Court Opinion

ID: 148088
Source: CourtListenerOpinion
Date Created: 2010-06-08 17:22:32+00
Date Added: 2024-06-11T09:41:19.274229
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,             
                Plaintiff-Appellee,        Nos. 07-50240
                                                09-50081
               v.
                                             D.C. No.
BRYAN LAURIENTI, a/k/a BRYAN              CR-03-00620-TJH-
ANTHONY LAURIENTI,                               03
             Defendant-Appellant.
                                      

UNITED STATES OF AMERICA,             
                Plaintiff-Appellee,
               v.                           No. 07-50358
DONALD SAMARIA, akas Donald S.               D.C. No.
Samaria, Donald Samuel Samaria,           CR-03-00620-TJH-8
Jr., Donny Samaria, Don Samaria,
Donald Samuel Samaria,
             Defendant-Appellant.
                                      

UNITED STATES OF AMERICA,             
                Plaintiff-Appellee,         No. 07-50365
               v.                            D.C. No.
                                          CR-03-00620-TJH-
DAVID MONTESANO,                                 05
             Defendant-Appellant.
                                      

                           8193
8194                 UNITED STATES v. LAURIENTI

UNITED STATES OF AMERICA,                         No. 07-50367
                 Plaintiff-Appellee,                 D.C. No.
                v.                              CR-03-00620-TJH-
CURTISS PARKER,                                         06
             Defendant-Appellant.
                                                   OPINION

        Appeals from the United States District Court
            for the Central District of California
          Terry J. Hatter, District Judge, Presiding

                     Argued and Submitted
              April 8, 2010—Pasadena, California

                         Filed June 8, 2010

  Before: Barry G. Silverman and Susan P. Graber, Circuit
   Judges, and Frederick J. Scullin, Jr.,* District Judge.

                     Opinion by Judge Graber

  *The Honorable Frederick J. Scullin, Jr., Senior United States District
Judge for the Northern District of New York, sitting by designation.
8198            UNITED STATES v. LAURIENTI

                       COUNSEL

Dennis P. Riordan, Riordan & Horgan, San Francisco, Cali-
fornia; Jonathan D. Libby, Deputy Public Defender, Los
Angeles, California; Karen L. Landau, Oakland, California;
and Irene P. Ayala, Los Angeles, California, for the
defendants-appellants.

Ellen R. Meltzer, Fraud Section, Criminal Division, United
States Department of Justice, Washington, D.C., for the
plaintiff-appellee.
                   UNITED STATES v. LAURIENTI                8199
                           OPINION

GRABER, Circuit Judge:

   After the collapse of a securities fraud “pump and dump”
scheme, the government indicted the owners, managers, and
senior brokers of a securities broker-dealer firm. The owners
and managers pleaded guilty to charges of criminal securities
fraud, but the senior brokers, including Defendants Bryan
Laurienti, Curtiss Parker, Donald Samaria, and David Monte-
sano, pleaded not guilty. Defendants conceded that a fraudu-
lent scheme existed but argued that they had not joined the
conspiracy or engaged in fraudulent acts; rather, they were
innocent brokers selling stocks to their clients, caught in the
government’s overly wide criminal dragnet. The jury found
otherwise and convicted Defendants on all counts. Defendants
appeal their convictions and sentences. We affirm Defen-
dants’ convictions but vacate their sentences and remand for
resentencing.

        FACTUAL AND PROCEDURAL HISTORY

   Hampton Porter Investment Bankers, LLC (“Hampton Por-
ter”), was a securities broker-dealer firm registered with the
United States Securities and Exchange Commission (“SEC”).
In the late 1990s and early 2000s, Hampton Porter’s owners
and top-level managers engaged in what is known as a “pump
and dump” scheme. Certain publicly traded companies
granted Hampton Porter (or its owners) large blocks of free,
or deeply discounted, stock. In return, Hampton Porter drove
up the price of these thinly traded stocks by pressuring unsus-
pecting clients into purchasing shares, by strongly discourag-
ing clients from selling shares, and by refusing in some
instances to execute clients’ sales orders. In the meantime,
Hampton Porter and others who stood to benefit from the
scheme sold their shares at artificially inflated prices. See gen-
erally United States v. Zolp, 479 F.3d 715, 717 n.1 (9th Cir.
8200                 UNITED STATES v. LAURIENTI
2007) (describing a “pump and dump” scheme); United States
v. Skelly, 442 F.3d 94, 96-97 (2d Cir. 2006) (same).

   When the stock market fell sharply in 2000, Hampton Por-
ter’s scheme crashed with it. Hampton Porter went out of
business in 2001. After an investigation, the government
indicted Hampton Porter’s owners, managers, and senior bro-
kers.1 The indictment alleges that the defendants participated
in a securities fraud conspiracy, in violation of 18 U.S.C.
§ 371, 15 U.S.C. § 78j(b), and 15 U.S.C. § 78ff and, by incor-
poration, 17 C.F.R. § 240.10b-5. The indictment alleges that
the “purpose of the conspiracy was to enrich defendants and
their co-conspirators by means of the fraudulent sales of
securities to the customers of Hampton Porter.” The indict-
ment also alleges additional counts against individual defen-
dants in connection with specified stock purchases for acts
committed “in furtherance of the fraudulent scheme.”

   The government’s investigation uncovered overwhelming
evidence that the criminal conspiracy existed and that the
owners and managers were complicit. The owners and man-
agers pleaded guilty to various charges and, in plea agree-
ments, agreed to testify against the senior brokers, who are
Defendants here. Defendants pleaded not guilty, and the dis-
trict court presided over a 14-day jury trial.2

  Much of the testimony and documentary evidence at trial
concerned Defendants’ receipt of “bonus commissions” when
a client purchased shares of four targeted stocks, referred to
by Defendants as “house stocks.”3 The commission structure
   1
     The government also initiated civil proceedings against Hampton Por-
ter and its employees. Evidence of those proceedings was not admitted at
trial, and they are not relevant to these appeals.
   2
     The trial also included charges against Defendant Michael Losse. The
jury acquitted him on all counts, and he is not a party to this appeal. The
term “Defendants” refers to the four Defendants that bring these consoli-
dated appeals.
   3
     Defendants’ use of the term “house stock” is not entirely consistent.
For purposes of this opinion, we use the term to encompass all four stocks
that generated bonus commissions for Hampton Porter’s brokers.
                     UNITED STATES v. LAURIENTI                    8201
worked in the following manner. On the purchase of all
stocks, the client paid a sales commission—typically $100.
The brokers fully disclosed that sales commission, and the cli-
ent’s copy of the transaction ticket reflected the commission.
Out of that sales commission, Hampton Porter paid its brokers
a predetermined percentage, typically 50%, for a resulting
regular commission of $50. As an incentive to the brokers to
push house stocks, however, Hampton Porter offered a “bonus
commission,” which Hampton Porter paid the brokers in addi-
tion to the regular commission. The bonus commission typi-
cally amounted to 5% of the purchase price of the house
stock. The bonus commissions were paid directly by Hampton
Porter, not by the clients. Neither the brokers nor the transac-
tion tickets disclosed to clients the existence of bonus com-
missions. In summary, for a purchase of non-house stock, a
broker received $50; but for a purchase of house stock, a bro-
ker received $50 plus 5% of the purchase price.

   Two simple examples illustrate the dramatic difference
between the broker’s commission on a client’s purchase of a
non-house stock and the broker’s commission on a client’s
purchase of a house stock. Suppose that a client bought
$30,000 worth of a non-house stock and that Hampton Porter
charged its standard $100 sales commission. The client would
pay $30,100, and the broker would receive a $50 commission.
Now assume instead that a client bought $30,000 worth of a
house stock and that Hampton Porter charged its standard
$100 sales commission. The client again would pay $30,100.
But this time, the broker would receive the $50 sales commis-
sion plus a bonus commission of $1,500. In summary, a cli-
ent’s purchase of $30,000 worth of stock would result in
either a total commission of $50 or a total commission of
$1,550—depending only on whether the stock purchased was
a house stock.4
  4
    The difference in commission becomes even more stark as the pur-
chase amount increases. It was not unusual for a client of Hampton Porter
to purchase hundreds of thousands of dollars worth of stock, resulting in
total commissions of tens of thousands of dollars for house-stock
purchases—compared to only $50 if the broker sold the same amount of
a non-house stock.
8202              UNITED STATES v. LAURIENTI
   Additionally, bonus commissions could be lost. Generally
speaking, if the client sold shares of a house stock, the broker
would lose the bonus commission that he or she had earned
on the original purchase of the house stock. The brokers
attempted to avoid the loss of the bonus commission in sev-
eral ways. First, and most simply, the brokers dissuaded the
client from selling the house stock. Second, if the broker
could find another client to purchase the house stock, he or
she executed a “cross-trade” between clients. Although the
specifics of the transaction were unknown to the two clients,
the selling client sold his or her shares of the house stock to
the purchasing client. In this way, the total number of shares
owned by Hampton Porter clients as a group would be unaf-
fected. Third, in some instances, the broker executed unautho-
rized purchases of the house stock by another, unsuspecting
client.

   The government introduced overwhelming and uncontested
evidence that Defendants knowingly received bonus commis-
sions. Several of Defendants’ former clients testified that
Defendants used high-pressure sales tactics to persuade them
to buy house stocks and that Defendants strongly discouraged
the sale of house stocks. They testified that, had they known
of the bonus commissions, they would not have bought the
house stocks. They also testified to unauthorized purchases in
their accounts and other illicit behavior by Defendants, such
as lying and failing to carry out their express instructions.
Finally, the government introduced uncontested evidence that
all Defendants except Laurienti regularly executed trades
without the necessary licenses.

   The jury found Defendants guilty on all counts. Although
the jury convicted each Defendant of more than one count, the
district court imposed only one sentence by operation of
U.S.S.G. § 3D1.2(d), which mandates that “counts involving
substantially the same harm shall be grouped together.” The
district court imposed sentences ranging from 30 months’
imprisonment to 52 months’ imprisonment. Each sentence is
                   UNITED STATES v. LAURIENTI                  8203
below the corresponding Guidelines range. The district court
also ordered that each Defendant pay restitution in amounts
ranging from approximately $300,000 to approximately $2.7
million. In these consolidated appeals, Defendants timely
appeal their convictions and their sentences.

                         DISCUSSION

I.    Challenges to the Convictions

     A.   Duty to Disclose Bonus Commissions

   Section 10(b) of the Securities Exchange Act of 1934
states:

         It shall be unlawful for any person, directly or
      indirectly, by the use of any means or instrumental-
      ity of interstate commerce or of the mails, or of any
      facility of any national securities exchange—

          ....

