U.S. v. Becker

Citation502 F.3d 122
Decision Date13 September 2007
Docket NumberDocket No. 06-1274-cr.
PartiesUNITED STATES of America, Appellant, v. Gregg BECKER, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Joshua Klein, Assistant United States Attorney (Robin L. Baker, Assistant United States Attorney, on the brief) for Michael J. Garcia, United States Attorney for the Southern District of New York, New York, NY, for Appellant.

Maranda Fritz, Hinshaw & Culbertson LLP, New York, NY, for Defendant-Appellee.

Before: CALABRESI, B.D. PARKER, and WESLEY, Circuit Judges.

B.D. PARKER, Jr., Circuit Judge:

In 2002 the government charged Gregg Becker with one count of securities fraud and one count of conspiracy to commit securities fraud, mail fraud, and wire fraud. See 15 U.S.C. §§ 78j(b), 78ff; 17 C.F.R. § 240.10b-5; 18 U.S.C. § 371. After a jury trial in the United States District Court for the Southern District of New York (Patterson, J.), Becker was convicted on both the substantive and the conspiracy counts. Judge Patterson sentenced him to 24 months' imprisonment, followed by three years of supervised release.1 Becker appealed his conviction to this Court, and we affirmed in an unpublished summary order filed October 31, 2003. We subsequently denied Becker's timely petition for rehearing on December 19, 2003.

On March 8, 2004, the Supreme Court decided Crawford v. Washington, 541 U.S. 36, 124 S.Ct. 1354, 158 L.Ed.2d 177 (2004), which held that the Sixth Amendment's Confrontation Clause bars the admission of out-of-court testimonial statements unless the declarant is unavailable and the defendant has had a prior opportunity to cross-examine. See id. at 59, 124 S.Ct. 1354. Relying on Crawford, Becker petitioned for a writ of habeas corpus, contending that his Sixth Amendment right to confrontation had been violated by the district court's admission of eleven plea allocution transcripts of alleged co-conspirators. See 28 U.S.C. § 2255. Judge Patterson granted Becker's petition, finding that under Crawford it was error to admit the plea allocutions and that this error was not harmless. Based on these findings, the court vacated Becker's conviction and ordered a new trial. The government appeals, contending that Becker's Crawford claim is procedurally barred and, alternatively, that any error in admitting the plea allocutions was harmless. We affirm.

BACKGROUND

From 1995 to 1996, Becker was employed as a licensed securities broker at the Melville, Long Island branch of Investor Associates ("IA"). It was later revealed that several IA brokers had been engaged in a massive securities fraud during this period. The Melville branch operated as a so-called "boiler room," where brokers were trained to cold call potential clients and pressure them into purchasing risky securities using a variety of deceptive sales tactics. In particular, brokers were instructed, and given incentives, to sell several highly speculative "house stocks" for which IA had participated in underwriting the initial public offerings. To generate interest from investors in the house stocks, IA brokers would follow sales scripts that contained false and misleading information about the stability of the securities and their potential for future growth. The brokers also lied to investors regarding their own backgrounds, level of experience in finance, and past performance. The demand created by these misrepresentations artificially inflated the share price of the house stocks, and the brokers collected large commissions. Meanwhile, investors were discouraged from selling the stocks, even as share prices inevitably fell and they experienced substantial losses.

At trial, the government presented several recorded telephone conversations in which Becker was heard lying to potential customers about his experience as a broker, his personal income and net worth, and the manner in which he was compensated for executing trades. On the recordings, Becker was also heard making predictions regarding the growth potential of house stocks and encouraging investors to hold their shares despite falling prices. In addition, the government presented the live testimony of Joseph Mandaro and Todd Peterson, two cooperating witnesses who were former IA brokers, and of three of Becker's former customers who had sustained significant monetary losses.

