Not a Lexis Advance subscriber? Try it out for free.

United States v. Mahaffy

United States Court of Appeals for the Second Circuit

March 5, 2012, Argued; August 2, 2012, Decided

Docket No. 09-5349-cr(L) 09-5352-cr(con), 10-0036-cr(con), 10-0181-cr(con), 10-0154-cr(con), 10-835(con), 10-2996(con), 10-3091(con), 10-4634-ag(con)

Opinion

 [*118]  Barrington D. Parker, Circuit Judge:

This appeal arises from an indictment that charged that traders employed by several brokerage firms conspired with employees of A.B. Watley, a day trading firm, to commit securities fraud by providing confidential information belonging to their employers to Watley. After a first  [*119]  trial in 2007 in the United States District Court for the Eastern District of New York (Glasser, J.), the jury acquitted the defendants on thirty-eight of thirty-nine counts.1 The jury hung, and the court subsequently declared  [**3] a mistrial, on the remaining count, which charged the defendants with conspiring to commit securities fraud. See 18 U.S.C. §§ 1348, 1349. In 2009 the government retried the conspiracy count before Judge John Gleeson, with honest services fraud and property fraud as the charged objects of the conspiracy. After a jury deadlock and a supplemental charge, the jury convicted all defendants under each of those theories. The Supreme Court subsequently decided Skilling v. United States, 130 S. Ct. 2896, 177 L. Ed. 2d 619 (2010), which limited the scope of the honest services fraud statute to cover only fraudulent schemes effectuated through bribes or kickbacks. Id. at 2928, 2933.

Shortly after sentencing, the SEC initiated administrative proceedings against defendant Kenneth Mahaffy. In connection with those proceedings, the SEC disclosed in December 2009 and January 2010 30 transcripts of investigative depositions taken as early as December 2004. Once they had access to those transcripts,  [**4] the defendants moved for a new trial, contending that 12 of the transcripts included material required to be disclosed pursuant to Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963). Specifically, they contended that information in the transcripts contradicted or undermined the testimony of key government witnesses on a central question at trial, namely, whether the allegedly misappropriated information was confidential under Carpenter v. United States, 484 U.S. 19, 108 S. Ct. 316, 98 L. Ed. 2d 275 (1987). The district court criticized the government's conduct but ultimately concluded that the jury would not have reached a different result had the transcripts been disclosed.

We disagree. We conclude that the government's failure to disclose portions of the transcripts violated Brady and that these Brady violations undermined confidence in the jury's verdict. Therefore, we vacate the misappropriation of confidential information component of the conspiracy convictions. Finally, because the district court did not adequately instruct the jury on the scope of honest services fraud, we vacate the honest services fraud component as well.

Read The Full CaseNot a Lexis Advance subscriber? Try it out for free.

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.

693 F.3d 113 *; 2012 U.S. App. LEXIS 16072 **; 2012 WL 3125209

UNITED STATES OF AMERICA, Appellee, v. KENNETH E.MAHAFFY, JR., LINUS N. NWAIGWE, TIMOTHY O'CONNELL, DAVID G. GHYSELS, KEEVIN H. LEONARD, ROBERT F.MALIN, Defendants-Appellants.KENNETH E.MAHAFFY, JR., Petitioner, v. UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Respondent.

Subsequent History: As Amended November 6, 2012.

Related proceeding at United States v. Santiago, 2014 U.S. Dist. LEXIS 88207 (E.D.N.Y., June 27, 2014)

Prior History: United States v. Mahaffy, 2011 U.S. Dist. LEXIS 10098 (E.D.N.Y., Feb. 2, 2011)

Disposition:  [**1] Appeal from judgments of conviction in the United States District Court for the Eastern District of New York (Gleeson, J.), following retrial, on conspiracy to commit honest services and property fraud. See 18 U.S.C. §§ 1348, 1349. After sentencing, the government disclosed transcripts of depositions taken by the SEC prior to the first trial. We hold that the transcripts contained material that was required to be disclosed under Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963), and that the district court did not adequately instruct the jury that it had to find bribery in order to convict under an honest services fraud theory of conspiracy to commit securities fraud.

VACATED and REMANDED.

CORE TERMS

squawked, confidential, Broker, box, trades, traders, transmitted, brokerage firm, district court, honest, block, convictions, conspiracy, retrial, securities fraud, frontrunning, defendants', firms, phone, unlawful activity, exculpatory, forfeiture, confidential information, first trial, employees, feed, conspiracy count, depositions, disclosure, disclose

Criminal Law & Procedure, Criminal Offenses, Fraud, General Overview, Commencement of Criminal Proceedings, Double Jeopardy, Standards of Review, De Novo Review, Sufficiency of Evidence, Inchoate Crimes, Conspiracy, Elements, Securities Fraud, Double Jeopardy Protection, Acquittals, Discovery & Inspection, Brady Materials, Appellate Review, Duty of Disclosure, Brady Claims, Constitutional Law, Fundamental Rights, Procedural Due Process, Scope of Protection, Appeals, Trials, Jury Instructions, Requests to Charge, Sentencing, Forfeitures