         (b) To use or employ, in connection with the pur-
      chase or sale of any security registered on a national
      securities exchange or any security not so registered,
      or any securities-based swap agreement (as defined
      in section 206B of the Gramm-Leach-Bliley Act),
      any manipulative or deceptive device or contrivance
      in contravention of such rules and regulations as the
      Commission may prescribe as necessary or appropri-
      ate in the public interest or for the protection of
      investors.

15 U.S.C. § 78j (emphasis added). The relevant SEC regula-
tion, Rule 10b-5, states:

        It shall be unlawful for any person, directly or
      indirectly, by the use of any means or instrumental-
8204              UNITED STATES v. LAURIENTI
    ity of interstate commerce, or of the mails or of any
    facility of any national securities exchange,

      (a) To employ any device, scheme, or artifice to
    defraud,

       (b) To make any untrue statement of a material
    fact or to omit to state a material fact necessary in
    order to make the statements made, in the light of the
    circumstances under which they were made, not mis-
    leading, or

      (c) To engage in any act, practice, or course of
    business which operates or would operate as a fraud
    or deceit upon any person, in connection with the
    purchase or sale of any security.

17 C.F.R. § 240.10b-5.

   Violations of section 10(b) and Rule 10b-5 can give rise to
both civil liability and criminal liability. See, e.g., Chiarella
v. United States, 445 U.S. 222 (1980) (criminal charges);
Desai v. Deutsche Bank Sec. Ltd., 573 F.3d 931 (9th Cir.
2009) (per curiam) (civil class action brought by individual
investors); SEC v. Talbot, 530 F.3d 1085 (9th Cir. 2008) (civil
charges brought by the SEC); see also 15 U.S.C. § 78ff
(imposing criminal liability for certain violations of securities
law). Here, the government brought criminal charges for will-
ful violations of section 10(b) under 15 U.S.C. § 78ff(a).
Count One of the indictment alleges that Defendants con-
spired to commit securities fraud, in violation of 18 U.S.C.
§ 371. The individual counts allege that Defendants individu-
ally acted, or aided and abetted an act, in furtherance of the
fraudulent scheme in connection with specified client pur-
chases of house stocks.

  The government’s overarching theory of the case is that
Hampton Porter’s owners, its managers, and Defendants con-
                  UNITED STATES v. LAURIENTI              8205
spired to engage in, and did engage in, a “pump and dump”
scheme. Hampton Porter artificially inflated the price of
house stocks by fraudulently selling shares to unwitting cli-
ents, the owners and managers benefitted by selling their
shares of house stocks at an artificially high price, and the
brokers benefitted by collecting undisclosed bonus commis-
sions.

  1.   Viable Legal Theory

   [1] One of the government’s theories of guilt was that
Defendants, with intent to defraud, failed to disclose to their
clients their receipt of bonus commissions on purchases of the
four house stocks. Defendants do not dispute, and overwhelm-
ing evidence supports the finding, that they received bonus
commissions and that they failed to disclose the bonus com-
missions to their clients. Instead, Defendants argue that their
failure to disclose is not a legal violation of any sort, espe-
cially not a criminal violation. Whether, and in what circum-
stances, a broker’s failure to disclose bonus commissions can
give rise to criminal liability is a pure question of law. “We
review questions of law de novo.” United States v. Green, 592
F.3d 1057, 1063 (9th Cir. 2010).

   Before addressing that legal question, however, it is impor-
tant to note that Defendants were not necessarily charged with
their failure to disclose the bonus commissions. To prove the
conspiracy count, the government had to show that a conspir-
acy to defraud existed, that a particular defendant knew the
purposes of the conspiracy and joined the conspiracy, and that
some member of the conspiracy (including the owners and
managers) performed an overt act in furtherance of the con-
spiracy. United States v. Boone, 951 F.2d 1526, 1543 (9th Cir.
1991). The conspiracy at issue here is the overall “pump and
dump” scheme. Defendants did not challenge, and over-
whelming evidence supports the finding, that the conspiracy
existed and that at least one member of it performed an overt
act.
8206                  UNITED STATES v. LAURIENTI
   Defendants’ primary defense was that they had not joined
the conspiracy.5 Even if the jury had been instructed that dis-
closure of bonus commissions is not required by any law, a
reasonable juror nevertheless could have concluded that
Defendants intentionally acted contrary to the interests of
their clients by pushing house stocks as part of a fraudulent
scheme to line Defendants’ pockets without regard for the
interests of their clients. The undisclosed bonus commissions
—even if not independent criminal conduct—are nevertheless
circumstantial evidence of Defendants’ agreement to join the
conspiracy. In short, even if the failure to disclose was per-
fectly legal in all circumstances, the government still met its
burden to establish a conspiracy.6

   In the final analysis, however, the government offered evi-
dence of Defendants’ failure to disclose the bonus commis-
sions not only as circumstantial evidence of their agreement
to join and carry out the conspiracy but also as an independent
violation of Rule 10b-5. Because that theory indisputably was
  5
     The elements of the conspiracy itself and the overt act were common
to all five Defendants, and the evidence on those elements was uncontested
and overwhelming. Because the jury convicted the four Defendants who
join in this appeal, but acquitted Defendant Losse, it apparently found that
the two common elements were met, but that the defendant-specific
element—agreement to the conspiracy—was met in all cases except
Defendant Losse’s.
   6
     A similar analysis applies to the individual counts. To prove the indi-
vidual counts, the government had to show, among other things, that the
defendant violated one of the prongs of Rule 10b-5 willfully and with the
intent to defraud. Once the jury found that Defendants had joined the
“pump and dump” conspiracy, it easily could conclude that Defendants’
role in the individual purchases of house stock was, for instance, an
employment of the overall scheme to defraud, in violation of Rule 10b-5.
Once Defendants agreed to the “pump and dump” scheme, their fraudulent
conduct in selling the stock to unsuspecting clients constituted a securities
violation because it was in furtherance of, and part of, the overall scheme
to defraud. Again, the undisclosed bonus commissions—even if not crimi-
nal conduct—are nevertheless circumstantial evidence of Defendants’
intent to mislead their customers.
                  UNITED STATES v. LAURIENTI                8207
one of the government’s theories of guilt, Defendants’ chal-
lenges to that theory must be addressed, even though the gov-
ernment did not have to advance that theory of guilt and even
though the government also presented other theories of guilt.

   We turn, then, to whether, and (if so) in what circum-
stances, a broker’s failure to disclose bonus commissions can
give rise to criminal liability. Defendants argue that there is
never a duty to disclose bonus commissions. In response, the
government does not assert that a broker always owes a duty
to disclose bonus commissions. Instead, it argues that the fail-
ure to disclose the bonus commissions, coupled with Defen-
dants’ intent to defraud, constituted criminal conduct if, but
only if, (1) Defendants had a fiduciary or similar relationship
of trust and confidence with their clients and (2) the failure to
disclose the bonus commissions was a “material” omission.

   We begin with the Supreme Court’s discussion of the
boundaries of criminal liability for a person trading on “inside
information.” In Chiarella, 445 U.S. at 224, the defendant
gleaned confidential information about third-party corpora-
tions through his job as a printer in New York. Capitalizing
on this “inside information,” the defendant made substantial
profits by trading in the stock market. Id. The government
indicted the defendant for violations of section 10(b) and Rule
10b-5, Chiarella, 445 U.S. at 225, the same statute and regu-
lation at issue here. The district court instructed the jury to
convict the defendant “if it found that [the defendant] will-
fully failed to inform sellers of target company securities that
he knew of a forthcoming takeover bid that would make their
shares more valuable.” Id. at 226. The Supreme Court granted
certiorari “to decide whether silence in such circumstances
violates § 10(b),” characterizing the issue as “whether silence
may constitute a manipulative or deceptive device” under sec-
tion 10(b). Id.

  In a footnote, the Court noted that the defendant was
charged only with violations of subsections (a) and (c) of Rule
8208              UNITED STATES v. LAURIENTI
10b-5, and not subsection (b) of the Rule. Chiarella, 445 U.S.
at 225 n.5. Subsections (a) and (c) of Rule 10b-5 prohibit
fraudulent devices, schemes, acts, or practices. Subsection (b)
of Rule 10b-5 prohibits the telling of material lies and prohib-
its the telling of material half-truths, where the speaker
“omit[s] to state a material fact necessary in order to make the
statements made, in the light of the circumstances under
which they were made, not misleading.” In Chiarella, because
the defendant had not made any statements to the sellers of
the stocks—and, a fortiori, no misleading or false statements
—the government did not charge the defendant with a viola-
tion of subsection (b). 445 U.S. at 225 n.5.

   Addressing the facts of that case, the Court held that,
“[w]hen an allegation of fraud is based upon nondisclosure,
there can be no fraud absent a duty to speak.” Id. at 235. Bor-
rowing from the Restatement (Second) of Torts, the Court
held that “the duty to disclose [material information] arises
when one party has information ‘that the other [party] is enti-
tled to know because of a fiduciary or other similar relation
of trust and confidence between them.’ ” Id. at 228 (alter-
ations in original) (quoting Restatement (Second) of Torts
§ 551(2)(a) (1976)). In holding that the defendant had no duty
to speak, the Court found persuasive that the defendant “was
not [the sellers’] agent, he was not a fiduciary, he was not a
person in whom the sellers had placed their trust and confi-
dence. He was, in fact, a complete stranger who dealt with the
sellers only through impersonal market transactions.” Id. at
232-33.

   [2] In conclusion, under Chiarella, a party has a duty to
disclose material “inside information” to another party only if
there is a fiduciary relationship or a similar relationship of
trust and confidence between the parties—at least with respect
to alleged violations of subsections (a) and (c) of Rule 10b-5.

  [3] In United States v. Szur, 289 F.3d 200, 211 (2d Cir.
2002), the Second Circuit applied the general Chiarella rule
                  UNITED STATES v. LAURIENTI                 8209
to the specific context here: a broker’s failure to disclose com-
missions. The Second Circuit held that, “when dealing with a
claim of fraud based on material omissions, it is settled that
a duty to disclose ‘arises [only] when one party has informa-
tion that the other [party] is entitled to know because of a
fiduciary or other similar relation of trust and confidence
between them.’ ” Id. (alteration in original) (quoting Chia-
rella, 445 U.S. at 228). That court approved of the following
jury instruction given by the district court, which stated in
pertinent part:

    Whether a fiduciary relationship exists is a matter of
    fact for you, the jury, to determine. At the heart of
    the fiduciary relationship lies reliance and de facto
    control and dominance . . . . One acts in a fiduciary
    capacity when the business with which he or she
    transacts, or the money or property which he or she
    handles, is not his or her own or for his or her own
    benefit, but for the benefit of another person, as to
    whom he or she stands in a relation implying and
    necessitating great confidence and trust on the one
    part and a high degree of good faith on the other
    part.

Id. at 210.

