[00:00:04] Speaker 03:
May it please the court, my name is Jessica Snyder and I represent the appellate Robert Jeznik.

[00:00:09] Speaker 03:
With the court's permission, I would like to reserve two minutes of my time for rebuttal.

[00:00:14] Speaker 03:
Go ahead, please.

[00:00:15] Speaker 03:
This appeal involves six errors, which individually justify reversal, but when viewed collectively, they demonstrate a fundamental imbalance at trial.

[00:00:25] Speaker 03:
While the government was allowed to pursue invalid and expansive theories of fraud, the district court's evidentiary and instructional rulings repeatedly undermined and restricted the defense by restricting cross-examination of a key witness, admonishing the jury that proper cross-examination mounted to victim blaming, instructing the jury that it's not a defense to fraud that an investor disregarded truthful disclosures,

[00:00:48] Speaker 03:
denying defense instructions relating to reliance of accountants and counsel, allowing prejudicial lay and expert testimony about Ponzi schemes and badges of fraud, and refusing to sever the case when co-defendants counsel actively pursued an antagonistic defense that hinged on securing Mr. Jesnick's conviction.

[00:01:06] Speaker 00:
Ms.

[00:01:06] Speaker 00:
Snyder, are you going to try to take on those all in your remaining seven minutes or have you divided up the issues?

[00:01:11] Speaker 03:
I was going to address the issues in the order they appear in our brief unless the court would like to address any issue in particular.

[00:01:18] Speaker 03:
So starting with the improper theory of fraud, first, as to the invalid theories of prosecution, I want to start by emphasizing that this is not presented to the court as a sufficiency of the evidence claim, but as an invalid legal theory.

[00:01:31] Speaker 03:
If this court agrees that any of the government's theories were invalid under the wire fraud statute, as that statute has been repeatedly narrowed by the Supreme Court, then because of the general verdict returned here,

[00:01:44] Speaker 03:
Reversal is required unless the court can find beyond a reasonable doubt that the jury would have convicted absent those improper theories.

[00:01:52] Speaker 03:
Both of the improper theories, if allowed, would criminalize a wide range of regular commercial conduct.

[00:01:58] Speaker 03:
The first government theory that was improper, the thinly disguised half-truth theory relating to Equitas's financial health, would allow a vague promotional statement to create an affirmative duty to disclose a wide swath of negative financial information

[00:02:13] Speaker 03:
absent a fiduciary duty.

[00:02:15] Speaker 03:
What's missing from the government's theory is a connection between the omitted information and what makes that affirmative statement misleading.

[00:02:25] Speaker 03:
If the wire fraud statute encompasses this level of disconnect between an optimistic sales pitch

[00:02:30] Speaker 02:
Something like let's talk about that.

[00:02:33] Speaker 02:
I don't really if you're sort of saying this is a puffery sort of sales pitch Thing if I look at the tear sheets, they're pretty specific about how the proceeds from the private notes are going to be used to be purchasing receivables If I look at the private placement memorandums, I think the from time to time language is

[00:02:58] Speaker 02:
Arguably misleading here.

[00:03:00] Speaker 03:
They certainly Don't Disclose that you know virtually 90% at times those private notes proceeds is going to be used for operating expenses Yes, your honor there were multiple theories of fraud pursuit in this case and some of them were valid theories the theories that were not valid where that was the half-truth relating to the statement equitas is doing great and

[00:03:25] Speaker 03:
The government tied this broad, vague promotional statement, Equitas is doing great, and said that it mandated that Equitas disclose basically all negative financial information.

[00:03:34] Speaker 02:
And the wire fraud statute, as the Supreme Court has interpreted it in the- Let's look at the income opportunity fund to private placement memorandum.

[00:03:46] Speaker 02:
It doesn't have any qualifiers about how the note funds are going to be used.

[00:03:54] Speaker 02:
You're under that only going to be used for purchasing receivables.

[00:04:01] Speaker 03:
Your Honor, that allegation in the government's brief, we address it in our reply brief, and I'll find the citation to the record, but testimony at trial actually was contradicted what the government stated in that brief.

[00:04:13] Speaker 03:
The fund manager of that fund said that that language of that PPM allowed them to use the money to redeem investors when it went through other entities, and that was... Okay, then what about the operating expenses?

[00:04:29] Speaker 02:
It says they're all going to be paid by the manager.

[00:04:31] Speaker 03:
And Your Honor, the factual assertions are addressed in our reply brief, but what I want to focus on as it relates to an improper theory is that it doesn't matter if we are alleging one of the theories or two of the theories at trial were improper.

[00:04:45] Speaker 03:
It doesn't matter that there were other theories that may have been proper.

[00:04:48] Speaker 03:
Perhaps this is a contested fact that was something that we mounted a strong defense to at trial.

[00:04:55] Speaker 03:
But supporting a proper theory of fraud, if there were

[00:04:58] Speaker 03:
actual lies or misrepresentations in the material.

[00:05:01] Speaker 03:
We're not saying that those were not proper theories.

[00:05:04] Speaker 03:
We're saying that there were two theories that were improper.

[00:05:06] Speaker 02:
Well, I guess the question of whether the jury would convict absent any of the invalid legal theories.

[00:05:12] Speaker 02:
I'm looking at the September 2nd, 2015 email of the general counsel Bob Holman where he says he raised the negative equity issue with Bob Jesnik and that this may be a Ponzi scheme.

[00:05:28] Speaker 02:
I'm looking at the email of September 18, 2015 from Brian Oliver to Bob Jesnik talking about how we're going to be $6.55 million cash negative at the end of the month.

[00:05:40] Speaker 02:
But we're assuming the Luxembourg fundraising will bring in $6.44 million.

[00:05:46] Speaker 02:
Tell me why a jury looking at these emails would have come up with a different verdict.

[00:05:56] Speaker 03:
Your Honor, there was a, and the government must prove harmlessness beyond a reasonable doubt if this court finds that either of their theories were invalid.

[00:06:04] Speaker 03:
But here, every one of the fraud allegations made at trial were subject to a very strong defense.

[00:06:11] Speaker 03:
Some of the allegations that were put into the marketing materials and the allegations

[00:06:15] Speaker 03:
which was one allegation of fraud, and allegations about what were put into the disclosure materials were drafted by counsel and accountants.

[00:06:24] Speaker 03:
And this is part of why there were multiple defenses presented at trial, but it was a hotly contested issue at trial whether or not there was a reliance on counsel and accountants for those statements.

[00:06:33] Speaker 02:
And while counsel... Okay, let's not talk about the private placement memorandum.

[00:06:38] Speaker 02:
Let's look at the testimony of investor Zemaripa.

[00:06:42] Speaker 02:
He said, I specifically asked if Equitas ever used the private note money, the investor money, to pay off interest payments to investors.

[00:06:51] Speaker 02:
And Bob Jesnik specifically said no.

