United States v. Offill

• Citation: 666 F.3d 168
• Decision Date: 06 December 2011
• Docket Number: No. 10–4490.,10–4490.
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Phillip Windom OFFILL, Jr., Defendant–Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

666 F.3d 168

UNITED STATES of America, Plaintiff–Appellee,

v.Phillip Windom OFFILL, Jr., Defendant–Appellant.

No. 10–4490.

United States Court of Appeals, Fourth Circuit.

Argued: Sept. 23, 2011.Decided: Dec. 6, 2011.

ARGUED: George Kostolampros, Venable, LLP, Washington, D.C., for Appellant. Patrick Friel Stokes, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF: Ronald M. Jacobs, Stephen H. Swart, Venable, LLP, Washington, D.C.; Michael S. Nachmanoff, Federal Public Defender, Kevin R. Brehm, Assistant Federal Public Defender, Office of the Federal Public Defender, Alexandria, Virginia, for Appellant. Neil H. MacBride, United States Attorney, David B. Goodhand, Assistant United States Attorney, Office of the United States Attorney, Alexandria, Virginia; Lanny A. Breuer, Assistant Attorney General, United States Department of Justice, Washington, D.C., for Appellee.

Before TRAXLER, Chief Judge, and WILKINSON and NIEMEYER, Circuit Judges.

Affirmed by published opinion. Judge NIEMEYER wrote the opinion, in which Chief Judge TRAXLER and Judge WILKINSON joined.

OPINION

NIEMEYER, Circuit Judge:

A jury convicted Phillip Offill on one count of conspiracy to commit securities registration violations, securities fraud, and wire fraud, in violation of 18 U.S.C. § 371, and nine counts of wire fraud, in violation of 18 U.S.C. § 1343. The indictment alleged that Offill had participated in a “pump and dump” securities scheme, which was designed to evade securities registration requirements, artificially inflate the value of securities, and then realize a gain by selling them at the inflated value to the public. The district court sentenced Offill to 96 months' imprisonment, a downward variance sentence.

On appeal, Offill contends that the district court erred during trial by (1) admitting opinion testimony of two experts and two lay witnesses for the government; (2) denying his request for a multiple conspiracy instruction; and (3) admitting evidence of subsequent acts not charged in the indictment. Offill also challenges the reasonableness of his sentence, arguing, among other things, that the district court impermissibly imputed to him the gain resulting from the entire conspiracy when calculating the applicable offense level under U.S.S.G. § 2B1.1.

For the reasons that follow, we affirm.

I

In March 2004 David Stocker, a securities lawyer in Phoenix, Arizona, retained Phillip Offill, a lawyer and securities specialist who had earlier worked for the Securities and Exchange Commission, to advise him on how to issue free trading (unrestricted) stock without the need of filing a registration statement. Stocker represented “penny-stock” companies for whom the securities registration process was too costly. Offill explained to Stocker that he could use Rule 504 of Regulation D of the Securities Act of 1933 and an analogous Texas state law, Texas Administrative Code (“TAC”) § 139.19, to create free-trading stock and avoid any requirement of registration. More specifically, Offill advised Stocker that Rule 504 and TAC § 139.19 provided an exception to registration requirements when the stock is sold to an “accredited investor” who purchases the stock with “investment intent.” As Offill explained, an “accredited investor” was a person with a net worth of $1 million or a business owned by persons each with a net worth of $1 million, and “investment intent” was generally demonstrated by holding a stock for a period of at least one year.

Under the working arrangement between Stocker and Offill, Offill orchestrated 51 stock issuances with Stocker during the period from April through August 2004, and Offill, through investment entities he controlled, served as the initial “accredited investor” in those transactions. Stocker and Offill produced legal opinion letters and stock subscription agreements for the transactions, asserting that the registration exemptions of Rule 504 and TAC § 139.19 applied to the transactions; that Offill, as an accredited investor, had paid for the stock; that the entity that Offill controlled had purchased the stock with “investment intent”; that Offill had no present intention of selling the stock; and that the transactions were not part of a “scheme or plan to evade registration requirements.” At Offill's suggestion, Stocker included a statement in his opinion letters noting that Stocker was not providing an opinion as to the stock purchasers' status as underwriters. For each transaction, Offill also created documents permitting Stocker to transfer the shares.

