UNITED STATES OF AMERICA, Appellant, -v.- MICHAEL GRAMINS, Defendant-Appellee.
No. 18-2007-cr
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
September 20, 2019
August Term 2018
(Argued: November 27, 2018 Decided: September 20, 2019)
Michael Gramins, a trader of Residential Mortgage-Backed Securities (“RMBS“), was convicted of conspiracy to commit wire fraud and securities fraud by a jury in the United States District Court for the District of Connecticut. At Gramins‘s trial, the district court had admitted testimony from one of Gramins‘s counterparties tending to establish that the counterparty credited Gramins‘s representations when Gramins acted as a “broker” between two counterparties.1
Shortly following Gramins‘s conviction, we decided United States v. Litvak, 889 F.3d 56 (2d Cir. 2018) (”Litvak II“), which held in the context of a similar prosecution that the erroneous and idiosyncratic viewpoint of a defendant‘s counterparty could not be relevant to the objective, “reasonable investor” standard for materiality in a securities fraud prosecution. The district court (Chatigny, J.) then sought to apply our holding in Litvak II to this case, and granted Gramins‘s motion for a new trial on the basis that counterparty testimony had been improperly admitted against Gramins at trial. We conclude, however, that the counterparty testimony at Gramins‘s trial was not improperly admitted and did not implicate our holding in Litvak II. Accordingly, the judgment of the district court is REVERSED and the case is REMANDED to the district court with instructions to reinstate the conviction.
FOR APPELLANT: HEATHER CHERRY, Assistant United States Attorney (David E. Novick,
FOR DEFENDANT-APPELLEE: MARC L. MUKASEY (Jeffrey B. Sklaroff, on the brief), Greenberg Traurig, LLP, New York, NY, for Michael Gramins.
DEBRA ANN LIVINGSTON, Circuit Judge:
On June 15, 2017, a jury in the United States District Court for the District of Connecticut convicted Defendant-Appellee Michael Gramins of conspiracy to commit wire fraud and securities fraud. Gramins and his alleged coconspirators, former trаders of Residential Mortgage Backed Securities (“RMBS“) at Nomura Securities International, Inc. (“Nomura“), lied to their counterparties about contemporaneous price negotiations with other, third-party counterparties. Those lies caused Nomura‘s counterparties to increase their bids and decrease their offers when they would not otherwise have done so. The counterparties believed that they were adjusting their bids or offers in response to bona fide, contemporaneous negotiations with those other, third-party counterparties, and paying Nomura a modest commission to facilitate supposedly “riskless” transactions with those counterparties. In reality, Gramins‘s false statements carved out sizable spreads between Nomura‘s buying-counterparties’ bids and its selling-counterparties’ offers, allowing Nomura to reap substantial profits unbeknownst to the counterparty on either side of the transaction.
At Gramins‘s trial, the government elicited testimony from several of Nomura‘s counterparties that Gramins‘s and his alleged co-conspirators’ lies were important to their investment decisions—in other words, that those misrepresentations were “material.” Shortly after the jury‘s guilty verdict, we held in United States v. Litvak, 889 F.3d 56 (2d Cir. 2018) (”Litvak II“), that the admission of testimony from a counterparty who erroneously asserts the existence of an agency relationship between himself and his broker-dealer unduly prejudices the jury on the issue of materiality, violating Federal Rules of Evidence (“FRE“) 401 and 403 and requiring a new trial. Following the issuance of our decision in Litvak II, Gramins supplemented his pending motion for а new trial, arguing that one of the government‘s witnesses at his trial—Joel Wollman of QVT Financial—had implied (without explicitly stating) an erroneous belief in the existence of an agency relationship between himself and Gramins. The district court (Chatigny, J.) then granted Gramins‘s motion for a new trial, citing Litvak II. We REVERSE the district court‘s order and REMAND to the district court with instructions to reinstate the conviction and proceed to sentencing.
BACKGROUND
I.
Gramins‘s conspiracy capitalized on certain distinctive features of the market for RMBS. As noted above, “RMBS” stands for Residential Mortgage-Backed Securities. RMBS are “large and complex aggregations of residential mortgages and home equity loans.” Litvak II, 889 F.3d at 59. Banks typically create RMBS by packaging together groups of mortgages and issuing bonds backed by the principal and interest payments of the homeowners who received the mortgages. Investors assess the value of RMBS in part by estimating
RMBS are “bought and sold at very high prices” and, as a rеsult, typically “marketed to large, sophisticated financial institutions” like banks and hedge funds. Litvak II, 889 F.3d at 60. Given the large size and unique features of each RMBS, the RMBS market lacks an “exchange” of the sort on which traditional corporate stocks and Treasury bonds trade. Moreover, the price at which a given RMBS will trade is generally not publicly known. Consequently, institutional investors looking to transact in RMBS must “contact registered broker-dealers . . . to find interested buyers or sellers,” or transact “directly with [the] broker-dealers” from the broker-dealers’ own accounts. Id.
Enter Gramins. Between 2009 and 2013, Gramins traded RMBS at Nomura, a broker-dealer registered with the Securities and Exchange Commission. Institutional investors frequently reached out to Nomura when looking to buy or sell a particular security. Gramins and his fellow traders would respond to expressions of interest from Nomura‘s customers by transacting with the customers from Nomura‘s own inventory or by communicating with other institutional investors in the hopes of finding a counterparty willing to complete the desired transaction.
More often than not, Nomura took the latter approach. Brokers like Gramins would attempt to match a prospective buyer of a particular RMBS with a prospective seller of that RMBS (and vice versa), reaping a small commission in return. Industry participants refer to this function alternatively as “facilitating,” see J.A. 191, 642, 734, “market making,” see J.A. 517, 544, and “riskless trading,” see J.A. 194, 252. The last term reflects the fact that, because Nomura “had the potential buyer and potential seller already matched up at the time of the transaction,” J.A. 194, it had prаctically eliminated any of the “market risk” associated with holding the security on its own books, J.A. 252.
Participants in the RMBS market distinguish among three types of RMBS transactions. First, in the “order trade” scenario described above, “a broker-dealer communicates [separately] with an interested buyer and seller and, if successful, effectuates a transaction in which a RMBS is transferred.” Litvak II, 889 F.3d at 60. In an order trade, “[t]he broker-dealer owns the bond, but usually briefly, in consummating the transaction between the two investors.” Id. Second, in a “BWIC” (“Bids Wanted In Competition“) trade, “a putative seller sends a bid-list to multiple broker-dealers,” who then “solicit expressions of interest and price ranges from potential buyers” and “place[] a bid in the auction of [that] particular security.” Id. Both of these types of trades fall within the “riskless” category because the broker-dealer “ha[s] the potential buyer and potential seller already matched up at the time of the transaction.” J.A. 194. Moreover, in both contexts, the broker-dealer
A third type of transaction has different features. In a so-called “inventory trade,” an investor “buys a bond already held in a broker-dealer‘s account” at the time of the parties’ negotiations. Litvak II, 889 F.3d at 60. In that context, the broker-dealer has incurred market risk by holding the RMBS in its inventory for a significant periоd of time prior to the transaction. And in that context, customers do not pay any additional commission because the broker-dealer has transacted directly from its own inventory—presumably, seeking maximum profit or minimum loss on its earlier investment in the bond—rather than intermediating between two interested counterparties.