[00:06:54] Speaker 03:
Your honor, I'm glad that you turned to that issue because Mr. Zamarippa's testimony will contain bold contradictions with other evidence in the record, and I think the most obvious example of that is Brian Oliver's testimony.

[00:07:04] Speaker 03:
That can be found at 9 Rice ER,

[00:07:07] Speaker 03:
1404 through 05 when Mr. Oliver testified that he never told an investor that all of their money would be used for consumer receivables and he never observed Bob Jesnik tell an investor that all of their money would be used.

[00:07:21] Speaker 02:
Well that's an investor telling you that I point-blank asked Mr. Jesnik the question.

[00:07:26] Speaker 02:
He said no.

[00:07:27] Speaker 03:
And his testimony was contradicted, and there's many reasons why Mr. Zamorippa's testimony should have been questioned.

[00:07:34] Speaker 03:
And I think that's why his cross-examination was so important, and I'd like to briefly touch on that issue about the restriction on his cross-examination and how harmful that was, Your Honor.

[00:07:44] Speaker 03:
His cross-examination was really important for his credibility because he was the only witness who said, I was directly told that all of my money would be used for purchasing receivables when I asked that question.

[00:07:58] Speaker 03:
And that was inconsistent with the disclosure documents, with the subscription agreement he signed and attested he had reviewed, and with Brian Oliver, the kind of star government witness's testimony.

[00:08:09] Speaker 03:
And cross-examination is important, not just because it gets in the facts.

[00:08:12] Speaker 03:
We had documents in this trial that showed kind of the cold, hard facts of these admitted exhibits.

[00:08:18] Speaker 03:
But it's important because witness demeanor changes when they're confronted with conflicting evidence.

[00:08:23] Speaker 03:
This witness might have squirmed when he was pushed on these conflicts in his testimony.

[00:08:28] Speaker 03:
He might have rolled his eyes.

[00:08:29] Speaker 03:
He might have changed his story.

[00:08:31] Speaker 03:
And all of this is part of the crucial.

[00:08:33] Speaker 02:
Right.

[00:08:33] Speaker 02:
But the jury made that credibility determination.

[00:08:36] Speaker 02:
They convicted your client.

[00:08:37] Speaker 02:
Right.

[00:08:38] Speaker 02:
They saw all of the witnesses in this six-week trial and they made their own credibility determinations as to all of these witnesses, correct?

[00:08:46] Speaker 03:
Your Honor, they did after cross-examination was restricted in a pretty dramatic way when the defense was trying to do what is their core constitutionally protected right and cross-examine him and prove that he wasn't credible.

[00:08:58] Speaker 03:
And Mr. Zama-Ripa's testimony contained like

[00:09:02] Speaker 03:
contradictions that on their face were highly unusual and confronting him with those contradictions was critical to proving Mr. Jesnik's defense.

[00:09:12] Speaker 03:
He said that he was never told his note was subordinated debt.

[00:09:17] Speaker 03:
When it says subordinated debt on the title of the document that he received on the front cover of the document he signed, he said that

[00:09:24] Speaker 03:
100% of he was told a hundred percent of his money would go to consumer receivables when Brian Oliver Testified in direct conflict with this this is Brian Oliver a star government witness Then to add to the harm the district court signaled to the jury repeatedly that this line of questioning that he Sue Esponti cut off and Restricted and kind of signaled the government to ask you would mr. Rice's acquittal necessitate a conviction of mr. Jesnik

[00:09:51] Speaker 03:
Your Honor, in terms of severance, if the jury accepted Mr. Rice's core defense, which was that Mr. Jesnick lied to investors and lied to Mr. Rice alike, if the jury accepted his core defense, then they could not acquit Mr. Jesnick.

[00:10:09] Speaker 03:
And this is an extreme example of antagonistic defenses that undermine Mr. Jesnick's right to a fair trial.

[00:10:15] Speaker 03:
Mr. Rice's counsel promised that he would be, quote, forced to act as a second prosecutor at trial, focused necessarily on securing Mr. Jesnick's conviction.

[00:10:24] Speaker 03:
And that was not an empty threat.

[00:10:26] Speaker 03:
In opening statement, he said that he lined himself with the government and said that what the government said is true about Mr. Jesnick.

[00:10:34] Speaker 03:
And he called him a liar 10 times in his opening statement.

[00:10:37] Speaker 03:
In closing argument, he repeated this theme, said that Mr. Rice was on the receiving end of nearly everything the government said happened at this company.

[00:10:44] Speaker 00:
And Mr. Desnick had a rebuttal.

[00:10:46] Speaker 03:
That's right, Your Honor, but that doesn't solve the harm of six weeks of trial where, sitting at defense counsel, there's a second prosecutor creating a conflict between every defense that's raised.

[00:10:57] Speaker 00:
Where do you get that rule?

[00:11:00] Speaker 00:
As I read the cases you've cited, we're talking about whether the defenses are really mutually exclusive.

[00:11:05] Speaker 00:
These defenses were mutually exclusive, Your Honor, and two-directional antagonism is not required.

[00:11:16] Speaker 00:
It could have been committed by both together.

[00:11:18] Speaker 00:
It could have been committed by one.

[00:11:20] Speaker 00:
The cases you cite involve only one culpable act or piece of evidence.

[00:11:29] Speaker 00:
These drugs either belong to you or you.

[00:11:32] Speaker 00:
Either you or you stabbed this person.

[00:11:34] Speaker 00:
They couldn't both do it.

[00:11:35] Speaker 00:
But in this case, one

[00:11:37] Speaker 00:
the other or both or neither could have done it.

[00:11:40] Speaker 00:
Why doesn't that eliminate this theory?

[00:11:44] Speaker 03:
Yes, there's two points that I think respond to your question.

[00:11:46] Speaker 03:
The first is that we look at what the core defense was, not what some other defenses could have been.

[00:11:52] Speaker 03:
There could be other defenses that were raised, but Mr. Rice's core defense was that Mr. Jesnik was guilty of fraud against the investors and against Mr. Rice himself.

[00:12:02] Speaker 03:
And that's what they say in Mayfield.

[00:12:03] Speaker 03:
They talk about the government's other kind of theories about what could have happened that could have made some third-part person culpable for this, or other defenses that could have been raised that meant neither of them were guilty.

[00:12:14] Speaker 03:
But we look to the core of the defense in this case.

[00:12:17] Speaker 03:
And that's what is the problem.

[00:12:19] Speaker 03:
Mayfield also emphasizes that two-directional antagonism isn't required.

[00:12:23] Speaker 03:
You don't have to have two defendants on a desert island with a closed universe around it.

[00:12:27] Speaker 03:
In fact, in Mayfield, what they had was one defendant who alleged she wasn't there,

[00:12:31] Speaker 03:
And the other defendant who said.

[00:12:33] Speaker 02:
You're two and a half minutes over your time.

[00:12:37] Speaker 02:
Let me just make sure.

[00:12:38] Speaker 02:
Do you want to hear more?

[00:12:39] Speaker 02:
OK.

[00:12:41] Speaker 02:
You're two and a half minutes over your time.

