In United States v. Goldstein, No. 18-13321 (Feb. 26, 2021) (Wilson, Branch, Julie Carnes), the Court affirmed defendants' convictions and sentences for conspiracy, mail fraud, wire fraud, and securities fraud.
Defendants' convictions arose from two fraud schemes: (1) a "pump and dump" market-manipulation operation where defendants artificially inflated the price of MCGI stock before selling it off for a profit; (2) a plan to sell shares of a privately-traded company, Find.com, via misleading and fraudulent representations. The defendants proceeded to trial and were found guilty of two counts of conspiracy, two counts of mail fraud, seven counts of wire fraud, and one count of securities fraud. Defendants were sentenced to 10 years in prison, and each ordered to pay restitution in the amount of $1.5 million. The district court also imposed a forfeiture order against each defendant for the total amount of the proceeds: approximately $1.9 million. The court specified, however, that the government could not recover more than the total of $1.9 million from defendants under the forfeiture order.
First, defendants jointly challenged the admission of wiretap evidence as violative of the Fourth Amendment. They argued that the agent's affidavit in support of the wiretap application did not establish probable cause (because any probable cause that had existed was stale) or satisfy the necessity requirement. The Court disagreed on both fronts, and in any case, found that the good faith exception to the exclusionary rule applied.
Second, defendants challenged the validity of the wiretap orders issued under Franks v. Delaware, which requires an evidentiary hearing when a defendant makes a substantial preliminary showing that statements or omissions made in an affidavit supporting a wiretap are deliberately false or made with reckless disregard for the truth. The Court affirmed the district court's denial of Franks hearing.
Third, defendants argued that there was a material variance between the indictment's allegations concerning the Find.com scheme and the evidence the government presented at trial to prove the scheme. The Court held that the defendants had not established a material variance, much less that any deviation between the facts alleged in the indictment and those proved at trial warranted reversal. The Court noted that a fatal variance exists only where the evidence at trial proves facts different from those alleged in the indictment, as opposed to facts which, although not specifically mentioned in the indictment, are entirely consistent with its allegations.
Fourth, defendant Bercoon argued that the government engaged in prosecutorial misconduct during its closing argument by suggesting that the jury could infer his intent to commit fraud from the fact that, rather than contacting law enforcement, he had pursued another pump-and-dump scheme with a co-conspirator the day after learning that the FBI was investigating him for market manipulation. Defendant's argument was subject to plain error review, and failed.
Fifth, defendant Goldstein challenged the district court's denial of his motion to suppress statements he made to an SEC attorney during a preliminary, informal telephone interview. He argued that the SEC attorney's promise of confidentiality rendered his statements involuntary. The Court affirmed the lower court's denial of the motion to suppress because the SEC attorney testified that it was her practice to read the SEC's Privacy Act script at the beginning of every interview, which informs the witness that the SEC routinely shares information obtained from witnesses with other authorities for investigative and enforcement purposes.
Sixth, defendant Goldstein challenged the district court's denial of his request for an evidentiary hearing to determine whether the SEC's civil investigation and the US Attorney's criminal investigations improperly merged, depriving him of his due process rights. The Court held that the district court did not abuse its discretion in denying Goldstein's request.
Seventh, defendants argued that the district court's $1.9 million forfeiture order improperly held them jointly and severally liable, in violation of the Supreme Court's decision in Honeycutt v. United States, 137 S. Ct. 1626, 1632 (2017). The Court assumed, without deciding, that Honeycutt's reasoning applied to the forfeiture statute at issue here. The Court further held that any argument that Honeycutt per se prohibits ordering joint and several forfeiture has no basis in the Supreme Court's decision. Here, the district court did not err because it limited the forfeiture to the total amount of proceeds each defendant personally acquired.
Finally, defendant Bercoon filed a pro se motion to dismiss his indictment, alleging prosecutorial misconduct based on what he characterized as numerous instances of the FBI agent's offering false testimony before the grand jury. The Court found no merit in defendant's arguments.