Nevertheless, while industry participants frequently distinguish among these three types of trades, the same agency law principles apply to all of them. “An essential feature of all of these trades . . . is that the broker-dealer acts solely in its own interest as a principal.” Id. at 61. As a matter of accounting, the broker-dealer‘s profit in any of the three scenarios outlined above is always simply the difference between the price at which it sold the security and the price at which it purchased it. See id. Moreover, while some RMBS transactions may be effectively “riskless” in practice, the broker-dealer always assumes some risk in the transaction, because “an institutional investor can refuse to purchase a bond held by the broker-dealer even when the investor caused the broker-dealer to purchase it by an expression of interest. . . .” Id. Consequently, “[a] broker-dealer is not . . . an agent for its counterparties in these trades,” and the final price in any transaction between broker-dealer and counterparty “is determined in an arms-length negotiation” between the two. Id.
II.
Having outlined the relevant features of the RMBS market, we turn now to Gramins‘s conspiracy to manipulate it. At trial, the government proved its conspiracy charge against Gramins with the following evidence. First, three of Gramins‘s co-conspirators—former RMBS traders at Nomura—testified to the nature of the scheme. Caleb Chao, a former junior analyst at Nomura, explained that Gramins and others would “misrepresent . . . prices to clients,” for instance by “tell[ing] the seller that we were seeing a bid that was lower than what the bidder had actually bid” or “tell[ing] a bidder that we had an offer that was higher than the offer actually was.” J.A. 580. Chao testified that the effect of these representations “was to get either one side or both sides to lower their offer [to sell] or increase their bid [to buy],” thereby “increas[ing] the spread or money that Nomura earned on the trade.” J.A. 580-81. Chao testified that Gramins had taught him to engage in these deceptive tactics and that he had observed Gramins engaging in them himself.
Frank Dinucci, a former vice president at Nomura, provided similar testimony. Dinucci explained that he and other Nomura RMBS traders “would lie about where we were actually buying or selling securities to clients” in order to “increase the profit for Nomura.” J.A. 199. Dinucci testified that these misrepresentations induced Nomura‘s
The government then introduced evidence of several specific RMBS trades to further demonstrate Gramins‘s role in the conspiracy. All of these trades fell within the first two types of trades described above (order and BWIC trades) rather than the third (inventory trades). On January 5, 2010, for instance, Gramins facilitated an order trade of AHMA 2007-1A1 (“AHMA“) bonds between Joel Wollman of QVT Financial and Chris Creed of Goldman Sachs Asset Management. Over instant message—a typical means of communication between broker-dealers and institutional investors, see J.A. 192, 240, 335, 441—Gramins raised the subject of the AHMA bonds with Wollman and confirmed that Wollman owned some amount of them. Gramins then told Wollman: “guy looking to add a bit of this . . . wants me to show a few holders a 46 bid.” Gov‘t Ex. 10J.4 Wollman then offered to sell the AHMA bonds at 47-16. Several minutes later, but before initiating any conversation with Creed, Gramins replied to Wollman, “ok, can show you a 46-16 bid on the ahma,” Gov‘t Ex. 10J, as if Creed had increased his bid in response to Wollman‘s offer. Wollman responded to Gramins by lowering his offer price to 47-08.
Only then did Gramins message Creed, writing: “hey chris . . . have a matcher for you.” Gov‘t Ex. 10C. When Creed expressed interest, Gramins inflated Wollman‘s 47-08 offer price to 49-00, telling Creed: “being offered 33mm ahma 07-1 a1 @ 49-00.” Gov‘t Ex. 10C. Gramins and Creed discussed the bond for a few minutes. Before receiving any bid from Creed (but after suggesting to Creed that he bid above 48-00), Gramins resumed his chat with Wollman, telling the latter “i have really been pushing this guy on ahma . . . / he says 47-00 is best best, otherwise wants me to move onto other holders.” Gov‘t Ex. 10J. Wollman then agreed to sell his bonds at 47-00.
Gramins then returned to his chat with Creed. When Creed suggested 48-12 and 48-20 as possible bids, Gramins replied: “happy to show what you want, but honestly dont think this guy is gonna budge,” referring to the fictitious 49-00 offer he had previously conveyed. Gov‘t Ex. 10C. Creed then told Gramins he would “pay the 49” if necessary, but would prefer to pay less if possible. Gov‘t Ex. 10C. Minutes later—and without any intervening interactions with Wollman, who had already agreed to sell at 47-00—Gramins told Creed: “chris this guy isn‘t moving at all . . . wants to just stick to his guns . . . so is 49-00 ok?” Gov‘t Ex. 10C. Creed agreed to pay 49-00. Nomura then purchased the AHMA bonds for 47-00 and sold them for 49-00, taking a 64-tick commission.
On February 9, 2011, Gramins engaged in similar conduct while brokering a trade of WAMU 2005-AR15 A1C3 (“WAMU“) bonds between PK Banks of DW Investments
Moments later, Gramins misrepresented Banks‘s bid back to Rieger, telling Rieger, “i have 51-00 bid.” J.A. 1338. Rieger reacted by lowering his initial offer to 51-28. One minute later, Gramins lied to Banks, telling him, “have the wamus down to 53-00 now.” J.A. 1329. Banks reacted by raising his bid to 52-00. At this point, even though Banks‘s bid of 52-00 now exceeded Rieger‘s offer of 51-28, Gramins continued to simulate an ongoing negotiation to both counterparties. He misstated Banks‘s bid to Rieger, telling the latter “ok . . . i am trying to push him more but have 51-16 [from the buyer].” J.A. 1338. This time, Rieger declined to lower his offer and told Gramins to “keep working.” J.A. 1338. Nevertheless, a few minutes later, Gramins told Banks, “I have 52-24 now.” J.A. 1330. Banks then raised his offer again. Banks‘s ultimatum to Gramins—“best @ 52-04 . . . paying you 52-10 all in,” J.A. 1333—indicated that he understood Gramins to be making a 6-tick commission for facilitating the trade. Several minutes later, though, Nomura bought the WAMU from Rieger at 51-20 and sold it to Banks at 52-10, taking a 22-tick commission.
