Court Opinion

ID: 2964172
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:21:42.694873+00
Date Added: 2024-06-11T11:42:51.585720
License: Public Domain

USCA1 Opinion

	

            
                            UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 95-1524

                              UNITED STATES OF AMERICA,

                                      Appellee,

                                          v.

                                  ROBERT A. DiIANNI,

                                Defendant, Appellant.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Douglas P. Woodlock, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                                  Cyr, Circuit Judge,
                                       _____________

                            Aldrich, Senior Circuit Judge,
                                     ____________________

                            and Gertner,* District Judge.
                                          ______________

                                 ____________________

            Francis J. DiMento with whom DiMento & Sullivan was on brief for
            __________________           __________________
        appellant.
            Mark J. Balthazard, Assistant United States Attorney, with whom
            __________________
        Donald K. Stern, United States Attorney, was on brief for appellee.
        _______________  ______________________

                                 ____________________

                                 ____________________

                            
        ____________________

        *Of the District of Massachusetts, sitting by designation.

                      ALDRICH, Senior Circuit Judge.  Defendant Robert A.
                               ____________________

            DiIanni found himself in serious trouble with the Securities

            and Exchange Commission; was indicted, and ultimately pleaded

            guilty to three counts of mail fraud, three counts of wire

            fraud, one count of interstate transportation of property

            taken by fraud and one count of securities fraud.  He

            received two consecutive sentences of 42 and 60 months,

            execution of the latter suspended with three years supervised

            release.  A special condition of his probation required

            compliance with a permanent injunction entered in an SEC-

            initiated civil case that arose out of some of the same

            fraudulent activities.  This forbade defendant from, inter
                                                                 _____

            alia, engaging in any conduct "in connection with the
            ____

            purchase or sale of any security," that would violate Rule

            10b-5,1 under the Securities Exchange Act, 15 U.S.C.

                                
            ____________________

            1.  The Rule provides, in relevant part:

                           It shall be unlawful for any person,
                      directly or indirectly, by the use 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 misleading, or

                           (c) To engage in any act, practice
                      or course of business which operates or

                                         -2-

              78j(b).  In May, 1992, defendant was released from prison

            and, in due course, engaged in conduct which led the

            government to successfully charge him with having breached

            this special condition by impersonating his stepson in

            securities dealings with the brokerage firm National

            Financial Services Corporation ("NFSC"), as well as a general

            condition that he refrain from lying to his probation

            officer.  The court revoked probation and sentenced defendant

            to two years imprisonment.  He appeals.  We affirm.

                      To revoke probation the sentencing court must make

            both a retrospective determination that the probationer has

            violated a condition of his probation, and a discretionary,

            prospective determination that any violation(s) warrants

            revocation.  Black v. Romano, 471 U.S. 606, 611 (1985)
                         _____    ______

            (revocation must meet due process requirements); United
                                                             ______

            States v. Gallo, 20 F.3d 7, 13 (1st Cir. 1994).  The
            ______    _____

            government need not prove a violation beyond a reasonable

            doubt, but must merely satisfy the court that a violation

            occurred.  Id. at 14.  The second step requires
                       ___

            individualized evaluation of the particular probationer and

            "a predictive decision, based in part on [an] assessment of

            [his] propensity toward antisocial conduct."  Id.  We review
                                                          ___

                                
            ____________________

                      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.

                                         -3-

            the court's decision for abuse of discretion.  Id. at 13;
                                                           ___

            United States v. Nolan, 932 F.2d 1005, 1006 (1st Cir. 1991)
            _____________    _____

            (court's revocation determination "will not be disturbed

            absent a showing of manifest abuse").

                      Condition Four of defendant's probation requires

            that he "answer truthfully all inquiries by the probation

            officer . . . ."  Defendant does not dispute that he falsely

            denied to his probation officer that he was "in any way

            involved" in managing or trading the securities appearing on

            a brokerage account statement that the officer happened to

            notice during an unannounced visit to defendant's home.  He

            simply contends his prevarication is immaterial because,

            contrary to what the probation officer apparently believed,

            the conditions of his probation do not forbid him from

            trading in securities.  Condition Four is not limited to

            inquiries that relate to other conditions of defendant's

            probation, however, and cannot be read to leave defendant

            free to pick and choose which inquiries deserve a truthful

            answer.

                      The court also found defendant had willfully

            concealed his identity -- and therefore his status as felon

            convicted for fraud in connection with securities

            transactions -- as the person controlling certain brokerage

            accounts with NFSC, and the limited partnerships ostensibly

            behind them, and that this amounted to a violation of

                                         -4-

            defendant's special condition of probation.  The record

            discloses that defendant incorporated a consulting outfit in

            his wife's name, set up two limited partnerships naming his

            stepson, Mark Pinguey, as general partner, and opened a

            margin account with NFSC for each partnership, signing

            Pinguey's name.  He then deposited 600,000 shares of a

            marginable stock borrowed through the consulting firm to one

            of the accounts, enabling him to obtain a $2.5 million credit

            from NFSC to purchase more stock.  During all ensuing

            transactions and other dealings with NFSC, defendant held

            himself out as Pinguey.  Even when defendant, posing as

            Pinguey, was asked by an NFSC representative whether "a Mr.

