ASPEN, CO > > SEE PAGE 3 January 13-18, 2013 / NACDL’s 33rd Annual Advanced Criminal Law Seminar

THENational Association of Criminal Defense Lawyers WASHINGTON, DC > > SEE BROCHURE February 20-23, 2013 / NACDL’s 2013 Midwinter Meeting & Seminar

LAS VEGAS, NV > > SEE PAGE 8 April 5-6, 2013 / NACDL & CACJ’s CHAMPION “Making Sense of Science VI” September/October 2012

White Collar Crime Issue

v The SEC’s Cooperation Initiative v The Willfulness Element of a False Statement Charge v Defense Strategies and Compliance Issues in the New Insider Trading Environment v Jury Instructions: Key Topics in Federal White Collar Cases v The Most Effective Opening Statement Ever Given? v Overzealous Bankruptcy Practice Can Lead to a Prison Cell ipated in drafting the documents, he did not have final control over the statements. Under the Supreme Court’s recent decision in Janus Capital Group Inc. v . First Derivative Traders , only “the per - son or entity with ultimate authority over the statement, including its content and whether and how to communicate it” is the maker of a statement for purposes of primary liability under the securities laws. 1 Most model or pattern securities fraud instruc - tions do not account for or address the Janus ruling. Proposing and advocating for an instruction that incorporates Janus could provide the jury with a reason to acquit. This article discusses six key issues where the court’s instruc - tions to the jury can truly affect the outcome of the case and where there is much room for advocacy. The first three — rea - sonable doubt, willful blindness, and venue — are common to white collar cases and to criminal cases in general. As a result, courts often propose to give their stan - dard instructions. But there is a strong basis to propose instruc - tions that may be more advanta - geous to the defense and can help make the difference between con - viction and acquittal. The last three concern instructions in sub - stantive areas of white collar law — securities fraud, tax evasion, and antitrust. These areas high - light that where the law is still developing, model or pattern jury instructions may not Jury Instructions: reflect the latest precedent, and often there are signifi - cant open issues that can, in appropriate cases, be pur - Key Topics in Federal sued to the defense’s advantage. Jury instructions are an extremely effective way White Collar Cases for defense counsel to present their theory of the case and law. The right charge can focus the jury and require it to confront directly whether the government has met its burden of proof on key defense issues. Proposing and advocating for clear and fair instruc - tions in the trial court is thus critical, particularly in areas such as those discussed below, where courts are reluctant to reverse convictions on the basis of erro - he right jury charge can make the difference neous instructions. between conviction and acquittal. Take, as a basic Texample, a criminal securities fraud case in which Reasonable Doubt the government has alleged that a defendant employed in a large organization made misleading statements “Proof beyond a reasonable doubt” is a concept about the company’s performance in financial state - fundamental to the American criminal justice system. A ments. The defendant contends that although he partic - clear instruction that requires jurors to reach the con -

BY SUSAN E. BRUNE AND LAURIE EDELSTEIN

26 WWW.NACDL.ORG THE CHAMPION stitutionally required “subjective state for the jury. 10 Justice Ginsburg acknowl - required to find a defendant guilty. 19 of certitude” or “near certitude” neces - edged that certain formulations of the The FJC’s pattern instruction, sary for conviction can anchor the jury reasonable doubt standard can be con - however, is not perfect. The last two in its deliberations and force the jury to fusing and unhelpful, including the sentences state: “If, based on your con - answer squarely whether the govern - “hesitate to act” analogy that many cir - sideration of the evidence, you are ment has met its heavy burden of prov - cuits still use: “a doubt that would cause firmly convinced that the defendant is ing guilt beyond a reasonable doubt. 2 It a reasonable person to hesitate to act in guilty of the crime charged, you must is remarkable, then, that there is no a matter of importance in his or her find him guilty. If on the other hand, standard federal jury instruction estab - personal life.” 11 That analogy, as Second you think there is a real possibility that lished in the case law. Circuit Judge Jon Newman has astutely he is not guilty, you must give him the In many circuits, trial courts do not observed, can be beset by ambiguity: benefit of the doubt and find him not instruct jurors that they must reach a guilty.” Several circuits and commenta - subjective state of certitude to convict. If the jurors encounter a doubt tors have expressed concern that the Instead, they use a “hesitate to act” for - that would cause them to “hes - phrase “a real possibility” could suggest mulation. 3 This formulation is poten - itate to act in a matter of that the defendant must make a show - tially ambiguous and may trivialize the importance,” what are they to ing that he or she is not guilty, thereby key decision facing jurors. Other cir - do then? Should they decline impermissibly shifting the burden of K cuits have approved instructions that to convict because they have proof to the defense. 20 The Supreme E Y

define reasonable doubt in a way that reached a point of hesitation, Court of New Jersey has adopted a can lower or shift the burden of proof or should they simply hesitate, modified version of the FJC instruction T required for conviction. And surpris - then ask themselves whether that eliminates this issue: “If, based on O ingly, given how fundamental the bur - in their own private matters, your consideration of the evidence, you P I

den of proof is to deliberations, there they would resolve the doubt are firmly convinced that the defendant C

remains a circuit split over whether rea - in favor of action, and if so, is guilty of the crime charged, you must S 12 sonable doubt should even be defined continue on to convict? find him guilty. If, on the other hand, 4 I for the jury. you are not firmly convinced of defen - N

The potpourri of reasonable doubt Justice Ginsburg noted that other dant’s guilt, you must give defendant instructions and the circuit split stem reasonable doubt instructions have the benefit of the doubt and find him F E 21

from the Supreme Court’s failure to additional shortcomings, such as not guilty.” D

provide clear guidance. Indeed, not “uninstructive circularity”: “Jury com - Because the Supreme Court’s deci - E until 1970, in In re Winship , did the prehension is scarcely advanced when a sion in Victor effectively held that prob - R

Supreme Court explicitly hold that the court ‘defines’ reasonable doubt as lematic words or definitions in a rea - A 13 due process clause of the Fifth and ‘doubt … that is reasonable.’” sonable doubt charge can be neutral - L

Fourteenth Amendments “protects the Justice Ginsburg recognized that ized by words or phrases that preclude W accused against conviction except upon difficulties in defining reasonable the jury from requiring more than a proof beyond a reasonable doubt of doubt have led some courts to question reasonable doubt to acquit, it is unlikely H I every fact necessary to constitute the the usefulness of any reasonable doubt that a reasonable doubt charge will pro - T 5 14 crime with which he is charged.” The instruction. But she refused to accept vide grounds for reversal of a guilty ver - E

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Court recognized that the reasonable those difficulties as a reason not to give dict on appeal. Advocating for a C

doubt standard was “indispensable” a definition. Justice Ginsburg’s charge that focuses on the government’s O because it “impresses on the trier of approach has to be the right one. The burden and instructs the jury that it L

fact the necessity of reaching a subjec - concept clearly is not self-defining; cannot convict unless it is firmly con - L tive state of certitude of the facts in even courts define it inconsistently. And vinced of the defendant’s guilt thus can A issue,” and is thus “a prime instrument studies confirm that when jurors are be critical. It may help secure an acquit - R

for reducing the risk of convictions not given a definition, they “are often tal in the first instance. C 6 resting on factual error.” But Winship confused about the meaning of reason - A 15 was an appeal from a bench trial, and able doubt.” That confusion can lead Willful Blindness S the Supreme Court did not address the jurors to apply a lower standard of E particulars of instructing the jury on proof than the constitutionally In May 2011, the Supreme Court S this constitutionally required burden required “subjective state of certitude” issued a decision in a patent case, of proof. or “near certitude.” 16 Global-Tech Appliances Inc. v . SEB The Supreme Court addressed rea - Defense counsel might consider S.A. ,23 which changed the contours of sonable doubt again in 1994 in Victor v. proposing the Federal Judicial Center’s the willful blindness doctrine — also Nebraska .7 Unfortunately, however, the (FJC) pattern instruction on reasonable known as “conscious avoidance,” “delib - Court again left trial courts without doubt, which Justice Ginsburg high - erate ignorance,” or the “ostrich” clear guidance about whether or how to lighted in Victor .17 This instruction does instruction. The doctrine relieves a instruct juries on the standard. 8 In dic - away with the “hesitate to act” analogy party from establishing a defendant’s tum, the Court went so far as to state and instead focuses on whether the “actual knowledge” of wrongdoing. that “the Constitution neither prohibits government has met its burden of Instead, it allows the court to instruct trial courts from defining reasonable proof: “Proof beyond a reasonable the jury that a party can prove “knowl - doubt nor requires them to do so as a doubt is proof that leaves you firmly edge” by showing that a defendant matter of course.” 9 convinced of the defendant’s guilt.” 18 actively avoided learning a fact. The But helpful for the defense is The “firmly convinced” standard, which decision in Global-Tech has caught the Justice Ginsburg’s concurrence, which certain circuits have approved, more attention of the criminal bar because it advocates for defining reasonable doubt accurately reflects the state of certainty raises significant questions regarding

