United States v. Laurence Isaacson
752 F.3d 1291
| 11th Cir. | 2014Background
- Isaacson was convicted by a jury of conspiracy to commit securities fraud (18 U.S.C. § 371) arising from a scheme in which the Lancer Fund bought and manipulated thinly traded shell companies and produced fraudulent valuations to placate auditors and conceal true portfolio value.
- Isaacson assisted in acquiring and managing shell companies (SMX, AUG, Nu‑D‑Zine) and provided business plans used by consultant Milton Barbarosh to generate false valuation reports given to auditors.
- Indicted in 2008, tried in 2010; several co‑defendants pleaded guilty, others were acquitted; Isaacson was convicted on Count One, sentenced to 36 months and ordered to pay $8 million restitution (district court applied a Guideline loss enhancement tied to Morgan Stanley’s June 28, 2002 investment).
- Isaacson filed a post‑conviction Rule 33 motion alleging undisclosed prosecutorial conflict (prosecutor’s wife had been affiliated with the firm representing a key witness, Barbarosh); the district court denied the motion.
- On appeal Isaacson challenged: (1) the extraterritorial reach of § 371 under Morrison, (2) Speedy Trial Act compliance (voir dire via written questionnaires), (3) statute of limitations (overt act), (4) sufficiency of the evidence, (5) attribution of Morgan Stanley’s loss and restitution, and (6) denial of the Rule 33 motion. The Eleventh Circuit affirmed the conviction and Rule 33 denial, vacated the sentence and restitution, and remanded for resentencing.
Issues
| Issue | Isaacson's Argument | Government's Argument | Held |
|---|---|---|---|
| Whether § 371 reaches Isaacson’s conduct given foreign hedge fund vehicle (Morrison) | Morrison bars liability because investments ran through BVI hedge fund, so no U.S. securities transaction | Securities traded on OTC markets; Lancer run from NYC and Isaacson acted in U.S., satisfying Morrison’s U.S. nexus | Rejected Isaacson’s argument; conduct satisfied Morrison (conviction affirmed) |
| Whether Speedy Trial Act tolled: did voir dire begin when court used written juror questionnaires? | Voir dire did not begin until in‑court oral examination; motion to dismiss timely | Court began ruling on juror challenges based on written questionnaires, which constitutes start of voir dire | Court may treat court‑supervised questionnaire selection as voir dire when judge rules on challenges; Isaacson’s Speedy Trial motion was untimely (denied) |
| Whether statute of limitations bars conviction for lack of an overt act within 5 years | Overt acts within limitations period did not involve Isaacson personally; cannot bootstrap others’ acts | An overt act by any conspirator within the statutory period suffices once defendant is linked to conspiracy | Rejected Isaacson’s claim; conspiracy liability permits an overt act by any conspirator to satisfy § 3282(a) |
| Sufficiency of evidence to support conspiracy conviction | Witnesses were not credible; many counts resulted in acquittal or no verdict | Testimony and documentary evidence showed Isaacson provided plans and managed shell companies used in valuations | Evidence, viewed in light most favorable to verdict, was sufficient; credibility determinations for jury (conviction affirmed) |
| Whether loss amount enhancement and $8M restitution could be attributed to Isaacson via Morgan Stanley investment | Morgan Stanley’s investment was independent and not shown to have resulted from Isaacson’s role in the subset conspiracy (defrauding auditors) | Losses were a reasonably foreseeable product of the conspiracy and thus attributable | Vacated sentence and restitution: government failed to prove Morgan Stanley’s loss resulted from the specific scope of criminal activity Isaacson joined; remand for resentencing without that enhancement |
| Whether nondisclosure of prosecutor’s wife’s prior affiliation with defense counsel required recusal or Brady disclosure | Nondisclosure created conflict/Brady violation likely to affect outcome; merits new trial | Wife had no financial stake or involvement in Barbarosh’s defense; disclosure would not have changed outcome | Denial of Rule 33 motion affirmed; no statutory recusal required and no reasonable probability of different result under Brady |
Key Cases Cited
- Morrison v. Natl. Australia Bank Ltd., 561 U.S. 247 (limits extraterritorial application of securities laws)
- Gonzalez v. United States, 671 F.2d 441 (11th Cir.) (definition of trial commencement for Speedy Trial Act context)
- Hunter v. United States, 323 F.3d 1314 (11th Cir. 2003) (sentencing accountability limited to scope defendant agreed to and reasonably foreseeable co‑conspirator acts)
- Sepulveda v. United States, 115 F.3d 882 (11th Cir. 1997) (court must not speculate to attribute additional loss at sentencing)
- Brady v. Maryland, 373 U.S. 83 (prosecutor’s duty to disclose exculpatory or impeachment evidence)