Court Opinion

ID: 854269
Source: CourtListenerOpinion
Date Created: 2013-03-05 01:00:44.56104+00
Date Added: 2024-06-11T13:22:24.253914
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                             MAR 04 2013

                                                                          MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

UNITED STATES OF AMERICA,                        No. 11-10209

              Plaintiff - Appellee,              D.C. No. 3:08-cr-00164-MHP-1

  v.
                                                 MEMORANDUM*
W. SCOTT HARKONEN, M.D.,

              Defendant - Appellant.

UNITED STATES OF AMERICA,                        No. 11-10242

              Plaintiff - Appellant,             D.C. No. 3:08-cr-00164-MHP-1

  v.

W. SCOTT HARKONEN, M.D.,

              Defendant - Appellee.

                  Appeal from the United States District Court
                      for the Northern District of California
                 Marilyn H. Patel, Senior District Judge, Presiding

                     Argued and Submitted December 6, 2012
                            San Francisco, California

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: D.W. NELSON, TASHIMA, and MURGUIA, Circuit Judges.

      A jury convicted Defendant W. Scott Harkonen of wire fraud for issuing a

fraudulent press release. The district court sentenced Harkonen to three years

probation and a $20,000 fine. Harkonen appeals his conviction, and the

government cross-appeals Harkonen’s sentence. We have jurisdiction pursuant to

28 U.S.C. § 1291 and affirm Harkonen’s conviction and sentence.

First Amendment Challenge

      We review First Amendment challenges to criminal convictions in two

steps: (1) deferring to the jury’s findings on historical facts, credibility

determinations, and the elements of statutory liability, we ask whether sufficient

evidence supports the verdict;1 and (2) if it does, we determine whether the facts,

as found by the jury, establish the core constitutional facts. See United States v.

Keyser, 704 F.3d 631, 638 n.1 (9th Cir. 2012) (citing Planned Parenthood of the

Columbia/Willamette, Inc. v. Am. Coal. of Life Activists, 290 F.3d 1058, 1070 (9th

Cir. 2002) (en banc)).

      Constitutional facts determine “the core issue of whether the challenged

speech is protected by the First Amendment.” United States v. Hanna, 293 F.3d
1
         Accordingly, our First Amendment analysis also addresses Harkonen’s
distinct argument on appeal that his wire fraud conviction was not supported by
sufficient evidence.

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1080, 1088 (9th Cir. 2002). The First Amendment does not protect fraudulent

speech, United States v. Alvarez, 132 S. Ct. 2537, 2544 (2012), so the core

constitutional issue in Harkonen’s case is whether the facts the jury found establish

that the Press Release was fraudulent.

      Step One: Whether Sufficient Evidence Supports the Verdict

      Wire fraud comprises three elements: (1) knowing participation in a scheme

to defraud; (2) use of the wires in furtherance of the scheme; and (3) a specific

intent to deceive or defraud. United States v. Green, 592 F.3d 1057, 1064 (9th Cir.

2010). The second element is uncontested on appeal and is irrelevant for First

Amendment purposes.

             Knowing Participation in a Scheme to Defraud

      At trial, nearly everybody actually involved in the GIPF-001 clinical trial

testified that the Press Release misrepresented GIPF-001’s results. Testimony

indicated that even Harkonen himself was “very apologetic” about the Press

Release’s misleading nature. Evidently, the jury credited all this testimony, and it

supports the finding that the Press Release was fraudulent even if not “literally

false.” See United States v. Woods, 335 F.3d 993, 998 (9th Cir. 2003).

      In addition to his being “very apologetic” about the Press Release, further

evidence supports the finding that Harkonen knew the Press Release was

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misleading. Harkonen prevented Intermune’s clinical personnel from viewing the

Press Release prior to its publication, even when they asked to see it, at one point

becoming “visibly” upset and “castigat[ing]” the head of the communications firm

that helped prepare the Press Release for permitting Intermune’s Vice President of

Regulatory Affairs to view a draft of the Press Release. Harkonen also did not

want the FDA to know about all his post-hoc analyses—the analyses on which the

Press Release was based—because he “didn’t want to make it look like we were

doing repeated analyses looking for a better result.”

