*1 rather than slaughter several sentences of
twenty-five years America, life for murder. UNITED STATES of argues credibility Davis that his is bol- Appellant, because, evidentiary stered hearing below, he admitted things some were him, detrimental to and therefore the court CASSESE, Defendant-Appellee. John J. testimony
should credit his that he would accepted if plea properly have No. 03-1710. credibility argument informed. This is se- Appeals, United States Court of
verely undermined the fact that Davis Second Circuit. admitted at the hearing also that he had point lied under oath at during some Argued: Nov. 2004. underlying proceedings. simply Davis does not offer sufficient evidence con- Decided: Oct. vince us the district finding court’s clearly erroneous.
Because we find no clear error in the
district court’s factual determination that
Davis would proffered the statements properly
even Nash had informed him of
the consequences, we conclude Davis
has not prejudice satisfied Strickland’s
prong. Davis has not established a rea- probability
sonable for” “but Nash’s
failure to inform Davis about the risks of
proffering, Davis would not have accepted Strickland, plea. See U.S.
the “ultimate decision[ ]” the state
summarily denying Davis’s ineffective as- merit,
sistance of counsel claim for lack of
was not an “unreasonable application” of Aeid,
Strickland.
See
Accordingly, although we conclude that
counsel’s failure to warn Davis about the
risks of proffering was unreasonable under circumstances, we affirm the district
court’s denial of petition. Davis’s
CONCLUSION reasons,
For foregoing denying district court the writ is
affirmed. *3 Glaser,
Steven R. Assistant United (Deirdre Attorney States McEvoy, A. Stein, Siegel, Gary Adam B. Assistant brief) United Attorneys, States on the for David Kelley, N. United Attorney States York, for the Southern District of New York, NY, New Appellant. for Shapiro, sequently, A.E. Latham Wat- we affirm Alexandra & of ac- (David LLP, York, quittal. N.Y. M. kins New
Brodsky, Kelly-Najah, A. Noreen Jennifer brief), for Background Herring,
L. on the Defendant Appellee. CALABRESI, PARKER, Before: B.D. Cassese was the and Presi- Chairman RAGGI, Judges. Circuit Computer dent of Corporation, Horizons Jersey-based New information technology PARKER, JR.,
B.D. Judge. Circuit company. services In April Comput- *4 er Horizons merger entered into discus- appeals The Government a of sions a Compuware, publicly with traded acquittal in the United States District business, in company the same of line and for the Southern District Court of New meeting a between executives of the two J.) (Sweet, following York of conviction companies resulted in proposal by a Com- 14(e) J. violating John Cassese for Section puware purchase Computer to Horizons. Exchange Securities Act of 1934 The proposal consisted of letter of intent Act”) (“1934 Exchange by and Rule 14e-3 proposed confidentiality agreement, with a committing fraud in connection ten- with both of which were to Computer forwarded 78n(e), 78ff; §§ der offer. U.S.C. See 15 4,May Horizons on Compuware’s 240.14e-3(a). § 17 C.F.R. The Govern- Barry investment banker Goldsmith. See Cassese, ment charged that CEO Cassese, 290 F.Supp.2d Computer Corporation, illegally Horizons (S.D.N.Y. 2003) Nov.13, (Cassese 15,000 purchased shares of Data Process- II). (“DPRC”) ing Corporation Resources stock after he learned from Compuware Intent, In the Letter of Compuware of- it planned acquire DPRC. Computer fered per Horizons share $22.50 outstanding for all and shares stated that On appeal, Government contends place the transaction would take through District erred in requiring Court either a tender offer or a cash merger. Compu- of Cassese’s belief that the personally gain Cassese stood mil- $33 was, likely transaction or was ware/DPRC in gone through. lion cash the deal had be, offer, structured tender and Computer The Board Directors of Hori- Government needed to show rejected Compuware’s zons offer as too Cassese believed his transactions un- were low, but Cassese continued discuss the prove willfully. lawful to acted with merger May Goldsmith. Later it Government also contends that ad- Cassese Goldsmith called and told duced sufficient evidence of will- him unlikely Compuware that was fulness, and, the District Court acquire Computer would Horizons at that grant- its conditionally abused discretion time. ing trial. Cassese a new We do not reach contentions, the first or third these be- that Compuware At about the same time cause we that the merger conclude Government— had initiated discussions with Horizons, giving presumptions it all it is Computer to which it also contacted beyond- possibility merger. entitled-—failed to a reason- about the of a DPRC willfully publicly company able doubt that Cassese violated was a traded Rule 14e-3 even under the more relaxed that was similar based on West Coast it proposes. Computer definition of willfulness Con- and lines of size business Compuware merger Horizons. DPRC and met in the announcement and the current April May begin- and trading price of the stock. Moschella tes- June, Di- ning of the DPRC Board of tified at trial that sounded sur- approved merger rectors the two him prised when Moschella told about the companies. id. See tender offer announcement. asked Moschella to sell the DPRC shares 17, 1999, June asked the