WWW.NACDL.ORG SEPTEMBER/OCTOBER 2012 27 when — if ever — courts should give a instructions, many have also held that obvious to him,” 37 or if a defendant willful blindness instruction in a crimi - the instruction should rarely be given. 30 “deliberately and consciously avoided nal case requiring proof of knowledge, These courts recognize that by allowing confirming [the] fact.” 38 But under and how any such instruction should be a jury to convict without finding that Global-Tech , willful blindness can sub - worded. These questions are particular - the defendant had actual knowledge of stitute for actual knowledge only if the ly important for white collar cases in illegal conduct, the willful blindness defendant (1) “subjectively believe[s] which a defendant’s knowledge and doctrine endangers the fundamental that there is a high probability that a state of mind are often central. Indeed, principle that criminal mens rea is nec - fact exists” and (2) “take[s] deliberate willful blindness instructions have essary for conviction. Justice Kennedy’s actions to avoid learning of that fact.” 39 played a prominent role in many recent dissents in Global-Tech and Jewell , dis - In other words, the government must high-profile white collar prosecutions, cussed in note 29, along with appellate show that the defendant took an affir - including the trials of Jeffrey Skilling, decisions that are critical of the doc - mative step to avoid learning a fact that Kenneth Lay, Bernard Ebbers, and trine, support an objection to a willful he believed had a high probability of Conrad Black. blindness instruction, particularly existing. In Global-Tech , the Court was when knowledge is a statutory element Recently, the Fifth Circuit in United asked to rule upon the level of knowl - of the relevant offense. 31 States v. Brooks held that its pre- Global edge required to prove a claim for active Tax prosecutions provide a partic - Tech pattern instruction, which S inducement under the patent law. The ularly compelling opportunity for chal - instructs the jury that it “may find that E

S Court held that a plaintiff must prove lenging the instruction. Under Cheek v. defendant had knowledge of a fact if

A that the defendant had “knowledge” United States , the government must you find that the defendant deliberately

C that the induced acts constituted patent prove beyond a reasonable doubt that a closed his eyes to what would otherwise infringement, but that a plaintiff did defendant committed a “voluntary, have been obvious to him,” was suffi - R not need to prove that the defendant intentional violation of a known legal cient to meet the Global-Tech stan - A had actual knowledge. Instead, the duty.” 32 A willful blindness instruction dard. 40 Although the court admitted L

L “knowledge” requirement could be sat - is inconsistent with the requirement that the instruction did not use the

O isfied by a showing that the defendant that the government prove that a defen - same language as in Global-Tech , it con -

C “willfully blinded itself to the infring - dant had actual knowledge that his con - cluded that “the same meaning is con - ing nature” of the conduct it encour - duct violated the tax laws. veyed.” 41 But there is a significant differ - E 24

T aged. To support its conclusion that Defense counsel can also object to ence between deliberately closing one’s

I “willfulness blindness” could substitute a willful blindness instruction on the eyes and taking deliberate actions to

H for actual knowledge, the Court turned ground that the evidence does not sup - avoid learning a fact. Closing one’s eyes

W to the criminal law. According to the port giving the instruction. Although amounts to inaction. Taking deliberate majority, although many criminal the government has the burden to actions to avoid learning a fact requires L statutes require proof that a defendant prove willful blindness, just as it has an affirmative act. 42 Although most pat - A acted knowingly or willfully, many the burden to prove knowledge, 33 the tern jury instructions, like the Fifth R

E courts have “fully embraced willful doctrine clearly makes it easier for the Circuit’s, have not yet been revised to

D blindness,” holding that defendants government to prove a defendant’s account for Global-Tech ’s subjective

E could not escape liability “by deliber - knowledge beyond a reasonable doubt. belief and active avoidance require - F

ately shielding themselves from clear Therefore, the government often seeks ments, despite the Fifth Circuit’s deci -

N evidence of critical facts that are a willful blindness instruction even sion in Brooks , they should be explicitly

I strongly suggested by the circum - when the government’s entire theory of part of any instruction. 43

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S stances.” Based on what the Court guilt is based on the defendant’s actual Global-Tech ’s distinction between

C viewed as “its wide acceptance in the knowledge or when there is no evi - willful blindness and recklessness or I Federal Judiciary,” the Court saw no dence that the defendant took steps to negligence is also worth emphasizing. A P reason to confine the doctrine to crim - avoid learning the truth. 34 But courts powerful and persistent criticism of the O inal actions. 26 have held that there must be some willful blindness instruction is that it T

Justice Anthony Kennedy’s dissent actual evidence of “willful blindness” creates the risk that a jury will convict

Y strongly criticized the majority’s rea - before the instruction is properly given based on reckless or even negligent E soning and its suggestion that willful — that is, the government must estab - conduct when intentional or knowing K blindness can appropriately satisfy the lish an appropriate factual predicate conduct is actually required. 44 Global- mental state requirement in “all federal for the instruction. 35 (Unfortunately, Tech explicitly distinguishes a willfully criminal cases involving knowledge.” 27 however, the courts of appeals have blind defendant “who takes deliberate As Judge Kennedy pointed out, the often excused improper willful blind - actions to avoid confirming a high Supreme Court had “never before held ness instructions as harmless error. A probability of wrongdoing and who can that willful blindness can substitute for trial court ruling that the requisite fac - almost be said to have actually known a statutory requirement of knowl - tual predicate has not been laid thus the critical facts” from a “reckless edge.” 28 And he questioned the majori - can be critical.) 36 defendant … who merely knows of a ty’s “mistaken step” of sanctioning the The upside about Global-Tech is substantial and unjustified risk of such substitution of one distinct mental state that it strengthened the test that juries wrongdoing,” and a “negligent defen - for another. 29 should apply when such an instruction dant … who should have known of a The majority’s opinion in Global- is given. Previously, courts instructed similar risk but, in fact, did not.” 45 Tech also overstates the federal judicia - the jury that the knowledge element Where an instruction is given, incorpo - ry’s embrace of the willful blindness could be satisfied by proof that the ration of language emphasizing that doctrine. Although the courts of defendant “deliberately closed his eyes recklessness and negligence are insuffi - appeals have upheld willful blindness to what would otherwise have been cient to establish knowledge is essential.

