United States v. Mahaffy
693 F.3d 113
| 2d Cir. | 2012Background
- Defendants were broker-dealers tried for conspiracy to commit securities fraud via misappropriation of confidential information and related property fraud, with debates over whether information was confidential and whether bribery qualified as honest services fraud.
- First trial acquitted on most counts; mistrial on the remaining conspiracy count occurred; retrial charged under two theories: honest services fraud and property fraud.
- Supreme Court Skilling later limited honest services to bribery/kickbacks; after sentencing, SEC disclosed SEC deposition transcripts ( Brady material) not previously disclosed.
- Transcripts contained testimony contradicting key government witnesses about confidentiality of squawk information; district court had not instructed jury on bribery necessary for honest services fraud.
- Following Brady violations and defective jury instructions, motions for new trial were granted in part and convictions vacated; case remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Brady material was suppressed | Mahaffy argues suppression violated Brady | Defendants contend transcripts contained material exculpatory/impeaching | Brady violation established; convictions vacated |
| Adequacy of jury instruction on confidential information | District court failed to define confidentiality per Carpenter | Ghysels contends instruction too narrow/undercut defense theory | Instruction inadequate; guidance provided; remand for proper charge |
| Honesty of services fraud requires bribery/kickbacks post-Skilling | Verdict supported by honest services theory without explicit bribes | Skilling confines honest services to bribery/kickbacks; trial flawed otherwise | Honest services convictions vacated |
| Forfeiture framework under § 981(a)(2) | Gross proceeds forfeiture appropriate for unlawful activity | Net proceeds appropriate; substantial difference given pass-through to brokers | Court adopts net proceeds measure for forfeiture; remand guidance |
Key Cases Cited
- Carpenter v. United States, 484 U.S. 19 (Supreme Court 1987) (confidential information requirement in property/fraud context)
- Skilling v. United States, 561 U.S. 358 (Supreme Court 2010) (honest services fraud limited to bribery/kickbacks)
- Triumph Capital Grp. v. United States, 544 F.3d 149 (2d Cir. 2008) (Brady material with exculpatory/impeaching value undermines verdict)
- United States v. Diaz, 176 F.3d 52 (2d Cir. 1999) (impeachment material and cross-examination considerations)
- United States v. Kozeny, 667 F.3d 122 (2d Cir. 2011) (plain-error and harmless-error standards in post-Skilling context)
- United States v. Bahel, 662 F.3d 610 (2d Cir. 2011) (post-Skilling evaluation of honest services/Brady issues)
- United States v. Bruno, 661 F.3d 733 (2d Cir. 2011) (plain-error review after Skilling guidance)
- Neder v. United States, 527 U.S. 1 (Supreme Court 1999) (standard for harmless error under Neder)
- Kyles v. Whitley, 514 U.S. 419 (Supreme Court 1995) (materiality and impact of suppressed evidence on verdict)
- Youngblood v. West Virginia, 547 U.S. 867 (Supreme Court 2006) (materiality requires reasonable probability of outcome change)