On Goldsmith account, in Morgan Stanley and Cass- Compuware, Chief Executive Officer of Karmanos, $49,000 Jr., profit ese made a of approximately Peter to call Cassese to Compuware inform him that going Approximately twenty on the sale. min- buy company Compuware another and that later, utes Cassese called Donald Pizzutel- might acquiring be interested in Computer (Michael partner) lo Pizzutello’s father and point Horizons at some in the At future. him to asked sell the DPRC shares call, phone the time he made the Karma- Lynch his Merrill account. Cassese made company’s nos had not been involved in his $100,000 profit of almost on this second negotiations Computer Horizons and sale, contributing to profit a combined was not aware an offer had been $149,000. about Sometime after Donald *5 21, Computer made to Horizons. On June Pizzutello sold in Cassese’s DPRC shares 1999, spoke Karmanos with Cassese account, Lynch the Merrill Cassese asked phone him Compuware and told would trades, him if he could cancel the and doing not be Computer deal with Hori- Pizzutello told him that the trades could time, at that might zons but be interested not be undone. When interviewed FBI in purchasing it in During the future. later, agents years several Pizzutello did conversation, Karmanos told also Cassese asking not remember him if Cassese Compuware going was to announce a However, could cancel the trades. deal with but not divulge any DPRC did Pizzutello told Cassese about the inter- details about the terms or structure of the view, Cassese reminded him of the cancel- proposed transaction. lation call urged and him to call the FBI 22, 1999, Cassese, day, The next June back and straight, set the record which previously who had owned shares of Pizzutello did. DPRC, 15,000 purchased shares of DPRC In August approximately
stock in in two his own name two of his broker- age months after Joseph accounts. He called Cassese’s DPRC transac- Moschel- la, tions, a friend of his son’s and a broker at Cassese and Goldsmith discussed Morgan Stanley, stock, but could not reach him. of DPRC and Pizzutello, He then called Michael his bro- Goldsmith testified at trial that he recalled ker at Lynch, placed Merrill and an order Cassese him admitting during that con- 10,000 later, for shares. A short time versation, substance, that “he had made back, when Moschella called him Cassese (Tr. 206). stupid mistake.” Goldsmith placed 5,000 for order an additional explained in testimony his that he under- and, shares of order to cover the stood Cassese to mean that he had done cost of purchase, sold another stock done,” something that “he should not have portfolio. but Goldsmith did say- not recall Cassese 24, 1999, ing On that he felt anything June done Compuware an- (Tr. 251-52). wrong. nounced that it would make a tender offer Goldsmith also for all outstanding impression shares of DPRC. Later testified that he had the Cass- day, Moschella informed ese “upset angry” Cassese but that it was (Tr. 208-09, why. to him guilt. not clear 252- cence and This motion was denied 53). at prejudice that time without to its later renewal. Following verdict, the guilty
II
Cassese renewed his
motion,
Rule 29
25, 2002,
Judge
which
granted
Sweet
in a
February
thoughtful
On
the SEC filed a
opinion.
II, 290
complaint against
F.Supp.2d
for
Cassese
at
Cassese
insider trad-
445.
ing in DPRC securities. Cassese consent-
The District Court concluded
him,
entry
judgment against
to the
ed
14(e)
prosecutions
criminal
under Section
agreed
pay disgorgement
and
in the
14e-3,
and Rule
where no other securities
$150,937.50,
prejudgment
amount
inter-
laws
alleged,
violations are
the Govern-
$19,512.84,
penalty
est of
civil
of ment,
prove willfulness,
must prove that
II,
$150,937.50.
F.Supp.2d
Cassese
the defendant believed that
the material
non-public information he traded
re-
upon
year later,
A
in March
to,
to,
lated
or most likely related
a tender
was indicted on two counts of insider trad-
II,
offer. Cassese
ment required, prove was but any that Cassese knew the a If a person transaction was has taken substantial commence, offer step tender and that the Government’s or com- steps has menced, ..., of criminal evidence intent was circumstan- it shall con- tender offer innocence, fraudulent, tial and consistent with his or at deceptive stitute or ma- most, equally practice supported nipulative inferences of inno- act or within the
98 14(e) But even under Government’s of the Act for offers.
meaning of section
criminal
we
liability,
con-
possession
theory
is in
relaxed
person
other
who
any
enough evi-
relating to
clude that it did not adduce
material information
such
beyond a
doubt
he
dence to
reasonable
which information
tender
offer
acting
believed
nonpublic
...
and which
knows
directly
unlawfully.
acquired
... has
knows
been
parties
indirectly
one
[from
II
involved in the tender offer
securities].
or sell certain
Following
verdict of
240.14e-3(a).
§
17 C.F.R.
judg
court’s
guilty, we reverse a district
of insufficient
acquittal
grounds
ment of
although
To
note that
begin, we
“after
we determine that
view
liability
any
violation of
civil
follows
light
most
ing the evidence
favor
regardless
laws
of whether
the securities
rational trier
prosecution,
able to
willful, in order to estab
the violation was
the essential ele
of fact could
found
securities
lish a criminal violation
beyond
of the crime
a reasonable
ments
laws,
must show that the
the Government
Espaillet,
380
doubt.”
willfully.
