17 F.4th 298
2d Cir.2021Background
- Platinum Partners (Nordlicht, Levy, others) was a major investor in Black Elk; Platinum funds (PPVA, PPCO, PPLO) and a related reinsurance vehicle Beechwood (BAM, BBIL) collectively controlled a large share of Black Elk bonds and preferred equity.
- Black Elk suffered major losses (2012 platform explosion, regulatory and litigation exposure) and pursued an asset sale to Renaissance in 2014; Platinum faced a liquidity crisis tied to Black Elk exposure.
- The Indenture/Trust Indenture Act (the "Affiliate Rule") required excluding bonds held by affiliates from the vote to amend the indenture; defendants sought to amend Section 4.10 to let asset-sale proceeds pay preferred equity first.
- Platinum entities transferred over $30 million in bonds to Beechwood and withheld disclosure of many Platinum-controlled bond holdings during the public consent solicitation; Beechwood and other Platinum-controlled votes produced the majority needed for the amendment, after which Black Elk paid roughly $100 million to preferred holders (Platinum-related entities).
- A jury convicted Nordlicht and Levy on conspiracy, wire fraud, and securities fraud counts related to the Black Elk scheme. The district court granted Levy a Rule 29 judgment of acquittal (and conditionally a new trial) and granted Nordlicht a Rule 33 new trial; the government appealed.
- The Second Circuit reversed the district court's judgment of acquittal as to Levy, vacated both defendants' grants of new trials, and remanded — holding there was sufficient circumstantial evidence for a rational jury to find intent and that the district court abused its Rule 33 discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence re: Levy's criminal intent (Rule 29) | Circumstantial evidence (role as CIO, dual roles at Platinum/Beechwood, bond transfers, voting instructions, urgency on wires and clawback avoidance) permits a rational jury to infer intent to defraud bondholders. | Levy lacked evidence of intent: no direct proof he viewed Beechwood as an affiliate, no proof he directed transfers or votes, and emails are equivocal or innocent. | Reversed district court: viewing evidence in government's favor, a rational jury could find Levy acted with requisite criminal intent; acquittal vacated. |
| Rule 33 new trial for Levy | A new trial is unwarranted because the evidence does not preponderate heavily against the verdict; jury reasonably credited circumstantial proof. | District court argued guilty verdict was manifest injustice for lack of proof of intent. | Vacated district court's grant of new trial; Rule 33 relief was not justified under "preponderates heavily" standard. |
| Rule 33 new trial for Nordlicht | Ample evidence (knowledge of Affiliate Rule, control over Beechwood activity, concealment tactics) supports conviction; evidence does not preponderate heavily against verdict. | District court found Nordlicht may have tried to comply and lacked notice of Beechwood affiliate status; granting new trial avoided manifest injustice. | Vacated district court's grant of new trial; record supports reasonable jury findings of control, concealment, and intent. |
| Materiality and application of the Affiliate Rule (misrepresentations in consent statement) | Omitting the number of affiliate-held bonds altered the vote calculus and was material to bondholders' decisions to tender/consent; jury may apply common-sense control in assessing affiliate status. | Defendants argued the government asked jury to adopt an untethered or improper definition of affiliate and that the nondisclosure was not material to investors. | Held for government: omitted affiliate holdings were material; government’s presentation (text of indenture/TIA plus common-sense inferences about control) was proper. |
Key Cases Cited
- United States v. Pauling, 924 F.3d 649 (2d Cir. 2019) (standard for appellate review of Rule 29 sufficiency claims)
- United States v. Martoma, 894 F.3d 64 (2d Cir. 2017) (burden on defendant challenging sufficiency of evidence)
- United States v. Autuori, 212 F.3d 105 (2d Cir. 2000) (standard that a verdict stands if any rational trier of fact could find guilt)
- United States v. Guadagna, 183 F.3d 122 (2d Cir. 1999) (deference to jury credibility determinations)
- United States v. Cassese, 428 F.3d 92 (2d Cir. 2005) (view evidence in totality; circumstantial evidence may suffice)
- United States v. Lorenzo, 534 F.3d 153 (2d Cir. 2008) (government may win on circumstantial proof if each element proven beyond reasonable doubt)
- Rosemond v. United States, 572 U.S. 65 (2014) (aider-and-abettor intent requirement)
- United States v. Archer, 977 F.3d 181 (2d Cir. 2020) (Rule 33 "preponderates heavily" standard and guidance on when a new trial is appropriate)
- TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (1976) (materiality standard for omissions/misrepresentations)
- Basic Inc. v. Levinson, 485 U.S. 224 (1988) (materiality: whether omitted fact would have significantly altered the total mix of information)
- United States v. Litvak, 808 F.3d 160 (2d Cir. 2015) (materiality is mixed question of law and fact well suited for jury)