        Lastly, there is sufficient evidence that the Press Release was at least

“capable” of influencing the decision of doctors to prescribe, or patients to seek,

prescriptions of Actimmune, United States v. Jenkins, 633 F.3d 788, 802 n.3 (9th

Cir. 2011), because the Press Release was purportedly a very effective marketing

tool.

              Specific Intent to Defraud

        Our conclusion that the jury was justified in finding that the Press Release

was misleading also strongly supports the finding that Harkonen had the specific

intent to defraud. See United States v. Sullivan, 522 F.3d 967, 974 (9th Cir. 2008).

Further circumstantial evidence, id., supports the conclusion that Harkonen’s

GIPF-001 analyses were conducted with fraudulent intent: Harkonen stated he

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would “cut that data and slice it until [he] got the kind of results [he was] looking

for,” and requested the final post-hoc analysis “simply . . . to see what that did to

the p-value.” Given his clear financial incentive to find a positive result in the face

of GIPF-001’s failure to meet its pre-determined goals, we conclude the evidence

sufficiently supports the jury’s determination that Harkonen had the specific intent

to defraud.

      Step 2: Whether the Facts as Found by the Jury Establish the Core
      Constitutional Facts

      Because they are supported by sufficient evidence, we defer to the jury’s

findings that the Press Release was misleading, that Harkonen knew it was

misleading, and that Harkonen had the specific intent to defraud. Cf. Keyser, 704

F.3d at 639 (“[W]e do not defer to the jury’s finding of intent, because, in this case,

intent is not an element of statutory liability.”). Thus, upon independent review of

the record,2 we affirm Harkonen’s conviction. See United States v. Stewart, 420
F.3d 1007, 1019 (9th Cir. 2005); cf. United States v. Bagdasarian, 652 F.3d 1113,

1123 (9th Cir. 2011) (speech was protected “because the prosecution failed to

present sufficient evidence” to convict).

      2
         Critically, Harkonen presented the evidence that most firmly supported his
case for the first time at sentencing. Because we must defer to the jury’s credibility
determinations, Keyser, 704 F.3d at 639, we will not reverse the jury’s verdict
based on evidence it never considered.

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McAnnulty Argument

      Harkonen, relying on American School of Magnetic Healing v. McAnnulty,

187 U.S. 94 (1902), argues we should reverse his conviction because “genuine

debates over whether a given treatment caused a particular effect are outside the

scope of the mail and wire fraud statutes.” We are unpersuaded.

      First, McAnnulty does not categorically prohibit fraud prosecutions for

statements about the efficacy of a particular drug; indeed, “[t]hat false and

fraudulent representations may be made with respect to the curative effect of

substances is obvious.” Seven Cases v. United States, 239 U.S. 510, 517 (1916).

Here, the government alleged the Press Release contained “false and misleading

information” about Actimmune, and the government was permitted to go to trial on

that theory.

      Second, Harkonen’s McAnnulty-based argument that his statements were

fraudulent only if they were universally considered objectively false is unavailing.

As used in the criminal mail fraud statutes, the term “to defraud” has its

commonplace definition and includes any sort of “dishonest method[] or

scheme[],” and any “trick, deceit, chicane or overreaching.” Carpenter v. United

States, 484 U.S. 19, 27 (1987); see also Woods, 335 F.3d at 998 (stating a

scheme’s “fraudulent” nature is measured by a “non-technical” standard).

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Statements are fraudulent if “misleading or deceptive” and need not be “literally

false.” Woods, 335 F.3d at 998.

