Court Opinion

ID: 9498666
Source: CourtListenerOpinion
Date Created: 2023-08-05 17:24:32.087607+00
Date Added: 2024-06-11T17:58:59.581865
License: Public Domain

TASHIMA, Circuit Judge,
dissenting.
Atul Bhagat (“Defendant”) was charged in a seven-count indictment with: (1) securities fraud (insider trading) in violation of 15 U.S.C. §§ 78j, 78ff, and 17 C.F.R. § 240.10b-5 (Counts One and Two); (2) making false statements to the Securities and Exchange Commission (“SEC”) in violation of 18 U.S.C. § 1001 (Counts Three, Four, Five, and Six); and (3) obstruction of justice in violation of 18 U.S.C. § 1501 *1150by providing false information in an SEC investigation (Count Seven). After a trial by jury, Defendant was convicted of all counts, except Count Four.
Defendant is an engineer and was employed by NVIDIA Corporation, a Silicon Valley manufacturer of graphics processor and media communications devices. On March 5, 2000, NVIDIA entered into a contract with Microsoft to develop and manufacture a 3-D graphics processor for Microsoft’s new video game console, the “X-Box.” As to how Defendant obtained insider information about that contract, paragraphs 6 and 7 of the indictment alleged:
6. On Sunday, March 5, 2000, at 11:04 p.m. PST, NVIDIA’s president and chief executive officer sent an e-mail message to all NVIDIA employees, including BHAGAT, announcing the contract. The e-mail said that NVIDIA had obtained the X-Box contract from Microsoft. The e-mail revealed that Microsoft would “prepay” NVIDIA $200 million and predicted that “[i]f Xbox becomes as big as Sony Playstation, we generate about $2B in sales over 5 years.”
7. On Monday, March 6, 2000, at 9:15 a.m. PST, NVIDIA’s Vice President of Marketing sent an e-mail to all NVIDIA employees. The e-mail was entitled “xbox shhhhhh ...” and said:
[The NVIDIA CEO] called me a few minutes ago (he is travelling) and asked that i remind everyone to keep xbox news quiet. Not a word to anyone outside of our walls. Lets let the news roll out in a controlled way. Microsoft plans to make the news public this Friday at GDC. But anything can happen; lets don’t jinx it!
The indictment then charged, and Defendant does not contest, that later the same day (at 12:23 p.m.), he purchased 1,000 shares of NVIDIA stock at 61-3/4 and 61-7/8 per share. The contract was publically announced on March 10 and NVIDIA stock immediately and substantially increased in price. Defendant sold his shares for $110,000, reaping a profit in excess of $48,000.
The government’s initial theory, consistent with the indictment, was that Defendant read the e-mails when he arrived at work that Monday morning, but there is no direct evidence that he did so. Defendant denied that he read the e-mails before placing his buy order and testified that he did not read them until 1:00 p.m., approximately 40 minutes after he made his purchase.1
During its cross-examination of Defendant, the government pursued what the parties refer to as the “office abuzz” theory. The government’s questioning of Defendant suggested that because of the open cubicle configuration of the office, Defendant could not help but overhear conversations among his co-workers regarding the exciting news of the X-Box contract — that the office was “abuzz” with the news. Defendant denied that he overheard any X-Box office conversation. The district court overruled Defendant’s objection that the government should not be allowed to argue the “office abuzz” theory because “there is no evidence in the record the company was abuzz with the news,” as indeed there was not, as a basis of liability. It also rejected Defendant’s proffered instruction that “the mere existence of an open cubicle environment may not, standing alone, give rise to an inference that Bhagat possessed insider information.”
Given that latitude, the government argued in closing that even if the jury could *1151not infer that Defendant obtained insider information from the e-mails, it could draw that inference from the fact that the office was “abuzz” with information about the X-Box contract. Specifically, the prosecutor argued “[i]n terms of whether Bhagat possessed the information, you should consider the magnitude of this news. This was big, big, big news. The company [was] abuzz with this news.” The prosecutor then walked the jury through the evidence that he claimed supported the “office abuzz” theory of liability:
He [Defendant] walked through the reception area, he sat in a room filled with people, with cubicles with no doors, he went to the cafeteria, and he says, you know, he walked around in a bubble and this big news didn’t reach him over the course of three hours with other people.
This “office abuzz” theory of liability as to how Defendant acquired insider information, an essential element of the charged crime,2 is factually distinct from the theory charged in the indictment, that Defendant acquired the insider information through reading the company-wide e-mails. Because it is a new, uncharged theory, Defendant had no notice of it and no opportunity to defend against it, to rebut it with his own evidence.3
