth
the elements of tipper liability for insider trading. See Salman, 137 S. Ct. at 423; United
States v. O’Hagan, 521 U.S. 642, 651–653 (1997); Dirks, 463 U.S. at 654; 15 U.S.C. §§ 78j and
78ff; 17 C.F.R. §§ 240.10b-5 and 240.10b5-1.
        8 United States v. Mahmood, 820 F.3d 177, 187 (5th Cir. 2016).
        9 United States v. Carbins, 882 F.3d 557, 563 (5th Cir. 2018) (internal quotation marks

and citation omitted).
        10 Jackson v. Virginia, 443 U.S. 307, 319 (1979).
        11 United States v. Martinez, 900 F.3d 721, 728 (5th Cir. 2018) (internal quotation

marks, alteration, and citation omitted).
        12 United States v. Hayes, 342 F.3d 385, 389 (5th Cir. 2003).

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       Liu challenges the sufficiency of the evidence to establish that she
possessed and disclosed material, nonpublic information, and that she acted
with scienter to support her conviction for insider trading. She also challenges
the sufficiency of the evidence to show that she conspired with her
codefendants to commit insider trading. Each of these issues will be discussed
in turn.
       a. Possession
       Liu first argues that the evidence was insufficient to show that she
possessed any information concerning the buyout. Specifically, she stresses
that she merely had potential access to information, which is insufficient to
establish possession.
       The Government, however, presented evidence showing that Liu
deduced that an acquisition was about to occur. On May 29, 2012, Liu received
CB&I and Toshiba’s 22-page due diligence request for “Project Jewel,” a code
name for the acquisition. This was followed by a number of other requests for
additional information. CFO Brian Ferraioli testified that a member of FP&A
“could easily have inferred” from the due diligence requests that a company
was seeking to purchase Shaw. In addition, FP&A Manager Rebecca Wallace
testified that she and Liu took a private phone call from a Morgan Stanley
investment banker on July 16, 2012 while at lunch, discussing “sensitive
information” concerning EBITDA (an important metric for a buyout). 13 Wallace
stated it was “pretty easy to guess” what was happening, both from the
involvement of investment bankers and the inquiry about EBITDA. Liu’s
group also assisted in the buyout by running the “Maggie” 14 forecasting model

       13 EBITDA is a company’s net income with its interest, taxes, depreciation, and
amortization added back. See generally Gen. Elec. Capital Corp. v. Posey, 415 F.3d 391, 393
(5th Cir. 2005).
       14 Maggie is a long-term financial projection model that Morgan Stanley used to assess

Shaw’s intrinsic value.
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for Morgan Stanley, which assessed Shaw’s worth for the acquisition. FP&A
updated Maggie at least twice in May and June 2012, which was atypical;
ordinarily Maggie was updated every six months. Liu’s coworker James
McMahon (a member of the FP&A team) testified that based on these updates
he believed Shaw was selling itself and assumed Liu, who had this same
information, believed the same.
       The Government presented evidence that Liu had been told of the
impending sale. CFO Ferraioli testified that he told Wallace about the planned
sale of Shaw weeks before Shaw announced the deal, and coworker Meredith
Guedry (a member of the FP&A team) in turn testified that Wallace told her
team, including Liu, about CB&I’s pending acquisition of Shaw prior to the
announcement. 15 Guedry’s detailed testimony about her conversations with
Liu in June added credibility to her conclusion that she had “no doubt” Liu
knew that the sale was pending. Indeed, Guedry explained that she and Liu
discussed the acquisition at length. Fearing her job was at risk due to the
acquisition, Guedry left Shaw’s Baton Rouge office in late June; Guedry
testified that Liu knew why she was leaving and agreed with her decision.
       Liu relies on three district court cases to argue this evidence was
insufficient to establish possession, yet they are all readily distinguishable.
First, in S.E.C. v. Horn, the Northern District of Illinois held that while the
defendant had potential access to information, that alone could not establish
possession of material, nonpublic information. 16 Similarly, in S.E.C. v. Truong,
the Northern District of California concluded that there was no evidence that
the defendant had trading information, for he “was not made privy to

       15 The jury could have similarly relied on Wallace’s testimony that Liu relayed to the
FP&A group talk she had heard from Shaw’s Environment and Infrastructure Division that
“the deal is still on.”
       16 No. 10-CV-955, 2010 WL 5370988, at *6 (N.D. Ill. Dec. 16, 2010).