28 WWW.NACDL.ORG THE CHAMPION Venue ing him to arrange the illegal contribu - government, in response, essentially tions. 56 conceded that it had failed to offer The Constitution of the United At the close of the evidence, direct evidence that a co-conspirator States twice guarantees to every defen - Edwards made an oral motion for judg - committed an overt act in furtherance dant in a criminal case the right to be ment of acquittal. The court denied the of the conspiracy in the Northern tried in the state and district where the motion from the bench but noted that, District of California, arguing instead alleged offenses were committed. 46 having gone back and reviewed the that direct proof was not necessary Proper venue thus is not simply a mat - briefing from the motion to dismiss where circumstantial evidence support - ter of formal legal procedure; it is a stage, “the closest questions in my mind ed the inference that venue was proper constitutional right. 47 Some criminal have to do with some of the venue in the district where the indictment was statutes, like the securities fraud statute, issues.” 57 After the jury acquitted brought. 67 The court denied the specify how to determine proper Edwards on one count and hung on five motions, agreeing with the government venue. 48 When the statutes do not, others, the court allowed defense coun - that direct proof was not necessary and “[t]he locus delicti must be determined sel to file papers in support of a that there was sufficient evidence from from the nature of the crime alleged renewed Rule 29 motion and requested which the jury could have inferred that and the location of the act or acts con - that “the brief be directed primarily venue was proper. Venue, however, is stituting it.” 49 towards the venue issues raised” by two likely to be an issue on appeal. 68 K It cannot be assumed that the gov - counts. 58 The government never filed a In cases like Tolov , Edwards , and E Y

ernment has met its burden of proving response and instead voluntarily dis - AU Optronics, where there is slim or no venue to the jury, particularly nowadays missed the case with prejudice. 59 evidence of proper venue, getting a T where prosecutions can involve com - The government’s proof of proper clear instruction that focuses the jury O plex financial transactions that touch venue was also a major issue in a closely on the venue requirement, coupled P I

upon various districts in preparatory or watched criminal antitrust case recently with a closing argument that points to a C

ancillary ways or where the focus is on tried in the Northern District of lack of evidence satisfying venue, could S the foreign actions of foreign defen - California, United States v. AU provide jurors with a path to consensus 60 I dants. For example, in 2011, the Second Optronics Corporation. There, the gov - for acquittal. Model instructions that N

Circuit, in United States v . Tolov , vacat - ernment indicted a foreign corpora - address venue, however, are not usually ed a securities fraud conviction for lack tion, its U.S. subsidiary, and a number tailored to the venue requirements of F E 50

of proper venue. The defendant had of executives, all of whom were Taiwan specific offenses. Therefore, requests to D

taken flights from JFK airport, in the residents, for allegedly engaging in a charge should be modified to fit the E

Eastern District of New York, to meet conspiracy to fix prices of TFT-LCD particular venue requirements of the R 61 with investors to whom he allegedly panels in violation of the Sherman offenses charged. A made material misstatements. The Act. The conduct underlying the An additional note about venue — L

court held that the defendant’s contact charges was predominately foreign in the courts of appeals have held unani - W with the Eastern District was insuffi - nature. 62 At the close of all the evidence, mously that the government must cient under the relevant securities fraud the defendants moved for acquittal on prove venue only by a preponderance of H I statute, which required trial “where any various grounds, including that the the evidence and not by proof beyond a T 69 act or transaction constituting the viola - government had failed to meet its bur - reasonable doubt. Defense attorneys E

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tion occurred .” As the Second Circuit den of proof on venue. The court may nonetheless want to request a C

put it, “catching flights” were, at most, inquired of the government whether it higher burden on the ground that a O acts preparatory to the crime. 52 was “at all worried about your venue charge setting forth two standards on L 63 Venue was also a hotly contested proof.” The government responded by the fundamental issue of the govern - L issue in the recent high-profile prosecu - moving to supplement an exhibit for ment’s burden will confuse the jury. For A tion of John Edwards, whom the gov - reasons that had “something to do with this reason, Sand’s Modern Federal Jury R

64

ernment charged in the Middle District venue.” The court granted the motion Instructions proposes that the court use C

of North Carolina with violating cam - over the defendants’ objection and the “beyond a reasonable doubt stan - A 53 70 paign finance laws. Edwards argued allowed the government to augment the dard.” Moreover, the lower standard is S throughout that venue was not proper record with a certification from a custo - not in harmony with the Supreme E for certain substantive counts where the dian of records at Apple Computers, a Court’s holding in Blakely v. S government neither alleged nor proved company that had purchased TFT- Washington that every issue “legally that he accepted illegal campaign con - LCDs, attesting to the authenticity of essential to the punishment” be proven tributions in the district. 54 Instead, the certain business records. The certifica - beyond a reasonable doubt. 71 contributions were paid in Colorado, tion was sworn out in Cupertino, Calif., California, and Florida. The only con - a city within the Northern District of Securities Fraud: tribution tied to North Carolina was California, but the business records payment for a flight that originated in made no reference to Cupertino or the Reasonable Reliance Raleigh, which is in the Eastern District Northern District of California. 65 A perplexing aspect of criminal of North Carolina, not the Middle Following the verdict, the two cor - securities law is that courts have District where Edwards was indicted. 55 porations and the two senior executives imposed more stringent requirements The government claimed venue was who were convicted — two individuals on a private plaintiff in a civil suit to proper under various theories, includ - were acquitted and the jury deadlocked prove securities fraud than on the gov - ing characterizing the campaign as to another — renewed their motions ernment to prove criminal liability. finance violations as continuing offens - for acquittal, vigorously arguing again This is so even though the same statute es that Edwards set in motion by calling that the government had failed to satis - — Section 10(b) of the Securities his aide in North Carolina and direct - fy its burden of proof on venue. 66 The Exchange Act of 1934 72 — governs

WWW.NACDL.ORG SEPTEMBER/OCTOBER 2012 29 criminal securities fraud actions and Eastern District of New York, defense the courts applying a dizzying array of private civil suits — and even though counsel asked the court to instruct the tests that were subject to intense legal courts typically interpret liability more jury that reliance was a required ele - debate. In March 2010, Congress narrowly in the criminal context. ment of the securities fraud charges in passed legislation codifying the eco - Under Section 10(b) and Rule 10b- the case. 79 The issue of reliance was crit - nomic substance doctrine. That legis - 5, which implements the statute, it is ical because of the absence of evidence lation resolves certain issues for those unlawful (1) to make an untrue state - that the alleged victims of the purport - transactions to which it applies, but ment of material fact or materially mis - ed fraud — sophisticated hedge fund leaves others unresolved. leading omission, (2) with scienter, (3) investors — actually relied on any of Before codification, some courts in connection with the purchase or sale the alleged misstatements or omissions applied a “conjunctive test,” requiring of securities, while (4) knowingly using, upon which the government had based the taxpayer to show that the transac - or causing the use of, any means or its case. tion had an objective economic effect, instrumentalities of interstate com - The court declined to give the such as potential for profit or other merce or the mails. 73 In interpreting this requested instruction. But it did incor - meaningful change in the taxpayer’s statute and rule in the civil context, the porate the concept of reliance into its position and that the taxpayer had a Supreme Court has expressly required charge on materiality. The court subjective non-tax business purpose for private securities fraud plaintiffs to instructed the jury that “[i]t is also not entering into the transaction. Other S prove the additional “essential element” a defense that investors did not rely courts applied a disjunctive test. For the E

S of actual reliance on the alleged mis - upon material misrepresentations or tax aspects of the transaction to be 74

A statement or omission. According to misleading omissions. Reliance by an respected, the taxpayer needed to show

C the Supreme Court, reliance is required investor is not an element of the offense only that the transaction presented an “because proof of reliance ensures that of securities fraud as I have defined it objective economic benefit or a non-tax R there is a proper ‘connection between a for you. You may, however, consider business purpose. And still others used A defendant’s misrepresentation and a reliance or lack of reliance in assessing a more fluid test treating the objective L 75 80 L plaintiff’s injury.’” materiality. ” In other words, the jurors and subjective components as factors to

O To date, an express reliance could ask themselves whether the be considered in the economic sub - 83 C requirement has not been incorporated alleged misstatements or omissions stance analysis. broadly, if at all, into the elements the were material in light of the lack of evi - Codification appears to resolve the E

T government must prove to establish dence that any alleged victim acted in conjunctive/disjunctive split, at least for

I criminal liability for securities fraud reliance thereon. future cases. For a transaction to have

H (or in SEC enforcement actions). But Both defendants were acquitted of economic substance, the statute impos -

