Thursday, January 21, 2021

Convictions vacated against bank executives: government must prove a statement false under each objectively reasonable interpretation of an ambiguous reporting requirement

United States v. Harra, --- F.3d ---, 2021 WL 97446, Appeal Nos. 19-1105, 19-1136, 19-1190, 19-1237 (Jan. 12, 2021); https://www2.ca3.uscourts.gov/opinarch/191105p.pdf

Wilmington Trust financed commercial real estate/construction projects. Extensions were common: the loan documents reserved its right to “renew or extend (repeatedly and for any length of time) this loan . . . without the consent of or notice to anyone.” Wilmington called this the “waiver process” and its internal policy did not classify loans in the “waiver process” as past due if the loans were in the process of renewal and interest payments were current. Even though regulatory agencies required Wilmington to report loans that were “contractually past due,” Wilmington excluded loans in the “waiver process” from those it reported as “past due” to the SEC and the Federal Reserve. Around 2009, these commercial loans were a large feature of Wilmington’s portfolio and represented over $300 million in loans. The defendant bank executives argued that under a reasonable interpretation of the reporting requirements, they properly excluded these loans from the “past due” classification. The District Court denied their requests to introduce evidence concerning or instruct the jury about that alternative interpretation. The jury convicted on all counts, including conspiracy to defraud the United States, commit securities fraud, and make false statements to regulators, 18 U.S.C. § 371; securities fraud, 18 U.S.C. § 1348; making false statements to the SEC and Federal Reserve, 18 U.S.C. § 1001 and 15 U.S.C. § 78m; and falsely certifying financial reports, 18 U.S.C. § 1350.

The Third Circuit found that, to prove falsity beyond a reasonable doubt, the government must prove a statement false under each objectively reasonable interpretation of an ambiguous reporting requirement. That is, the government must prove either (1) that its interpretation of the reporting requirement is the only objectively reasonable interpretation or (2) that the defendant’s statement was also false under the alternative, objectively reasonable interpretation. To hold otherwise would violate Due Process and the government’s burden to prove each element: because falsity and knowledge are distinct elements, the government must prove a statement was false beyond a reasonable doubt, regardless of the defendant’s subjective intent to lie.

Under this standard, the evidence was insufficient on the false statements convictions and the Court entered a judgment of acquittal. The Court found sufficient evidence of an alternative theory of liability on the conspiracy and securities fraud convictions, improper short-term mass waivers, but the error as to the false statements theory of liability infected all counts and was not harmless and so the conspiracy and securities fraud convictions were vacated and remanded for retrial.

 

 

 

 

 

 

 

 

 

 


Enticement of a minor and travel case: sufficient evidence, no misstatement of law, no entrapment, no plain error in sentencing enhancement for misrepresenting age and sexual orientation

United States v. Davis, --- F.3d ----, 2021 WL 97427, Appeal No. 19-1696 (3d Cir. Jan. 12, 2021); https://www2.ca3.uscourts.gov/opinarch/191696p.pdf

Davis answered a Craigslist ad supposedly about an 18-year old “Wild Child” and then chatted over an eight-day period with an undercover officer acting as a 14-year old minor about sex and other things. Davis ultimately drove from New York to meet the minor in a parking lot in Pennsylvania, bringing condoms with him. He was charged with attempting to entice a minor to engage in sexual conduct, 18 U.S.C. § 2422(b), and for traveling with intent to engage in illicit sexual conduct, 18 U.S.C. § 2423(b). His defenses were that he thought he was role-playing with an adult and that he was entrapped. He was convicted by a jury on both counts and sentenced to 127 months imprisonment. The Third Circuit rejected four points on appeal.

The evidence was sufficient: Attempt requires proof of a requisite intent and a substantial step. Although sometimes a substantial step may supply unequivocal evidence of criminal intent, it need not always do so. If the government presents evidence (need not be unequivocal) of criminal intent independent of a defendant’s substantial step, then the substantial step need only corroborate criminal intent. Davis’s post-arrest confession to knowing the minor’s age and their text communications are each evidence of criminal intent independent of that demonstrated by his substantial steps (travel to the prearranged meeting place and possession of condoms).  

The prosecutor did not misstate the law in closing: The government did not err in arguing that post-enticement acts like travel or the possession of condoms could be a substantial step for enticement of a minor. The substantial step inquiry corroborates criminal intent and establishes that a defendant went beyond mere planning. The substantial step must relate to but need not be the exact conduct criminalized by the statute. Here travel and condom possession related to the enticing communications because they demonstrated the communications were not “all hot air.”

Davis was not legally entrapped: The Court found Davis was not entrapped as a matter of law. To disprove the affirmative defense of entrapment, the government can show predisposition by “a willingness to commit the crime for which he is charged as evidenced by the accused’s ready response to the inducement.” The Court found the chats showed that when Davis discovered he was corresponding with a 14-year-old who posted a personals ad for sex, his “ready response” acknowledged her age and asked if she wanted to meet that day. Also, his reluctance to engage in sexually explicit conversation may be evidence of a misguided attempt to avoid incriminating himself, not necessarily evidence of his non-predisposition to violate § 2422(b). 

The sentencing enhancement was not plain error: The Court ruled it was not plain error to apply a two-level sentencing enhancement for misrepresenting age and sexual orientation to influence a minor to engage in sexual conduct. See U.S.S.G. § 2G1.3(b)(2)(A) (enhancement when conduct involves knowing misrepresentation of a participant’s identity to . . . induce the travel of a minor to engage in prohibited sexual conduct). It did not matter that Davis ultimately corrected the misrepresentation of his age if he lied about it in an effort to make the minor feel comfortable. His objection to the enhancement based on a lie about sexual orientation failed under plain error because the government’s theory was reasonable: he misrepresented his sexual orientation to assure the minor he was not a sexual threat in his continued effort to meet her.

    Failure to group certain counts as required by the Sentencing Guidelines is plain error requiring resentencing even if the sentencing co...