   In Skelly, 442 F.3d at 96-99, the Second Circuit in another
criminal case again addressed the issue raised by the parties
here: whether a stock broker has a duty to disclose bonus
commissions. That court again approved of the jury instruc-
tion given in Szur and made clear that a proper jury instruc-
tion in this context must include “the elements of ‘reliance
and de facto control and dominance.’ ” Id. at 99. Concerning
when a fiduciary duty arises, the court elaborated that,

    while there is no general fiduciary duty inherent in
    an ordinary broker/customer relationship, a relation-
    ship of trust and confidence does exist between a
8210                  UNITED STATES v. LAURIENTI
      broker and a customer with respect to those matters
      that have been entrusted to the broker. Most com-
      monly, this relationship exists in situations in which
      a broker has discretionary authority over the custom-
      er’s account, but we have recognized that particular
      factual circumstances may serve to create a fiduciary
      duty between a broker and his customer even in the
      absence of a discretionary account.

Id. at 98 (citations and internal quotation marks omitted).

   [4] We agree with the Second Circuit that, when a relation-
ship of trust and confidence exists between a broker and a cli-
ent, a broker must disclose all facts material to that
relationship. We therefore adopt the Second Circuit’s
approach and hold that the general Chiarella rule applies to
a broker’s duty to disclose material information: A broker has
a duty to disclose material information about a stock purchase
if the broker and client have a fiduciary relationship or a simi-
lar relationship of trust and confidence. (As a convenient
shorthand, we will refer to “a fiduciary relationship or a simi-
lar relationship of trust and confidence” as a “trust relation-
ship.”)

   Although Chiarella concerned the use of “inside informa-
tion,” the foundation for the Supreme Court’s rule was the
general law of torts and, more specifically, the rule that per-
sons in trust relationships have greater duties to each other
than do persons involved in arms-length transactions. The
Second Circuit’s holding that this general rule applies to the
situation at issue here logically applies that rule. Defendants
do not make any arguments,7 and we can think of none, why
  7
    Defendants quote from a civil case, Benzon v. Morgan Stanley Dis-
tribs., Inc., 420 F.3d 598, 612 (6th Cir. 2005), in which the Sixth Circuit
held that the defendant brokers did not have a duty to disclose to their cli-
ents that they earned more from selling Morgan Stanley mutual funds than
from selling other mutual funds. In this regard, the Sixth Circuit held that
                       UNITED STATES v. LAURIENTI                        8211
the general Chiarella rule should not apply here. Accordingly,
we reject Defendants’ argument that a broker never has a duty
to disclose bonus commissions.

   Our holding today is somewhat more limited than the Sec-
ond Circuit’s approach, which reached all of Rule 10b-5. As
noted above, the Supreme Court’s opinion in Chiarella
addressed whether silence could constitute a manipulative
device when a defendant is charged under subsections (a) and
(c) of Rule 10b-5. The defendant in that case had not made
any statements to anyone, so the Court naturally addressed
whether the law imposed a duty to speak. By contrast, where,
as here, a defendant is charged under subsection (b) of Rule
10b-5 and has made many statements to his clients, criminal
liability may encompass the failure to disclose bonus commis-
sions even in the absence of a trust relationship. Under sub-
section (b) of Rule 10b-5, even in the absence of a trust
relationship, a broker cannot affirmatively tell a misleading
half-truth about a material fact to a potential investor. That
requirement is entirely consistent with the Supreme Court’s
holding that there can be no fraud absent a duty to speak: The
duty to disclose in these circumstances arises from the telling
of a half-truth, independent of any responsibilities arising
from a trust relationship.

   [5] But we need not decide whether that theory of guilt is
viable, and we expressly leave the question open for another

no duty arose because “Plaintiffs have pointed [to] no statutory or regula-
tory requirement that Defendants disclose that their brokers earn more for
selling their own mutual funds. Because Plaintiffs have failed to identify
the source of Defendants’ alleged duty to disclose,” the court held that no
duty existed. Id. At no point in the opinion does the Sixth Circuit mention
the potential for a duty arising from a trust relationship; it appears that the
plaintiffs simply did not argue that the brokers had a trust relationship with
the plaintiffs that would have given rise to the duty to disclose. Accord-
ingly, Benzon is consistent with the Supreme Court’s decision in Chia-
rella, the Second Circuit’s approach in cases such as Szur and Skelly, and
our approach.
8212              UNITED STATES v. LAURIENTI
day, because the government has not advanced that argument,
either on appeal or before the district court. Additionally, the
government has not distinguished among the subsections of
Rule 10b-5; it charged Defendants with violating all three
subsections, and it did not tailor its proposed jury instructions
along the lines just described. Finally, the government did not
identify which specific statements made by Defendants would
qualify as misleading half-truths such that the bonus commis-
sions would constitute a material omission under subsection
(b). See Skelly, 442 F.3d at 97 (“[O]therwise truthful state-
ments made by [a broker] about the merits of a particular
investment are not transformed into misleading ‘half-truths’
simply by the broker’s failure to reveal that he is receiving
added compensation for promoting a particular investment.”).
Accordingly, we limit our holding to the general rule that, if
a broker and a client have a trust relationship, as described by
the Second Circuit, then the broker has an obligation to dis-
close all facts material to that relationship.

   [6] On the other hand, we emphasize that, even in a trust
relationship, a broker is required to disclose only material
facts. As the Second Circuit has held, materiality is defined by
the nature of the trust relationship between the clients and the
brokers: “This relationship places an affirmative duty on bro-
kers to use reasonable efforts to give the customer informa-
tion relevant to the affairs that have been entrusted to them.”
Szur, 289 F.3d at 211 (brackets and internal quotation marks
omitted). In the context at issue here—the purchase of stocks
—we see no difference between that definition of materiality
and the definition of materiality related to affirmative mis-
statements or half-truths: “For securities fraud, a statement is
material if there is a substantial likelihood that a reasonable
investor would consider it important in making a decision.”
United States v. Tarallo, 380 F.3d 1174, 1182 (9th Cir. 2004).

  [7] In deciding whether to buy a given stock, a reasonable
investor would consider it important that, in contrast to the
purchase of most stocks, the broker would receive a 5% com-
                   UNITED STATES v. LAURIENTI                8213
mission from the purchase of this particular (house) stock. At
trial, every former client who testified said that he or she
would not have bought the house stocks had he or she known
about the bonus commissions. We therefore reject Defen-
dants’ argument that the bonus commissions are immaterial as
a matter of law. See Press v. Quick & Reilly, Inc., 218 F.3d
121, 130 (2d Cir. 2000) (holding that extra commissions on
the sale of particular securities products represent a “conflict
of interest” that is “material”); Chasins v. Smith, Barney &
Co., 438 F.2d 1167, 1172 (2d Cir. 1971) (holding that “failure
to inform the customer fully of its possible conflict of interest,
in that it was a market maker in the securities which it
strongly recommended for purchase by [the plaintiff], was an
omission of material fact in violation of Rule 10b-5”); see
also Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 756 F.2d 230, 242 (2d Cir. 1985)
(“Commissions that defendants receive on the CDs they sell
to the public are relevant and must be disclosed.”).

   We recognize that brokerages often have complicated com-
pensation systems and that brokers sometimes receive addi-
tional compensation on client purchases of particular
securities products. Our holding today does not mean that all
compensation arrangements are necessarily “material” even
within a trust relationship and therefore could lead to criminal
(and civil) liability. For example, de minimis variations in
compensation among different securities products would be
immaterial as a matter of law. See Szur, 289 F.3d at 211-12
(holding that some information “borders on insignificant
minutia, the omission of which could never be actionable for
fraud” (internal quotation marks omitted)). Additionally,
courts have recognized that, depending on the circumstances,
even minimal disclosures can meet the broker’s obligation to
disclose. See, e.g., Benzon, 420 F.3d at 612 (holding that the
brokers met their disclosure obligations because of a prospec-
tus disclosure that brokers “may receive different compensa-
tion for selling each Class of share”); Press, 218 F.3d at 130
(holding that the brokers satisfied their disclosure obligations
8214              UNITED STATES v. LAURIENTI
because of “general disclosures” in fund prospectuses and
“Statements of Additional Information” filed with the SEC by
the managers of the money market funds). The bonus com-
missions here fall into neither category. The difference
between a commission of $50 on the sale of a non-house
stock and a commission of thousands of dollars on the sale of
a house stock is not a de minimis difference in compensation.
And Defendants here did not disclose the bonus commissions
in any way whatsoever.

   [8] Finally, Defendants argue that, even if case law now
has established that a broker sometimes has a duty to disclose
commissions, their convictions violate the “fair warning
requirement, derived from the Ex Post Facto Clause and the
Due Process Clause, [which] requires that criminal laws spec-
ify the scope of criminal laws in advance and with clarity.”
Appellants’ Joint Opening Br. at 26. We are unpersuaded.
“Retroactive application of unforeseen expansions of substan-
tive law violate[s] due process because an ordinary person is
not able to conform his or her conduct to what the law
requires.” United States v. Miranda-Guerena, 445 F.3d 1233,
1237 (9th Cir. 2006); see also McSherry v. Block, 880 F.2d
1049, 1052-58 (9th Cir. 1989) (discussing the “fair warning”
requirement). The requirement to disclose substantial bonus
commissions to a client in a trust relationship flows naturally
from the Supreme Court’s Chiarella decision in 1980, as the
Second Circuit held, without elaboration, in Szur in 2002; it
cannot be characterized as an “unforeseen expansion[ ] of
substantive law.” Miranda-Guerena, 445 F.3d at 1237. Fur-
thermore, the failure to disclose is illegal only if done with
intent to defraud; it cannot be said that “an ordinary person is
not able to conform his or her conduct to” acting without
fraudulent intent. Cf. Screws v. United States, 325 U.S. 91,
102 (1945) (“The requirement that the act must be willful or
purposeful may not render certain, for all purposes, a statutory
definition of the crime which is in some respects uncertain.
But it does relieve the statute of the objection that it punishes
without warning an offense of which the accused was
                  UNITED STATES v. LAURIENTI                8215
unaware.”). We hold that Defendants’ convictions do not vio-
late the constitutional “fair warning” requirement.

  2.   Jury Instructions

   [9] Defendants argue, in the alternative, that the district
court committed reversible error by failing to instruct the jury
on the government’s burden to prove a trust relationship
between Defendants and their clients. Defendants accurately
observe that the district court did not give a jury instruction
on the trust relationship requirement. The jury instructions as
a whole permitted a conviction on the theory, among others,
that Defendants failed to disclose the bonus commissions with
the intent to defraud—but without requiring the jury to find
that a trust relationship existed between Defendants and their
clients. With the potential caveat of the subsection (b) argu-
ment, discussed above and not advanced by the government,
there is no support for a duty to disclose commissions outside
a trust relationship. We therefore hold that the district court
erred by failing to give a “trust relationship” jury instruction.