W there is a basis for seeking an instruc - all charges in that case. The issue of es a conjunctive test. A taxpayer must tion on reliance. An unpublished reliance therefore did not reach appel - show that “the transaction changes in a L Second Circuit decision, United States late review. Someday the issue will be meaningful way (apart from federal A v. Schlisser , sets forth the rationale for a reached; therefore, where appropriate, income tax effects) the taxpayer’s eco - R

E reliance requirement in criminal it should be addressed and preserved. nomic position,” and that “the taxpayer 76

D cases. As the Schlisser court explained, has a substantial purpose (apart from E the government should likely be Tax Evasion: The Economic federal income tax effects) for entering F 84 required to prove reliance as an ele - Substance Doctrine into such transaction.” In other words,

N ment of criminal securities fraud to obtain the tax benefits of a transac -

I because “[w]hile the securities fraud Over the last 10 years, the govern - tion, a taxpayer must satisfy both the

S statute speaks only in terms of ‘materi - ment has stepped up its attack against objective and subjective prongs of the

C al[ity],’ the very same statutory lan - what it alleges to be abusive tax shel - doctrine. On the flip side, in a criminal I guage has been interpreted in the civil ters by bringing criminal tax evasion tax evasion action, it now appears that P context to require actual reliance.” 77 charges — not against the taxpayers the government may have to disprove O The Schlisser court did not decide who allegedly evaded their taxes — but only one of the prongs to show that a T

whether reliance was a required ele - against the tax shelter promoters and defendant acted “willfully” in violation

Y ment because, on the facts of the case, the accountants, lawyers, and bankers of the tax laws — that is, committed a E the district court’s failure to so instruct involved in the transactions. 81 In “voluntary, intentional violation of a K the jury did not rise to the level of plain recent cases, a chief battleground has known legal duty.” 85 error, and the evidence of the victims’ been the court’s instructions to the Codification, however, leaves a actual reliance was overwhelming. The jury as to whether the tax transaction number of questions unanswered. The court noted, however, that the govern - had “economic substance.” The “eco - statute does not define the term “trans - ment had not offered a rationale for nomic substance” charge is critical action,” beyond stating that the “[t]erm why the statute should be interpreted because to convict a defendant of tax ‘transaction’ includes a series of trans - differently in the criminal context, evasion, the government must estab - actions.” 86 The definition of a “transac - where, in fact, courts “typically inter - lish that the taxpayer owed additional tion” in tax cases can be critical. For pret liability more narrowly.” 78 taxes. 82 One way the government can example, if a narrow definition is used, Even if the court refuses a request do that is to show that the transaction it may be more difficult to show that to instruct the jury that reliance is an lacked “economic substance,” the effect the taxpayer had a substantial non-tax element, counsel may still be able to of which is that the taxpayer cannot purpose in entering the transaction. 87 persuade the court to integrate the con - claim the tax benefits of the transac - The statute, likewise, provides little cept into the charge and thereby put the tion and therefore owes taxes. But the guidance on what would constitute a issue before the jury. For example, in a contours of the economic substance “meaningful change” in a taxpayer’s securities fraud prosecution in the doctrine have been far from clear with “economic position” or what would

30 WWW.NACDL.ORG THE CHAMPION qualify as a “substantial purpose” apart a number of novel issues concerning the the parallel TFT-LCD civil antitrust from tax effects for entering into the extraterritorial reach of the U.S. action — assigned to the same judge — transaction. antitrust laws in the criminal context. As the court expressly held that the FTAIA The statute also does not resolve the court stated during the charge con - was a substantive, not a jurisdictional, another key debate in recent tax evasion ference, “We are in what appears to me limitation on the Sherman Act. 98 The cases: how to define a transaction’s to be pretty uncharted waters here.” 91 court rejected Ninth Circuit precedent profit potential. Under the statute, one A key open issue was whether the to the contrary, ruling that the Supreme way a taxpayer can show that a transac - Foreign Trade Antitrust Improvements Court’s decision in Arbaugh v. Y&H tion has economic substance is to meet Act (FTAIA), 92 which excludes foreign Corporation compelled the conclusion the “profit potential” test. That test is commerce from the reach of the that the FTAIA imposed a substantive met “if the present value of the reason - Sherman Act, applied to the criminal merits limitation rather than a jurisdic - ably expected pre-tax profit from the conduct charged and whose decision tional bar. 99 In Arbaugh , the Supreme transaction is substantial in relation to was it to make — the judge’s or the Court held that a statute is jurisdictional the present value of the expected net jury’s? If it was the jury’s decision, then only if the legislature clearly says so. 100 tax benefits that would be allowed if the how should it be instructed with respect Between the court’s motion to dismiss transaction were respected,” taking into to the Act’s requirements? Congress ruling in AU Optronics and its ruling in account “[f]ees and other transaction passed the FTAIA in 1982 in an effort to the civil suit, the Third Circuit in Animal K expenses.” 88 But the statute does not limit the application of U.S. antitrust Sci. Prods. v. China Minmetals Corp. , E Y

define “pre-tax profit” or what it means laws to foreign anticompetitive conduct another global antitrust case, had come to be “reasonably expected.” Nor is it when that conduct causes no injury to to the same conclusion. 101 The Seventh T clear what “substantial” means. Is it a U.S. consumers. 93 Although the statute’s Circuit in Minn-Chem Inc. v. Agrium Inc. O qualitative test, a quantitative one, or language is “convoluted” and “inelegant - also strongly suggested that its previous P

94 I both? The statute is likewise ambiguous ly phrased,” the FTAIA, in essence, pro - ruling that the FTAIA imposed a juris - C

as to which fees and transaction vides that the Sherman Act does not dictional bar would not survive Arbaugh S expenses are to be taken into account apply to foreign commerce unless the and the Supreme Court’s decision in I when determining pre-tax profit. Does alleged anticompetitive conduct (1) Morrison v. National Australian Bank N

the calculation include legal fees for a involves “import trade or commerce” or Ltd. , concluding that Section 10(b) of tax opinion letter received in connec - (2) has “a direct, substantial, and reason - the Exchange Act does not apply F E 102

tion with the transactions? Those can ably foreseeable effect” on U.S. domestic, extraterritorially. D

substantially and significantly affect the import, or export commerce that gives Based on these decisions, the defen - E 89 95 profit potential. rise to a claim under U.S. antitrust laws. dants in AU Optronics convinced the R

Codification has a way of resolving This first exception is known as the court to instruct the jury that the two A some issues while opening up new ones. “import trade or commerce” exception exceptions to the FTAIA were elements L

The recent codification in the tax law and the second as the “domestic injury” of the offense and that the government W area is no exception. Jury instructions or “direct effects” exception. 96 was required to prove them beyond a in this area thus will continue to be The defendants in AU Optronics reasonable doubt. 103 The court also H I debated and contested. moved to dismiss the indictment, argu - agreed to define somewhat narrowly the T

ing that it failed to allege that defen - conduct required to satisfy the “import E

Antitrust: Application dants’ actions fell within either of the trade or commerce” exception. C

two exceptions to the FTAIA — the Defendants argued that for the govern - O Of the FTAIA “import trade or commerce” or the ment to satisfy its burden of proving that L

Over the last decade, the Antitrust “domestic injury” exception. They con - defendants’ conduct involved “import L Division of the U.S. Department of tended that the FTAIA serves as a sub - trade or commerce,” it was required to A Justice has vigorously pursued and pros - stantive limitation on the Sherman Act; establish beyond a reasonable doubt that R

ecuted international cartels that have these facts thus were essential elements defendants’ conduct was “directed” or C 104 allegedly violated the antitrust laws. of a Sherman Act claim involving for - “targeted” at the U.S. import market. A