15
defendant
acted
U.S.C.
(2d Cir.2004)
713,
(emphasis in
78ff(a).
F.3d
§
willful
This Court has defined
Virginia,
original) (quoting Jackson
“a
realization on the defendant’s
ness
307, 319,
99 S.Ct.
61 L.Ed.2d
U.S.
part
doing wrongful
that he was
act”
(1979)).
vein,
In
“the defendant
laws,
under the securities
United States
sufficiency of the
challenging
who is
(2d Cir.1970),
Peltz,
in a
“
(in
heavy
Id.
evidence bears
burden.”
knowingly
situation where
‘the
omitted).
quotation
ternal
marks
Howev
wrongful
significant
act involved a
risk of
”
er,
heavy
the defendant’s
burden is not
occurred,’
effecting the violation that has
judg
insurmountable. A district court’s
Fugazy,
Metromedia Co. v.
if “no
Cir.1992)
acquittal
upheld
ment
must
Peltz,
(quoting
rational trier of fact could have found the
55).
*7
beyond
guilty
defendant
a reasonable
it
argues
The Government
that was not
Jackson,
v.
doubt.” United States
335
to
required
prove
Cassese believed
(2d
170,
Cir.2003);
also
180
see
Unit
law,
violating
particular
that he was
nor
Glenn,
(2d
ed
312 F.3d
States
violating
that he knew he was
a rule that
Cir.2002).
governed trading
specifically
related
to a
Instead,
we,
applying
principles,
offer.
the Government
In
these
tender
contends,
course,
proof
usurping
all that was needed was
are careful to avoid
Rule
beyond
doubt that
role of the
since
29 “does not
reasonable
Cassese
committing wrong- provide
opportunity
realized that he was
the trial court with an
...
ful act.
contends that
to substitute its own determination of
The Government
weight
showed that Cassese believed the
and the reason-
the evidence
evidence
it
to
to
drawn for that of the
was unlawful
trade securities based
able inferences
be
718;
Espaillet,
see
upon
pur-
jury.”
insider information when he
380 F.3d at
also
shares,
Guadagna,
and that this realiza-
chased DPRC
United States
Cir.1999).
Additionally,
to
viola-
and of
enough
tion was
establish a willful
importance,
tion of Rule 14e-3 even
he was not
critical
the evidence must be
Glenn,
in
at
regu-
totality,
aware that the trades violated a rule
viewed
its
may gain
fact
color from
lating trading in connection with tender
“as each
others,”
summated,
But
Guadagna,
proof
Here, question is whether the evi- shares potentially unlawful. dence, entirety, viewed its was sufficient jury’s finding that Cassese analyzing Before the Government’s evi- willfully violated the securities laws. The dence, helpful it is keep mind provided Government contends sub- context in which the trades In occurred. that, point stantial evidence on this viewed shares, purchasing the DPRC Cassese did permissible as a whole and with all infer- any not breach fiduciary nor duty, did he favor, ences drawn its supported misappropriate any confidential informa- verdict and that the District Court erred I, tion. See Cassese F.Supp.2d at 485- when it reached a different conclusion. 88. The information Cassese had received disagree. We was not related to Computer Horizons any The Government’s trial company in which he could be con- willfully Cassese violated a criminal law sidered an insider virtue of director- (1) pieces consisted of five ship evidence: otherwise. Accordingly, he was accounts; Cassese’s use of two brokerage legal duty under no to refrain trading (2) (3) timing purchase; of the DPRC on the information being virtue trades; insider, Cassese’s desire to cancel keep Finally, or to it confidential. Goldsmith; significantly, Cassese’s conversation the Government did not Confidentiality Proposed does not —and contend— II, Agreement. traded, F.Supp.2d he knew DPRC would 452 - 456. subject of a tender offer. In other words, proved contends it Government argues The Government this evi- despite willfulness the lack dence, together, when taken demonstrates signals warning put traditional that would First, Cassese’s willfulness. use ought one notice that he to refrain from multiple accounts suggests he was *8 trading. attempting activity. to conceal his unlawful Second, evidence that he to tried undo Brokerage Cassese’s Use of Two Ac- “break” the trade at and the fact that counts point trade, some after the told he Gold- smith that he had amade “mistake” when The argues Government stock, purchased he permitted DPRC demon- to conclude .that Cass Third, strate his of guilt. placed separate consciousness smaller in ac ese trades sig- the fact that Cassese stood to receive counts in to of order reduce risk detec the. personal nificant financial in the of benefits tion conduct he believed to be unlawful. event of a Compuware-Computer Hori- It rests fact this conclusion transaction, zons his anger purchased through and when he Cassese DPRC shares accounts, learned the transaction would not be con- brokerage two different and that fact left a The that Cassese only instance in which commission. this was the only placed mul- for Moschella and an purchased security through message the same back, called after day. on the same order with him when he tiple accounts already Pizzutello had instructed Cassese is, stated, frivo- argument simply This is, shares, again, to DPRC en- It commonplace lous. for investors innocence. More to tirely consistent with different maintain accounts with broker- of point, the circumstances under brokerage houses Brokers and dealers. case, accounts the existence the two specialities. strengths have and different intent. proof no of criminal provided viable objectives, re- strategies and Investment making change years, in purchased sults over shares Cassese natural, changes name, in and indeed through brokers not a nominee. his own common, and dispute occurrence. Brokers come The did not Government go, many aware, choose to leave consequence years and investors was well as investor, relationships to desuetude rather than paper generated as an trail Consequently, for num- by trading activity, including sever them. confirma- personal as as monthly ber of well investment-relat- slips tion and the statements he reasons, many great prefer investors ed The received