On March 16, 2011, Gramins employed similar practices while soliciting a bid from Wollman in the context of a BWIC auction of INDX 2005-AR14 A1B2 (“INDX“) bonds. After Gramins informed Wollman of the BWIC opportunity, Wollman bid on the bonds, stating that he “would take a shot at 18-1.” J.A. 1346. Wollman asked Gramins, “you gonna use?” J.A. 1346. Gramins confirmed that he would use Wollman‘s bid, telling him: “yes using.” J.A. 1346. Several minutes later, Gramins informed Wollman that the bid had been successful. JA1347. As the evidence showed, however, Gramins did not in fact use Wollman‘s bid of 18-01. Instead, Gramins bid only 17-17, won the auction anyway, and purchased the INDX at that price.
Gramins continued deceiving Wollman after the auction had finished. With respect to the amount of commission to be paid, Wollman asked Gramins if he could “do something like 18-5” given the low price of the bond. J.A. 1347. Based on the 18-01 price that Wollman thought Nomura had paid, Wollman‘s proposal would have netted Nomura a four-tick commission. Several minutes later, though, Gramins pushed back on that proposal, noting that he (Gramins) would have been “happy to buy [the INDX] at 19,” and asking Wollman, “do you mind sticking w the qtr pnt?” J.A. 1350. Wollman agreed to Gramins‘s request and paid Nomura 18-09, which he believed would net Nomura a market-standard eight-tick commission. But because Nomura had bid only 17-17 for the bond, rather than using Wollman‘s bid of 18-01, Gramins reaped a 24-tick commission from Wollman‘s purchase.
Caleb Chao also testified to an order trade that he and Gramins brokered jointly on May 1, 2012. Chao testified that he sat to Gramins‘s immediate left on Nomura‘s trading desk, and that Gramins instructed him on how and what to communicate to clients while brokering trades. While Chao instant messaged the buyer (Aadil Abbas of Hartford Investment Management Company (“HIMCO“)), Gramins
Even though, at that point, Abbas‘s bid (78-22) exceeded Sunshine‘s offer (78-16), Nomura did not execute the trade. Instead, a few minutes after Gramins had received Sunshine‘s offer, Chao falsely stated to Abbas, “seller came back to us with an 80-16 offer.” J.A. 1498. Abbas raised his bid to 79-00 in response. Chao then told Abbas that the seller “usually likes to engage so dont think we want to move to best level right away,” and offered to “show 78-24 and see what comes back.” J.A. 1499. Chao testified at trial that the purpose of this false statement “was to give Mr. Abbas sort of an illusion, a false illusion that, you know, we were trying to buy the bonds cheaper for him.” J.A. 592. Contrary to Chao‘s statement to Abbas, though, Gramins did not discuss the PPSI‘s price with Sunshine any further. After waiting a few minutes, Chao simply pretended that Sunshine had lowered his bid again, telling Abbas, “ok, showing 79-24 offer now . . . there might be a little wiggle room here.” J.A. 1499. This time, Abbas declined to raise his bid above 79-00. Gramins then bought the PPSI from Sunshine at 78-16 and Chao sold it to Abbas at 79-02. Nomura took an 18-tick commission on the trade.
Along with the details of these negotiations, the government also introduced evidence at trial concerning a then-recent prosecution for similar trading practices. In late January 2013, the government had indicted Jesse Litvak, a trader at the global securities broker-dealer Jefferies & Company (“Jefferies“), for making misrepresentations in the context of his business activities. See United States v. Litvak, 808 F.3d 160, 166 (2d Cir. 2015) (”Litvak I“). Jefferies was one of Nomura‘s competitors, and Litvak occupied a trading position similar to Gramins‘s. The Litvak indictment alleged that Litvak had “fraudulently misrepresented to purchasing counterparties the costs to Jefferies of acquiring certain RMBS” and “fraudulently misrepresented to selling counterparties the price at which Jefferies had negotiated to resell certain RMBS.” Id.5
Jonathan Raiff, Nomura‘s head of Global Markets for the Americas, testified at Gramins‘s trial concerning the firm‘s reaction to the Litvak indictment. Raiff testified that the Litvak indictment was “something everyone was aware of,” J.A. 268, was “a subject of conversation” in the RMBS industry, and that “lots of people were discussing it,” J.A. 299. Raiff also testified that in early February 2013, about a week after the Litvak indictment, Nomura scheduled a compliance training session for traders and salespeople in its securitized products groups. Gramins attended that training session. Raiff testified that the training session “was held specifically to discuss the conduct at issue in the Litvak indictment,” J.A. 301, and that the “general focus of the session was if you say something, make sure it‘s accurate,” J.A. 300. The training session also operated as
The government also introduced evidence of one final RMBS trade that took place after the Litvak indictment and the associated Nomura compliance training session. On November 22, 2013, Gramins facilitated an order trade of JPMAC 2006-WMC1 A4 (“JPMAC“) bonds between Wollman and Harrison Choi of The TCW Group, Inc. Gramins first messaged Choi, who offered to sell the bonds at 80-00. Minutes later, Gramins lied to Wollman about Choi‘s offer, saying: “ok here‘s what i just got / 29+mm A4‘s @ 81-16.” J.A. 1573. That caused Wollman to raise his bid to “80 flat.” J.A. 1574. Minutes later, Gramins lied again, this time to Choi, and over the phone. Gramins told Choi: “[The buyer] wanted to be 78. I said no. I have 78 and three-quarters.” J.A. 1582. That caused Choi to lower his offer to “79 and a quarter.” J.A. 1584.
After speaking to Choi, Gramins called Michael Romanelli (“Romanelli“), a salesperson for Nomura. Gramins and Romanelli discussed how to phrase Choi‘s latest offer to Wollman and whether Romanelli (instead of Gramins) should convey it to Wollman over the phone. The two agreed on a phrasing of “80 and a half to you,” and Romanelli told Gramins, “keep it in chat, because if I call, he‘s gonna get suspicious and start asking me questions.” J.A. 1586, 1587. Minutes later, Gramins told Wollman, over instant message, “i have beaten [Choi] up as much as i can / 80-16 is thе best i can get them to you.” J.A. 1575. Gramins confirmed to Wollman that this price factored in a commission from Choi, even though he and Choi had not discussed any. Wollman agreed to the price. Gramins then bought the JPMAC bond from Choi at 79-08 and sold it to Wollman at 80-16, taking a 40-tick commission on the trade.
III.
On September 3, 2015, the government indicted Gramins, along with his alleged co-conspirators Ross Shapiro and Tyler Peters (collectively with Gramins, the “defendants“). On March 6, 2017, the government filed the operative indictment. The indictment charged the defendants with two counts of securities fraud, pursuant to
Much of the trial focused on whether the defendants’ lies were “material” to their counterparties’ investment decisions, as required under the securities and wire fraud statutes. See, e.g.,
materiality in part with testimony from four of Nomura‘s counterparties: Zachary Harrison of Putnam Investments, Eric Marks of Ellington Capital Management, Abbas of HIMCO, and Wollman of QVT Financial. Before the jury, these counterparties described the BWICs and order trades outlined above, in which Gramins or one of his associates had lied to them, and explained how those lies had impacted their investment decisions.