These cases, which often involve pre - eign commerce and the government was The government contested this defini - S dominately foreign conduct, have raised required to plead and ultimately prove tion, claiming that there was “no target - E thorny issues about the application of them beyond a reasonable doubt. The ing requirement in the statute”; all the S the Sherman Act to alleged criminal government maintained that the FTAIA jury was required to find was an agree - conduct beyond the borders of the addresses only subject matter jurisdic - ment to fix the price of products that United States. Many of these issues have tion, not the merits or elements of the eventually were sold in the United States remained unresolved because these Sherman Act. Therefore, it was not or delivered to the United States. 105 Over criminal cases rarely go to trial. Since required to plead or prove either fact, the government’s objection, the court 2001, no corporate defendant and only a and it was for the court, not the jury, to instructed the jury that the “import few individuals have taken the govern - decide where the conduct alleged fell trade or commerce” exception required ment to trial in an international criminal within the Sherman Act. But in deciding the government to prove that the defen - cartel case. 90 But recently, one interna - the motion, the court did not resolve the dants engaged in “fixing the price of tional corporation and several of its substantive versus jurisdictional issue. It TFT-LCD panels targeted by the partici - executives challenged the government’s concluded that even if the FTAIA pants to be sold in the United States or global price-fixing allegations all the way applied in a criminal antitrust case, the for delivery to the United States.” 106 through trial. That case, United States v. indictment’s allegations were sufficient It remains to be seen whether other AU Optronics Corporation , discussed to satisfy the statute’s exception for courts will agree that the FTAIA imposes above in the venue section, required the “import trade or import commerce.” 97 substantive, as opposed to jurisdictional, parties and the court to confront directly Several months later, however, in limitations on antitrust actions involv -

WWW.NACDL.ORG SEPTEMBER/OCTOBER 2012 31 ing foreign commerce. The Supreme eign anti-competitive conduct and the F.2d 329, 333 (4th Cir. 1985) (definitions Court’s decision in Morrison and the effect on U.S. commerce. 114 This holding create confusion); United States v. Lawson , Seventh Circuit’s en banc decision in has the potential to expand significantly 507 F.2d 433, 442-43 (7th Cir. 1974) (the Minn-Chem holding that the FTAIA the “domestic injury” or “direct effects” phrase “reasonable doubt” is “of common spells out an element of an antitrust exception to the FTAIA. It also creates a acceptance”; further elaboration “tends to claim suggest that they will. 107 circuit split with the Ninth Circuit, misleading refinements”); Circuit Pattern Interpreting the FTAIA as imposing a which has held that an effect was direct Criminal Jury Instructions for the Seventh substantive limitation on antitrust only if it was an “immediate” conse - Circuit, Instr. 2.04, Comment (“The actions will make it more difficult for quence of a defendant’s anticompetitive Commission recommends that no instruc - civil antitrust defendants to dismiss conduct. 115 tion be given defining ‘reasonable claims at the outset of an action, but it is Ultimately, the Supreme Court may doubt.’”). Other circuits, including the likely to be helpful for criminal antitrust need to resolve these issues. But until it Third, Eighth, and Tenth Circuits, have defendants because it requires the gov - does, this evolving area of law demands ruled that a trial judge, upon request, must ernment to prove the two exceptions to careful attention — both at the motion define reasonable doubt or be reversed. the FTAIA beyond a reasonable doubt. phase and when drafting jury instructions. See, e.g. , United States v. Pepe , 501 F.2d It is also unclear how other courts 1142, 1143 (10th Cir. 1974); Friedman v. will construe the conduct necessary to Conclusion United States , 381 F.2d 155, 160 (8th Cir. S satisfy the “import trade or commerce” 1967); Blatt v . United States , 60 F.2d 481, E

S exception. In Minn-Chem , the original Model or standard jury instruc - 481 (3rd Cir. 1932). The Sixth Circuit has

A panel agreed that the relevant inquiry is tions often do not capture the nuances “consistently proceeded on the assump -

C whether the defendants’ alleged anticom - of every case or keep pace with evolving tion that some definition should be given, petitive conduct is “directed” at an import case law. They can — and should — be with the only real question being what the R market or “target[s] [U.S.] import goods revisited. Unsettled areas of the law definition should be.” Pattern Criminal A or services.” 108 It is not enough merely for provide significant opportunities for Jury Instructions for the Sixth Circuit, Instr. L

L defendants to be engaged in the U.S. mar - the defense. Because the right charge 1.03, Committee Commentary 1.03.

O ket. But in its en banc decision, the can help win a case, taking advantage of 5. Winship , 397 U.S. at 364.

C Seventh Circuit appears to have broad - these opportunities is crucial. It truly 6. Id. at 364, 363 (internal quotations ened the definition of “import and trade may make the difference between con - and citations omitted). In his concurring E opinion, Justice Harlan agreed, explaining T commerce,” stating that “transactions in viction and acquittal.

I which a good or service is being sent Melissa S. Dassori of Brune & that proof beyond a reasonable doubt

H directly into the United States with no Richard LLP contributed to the research reflects society’s value determination that

W intermediate stops” fall within the U.S. and writing of this article. “it is far worse to convict an innocent man antitrust laws. 109 than to let a guilty man go free.” Id. at 372 L Another open issue is how “direct” Notes (Harlan, J., concurring). A the effects on U.S. commerce must be to 1. Janus Capital Group Inc. v . First 7. Victor v. Nebraska , 511 U.S. 1 (1994). R

E satisfy the domestic injury or direct Derivative Traders , 131 S. Ct. 2296, 2302 8. Between Winship and Victor , the

D effects exception to the FTAIA. The (2011). Supreme Court addressed the adequacy

E defendants in AU Optronics requested 2. See Jackson v. Virginia , 443 U.S. 307, of specific reasonable doubt instructions F 315 (1979) (fact-finder needs to “reach a in two other cases. In Cage v . Louisiana , that the court instruct the jury that a subjective state of near certitude of the 498 U.S. 39 (1990), the Court reversed a

N “direct” effect is one that “follows as an

I immediate consequence of the defen - guilt of the accused”); In re Winship , 397 conviction where the trial court’s instruc -

110

S dant’s activity.” The government U.S. 358, 364 (1970) (necessary for trier of tion suggested a higher standard for

C agreed that a direct effect must “follow as fact to reach “subjective state of certitude acquittal by requiring “an actual substan - I an immediate consequence” of the con - of the facts in issue”) (citation omitted). tial doubt,” “grave uncertainty,” or “a moral P duct. But based on the facts of the case 3. Judge Leonard Sand’s Modern certainty.” In Sullivan v. Louisiana , 508 U.S. O — the incorporation of price-fixed pan - Federal Jury Instructions presents an exam - 275 (1993), the Court faced a similar T

els into finished products sold in or for ple of the “hesitate to act” formulation. See instruction and held that such an instruc -

Y delivery to the United States — the gov - 1 LEONARD B. S AND , ET AL ., MODERN FEDERAL JURY tion, which permitted conviction on less E ernment argued that there was no need INSTRUCTIONS , 4.01, Instr. 4-2 (2011). than proof beyond a reasonable doubt, K to instruct the jury on the meaning of 4. Notably, the Fourth and Seventh violated the defendant’s Sixth “direct,” and the court did not provide a Circuits have taken the position that Amendment right to a jury finding of guilt definition. 111 In Minn-Chem , however, courts should not define “reasonable and thus constituted a basic structural the government took the position that doubt” for the jury. They reason that “rea - error. the term “direct” as used in the FTAIA sonable doubt” is a common term with a 9. Victor , 511 U.S. at 5. The Court should be interpreted more broadly to self-evident meaning that is readily appar - explained, “[S]o long as the court instructs mean “reasonably proximate” so as to ent to jurors and that definitions can be the jury on the necessity that the defen - cover a wider range of conduct. 112 misleading. See, e.g. , United States v . Garcia , dant’s guilt be proved beyond a reason - Although the original panel held that an No. 94-5117, 1996 U.S. App. LEXIS 1882, at able doubt, the Constitution does not effect is “direct” if “it follows as an *26-27 (4th Cir. Feb. 9, 1996) (district court require that any particular form of words immediate consequence of the defen - correctly refused to give instruction); be used in advising the jury of the govern - dant’s activity,” 113 the Seventh Circuit en United States v . Reynolds , 64 F.3d 292, 298 ment’s burden of proof.” Id. (citations banc agreed with the government, (7th Cir. 1995) (“An attempt to define rea - omitted). adopting its definition that “direct” sonable doubt presents a risk without any 10. Id. at 26 (Ginsburg, J., concurring means only “a reasonably proximate real benefit.”) (internal quotations and in part and concurring in the judgment). causal nexus” between the alleged for - citation omitted); United States v . Moss , 756 11. Id. at 24-25; 1 SAND , ET AL ., M ODERN