[00:12:43] Speaker 02:
I'll think about giving you one minute for rebuttal.

[00:12:45] Speaker 03:
Thank you, Your Honor.

[00:12:56] Speaker 01:
Good morning.

[00:12:59] Speaker 01:
May it please the court.

[00:13:00] Speaker 01:
Anna Esteval for defendant appellant Andrew McRitchie.

[00:13:03] Speaker 01:
I'd like to reserve three minutes for rebuttal.

[00:13:06] Speaker 01:
And your honors, I intend to focus on the district court's error in refusing to instruct on the advice of counsel and accountants and the insufficiency of the good faith instruction.

[00:13:16] Speaker 01:
This error went to the heart of Mr. McRitchie's principal defense at trial and was profoundly prejudicial.

[00:13:21] Speaker 00:
What was the advice of counsel that Mr. McRitchie followed?

[00:13:26] Speaker 01:
He followed advice of council in several respects so the government's allegations with respect to mr. McRitchie in particular because he was not present for in-person oral solicitations of the private note were focused on the actual transaction documents the PPM's and The marketing statements and the Lux Fund so I can turn to each of those individually with respect to the

[00:13:51] Speaker 01:
the PPMs, there was substantial evidence that at the very beginning of the indictment period, even prior to the indictment period, there was extensive evidence that attorneys drafted the PPMs with full knowledge of the use of proceeds.

[00:14:06] Speaker 02:
Let's look at Mr. McRitchie's edits to the PPM, August 16, 2015.

[00:14:11] Speaker 02:
From time to time, the company may use proceeds

[00:14:15] Speaker 02:
of the sale of secured notes to repay the principal and interest of previously issued secured notes, he writes in the comment bubble, why qualify?

[00:14:24] Speaker 02:
We do this all the time, and there shouldn't be a problem to investors of us doing so.

[00:14:28] Speaker 02:
So he was clearly aware that that statement was not true, correct?

[00:14:34] Speaker 01:
Well, with respect to that period of time when he made that comment, that was in August of 2015 and shortly after there were financial reports that significantly changed everyone's outlook as to the finances of the company.

[00:14:50] Speaker 01:
What Brian Oliver, the cooperating witness,

[00:14:52] Speaker 01:
called a watershed moment.

[00:14:54] Speaker 01:
And that comment is actually great evidence of Mr. McRitchie being fully forthcoming with counsel and telling counsel that this is how the use of proceeds are being used.

[00:15:05] Speaker 02:
Well, then let's go to his September 5, 2015 email to Brian Oliver.

[00:15:09] Speaker 02:
I agree on the critical nature of our situation.

[00:15:12] Speaker 02:
To be honest, though, we have been heading towards this point for a couple of years, spending money we don't have, addicted to the private note investments.

[00:15:21] Speaker 02:
We are heading for a big train wreck.

[00:15:22] Speaker 02:
This is in response to Mr. Oliver saying that we fall into a false sense of security that we are bringing in some accounting manner, quote, making money, end quote, when we are in fact burning cash at an alarming pace.

[00:15:43] Speaker 01:
Yes, Your Honor, and at that point in September 2015, General Counsel Holman, as well as other attorneys, had fully taken the reins with full knowledge as to every aspect of the company and the use of proceeds.

[00:15:58] Speaker 01:
And Mr. McRitchie followed counsel's advice with respect to every action that he took, and to the extent

[00:16:06] Speaker 01:
That email was discussing Mr. McRitchie's serious concerns about the financial state of the company following the watershed moment that Brian Oliver discussed, and it reflects his reflection.

[00:16:21] Speaker 02:
You know, you said that Mr. McRitchie was only involved in the written materials and that he didn't do any pitches, but he's the one that pitched Lux Bond, right, around this time frame, summer 2015, August 2015, correct?

[00:16:34] Speaker 01:
And again, with respect to his conduct in that respect, it was fully with the advice of counsel.

[00:16:42] Speaker 02:
Okay, let's talk about counsel.

[00:16:43] Speaker 02:
If I look at Mr. Rudum's testimony, he says he never communicated that, okay, I'll just read it, it's ER 6107, that, you know, he said he didn't trust

[00:16:57] Speaker 02:
his clients in quote I can't continue to represent them and I won't question how did you communicate to the client that you didn't trust the answers they were giving you answer I resigned did you do anything other than resign to communicate your lack of trust answer I don't believe I did

[00:17:13] Speaker 01:
So Mr. Ruddum's testimony wasn't with respect to the Lux Fund, so I can address those two issues separately.

[00:17:21] Speaker 01:
And Mr. Ruddum was called as a rebuttal witness after Mr. McRitchie testified in his own defense as to his good faith reliance on counsel.

[00:17:31] Speaker 01:
And so the fact that the government put Mr. Ruddum and Mr. Norris, who was at Sidley Austin and advised with respect to the Lux Fund, into its

[00:17:38] Speaker 01:
Rebuttal case just goes to show that there was some evidence in the record to support an advice of counsel instruction So what advice of mr. Ruddham did mr. McRitchie rely on that was not communicated by mr. Ruddham

[00:17:53] Speaker 01:
Mr. Ruddum was one of the attorneys involved in the initial drafting of the 2013 PPM.

[00:17:58] Speaker 01:
This was back when several attorneys, including Mr. Ruddum, a Perkins-Cooey lawyer, and Andy Craig, another member of the general counsel's office, all discussed the use of proceeds, and the Perkins-Cooey lawyer even said,

[00:18:11] Speaker 01:
The use of proceeds resembles Ponzi payments and I don't know the legal implications of informing investors that that's what you're doing with your money.

[00:18:19] Speaker 01:
All of the lawyers were having this internal discussion and based on that discussion drafted the 2013 PPM.

[00:18:26] Speaker 01:
Mr. Ruddim drafted that 2013 PPM.

[00:18:29] Speaker 01:
So in his testimony, he was discussing his ultimate decision to resign in September or October of 2015.

[00:18:40] Speaker 01:
And when he did resign, he didn't tell Mr. McRitchie or anyone else at the company why he was resigning.

[00:18:47] Speaker 01:
In fact, he said something to the effect of, it looks like you need other counsel or more experienced counsel for this kind of thing.

[00:18:54] Speaker 01:
So Mr. Ruddum's testimony in the government's rebuttal case in order to rebut Mr. McRitchie's testimony was fiercely contested.

[00:19:01] Speaker 01:
And this goes to the issue of whether or not there was some evidence sufficient to justify the instruction.

[00:19:08] Speaker 01:
And of course, this court's precedent is that even if that evidence is doubtful, weak, or otherwise contested, as long as there's some foundation in the evidence, then it is justified.

[00:19:20] Speaker 00:
But the district court did provide a good faith

[00:19:23] Speaker 00:
defense exception, and this is a variety of that.

[00:19:27] Speaker 00:
You didn't get the exact advice of counsel, but the jury was aware that they could acquit if he was acting in good faith.