   We turn, then, to whether the error is reversible. The parties
dispute whether Defendants merely forfeited the argument
such that “plain error” review applies or whether Defendants
waived the argument outright under the “invited error” doc-
trine. “Forfeiture is the failure to make a timely assertion of
a right, whereas waiver is the ‘intentional relinquishment or
abandonment of a known right.’ Forfeited rights are review-
able for plain error, while waived rights are not.” United
States v. Perez, 116 F.3d 840, 845 (9th Cir. 1997) (en banc)
(quoting United States v. Olano, 507 U.S. 725, 733 (1993)).
“If the defendant has both invited the error, and relinquished
a known right, then the error is waived and therefore unre-
viewable.” Id. Waiver does not occur when there is “no evi-
dence that [the defendants] considered submitting the
[omitted] element to the jury, but then, for some tactical or
other reason, rejected the idea.” Id.; see also United States v.
Tuyet Thi-Bach Nguyen, 565 F.3d 668, 676 (9th Cir. 2009)
8216                  UNITED STATES v. LAURIENTI
(rejecting the government’s argument that waiver applied
because there was no evidence that the defendant was aware
of the omitted element); United States v. Romm, 455 F.3d
990, 1004 n.17 (9th Cir. 2006) (“Here, since nothing in the
record suggests that Romm or his trial counsel were aware of
the element omitted from the jury instructions, invited error
does not apply.”); United States v. Burt, 143 F.3d 1215, 1217
(9th Cir. 1998) (holding that the defendant had not waived the
argument because “there is no evidence that the defendant, the
government or even the [district] court was aware” of the
omitted element). But a defendant waives the right to appeal
if the “defendant considered the controlling law, or omitted
element, and, in spite of being aware of the applicable law,
proposed or accepted a flawed instruction.” Perez, 116 F.3d
at 845. For example, waiver occurs when “the defendant was
aware of the omitted element and yet relinquished his right to
have it submitted to the jury.” Id.

   Here, the government proposed a correct trust relationship
instruction, modeled after the Second Circuit’s decision in
Skelly. Defendant Laurienti affirmatively objected to that
instruction, on the patently false ground that no criminal case
supported the government’s proposed instruction.8 For rea-
sons never explained on the record, the district judge refused
to give the government’s proposed instruction, stating only
that the instruction “will not be given.” The government asked
the district court to reconsider its decision. The instruction,
after all, ran counter to the government’s interest because it
required that the government prove an additional element
beyond a reasonable doubt. Yet again, the district judge
  8
    Defendant Laurienti’s objection stated: “This instruction is created
from whole cloth and [sic] civil and regulatory authorities. There is no
statute nor other apposite authority which imposes criminal liability on the
grounds advanced. Nor were the accuseds charged with, or arraigned on,
any ‘breach of fiduciary’ charges.” In support of its proposed instruction,
the government properly cited Skelly, the Second Circuit’s criminal case.
On appeal, all Defendants refer to the proposed instruction as the “Skelly
instruction.”
                      UNITED STATES v. LAURIENTI                       8217
responded only that “You’ve made your record and you’re
free to argue it[,] but you can’t have an instruction regarding
it.” Defendants remained silent during the colloquy between
the government and the district judge. None of them raised
the trust relationship issue with the court.

   We hold that Defendant Laurienti expressly waived his
right to appeal the omitted jury instruction. Defendant Lau-
rienti’s objection to the proposed instruction easily demon-
strates that he “was aware of the omitted element and yet
relinquished his right to have it submitted to the jury.” Perez,
116 F.3d at 845. Defendant Laurienti concedes, as he must,
that he objected to the government’s proposed instruction and
that all Defendants remained silent when the government re-
proposed the instruction over the district court’s contrary rul-
ing. Defendant Laurienti argues that he nevertheless should be
permitted to raise the argument on appeal, because he faced
a “Hobson’s choice.”9 Appellants’ Joint Reply Br. at 12.
Defendants’ main legal theory, of course, is that brokers never
have a duty to disclose, even if there is a trust relationship.
Defendant Laurienti argues that, “had the defendants joined in
the government’s request for the [trust relationship] instruc-
tion, they would have forfeited their lead claim of trial error
[that there is never a duty to disclose].” Appellants’ Joint
Reply Br. at 12.

   Defendant Laurienti is wrong, because nothing prevents a
party from arguing in the alternative. Defendants could have
proposed an instruction along the lines of the legal theory they
proposed (which they did not) and, at the same time, argued
that, if the court rejected Defendants’ theory, the court should
accept the government’s proposed instruction. That line of
argument would not have prejudiced Defendants, either
  9
   Defendants briefly argue, in the alternative, that a challenge to an omit-
ted element from a jury instruction can never be waived because it is of
constitutional dimension. We squarely rejected that argument in Perez,
116 F.3d at 845 n.7.
8218                  UNITED STATES v. LAURIENTI
before the district court or on appeal. And it would ensure that
the situation we face now—indisputably incorrect jury
instructions—would not have occurred. Instead, Defendants
affirmatively argued that erroneous jury instructions should
be given and now seek to fault the district court for acquiesc-
ing.

    On this record, we are convinced that Defendant Laurienti
was not careless or ignorant; instead, we hold that he inten-
tionally relinquished his right to challenge the jury instruction.10
As discussed above, the jury instructions given suggested that
the failure to disclose bonus commissions was always illegal.
But the instructions were somewhat ambiguous on this point.
And that ambiguity allowed Defendants, during closing argu-
ment, to make their primary argument to the jury, even though
it is a legal argument: Brokers never have an obligation to dis-
close bonus commissions. Nothing in the jury instructions, as
given, expressly contradicted that theory. Had the district
court given the government’s proposed instruction, however,
that instruction would have fatally undermined Defendants’
argument that there is never a duty, because the proposed
instruction affirmatively states that there is a duty to disclose
when there is a trust relationship. In other words, the pro-
posed instruction would have removed the ambiguity and
would have contradicted Defendants’ main argument.
  10
     For this reason, our decision in United States v. Alferahin, 433 F.3d
1148 (9th Cir. 2006), is inapposite. In a footnote in Alferahin, we held that
“[t]he record in this case clearly indicates that Alferahin’s attorney did not
intentionally relinquish a known right . . . [because] both defense counsel
and the district court were operating under a misapprehension of the appli-
cable law.” Id. at 1154 n.2. We echo the concurrence’s sentiment in that
case that the majority’s explanation inadequately distinguishes Perez,
because the plain error issue is “more difficult than the majority opinion
suggests.” Alferahin, 433 F.3d at 1162 (Berzon, J., concurring in part). In
any event, we are unpersuaded that our record-specific decision in Alf-
erahin applies here. Defendant Laurienti’s intentional, affirmative objec-
tion to the proposed jury instruction clearly illustrates that he was not
simply operating under a misapprehension of the applicable law.
                   UNITED STATES v. LAURIENTI                 8219
   [10] In conclusion, we hold that Defendant Laurienti
waived his right to challenge the district court’s failure to give
the “trust relationship” jury instruction. With respect to the
other three Defendants, the issue of waiver versus forfeiture
requires a bit more explanation. At a pre-trial hearing, the dis-
trict court instructed Defendants that, in a joint trial, the court
would consider all objections raised by any one Defendant as
having been raised by all Defendants, unless one or more
Defendants opted out. Defendants agreed, and they do not
challenge that general policy on appeal.

   [11] No Defendant opted out of Defendant Laurienti’s
objection to the government’s proposed jury instruction.
Effectively, therefore, all Defendants joined the objection.
The government argues that all Defendants, and not just
Defendant Laurienti, thereby waived the right to challenge the
omitted jury instruction. At oral argument, Defendants’ coun-
sel argued that we should not hold that the three other Defen-
dants waived the right to challenge the omitted jury
instruction, because silence cannot constitute waiver. We dis-
agree for three reasons.

   First, we have not held that silence can never constitute
waiver. Because the court placed Defendants clearly on notice
of the effect of their silence, silence very well might consti-
tute waiver. See Perez, 116 F.3d at 845 (“We do not mean to
suggest that a defendant may have jury instructions reviewed
for plain error merely by claiming he did not know the
instructions were flawed. What we are concerned with is evi-
dence in the record that the defendant was aware of, i.e., knew
of, the relinquished or abandoned right.”).

   Second, we decline to accept an argument that might pro-
mote gamesmanship on the part of joint defendants. Defen-
dants in similar circumstances could spread objections among
themselves so as to defeat waiver for all objections.

   Third, and most important, the record demonstrates without
a doubt that all Defendants intentionally shared in the strategy
8220              UNITED STATES v. LAURIENTI
that resulted in the waiver expressed by Defendant Laurienti’s
objection to the government’s proposed jury instruction. In
other words, taken in context the other Defendants’ silence
here was conscious, active agreement, not merely passivity or
failure to comment.

   [12] For those reasons, we hold that all Defendants waived
the right to challenge the district court’s failure to give the
“trust relationship” jury instruction. Accordingly, we do not
examine that issue on the merits.

  B.   “Unlawful Sales Practices” in the Indictment

  Defendants next challenge, as unnecessary surplusage, the
indictment’s use of the word “unlawful” in relation to Defen-
dants’ receipt of bonus commissions. Under the heading “The
Scheme to Defraud,” the indictment includes the following
paragraph:

      Defendants and their co-conspirators employed a
    variety of unlawful sales practices, including:

      (a) paying brokers undisclosed special incentive
    compensation to sell particular stocks;

      (b) using high-pressure tactics and false state-
    ments to induce customers to buy stocks;

      (c) recommending stocks without determining
    customers’ suitability for purchasing thinly-traded
    speculative low-priced securities;

      (d) making false and misleading statements to per-
    suade customers not to sell particular stocks;

       (e) failing to take and execute customer orders to
    sell particular stocks;
                   UNITED STATES v. LAURIENTI                 8221
       (f) engaging in so-called “cross trades”;

      (g) making unauthorized purchases in customers’
    accounts;

      (h) converting customer cash account holdings to
    margin without authorization;

      (i) placating customers with false promises of
    “make-up” trades;

      (j) opening and trading in customer accounts with-
    out an active brokers license, by using the registered
    representative numbers of other brokers.

(Emphases added.)

   At a pre-trial hearing on motions in limine, Defendants
requested that the word “unlawful” be redacted. Consistent
with their general legal theory, Defendants argued that bro-
kers never have a duty to disclose bonus commissions and
that the challenged sections of the indictment must be
redacted as prejudicial. In response, the government admitted
that undisclosed bonus commissions are not always unlawful.
The government argued that, in the context of this case, how-
ever, the actions were part of an overall scheme to defraud
and therefore constituted criminal behavior. The government
expressly conceded that a failure to disclose bonus commis-
sions is illegal only if a trust relationship exists. The govern-
ment stated that it intended to prove the existence of just such
a trust relationship at trial. The district judge issued his ruling
with unhelpful brevity: “All right. The motion to redact is
denied.”