Offill received $2,500 as compensation for his work on each of the 51 transactions, for a total of $127,500.

Many of the statements in the legal opinion letters and stock subscription agreements were in fact untrue. With respect to some of the stock issuances, Offill and Stocker devised a “pump and dump” scheme designed to artificially inflate stock prices and then sell the stock to the public for gain. In connection with each of these stock issuances, as well as other stock issuances, despite the representations in the subscription agreements that Offill had purchased the stock with investment intent, Offill in fact never paid for the stock. Moreover, he allowed Stocker to transfer the shares to coconspirators within days of the initial issuance, for public sale thereafter. Under the “pump and dump” scheme, after Offill and Stocker distributed the stock to co-conspirators to create a secondary market, other conspirators, serving as “promoters,” organized marketing campaigns to increase the value of the shares through spam e-mail, press releases, and faxes that contained false information about the issuing companies. The conspirators also manipulated the price of the shares by coordinating their trading activities to limit the supply of available stock. Once the stock reached a sufficiently high price, the conspirators “dumped” their shares by selling them to the public, providing the conspirators with a gain of millions of dollars. Some of the proceeds of these sales were deposited in brokerage accounts associated with Offill.

In Count I of the indictment, Offill was charged with participating in the illegal issuances of stock of nine companies: Emerging Holdings, Inc. (one issuance), MassClick, Inc. (one issuance); China Score, Inc. (one issuance); Ecogate, Inc. (one issuance); Media International Concepts, Inc. (one issuance); Vanquish Productions, Inc. (one issuance); Custom Designed Compressor Systems, Inc. (one issuance); Auction Mills, Inc. (two issuances); and AVL Global, Inc. (two issuances). Count I also charged Offill with conspiracy to artificially manipulate the stock prices of Emerging Holdings, MassClick, and China Score. The remaining nine counts charged Offill with committing wire fraud in connection with his role in the stock issuance of Emerging Holdings.

Following trial, a jury found Offill guilty on all counts. The district court sentenced Offill to 60 months' imprisonment on the conspiracy count and to 96 months' imprisonment for each of the wire fraud counts, all to run concurrently. The court enhanced the sentences on the wire fraud counts under U.S.S.G. § 2B1.1 because the conspiracy had gained more than $1 million as a result of the illegal conduct. Although the resulting Sentencing Guidelines range provided for 168 to 210 months' imprisonment, the district court imposed a downward variance sentence of 96 months' imprisonment in order to avoid creating too great a disparity between Offill's sentence and the sentences of some co-conspirators, who had cooperated with the government.

This appeal followed.

II

Offill contends first that the district court abused its discretion in admitting the testimony of two expert witnesses presented by the government—Steve Thel, a professor of securities law at Fordham University, and Denise Crawford, the Commissioner of the Texas State Securities Board—arguing that their testimony included inadmissible legal conclusions and improperly addressed Offill's intent. Offill claims that the experts' testimony “wrested the obligation to instruct the jury from the trial court and told the jury how to decide this case.”

Before trial, the government identified Thel and Crawford as experts on general securities law concepts and practice, including securities registration, exemptions from registration, restricted and unrestricted securities, and the functioning of markets. The government's notice to Offill about the anticipated testimony from these witnesses was detailed, outlining specifically each subject the government intended to cover with each witness. Offill filed a motion in limine (1) to “preclud[e] the government's expert witnesses from offering legal conclusions at trial and (2) to instruct any government expert that testifies that he or she may not discuss the legal consequence of Mr. Offill's alleged conduct or the conduct of his alleged co-conspirators.” Ruling on Offill's motion, the district court stated that what the government had proposed to ask the witnesses would be admissible but, as Offill had requested, the court imposed limits on the proposed testimony. The court stated:

In the response I think the Government has properly drawn the line in stating that they will not ask for any expert witnesses to give opinions as to conduct being illegal manipulation, or that a party has acted unlawfully, or that an entity or individual is liable, and will not ask any question which goes to the intent of Mr. Offill.

The court recognized that the government could present the witnesses' testimony by way of hypothetical questions

to talk about the functioning of the securities markets, the ordinary practices and procedures, the rationale behind those policies and procedures and the regulations that apply. These hypotheticals can at times get a little close to the line if, obviously, tailored specifically to the conduct here.

Finally, the court pointed...