[00:19:36] Speaker 01:
But the good faith instruction that the court gave was very different from the instruction approved by this court in Bush.

[00:19:43] Speaker 01:
The instruction here was just with respect to a good faith belief in the truth of the specific misstatements alleged.

[00:19:52] Speaker 02:
But why don't we compare those two instructions?

[00:19:56] Speaker 02:
So, you know, the Bush decision does say that the advice of counsel instruction is subsumed within the good faith instruction.

[00:20:06] Speaker 02:
And in Bush they said good faith is a complete defense to each count because good faith is inconsistent with an intent to defraud.

[00:20:13] Speaker 02:
Good faith means a belief or opinion honestly held without an intent to mislead.

[00:20:17] Speaker 02:
And Judge Simon

[00:20:18] Speaker 02:
instructed, jury instruction number 20, you may determine whether the defendant had an honest, good faith belief in the truth of the specific alleged misrepresentations in deciding whether that defendant acted with an intent to defraud.

[00:20:30] Speaker 02:
If you find the defendant had such an honest, good faith belief, the necessary intent to defraud did not exist.

[00:20:36] Speaker 02:
I don't really see those as materially different.

[00:20:38] Speaker 01:
Well, in Bush, Your Honor, it encompassed a belief or opinion honestly held without an intent to mislead.

[00:20:45] Speaker 01:
And that would cover Mr. McRitchie's defense if the court had given that instruction that Bush gave, because that is not limited to only a good faith belief in the truth of a specific misrepresentation that wasn't Mr. McRitchie's defense, that he made a misstatement but actually believed that it was true.

[00:21:04] Speaker 01:
And so the jury was given no

[00:21:06] Speaker 01:
no understanding that it could accept Mr. McRitchie's defense.

[00:21:11] Speaker 01:
And in fact, it was even more prejudicial in light of the other instruction that the court gave that ignorance of the law is not a defense and the government's misleading argument that the fact that a lawyer or accountant could have stopped them is not a defense.

[00:21:25] Speaker 01:
And so the jury hearing all of those instructions without a bush-like instruction about a belief or opinion honestly held,

[00:21:33] Speaker 01:
could not have properly evaluated all the evidence that Mr. McRitchie put forth and his testimony that he relied in good faith.

[00:21:45] Speaker 01:
You have a minute and 12 seconds left.

[00:21:48] Speaker 01:
I'll reserve my time, thank you.

[00:21:49] Speaker 01:
Okay, thank you.

[00:22:00] Speaker 05:
Good morning, Your Honors.

[00:22:02] Speaker 05:
Angelo Calfo on behalf of appellate Brian Rice.

[00:22:08] Speaker 05:
Your honors, our position is that the trial court's errors, individually or combined, deprived our client of a fair trial.

[00:22:19] Speaker 05:
And the errors that occurred at trial, in our view, had a unique impact on Mr. Rice, different than the other defendants in the case because of the facts

[00:22:31] Speaker 05:
relating to his alleged participation in this company.

[00:22:34] Speaker 05:
And I think maybe the most poignant fact that came out at trial was during the testimony of the government's primary witness, Brian Oliver, he testified that in the months before the company collapsed, he was lying to Mr. Rice about whether these investments should continue to be sold.

[00:22:55] Speaker 05:
And he said he lied to Mr. Rice

[00:22:57] Speaker 05:
because he wanted to keep fundraising going.

[00:23:01] Speaker 05:
I mean, that's coming from the government's own witness.

[00:23:05] Speaker 05:
And I think that sort of, you know, we look at the larger context here, our theory of trial, which I think the government conceded, frankly, was that our client came into this organization on false pretenses.

[00:23:17] Speaker 05:
They lied to him about it.

[00:23:18] Speaker 05:
And then they lied to him while he was there.

[00:23:20] Speaker 05:
And so

[00:23:23] Speaker 05:
This was very unique because he wasn't involved, for example, in creating the PPMs, in creating the tear sheets.

[00:23:31] Speaker 05:
And in fact, during the last year that he was there, what he did was when the government's witness, Bob Holman, the company's general counsel, came in and started saying, hey, there are problems here.

[00:23:42] Speaker 05:
He worked with Mr. Holman to revise the PPMs, to revise the tear sheets, to change the way they were doing business.

[00:23:50] Speaker 05:
And in fact, Mr. Holman testified that

[00:23:53] Speaker 05:
Mr. Rice was solidly supportive of changes to the investor communications to make them in line with the company's business.

[00:24:00] Speaker 05:
I mean, that's pretty unique compared to the evidence that was presented against the other defendants.

[00:24:10] Speaker 02:
So there's an email from Nasser Abu Shaban, September 28, 2015, which says, we need to close $8.5 million in fundraising to meet all the obligations for the week.

[00:24:23] Speaker 02:
And Mr. Rice responds to that the next day, saying, I'll let Brian Oliver comment on notes, but I have an additional $3 million in 90-day private note money we should see from PAG.

[00:24:35] Speaker 02:
So he's still out there hustling.

[00:24:38] Speaker 02:
for more investors knowing where that money is going.

[00:24:43] Speaker 02:
And in third quarter of 2015,

[00:24:48] Speaker 02:
to investor Brian, or I guess, I don't think his name is Chris Bean.

[00:24:53] Speaker 02:
Mr. Rice called, let him know there's a very time-sensitive investment opportunity.

[00:24:58] Speaker 02:
They needed to raise the funds, execute on, and said that they were urgently looking for cash, and were willing to pay a slightly higher yield for a 90-day note.

[00:25:07] Speaker 02:
So Mr. Rice is still out there giving that sales pitch, trying to bring money in, knowing exactly where that money's gonna go, right?

[00:25:14] Speaker 05:
Absolutely.

[00:25:15] Speaker 05:
The company had a very serious liquidity problem that was something everybody in the company knew, and that's what the investment advisors also knew.

[00:25:23] Speaker 05:
And this is the other difference, Your Honor, when you're looking at those things.

[00:25:26] Speaker 05:
For example, you mentioned a September 2015 email.

[00:25:30] Speaker 05:
That was the very same month that Mr. Oliver testified

[00:25:33] Speaker 05:
your honor, that he was lying to Brian Rice about the investments.

[00:25:36] Speaker 02:
Let's look at Mr. Sica's testimony.

[00:25:40] Speaker 02:
Did you ever tell Mr. Rice that you had suspicions that you thought Equitas was a Ponzi scheme?

[00:25:45] Speaker 02:
Answer, yes.

[00:25:46] Speaker 02:
What was his response to that?

[00:25:48] Speaker 02:
He denied it.

[00:25:51] Speaker 02:
Well, Your Honor, this is the thing about... Did Mr. Rice ever tell you about an SEC investigation into Equitox?

[00:25:57] Speaker 02:
Equitas answered no.

[00:26:00] Speaker 02:
Did Mr. Rice ever tell you about liquidity problems, long-term liquidity problems at Equitox?

[00:26:04] Speaker 02:
Answer no.