home. Government’s con- relationships multiple to maintain thought tention that trades of Cassese two long 5,000 brokerage 10,000 $132,500 houses. Since had costing Cassese and shares firms, and in the $66,250, had accounts several costing respectively, shares would in past undetected, 15,000 different held same stock go that a trade of but accounts, pur- not, use two $198,750 his accounts costing shares would is not in the ab- chase DPRC shares —at least plausible since the two trades have would proof of more from the sence Govern- generated paper twice the trail of the sin- easily Moreover, ment —could been result gle transaction. sizes random circumstances. DPRC transactions consistent with were trading prior practices. For ex- Cassese’s ini- The evidence reveals Cassese ample, he had effected trades as previously place an tially called Moschella order $300,000 Morgan high Stanley as his Morgan Stanley but his account did $400,000 high and account as then reach him. Cassese called Pizzutello Lynch Merrill account. are baffled as We 10,000 placed an for shares of order why the Government believes con- And DPRC with his firm. when Moschella substantially duct that increases the risk of call, returned his told him to sell can, time, apprehension at the same consti- company pur- and to his shares another tute of concealment. 5,000 DPRC, thereby shares real- chase izing on the sold shares profit substantial Attempt “Break the giving his son’s friend a commission. Trade” It is reasonable to conclude initially may argues to ask also have intended Government purchase, placed Moschella to asked make because Cassese Donald Pizzutello *9 order with Pizzutello when he could to undo the trade sometime after Pizzutel Moschella, then and lo sold reach and went ahead the DPRC shares Cassese’s Mer account, Lynch placed properly second order rill with Moschella when he called infer that it was unlawful to back because Cassese Cassese knew profit purchase wanted his on another when he to realize DPRC shares did. give unpersuaded. and to son’s friend a Here too we The fact investment are ning about conceal inquired canceling sought that Cassese later Cassese the trade— only a supplies highly, implausible the trades modicum of it is urge he would information about his intentions at the rel- Pizzutello to correct his statement to the is, bought time—that he evant FBI about information the Government re- is so since Moschel- especially stock. This appeal on In gards damaging. any as so that Cassese testimony la’s trial was was event, objectively, viewed this eonseious- surprised to hear the tender offer an- ness-of-guilt as evidence is consistent with Court properly nouncement. The District innocence as with To guilt. the extent attempt concluded that Cassese’s cancel Cassese sought to cancel the trade because the trades attitude on the day reflects his purchase he realized that the stock was stock, day he he bought sold the not the it. unlawful, equally it is possible he real- II, F.Supp.2d 454. Given ized this on day sought he to cancel the acting public on Cassese was informa- day purchase. trade as on the Even eventually tion when he sold DPRC accepting arguendo the Government’s shares, specifically and pro- Rule 14e~3 analysis, this bit relatively of evidence does information, trading non-public scribes little to advance the Government’s case to only day purchased his mind set on the he beyond-a-reasonable-doubt threshold. If the shares is relevant. Cassese did not purchase realize the was unlawful until (3) Cassese’s Statement to Goldsmith day June tender offer 24—the was argues The Government that based publicly sought announced—and break testimony that on Goldsmith’s Cassese ad reason, the trade for that he would not him mitted to that “he had made a stupid willfully have Rule 14e-3 when violated mistake,” entitled was to infer Furthermore, purchased the shares. that Cassese admitted had effect that he District correctly although Court held that purchased while knowing DPRC stock evidence of after-the-fact consciousness of wrong it was guilt may independent probative disagree. to do so. We force, may Goldsmith strengthen sup- inferences testified that had a evidence, plied by “vague other pieces such recollection” and recall “[didn’t] (Tr. evidence is “insufficient on which to specific conversation. words” of the 208). guilt convict where Moreover, other evidence is he testified he did weak and the before the court evidence admitting not recall wrong hospitable interpretation as to an consis- doing. Most importantly, conversation tent with the innocence it defendant’s place with Goldsmith took two months af theory to the guilt.” Government’s purchased ter Cassese the stock. Even Johnson, with the along when considered Govern (2d Glenn, Cir.1975); 69; evidence, ment’s Goldsmith’s other testi Scheibel, see also United States 870 F.2d mony is weak as to evidence Cir.1989). purchase, at the time state mind day for even Cassese realized one after addition, In guilt the inference of making that was mistake Government draw is further un- seeks to potentially do so because it was unlaw testimony dermined Pizzutello’s that it ful, violating he would not liable for Cassese who him of the reminded Viewing him Rule 14e-3. this bit urged cancellation call to call the light FBI favorable the Govern straight back to set the record re- most ment, may garding the call. If in- the fact that Cassese have felt the Government’s ference he made a months after the begin- were correct —that mistake two *10 specific the makes, best, Again I don’t recall modest of A: the most