One of these witnesses, Wollman of QVT Financial, gave the testimony that Gramins now contends was improperly admitted. In that testimony, Wollman alluded to the distinction between inventory trades and “riskless transactions,” explaining that he maintained heightened expectations of truthfulness from his broker-dealer in the latter context. For example, early on in his dirеct examination, Wollman stated that he
Later on in his testimony, Wollman testified that he believed Gramins‘s representations during the AHMA trade because he understood that Gramins was “acting as a broker in this capacity.” J.A. 688. In other words, in a “riskless” order or BWIC trade, Wollman explained, “he‘s not . . . buying bonds for his inventory,” but rather “acting on behalf of another counterparty,” or “facilitating a trade between me and that other counterparty.” J.A. 688. Wollman emphasized that “in that context, I expect that facts that [Gramins] tells me are truthful.” J.A. 688. Later, in another exchange, Wollman explained that Gramins was “brokering a trade between me and another counterparty” in the context of the JPMAC transaction. J.A. 705. In other words, he reiterated, the bonds at issue “aren‘t [Gramins‘s] bonds, he is — his role in this is to match together a seller of bonds and a buyer of bonds — two other counterparties, not him — and he‘s facilitating that transaction.” J.A. 705.
Finally, on redirect examination, the government reviewed the three charged trades — AHMA, INDX, and JPMAC — in which Wollman had engaged with Gramins. The government attorney asked Wollman whether he thought he was “sitting across the table from” Nomura in the context of each trade. J.A. 727. With rеspect to each trade, Wollman responded in the negative. In the AHMA trade, he testified, Nomura was “brokering a trade for me,” or “acting as a broker, a facilitator.” J.A. 727. Regarding the INDX BWIC, he testified that the transaction “was almost more clerical, administrative than . . . anything else.” Id. Regarding the JPMAC trade, too, Wollman explained that the transaction “was a broker trade” with “a seller and a buyer.” Id. Gramins claims that these portions of Wollman‘s testimony were irrelevant and unduly prejudicial under Litvak II.
The government‘s rebuttal summation produced two additional items to which Gramins objected. The first involved the government‘s reference to transactions not charged in the indictment. Prior to trial, the government had moved in limine to preclude evidence of “the supposed absence of criminal activity in [the defendants‘] uncharged securities transactions.” J.A. 73. The district court did not rule on this motion, but the parties informally agreed not to reference any specific uncharged trades at trial. In his closing argument, however, Shapiro‘s counsel argued that the trades charged in the indictment amounted to “substantially less than $5 million” over four years, which could not have significantly affected the defendants’ compensation, and that therefore the government had produced “zero evidence” of motive. J.A. 869–70. In response, on rebuttal summation, the government reminded the jury that “these are a selection of the trades,” and that “we could be here for six months if we bring you every trade.” J.A. 896; see also id. (“Dinucci told you that these tactics would occur almost daily; and Feely told you that the defendants would engage in these tactics at every opportunity, which he also estimated would be daily.“). After summations, defense counsel asked the district court for a curative instruction limiting the jury to those trades specifically charged in the indictment, which the district court gave.
On June 15, 2017, the jury reached its verdict. The jury convicted Gramins on the conspiracy count, failed to reach a verdict with respect to Gramins on one count of securities fraud and one count of wire fraud, and acquitted Gramins on all remaining counts.6 The district court declared a mistrial on the unresolved counts but otherwise accepted the jury‘s partial verdict.
IV.
On August 28, 2017, Gramins filed his post-trial motions. He moved for a judgment of acquittal pursuant to
On May 3, 2018, before the district court had ruled on Gramins‘s post-trial motions, the Second Circuit issued its opinion in Litvak II. The government‘s prosecution of Jesse Litvak had taken several twists and turns since his initial indictment in 2013. First, a jury in the United States District Court for the District of Connecticut had convicted Litvak on the ten counts of securities fraud with which he was originally charged,7 but this Court vacated those convictions on evidentiary grounds in Litvak I. Litvak I, 808 F.3d at 169. At Litvak‘s second trial, the jury convicted him of a single count of securities fraud. Litvak II, 889 F.3d at 59. Litvak moved for a judgment of acquittal pursuant to
In Litvak II, this Court rejected Litvak‘s challenge to the denial of his motion for a judgment of acquittal, holding that the government‘s evidence was sufficient to support a conviction as a matter of law. 889 F.3d at 66–67. But we vacated Litvak‘s
Both Gramins and the government filed supplemental briefing with respect to Gramins‘s post-trial motions in light of our holding and analysis in Litvak II. On June 5, 2018, the district court ruled on Gramins‘s motions. The court denied Gramins‘s motions for a judgment of acquittal, noting that counterparty witnesses had testified at trial to the importance of Gramins‘s misrepresentations and that “a rational trier of fact could find that the ‘point of view’ of these witnesses was ‘within the parameters of the thinking of reasonable investors’ in the RMBS market at the time.” Sp. App. 2 (quoting Litvak II, 889 F.3d at 65). But the district court granted Gramins‘s motion for a new trial. Although the court acknowledged that, unlike Norris‘s testimony at Litvak‘s trial, no witness had explicitly claimed that an agency relationship existed between Gramins and his counterparties, the court nevertheless concluded that “Wollman strongly implied that that is how he viewed the role of broker-dealers in the RMBS market when brokering trades.” Sp. App. 14. Because Wollman‘s testimony had suggested to the jury that Gramins owed fiduciary duties of loyalty and honesty to his trading counterparties, the district court reasoned, a new trial was necessary.8
The district court also addressed the government‘s comments during rebuttal summation. The court agreed with defense counsel that the government‘s reference to uncharged transactions was inappropriate, but concluded that two curative instructions had adequately addressed it. As for the government‘s rhetorical device asking whether the defendants “l[ied] to take people‘s money,” the district court concluded that “it does not appear that [this] oversimplification of the law was calculated to inflame the jury,” nor “that the jury was [in fact] misled.” Sp. App. 12. Accordingly, the district court concluded that neither statement alone rose to the level of prosecutorial misconduct or warranted a new trial. Nevertheless, in granting Gramins‘s motion for a new trial, the district court took those comments into account, reasoning that “[e]ven if the admission of Wollman‘s ‘point of view’ testimony, standing alone, does not justify vacating Gramins‘s conviction, the combination of errors described above justifies a new trial.” Sp. App. 20.
The government timely appealed the district court‘s order granting Gramins a new trial. The Solicitor General authorized the appeal.