[00:26:06] Speaker 05:
Well, Your Honor, I think you can take, obviously, our position is, for example, that, you know, the harmless standard here is beyond a reasonable doubt.

[00:26:13] Speaker 05:
So I'm not saying there wasn't sufficient evidence for the government to present the case.

[00:26:17] Speaker 05:
What I'm saying is that if we had the opportunity to fully defend, we could have won.

[00:26:23] Speaker 05:
And not just, this is a case where the government can't sustain its burden.

[00:26:30] Speaker 05:
Now, on those particular ones, Mr. Sicko was one of four investment advisors that Mr. Rice interacted with.

[00:26:37] Speaker 05:
You mentioned Mr. Zamarepa, for example.

[00:26:39] Speaker 05:
He had no contact with these individual investors.

[00:26:41] Speaker 05:
Mr. Rice didn't.

[00:26:43] Speaker 05:
Only with these investment advisors.

[00:26:45] Speaker 05:
And if you look at the cross examinations of each, Your Honor, I think you'll see that the testimony was highly questionable.

[00:26:53] Speaker 05:
For example, Mr. Sica said he didn't know about the SEC investigation, but there was evidence we presented during his cross that he did.

[00:27:01] Speaker 05:
He claimed that he didn't know that the company was using new investor money to pay prior investors.

[00:27:07] Speaker 05:
He had testified in an SEC investigation that he knew that.

[00:27:12] Speaker 05:
Let's take Mr. Bean, for example.

[00:27:14] Speaker 05:
He testified at the government's request about how Mr. Rice said this about Equitas and that about Equitas.

[00:27:21] Speaker 05:
Did you see his cross-examination where he said, Your Honors, he said, I don't remember if we talked about Equitas at all.

[00:27:30] Speaker 05:
And when it came to Ms.

[00:27:32] Speaker 05:
Renassi, the same issue came, you know, same kinds of credibility issues.

[00:27:37] Speaker 05:
And, Your Honor, this ties in to instruction number 19.

[00:27:41] Speaker 05:
Because if you look at what Mr. Rice was convicted of, according to the government's theory, it was his interactions with these investment advisors.

[00:27:49] Speaker 05:
And Instructure Number 19 told the jury, it's no defense.

[00:27:54] Speaker 05:
It is not a defense to mail or wire fraud if an investor, an investment advisor, intentionally ignored information that was available to them.

[00:28:03] Speaker 00:
But that goes to materiality, does it not?

[00:28:05] Speaker 05:
Well, it should, Your Honors, but I'm sure you, in my reply brief, you saw two things.

[00:28:10] Speaker 05:
One, I raised this with the district court that you should limit this to materiality.

[00:28:16] Speaker 05:
And he said, well, yeah, that's what Lindsay sort of says, but no.

[00:28:21] Speaker 05:
And then the government argued, no, Your Honor, it goes to culpability generally.

[00:28:26] Speaker 00:
Well, the government can make its argument, but the district court's instruction, and it was a little surprised given the presentation in the briefs to find

[00:28:35] Speaker 00:
that there's really no other way to read this, that this comes under the heading of materiality, does it not?

[00:28:40] Speaker 05:
Well, Your Honor, I think we may be giving the jury too much credit to say that it comes under that heading and therefore it couldn't be read as something else because it says it is not a defense to mail or wire fraud.

[00:28:53] Speaker 05:
It could have been very, and I asked the judge, Your Honor, could you just add at the end, I asked, it's in the record, could you just add as to materiality?

[00:29:02] Speaker 05:
And he said, yes, technically that's what Lindsey says, but I'm not going to change it.

[00:29:07] Speaker 05:
And then when you go to closing argument, Your Honor, the government's arguing you can't disclose your way out of fraud.

[00:29:12] Speaker 05:
They're telling the jury that any argument that the investment advisors had information that contradicted the claims of omission by my client is a joke.

[00:29:22] Speaker 00:
That was a witness who said, you can't disclose your way out of fraud.

[00:29:24] Speaker 05:
And the government repeated it.

[00:29:26] Speaker 05:
How often?

[00:29:27] Speaker 05:
Pardon?

[00:29:28] Speaker 05:
How often?

[00:29:28] Speaker 05:
In rebuttal, Your Honor.

[00:29:30] Speaker 00:
Uh-huh.

[00:29:30] Speaker 00:
And quoting that witness?

[00:29:31] Speaker 00:
And citing that witness?

[00:29:32] Speaker 05:
Well, Your Honor, I think they argued it as part of this instruction.

[00:29:37] Speaker 05:
And so did the, in opening,

[00:29:40] Speaker 05:
The prosecutor specifically said, with respect to number 19, that it related to whether or not there was a false statement, not just materiality.

[00:29:51] Speaker 05:
So it was argued differently, Your Honor, and it was understood by the district court differently.

[00:29:55] Speaker 05:
It was understood by the prosecutors differently.

[00:29:58] Speaker 05:
And when the jury got back there and they're told it's no defense to mail or wire fraud if the investor deliberately ignores information,

[00:30:09] Speaker 05:
then that's how they're going to decide the case.

[00:30:12] Speaker 05:
And it was very insidious here, Your Honor, because if you read the closing arguments of the government, especially in rebuttal, it's that Mr. Rice didn't disclose this, he didn't disclose that, he didn't disclose the other thing.

[00:30:25] Speaker 05:
And it had to be essential to our defense to be able to explain what information, what disclosures the investment advisor had, what other information he had,

[00:30:35] Speaker 00:
Are you contending that there appears to be quite a volume of evidence in terms of the disclosures that were made?

[00:30:42] Speaker 00:
What was missing?

[00:30:44] Speaker 00:
What documents in terms of the disclosures presented over this trial, weeks and weeks, were missing that would have made a difference?

[00:30:52] Speaker 05:
Well, Your Honor, I think it wasn't so much a problem with the evidence being there.

[00:30:56] Speaker 05:
It's that when the jury went back and analyzed the evidence, they would say,

[00:31:00] Speaker 05:
For example, if somebody said, well, Mr. Rice lied to me because he didn't tell me about the SEC investigation.

[00:31:07] Speaker 05:
And then there was evidence that that investment advisor knew about the SEC investigation or had information available to him, and he ignored it.

[00:31:16] Speaker 05:
Mr. Rice can be convicted under this instruction because the investor ignored information that was readily available that would have made the half-truth, quote, unquote, accurate.

[00:31:27] Speaker 05:
And that's where it really gets to be a problem.

[00:31:29] Speaker 05:
Your Honor, I would like to reserve a minute for rebuttal.

[00:31:32] Speaker 02:
Yes, you have 30 seconds left, but I'll give everybody a minute for rebuttal.

[00:31:48] Speaker 04:
Good morning, and may it please the court.

[00:31:50] Speaker 04:
I'm Hannah Horsley on behalf of the United States.

[00:31:53] Speaker 04:
I'm going to focus primarily on responding to the specific arguments raised this morning.