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confidential sales and financial information in the normal course of his
duties.” 17 Lastly, in S.E.C. v. Schvacho, the Northern District of Georgia, after
conducting a bench trial, determined that a correlation between stock
purchases and a few phone calls between two friends required too much
conjecture. 18 In contrast to these cases, the evidence adduced at trial provided
the jury with a sufficient basis to conclude that Liu actually possessed
information about the impending sale of Shaw.
       b. Materiality
       Liu next argues that the evidence was insufficient to show that the
information she possessed concerning the acquisition of Shaw was material.
Liu underscores that any information she possessed was speculative and
founded on rumor.
       Based on Supreme Court precedent, the district court charged the jury
without objection that information is material “if a reasonable investor would
consider it significant in the decision whether to invest, such that it alters the
total mix of information available about the proposed investment.” 19 The court
also clarified that “confirmation by an insider of facts or rumors that the
company had not confirmed publicly itself may constitute material, nonpublic
information.”
       As materiality “depends on the facts,” it “is to be determined on a case-
by-case basis.” 20 While this court has not addressed this issue in the context of
tipper liability, the Second Circuit has. In United States v. Mylett, for example,

       17 98 F. Supp. 2d 1086, 1089 (N.D. Cal. 2000).
       18 991 F. Supp. 2d 1284, 1299 (N.D. Ga. 2014).
       19 In TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976), the Supreme Court

held that, in the proxy-solicitation context, an omitted fact was material if a reasonable
investor would consider it “as having significantly altered the ‘total mix’ of information
available.” Then, in Basic Inc. v. Levinson, 485 U.S. 224, 234 (1988), the Court expressly
adopted that standard in the § 10(b) and Rule 10b-5 context.
       20 Id. at 250.

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the defendant, the Vice President of Labor Relations at AT&T, told his friend
that a newspaper article speculating a merger between AT&T and an unnamed
company was true, because he had conducted a feasibility study of the merger
and had been told by his supervisor not to discuss the article. 21 On appeal, the
court determined that a reasonable investor would find this information
valuable, even if the merger was speculative. It held that a $6 billion
acquisition could be considered “an event of great magnitude,” in part due to
the “sharp jump” in the stock price after the announcement. 22 The court also
found that there was a high probability of acquisition because the company
had hired an investment bank, outside counsel, and accountants in
preparation. 23 Similarly, in S.E.C. v. Mayhew, the Second Circuit held that a
tip to the defendant that an acquisition was in the works was material. 24 The
court concluded that because the information came from an insider and the
merger discussions were “actual and serious,” a “lesser level of specificity” was
necessary to constitute material information. 25
       On the other hand, the Fourth Circuit in Taylor v. First Union Corp. held
that information being withheld concerning talks between banks did not
constitute material information. 26 Two banks in separate states held a meeting
to discuss the possibility of “developing a relationship.” 27 Following a Supreme

       21  97 F.3d 663, 666 (2d Cir. 1996).
       22  Id. at 667.
        23 Id.
        24 121 F.3d 44, 52 (2d Cir. 1997).
        25 Id. See also United States v. Cusimano, 123 F.3d 83, 86 (2d Cir. 1997) (holding that

a tip that “something was happening” between two companies, although the tipper “wasn’t
sure what,” was still material); Holmes v. Bateson, 583 F.2d 542, 558 (1st Cir. 1978)
(determining that information of a possible merger was material although the specifics had
not yet been settled); S.E.C. v. Shapiro, 494 F.2d 1301, 1306–07 (2d Cir. 1974) (concluding
that while the merger was not probable, the “possibility was not so remote that . . . it might
not have influenced a reasonable investor”).
        26 857 F.2d 240, 242 (4th Cir. 1988).
        27 Id.

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Court decision declaring interstate banking to be constitutional, the two banks
again met, this time to consider a merger. The Fourth Circuit determined that
those discussions were “preliminary, contingent, and speculative.” 28 “At best,
the merger discussions culminated in a vague ‘agreement’ to establish a
relationship,” with “no agreement as to the price or structure of the deal.” 29
       This present case poses a stark contrast to Taylor. The information
available to Liu in May 2012 when CB&I sent its 22-page due diligence request
showed that the companies’ negotiations concerning a possible sale of Shaw
were quite serious. As the summer progressed, Liu observed that Maggie had
been updated out of cycle. She also participated on multiple calls with Morgan
Stanley bankers who, referencing “the other side,” discussed the metric. Other
members of FP&A eventually informed her that Shaw was being bought. Liu
emphasizes that she did not know the price or other details of the deal, such
as the buyer’s identity, but materiality in this instance does not demand that
the tipper know all the details of the proposed transaction. Here, talks of an
acquisition were far beyond speculation. That the information came from Liu,
a deemed “insider,” made it all the more likely to affect the mix of total
information available for the reasonable investor. Thus, the jury had sufficient
evidence to conclude the information was material.
       c. Nonpublic
       Liu makes a conclusory claim that the information in question was
public. Arguments not briefed are waived. 30 In any event, the information
surrounding Shaw’s acquisition was clearly nonpublic. Information becomes
public when it is disclosed “to achieve a broad dissemination to the investing