DISCUSSION
Our review of the district court‘s ruling granting Gramins a new trial
Furthermore, we also nоte that the district court exercised its discretion subject to the standards governing a
Finally, while the district court granted Gramins a new trial on the basis of the Wollman testimony that it admitted during his original trial, this Court typically “review[s] a district court‘s evidentiary rulings under a deferential abuse of discretion standard, and . . . will disturb an evidentiary ruling only where the decision to admit or exclude evidence was ‘manifestly erroneous.‘” United States v. McGinn, 787 F.3d 116, 127 (2d Cir. 2015) (quoting United States v. Samet, 466 F.3d 251, 254 (2d Cir. 2006)). Even if a decision was “manifestly erroneous,” this Court will affirm “if the error was harmless.” Id. (citing United States v. Miller, 626 F.3d 682, 688 (2d Cir. 2010)). Therefore, while we review the district court‘s
I.
A conviction for securities fraud pursuant to
The government and defense counsel each advanced competing theories of materiality at trial. The government, for its part, argued that in a negotiation over the price of a security, information about the price at which other market participants are willing to trade that security is necessarily important to the reasonable investor. See, e.g., J.A. 835 (arguing that materiality is “almost obvious” because Gramins‘s statements concealed the fact that the counterparty “could have bought” the security at a “cheaper [price] than what [he] eventually ended up paying“); J.A. 899 (calling it “common sense” that “in this brokered market where you‘re lining up people, what the broker-dealer says about what the guy over there is willing to pay is going to affect what you might be willing to sell at“). The government also pointed to the opaque nature of the RMBS market, which lacks an exchange, forcing counterparties to rely exclusively on their broker-dealers for information about price. See, e.g., J.A. 830 (“When it came to perhaps the most critical piece of information in a negotiation . . . the only way the bidder knew what the seller was offering[] was if and when the broker-dealer Nomura, the defendants, chose tо give that information.“). Finally, the government relied on the “norms of the market,” whereby, in the context of BWIC and order trades, “[b]uy side accounts buy and sell to each other through the broker-dealer.” J.A. 898. In those trading contexts, the government argued, reasonable investors credited broker-dealers’ representations based on “years of experience” with broker-dealers accurately relaying bids and offers. J.A. 838.
Defense counsel painted a different picture of the RMBS market, emphasizing the principal-to-principal nature of RMBS transactions as a formal legal matter. See, e.g., J.A. 872 (“Nomura didn‘t have to sell anybody anything unless they got the price they wanted.“). Because every participant in the RMBS market transacted solely as a principal, the defense argued, sophisticated counterparties simply would not have placed any significance on their broker-dealers’ statements about price. See, e.g., J.A. 873 (“[E]very ounce of proof in this case tells you that [the counterparties] were not attaching any significance to anybody‘s words or anybody‘s acquisition cost or anybody‘s profit, not in this market....“). And Nomura‘s counterparties were indeed sophisticated; defense counsel emphasized the complex mathematical models and other objective sources that RMBS traders used to guide their investment decisions. See, e.g., J.A. 874 (“[The counterparties] told you the model was the anchor; they told you the model was the foundation, it was the base of all decision-making.“); J.A. 874 (“The model, the data, the price talk, the color, the independent pricing servicеs, that‘s what goes into the final decisions, not Nomura‘s sales chat.“). Finally, the defense noted that the counterparty witnesses unanimously testified at trial that they continued to be “happy with
“Determination of materiality under the securities laws is a mixed question of law and fact that the Supreme Court has identified as especially ‘well suited for jury determination.‘” Litvak I, 808 F.3d at 175 (quoting United States v. Bilzerian, 926 F.2d 1285, 1298 (2d Cir. 1991)). Absent violation of the
The government sought to support its theory of materiality in part with direct testimony from several of Nomura‘s counterparties. The government called four of Nomura‘s counterparties to the stand, and all four testified that they considered the defendants’ lies important to them in the context of the price negotiations in which they occurred. For example, the government elicited testimony from Marks concerning a negotiation in which Nomura had lied to Marks about the seller‘s offer price. The government informed Marks of the true offer price and asked him, “[W]ould the truth, would that information have been important information in the course of this negotiation?” J.A. 743. Marks responded, “Yes, it would be important. I would probably negotiate differently. . . . I would probably try to see if I could buy the bonds at a cheaper price.” J.A. 743. Harrison answered a similar “importance” question similarly, telling the jury, “In this kind of negotiation with another end account where Nomura was the middleman, accurately relaying information back and forth would have been important, especially this kind of information regarding the price level.” J.A. 351. Abbas likewise answered the “importance” question: “Yes. All of that is the color that I‘m receiving regarding an ongoing negotiation, so from that angle it‘s important.” J.A. 537. See also J.A. 688 (Wollman testifying similarly).
Both Litvak I and Litvak II establish that this sort of testimony from a broker-dealer‘s counterparties can constitute sufficient evidence of materiality to support a conviction for securities fraud. See Litvak I, 808 F.3d at 175–76 (“[T]estimony from several representatives of Litvak‘s counterparties that his misrepresentations were ‘important’ to them in the course of the transactions . . . and that they or their employers were injured by those misrepresentations . . . . precludes a finding that no reasonable mind could find Litvak‘s statements material.” (citation omittеd)); Litvak II, 889 F.3d at 66 (citing Litvak I and holding that “there was sufficient evidence for a rational jury to find [Litvak‘s] misstatements material beyond a reasonable doubt” on the basis of testimony from Litvak‘s counterparties). In other words, a rational jury could have found, on the basis of counterparty testimony that the defendants’ misrepresentations were important to those counterparties’ investment decisions,
The question before us today is thus not whether the government introduced evidence sufficient to support the jury‘s conviction of Gramins on its theory of materiality, but whether the presentation of that evidence at trial gave the government an unfair advantage in pressing that theory to the jury. We encountered different manifestations of that same general question in Litvak I and Litvak II. The Litvak precedents reflect our attempts to referee the debate between the government and defense counsel over these conflicting theories of materiality by policing the evidence presented at trial to support them.
In Litvak I, we considered testimony from a business school professor and expert witness for the defense that “where a manager follows rigorous valuation procedures, as was the case here, consideration of, or reliance on, statements by sell-side salesmen or traders concerning the value of a RMBS or the price at which the broker-dealer acquired it or could acquire it, are not relevant to that fund‘s determination with respect to hоw much to pay for a bond.” Litvak I, 808 F.3d at 182. The district court had excluded that expert testimony on relevance grounds, but we disagreed. We described the testimony as “highly probative of materiality” and “undoubtedly relevant to the jury‘s determination” on that element. Id. at 182-183. “With such testimony before it, a jury could reasonably have found that misrepresentations by a dealer as to the price paid for certain RMBS would be immaterial to a counterparty that relies not on a ‘market’ price or the price at which prior trades took place, but instead on its own sophisticated valuation methods and computer model.” Id. at 183. In short, the district court‘s evidentiary ruling unfairly tipped the scales against the defense‘s theory of materiality. We consequently vacated that ruling and remanded for a new trial in which defense counsel could present its theory to the jury unimpeded, and with relevant expert testimony to support it.