[00:31:57] Speaker 04:
And of course, we'll answer the court's questions on anything else.

[00:32:01] Speaker 04:
First, with respect to Mr. Jesnik's allegation that the government presented an invalid theory of fraud is simply not true on this record.

[00:32:10] Speaker 04:
The government pursued one legal theory of fraud.

[00:32:13] Speaker 04:
And there were multiple means or factual ways in which

[00:32:18] Speaker 04:
the fraud was perpetrated, the types of misrepresentations made.

[00:32:22] Speaker 04:
That does not make this a legal theory of fraud that could somehow be found invalid.

[00:32:28] Speaker 00:
Is it true under your theory that you can, in fact, disclose your way out of fraud?

[00:32:32] Speaker 04:
Yes.

[00:32:33] Speaker 00:
OK.

[00:32:34] Speaker 00:
And yet the government ran with that quote from a witness again and again.

[00:32:39] Speaker 04:
Your Honor, I think it's clear when you look at the totality of the closing arguments that that was not

[00:32:43] Speaker 04:
The government did not run with that theory.

[00:32:47] Speaker 02:
But you did repeat it, and you're agreeing that that statement's not correct.

[00:32:51] Speaker 04:
Well, it was repeated in the context, again, of quoting from the testimony of a particular witness.

[00:32:57] Speaker 00:
And then there are all these other- But not for the purposes of establishing what that testimony established.

[00:33:03] Speaker 00:
It was a pull quote and kind of a slogan that was wielded by the prosecution.

[00:33:07] Speaker 04:
It was a slogan, and it was really in substance an argument that

[00:33:11] Speaker 04:
they did not disclose their way out of fraud, that these PPMs, this financial statement didn't actually provide the kind of critical qualifying information or the complete truth that would have meant full disclosure.

[00:33:24] Speaker 02:
Well, but a lot of these statements were true, right, for much of the time.

[00:33:28] Speaker 02:
Some of these private note monies were only used from time to time.

[00:33:35] Speaker 04:
Not during the time period charged in the conspiracy.

[00:33:38] Speaker 04:
The testimony of Brian Oliver was that the vast bulk of the money was not used for those purposes during the course of the conspiracy.

[00:33:45] Speaker 02:
But that means that for some portion of the money, it was used appropriately in the manner disclosed to investors.

[00:33:51] Speaker 04:
But the point is, as the court noted earlier, the tear sheets are really what are saying the primary use of the money is going to be, which is, you know, to buy income-producing receivables.

[00:34:03] Speaker 04:
The PPM doesn't do anything to correct that.

[00:34:06] Speaker 04:
It's not the full disclosure of critical qualifying information to just say from time to time we may use it to pay back other investors for redemptions.

[00:34:17] Speaker 04:
That's not a full correction to all of the oral pitches and all of those tear sheets that they were sending out quarter after quarter saying we're primarily using your money to purchase receivables.

[00:34:30] Speaker 04:
So it didn't complete

[00:34:32] Speaker 04:
It didn't correct the problem.

[00:34:34] Speaker 04:
And I want to point the court to other parts of the record where, in closing argument, we referenced the PPMs.

[00:34:43] Speaker 04:
We referenced the financial statement, the audited financial statement, and made clear that they were in evidence.

[00:34:52] Speaker 04:
And the government argued, with respect to IOF 2 PPM, you can read it for yourself.

[00:34:57] Speaker 02:
But you didn't by stopping

[00:35:01] Speaker 02:
all of the testimony from these RIAs, I mean, they had an incentive, perhaps, to not be fully honest, right, because they should have performed more due diligence before getting their clients to make these investments.

[00:35:17] Speaker 02:
So by stopping the cross-examination into these RIAs to really get at whether they were being truthful or not, you undermine the defendant's ability to really challenge their credibility, didn't you?

[00:35:31] Speaker 04:
And that is not what happened.

[00:35:33] Speaker 04:
There was one witness, Bob Zamorippa, who was not an RIA, whose testimony during cross-examination was curtailed.

[00:35:41] Speaker 04:
And as the court made clear at the time, that was only because he had not read the PPM in detail.

[00:35:47] Speaker 04:
So the court made a relevancy determination that for that one witness, you couldn't dig into the details of the PPM because he testified he hadn't read it.

[00:35:57] Speaker 04:
All of the RIA witnesses, all four of the RIA witnesses, as well as two other witnesses, were questioned about the PPM.

[00:36:04] Speaker 02:
But why couldn't that be relevant to intent to defraud?

[00:36:07] Speaker 02:
Right?

[00:36:08] Speaker 02:
He had the information available.

[00:36:10] Speaker 02:
Had he bothered to read it?

[00:36:13] Speaker 02:
Because he may not have invested.

[00:36:14] Speaker 04:
As this court has long made clear following Nader in Peterson, even before that in Chikoni, and again in Lindsay,

[00:36:22] Speaker 04:
The victim's conduct, whether they read the materials, whether they understood the materials, what they did with the materials is irrelevant.

[00:36:32] Speaker 04:
We're looking at the intent of the defendants in determining whether they had a good faith belief what they were saying was true, not how it landed with the victims.

[00:36:45] Speaker 04:
state of mind or negligence?

[00:36:48] Speaker 02:
Their credibility is very key here because a lot of your evidence dealt with what were the oral pitches that defendants were making to these RIAs.

[00:36:59] Speaker 02:
So hamstringing the defendant's ability to challenge the credibility of the RIAs was crucial, wasn't it?

[00:37:06] Speaker 04:
And they were not.

[00:37:07] Speaker 04:
The record shows they were not hamstrung.

[00:37:09] Speaker 04:
They got to question all of the RIAs about the documents and whether they read them and what they understood them to mean.

[00:37:16] Speaker 04:
And if the court looks closely at the jury instruction conference with Judge Simon, this is in volume 28 of the Rice excerpts at 6183 to 93.

[00:37:28] Speaker 04:
It's very clear the district court did not, in any way, restrict their ability to argue this as to either credibility or intent.

[00:37:37] Speaker 04:
And in fact, they did.

[00:37:38] Speaker 04:
And we cite in that.

[00:37:39] Speaker 02:
But let me ask you about

[00:37:41] Speaker 02:
Brian Oliver's guilty plea.

[00:37:45] Speaker 02:
You said at opening argument, before this trial, I'm quoting, before this trial, Brian Oliver stood in a courtroom just like this one and pled guilty to conspiring to defraud investors, the number two of the company.

[00:37:58] Speaker 02:
He pled guilty to crimes that all three defendants, his alleged co-conspirators are charged with.

[00:38:04] Speaker 02:
Now you argue, oh, I only made that statement for Mr. Oliver's credibility.

[00:38:12] Speaker 02:
But that strains credulity, because this is saying, hey, Brian Oliver did the exact same thing as these three defendants, and he pled guilty, and these three defendants should too, because they're equally guilty.

[00:38:29] Speaker 02:
They did the same thing.

[00:38:30] Speaker 02:
So how can you say that that statement in opening is a credibility characterization versus a guilt?