32 WWW.NACDL.ORG THE CHAMPION FEDERAL JURY INSTRUCTIONS , Instr. 4-2. Pattern the first time that Justice Kennedy has 339-42; Kaplan , 490 F.3d at 127-28; instructions from the Third, Fifth, Sixth, spoken on this issue. Then-Judge Ferrarini , 219 F.3d at 154-57; de Francisco- Eighth, and Eleventh Circuits contain sim - Kennedy wrote a forceful dissent in United Lopez , 939 F.2d at 1409-11; United States v. ilar language. States v. Jewell , the case in which the Giovannetti , 919 F.2d 1223, 1226-29 (7th 12. Jon O. Newman, Beyond Ninth Circuit adopted the willful blind - Cir. 1990). “Reasonable Doubt ,” 68 N.Y.U. L. R EV . 979, ness doctrine. There, Judge Kennedy 36. See, e.g. , Alston-Graves , 435 F.3d at 982-83 (1993). The “hesitate to act” analo - clearly explained the dangers of applying 431; Kaplan , 490 F.3d at 128; United States gy has also been criticized as trivializing willful blindness in the criminal context: v. Mendoza-Medina , 346 F.3d 121, 133-35 the constitutional standard. See United “the English authorities seem to consider (5th Cir. 2003); Ferrarini , 219 F.3d at 157; States v. Noone , 913 F.2d 20, 28-29 (1st Cir. wilful blindness a state of mind distinct Barnhart , 979 F.2d at 652. 1990); Federal Judicial Center, Pattern from, but equally culpable as, ‘actual’ 37. Skilling , 554 F.3d at 548 & n.19. Criminal Jury Instructions, Commentary to knowledge. When a statute specifically 38. Ferrarini , 219 F.2d at 154. Instruction No. 21 (1987). requires knowledge as an element of a 39. Global-Tech , 131 S. Ct. at 2070. 13 . Victor , 511 U.S. at 25 (Ginsburg, J., crime, however, the substitution of some 40. United States v. Brooks , 681 F.3d concurring in part and concurring in the other state of mind cannot be justified 678, 701-03 (5th Cir. 2012). judgment). even if the court deems that both are 41. Id. at 703. 14. Id. at 24-25. equally blameworthy.” United States v. 42. In Giovannetti , 919 F.2d at 1226- K 15. Id. at 26 (citing Note, Defining Jewell , 532 F.2d 697, 706 (9th Cir. 1976) 29, the Seventh Circuit emphasized the E Y Reasonable Doubt , 90 COLUM . L. R EV . 1716, (Kennedy, J., dissenting). importance of the distinction between

1723 (1990)) (collecting and discussing 30. See, e.g. , United States v. Skilling , avoiding learning of a fact through inac - T studies). 554 F.3d 529, 548-50 (5th Cir. 2009); United tion and taking active steps to avoid O

16. See, e.g. , Robert C. Power, States v. Alston-Graves , 435 F.3d 331, 339- learning the truth. P I

Reasonable and Other Doubts: The Problem 41 (D.C. Cir. 2006); United States v. Ruhe , 43. Dane C. Ball, in his article, C

of Jury Instructions , 67 TENN . L. R EV . 45, 97- 191 F.3d 376, 385 (4th Cir. 1999); United Improving ‘Willful Blindness’ Jury S

108 (1999) (collecting and discussing States v. Barnhart , 979 F.2d 647, 651 (8th Instructions in Criminal Cases After High I

studies); Lawrence M. Solan, Refocusing Cir. 1992); United States v. de Francisco- Court’s Decision in Global-Tech , CRIMINAL N

the Burden of Proof in Criminal Cases: Some Lopez , 939 F.2d 1405, 1409 (10th Cir. 1991). LAW REPORTER (June 15, 2011), provides spe - Doubt About Reasonable Doubt , 78 TEX . L. 31. As one commentator has cific strategies and arguments to use in F E EV R . 105, 119-132 (1999) (same). observed, “[i]n an appropriate case down trying to obtain an instruction based on D

17. Victor , 511 U.S. at 26-27. the road, Kennedy could lead the Court to Global-Tech. He also proposes a possible E

18. Federal Judicial Center, Pattern reconsider how the ‘willful blindness’ doc - instruction emphasizing that the defen - R

Criminal Jury Instructions, Instr. No. 21 trine erodes the criminal-intent safe - dant must take “affirmative efforts or A

(1987). guards in federal law.” Brian W. Walsh, The actions” to avoid learning a fact rather L

19. The First, Second, Fifth, Ninth, Supreme Court’s Willful Blindness Doctrine than simply ignoring the truth. The Third W Tenth, and D.C. Circuits have approved the Opens the Door to More Wrongful Criminal Circuit’s post- Global Tech instruction also “firmly convinced” standard. See, e.g. , Convictions , The Heritage Foundation, provides a model. See Model Criminal Jury H I

United States v. Rodriguez , 162 F.3d 135, WebMemo No. 3304 (June 30, 2011). Instructions, Third Circuit Court of T

146 (1st Cir. 1998); United States v. Reese , 32. Cheek v. United States , 498 U.S. Appeals, Chapter 5 (Mental States), Instr. E 33 F.3d 166, 172 (2d Cir. 1994); United 192, 201 (1991). 5.06 & cmt. C

States v. Williams , 20 F.3d 125, 131-32 (5th 33. See, e.g., United States v. Flores , 454 44. See United States v. Kaiser , 609 F.3d O Cir. 1994); United States v. Velasquez , 980 F.3d 149, 156-59 (3d Cir. 2006) (discussing 556, 566 (2d Cir. 2010); Alston-Graves , 435 L

F.2d 1275, 1278 (9th Cir. 1992); United burden of proof and collecting cases). If F.3d at 340; United States v. Ojebode , 957 L

States v. Conway, 73 F.3d 975, 980 (10th Cir. the court does charge the jury on willful F.2d 1218, 1229 (5th Cir. 1992); de A 1995); United States v. Taylor , 997 F.2d blindness, defense counsel may ask the Francisco-Lopez , 939 F.2d at 1410-11; R

1551, 1555-56 (D.C. Cir. 1993). court, as part of the specific instruction, to Giovannetti , 919 F.2d at 1228. C

20. See, e.g., Reese , 33 F.3d at 172; reaffirm that the burden of proof remains 45. Global-Tech , 131 S. Ct. at 2070-71. A

United States v. Porter , 821 F.2d 968, 973 on the government. See, e.g., id. at 159 46. U.S. C ONST . art III, § 2, cl. 3 & amend. S

(4th Cir. 1987); Solan, Refocusing the (“So with respect to the issue of the VI; see also FED . R. C RIM . P. 18. E