trades words, impression that but that was the respon- to Government’s contributions the to beyond a reasonable I talked him. sibility got I proving the willfully violated doubt that Cassese (Tr. 208). Further, was never Goldsmith laws. securities what, if anything, as to Cassese certain The Court made about. District was upset Motive to Cassese’s Evidence as about the Government’s two observations that the argues The Government First, Goldsmith’s testi- theory motive. rely on ad jury properly evidence to the Government’s mony did little Cassese’s motive. regarding duced at trial Second, the Government theory. even had points to the Government Specifically, an- by that motivated proved Cassese was financial stake in substantial not prohibit do ger, securities laws “[t]he Compuware-Computer completion of the they stock when people purchasing ($33 million), and his transaction Horizons II, F.Supp.2d angry.” Cassese are following collapse. As anger the deal’s Both are correct. Pur- observations motive, the further Gov proof Cassese’s consequence anger does chasing as on testi ernment also focuses Goldsmith’s to violation of the securi- equate not willful to him mony acknowledged that Cassese ties laws. when he anger that he was motivated the DPRC shares. decided Agreement Confidentiality The claims that Specifically, the Government Confidentiality Pointing that he admitted to Goldsmith Cassese along with Agreement faxed he purchased stock because was DPRC Intent, May 1999 Letter of which upset company the fact that his was about trading in specifically upon warned that purchased. going to be pursuant merger ne formation received This contention the Government might gotiations Compuware violate evidentiary predi- rests on thinnest laws, argues the Government the securities cates. testified: Goldsmith permitted to infer that that the was Q: you spoke John Cassese When Confidentiality Agree Cassese read August your is it recollection ment, on specifically notice was upset, that he was or is that he said purchases of DPRC shares based your conclusion? il Compuware would be information from I A: I have a recollection. don’t vague established legal. Although evidence words, if those the actual but know were document, Cass that Cassese received the my impression of what took document, signed ese never away. he no evidence that Government adduced in properly it. District
read Court con Q: structed the it should respect question to the With Confidentiality Agree you proposed asked at the end about sider your had been shown conversation with Mr. Cassese ment II, 290 August, say you did in words or read document. Cassese n. we bought presume at 455 12. Since F.Supp.2d that the reason he substance instructions, jurors follow Court’s stock on June 22nd was that Joyner, States upset Compuware-CHC abut see United (2d Cir.2000), and since there Computer going Horizons deal not 69-70 no in the record through? simply *11 document, RAGGI, Judge, Cassese read the we are confi- Circuit dissenting. part jury’s that it no in the played dent appeal On judgment from a ac- As the prop- deliberations. District Court quittal after a of guilty, verdict the jury concluded, Agree- the erly Confidentiality government challenges the district court’s probative respect ment “has no value with construction of for purposes “willfulness” II, intent.” Cassese Cassese’s of Securities Exchange Commission at 455.1 F.Supp.2d (“SEC”) 14e-3(a). Rule See C.F.R. Since few events the life of an individ 240.14e.3(a). § The district court conclud- importance ual of a assume the criminal ed that required govern- willfulness the conviction, “beyond take we the a reason defendant, ment the that John J. with requirement able doubt” utmost seri Cassese, nonpublic knew that the informa- Here, we ousness. find the Govern tion on to, which he traded “related or ment’s evidence failed to reach to, likely offer,” most related a tender above, threshold. As discussed viewed government which the failed do. Unit- by each singly, of the areas the Cassese, ed F.Supp.2d States Government was characterized modest 450, (S.D.N.Y.2003). The majority evidentiary showings, attenu equivocal or unnecessary issue, finds it to reach this guilt ated evidence of or combination of concluding even willfulness the three. importantly, More the requires proof generally that Cassese un- totality, evidence viewed its evi actions, derstood unlawfulness of his of willfulness dispel dence is insufficient to carry failed to its burden. on part reasonable doubt of a reason agree Because I do not either with the able light fact finder. Viewed most majority’s sufficiency conclusion or with evidence, prosecution, favorable to the the district court’s construction of willful- best, gives “equal nearly equal cir 14e-3(a), ness it applies as Rule I re- theory guilt cumstantial to a spectfully dissent. innocence,” theory
and a and thus “a necessarily reasonable must entertain 1. Majority’s Conclusion that Glenn, a reasonable doubt." 312 F.3d at Government Failed to Prove Willful- (citation omitted). ness a. Sufficiency Review
Conclusion reasons, foregoing For the affirm the “Willfulness” is the element con- we 14e-3(a) acquittal. District Court’s verts a civil violation of into Rule Government, law, Finally, argument, at oral the Government adduced no evidence emphasized prior experi- showing participated Cassese’s business Cassese ever ain important supporting any familiarity ence its the- tender offer or that he had ory argues pertaining willfulness. The Government laws with the to tender offers. In event, easily that the entitled infer that the we conclude publicly company prior CEO of traded experience with twen- a fact with as consistent ty-seven years experience of business would his innocence as theo- with Government’s ry guilt. familiar with securities laws have believed are manner which trades monitored was entitled-to trade Karmanos' infor- regulators, sup- company, securities and that his actions relate mation since did not deal, port theory willfully that he violated was not involved in the he had no However, although fiduciary relationship securities laws. the Gov- with Karmanos Compuware, ernment's evidence establishes that Cassese and he had no reason to believe aspects was familiar some of securities the transaction would be tender offer. *12 104 78ff(a) as suited ing “especially mens rea issues § felony
a
crime. See 15 U.S.C.