In Litvak II, we encountered a different problem: misstatements of agency law by government witnesses that unduly supported the government‘s theory of materiality. At Litvak‘s second trial, one of the government‘s counterparty witnesses had erroneously testified that Litvak was acting as his “agent” (rather than as a principal) in facilitating RMBS transactions between him and other counterparties. In addressing this testimony, we reiterated the importance of point-of-view testimony from a defendant‘s counterparties, but held that in order to be relevant such testimony must fall “within the parameters of the thinking of reasonable investors in the particular market at issue.” Litvak II, 889 F.3d at 65. We reasoned that a cоunterparty‘s erroneous claim of an agency relationship with the defendant could unduly prejudice the jury “because it might cause a jury to ‘construe [Litvak‘s misstatements] as having great import to a reasonable investor if coming from the investor‘s agent.‘” Id. at 68 (quoting Litvak I, 808 F.3d at 187 (emphasis and alterations in original)). In short, we again concluded that an evidentiary ruling at trial had unfairly tipped the scales in favor of the government, this time by the admission of evidence that unduly advanced the government‘s theory. We vacated and remanded for a new trial without the prejudicial testimony.
Litvak II was decided after the conclusion of Gramins‘s trial, and the district court issued its decision granting Gramins
II.
The district court granted Gramins a new trial on the basis of this Court‘s evidentiary holdings in Litvak II. In that case, as described above, this Court
vacated Litvak‘s conviction for securities fraud on the basis of statements from one of Litvak‘s counterparties, Brian Norris, who “testified that he believed [Litvak] to be his agent, and that broker-dealers serve as an agent in between buyers and sellers.” Litvak II, 889 F.3d at 63 (internal quotation marks and alterations omitted). As both parties acknowledged at Gramins‘s trial below, Norris‘s statements were in fact incorrect. Litvak, like Gramins and like any other broker-dealer in the RMBS market, transacted at all times as a principal, and never as an agent for any counterparty.In Litvak II, we held that Norris‘s misstatements of agency law provided two grounds for vacatur of Litvak‘s conviction. First, we held that the district court should have excluded the evidence as irrelevant under
As an alternative ground for vacatur, we held that the district court should have excluded Nоrris‘s testimony under
A.
Gramins sought a new trial, and the district court granted one, on the basis of Wollman‘s testimony against Gramins and its purported similarity to the Norris testimony at issue in Litvak II. Wollman‘s testimony against Gramins, however, is a horse of a different color. To begin with, Wollman‘s testimony, unlike Norris‘s, was neither “erroneous” nor “idiosyncratic.” Id. at 59. First, the testimony was not “erroneous” because Wollman made no misstatements of agency law. Nowhere in the record of Gramins‘s trial does Wollman state that he believed that Gramins was his agent, nor that Gramins owed him fiduciary duties. In fact, nowhere in the record does Wollman advert to any principles of agency law at all.
The portions of Wollman‘s testimony on which Gramins relies do not erroneously claim an agency relationship with Gramins. For instance, Gramins‘s brief on appeal emphasizes Wollman‘s many references to Gramins‘s role as a “broker” or to his conduct as “brokering.” See, e.g., J.A. 688 (Wollman: Gramins was “acting as a broker in this capacity“); J.A. 705 (Wollman: Gramins was “brokering a trade between me and another counterparty“). But even contemporaneous statements from Gramins and other broker-dealer representatives make clear that the word “broker” is a common shorthand for the role played by a broker-dealer in matching one counterparty with another, rather than a synonym for the legal role of “agent.” See J.A. 1337 (Gramins to seller: “happy to reflect what you like . . . and I am purely looking to broker.“); J.A. 221 (Dinucci: “Brokering trades is when you have a buyer and a seller matched up on a bond, and you simply play the middleman in that transaction.“).
Other statements drawn from Wollman‘s testimony likewise do not contain erroneous statements of agency law. These comments merely describe the business context in which Wollman typically interacted with Gramins, which involved Gramins communicating price negotiations with another counterparty in an effort to “facilitate” a transaction between Wollman and that counterparty. For instance, Wollman‘s comment that Gramins was “acting on behalf of another counterparty,” J.A. 688, merely conveyed that Gramins was communicating bids and offers from that counterparty, rather than negotiating about a bond that he (Gramins) already owned. Likewise, Wollman‘s comment that he was not “sitting across the table” from Gramins in the context of a “broker trade,” J.A. 727, served to contrast an order trade, in which Gramins proposed to deliver a bond to (or receive it from) a second counterpаrty other than Wollman, with an inventory trade, in which no counterparty other than Wollman existed. Wollman explained throughout his testimony that he had different expectations of Gramins in the context of an order or BWIC trade, in which Gramins was (to use Gramins‘s own phrase) “merely looking to broker” a trade between two other counterparties, than he did in the context of an inventory trade, in which Gramins and Wollman transacted alone.
Indeed, every portion of Wollman‘s testimony to which Gramins refers in defending the district court‘s order similarly served to distinguish the former business context from the latter. Statements like these do not misstate the law—nor do they correctly state the law. They simply do not purport to reflect any legal conclusion at all, instead merely describing (often in industry jargon) Wollman‘s different expectations
Wollman‘s trial testimony was also not “idiosyncratic.” Quite the contrary: all three of the government‘s other counterparty witnesses testified similarly as to their expectations of broker-dealer employees purporting to act in a “broker” capacity. Marks testified, regarding order trades, that he “would consider that to be a riskless transaction for the broker,” J.A. 738, and would expect that the broker-dealer “would line up both sides of the trade and . . . execute each side individually but basically as close to simultaneously as they could,” J.A. 744. Abbas testified that in the context of any non-inventory transaction, such as an order trade, he would expect a broker-dealer to accurately relay his bid to the seller and would rely on the broker-dealer‘s representations about the seller‘s offers as “color . . . regarding an ongoing negotiation.” J.A. 537. Harrison explained, regarding order trades, that “[i]n this kind of negotiation with another end account where Nomura was the middleman, accurately relaying information back and forth would have been important, especially this kind of information regarding price level.” J.A. 351. In light of this corroborating testimony from other counterparties, Wollman‘s description of his expectations when Gramins acted in a “broker” capacity were hardly atypical.
