United States v. Nouri
2013 U.S. App. LEXIS 4455
| 2d Cir. | 2013Background
- Nouri brothers and Martin were convicted in SDNY for conspiracy to commit securities fraud, wire fraud, and commercial bribery, plus securities fraud; Michael Nouri was CEO of Smart Online, a public company, with losses and no profits.
- Smart Online stock traded on the OTC Bulletin Board starting April 15, 2005; NASDAQ listing was sought but ultimately suspended in January 2006.
- A market manipulation scheme involved Brume (the broker) being paid to purchase Smart Online stock for customers, funded by Smart Online.
- Blume, Gardner, and several brokers were paid illicitly, often via third-party or employee-authorized channels, to induce customers to buy Smart Online stock.
- Brokers, including Martin, Lustig, Serrano, and Doolan, concealed payments from Smart Online to customers; FINRA/Judicial witnesses described duties to disclose outside compensation.
- Evidence included FBI recordings and witnesses showing Michael orchestrating payments and directing purchases to raise the stock price and facilitate NASDAQ listing could be pursued.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Honest-services wire fraud instruction plain error | Plaintiffs argue Skilling narrowed honest-services scope | Defendants contend misstatement of law and omission of bribe/kickback limit | Plain-error but harmless; convictions otherwise affirmed |
| Honest-services in securities fraud instruction plain error | Honest-services concept improperly included in 10b-5 instruction | There was risk of convicting without proper elements | Harmless error; still upheld securities fraud convictions on proper elements |
| Sufficiency of evidence for securities fraud | Evidence showed duties to disclose bribes and material omissions | Evidence insufficient to prove all elements | Evidence sufficient; rational jury could convict |
| Restriction of Martin’s examination of Richardson | Excluding testimony would limit defense theory | Discretionary limits improperly narrowed state-of-mind evidence | No abuse of discretion; exclusion proper as cumulative and remote |
| Reasonableness of Martin’s sentence | Sentence disparity with co-defendants and lack of acceptance of responsibility | Sentence overly harsh and unequal | Within range; no abuse of discretion; no reversal |
Key Cases Cited
- Skilling v. United States, 561 U.S. 358 (U.S. 2010) (honest-services scope limited; only bribe/kickback core)
- Bruno v. United States, 661 F.3d 733 (2d Cir. 2011) (honest-services requires quid pro quo in some contexts)
- Bahel v. United States, 662 F.3d 610 (2d Cir. 2011) (narrowed honest-services applicability)
- Needham v. United States, 604 F.3d 673 (2d Cir. 2010) (plain-error review for trial errors after non-objection)
- Gomez v. United States, 580 F.3d 94 (2d Cir. 2009) (harmless error standard for omitted elements)
- Marcus v. United States, 130 S. Ct. 2159 (S. Ct. 2010) (plain-error harmlessness framework for trial errors)
- S.E.C. v. First Jersey Sec., Inc., 101 F.3d 1450 (2d Cir. 1996) (securities fraud elements include materiality and duties)