  [13] Federal Rule of Criminal Procedure 7(d) states: “Sur-
plusage. Upon the defendant’s motion, the court may strike
surplusage from the indictment or information.” The advisory
committee’s notes state that “[t]his rule introduces a means of
8222               UNITED STATES v. LAURIENTI
protecting the defendant against immaterial or irrelevant alle-
gations in an indictment or information, which may, however,
be prejudicial.” Id., advisory committee’s notes. “Denial of a
motion to strike surplusage is reviewed for an abuse of discre-
tion.” United States v. Terrigno, 838 F.2d 371, 373 (9th Cir.
1988). “The purpose of a motion to strike under Fed. R. Crim.
P. 7(d) is to protect a defendant against prejudicial or inflam-
matory allegations that are neither relevant nor material to the
charges.” Id. (internal quotation marks omitted).

   [14] The characterization of the sales practices as unlawful
was relevant, because the government sought to prove that, as
conducted by Defendants (with an intent to defraud and in
violation of trust relationship duties), the practices were
indeed unlawful. See id. (holding that the indictment’s refer-
ence to the defendant’s issuing checks “willfully” was rele-
vant because the government sought to prove that fact). Even
if the use of the word “unlawful” could be considered prejudi-
cial, we hold that the district court nevertheless did not abuse
its discretion because the allegation was relevant. See id.;
accord United States v. Hedgepeth, 434 F.3d 609, 612 (3d
Cir. 2006).

  C.   Failure to Allow Paul Meyer to Testify as an Expert

   Defendants argue that the district court abused its discretion
by not permitting defense witness Paul Meyer to testify as an
expert. We review for abuse of discretion the district court’s
decision not to permit expert testimony. United States v.
Cohen, 510 F.3d 1114, 1123 (9th Cir. 2007). Even if the dis-
trict court abused its discretion, we review any error for harm-
lessness. “ ‘Under our test for nonconstitutional error, which
we apply to errors as to the admissibility of expert testimony,
we must reverse unless it is more probable than not that the
error did not materially affect the verdict.’ ” Id. at 1127 (quot-
ing United States v. Rahm, 993 F.2d 1405, 1415 (9th Cir.
1993)).
                  UNITED STATES v. LAURIENTI               8223
   Defendants offered Meyer as an expert on the securities
industry. Meyer had worked in a wide variety of positions for
26 years in the securities industry—all of that time at a large
firm, Smith Barney, and its predecessors. He had recently
retired and started his own expert witness consulting business.
He had never testified as an expert in federal court, but he had
testified at several administrative proceedings and once in
state court. He did not have any specialized degrees and had
not written any publications.

   The district court denied Defendants’ request that Meyer be
permitted to testify as an expert witness. The court held that
Meyer could testify as a “summary” witness but that he could
not testify to ultimate conclusions. When pressed on the limits
of permissible testimony, the court held that it would issue
question-specific rulings as Meyer testified. When Meyer tes-
tified, the district court permitted many of Defendants’ ques-
tions, but it also sustained some of the government’s
objections.

   [15] To the extent that Defendants argue that the district
court abused its discretion by failing to describe Meyer as an
“expert” in front of the jury, we disagree. The determination
that a witness is an expert is not an express imprimatur of spe-
cial credence; rather, it is simply a decision that the witness
may testify to matters concerning “scientific, technical, or
other specialized knowledge.” Fed. R. Evid. 702. For exam-
ple, the Ninth Circuit Manual of Model Criminal Jury Instruc-
tions includes an instruction admonishing the jury to consider
expert witness testimony “like any other testimony.” 9th Cir.
Crim. Jury Instr. 4.17. It is the scope of testimony excluded
by the district court that we must examine, not the court’s
nominal decision not to label Meyer an “expert.”

   [16] “If the evidence could have been excluded under
either [Federal Rule of Evidence 702 or 704], the district
court did not abuse its discretion.” United States v. Morales,
108 F.3d 1031, 1035 (9th Cir. 1997) (en banc). The govern-
8224               UNITED STATES v. LAURIENTI
ment does not argue that Meyer’s testimony could have been
excluded under Federal Rule of Evidence 704. The scope and
meaning of the rules of the National Association of Securities
Dealers (“NASD”), for example, is a proper subject of expert
testimony. See Vucinich v. Paine, Webber, Jackson & Curtis,
Inc., 803 F.2d 454, 461 (9th Cir. 1986) (“Testimony concern-
ing the rules of the New York Stock Exchange and of the
[NASD] was highly relevant and far from prejudicial because
the rules reflect the standard to which all brokers are held . . . .
Exclusion was an abuse of discretion.” (citation and internal
quotation marks omitted)). The government argues instead
that Meyer did not meet the threshold test of Rule 702.

  Federal Rule of Evidence 702 states:

       If scientific, technical, or other specialized knowl-
    edge will assist the trier of fact to understand the evi-
    dence or to determine a fact in issue, a witness
    qualified as an expert by knowledge, skill, experi-
    ence, training, or education, may testify thereto in
    the form of an opinion or otherwise, if (1) the testi-
    mony is based upon sufficient facts or data, (2) the
    testimony is the product of reliable principles and
    methods, and (3) the witness has applied the princi-
    ples and methods reliably to the facts of the case.

We have held:

        Rule 702 assigns to the district court the role of
    gatekeeper and charges the court with assuring that
    expert testimony “rests on a reliable foundation and
    is relevant to the task at hand.” The gatekeeper role
    “entails a preliminary assessment of whether the rea-
    soning or methodology underlying the testimony is
    . . . valid and of whether that reasoning or methodol-
    ogy properly can be applied to the facts in issue.”
                  UNITED STATES v. LAURIENTI                8225
United States v. Hermanek, 289 F.3d 1076, 1093 (9th Cir.
2002) (citation omitted) (quoting Daubert v. Merrell Dow
Pharms., Inc., 509 U.S. 579, 592-93, 597 (1993))

   [17] The government argues that Meyer was not qualified
as an expert because his opinions were not supported by any
methodology other than his own work experience. But the
government does not explain why Meyer’s experience was
not sufficient in this regard. It is true that Meyer’s experience
was only at a large firm, that he had little experience with the
types of stocks at issue in this case, and that he had never
heard of the term “house stock.” But those facts do not under-
mine his general knowledge of the NASD rules and his gen-
eral knowledge of the industry as a whole. Although the
district court has a gatekeeping function, the district court
here abused its discretion by sustaining some of the govern-
ment’s objections, particularly with respect to questions about
the NASD rules.

   [18] We have examined the record carefully, however, and
we conclude that the district court’s errors were harmless.
Unlike in many cases, where the district court prohibits all
testimony by a proffered expert, the district court here permit-
ted testimony by Meyer on a wide range of topics and sus-
tained objections only to a limited set of questions. See, e.g.,
Cohen, 510 F.3d at 1126 (holding that “the best way for the
district court to have insured the exclusion of the potentially
inadmissible aspects of Dr. Roitman’s testimony was not to
bar him from testifying altogether, but to sustain the govern-
ment’s objections to particular questions”); United States v.
Finley, 301 F.3d 1000, 1018 (9th Cir. 2002) (holding that the
exclusion of expert testimony was not harmless because, in
part, “the [district] court excluded the entire testimony” of the
proffered expert). Most of the excluded testimony here per-
tained to the NASD rules and to Defendants’ failure to dis-
close bonus commissions. As an initial matter, we note that
Meyer was permitted to testify to a large extent on those top-
ics, even though some questions were disallowed. Even if
8226              UNITED STATES v. LAURIENTI
Meyer had testified in response to all questions and even if his
testimony had fully convinced the jury that the failure to dis-
close bonus commissions was a common practice in the
industry and consistent with NASD rules, the government
introduced strong and convincing evidence of many other the-
ories of guilt, as discussed above in Part I(A)(2). Our exami-
nation of the record does not reveal any other excluded
subject area of importance, and Defendants’ counsel identi-
fied none when pressed at oral argument. Cf. Cohen, 510 F.3d
at 1127 (holding that exclusion of expert testimony was not
harmless because it was “ ‘essential to the defense’ ” (quoting
Finley, 301 F.3d at 1018)).

   In summary, we are persuaded that “it is more probable
than not that the error did not materially affect the verdict.”
Id. (internal quotation marks omitted). The district court’s
errors were harmless.

  D.   Guilt-Assuming Hypotheticals

   Defendants argue that the government used improper
“guilt-assuming hypotheticals” during its direct examination
of government fact witnesses and during its cross-
examination of Defendant Laurienti’s character witnesses.
Defendants argue that, under this court’s decision in United
States v. Shwayder, 312 F.3d 1109, 1120-21 (9th Cir. 2002),
the government’s questions violated Defendants’ right to due
process. We review for abuse of discretion the district court’s
rulings on the scope of questioning. United States v. Larson,
495 F.3d 1094, 1101-02 (9th Cir. 2007) (en banc).

   We have held that guilt-assuming hypotheticals are imper-
missible in the context of the government’s cross-examination
of a defendant’s character witnesses. Shwayder, 312 F.3d at
1120-21. That rule derives from the fact that, when a charac-
ter witness is asked a guilt-assuming hypothetical, the answer
“can have only negligible probative value as it bears on the
central issue of guilt.” Id. at 1120 (internal quotation marks
                   UNITED STATES v. LAURIENTI                8227
omitted). Consistent with our holding, the district court sus-
tained Defendant Laurienti’s objections to the government’s
guilt-assuming hypotheticals posed to his character witnesses.

   [19] With respect to the government’s fact witnesses, how-
ever, there appears to be no support for the proposition that
the government cannot ask its own fact witnesses otherwise
relevant questions that may have a guilt-assuming element.
The government’s questions in this case were plainly relevant
and probative: In order to establish materiality of Defendants’
actions, the government asked questions such as, “If you had
known prior to purchasing [a house stock] that Hampton Por-
ter prevented or discouraged their brokers from allowing their
clients to sell their shares of [the house stock], would you
have purchased the [shares of the house stock]?” Because
those questions have much more than “negligible probative
value as it bears on the central issue of guilt,” id., our primary
concern with respect to character witnesses simply does not
apply. We therefore hold that the district court did not abuse
its discretion by permitting the government’s questioning of
its own fact witnesses. See United States v. Jennings, 487
F.3d 564, 581-82 (8th Cir. 2007) (holding that, unlike with
respect to character witnesses, it is generally permissible to
ask guilt-assuming hypotheticals of fact witnesses to prove
materiality); see also United States v. Kellogg, 510 F.3d 188,
196 (3d Cir. 2007) (distinguishing between opinion character
witnesses and reputation character witnesses and holding that
“there is nothing inherent in guilt-assuming hypotheticals, in
the abstract, that makes them unfairly prejudicial, let alone so
prejudicial as to constitute a per se violation of due process”).

