United States v. Vilar
729 F.3d 62
| 2d Cir. | 2013Background
- Vilar and Tanaka ran Amerindo and sold "Guaranteed Fixed Rate Deposit Accounts" (GFRDAs) and an alleged SBIC investment to clients, promising safe, short-term investments but investing heavily in risky tech/biotech stocks. When the market collapsed investors lost millions.
- Lily Cates invested $5 million in an SBIC account after Vilar falsely represented that Amerindo had an SBIC license; funds were diverted to pay personal and corporate obligations. Other investors (e.g., the Mayer family, Graciela Lecube‑Chavez) bought GFRDAs and suffered losses.
- In 2006 DOJ indicted the defendants on multiple counts including conspiracy, securities fraud under §10(b)/Rule 10b‑5, investment adviser fraud, mail and wire fraud, money laundering, and false statements to the SEC. After a jury trial (2008) both were convicted on various counts; sentences were imposed in 2010 and large restitution/forfeiture orders followed.
- On appeal the Second Circuit considered numerous issues, principally whether §10(b)/Rule 10b‑5 apply extraterritorially (post‑Morrison), whether reliance is an element in government §10(b) prosecutions, evidentiary rulings (U.S. & U.K. searches; Renata Tanaka statements), indictment sufficiency, constructive amendment by jury charge, and sentencing (loss/restitution/forfeiture).
- The court affirmed convictions but remanded for resentencing: it held §10(b)/Rule 10b‑5 have no extraterritorial reach (criminal or civil), reliance is not an element of government §10(b) cases, certain evidentiary rulings were proper, and restitution/forfeiture/loss calculations must be revisited to account for Morrison’s territorial limits and MVRA constraints.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Extraterritorial reach of §10(b)/Rule 10b‑5 | Gov't: Morrison limit applies only in civil cases; criminal prosecutions may reach extraterritorial conduct | Vilar & Tanaka: their conduct was extraterritorial and thus outside §10(b)'s reach | §10(b)/Rule 10b‑5 do not apply extraterritorially in criminal or civil cases; convictions stand because record showed domestic transactions (domestic irrevocable liability) so error was not plain |
| Reliance element in government §10(b) prosecutions | Defendants: jury should be instructed that victims must have actually relied on misrepresentations | Government: reliance is only required for private plaintiffs, not for government prosecutions | Reliance is not an element for government civil/criminal §10(b) cases; no instruction required |
| Constructive amendment / mail fraud charge | Vilar: indictment alleged mailing of a false account statement; jury instruction allowed conviction even if mailing was innocuous, thereby constructively amending the indictment | Government: mailing need not contain false statements so instruction was correct | No constructive amendment; core of criminality (scheme to defraud and use of mailing) remained the same |
| Restitution/ loss and forfeiture calculations after Morrison | Defendants: sentencing used losses from foreign purchasers and overbroad calculations (including compounded state interest); forfeiture/arithmetic errors | Government: relied on aggregated losses and district court calculations | Remand for de novo resentencing: district court must (1) determine relevant offense conduct and loss accounting consistent with Morrison, (2) limit MVRA restitution to victims who purchased securities domestically, and (3) correct forfeiture errors |
Key Cases Cited
- Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010) (limits §10(b) to securities listed on U.S. exchanges or domestic purchases/sales)
- Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013) (discusses presumption against extraterritoriality)
- Central Bank of Denver v. First Interstate Bank, 511 U.S. 164 (1994) (distinguishes scope of conduct proscribed by §10(b) from elements of private causes of action)
- Bowman v. United States, 260 U.S. 94 (1922) (addresses extraterritorial application of criminal statutes)
- O'Hagan, United States v., 521 U.S. 642 (1997) (upholds SEC rulemaking and discusses criminal liability under securities laws)
- Nix v. Williams, 467 U.S. 431 (1984) (articulates the "inevitable discovery" exception to exclusionary rule)
- Neder v. United States, 527 U.S. 1 (1999) (addresses elements of scheme statutes like mail fraud; reliance/damage distinctions)
- Schmuck v. United States, 489 U.S. 705 (1989) (mailings that are "innocent" can still satisfy the mailing element of mail fraud)