any
jury”).
a trial
willfully violates
for resolution
person who
(“Any
...,
or
rule
chapter
of
provision
this
Moreover,
reviewing
must
a
court
exam-
the
regulation
or
thereunder
violation
light most
ine the evidence in the
favorable
upon
unlawful ...
shall
which was made
every
rea-
government
to the
credit
more
than
fined not
conviction be
jury
the
sonable inference that
20
$5,000,000,or
not more than
imprisoned
See, e.g.,
in
favor.
States
drawn
its
United
both.”).
matter,
general
“As a
years, or
Cir.1999).
(2d
Walker,
326,
191
333
v.
F.3d
context,
in
a ‘will
when used
the criminal
favorable to the
The fact that inferences
a ‘bad
is
undertaken with
ful’ act
one
evi-
could also be drawn
the
defense
words,
a
In
other
establish
purpose.’
“the
no
because
task
import
dence is of
statute,
of a
‘the Govern
‘willful’violation
among
is
competing inferences
choosing
acted
ment must
that the defendant
jury,
reviewing
for the
not a
court.” Unit-
un
that his conduct was
knowledge
Salmonese,
608, 618
v.
352 F.3d
ed States
”
States, 524
Bryan
lawful.’
v. United
(internal
(2d Cir.2003)
quotation marks
1939,
184, 191-92,
141
U.S.
118 S.Ct.
Jackson,
omitted); see United States v.
v.
197
(quoting
L.Ed.2d
Ratzlaf
Cir.2003)
(2d
170,
(noting
335 F.3d
180
States,
135, 137, 114
510 U.S.
S.Ct.
United
judg-
may
that court
substitute its own
(1994)).
655,
vorable to the from evidence, the court must assume that such Further, the evidence showed that Cass- an inference was drawn. And the totali specifically ese was that trading warned ty evidence, including permissible all nonpublic relating corpo- information ato government, inferences favorable acquisition rate May unlawful. On jury would allow a rational find the 1999, only six challenged weeks before the charged proved elements of the crime be purchases, Compuware sent Cassese a yond doubt, a reasonable the court cannot Confidentiality Agreement with a along guilty set aside a verdict. proposing acquire Letter Intent Com- puter Horizons. Confidentiality The b. The Trial Evidence Willfulness Agreement stated: United States “[T]he my colleagues Unlike in I majority, securities prohibit person pos- laws totality conclude that the of the evidence non-public session material information would permit rational find willful- a company about from purchasing sell- ness beyond in this case a reasonable ing such company.” securities of Confi- doubt. dentiality Agreement warning at 3. This broad, extraordinarily reaching beyond the Background Cassese’s parties’ specific negotiations and even be-
The yond trading evidence indicated that Cassese was restrictions Rules 10b- investor, 14e-3(a). sophisticated regu- reasonably who traded 5 and A disputed has that he never knew he or that he traded on that to avail information possessed nonpublic resulting profit information about opportunity Com- himself of the DPRC, puware’s acquisition agreement with in advance of the market. stances, reasonably jury could a rational receipt of this warn- infer had, fact, re- on non- that Cassese reliance conclude ing subsequent that his Confidentiality DPRC purchasing Agreement, public information viewed the is, willful, charged done with he made the stock was such unlawful understanding that his actions were awareness so purchases, DPRC did laws. under the securities nonpublic trade on that it was unlawful to information. acquisition be- majority concludes otherwise The “no the record” cause finds to Undo the Cass- support an inference that
that could Effort Confidentiality Agreement. Trades ese read the *14 infer jury a can agree. cannot Whether receipt of While I think Cassese’s or is familiar with person has read that would, Agreement warning Confidentiality depends on the of a document the contents itself, jury to find permit rational totality See United of the circumstances. evidentiary willfulness, further (3d Brodie, 123, v. F.3d 156-57 408 States at- provided subsequent was Cir.2005) jury rea- that could (concluding despite his tempt undo DPRC trades sonably familiarity with infer defendant’s majority profitability.3 their obvious The noted, on a memorandum that contents of supports, that this evidence concludes face, see copy); he had sent a its that been most, an aware inference Cassese was Soto, F.3d v. 47 generally United States at the the unlawfulness of his trades Cir.1995) (2d 546, (recognizing that 550 them, he not at sought time undo totality must consid- of circumstances be purchases. time he made the initial infer- permissible in determining ered disagree. must ences). cases majority’s analysis relies on case, Confidentiality Agree- In this holding that circumstantial evidence of In- accompanying ment Letter and guilt notably consciousness of false excul Cassese, his directly to tent were sent — alone flight statements and patory Moreover, the doc- receipt undisputed. —cannot support guilty verdicts. There must junk uments not mail were unsolicited indicating some further evidence adduced busy corporate routine memoranda that charged the defendant’s commission Rather, the might ignore. chief executive Glenn, criminal acts. See United States important an busi- transmittals related to Scheibel, 69; F.3d at Computer acquisition ness