  E.   Other Challenges to the Convictions

   [20] We have considered Defendants’ other challenges to
their convictions, and we reject those arguments. On de novo
review, United States v. Green, 592 F.3d 1057, 1063 (9th Cir.
2010), we hold that the district court did not err in failing to
give Defendant Laurienti’s proposed instruction on knowl-
8228              UNITED STATES v. LAURIENTI
edge of Rule 10b-5. Defendant Laurienti’s argument that
knowledge of the Rule is an element of the crime, and not an
affirmative defense, is squarely foreclosed by our decision in
Tarallo, 380 F.3d at 1192.

   Reviewing de novo, United States v. Stewart, 420 F.3d
1007, 1014 (9th Cir. 2005), we conclude that sufficient evi-
dence supported the convictions of Defendant Laurienti and
Defendant Samaria. See Jackson v. Virginia, 443 U.S. 307,
319 (1979) (holding that we must affirm if, viewing the evi-
dence in the light most favorable to the prosecution, any ratio-
nal trier of fact could have found the essential elements of the
crime beyond a reasonable doubt).

   [21] Reviewing for abuse of discretion, United States v.
Pang, 362 F.3d 1187, 1191-92 (9th Cir. 2004), we hold that
the district court properly declined to admit into evidence
charts and summaries, because those charts and summaries
were of evidence already admitted into evidence, see United
States v. Wood, 943 F.2d 1048, 1053 (9th Cir. 1991) (holding
that “charts or summaries of testimony or documents already
admitted into evidence are merely pedagogical devices, and
are not evidence themselves”).

   [22] On de novo review, United States v. Chang Da Liu,
538 F.3d 1078, 1087 (9th Cir. 2008), we hold that the district
court did not violate Defendant Montesano’s right to due pro-
cess by admonishing all Defendants to consider carefully
whether to testify on their own behalf. Under these circum-
stances, we are unpersuaded that the admonition became coer-
cive or impermissible simply because, on the previous day,
the government filed an ex parte submission (which, we now
know, related to Defendant Losse, not Defendant Montesano).
See generally United States v. Jaeger, 538 F.3d 1227, 1231-
33 (9th Cir. 2008) (holding that the district court’s admonition
was within permissible bounds), cert. denied, 129 S. Ct. 941
(2009). We note that Defendant Montesano never inquired
                  UNITED STATES v. LAURIENTI                8229
about the ex parte submission before deciding whether to tes-
tify, even though he had ample opportunity to do so.

   [23] On de novo review, United States v. Valdez-Santos,
457 F.3d 1044, 1046 (9th Cir. 2006), we hold that venue was
proper as to the individual counts against Defendant Lau-
rienti. Although some acts occurred outside the Central Dis-
trict of California, the clients’ funds were received by
Hampton Porter’s clearing house in the Central District, an
entirely foreseeable and necessary result of the transactions.
See United States v. Angotti, 105 F.3d 539, 544 (9th Cir.
1997) (holding that, in criminal prosecutions involving bank-
ing transactions, venue is proper where funds are received);
see also United States v. Svoboda, 347 F.3d 471, 483 (2d Cir.
2003) (holding that “venue is proper in a district where (1) the
defendant intentionally or knowingly causes an act in further-
ance of the charged offense to occur in the district of venue
or (2) it is foreseeable that such an act would occur in the dis-
trict of venue”).

   [24] Finally, we hold that the two errors discussed above—
the erroneous jury instruction and the excluded expert
testimony—are cumulatively harmless. See United States v.
Frederick, 78 F.3d 1370, 1381 (9th Cir. 1996) (“In some
cases, although no single trial error examined in isolation is
sufficiently prejudicial to warrant reversal, the cumulative
effect of multiple errors may still prejudice a defendant.”); see
also United States v. Fernandez, 388 F.3d 1199, 1257 (9th
Cir. 2004) (holding that “errors not rising to level of plain
error are to be considered in assessing cumulative error” (cit-
ing United States v. Wallace, 848 F.2d 1464, 1476 n.21 (9th
Cir. 1988))). We are not persuaded that “the aggregated error
so infected the trial with unfairness as to make the resulting
conviction a denial of due process.” Jackson v. Brown, 513
F.3d 1057, 1085 (9th Cir. 2008) (internal quotation marks
omitted).

  In conclusion, we affirm Defendants’ convictions.
8230                   UNITED STATES v. LAURIENTI
II.        Challenges to the Sentences

   Defendants raise challenges to their sentences that fall into
four categories: (1) failure to hold an evidentiary hearing, (2)
sentencing adjustments other than amount of loss, (3) loss cal-
culation for purposes of the Sentencing Guidelines, and (4)
loss calculation for purposes of restitution. Because the dis-
trict court erred in calculating loss both for purposes of the
Sentencing Guidelines and for purposes of restitution, we
vacate Defendants’ sentences and restitution orders and
remand for resentencing and a recalculation of restitution. In
the interest of judicial economy, we address Defendants’
other objections to their sentences, because the district court
might make similar findings on remand. Because we vacate
the sentences, however, Defendants are entitled to an entirely
new sentencing hearing on an open record. See United States
v. Matthews, 278 F.3d 880, 885 (9th Cir. 2002) (en banc)
(“We hold that, as a general matter, if a district court errs in
sentencing, we will remand for resentencing on an open
record—that is, without limitation on the evidence that the
district court may consider.”).

   We also note at the outset that the district court applied the
1998 edition of the Sentencing Guidelines—the version appli-
cable at the time of the offense—because that version is, over-
all, more favorable to Defendants. Defendants do not
challenge that choice on appeal. Except as otherwise noted,
therefore, all citations to the Sentencing Guidelines are to the
1998 version.

      A.     Evidentiary Hearing

  [25] Defendant Laurienti argues that the district court
abused its discretion by denying his motion for an evidentiary
hearing on the amount of loss. He cites no authority requiring
a district court to hold a hearing in this context, and he does
not describe what evidence he would have presented at such
a hearing that he did not present in his written submissions.
                   UNITED STATES v. LAURIENTI                 8231
We hold that the district court did not abuse its discretion. See
United States v. Kimball, 975 F.2d 563, 568 (9th Cir. 1992)
(“There is no general right to an evidentiary hearing at sen-
tencing, and where a defendant fails to present any facts in
rebuttal to the government’s evidence, there need be no new
evidentiary hearing.” (citation, brackets, and internal quota-
tion marks citation omitted)).

  B.     Sentencing Adjustments Other than Loss

  Defendants challenge four different sentencing adjust-
ments: (1) minor role, (2) number of victims, (3) mass-
marketing, and (4) abuse of trust. Before discussing those
adjustments, a discussion on the standard of review is in
order.

    1.    Standard of Review

   Two standards of review are clear. We review de novo the
district court’s interpretation of the Sentencing Guidelines
(because it is a pure question of law). United States v. Kil-
bride, 584 F.3d 1240, 1261 (9th Cir. 2009). And we review
for clear error the district court’s finding of fact (because it is
a pure question of fact). Id. But it is unclear what standard of
review applies to the district court’s application of the Sen-
tencing Guidelines to the facts at hand (which typically is
viewed as a mixed question of fact and law). In many opin-
ions, we state, without qualification, that we review for abuse
of discretion. See, e.g., United States v. Loew, 593 F.3d 1136,
1139 (9th Cir. 2010) (“‘We review . . . the district court’s
application of the Guidelines to the facts for abuse of discre-
tion . . . .’ ” (quoting United States v. Garro, 517 F.3d 1163,
1167 (9th Cir. 2008)), cert. denied, 2010 WL 1130267 (U.S.
Apr. 19, 2010) (No. 09-9760). In recent years, however, we
have “noted an intracircuit conflict as to whether the standard
of review for application of the Guidelines to the facts is de
novo or only for abuse of discretion.” United States v. Yip,
592 F.3d 1035, 1038 (9th Cir. 2010) (citing United States v.
8232              UNITED STATES v. LAURIENTI
Rivera, 527 F.3d 891, 908 (9th Cir.), cert. denied, 129 S. Ct.
654 (2008)); accord United States v. Berger, 587 F.3d 1038,
1041 & n.5 (9th Cir. 2009); United States v. Contreras, 581
F.3d 1163, 1164 n.2 (9th Cir. 2009), adopted in relevant part,
593 F.3d 1135, 1136 (9th Cir. 2010) (en banc) (per curiam);
United States v. Thornton, 511 F.3d 1221, 1227 n.4 (9th Cir.
2008). We have avoided the question because the standard of
review has not changed the outcome: The same result is
reached under either standard. Thornton, 511 F.3d at 1227
n.4. We join that growing number of cases in declining to
reach the issue.

    2.    Minor Role Adjustment

   [26] “Based on the defendant’s role in the offense,
decrease the offense level as follows: . . . (b) If the defendant
was a minor participant in any criminal activity, decrease by
2 levels.” U.S.S.G. § 3B1.2(b). Defendant Laurienti argues
that the district court erred in declining to give him a two-
point reduction for a minor role.

    [T]his court has emphasized that any downward role
    adjustment should be restricted to those cases pre-
    senting exceptional circumstances. The defendant
    bears the burden of proving that he is entitled to a
    downward adjustment based on his role in the
    offense.

         ....

       Whether the defendant qualifies for either a mini-
    mal or minor role adjustment depends on the facts of
    the particular case. Thus, a district court’s refusal to
    grant a defendant’s request for role reduction based
    on his minimal or minor role should be overturned
    only where the refusal was a clearly erroneous deci-
    sion. Moreover, where there are two permissible
                  UNITED STATES v. LAURIENTI                   8233
    views of the evidence, the fact-finder’s choice
    between them can not be clearly erroneous.

United States v. Awad, 371 F.3d 583, 591 (9th Cir. 2004)
(citations and internal quotation marks omitted).

   Defendant Laurienti certainly was not the mastermind, and
the overall scheme to defraud could have operated without
him. But he joined the conspiracy, and he played a key role
by convincing unwitting clients to purchase house stocks. In
our view, this case does not present “exceptional circum-
stances” in which the district court had no choice but to grant
the two-level downward adjustment.

    3.   Number-of-Victims Enhancement

   “If the offense involved . . . (B) a scheme to defraud more
than one victim, increase by 2 levels.” U.S.S.G. § 2F1.1(b)(2).
Defendant Samaria challenges the district court’s finding that
there was more than one victim. In United States v. Galliano,
977 F.2d 1350, 1354 (9th Cir. 1992), in discussing a challenge
to this enhancement, we held:

    Conduct relevant in determining the applicable
    Guideline range includes all harm that resulted from
    the acts or omissions for which the defendant is
    accountable. Among others, Galliano participated in
    a scheme to defraud California Federal, Valley
    Bank, VISA, Citibank, and American Express. In
    addition to the counts of conviction, the district court
    properly considered the entire fraudulent scheme in
    concluding that he was involved in a scheme to
    defraud more than one victim.

(Brackets, citation, and internal quotation marks omitted.)