[00:38:42] Speaker 04:
Well, the district court properly instructed the jury twice on how they could consider those statements.

[00:38:47] Speaker 04:
So if there were any error, it was definitely cured by that instruction.

[00:38:51] Speaker 04:
The court made it very clear you may not consider it as evidence against any three of these defendants as to whether they are guilty or whether they lied to investors.

[00:39:01] Speaker 04:
So both as to the conduct itself and whether that amounted to a crime.

[00:39:05] Speaker 04:
The court clearly precluded the risk that they could consider it improperly.

[00:39:10] Speaker 02:
But do you concede that statement may have been improper?

[00:39:12] Speaker 04:
I'm sorry?

[00:39:14] Speaker 02:
Do you concede that statement may have been improper?

[00:39:16] Speaker 04:
No, I'm not conceding that.

[00:39:18] Speaker 04:
I think under Halbert and the way it was used and the context in which it was made, it was clear it was commenting on Oliver in order for them to understand that he had a firsthand basis for the knowledge and the testimony he was going to provide.

[00:39:33] Speaker 04:
as the government said, he was in the room when it happened, and he's going to peel back the curtain and explain what happened.

[00:39:40] Speaker 00:
But doesn't that, I mean, this is quite the bell to unring here.

[00:39:46] Speaker 00:
Doesn't that require even more caution, counsel, even more caution on the government's part, not to make that the centerpiece of the introduction to its opening?

[00:39:56] Speaker 04:
Well, it was not the centerpiece of the opening.

[00:39:59] Speaker 04:
I think if you read it in full context,

[00:40:01] Speaker 04:
It came up in talking about who was going to be testifying and identifying who these people were in one instance.

[00:40:10] Speaker 04:
And government counsel specifically said, it's up to you to decide whether these defendants lied.

[00:40:18] Speaker 04:
He didn't in any way say, because Mr. Oliver lied, these two must have as well.

[00:40:23] Speaker 04:
But I do think the court's instruction there, reviewed for an abuse of discretion, precluded the risk that it was used improperly.

[00:40:36] Speaker 04:
If the court has any other questions, I'm happy to answer them.

[00:40:40] Speaker 00:
I guess the fraud expert.

[00:40:45] Speaker 00:
To have an expert, there is lay testimony from investors about a Ponzi scheme.

[00:40:53] Speaker 00:
But put on an expert who has a method of determining whether fraud occurred.

[00:41:03] Speaker 00:
establish these badges of fraud.

[00:41:08] Speaker 00:
Why was that admissible?

[00:41:11] Speaker 04:
I think in the context of this case, this is not a super straightforward Ponzi scheme where you're telling somebody... Well, the government didn't think it was a Ponzi scheme at all.

[00:41:21] Speaker 00:
That's not how it was charged.

[00:41:23] Speaker 04:
Well, it wasn't charged as a Ponzi scheme, but the evidence was that they were taking investor money and using it to pay back prior investors.

[00:41:33] Speaker 04:
You're right, we did not present it as this is a Ponzi scheme, but my point is to the extent you have an expert witness who's trying to explain why the conduct of this business, why the use of assets, the transfer of assets, the way all the entities operated in relation to each other, how that investor money flowed through the company, it was sufficiently complicated that it was very helpful in this case to have the expert witness be able to testify

[00:42:02] Speaker 04:
so that the jury could really understand and help them understand the evidence about how the money was used and that it was in fact going to pay back prior investors.

[00:42:15] Speaker 04:
It was also, if anything, would have been harmless error because they're not even contesting the testimony of both Vanessa DeHaan and Brian Oliver himself, who both testified this was, that the way they were operating the company

[00:42:29] Speaker 04:
was a Ponzi scheme.

[00:42:30] Speaker 02:
Do you think it would have been a better practice to revise the jury instruction regarding the Lindsay issue to say it's not a defense that the RIAs or investors relied on misleading information?

[00:42:47] Speaker 02:
Because that is what Lindsay is talking about, right?

[00:42:50] Speaker 02:
fraudulent information and the defendants here are more focused on the correct information that's in the private placement memorandum.

[00:42:59] Speaker 02:
Would that have been the better practice to have qualified the information not relied on?

[00:43:04] Speaker 04:
Possibly.

[00:43:05] Speaker 04:
Lindsay does use the word relevant information, not truthful information or false information.

[00:43:10] Speaker 04:
I think the import here and the part of the Lindsay case that the court was really trying to make use of is this general

[00:43:19] Speaker 04:
victim negligence standard and just adding the specific language that comes up in Lindsay for the first time that a form of negligence is intentional disregard of information.

[00:43:32] Speaker 04:
So it's really using, I mean, just that direct quote from Lindsay is all that got inserted into the instruction.

[00:43:42] Speaker 04:
Okay, thank you, your honor.

[00:43:51] Speaker 03:
Thank you, your honor.

[00:43:52] Speaker 03:
I just want to make a few quick record points to respond to some of your questions, and then I would like to hopefully address one issue.

[00:43:59] Speaker 03:
The first is that the IOF Fund 2 citation is 12 RICER

[00:44:05] Speaker 03:
2123 through 24, that addresses the government witness testimony that conflicts with the language cited.

[00:44:12] Speaker 03:
I also want to emphasize about the materiality instruction that this court referenced and how it had a heading of materiality.

[00:44:20] Speaker 03:
That heading was not read to the jury out loud.

[00:44:23] Speaker 03:
If you look at the transcript of the instructions as read to the jury, they did not read any of the headings.

[00:44:28] Speaker 03:
And you can see that at 28, Rice ER 6183 through 93.

[00:44:34] Speaker 02:
Did Judge Simon give the jury a hard copy of the instructions?

[00:44:37] Speaker 03:
He did, Your Honor.

[00:44:38] Speaker 02:
So if it wasn't read out loud, what does it matter?

[00:44:39] Speaker 02:
They had a copy and they took that copy into the jury room during deliberations.

[00:44:43] Speaker 03:
That they may or may not have reviewed and this court's precedent has said that what's read out loud is what governs.

[00:44:48] Speaker 03:
I also wanted to point the court to the language in the rebuttal oral argument where the government really emphasized that the crime is complete and you can't disclose your way out of fraud.

[00:44:56] Speaker 03:
That's at Rice ER 6816.

[00:44:59] Speaker 03:
He said, the crime has been completed, and you can't disclose your way out of fraud, meaning you can't use the PPM.

[00:45:04] Speaker 03:
Once you've said, we are doing great.

[00:45:07] Speaker 03:
For all of these issues, harmlessness is beyond a reasonable, or for many of these issues, beyond a reasonable doubts.

[00:45:13] Speaker 03:
And the Yates case looked at whether or not it was a close case, a complex record, jury double liberation for four days, and a split verdict.

[00:45:21] Speaker 03:
And those are the exact factors that we have here, Your Honor.

[00:45:25] Speaker 03:
realize I've passed my time.