matter —the (2d Cir.1989); United already which Cassese had Horizons—in Johnson, States part in which playing been active Cir.1975). enough. True But these cases interest.2 significant personal he had a that, if such actus reus evi do hold Further, there was direct evidence adduced, temporal there is some dence Letter accompanying Cassese had read the con jury’s limit on the consideration of Barry of Intent: testified Goldsmith sciousness-of-guilt establish him evidence Cassese discussed its contents with Indeed, flight or false excul day Trial Tr. at 186- mens rea. receipt. after its indicative totality patory 87. of the circum- statements were From two-day profit approxi- acquired Computer earned a Compuware If had Ho- 3. Cassese $149,000 proposed rizons the Letter mately purchases under terms and sales from his Intent, per- have realized a would stock. of DPRC gain $33 sonal in excess of million. knowledge and intent at the conversation, defendant’s from the context of this actions, he had understood time of those the evidence would Cassese to mean “[t]hat he stock in a charged bought company be irrelevant to the crime and that he Instead, 255; should not have done.” Id. at properly excluded. the law ad- see (permitting Fed.R.Evid. 701 lay opinion consciousness-of-guilt pre- mits testimony); see also United States v. Gar- cisely jury may properly infer because cia, (observing that the him- therefrom defendant believes lay opinion testimony assists crime, guilty charged self to be by affording it “an insight into an event is, which some constitutes evidence that uniquely available” a direct fact, Sand, guilty. 1See Leonard B. et participant). ah, Jury Modern Federal Instructions: Criminal, (flight), Instructions 6-9 6-11 Goldsmith’s testimony indicates (false statements) (2002). exculpatory So Cassese his realized “mistake” case, plain- in which other evidence purchased shares, the DPRC not merely ly placed established that Cassese had after fact. Goldsmith stated charged purchases, stock a rational Cassese told him he purchased reasonably DPRC shares infer from effort because he was angry about *15 Compuware’s failure to pursue acquisition to he undo those trades that believed that of Computer 14e-3(a) Horizons. guilty he was of the charged Rule crime, is, that, Q: getting your that that he believed at Without assump- into tions, trades, placed say time so in did Mr. Cassese anything he he did else about the of DPRC willful violation of federal securities laws. shares? Gordon, See v. United States (2d Cir.1993) A: (holding upset 906-07 He related that he was that defen- either angry .... knowledge partici- dant’s and intent to criminal pate in a conspiracy may be es- evidence, through
tablished circumstantial CXQ: say you [D]id he to words or “including] that exhibit a acts conscious- substance that the reason he guilt”); ness of see also United States bought the stock DPRC on June Perez, Cir.2004) upset 22nd that he was about (recognizing attempt that defendant’s to the Compuware-[Computer Hori- persuade a exculpa- witness to make false not going through? zon] deal tory probative guilty statements A: Again, I don’t the specific recall intent). knowledge and words, that impression but was the I got when I him. talked to (4) The Admissions to Goldsmith Trial atTr. 207-08. Still further willful- Cassese’s testimony this Viewing light in the most provided by Barry ness was Goldsmith’s government, to favorable I cannot testimony. trial It is apparent, even on a agree majority with that Goldsmith did record, cold that Goldsmith was a reluctant about, what upset know Cassese was Nevertheless, witness. testified nor with the district court that his testimo- after he alerted the appearance Cassese to ny government’s did little prove of his trades in letter from the motive, theory see United States Dealers, National Association of Securities Cassese, 290 at 457. A F.Supp.2d rational acknowledged making a “stupid jury could infer from testimony this purchasing Tri- mistake” those shares. his volunteered motive al Tr. at bought 207-08. Goldsmith also testified Goldsmith: he had the DPRC Court’s Alternative View 2. The District looking to diver- he was
stock not because upset his but he was sify portfolio, because of Willfulness own deal with failure of his about ruling, the district post-verdict In a observes, it majority Compuware. As the willfulness, pur- for concluded court one is because illegal buy is not stock 14e-3(a) violation, of a criminal Rule poses case, when, as in this upset angry. But more required (1) trad- knows he is upset purchaser general Cassese’s awareness than information; (2) knows nonpublic on ing purchases; of his unlawfulness stock such experience that from his business non- knew that the required proof (3) trading strictly has been policed; to a issue related public information Confidentiality Agreement) (by a warned v. Cass- tender offer. See United States trading nonpublic acquisition on ese, unlawful; If such “rela- subsequently F.Supp.2d 450.5 information is charged pur- undo stock attempts to his in fact tionship knowledge” required were chases; pur- these admits conviction, gov- mistake,” “stupid chases so were