Relevance under the
Views that are not “erroneous or idiosyncratic” do not implicate Litvak II‘s core theory that “the point of view of an investor who is admitted to be wrong” could not be “relevant to prove what a reasonable investor, neither confused nor incorreсt, would have deemed important.” 889 F.3d at 69 (internal quotation marks and citation omitted). And Wollman‘s testimony, for the reasons outlined above, was neither “erroneous” nor “idiosyncratic.” Id. at 59. Wollman‘s testimony therefore did not fall within the specific category of irrelevant testimony proscribed by Litvak II, and the district court erred in concluding otherwise. Instead, applying the standards for relevance described above, Wollman‘s testimony—that he credited Gramins‘s representations when Gramins acted in a “broker” capacity, facilitating order and BWIC trades—had some “tendency” to make it “more probable” that a reasonable RMBS investor would have found Gramins‘s lies significant in the course of his or her deliberations. The testimony was thus relevant to the jury‘s assessment of materiality under
Nor did Wollman‘s testimony advance the government‘s theory of materiality in an impermissible manner. As noted above,
To begin with, Wollman himself, when questioned on cross-examination about the RMBS trades he engaged in, unequivocally expressed an accurate understanding about the formal legal nature of those transactions. He acknowledged that in the trades he had described on direct examination, “there‘s two parts of th[e] transaction.” J.A. 714. Wollman agreed with defense counsel that “Nomura first has to buy the bond from the selling counterparty” and that Nomura “uses its own capital to do that.” J.A. 714. He also agreed that “once [Nomura] owns [the bond], it has it—owns it in its inventory for even a little bit of time or a long time and then it gets entered into a separate transaction where it sells the bond [to the purchasing counterparty].” Id. Wollman also repeatedly agreed with defense counsel‘s description that in both BWIC and order trades, “there‘s two separate transactions,” one in which “Nomura buys the bond from the seller, owns it, uses its capital,” and a second in which Nomura “then sells it to its customer . . . in a separate transaction.” Id. In light of this cross-examination exchange, in which defense counsel painstakingly clarified the legal structure of Wollman‘s RMBS transactions with Wollman‘s unhesitating agreement, it is difficult to see how Wollman‘s testimony on direct examination—none of which claimed an agency relationship with Gramins or, indeed, even alluded to any propositions of agency law in the first place—could have misled or confused the jury as to the agency issue.
Furthermore, every legal authority present in the courtroom—prosecutors, defense counsel, and judge—expressly and repeatedly informed the jury that no agency relationship existed between Wollman and Gramins. The government specifically disclaimed the existence of an agency relationship on summation, informing the jury, “Nobody‘s clаiming here that anybody is a fiduciary. The only person who has mentioned the word ‘fiduciary’ in this trial is the defendants. We‘re not claiming that.” J.A. 836. On rebuttal summation, the government explicitly premised its argument on the absence of an agency relationship, arguing to the jury, “Just because you‘re not someone‘s agent, doesn‘t mean you get to rip them off.” J.A. 898 (emphasis added). Defense counsel also repeatedly hammered on the absence of a fiduciary relationship between the defendants and their counterparties, in multiple instances that the jury could not plausibly have overlooked or even disbelieved. See, e.g., J.A. 847 (“Every single trade that is charged in this case involved an arm‘s length principal-to-principal transaction.“); J.A. 848 (“Nomura never acted as an agent or an adviser and they never had a fiduciary duty.“); J.A. 861 (“So here the Court instructed you that, as a principal, the defendants owed no duty of loyalty to the counterparties and were acting in their own self-interest, not the interest of the counterparties.“); J.A. 874 (“We know this is a principal-to-principal market, you‘ve heard it several times, everybody for
And nowhere was that clearer than in the district court‘s own instructions to the jury. Indeed, the court explicitly instructed the jury, on multiple occasions, that Gramins and his co-defendants were not agents or fiduciaries for any of their counterparties in any of the RMBS trades at issue. At the start, during the government‘s case, the court gave the jury a lengthy explanation of the term “fiduciary” and the legal concept of fiduciary duties. The court then instructed the jury that “[t]he government does not claim that the relationship between Nomura and the counterparties involved in this case . . . was a fiduciary relationship, nor does the government claim that the individual defendants were in a fiduciary relationship with the counterparties.” J.A. 326. The district court then further explained that “both sides agree that Nomura and the counterparties acted as principals, meaning that in each instance each one acted in its own interest.” J.A. 326.
The court‘s final instruction to the jury, immediately preceding its deliberations, explicitly reiterated that the defendants were not agents of their counterparties. The district court explained the difference between an agent and a principal and then stated, “I instruct you that, as a matter of law, the defendants were at all times acting as principals on behalf of Nomura and not as the agent of the counterparties.” J.A. 828. The court further explained that “when a defendant bought an RMBS bond from a counterparty, he was not the agent of that seller; and when a defendant sold an RMBS bond to a counterparty, he was not the agent of that buyer.” J.A. 828. Finally, the court explained, “[a]s a principal, the defendants owed no duty of loyalty to the counterparties and were acting in their own self-interest, not the interest of the counterparty.” Id.11 The district court therefore repeatedly and сorrectly emphasized to the jury Gramins‘s formal status under the law.
We reject as implausible the notion that the jury may have discarded these straightforward and comprehensive jury instructions, along with supporting statements of the law from attorneys on both sides, in favor of the contrary and erroneous legal conclusion that Gramins acted as an agent for his counterparties or owed them fiduciary duties arising from his RMBS transactions. See United States v. Snype, 441 F.3d 119, 129–30 (2d Cir. 2006)
C.
The district court reached a contrary conclusion for two reasons that we will specifically address here. First, the district court concluded that Wollman‘s testimony “strongly implied” the existence of an agency relationship between himself and Gramins. S.A. 14. But as described above, the excerpts from Wollman‘s testimony highlighted by the district court merely served to distinguish between two categories of RMBS trades—one in which the broker-dealer purported to match a buying counterparty with a selling counterparty (order or BWIC trades) and another in which the broker-dealer purported to deal directly with a single counterparty (inventory trаdes). The government had the right to introduce testimony that RMBS counterparties treat a broker-dealer‘s representations differently in these two contexts.12 While such testimony does not address the fact that the same legal relationship between broker-dealer and counterparty obtains across these various trade contexts, the defense was free to (and did) emphasize that fact on cross-examination and on summation. The relative significance of these facts about the RMBS market to the “reasonable investor” standard by which materiality is determined was for the jury to decide.13
Second, in explaining its expansive construction of Litvak II, the district court relied on our statement in that opinion that “[t]he government‘s concept of subjective trust as evidence of materiality became a back door for the jury to apply the heightened expectations of trust that an agency relationship carries.” Litvak II, 889 F.3d at 69–70. But read in context, that statement referred to the government‘s attempt at Litvak‘s trial “to cabin the effect of Norris‘s testimony” by arguing instead
In light of the foregoing analysis, we conclude that the district court‘s decision to grant Gramins a new trial was based on an overbroad reading of Litvak II and therefore “cannot be located within the range of permissible decisions.” Zervos, 252 F.3d at 169. We sympathize with the district court; this novel form of prosecution has raised issues of first impression and our two prior precedents on the subject are at times obscure.14 Nevertheless, we conclude that admission of the Wollman testimony to which Gramins objects did not violate
III.
