United States v. DeMizio
741 F.3d 373
2d Cir.2014Background
- Darin DeMizio, head of Morgan Stanley’s domestic stock‑loan desk (2001–2005), was indicted and convicted of conspiracy to commit honest‑services wire and securities fraud (18 U.S.C. §§ 1343, 1346, 1348, 1349) and making a false statement (18 U.S.C. § 1001).
- Government evidence showed DeMizio steered Morgan Stanley stock‑loan business to conduit broker‑dealers and finder firms that, at his direction, paid large commissions to his father (Robert) and brother (Craig) for little or no legitimate finder work.
- Payments from intermediary firms to the relatives totaled roughly $1.7 million (2000–2004); witnesses described use of coded communications and secrecy to conceal arrangements from Morgan Stanley.
- DeMizio denied wrongdoing, arguing the relatives performed some work, payments were not to him personally, and disclosures to Morgan Stanley were sufficient; he asked for an instruction requiring proof of employer detriment if the theory were self‑dealing rather than kickbacks.
- After conviction and sentencing, the appeal was held pending Skilling v. United States; the case was remanded for the district court to assess Skilling’s effect. The district court and this Court affirmed, holding the evidence supported a kickback theory and any jury‑instruction error was harmless.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence of honest‑services fraud post‑Skilling | Government: evidence showed a kickback scheme steering Morgan Stanley business to firms that paid relatives for little/no work | DeMizio: payments were for some legitimate work; payees were not him; disclosures precluded fraud; insufficient to show bribery/kickbacks under Skilling | Held: Evidence sufficient — payments to relatives were kickbacks despite some minimal work or indirect payment; conviction stands |
| Proper jury instruction re: § 1346 after Skilling | Government: trial focused solely on kickbacks; jury need not be further instructed | DeMizio: court should have instructed jury that honest‑services liability is limited to bribery/kickbacks per Skilling | Held: District court erred by not limiting instruction to bribery/kickbacks, but the error was harmless beyond a reasonable doubt because the case was tried and argued only on a kickback theory and evidence was ample |
| Whether private‑sector kickbacks require direct payment to employee | N/A (government relied on indirect payments to entities tied to DeMizio) | DeMizio: kickbacks only when the employee personally receives payment | Held: Rejected — schemes qualify when employee directs payments to entities or family in which he has an interest; indirect payments can be kickbacks |
| Whether minimal/Token work negates kickback characterization | N/A | DeMizio: any work, however small, prevents characterization as a kickback | Held: Rejected — substantial payments for minimal or nominal work can still be kickbacks; token work does not shield defendants from liability |
Key Cases Cited
- Skilling v. United States, 561 U.S. 358 (2010) (limits § 1346 honest‑services liability to bribery and kickbacks)
- McNally v. United States, 483 U.S. 350 (1987) (mail/wire fraud historically limited to property rights; prompted enactment of § 1346)
- Neder v. United States, 527 U.S. 1 (1999) (harmless‑error review for omitted jury element)
- United States v. McDonough, 56 F.3d 381 (2d Cir. 1995) (upholding kickback conviction where recipient performed almost no work)
- United States v. LaSpina, 299 F.3d 165 (2d Cir. 2002) (affirming kickback scheme involving payments to associates for little work)
- United States v. Margiotta, 688 F.2d 108 (2d Cir. 1982) (kickbacks routed to persons/entities designated by defendant)
- United States v. Hausmann, 345 F.3d 952 (7th Cir. 2003) (kickback arrangements may include payments to relatives/charities tied to defendant)
- United States v. Urciuoli, 613 F.3d 11 (1st Cir. 2010) (honest‑services conviction upheld where appointee received ample pay for limited work)
- United States v. Bryant, 655 F.3d 232 (3d Cir. 2011) (upholding convictions where defendants received low‑show or nominal jobs as part of bribery scheme)