evi- conceded failure adduce ernment’s “he him to mean that listener understands alter- point provide dence bought company in a that he should stock ground affirming for native done,” I that a rational not have conclude I acquittal Accordingly, this case. beyond a doubt jury could find reasonable agree I briefly why do not explain willfully violated feder- purchaser that the court’s construction willfulness. district law.4 al securities Accordingly, respectfully dissent as to a. Established Precedents *16 judg- majority’s to affirm the the decision Willfulness ground that the acquittal ment of on the This court’s decisions in United States sufficient failed evi- government to adduce Peltz, 433 F.2d and United States dence to willfulness. prove 78ff(a). § respect to the relation- government The that Cassese’s will- U.S.C. With submits 14e-3(a), was fur- ship ful violation of federal securities law Rule district element of the brokerage by of ther his use two government evidenced charged simply court that the place the DPRC trades. If accounts to required prove at the was that time isolation, purchases dual were to be viewed in shares, purchased was "the defendant might agree majority the infer- with the that nonpublic possession of material informa- ence concealment to be drawn therefrom of relating to the offer for DPRC.” tion tender finding support too weak to a of willfulness willfulness, Tr. As the court Trial at 523. beyond a doubt. But the evidence reasonable instructed: and, therefore, does stand I cannot not alone [Tjlie law, conclude, prove Mr. must that a reason- as matter of that considering deliberately jury, intentionally able these somewhat Cassese acted atypical together totality trades with of something to do that the law the intent willfulness, indicating is, other forbids; purpose to diso- that with a bad give weight in find- not the dual trades some bey disregard the law. ing willfulness. he Mr. Cassese need not known that charged 5. The court had not district breaking any particular was law or necessary find that it was that only particular He have been rule. need nonpub- knew or had reason to know that the It aware the unlawful nature of his acts. of offer, to a ei- lic information related tender theory did not is the of defense 14e-3(a) gener- prove ther Rule violation requisite have this intent. ally of or to the willfulness element Id. at 528-29. 32(a) Exchange of the Act. See 15 Section Dixon, public 536 F.2d both authored information on which he traded re- Judge Friendly, prec stand as lated to a established tender offer. knowledge
edent
of
b.
Knowledge
The
required to establish a willful
of
Elements
Rule
violation
U*e-3(a)
Exchange
Act
is the defendant’s
general
awareness
unlawfulness
A
ground
second
for rejecting
dis-
his conduct. Peltz holds that willfulness is
trict court’s construction of willfulness is
proof simply
established
the defen
that it impermissibly expands the knowl-
knew
“he
doing wrongful
dant
14e-3(a).
edge elements specified in Rule
act,” provided
“knowingly
act
wrongful
states,
That
pertinent
rule
part:
a significant
effecting
risk of
involve[d]
If any person has taken a substantial
...
F.2d
violation
occurred.” 433
at
step
steps
commence,
or has. com-
55. Dixon reiterates this exact construc
(“the
menced
offer
offering
tender
tion of willfulness.
SEC
standard.” Id.
flexibly in
context of
fine fraud
area
tender
highly
and
sensitive
discrete
interpretation
its
agency’s
An
own
offers”).
generally
rules is
accorded considerable
indicates,
Tallman,
highlighted language
As the
380
deference. See Udall
U.S.
(1965)
employs
knowledge require-
16,
792,
rule
two
1,
S.Ct.
sue the of the source-knowledge c. The District Count’s Stated Ground dissent, burden however, further this a Stricter Construction Will- majority because the affirms the judgment
for
of acquittal
grounds.
on other
I
sim-
note
fulness
ply
if a court were to conclude that
Finally, the district court’s stated reason
government’s
construction of
for
requiring proof
relationship knowl-
source-knowledge
element raised
ab-
edge
aspect
willfulness is uncon-
liability
solute
concerns about
14e-
Rule
vincing. The district court concluded that
3(a), those concerns would appropriately
relationship knowledge
was essential
be addressed by
narrowly
more
construing
prove willfulness to ensure that Rule 14e-
the source-knowledge element
3(a)
not “impose
liability
does
absolute
for
recognizes,
SEC
rather
by injecting
than
all
nonpublic
who trade on material
infor-
into the
element willfulness a relation-
relating
mation”
to tender offers. United
ship-knowledge requirement that the SEC
Cassese,
States v.
In its brief to this
appears construe this source-knowledge requiring proof only
element as that Com-
puware offering was an person and that acquired
Cassese knew non-
public Compuware.7 information from It
might fairly questioned whether
accurately government’s burden, states the
7. charge The district by Compuware court’s to the was disclosed to him theory officer, director, consistent with the source- employee person or other burden, knowledge instructing gov- acting Compuware.” behalf Trial Tr. at required ernment "that the de- knew fendant information had been