            DiIanni" was impersonating Pinguey, defendant kept up the

            ruse.  The record supports the court's finding that defendant

            deliberately made untrue statements in identifying and

            representing himself as Pinguey in his dealings with NFSC,

            and -- contrary to his story that he was acting under

            Pinguey's "authorization" -- did so systematically with the

            intent to conceal the fact that he, not Pinguey, controlled

            the transactions that NFSC processed through the accounts.

                      In order for defendant's untruths and omissions to

            come within the prohibitions of the civil injunction,

            however, they had to have been of "material fact" within the

            meaning of Rule 10b-5.  17 C.F.R.   240.10b-5(b).  See Basic
                                                               ___ _____

            Inc. v. Levinson, 485 U.S. 224, 231 (1988).  The true
            ____    ________

                                         -5-

            identity of an investor is not always material, see United
                                                            ___ ______

            States v. Bingham, 992 F.2d 975 (9th Cir. 1993), but where
            ______    _______

            there is a "substantial likelihood" that a reasonable

            decision-maker would have viewed the omitted fact "as having

            significantly altered the total mix of information made

            available," the Rule's materiality requirement is fulfilled. 

            Basic Inc., 485 U.S. at 231-32 (internal quotations omitted). 
            __________

            The record indicates that in his heyday defendant was a

            successful, high-profile investment advisor, well-known in

            the financial world.  His indictment and convictions were

            well documented in the local press, which detailed the

            millions he bilked from his victims, as well as the fast and

            loose financial dealings that had prompted SEC sanctions

            years earlier.  A 1990 feature on the cover of the Boston

            Globe's business pages dubbed him "one of Boston's most

            notorious investment advisors of the 1980s," and reported his

            post-incarceration plans to jump back into the financial fray

            upon release from prison.  Had defendant signed his own name

            to the margin account agreements in December of 1992, rather

            than Pinguey's, there is a substantial likelihood that it

            would have rung someone's bell at NFSC, and the means of

            uncovering the details of defendant's past were readily

            available.  We have no doubt this information would have

                                         -6-

            significantly transformed the picture.2  We also think it

            reasonable to conclude that an intent to preclude NFSC from

            obtaining this information was in large measure the reason

            defendant employed Pinguey as his puppet.  Defendant's

            behavior was manifestly outside the bounds of Rule 10b-5.3

                      Given the relationship between defendant's

            probation infractions and his past criminal conduct, it was

            not unreasonable for the court to conclude that defendant's

            post-release activities suggested he was positioning himself

            incognito to get right back into his old heists.  The court

            found his new offenses "in many ways a kind of shadow of the

            offenses that led initially to Mr. DiIanni's incarceration

            . . . .  Moreover, they come after considerable experience

            here with violations of the federal securities law, a SEC

                                
            ____________________

            2.    The court credited testimony that NFSC would not have
            entered into any margin account agreements with a convicted
            felon.  It is of no moment that NFSC did not perform a credit
            check on Pinguey, which of course would not have revealed
            anything about defendant.  Defendant's assertion in his
            appellate brief that NFSC was not checking any accounts at
            the time is unsupported and in any event does not alter the
            fact that, under defendant's particular circumstance, his
            identity alone would have been material to NFSC's decision
            whether to open the margin accounts. Compare Bingham, 992
                                                 _______ _______
            F.2d at 976 (no evidence was introduced to show investors
            would have found the misrepresented or omitted information
            significant).

            3.  The civil injunction requires defendant to conform his
            behavior to the provisions of Rule 10b-5.  Proof of material
            reliance, although necessary to state a private cause of
            action for damages under Rule 10b-5, see Estate of Soler v.
                       _______                   ___ _______________
            Rodriguez, 63 F.3d 45, 53 (1st Cir. 1995), is not required to
            _________
            demonstrate violation of the terms of the injunction, and
            therefore also of defendant's special condition of probation.

                                         -7-

            injunction, a criminal prosecution . . . .  And so, what I

            have before me is a recidivist who -- offered any opportunity

            -- will undertake to engage in conduct that is proscribed by

            the federal securities laws."  The court reasonably found

            defendant's efforts to explain away his behavior not

            credible, and his propensity for "anti-social" conduct

            substantial.

                      Finally, defendant contends that a two year

            sentence is too harsh.  It was well within the court's

            authority to impose and, for the reasons amplified above, we

            find no abuse of discretion.

                      Affirmed.
                      ________

                                         -8-