United States v. Behrens
2011 WL 2694608
8th Cir.2011Background
- Behrens was indicted on securities fraud, multiple counts of mail and wire fraud, and money laundering.
- He pled guilty to one count of securities fraud under 15 U.S.C. § 78j(b), 78ff, and 17 C.F.R. § 240.10b-5 (Rule 10b-5).
- At sentencing, Behrens asserted the no-knowledge defense under § 78ff(a), an affirmative defense burdened on the defendant.
- The district court held the no-knowledge defense inapplicable because Behrens pled guilty to a statutory offense.
- The district court sentenced Behrens to 60 months and ordered restitution of $6,841,921.90.
- On appeal, Behrens contends the no-knowledge defense is available at sentencing and that the district court erred in denying it.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the no-knowledge defense under § 78ff(a) is available at sentencing for § 78j(b) offenses. | Behrens argues the defense applies to violations of SEC rules under § 78j(b). | The Government contends the defense does not apply because Behrens pled guilty to a statutory offense. | Yes; no-knowledge defense available at sentencing. |
| Whether § 78j(b) requires knowledge of SEC rules to convict, affecting the no-knowledge defense. | Behrens relies on O'Hagan that no-knowledge is a safeguard for § 78j(b) violations. | The Government maintains knowledge is not a prerequisite beyond the statutory conduct. | Plain language requires violation of a rule; no-knowledge defense is relevant to sentencing. |
| Whether Knueppel is persuasive authority on the no-knowledge defense for § 78j(b) cases. | Behrens rejects Knueppel’s limitation on the defense. | Government urged Knueppel as controlling. | No; Knueppel is unpersuasive given plain statutory text. |
| Remedy for error in denial of no-knowledge defense at sentencing. | Behrens seeks vacatur and remand for proper consideration of no-knowledge. | Government argues for affirmation if defense not proven at sentencing. | Sentence vacated and case remanded for proceedings consistent with the opinion. |
Key Cases Cited
- United States v. O'Hagan, 521 U.S. 642 (1997) (limits and safeguards for securities fraud liability; no-knowledge defense acknowledged as a safeguard under § 78ff(a) and Rule 10b-5)
- United States v. Reyes, 577 F.3d 1069 (9th Cir.2009) (no-knowledge defense discussed as applicable to securities offenses under § 78j(b) and Rule 10b-5)
- United States v. Willett, 623 F.3d 546 (8th Cir.2010) (recognizes consideration of no-knowledge issues on remand when district court erred in disposition)
- United States v. Mendoza-Gonzalez, 520 F.3d 912 (8th Cir.2008) (emphasizes not looking beyond plain language of statute when unambiguous)
- United States v. McAllister, 225 F.3d 982 (8th Cir.2000) (statutory interpretation guiding analysis of ambiguity and intent)