       28  Id. at 244.
       29  Id.
        30 See United States v. Reagan, 596 F.3d 251, 254 (5th Cir. 2010) (holding a failure to

fully brief constitutes a waiver).
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public generally and without favoring any special person or group.” 31 Here, the
evidence sufficiently showed that CB&I and Shaw kept the deal a secret until
they announced the acquisition. Indeed, the companies went to great lengths
to keep discussions confidential. Directors of both companies testified that they
used code names, had access-controlled electronic data rooms, and executed
confidentiality agreements.
       d. Disclosure
       Liu also argues that the Government failed to show that she disclosed
this material, nonpublic information to Russo and Vic. She contends that
communications between the parties, even if “timely,” were not so unusual as
to reveal Liu disclosed any information about the buyout.
       The striking concert of action between Liu and her codefendants,
however, presented a different tale to the jury. The phone records show that
Liu, Vic, and Russo coordinated with one another at the precise times that Vic
purchased Shaw call options and Russo’s mother purchased Shaw stock. The
jury was entitled to find the timing of the communications revealing: Liu spoke
with Russo numerous times, and she communicated with Diemo, who in turn
spoke to Vic, repeatedly. 32 The highest volume of phone communications
between Liu and Diemo in 2012 occurred in July, the most notable days being
July 18, 19, and 30. Vic and Diemo also had the highest volume of phone
communications between them in July 2012, similarly peaking on July 19
(when Vic first ordered Shaw call options).

       31  Dirks v. S.E.C., 463 U.S. 646, 653 n.12 (1983) (citing In re Faberge, Inc., 45 S.E.C.
249, 256 (1973)). The district court further instructed the jury that a “tip from a corporate
insider that is more reliable or specific than public rumors is nonpublic information despite
the existence of such rumors in the media or investment community.”
        32 For example, on July 26 (the day before the trades), Diemo and Liu exchanged 66

calls and texts. Diemo and Vic exchanged 22 calls and texts.
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       Moreover, the Government produced more concrete evidence that these
communications concerned Shaw’s pending acquisition. Russo’s mother
testified to a grand jury that Liu admitted to her that she passed on the
information about the pending Shaw buyout. 33 In addition to this direct
testimony, the call records support an inference that Liu relayed her
knowledge about the impending sale to Russo and Vic. On July 18, 2012, Liu
and Russo exchanged a series of phone calls and texts. Immediately thereafter,
Russo called his mother and asked permission to buy Shaw stock in her
brokerage account, explaining he knew of rumors of an acquisition. Similarly,
on July 19, 2012, Liu spoke with Diemo, who in turn spoke with Vic. Vic then
contacted his brother, Chris Ho (“Chris”). Chris promptly called his brokerage
firm on a recorded line to inquire into purchasing options for Shaw. During the
call, he told the agent, “That’s all I needed to know, ‘cause you know how it is.
Everybody always gets a tip. . . . [From] a friend of a friend and from a
janitor.” 34 Finally, while Vic was communicating with his broker, a user logged
onto Vic’s brokerage account from a device Liu regularly accessed and
researched Shaw call options. The jury could infer Liu was the user who logged
into the account to assist Vic in purchasing the call options. The evidence was

       33  Liu contends that this evidence could only be used for impeachment purposes. This
is incorrect. Ms. Russo’s prior grand jury statement, while posing two layers of hearsay
issues, is nonetheless admissible substantively. First, her statement as to what Liu told her
is admissible under Rule 801(d)(2) of the Federal Rules of Evidence as an exclusion from
hearsay, since Liu’s statement is a party admission. Second, Ms. Russo’s grand jury
testimony satisfies the requirements of another exclusion from hearsay, Rule 801(d)(1)(A), as
Ms. Russo testified under oath at a proceeding, and she is now subject to cross-examination
about her earlier statement. Further, there is no Confrontation Clause issue; if Russo wanted
to cross-examine his mother about why she made the prior statement, he had that
opportunity.
        34 Vic’s friend Lance Burgos also testified that Vic called him that day to inform him