[00:45:27] Speaker 02:
All right, thank you.

[00:45:37] Speaker 01:
Thank you, Your Honors.

[00:45:38] Speaker 01:
I would just like to, again, reiterate the prejudice of the instructions that the court gave and the government's argument and the government's taking advantage of the holes in the instructions and misleading the jury in that regard.

[00:45:52] Speaker 01:
The good faith instruction in this case was so narrow as to prevent the jury from considering Mr. McRitchie's defense and didn't cover the advice of counsel defense.

[00:46:03] Speaker 01:
And it also didn't cover a truthful disclosure defense.

[00:46:08] Speaker 01:
And the government misled the jury in argument by arguing not only you can't disclose your way out of fraud, but also that it's not a defense to point to the truthful disclosures.

[00:46:19] Speaker 01:
In addition to their argument about

[00:46:22] Speaker 01:
the lawyers and accountants not being, the fact that lawyers and accountants did not quote unquote stop them is not a defense.

[00:46:32] Speaker 01:
And in this case in particular, the prejudice is exceedingly important because

[00:46:40] Speaker 01:
None of, with respect to the marketing materials and the PPMs that were fully drafted by counsel and the marketing materials that were created by the accountants that Mr. McRitchie relied on.

[00:46:53] Speaker 01:
And he, unlike Mr. Rice and Mr. Jeznik, was fully reliant on those accountants and the counsel for purposes of those disclosure materials.

[00:47:03] Speaker 01:
And with respect to the disclosure defense that he advanced at trial,

[00:47:08] Speaker 01:
Because he wasn't present during the oral solicitations, it was especially important that he was relying on counsel's advice and the full disclosures in the written materials.

[00:47:16] Speaker 01:
Thank you.

[00:47:17] Speaker 02:
Thank you.

[00:47:22] Speaker 02:
Everyone's going over time.

[00:47:23] Speaker 02:
I just want to note that for the record, and that's fine.

[00:47:25] Speaker 02:
Go ahead, please.

[00:47:26] Speaker 05:
Your Honor, well, Your Honor read from one portion of the opening statement that was given relating to Brian Oliver's plea.

[00:47:33] Speaker 05:
What was said before that was there is no dispute in this case that former high-level Equitas executives have already pled guilty for the crimes they have committed.

[00:47:43] Speaker 05:
The key issue is whether these defendants lied.

[00:47:45] Speaker 05:
And that happened

[00:47:46] Speaker 05:
like minutes into the opening statement.

[00:47:49] Speaker 05:
This wasn't something that was buried in the middle or not a centerpiece.

[00:47:53] Speaker 05:
It came right away.

[00:47:53] Speaker 05:
And if you look at that language there, there is no tie between the statement relating to the guilty plea and the credibility of any witness.

[00:48:01] Speaker 05:
In fact, no witness is even identified.

[00:48:04] Speaker 05:
Former high-level executives at the company are going to plead guilty to the same

[00:48:08] Speaker 05:
of defenses that these individuals here are sitting at.

[00:48:12] Speaker 05:
There's only one inference about why that was given.

[00:48:15] Speaker 05:
I think the prosecutor was pretty surprised when I stood up and said, hey, wait a second.

[00:48:18] Speaker 05:
You know, you can't use it that way.

[00:48:20] Speaker 05:
And the judge agreed.

[00:48:22] Speaker 05:
But I think you can't unring a bell like that in the first few seconds of an opening statement.

[00:48:27] Speaker 05:
That set the tone for the entire case.

[00:48:29] Speaker 05:
And it was the first major error that occurred.

[00:48:32] Speaker 05:
And then, Your Honor,

[00:48:33] Speaker 05:
During my examination of an RIA, not an individual investor, Fariba Aranasi, I was asking her about her use of the PPMs based on some internal documents that she had.

[00:48:45] Speaker 05:
She had testified that the tear sheet was the Bible.

[00:48:49] Speaker 05:
And while her internal record showed that she had her internal assistance modify the tear sheets, saying they're too scary, and they'll read the PPM anyway.

[00:49:03] Speaker 05:
The judge interrupted my examination and said, and because he sustained objections, let me explain to you a little bit about why I'm sustaining these objections to the jury.

[00:49:16] Speaker 05:
I'll give you more legal instructions later, but under the law of mail and wire fraud, we don't blame the victim.

[00:49:22] Speaker 05:
I'm standing up there, your honor, asking the quote unquote victim the question, and the judge is telling the jury we don't blame the victim.

[00:49:29] Speaker 05:
Later in that same examination,

[00:49:31] Speaker 05:
he stated in front of the jury that your cross is marginally relevant.

[00:49:37] Speaker 05:
And of course, at that point, we had no idea that the judge was going to instruct the jury that even intentionally disregarding this information by the RIAs was no defense to any of our claims.

[00:49:49] Speaker 02:
But isn't that consistent with Lindsay?

[00:49:52] Speaker 05:
that it's no defense?

[00:49:54] Speaker 05:
Your Honor, I think it's not.

[00:49:55] Speaker 02:
Even intentional disregard of relevant information is not a defense.

[00:49:59] Speaker 05:
It is when the theory is that there were affirmative misrepresentations made.

[00:50:04] Speaker 05:
And in fact, in the courts in the Ninth Circuit's model instructions, it sort of cabinets, Lindsay, in the commentary just to mortgage fraud cases.

[00:50:13] Speaker 05:
I don't know why, but that's where it's there.

[00:50:15] Speaker 05:
Here you've got a case, and I think this is the really critical distinction.

[00:50:19] Speaker 05:
And that is, my client's being told over and over, the jury's being told, he didn't say this, he didn't say this, he didn't say this.

[00:50:26] Speaker 05:
And when you give the investment advisor the power to say, I ignored this, this, and this, even if it would clarify what was not stated, that's the real insidious part of this instruction, is it gives the investor the ability to frame what a half-truth is by ignoring information that was disclosed.

[00:50:44] Speaker 05:
Truthful information, not like in Lindsay.

[00:50:48] Speaker 05:
where the basic point of Lindsay was, you know, you can't argue that your false statements weren't considered by the bank and therefore you're not, you know, guilty.

[00:50:55] Speaker 05:
That's a no-brainer, right, Your Honor?

[00:50:58] Speaker 05:
But in this case, when you've got truthful disclosures and other information available to the investor that would clarify the alleged omissions, that's where you got a real problem with the case and the fairness of the way this went down.

[00:51:13] Speaker 05:
Thank you so much.

[00:51:14] Speaker 02:
All right.

[00:51:14] Speaker 02:
Thank you.

[00:51:15] Speaker 02:
Thank you very much.

[00:51:16] Speaker 02:
Thank you to all counsel.

[00:51:19] Speaker 02:
Very much appreciate your helpful arguments today.

[00:51:23] Speaker 02:
Thank you.

[00:51:24] Speaker 02:
All right.

[00:51:24] Speaker 02:
We are adjourned for today.

[00:51:25] Speaker 02:
Thank you.