Thus, under our case law, this clearly is a case of a prejudicial variance from the indictment which requires reversal. This case is indistinguishable from United States v. Choy, 309 F.3d 602 (9th Cir.2002). There the indictment charged that Choy “gave, offered, and promised a thing of value (to wit, $5,000.00) to a public official.” Id. at 605. At trial, however, the government advanced an uncharged theory that Choy purchased computers to be used by a public official in a bribery scheme. See id. at 606. The district court instructed the jury that it could conclude that Choy “provided a thing of value” under either the theory charged in the indictment or the theory advanced at trial. Id. We reversed because the new theory was a variance that involved “a set of facts distinctly different from that set forth in the indictment.” Id. at 607. So too here, the “office abuzz” theory is a variance that involves “a set of facts distinctly different from that set forth in the indictment.” Id.
We have previously observed that “[o]ne of the primary purposes of an indictment is to inform a defendant of ‘what he is accused of doing in violation of the criminal law, so that he can prepare his defense.’ ” United States v. Adamson, 291 F.3d 606, 616 (9th Cir.2002) (quoting United States v. Tsinhnahijinnie, 112 F.3d 988, 991 (9th Cir.1997)). As in Adamson:
This purpose was not served here. If the indictment had not specified a different particular misrepresentation, one might say the variance was benign. Having specified a different particular misrepresentation, however, the indictment not only failed to inform the defendant of the actual misrepresentation that would be shown at trial, but it also affir*1152matively misled the defendant and obstructed his defense at trial.
Id. Accordingly, I would conclude that the variance here affected Defendant’s substantial rights and, thus, requires reversal. See id.
While paying lip service to the rule that “[a] material variance exists if a materially different set of facts from those alleged in the indictment is presented at trial, and if that variance affects the defendant’s ‘substantial rights’ ” (citing Adamson, 291 F.3d at 615-16), the majority elides the analysis required by that rule and simply concludes that “[a]t all times, the pertinent fact was that Bhagat was aware of the emails notifying employees of the X-Box contract award.” Maj. op. at 1146. Yet, that is precisely the determinative issue that was hotly contested in this ease. While it is uncontested that the two company-wide e-mails were transmitted, there is no direct evidence that Defendant was “aware” of them; indeed, he denied that he read his office e-mails until 1:00 p.m. on Monday. Thus, the majority conveniently jumps to a conclusion that is unsupported by the record.
The majority’s discussion of this issue concludes by noting that “[a]s in Adamson, in Choy we focused on the extent to which the jury was steered toward a finding at variance with the indictment.” Id. at 1147 (citing Choy, 309 F.3d at 607; Adamson, 291 F.3d at 615-16). It then asserts that “[njothing of the sort occurred in this case, and the verdict reflected no material variance from the charges in the indictment.” Id. But what occurred in Adamson and Choy is exactly what occurred in this case: By permitting the government to argue in closing that insider liability could be predicated on the “office abuzz” theory, “the jury was steered toward a finding[aequisition of insider information] at variance with the indictment,” which charged the acquisition of insider information solely from a reading of the company-wide emails. And the majority’s assertion that “the verdict reflected no material variance from the charges in the indictment,” id., is a non sequiter. First, the majority’s speculation of what the verdict may reflect is not the test under our variance jurisprudence. Second, the very reason for our variance jurisprudence is precisely because we cannot know whether “the verdict reflected no material variance from the charges in the indictment.”
I therefore respectfully dissent from the majority’s conclusion that “[t]he record does not support a claim of variance,” id., and from its holding affirming the judgment of conviction.

. Defendant also testified that when he learned of the trading blackout he attempted to cancel his trade, but was unsuccessful.

. Although the acquisition of insider information is technically an element only of the Count One charge — insider trading — factually, it is an indispensable predicate of all of the remaining counts of conviction.

. Accepting the government’s contention, the majority asserts that the "office abuzz” theory was permitted to be "invoked” "for the limited purpose of impeaching Bhagat’s credibility....” Maj. op. at 1145. Yet, in rejecting Defendant's proposed instruction that this theory could not be a basis of liability, the trial court failed to give a limiting instruction that this theory, and any evidence in support of it, could be used only to assess Defendant’s credibility and not as a basis of liability. Further, the government's closing argument, summarized above, belies its contention that the theory was invoked solely to impeach Defendant’s credibility.