  [27] The conspiracy in this case targeted scores of
investors—certainly more than one. Curiously, in view of the
8234              UNITED STATES v. LAURIENTI
conspiracy count, the arguments by both the government and
Defendant Samaria assume that the relevant victims for pur-
poses of this enhancement are only those with whom Defen-
dant Samaria personally had some direct connection. But even
if one considers only those investors with whom Defendant
Samaria had a direct connection, ample evidence supports
application of this enhancement. The district court did not err
in this respect.

    4.   Mass-Marketing Enhancement

   “If the offense was committed through mass-marketing,
increase by 2 levels.” U.S.S.G. § 2F1.1(b)(3). Defendants
argue that the district court erred in imposing that two-level
increase. The application notes state:

       “Mass-marketing,” as used in subsection (b)(3),
    means a plan, program, promotion, or campaign that
    is conducted through solicitation by telephone, mail,
    the Internet, or other means to induce a large number
    of persons to (A) purchase goods or services; (B)
    participate in a contest or sweepstakes; or (C) invest
    for financial profit. The enhancement would apply,
    for example, if the defendant conducted or partici-
    pated in a telemarketing campaign that solicited a
    large number of individuals to purchase fraudulent
    life insurance policies.

Id. cmt. n.3. “We are bound by the interpretative commentary
of the Sentencing Guidelines unless it violates the Constitu-
tion, a federal statute, or is inconsistent with the guideline
itself.” United States v. Pirello, 255 F.3d 728, 731 (9th Cir.
2001).

   At trial, ample evidence demonstrated that Hampton Porter
solicited clients in part through cold-calling large numbers of
potential clients. Hampton Porter secured many clients,
including several of the testifying victim-witnesses, through
                   UNITED STATES v. LAURIENTI                 8235
its cold-calling practice. Defendants do not dispute that
Hampton Porter solicited clients in this manner. Defendants
argue, instead, that any cold-calling was incidental to the
fraudulent scheme, or that it was done primarily for legitimate
purposes (i.e., to solicit clients for legitimate stock purchases).
But the “pump and dump” scheme could not function without
securing new and unsuspecting clients. Even if the telemar-
keting campaign was done, in part, for legitimate purposes, on
this record it is undeniable that the telemarketing also was
done, in part, for fraudulent purposes.

   [28] The example given in the Guideline’s application
note, quoted above, guides our analysis. If the example’s
hypothetical insurance company solicited some clients
through non-telemarketing means and if the company sold
some legitimate policies, it seems clear that the enhancement
would apply nevertheless. The text of the enhancement does
not require that the only means of solicitation was through
mass-marketing but, rather, whether that means of solicitation
played some non-trivial role in the commission of the crimi-
nal offense. Cf. United States v. Olshan, 371 F.3d 1296, 1299
(11th Cir. 2004) (rejecting the defendant’s argument that the
enhancement should not apply “where the targeted audience
is drawn from the defendant’s existing client list, . . . instead
of from the public at large or some subgroup of it with whom
the defendant has had no prior dealings”). We hold that the
district court did not err by applying this enhancement.

   [29] Defendant Montesano also argues that it was imper-
missible to apply an enhancement for both mass-marketing
and the number of victims. The text of the Guideline states
the opposite, because it lists the enhancements in separate,
independent subsections:

      (2) If the offense involved . . . (B) a scheme to
    defraud more than one victim, increase by 2 levels.

      (3) If the offense was committed through mass-
    marketing, increase by 2 levels.
8236              UNITED STATES v. LAURIENTI
U.S.S.G. § 2F1.1(b). The intent of the Sentencing Commis-
sion is clear: Enhancements under both subsection (2) and
subsection (3) could apply. As the government explains, the
conduct described in those subsections does not necessarily
overlap: One can defraud only one victim through a mass-
marketing scheme, and one can defraud more than one victim
but not use mass-marketing. For those reasons, applying an
enhancement for mass-marketing and for the number of vic-
tims does not constitute impermissible double-counting. In so
holding, we join the Tenth and Eleventh Circuits. Olshan, 371
F.3d at 1301; United States v. Fredette, 315 F.3d 1235, 1244-
45 & n.4 (10th Cir. 2003).

   Defendant Montesano insists that the Sentencing Commis-
sion intended the enhancements to be in the alternative, and
not cumulative, because of the 2001 amendments to this
Guideline. The applicable Guideline currently states:

       (2) (Apply the greatest) If the offense—

       (A) (i) involved 10 or more victims; or (ii) was
    committed through mass-marketing, increase by 2
    levels;

       (B) involved 50 or more victims, increase by 4
    levels; or

       (C) involved 250 or more victims, increase by 6
    levels.

U.S.S.G. § 2B1.1(b) (2009).

   We agree that the 2001 amendment indeed changed the cal-
culations so that, under the plain text of the Guideline, mass-
marketing is an alternative enhancement for number of vic-
tims. But nothing in the amendment suggests that the change
was retroactive. Moreover, the other 2001 changes to the
Guideline, such as the loss-amount chart, greatly increased the
                      UNITED STATES v. LAURIENTI           8237
enhancements. For instance, a $1 million loss under the old
Guideline resulted in an 11-level increase, but the new Guide-
line mandates a 16-level increase for the same loss amount.
The district court applied the 1998 Guidelines because—
overall—they are more favorable to Defendants (and Defen-
dants do not contest that choice). Defendant Montesano
appears to be cherry-picking which amendments he would
like and which amendments he would not like. That he cannot
do.

    5.        Abuse-of-Trust Enhancement

   “If the defendant abused a position of public or private
trust, or used a special skill, in a manner that significantly
facilitated the commission or concealment of the offense,
increase by 2 levels. This adjustment may not be employed if
an abuse of trust or skill is included in the base offense level
or specific offense characteristic.” U.S.S.G. § 3B1.3. Defen-
dants argue that the district court erred by imposing the two-
level enhancement for abuse of trust. They contend that their
conduct did not meet the first sentence of the enhancement
because it was not an abuse of trust. Additionally, Defendant
Montesano argues that the enhancement cannot be applied
because any abuse of trust “is included in the base offense
level” and thus violates the second sentence of the enhance-
ment.

         a.    Was Defendants’ Conduct an “Abuse of Trust”?

   The scope of the “abuse of trust” enhancement was the sub-
ject of a recent en banc decision. In Contreras, 593 F.3d at
1136, sitting en banc, we adopted all but two small sections
of the three-judge panel opinion in the case, 581 F.3d 1163.
Through incorporation of the three-judge panel opinion, we
overruled longstanding precedent on what the government
must show in order to establish that a person is in “a position
of public or private trust.” U.S.S.G. § 3B1.3. We held that,
contrary to a long line of cases, a person must hold “a position
8238               UNITED STATES v. LAURIENTI
of ‘professional or managerial discretion.’ ” Contreras, 581
F.3d at 1167. The defendant must be “a ‘professional’ or
‘manager’ who, because of his or her special knowledge,
expertise, or managerial authority, is trusted to exercise ‘sub-
stantial discretionary judgment that is ordinarily given consid-
erable deference.’ ” Id. at 1168 n.5 (some internal quotation
marks omitted) (quoting U.S.S.G. § 3B1.3 cmt. n.1). We held
that our earlier cases permitting a finding of a position of trust
under a much lower standard were too broad, and impermiss-
ibly encompassed positions such as truck driver and bank
teller. Id. at 1167.

   We decided Contreras after the sentencing hearings in the
present case, at which the district court applied the then-
correct, but now overruled, legal standard. On remand, the
district court must assess this enhancement anew, using the
new, more stringent legal test.

       b.   Is “Abuse of Trust” Encompassed by the Base
            Offense Level?

   [30] Defendant Montesano argues that the abuse-of-trust
enhancement is impermissible because an abuse of trust is
included in the base offense level. See U.S.S.G. § 3B1.3
(“This adjustment may not be employed if an abuse of trust
or skill is included in the base offense level . . . .”). Because
this argument is independent of our new legal standard, we
address it now. The base offense level here encompasses a
wide variety of crimes: “Fraud and Deceit; Forgery; Offenses
Involving Altered or Counterfeit Instruments Other than
Counterfeit Bearer Obligations of the United States.” Id.
§ 2F1.1. Not all of those crimes necessarily include an abuse
of trust; for example, one can commit forgery without an
abuse of trust. Accordingly, the second sentence of § 3B1.3
does not apply. See United States v. Ajiboye, 961 F.2d 892,
895 n.4 (9th Cir. 1992) (holding that the second sentence of
§ 3B1.3 does not apply to the base offense level for “Larceny,
Embezzlement, and Other Forms of Theft” because that “pro-
                   UNITED STATES v. LAURIENTI                8239
vision of the Guidelines does not include ‘an abuse of trust or
skill’ in it”). Joining the Fifth and Tenth Circuits, we hold that
the abuse-of-trust enhancement is not included in the base
offense level under Sentencing Guideline § 2F1.1. See United
States v. Gallant, 537 F.3d 1202, 1243 (10th Cir. 2008) (“[I]t
is well-established that an abuse of trust is not incorporated in
the base offense level for fraud under § 2F1.1.”), cert. denied,
129 S. Ct. 2026 (2009); United States v. Buck, 324 F.3d 786,
792-93 (5th Cir. 2003) (holding that an abuse-of-trust
enhancement is permissible when the base offense level is
under § 2F1.1).

   [31] Defendant Montesano’s true argument is that he
“could not be saddled with the two-level, abuse-of-trust
enhancement because his offenses of conviction necessarily
included his position of trust.” Appellant Montesano’s Open-
ing Br. at 11 (emphasis added). But Defendant Montesano
misstates the legal test. The enhancement is inapplicable only
if the base offense level necessarily includes an abuse of trust,
regardless whether the defendant’s offenses of conviction
include an abuse of trust. See United States v. Levy, 992 F.2d
1081, 1084 (10th Cir. 1993) (holding that Sentencing Guide-
line § 3B1.3 “directs that we look to the base offense level . . .
assigned by the guidelines to the crime of conviction. It does
not direct us to the elements of the offense itself.” (citing Aji-
boye, 961 F.2d at 895 n.4)). The apparent concern of the Sen-
tencing Commission was that, if the Sentencing Commission
had already incorporated an abuse-of-trust consideration into
its base offense level calculation, it would constitute unfair
“double counting” to apply this enhancement. Where the
abuse-of-trust consideration is not included in the base
offense level, no unfairness results.

  C.   Loss Enhancement

   According to the government, there are approximately 100
victims of the conspiracy. But the government conducted an
investigation into the activities of only 30 of those victims,
8240                UNITED STATES v. LAURIENTI
many of whom were clients of Defendants’. The government
then calculated the 30 investigated victims’ losses with
respect to the four house stocks. The government calculated
their losses individually, by taking the full purchase price paid
by a victim minus the residual value of the stock in April 2001
—the date when Hampton Porter closed its doors and clients
were required to transfer their holdings to a different broker-
age firm.11 The government then attributed to each Defendant
the losses specific only to that Defendant’s clients. The gov-
ernment used the same loss amount as the recommended
amount of restitution. The Presentence Reports adopted the
government’s calculations, and the district court adopted the
findings in the Presentence Reports.

