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United States Court of Appeals for the Second Circuit
February 19, 2008, Argued; June 11, 2008, Decided
Docket Nos. 05-5523-cr(L), 06-0080-cr(con), 06-2392-cr(con)
[*85] KATZMANN, Circuit Judge:
Over sixty years ago, the [**2] Supreme Court established the test for whether a given financial instrument or transaction constitutes an "investment contract" -- and, therefore, a security -- for purposes of the federal securities laws. SEC v. W.J. Howey Co., 328 U.S. 293, 66 S. Ct. 1100, 90 L. Ed. 1244 (1946). We write today to underscore that, ] in applying the Howey factors, courts can (and should) look beyond the formal terms of a relationship to the reality of the parties' positions to evaluate whether "the reasonable expectation was one of significant investor control." SEC v. Aqua-Sonic Prods. Corp., 687 F.2d 577, 585 (2d Cir. 1982).
Appellants Dickau and Silverstein were two of twenty-five individuals indicted for criminal fraud for their role in marketing investment interests in film companies. Following a jury trial, they were each convicted of securities fraud and conspiracy to commit securities and mail fraud. On appeal, they challenge their convictions, claiming, inter alia, that insufficient evidence supported the determination that the interests at issue were securities and that the district court erred in including a "no ultimate harm" charge in the jury instructions. In addition, they challenge their sentences on the ground that [**3] the district court erred in measuring the loss amount as the entire cost of the total shares that defendants sold. We find the various objections to the conviction to be without merit. We agree with appellants, however, that the district court erred in its determination of the loss amount and therefore remand the cases for resentencing.
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529 F.3d 83 *; 2008 U.S. App. LEXIS 12409 **; Fed. Sec. L. Rep. (CCH) P94,746; 2008 WL 2357233
UNITED STATES OF AMERICA, Appellee, --v.-- JAMES M. LEONARD, LAURENCE BOWSKY, VINCENT CAVARRA, ABRAHAM M. DANIELS, ALBERTO FERREIRAS, HOWARD P. GOODMAN, MARY L. GOODMAN, IAN HAHN, ROSEMARIE INGENITO, RICHARD H. JENKINS, KURT E. KRANZ, ANTHONY LIGGIO, PHILIP MANZIONE, WILLIAM NEWSOM, LISA NIKSIC, DONALD F. O'GRADY, FRANK ROSSI, ANTHONY R. STARK, BEVERLY J. TEDDER, ERIC THOM, DANA VALENSKY, KENNETH R. ZOLO, Defendants, CYNTHIA SILVER, 1 PAUL C. DICKAU, NANCI SILVERSTEIN, Defendants-Appellants.
Subsequent History: Appeal after remand at, Decision reached on appeal by United States v. Newsom, 2010 U.S. App. LEXIS 22823 (2d Cir. N.Y., Nov. 2, 2010)
Prior History: [**1] Appeals from judgments of the United States District Court for the Eastern District of New York (Wexler, J.), (1) convicting appellant Dickau of two counts of securities fraud and two counts of conspiracy to commit securities and mail fraud and sentencing him, in principal part, to forty-three months' imprisonment with a restitution order of $ 499,989.64, and (2) convicting appellant Silverstein of one count of securities fraud and one count of conspiracy to commit securities and mail fraud and sentencing her, in principal part, to six months' imprisonment with a restitution order of $ 14,940.
Disposition: We AFFIRM the convictions, VACATE the sentences, and REMAND to the district court for resentencing.
investors, district court, sentences, film, documents, amount of loss, organizational, promoters, commissions, passive, convictions
Securities Law, Scope of Provisions, Definitions, Covered Securities, Initial Offerings of Securities, Security Defined, Criminal Law & Procedure, Standards of Review, Substantial Evidence, Sufficiency of Evidence, Fraud, Securities Fraud, General Overview, Securities Exchange Act of 1934 Actions, Implied Private Rights of Action, Deceptive & Manipulative Devices, Regulators, US Securities & Exchange Commission, Penalties for Knowing & Willful Violations, Securities Act Actions, Definitions, Business & Corporate Law, Limited Liability Companies, Member Duties & Liabilities, Sentencing, Appeals, Proportionality & Reasonableness Review, Imposition of Sentence, Factors, Sentencing Guidelines, Penalties