The above analysis shows why the district court‘s admission of Wollman‘s testimony at Gramins‘s trial did not violate the
We agree with Gramins regarding the first factor: the “overall strength of the prosecutor‘s case.” Id. “Materiality was an issue central to [Gramins‘s] cаse and was hotly contested at trial.” Litvak I, 808 F.3d at 184. As we explained in Part I, supra, the materiality question here is inherently difficult, both sides presented complex and opposing theories of materiality to the jury, and the jury ultimately decided that question on the basis of several days’ testimony from which competing inferences could have been drawn. Accordingly, the first McGinn factor is at best a wash for the government. Nevertheless, we deem any error harmless on the basis of the other three factors.
With respect to the second factor, “the prosecutor‘s conduct with respect to the improperly admitted [testimony]” was not inappropriate or otherwise unfair to Gramins. McGinn, 787 F.3d at 127. Quite the contrary. As explained above, the prosecutors actively took steps to disabuse the jury of any mistaken notion that Gramins acted in a fiduciary capacity. See, e.g., J.A. 836 (government summation) (“Nobody‘s claiming here than anybody is a fiduciary. The only person who has mentioned the word ‘fiduciary’ in this trial is the defendants. We‘re not claiming that.“). Even when the defendants themselves used terms like “agent” or “broker” in describing their role, the prosecutors explicitly disclaimed any associated legal conclusions when referencing that testimony. See, e.g., J.A. 839 (“[Peters] [t]alks about trading both in agented roles, his word and not mine, and by taking position risk. Two different roles they played in the market.” (emphasis added)). The prosecutors placed no undue reliance on Wollman‘s supposedly erroneous testimony, nor did they actively seek to imbue the jury with the mistaken impression of the law that that testimony supposedly conveyed.
As to the third factor—the testimony‘s “importance,” McGinn, 787 F.3d at 127—the recоrd does not support the conclusion that Wollman‘s testimony supplied the crucial difference resulting in the jury‘s sole conviction of Gramins. Because Wollman‘s testimony concerned only trades with Gramins (and not with any of his co-defendants), and because only Gramins was ultimately convicted of any charges, Gramins urges us to draw the inference that Wollman‘s supposedly erroneous testimony differentiated Gramins from the other defendants in the jury‘s eyes. We question the basis for that inference. Because materiality is evaluated by an objective, “reasonable investor” standard, any testimony relevant to this standard would necessarily affect the case against all three defendants.
Moreover, a much more obvious inference exists to explain the different results. Materiality was not the only significant issue at Gramins‘s trial; the parties also hotly contested intent. See, e.g., J.A. 829 (government summation) (“So [this] again takes you back to those two questions: Materiality and intent.“). And on that issue, Gramins was clearly not similarly situated to his co-defendants. That is because only one of the trades referenced at trial—the JPMAC trade—occurred after the Litvak indictment, and that trade involved only Gramins. The fact that the JPMAC trade postdated the Litvak indictment provided strong evidence for Gramins‘s consciousness of wrongdoing. See, e.g., J.A. 268 (Litvak indictment was “something everyone was aware of” in the RMBS industry); J.A. 301 (describing a compliance training session, which Gramins attended, “held specifically to discuss the conduct at issue in the Litvak indictment“). No similarly strong mens rea evidence was present for the other defendants, and the jury
We note, additionally, that this understanding of the verdict finds strong support in the parties’ closing arguments. Shapiro‘s counsel, for instance, repeatedly emphasized that Shapiro had not engaged in any deceptive trading practices subsequent to the Litvak indictment and associated compliance session. See, e.g., J.A. 868 (“[I]n 2013, there was a compliance session. . . . There‘s not a shred, not a shred, of evidence that [Shapiro] ever used these tactics, ever, after that session, or at all in 2013, even before the session.“); J.A. 870 (“The only evidence [on intent] is, as soon as [Shapiro] was told you can‘t engage in certain tactics, the desk stopped doing it, he directed people to stop doing it.“). Not only that, but Shapiro‘s counsel even specifically emphasized that Shapiro had not participated in the JPMAC trade, effectively pointing the finger toward Gramins by the contrast. See J.A. 869 (“And what about that November 2013 trade? Well, [Shapiro] wasn‘t even involved in that trade.“). Even Gramins‘s own counsel could not help but repeatedly emphasize the Litvak indictment as the temporal dividing line between culpable and non-culpable conduct. See, e.g., J.A. 880 (“The bottom line is, until Litvak, nobody realized that what they were doing could be construed as wrong or criminal.” (emphasis added)); J.A. 880 (“But until Litvak, they never told anybody, you can say this in a chat but you can‘t say that.” (emphasis added)). This repeated emphasis on a category of evidence unique to Gramins further supports the inference that mens rea (and not materiality) likely made the difference in his conviction.
Finally, with respect to the fourth McGinn factor, we сonclude that Wollman‘s testimony was indeed “cumulative of other properly admitted [testimony].” McGinn, 787 F.3d at 127. Every counterparty witness testified to the differences between order (or BWIC) and inventory trades, and all of those counterparty witnesses corroborated Wollman‘s testimony that a reasonable investor would have different expectations for his broker-dealer in those two contexts. See, e.g., J.A. 744 (Marks); J.A. 537 (Abbas); J.A. 351 (Harrison). The fact that Wollman may have placed additional emphasis on this distinction, or discussed it at greater length, makes no difference. In light of the above analysis, and our conclusions on three of the four McGinn factors, we conclude that any error in the admission of Wollman‘s testimony was indeed harmless.
IV.
Gramins also moved for a new trial on the basis of two statements from the government‘s rebuttal summation: one referencing RMBS trades not in evidence and another instructing the jury that “lying to take people‘s money” would constitute fraud. We agree with the district court that neither of these statements alone requires a new trial. See S.A. 11 (reference to uncharged trades “drew an immediate objection, which was addressed through two curative instructions“); S.A. 12 (finding that “it does not appear that [the prosecutor‘s] oversimplification of the law was calculated to inflame the jury,” nor that “the jury was misled“).
The district court, however, also concluded its opinion with a cursory analysis, contained under the heading “Cumulative Prejudice,” stating as follows: “Even if the admission of Wollman‘s ‘point of view’ testimony, standing alone, does not justify vacating Gramins‘s conviction, the combination of errors described above justifies a new trial.” S.A. 20. Because we conclude that the admission of Wollman‘s testimony did not constitute error at all, we necessarily
CONCLUSION
For the foregoing reasons, we REVERSE the district court‘s order and REMAND with instructions to reinstate the conviction.