of the acquisition rumors. Despite his familiarity with the stock market, Burgos stated Vic’s
information came as a surprise to him.
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thus sufficient for the jury to find that Liu passed on to Russo and Vic her
knowledge about the pending acquisition of Shaw.
      e. Personal Benefit
      The Government had to demonstrate that Liu disclosed this
aforementioned information for a personal purpose in breach of her fiduciary
duty as a corporate insider. Liu does not contest that she was a corporate
insider. Further, she concedes that, in regard to receiving a personal benefit,
she “had a close personal relationship with Russo and Diemo Ho in July 2012”
that “[a]s a matter of law . . . [is] sufficient to infer a personal benefit if [she]
disclosed material nonpublic information for securities trading purposes.”
      f. Anticipation of Trade
      Liu asserts that even if she shared material, nonpublic information, she
did not do so with any intention that Vic or Russo trade on it. Insider trading
requires that a tipper’s “deceptive use of information be in connection with the
purchase or sale of a security.” 35 Liu argues that, if anything, she told Russo
not to trade Shaw stock.
      The jury had reason to conclude otherwise, for the reasons stated above.
The jury was entitled to find that, because Liu was researching Shaw call
options from Vic’s account apparently to assist in purchasing the options, she
understood precisely what Vic was in the process of doing: purchasing Shaw
call options based on the information she furnished him about Shaw’s potential
acquisition. Additionally, on July 27, 2012, the date that Vic purchased his
Shaw call options and nine days after the flurry of communication began, Vic
asked his broker if he could sell his options on July 30, the date that CB&I
announced its purchase of Shaw. A reasonable juror could find that Liu

      35   United States v. O’Hagan, 521 U.S. 642, 655–56 (1997).
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conveyed the approximate date of the acquisition to Vic, so he could purchase
and sell Shaw options on the most advantageous dates.
       g. Unlawful Trade
       The Government had to show that Vic and Russo actually traded (i.e.,
bought or sold) Shaw securities. The Government provided sufficient evidence
that Vic and Russo did so. The jury saw records from Vic’s optionsXpress
account and Russo’s mother’s brokerage account at Edward Jones (in which he
had a beneficial interest) that showed both parties, acting on the information
Liu provided, purchased Shaw stock or options.
       h. Scienter
       Liu contends that the evidence was insufficient to prove she acted with
the requisite scienter to commit securities fraud. That is, Liu argues that she
did not act knowingly, willfully, and with the intent to defraud. 36 The district
court defined “knowing” for the jury as requiring Liu acted voluntarily and
intentionally, not because of mistake or accident. It defined “willfully” to mean
that Liu acted purposely with the specific intent to either disobey or disregard
the law. Lastly, it defined “specific intent to defraud” as to act with an intent
to deprive Shaw of the confidentiality of its material, nonpublic information.
       The Government provided the jury with sufficient evidence that Liu
knew the trading scheme was unlawful and nevertheless participated. As a
member of FP&A, Liu received training on insider trading and handling
confidential corporate information. 37 She also knew that, as an “insider,” she
could not trade during blackout periods, and Shaw sent quarterly emails
reminding her of this policy. The policy explicitly stated she could not “pass on

       36See Dirks, 463 U.S. at 664 n.23 (1983).
       37The Shaw Group Code of Corporate Conduct explicitly defined material information
as information “that is important to a reasonable investor in deciding whether to buy or sell
a company’s stock or other securities.” It also listed acquisitions as an example of material,
nonpublic information.
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to others” any material, nonpublic information. She would have understood
that any information concerning a potential merger was confidential, yet she
shared it anyway. In addition, the Government produced evidence that Liu lied
to the FBI and IRS in 2014, claiming that she did not know about the merger
prior to the announcement, despite having been emailed that the acquisition
cleared the day before. A jury was entitled to find that Liu acted with the
requisite scienter.
      i. Interstate Commerce
      To be convicted of insider trading, Liu had to have used some
instrumentality of interstate commerce. The instrumentality could be a
telephone, the internet, mail, or the facilities of a national securities exchange.
Liu does not contest that the scheme involved an instrumentality of interstate
commerce.
      B. Conspiracy
      Liu argues that the evidence was insufficient to prove a conspiracy to
commit securities fraud. For the Government to prove a conspiracy under 18
U.S.C. § 371, it had to show “(1) an agreement between two or more persons to
pursue an unlawful objective; (2) the defendant’s knowledge of the unlawful
objective and voluntary agreement to join the conspiracy; and (3) an overt act
by one or more of the members of the conspiracy in furtherance of the objective
of the conspiracy.” 38 “An agreement may be inferred from concert of action,
voluntary participation may be inferred from a collection of circumstances, and
knowledge may be inferred from surrounding circumstances.” 39 A conspiracy
“may be established by either direct or circumstantial evidence.” 40 Liu argues

