United States v. George Georgiou
777 F.3d 125
| 3rd Cir. | 2015Background
- Georgiou led a multi-year scheme (2004–2008) manipulating four OTC stocks (Neutron, Avicena, HYHY, Northern Ethanol) using matched trades, wash sales, nominee and offshore accounts, producing over $55 million in actual losses.
- Some manipulative trades were executed through U.S.-based market makers; Georgiou communicated and directed schemes via email, phone, in-person meetings in the U.S., and wired money to a U.S. undercover agent.
- Co-conspirator Kevin Waltzer cooperated with the FBI; his recorded communications and transactions were key government evidence. Georgiou wired $5,000 to an undercover agent shortly before arrest.
- A jury convicted Georgiou of conspiracy, four counts of securities fraud (15 U.S.C. § 78j(b)/Rule 10b-5), and four counts of wire fraud (18 U.S.C. § 1343); district court sentenced him to 300 months, restitution ~$55.8M, and $26M forfeiture.
- On appeal Georgiou raised (for the first time) extraterritoriality challenges under Morrison to the securities counts, contested extraterritorial application of wire fraud, asserted Brady/Jencks violations about Waltzer materials, challenged evidentiary rulings admitting SEC witness summaries, and disputed loss/victim/forfeiture calculations at sentencing.
Issues
| Issue | Plaintiff's Argument (Georgiou) | Defendant's Argument (Government) | Held |
|---|---|---|---|
| Extraterritorial reach of Section 10(b) (Morrison) | Convictions rested on foreign transactions; Morrison bars §10(b) where trades are extraterritorial | Some trades were domestic because executed through U.S. market makers and created irrevocable liability in U.S. | Transactions executed through U.S. market makers created domestic transactions (irrevocable liability/pass of title); §10(b) application was proper |
| Wire fraud extraterritoriality | Wire fraud counts improperly based on foreign conduct; jury not limited to domestic acts | §1343 applies extraterritorially; wires used in interstate/foreign commerce were proven | Wire fraud convictions valid; statute reaches schemes executed via interstate/foreign commerce and evidence showed use of wires in U.S. operations |
| Brady and Jencks (Waltzer records, Bail Report, SEC notes) | Government suppressed Waltzer mental‑health/substance‑use and SEC interview notes that impeach key witness | Most material was produced or available to defense; withheld items were not Brady material or not in prosecutors’ possession | No Brady violation: either not suppressed, not material, or cumulative; no Jencks violation because sought material was not in prosecutorial possession |
| Evidentiary rulings (SEC witness Koster, summary charts, Rule 701/1006) | Koster improperly offered expert opinions; charts were prejudicial summaries beyond scope | Koster testified as lay summary witness about voluminous trading records; charts were admissible under Rule 1006 | District court did not abuse discretion: Koster’s testimony fit Rule 701/curative scope and summaries complied with Rule 1006 |
| Sentencing (loss calculation, victim count, forfeiture) | Loss overstated (should account for market forces per Dura); victim count and forfeiture errors | Dura is civil and not required here; records show >250 victims and traceable forfeitable proceeds; many objections waived | Loss and victim enhancements upheld; court need not apply Dura in this context; forfeiture proper and objections waived |
Key Cases Cited
- Morrison v. National Australia Bank, 561 U.S. 247 (2010) (statute’s territorial reach: §10(b) applies only to securities listed on U.S. exchanges or sales in the United States)
- Pasquantino v. United States, 544 U.S. 349 (2005) (wire‑fraud statute can reach schemes involving foreign commerce and is complete when scheme executed in U.S.)
- Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) (in civil securities fraud, loss causation requires proof that the fraud proximately caused the loss)
- Bagley v. United States, 473 U.S. 667 (1985) (Brady material is material if disclosure would create a reasonable probability of a different result)
- Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012) (treats point of irrevocable liability/title transfer as locus for domestic securities transaction)
- United States v. Vilar, 729 F.3d 62 (2d Cir. 2013) (applies Morrison in criminal context; assesses U.S. nexus for §10(b) liability)