Burden of Proof in Criminal Cases , 78 TEX . L. defendant’s knowledge, if you find, 47. See United States v. Ebersole , 411 S REV . at 116-18; Power, Reasonable and beyond a reasonable doubt, from all the F.3d 517, 524 (4th Cir. 2005). When multi - Other Doubts , 67 TENN . L. R EV . at 84. evidence in the case, that the defendant ple offenses are charged, the government 21. State v. Medina , 685 A.2d 1242, was subjectively aware of a high probabil - has the burden to prove that venue is 1251-52 (N.J. 1996); see Solan, Refocusing ity of the existence of a fact and deliber - proper as to each count. Id. the Burden of Proof in Criminal Cases , 78 ately tried to avoid learning whether the 48. See, e.g., 15 U.S.C. § 78aa. TEX . L. R EV . at 117-18. fact was true, you may find that the govern - 49. United States v. Cabrales , 524 U.S. 22. Victor , 511 U.S. at 17, 21-22. ment has satisfied its burden of proving the 1, 6-7 (1998) (quoting United States v. 23. Global-Tech Appliances, Inc. v. SEB element of knowledge of that fact .”) Anderson , 328 U.S. 699, 703 (1946)). For S.A. , 131 S. Ct. 2060 (2011). (emphasis added). conspiracy, venue is appropriate in any 24. Id. at 2071. 34. See, e.g. , Skilling , 554 F.3d at 549- district where an overt act in furtherance 25. Id. at 2068-69. 50; United States v. Kaplan , 490 F.3d 110, of the conspiracy was committed by a co- 26. Id. at 2069. 127-28 (2d Cir. 2007); Alston-Graves , 435 conspirator. See United States v. Svoboda , 27. Id. at 2073 (Kennedy, J., dissent - F.3d at 341-42; United States v. Ferrarini , 347 F.3d 471, 483 (2d Cir. 2003). ing). 219 F.3d 145, 154-57 (2d Cir. 2000); de 50. United States v. Tolov , 642 F.3d 314 28. Id. Francisco-Lopez , 939 F.2d at 1411-12. (2d Cir. 2011). 29. Id. at 2072. Global-Tech was not 35. See, e.g. , Alston-Graves , 435 F.3d at 51. 15 U.S.C. § 78aa (emphasis added).

WWW.NACDL.ORG SEPTEMBER/OCTOBER 2012 33 52. Tolov , 642 F.3d at 319. The Second Corp. , No. 09 Cr. 110, 2012 U.S. Dist. L EXIS 05 Cr. 888 (S.D.N.Y.); United States v. Circuit found that flying out of JFK was, 80605, at *8-9 (N.D. Cal. Jun. 11, 2012). Coplan , No. 07 Cr. 453 (S.D.N.Y.); and United however, sufficient to establish venue for 69. See United States v. Kuok , 671 F.3d States v. Daugerdas , No. 09 Cr. 581 the conspiracy counts with which the 931, 937 (9th Cir. 2012); United States v. (S.D.N.Y.). The authors were counsel to one defendant was charged because for a Acosta-Gallardo , 656 F.3d 1109, 1118 (10th of the defendants in the Daugerdas case. conspiracy charge, venue is proper in any Cir. 2011); United States v. Knox , 540 F.3d 82. See Boulware v. United States , 552 district where any overt act in furtherance 708, 716 (7th Cir. 2008); United States v. U.S. 421, 424 (2008). of the conspiracy occurred. Id. at 319-20. Rommy , 506 F.3d 108, 119 (2d Cir. 2007); 83. Much has been written on the 53. United States v. Edwards , No. 11Cr. United States v. Jaber , 509 F.3d 463, 465 various tests and their application. See, 161 (M.D.N.C.). (8th Cir. 2007); United States v. Stickle , 454 e.g., Jeffrey C. Glickman & Clark R. 54. See, e.g. , John Edwards’ Mem. in F.3d 1265, 1271-72 (11th Cir. 2006); United Calhoun, The ‘States’ of the Federal Supp. of his Mot. to Dismiss Ind. States v. Perez , 280 F.3d 318, 329-30 (3d Cir. Common Law Tax Doctrines , 61 TAX LAW . Allegations for Charging Defects, Edwards 2002); United States v. Scott , 270 F.3d 30, 34 1181 (2008); Yoram Keinan, The Many (Sept. 6, 2011), Dkt. No. 39 (“Edwards Mot. (1st Cir. 2001); United States v. Carreon- Faces of the Economic Substance’s Two- to Dismiss”) at 4-7; see generally Edwards’ Palacio , 267 F.3d 381, 390-91 (5th Cir. Prong Test: Time for Reconciliation? , 1 Renewed Rule 29 Mot. for an Aquittal, 2001); United States v. Crozier , 259 F.3d N.Y.U. J.L. & B US . 371 (2005). Edwards (June 11, 2012), Dkt. No. 319 503, 519 (6th Cir. 2001). 84. 26 U.S.C. § 7701(o)(1) (2012). S (“Edwards Rule 29 Mot.”). 70. See 1 SAND ET AL ., MODERN FEDERAL 85. Cheek , 498 U.S. at 201. E

S 55. Edwards Mot. to Dismiss at 1; JURY INSTRUCTIONS P 3.01, Inst. 3-11 & cmt. 86. 26 U.S.C. § 7701(o)(5)(D).

A Edwards Rule 29 Mot. at 1-2. 71. Blakely v. Washington , 542 U.S. 87. See David P. Hariton, The Frame

C 56. See Gov’t Resp. to Def.’s Mot. to 296, 313 (2004). Game: How Defining ‘The Transaction’ Dismiss Ind. Allegations for Charging 72. 15 U.S.C. § 78j(b). Decides the Case , 63 TAX LAW . 1 (2009). R Defects, Edwards (Sep. 26, 2011), Dkt. No. 73. 17 C.F.R. § 240.10b-5(b). 88. 26 U.S.C. § 7701(o)(2)(A)-(B). A 62 at 6-15; see also Edwards Rule 29 Mot. 74. Stoneridge Inv. Partners LLC v. 89. The American Bar Association’s L

L at 5. Scientific-Atlanta Inc. , 552 U.S. 148, 157, Section on Taxation has issued comments

O 57. Tr., Edwards (May 11, 2012), Tr. at 159 (2008). noting these ambiguities and requesting

C 97, available at http://msnbcmedia.msn. 75. Erica P. John Fund v. Halliburton guidance from the Department of com/i/msnbc/Sections/NEWS/120514_Ed Co. , 131 S. Ct. 2179, 2184 (2011) (quoting Treasury. See ABA Section of Taxation, E wards_Motion.pdf (last visited Aug. 8, Basic Inc. v. Levinson , 485 U.S. 224, 243 Request for Guidance on Implementation of T

I 2012). (1988)). Economic Substance Legislation (Jan. 18,

H 58. Order, Edwards (June 4, 2012), Dkt. 76. United States v. Schlisser , 168 Fed. 2011) at 26-37.

W No. 315. Appx. 483 (2d Cir. 2006). 90. See Jason Brown, Mark S. Popofsky 59. Order for Dismissal, Edwards (June 77. Id. at 486 (citation omitted). & Anthony Biagioli, Restraining Liberty L 13, 2012), Dkt. No. 320. 78. Id. (emphasis in original). Other Before a Verdict Is in Sight , GLOBAL A 60. United States v. AU Optronics Corp. , courts have reached the same conclusion COMPETITION REV . 36, 36 (May 2011). R

E No. 09 Cr. 110 (N.D. Cal.). regarding other elements of the securities 91. Tr., AU Optronics (Feb. 27, 2012),

D 61. TFT-LCDs are thin-film transistor fraud statute. See, e.g., United States v. Dkt. No. 822, Tr. at 4699.