      38  United States v. Coleman, 609 F.3d 699, 704 (5th Cir. 2010).
      39  United States v. Grant, 683 F.3d 639, 643 (5th Cir. 2012) (internal citations and
quotation marks omitted).
       40 United States v. Abadie, 879 F.2d 1260, 1265 (5th Cir. 1989).

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the Government failed to demonstrate she intentionally entered into an
agreement to commit insider trading, as the communications between parties
would have happened regardless of any conspiracy.
       As the above elements of insider trading illustrate, however, the
Government offered sufficient evidence to demonstrate Liu provided inside
information to Russo and Vic and voluntarily agreed to join them in
committing insider trading. The back-and-forth communications and
subsequent trades, meanwhile, constitute overt acts in furtherance of the
conspiracy. Therefore, Liu’s challenge to her conspiracy conviction fails.
       C. Severance
       Liu contends that this court should vacate her conviction and remand for
a new trial because the district court abused its discretion in failing to grant a
severance and try her separate from Vic and Russo. Rule 14 of the Federal
Rules of Criminal Procedure allows severance as justice requires. Prejudice
alone, however, does not mandate severance; rather, Rule 14 “leaves the
tailoring of the relief to be granted, if any, to the district court’s sound
discretion.” 41 A severance should be granted “only if there is a serious risk that
a joint trial would compromise a specific trial right of one of the defendants, or
prevent the jury from making a reliable judgment about guilt or innocence.” 42
“There is a preference in the federal system for joint trials of defendants who
are indicted together.” 43
       This court reviews a district court’s failure to sever a defendant from a
trial by the “exceedingly deferential” abuse of discretion standard. 44 The
appellant must show that “(1) the joint trial prejudiced him to such an extent

       41 Zafiro v. United States, 506 U.S. 534, 538–39 (1993).
       42 Id. at 539.
       43 Id. at 538.
       44 United States v. Chapman, 851 F.3d 363, 379 (5th Cir. 2017) (quoting United States

v. Whitfield, 590 F.3d 325, 355 (5th Cir. 2009) (internal quotation marks omitted).
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    Case: 18-31299         Document: 00515182773        Page: 17     Date Filed: 10/31/2019

                                        No. 18-31299
that the district court could not provide adequate protection; and (2) the
prejudice outweighed the government’s interest in economy of judicial
administration.” 45 In conspiracy cases, this court “generally favor[s] specific
instructions over severance.” 46 “A spillover effect, by itself, is an insufficient
predicate for a motion to sever.” 47
       Liu argues that the district court erred in not granting a severance for
two reasons. First, she contends that the evidence regarding Vic’s tax fraud,
including his remark that he was “in trouble” to his tax preparer, would have
been inadmissible against her because it was irrelevant; she also argues that
jury instructions failed to cure prejudice. Second, Liu argues that Chris’s
statement that he received a tip would have been inadmissible against her,
because Chris was neither an alleged coconspirator nor a tippee.
       Most of the evidence against Vic that Liu complains is prejudicial would
have been admissible against her in a separate trial. Even if isolated items of
evidence were not admissible against Liu, the district court’s instructions
provided her with adequate protection. Specifically, the district court
instructed the jury that “sometimes an exhibit may be admissible only as to
one defendant and not the others,” and Vic’s tax fraud was “such [an] exhibit[]
and may be considered only insofar as defendant Victory Ho is concerned, but
should not be considered as to defendants Kelly Liu and Salvador Russo.” Liu
fails to show the prejudice required for a severance, and her challenge to the
district court’s denial of her motion to sever is thus without merit.
       III. CONCLUSION
       For these reasons, we AFFIRM the district court’s judgment.

       45   United States v. Owens, 683 F.3d 93, 98 (5th Cir. 2012) (internal quotation marks
omitted).
       46   United States v. Ledezma-Cepeda, 894 F.3d 686, 690 (5th Cir. 2018).
       47   United States v. Bieganowski, 313 F.3d 264, 287 (5th Cir. 2002).
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