488 F. App'x 481
2d Cir.2012Background
- Levis was Senior Executive Vice President and Treasurer of Doral Financial Corporation and allegedly misrepresented that Doral had two independent valuations and that certain hedges functioned as caps.
- Doral employed hedging instruments (derivatives, futures, options, swaps, collars, forward sale commitments) to manage risk, though these hedges did not guarantee a minimum pass-through rate.
- Levis was charged with one count of securities fraud and two counts of wire fraud based on misrepresentations about independent valuations and contractual caps.
- The district court barred Levis from presenting a hedging defense as to Count Three (wire fraud) but allowed other considerations for Counts One and Five (securities and wire fraud).
- The district court instructed the jury on good faith and the government’s burden, and the jury convicted on all counts except Count Three after exclusion of hedging evidence.
- The Second Circuit vacated the Count Three wire-fraud conviction, remanded for retrial on that count, affirmed Count One, and affirmed venue and speedy-trial rulings where appropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether hedging evidence could be presented for Count Three | Levis argues hedges could cap risk and affect materiality. | Levis contends hedging evidence is relevant to materiality of misrepresentations. | Yes; district court erred in barring hedging for Count Three. |
| Whether hedging evidence was relevant to Counts Five and One | Hedges could corroborate misrepresentations. | Hedges are legally irrelevant to independent evaluations. | No error in excluding hedging for Counts One and Five. |
| Speedy Trial Act compliance | Adjourment violated Speedy Trial Act. | Ends-of-justice findings were not properly recorded. | No Speedy Trial Act violation; ends-of-justice findings ratified. |
| Venue for Count Five | Venue lacked direct evidence of transmission in SDNY. | Venue should be improper without transmission. | Venue proper because publication on the internet made the 10-K reasonably accessible in SDNY. |
| Jury instructions on good faith and deception | Instructions misstate good-faith defense. | Instructions adequate when viewed with the charge as a whole. | No reversible error; instructions were proper when considered collectively. |
Key Cases Cited
- United States v. Pierce, 224 F.3d 158 (2d Cir. 2000) (elements of wire fraud: scheme, scienter, materiality)
- United States v. Cadet, 664 F.3d 27 (2d Cir. 2011) (abuses discretion in evidentiary rulings)
- United States v. Rossomando, 144 F.3d 197 (2d Cir. 1998) (good-faith defense and intent to harm investors)
- United States v. Ferguson, 676 F.3d 260 (2d Cir. 2011) (purpose and effect of misrepresentation on investors)
- United States v. Mittelstaedt, 31 F.3d 1208 (2d Cir. 1994) (limits on misrepresentation given non-fraudulent context)
- United States v. Dinome, 86 F.3d 277 (2d Cir. 1996) (limits of implicated evidence under fraud statutes)
- United States v. D’Amato, 39 F.3d 1249 (2d Cir. 1994) (fraud elements and materiality considerations)
- United States v. White, 552 F.3d 240 (2d Cir. 2009) (standards for evaluating jury instruction errors)
- United States v. Griffith, 284 F.3d 338 (2d Cir. 2002) (prejudice spillover considerations)