   The loss amount corresponds to an enhancement under the
chart at Sentencing Guideline § 2F1.1(b)(1). Depending on
the loss amount specific to each Defendant, Defendants here
received enhancements ranging from 8 levels to 13 levels.

   Defendants challenge (1) the applicable legal standard, (2)
the sufficiency of the evidence, (3) the failure to offset gains,
and (4) the calculation method generally.

       1.   Applicable Legal Standard

   Defendant Laurienti argues that the district court should
have applied the “clear and convincing” standard, instead of
the “preponderance of the evidence” standard, when making
its factual findings related to loss. Because each Defendant
was convicted of conspiracy, and because the losses were
incurred because of that conspiracy, the “preponderance of
the evidence” standard applies. United States v. Harrison-
Philpot, 978 F.2d 1520, 1523-24 (9th Cir. 1992); see also
United States v. Riley, 335 F.3d 919, 926 (9th Cir. 2003)
(applying Harrison-Philpot).
  11
    The residual value calculation for one of the house stocks was as of
February 2001 instead of April 2001. No party challenges that disparity.
                  UNITED STATES v. LAURIENTI               8241
    2.   Sufficiency of the Evidence

   Defendants next argue that the government did not meet its
burden of establishing that the clients who did not testify at
trial were victims, because there was insufficient evidence to
establish that those clients invested because of the criminal
conspiracy. Defendants do not challenge that the non-
testifying clients bought house stocks and suffered losses.
Instead, Defendants argue that the district court could not
have concluded, without more evidence, that those clients
were victims of the conspiracy. We disagree. Defendants were
convicted of criminal conspiracy to defraud clients specifi-
cally by recommending the house stocks; in the circumstances
shown in this record, it is reasonable to infer that all clients
of Defendants who purchased the house stocks were duped by
the conspiracy. Except as described below, Defendants did
not offer any evidence to rebut that inference.

   [32] Defendant Laurienti presented evidence that two of
his clients were not victimized. In its briefing on appeal, the
government concedes that the loss calculation should not have
included those two clients’ losses. Appellee’s Br. at 91 n.33.
We agree and hold that the district court erred by including
those clients’ losses in the loss calculation.

   [33] Defendant Parker presented evidence that two of his
clients suffered much smaller losses than the losses calculated
by the government. In its briefing on appeal, the government
admits that Defendant Parker’s calculations are correct: Two
of his clients suffered smaller losses. Appellee’s Br. at 104-
05. We agree and hold that the district court erred by over-
stating the losses to those clients.

    3.   Failure to Offset Gains

  The government calculated the losses for a particular victim
as follows. For each house stock that a victim bought, the
government calculated the total net loss or gain for that stock
8242               UNITED STATES v. LAURIENTI
by that victim. It then added up all of the net losses that the
victim incurred, ignoring any house stocks in which the vic-
tim had accrued a gain. For instance, if a victim lost $200,000
on stock A but gained $50,000 on stock A in an earlier trans-
action, then the total loss would be $150,000. But if the victim
lost $200,000 on stock A and gained $50,000 on stock B, then
the total calculated loss would be $200,000: The $50,000 gain
was not factored in, because the gain accrued on a different
house stock.

   [34] There is no logical reason to offset gains made on one
house stock, but not to offset the gains made on a different
house stock. The single scheme to defraud encompassed all
four house stocks. For a given victim, it is the net loss or gain
of all house stocks that truly accounts for the actual loss to the
victim as a result of the scheme to defraud. Cf. United States
v. Orton, 73 F.3d 331, 334 (11th Cir. 1996) (holding that, in
calculating loss from a Ponzi scheme, the district court cor-
rectly calculated the net loss to the losing victims); United
States v. Mount, 966 F.2d 262, 265 (7th Cir. 1992) (noting
that “a fraud that consists in promising 20 ounces of gold but
delivering only 10 produces as loss the value of 10 ounces of
gold, not 20”). The proper focus is on the amount of loss for
a particular victim. It is true that, for those clients who experi-
enced a gain as a result of the fraudulent scheme, the govern-
ment correctly determined that those gains should not be used
to offset the losses to other victims. Orton, 73 F.3d at 334.
But, for any given victim, it is the net loss that matters; there
is no basis for selectively offsetting gains for some house
stocks but not others. We hold that the district court’s calcula-
tion method erred in this regard.

    4.   Calculation Method Generally

  Defendants argue that the district court’s calculation
method is also contrary to our opinion in United States v.
Zolp, 479 F.3d 715 (9th Cir. 2007). In Zolp, the defendant had
conducted a “pump and dump” scheme similar to the one at
                   UNITED STATES v. LAURIENTI                  8243
issue here. The stocks in that case came from legitimate com-
panies whose stock values were inflated through the fraudu-
lent scheme. Id. at 717. The district court calculated the actual
loss as the amount that the victims paid to buy the stock, with
no offset for the present-day value of the stock. Id. 717-18.
We held that that calculation method was erroneous. Id. at
718-19. If the underlying company was worthless or practi-
cally worthless, it is reasonable to use the total investment
cost as the actual loss. Id. at 719. But, if the underlying com-
pany has intrinsic value, then the use of the total investment
cost is erroneous. Id. We held that,

      because the stock continues to have residual value
      after the fraudulent scheme is revealed, the court
      may not assume that the loss inflicted equals the full
      pre-disclosure value of the stock; rather, the court
      must disentangle the underlying value of the stock,
      inflation of that value due to the fraud, and either
      inflation or deflation of that value due to unrelated
      causes.

Id.

   [35] The government argues that the district court’s calcu-
lation method here is consistent with Zolp because, unlike in
Zolp where the district court used no offset, the district court
here offset the victim’s losses with the market value of the
stock as of April 2001. We are only partially persuaded. In
Zolp, we held that the district court “must disentangle the
underlying value of the stock, inflation of that value due to the
fraud, and either inflation or deflation of that value due to
unrelated causes.” Id. (emphasis added). Although the district
court here accounted for “the underlying value of the stock,”
it did not account for the market forces that also contributed
to the decrease in stock value. It is undeniable that, in addition
to the fraud, the market’s drop in 2000 had an effect on stock
values.
8244              UNITED STATES v. LAURIENTI
   We are aware, and Defendants do not appear to dispute,
that some of the house stocks may have fallen into the cate-
gory of “practically worthless” stocks that we discussed in
Zolp. On remand, for each house stock, the district court must
either make a finding that the stock is “practically worthless,”
as discussed in Zolp, or it must estimate the “inflation or
deflation” of the value of the house stock due to market
forces, unrelated to the conspiracy.

    5.   Holistic Perspective

   The thrust of the government’s arguments concerning the
loss calculation is that, even if there are some minor errors,
the Sentencing Guidelines require only a reasonable estimate,
not mathematical precision. There is force to the govern-
ment’s argument. “The district court’s determination of loss
is a finding of fact to which we must give ‘appropriate defer-
ence,’ see U.S.S.G. § 2B1.1, cmt. n.3(C), and which we
review for clear error.” Zolp, 479 F.3d at 718. “The court
need not make its loss calculation with absolute precision;
rather, it need only make a reasonable estimate of the loss
based on the available information.” Id. at 719. The govern-
ment argues that, even if the district court’s calculations were
somewhat erroneous, the calculated losses are a reasonable
estimate of the loss caused by each Defendant and that, there-
fore, the loss calculations should not be reversed.

   In this regard, the government points out that its calculation
method is grossly in Defendants’ favor in at least three ways.
First, the government attributed to each Defendant only those
losses that had a direct connection to the Defendant. Because
Defendants were convicted of conspiracy, the government
likely could have attributed almost all losses from the conspir-
acy to all Defendants. See U.S.S.G. § 1B1.3(a)(1)(B) (permit-
ting loss calculation to include “all reasonably foreseeable
acts and omissions of others in furtherance of the jointly
undertaken criminal activity”). Second, the government’s cal-
culation contained losses only with respect to the 30 victim-
                  UNITED STATES v. LAURIENTI                8245
clients that it investigated. The government asserts that
approximately 70 other victim-clients could be investigated.
Third, the government could have chosen to calculate
intended loss instead of actual loss. The government asserts
that the intended loss of the conspiracy was much greater than
the actual loss suffered by the victims. In sum, had the gov-
ernment so chosen, it could have introduced evidence of much
greater losses for all Defendants. That being so, the govern-
ment argues, its chosen calculation method is a reasonable
estimate, even though it does contain some mathematical
errors.

   We acknowledge that the loss calculation need be only a
reasonable estimate. In the context of this case, though, we
are unpersuaded that the “reasonable estimate” requirement
allows us to overlook the district court’s many errors, particu-
larly because many of the errors suffer from logical defects.
All methodologies for estimation have inherent imperfections;
otherwise they would be precise calculations, not estimates.
So long as those imperfections are logical and are not prone
to overwhelming the final result, they are permissible. But
where, as here, the imperfections are illogical, such as the
failure to offset gains in certain house stocks, it is impossible
to tell whether the ultimate estimate is reasonable or not. Hav-
ing chosen to calculate actual loss for a subset of victims tied
to each Defendant, the government cannot now argue that its
flaws in calculation are irrelevant simply because it could
have calculated loss differently.

   On the other hand, the government has always made clear,
to the court and to Defendants, that its loss calculations could
greatly exceed the loss calculations that it actually submitted
to the district court. Defendants nevertheless chose to appeal
the government’s calculation method. Because we remand for
resentencing on an open record, the government is free to
present evidence concerning any calculation methods that are
consistent with the Sentencing Guidelines, our discussion
above, and its ethical obligations. See Nulph v. Cook, 333
8246              UNITED STATES v. LAURIENTI
F.3d 1052, 1057 (9th Cir. 2003) (“A defendant has a due pro-
cess right under the Fourteenth Amendment not to be sub-
jected to vindictive sentencing after successfully attacking a
conviction or sentence.”).

  D.   Restitution Orders

   [36] Finally, Defendants challenge the calculation of loss
for purposes of restitution. Although a reasonable estimate
suffices for the loss calculation, “[t]he amount of restitution
must be definite and limited by the amount actually lost by
the victims.” United States v. Barany, 884 F.2d 1255, 1260
(9th Cir. 1989) (internal quotation marks omitted). As dis-
cussed above, the district court erred in certain respects in its
calculation of loss. Accordingly, we vacate all four restitution
orders and remand for recalculation of actual loss.

   Convictions AFFIRMED; sentences and restitution orders
VACATED and cases REMANDED for resentencing and
recalculation of restitution.