United States v. Lange
2016 U.S. App. LEXIS 14929
| 2d Cir. | 2016Background
- Defendants Brad A. Russell and Kristofor J. Lange were tried for (1) conspiracy to commit wire and securities fraud (Count Two) and (2) substantive securities fraud (Count Three); Russell also convicted on a separate wire-fraud conspiracy (Count One). After a jury verdict, the district court granted Kristofor a Rule 29 acquittal only on Count Three for lack of venue; the Government appealed.
- Underlying schemes: Bill Lange ran HFGI (mortgage/escrow scheme; >$9M diverted) and then BSMI (mining company fraud; ~$780K raised) using false LOIs, business plans, newsletters, cold calls, and emails; Kristofor and Russell had operational roles in BSMI (calls, materials, list management); some solicitations reached Eastern District of New York (EDNY) recipients and an undercover postal inspector there.
- Government asserted EDNY venue based on (i) cold-call solicitations to EDNY residents from BSMI lists and (ii) email communications/newsletter received in EDNY; defendants argued those acts were insufficient to establish venue for Counts Two and Three as to each defendant.
- District court denied defendants’ post-verdict Rule 29 motions on venue for Count Two (conspiracy) but granted Kristofor acquittal on Count Three (substantive securities fraud); both defendants appealed various issues including venue and jury instructions.
- Second Circuit reviewed venue de novo, viewed evidence in government’s favor, and considered foreseeability, aiding-and-abetting principles, and the substantial-contacts test in concluding venue in EDNY was proper for both Counts Two and Three; it affirmed convictions, reversed the acquittal, and remanded to reinstate Kristofor’s Count Three conviction and resentence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Venue for substantive securities fraud (Count Three) | Government: EDNY venue proper because BSMI employees made/materially fraudulent calls and sent emails/newsletters into EDNY; defendants foresaw or aided those acts. | Defs: acts were preparatory or occurred elsewhere; insufficient proof defendants caused or foreseewere calls/emails into EDNY. | Venue proper: calls and emails into EDNY constituted acts in furtherance of securities fraud; acts were foreseeable to defendants and/or they aided and abetted, so EDNY venue satisfied. |
| Venue for conspiracy (Count Two) | Government: overt acts in EDNY (cold calls, emails to undercover inspector) were in furtherance of conspiracy. | Defs: overt acts were by non-conspirators or mere preparations; insufficient to establish venue. | Venue proper: overt acts (calls/emails) by or caused by conspirators in EDNY materially furthered conspiracy; venue sustained. |
| Conscious-avoidance jury instruction | Gov: instruction appropriate where defendants claimed lack of knowledge and evidence supported a high-probability factual predicate. | Defs: instruction cannot substitute for proof of knowing participation in conspiracy; no factual predicate if actual knowledge established. | Instruction proper: trial court’s instructions required intentional participation; conscious-avoidance was a permissible means to prove knowledge of unlawful aims where factual predicate existed. |
| "No ultimate harm" instruction | Gov: instruction proper where defendants contemplated immediate deprivation even if they claimed later restitution might make victims whole. | Defs: instruction inapplicable because defendant made no false statements or caused no ultimate harm. | Instruction proper: factual predicate supported it; jury was required to find intent to defraud; no evidence of jury confusion. |
Key Cases Cited
- United States v. Tzolov, 642 F.3d 314 (2d Cir.) (standard for venue review; securities-venue principles)
- United States v. Royer, 549 F.3d 886 (2d Cir.) (venue where defendant causes acts in district; receipt of electronic transmissions supports venue)
- United States v. Svoboda, 347 F.3d 471 (2d Cir.) (foreseeability supports venue; conscious-avoidance doctrine limits)
- United States v. Smith, 198 F.3d 377 (2d Cir.) (aider-and-abettor may be tried where principal acted)
- United States v. Ferrarini, 219 F.3d 145 (2d Cir.) (conspiracy requires knowing participation; limits on using conscious avoidance to infer membership)
- United States v. Cuti, 720 F.3d 453 (2d Cir.) (same evidentiary facts can support actual knowledge and conscious avoidance)
- United States v. Nektalov, 461 F.3d 309 (2d Cir.) (factual predicate required for conscious-avoidance instruction)
- United States v. Berkovich, 168 F.3d 64 (2d Cir.) (standards for "no ultimate harm" instruction)