On direct examination, Mandaro testified to having told numerous lies to customers in connection with selling the house stocks. He further testified that he worked "very close with Gregg" and that much of the information that Becker gave to customers regarding his personal background and experience in the financial industry was false. Mandaro testified that he made similar false statements regarding his own background to give customers "the sense of a well-established well-known successful broker." About such statements, he testified: "I knew it was illegal. I knew it was a blatant lie." Peterson testified similarly regarding lies he told customers regarding his personal background, as well as about his understanding that such lies were inconsistent with the training he had completed to become a licensed securities broker. Both Mandaro and Peterson also testified that they lied to customers about the commissions they received on the sale of house stocks, about the length of time the customers could expect to hold the stocks before selling them, and about the likelihood that the house stocks would increase in value.

Finally, the government read into evidence, over the defense's objections, the transcripts of eleven plea allocutions by former IA brokers who described their intentional participation in the fraudulent scheme. These plea allocutions — which the government no doubt anticipated, at the time they were taken, would be powerful evidence but not subject to cross-examination when introduced in a subsequent trial — went far beyond anything required by Rule 11 of the Federal Rules of Criminal Procedure. Each allocuting defendant discussed in detail the specific practices used to carry out the fraud at IA — especially the use of sales scripts to mislead customers into purchasing securities and the broker's inflation of his own credentials to further deceive customers — and these details were largely identical among the allocutions. The allocutions also contained broad statements concerning the pervasiveness of the fraud. For example: "It was well-known at Investors Associates that . . . you couldn't just let clients sell house stock." In addition, some defendants referred throughout their allocutions to actions "we" took — for example, "[w]e also used the high pressure sales tactics that was described in the charges" — potentially implying that all IA brokers were knowing participants in the conspiracy.

Prior to admitting the plea allocutions, the court instructed the jury that it could consider them "for proof that a conspiracy existed as charged in the indictment, but not to show that any defendant here was a member of that conspiracy." The court further instructed the jury to "consider these allocutions only for the following two issues: (1) there was a conspiracy or a scheme to commit securities fraud, mail fraud, or wire fraud; (2) what, if anything, each of the persons' testimonies you're about to hear did to further the object of the conspiracy, if you do find that a conspiracy existed." The court reiterated these limiting instructions immediately after the transcripts were read, emphasizing that "[t]here is no evidence in these statements that any of the defendants are co-conspirators." At the conclusion of the trial, the court again reminded the jury that it could "consider evidence that other people pleaded guilty to these crimes as evidence that a conspiracy existed" but could "not consider the guilty pleas of others as evidence that any of the defendants were members of the alleged conspiracy."

The jury found Becker guilty on both counts of the indictment. On direct appeal, we rejected Becker's arguments that the misrepresentations he made to investors regarding his background and experience were not material; that the misrepresentations were not made "in connection with" the purchase or sale of the house stocks; that the government failed to prove that Becker had the necessary intent to support a securities fraud conviction; and that the district court erred in admitting the plea allocutions as evidence of the charged conspiracy. As noted above, our summary order affirming the conviction was filed on October 31, 2003, and we denied Becker's petition for rehearing on December 19, 2003. Although Becker had until March 18, 2004 — ten days after the Supreme Court decided Crawford — to file a timely petition for certiorari, see SUP.CT. R. 13(3), he did not do so.

Subsequently, Becker petitioned for habeas relief, pressing several arguments including that the admission of the plea allocutions violated Crawford. The district court denied the petition on all bases except the Crawford claim. United States v. Becker, No. 01 Cr. 156(RPP), 2005 WL 3110650, at *9-*10 (S.D.N.Y. Nov. 18, 2005) ("Becker I"). The court rejected the government's argument that Crawford was inapplicable, reasoning that under Teague v. Lane, 489 U.S. 288, 109 S.Ct. 1060, 103 L.Ed.2d 334 (1989), Becker's conviction did not become final until after Crawford was decided and, as a result, Crawford applied despite being non-retroactive. Id. at *9; see Mungo v. Duncan, 393 F.3d 327, 336 (2d Cir.2004). The court also determined that the admission of the plea allocutions violated Crawford. Becker I, at * 10. In a later opinion, the court held that the Crawford error was not harmless, and vacated the conviction and ordered a new trial. United States v. Becker, No. 01 Cr. 156(RPP), 2006 WL 156677 (S.D.N.Y. Jan. 17, 2006). This appeal followed.

DISCUSSION

We review a district court's decision to grant a habeas petition de novo and the court...

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