      Third, Harkonen’s request that we reverse his conviction because he was

engaging in a genuine scientific debate is hardly different than arguing that he is

innocent; genuine debates of any sort are, by definition, not fraudulent. Here, a

jury found, beyond a reasonable doubt, that Harkonen issued the Press Release

with the specific intent to defraud, and that finding is supported by the evidence

presented at trial. We know of no case where, based on McAnnulty, a court

disregarded a jury’s factual findings to overturn a criminal conviction, and we will

not do so here. See Research Labs. v. United States, 167 F.2d 410, 414–17 (9th

Cir. 1948) (limiting McAnnulty and stating it does not prohibit a jury from

weighing conflicting scientific testimony to determine whether statements about a

drug’s efficacy were misleading).

Due Process

      Harkonen’s due process argument is essentially a re-dressing of his First

Amendment and McAnnulty arguments, so it too must fail. An ordinary person

would have understood, see Skilling v. United States, 130 S. Ct. 2896, 2927–28

(2010), that if he made misleading statements in a press release with the specific

intent to defraud he would be subject to the wire fraud statute.

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Jury Instructions

      The district court did not abuse its discretion in formulating its jury

instructions. United States v. Hofus, 598 F.3d 1171, 1174 (9th Cir. 2010). When

the district court provides adequate instructions on the specific intent element of

wire fraud, no good faith instruction is required, United States v. Frega, 179 F.3d
793, 804 (9th Cir. 1999), and because “puffing” “fall[s] under the umbrella of . . .

good faith,” United States v. Gay, 967 F.2d 322, 329 (9th Cir. 1992), a specific

intent instruction adequately covered Harkonen’s puffing defense.

Brady Argument

      Harkonen has failed to demonstrate a reasonable probability that the

government’s withholding of evidence caused prejudice, which occurs if the

evidence withheld “undermines confidence in the outcome of the trial.” United

States v. Kohring, 637 F.3d 895, 901–02 (9th Cir. 2010) (internal quotation marks

omitted). The documents at issue here might demonstrate that the Press Release

did not mislead some doctors, but there was other evidence that the Press Release

was widely and successfully used as a marketing tool, indicating it was “capable”

of misleading some addressees and was, therefore, “material.”

                                          8
Matrixx Motion

      The district court did not abuse its discretion in denying Harkonen’s

“Matrixx motion” for a new trial, see United States v. Del Toro-Barboza, 673 F.3d
1136, 1153 (9th Cir. 2012), because Matrixx Initiatives, Inc. v. Siracusano, 131 S.

Ct. 1309 (2011), does not undermine the thrust of the government’s theory in

Harkonen’s case. Harkonen’s scientific methods were not on trial; the issue was

whether he misleadingly presented his analyses in the Press Release. The

distinction between these two issues was made clear at trial when, for instance,

Intermune’s former Senior Director of Biostatistics testified that post-hoc analyses

are “good science” in the sense that they may generate hypotheses for future study,

but that he “winced” when he saw the Press Release because “the conclusiveness

of the results was overstated.”

Harkonen’s Sentence

      The district court did not abuse its discretion in finding that the government

failed to meet its burden on the U.S.S.G. § 2B1.1(b)(1) “intended loss”

enhancement. See United States v. Yepez, 652 F.3d 1182, 1187 (9th Cir. 2011).

The district court never explicitly ruled on the government’s § 2B1.1(b)(1)

intended loss argument, but the record in its entirety indicates the district court was

well aware of this argument. In that context, we read the district court’s statement

                                           9
that, “when it comes to the loss . . . this case is really wanting in the kind of

showing that would meet the preponderance standard,” as a rejection of both the

government’s actual and intended loss arguments due to the government’s failure

to articulate a loss theory that made sense.

      Nor did the district court erroneously require the government to prove an

“actual” pecuniary loss (the U.S.S.G. § 2B1.1 definition of “victim”) for a

U.S.S.G. § 3A1.1 “vulnerable victim” enhancement; rather, the district court found

that the government failed to meet its burden of identifying an actual victim. This

is clear from the district court’s conclusion that “we can’t even figure out who is a

victim in this case, and whether the victims were benefited in some way.”

      AFFIRMED.

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