E liquid-crystal display panels, which are Charnay , 537 F.2d 341, 348 (9th Cir. 1976) 92. The Foreign Trade Antitrust F used in a number of products, such as (in interpreting the scope of the statute’s Improvements Act of 1982, 15 U.S.C. § 6a.

computer monitors, notebook computers, prohibition on manipulative and decep - 93. See Hartford Fire Ins. v. California , N

I and televisions. tive devices, court concluded that there “‘is 509 U.S. 764, 796 n.23 (1993) (“The FTAIA

S 62. See, e.g. , Superseding Indictment, no reasonable basis for holding that some was intended to exempt from the

C AU Optronics (Jun. 10, 2010), Dkt. No. 8. different interpretation (of Rule 10b-5) Sherman Act export transactions that did

I 63. Tr., AU Optronics (Feb. 27, 2012), should apply to a criminal action’ than in a not injure the United States economy.”) P Dkt. No. 822, Tr. at 4696. civil action”) (quoting United States v. (citing H.R. Rep. No. 97-686, at 2-3, 9-10 O 64. Id. at 4697. Clark , 359 F. Supp. 128, 130 (S.D.N.Y.1973)). (1982)). T

65. See Defs.’ Obj. to Any Use in the Courts in criminal securities fraud cases 94. Turicentro S.A. v. Am. Airlines Inc. ,

Y Gov’t’s Rebuttal Arg. of the Certification to thus often look to and apply precedents 303 F.3d 293, 300 (3d Cir. 2002) (internal E Exhibit 835, AU Optronics (Feb. 29, 2012), established in the civil context. See, e.g. , quotations and citation omitted). K Dkt. No. 827; Defs.’ Jt. Mem. in Supp. of United States v. Reyes , 660 F.3d 454, 468 95. 15 U.S.C. § 6a. Mot. for J. of Acquittal, or in the (9th Cir. 2011) (adopting definition of 96. In the recent Seventh Circuit en Alternative, for New Trial, AU Optronics materiality from Basic v. Levinson , 485 U.S. banc decision in Minn-Chem Inc. v. Agrium (Apr. 20, 2012), Dkt. No. 878 at 6. 224 (1988)); United States v. Cusimano , 123 Inc. , 683 F.3d 845, 2012 U.S. App. LEXIS 66. See Defs.’ Jt. Mem. in Supp. of Mot. F.3d 83, 88 (2d Cir. 1997) (same); see also 13131 (7th Cir. 2012) ( en banc ), Judge for J. of Acquittal, AU Optronics (Apr. 20, United States v. Kelley , 551 F.3d 171, 175 (2d Diane Wood writes that describing 2012), Dkt. No. 878 at 3-16; Def. Hui Cir. 2009) (construing “in connection with” “import trade and commerce” as an Hsiung’s Mots. for J. of Acquittal and for a requirement by reference to SEC v. “exception” to the FTAIA is inaccurate New Trial, Notice of Mots., and Mem. of P. & Zandford , 535 U.S. 813 (2002)). because “import trade and commerce” are A., AU Optronics (Apr. 20, 2012), Dkt. No. 79. The authors were counsel for one excluded at the outset from coverage of 879 at 29-36. of the defendants in the action, United the FTAIA in the same way that domestic 67. See U.S.’ Opp. to Defs.’ Jt. Mot. and States v. Cioffi , 08 Cr. 415 (FB) (E.D.N.Y.). interstate commerce is excluded. Given Def. Hui Hsiung’s Mot. for Judg. of 80. United States v. Cioffi , 08 Cr. 415 that most courts have discussed FTAIA Acquittal, AU Optronics (May 4, 2012), Dkt. (FB) (E.D.N.Y.), Court Ex. 1 at 17 (emphasis issues in terms of the two exceptions — No. 895 at 6-17. added). the “import trade or commerce” exception 68. See United States v. AU Optronics 81. See, e.g. , United States v. Stein , No. and the “domestic injury” or “direct

34 WWW.NACDL.ORG THE CHAMPION effects” exception — we adopt that con - 16 (internal quotations and citation omit - vention here. Id. at *22. ted); Jury Instructions, AU Optronics (Mar. 97. Alternatively, the court held that 1, 2012), Dkt. No. 829 at 10-11. the indictment alleged a domestic con - 112. Br. for the U.S. and FTC as Amici spiracy that was not barred by the FTAIA. Curiae in Supp. of Neither Party on Reh’g See United States v. AU Optronics Corp. , En Banc, Minn-Chem (Jan. 18, 2012), Dkt. 2011 U.S. Dist. LEXIS 42345, at *14-18 (N.D. No. 64 at 20-30. Cal. Apr. 18, 2011). 113. Minn-Chem, Inc., 657 F.3d at 662 98. In re TFT-LCD Antitrust Litig ., 2011 (internal quotations and citation omitted). U.S. Dist. LEXIS 115212, at *11-18 (N.D. Cal. 114. Minn-Chem , 2012 U.S. App. LEXIS Oct. 5, 2011). 13131, at *29 ( internal quotations and 99. Id. at *15-18 (citing and relying on citation omitted) . Arbaugh v. Y&H Corp. , 546 U.S. 500 (2006)). 115. United States v. LSL Biotechs. , 379 100. Arbaugh , 546 U.S. at 515-16. F.3d 672, 680 (9th Cir. 2004). n 101. See Animal Sci. Prods. v. China Minmetals Corp. , 654 F.3d 462, 467-69 (3d Cir. 2011). K 102 . See Minn-Chem Inc. v. Agrium E About the Authors Y Inc. , 657 F.3d 650, 659 (7th Cir. 2011) (cit -

ing Arbaugh and Morrison v. Nat’l Austl. Susan Brune focuses her practice on T Bank Ltd. , 130 S. Ct. 2869 (2010)). The white collar de - O

Seventh Circuit declined to decide the fense, government P investigations, and I issue because it was not necessary to C commercial litiga - resolve the appeal. But on rehearing en S

banc , the Seventh Circuit overruled its tion. A seasoned I

earlier precedent, holding that the FTAIA trial lawyer, she N founded Brune & does not impose a jurisdictional limit but instead spells out an element of a claim. Richard LLP, a firm F E EXIS with offices in New See Minn-Chem , 2012 U.S. App. L 13131, D York and San Francisco, in 1998. Before

at *13-17. E

103. Jury Instructions, AU Optronics becoming a defense lawyer, she served R

(Mar. 1, 2012), Dkt. No. 829 at 10. as an Assistant U.S. Attorney in the A

104. Defs.’ Proposed Preliminary Jury Southern District of New York . L

Instructions on the Elements of the W Offense, and Mem. in Supp. of Proposed Susan E. Brune Instructions, AU Optronics (Nov. 2, 2011), Brune & Richard LLP H One Battery Park Plaza I Dkt. No. 411 at 3-5 (quoting Animal Sci. T

Prods. , 654 F.3d at 470 (“the relevant New York, NY 10004 E inquiry is whether the defendants’ alleged 212-668-1900 C E-MAIL [email protected] m

anti-competitive behavior was directed at O an import market”)) (internal quotations L

and citations omitted). See also Stipulated Laurie Edelstein is the head of Brune & L

and Party-Proposed Jury Instructions, AU Richard LLP’s San A Optronics (Feb. 24, 2012), Dkt. No. 807 at 30. Francisco office. R Her practice focus -

105. Tr., AU Optronics (Feb. 27, 2012), C es on commercial

Dkt. No. 822, Tr. at 4698-99. A litigation, white

106 . Jury Instructions, AU Optronics S

(Mar. 1, 2012), Dkt. No. 829 at 10 (emphasis collar defense, and E

added); see also Tr., AU Optronics (Feb. 27, SEC enforcement S 2012), Dkt. No. 822, Tr. at 4699-4700. actions. An accom - 107. See Minn-Chem , 2012 U.S. App. plished trial lawyer LEXIS 13131, at *13-17. in commercial and white collar matters, 108. Minn-Chem , 657 F.3d at 661 (inter - she has recently tried cases involving al - nal quotations and citations omitted). legations of conspiracy, securities fraud, 109. Minn-Chem , 2012 U.S. App. LEXIS and tax evasion, as well as a breach of 13131, at *21. contract action . 110. Defs.’ Reply Mem. in Supp. of Proposed Jury Instructions, AU Optronics Laurie Edelstein (Dec. 6, 2011), Dkt. No. 470 at 10 (internal Brune & Richard LLP quotations and citation omitted). 235 Montgomery Street 111. U.S.’ Opp. to Defs.’ Proposed Suite 1130 Preliminary Jury Instructions on the San Francisco, CA 94104 Elements of the Offense; U.S.’ Proposed 415-563-0600 x111 Alternative Preliminary Instruction, AU E-MAIL [email protected] m Optronics (Nov. 23, 2011), Dkt. No. 432 at

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