United States v. Nouri
| Decision Date | 04 March 2013 |
| Docket Number | Docket Nos. 09–3627–cr(L), 09–5215–cr(C), 10–0716–cr(C), 10–2107–cr(C), 10–2126–cr(C). |
| Citation | 711 F.3d 129 |
| Parties | UNITED STATES of America, Appellee, v. Dennis Michael NOURI, Anthony Martin, Reza Eric Nouri, also known as Reeza Eric Nouri, Defendants–Appellants, Ruben Serrano, Alain Lustig, Defendants. |
| Court | U.S. Court of Appeals — Second Circuit |
OPINION TEXT STARTS HERE
David S. Leibowitz, Avie Weitzman, Brent S. Wible, Assistant United States Attorneys, for Preet Bharara, United States Attorney for the Southern District of New York, New York, NY, for Appellee.
Roland R. Acevedo, Scopetta Seiff Kretz & Abercrombie, New York, NY, for Appellants Dennis Michael Nouri and Reza Eric Nouri.
Alexander E. Eisemann, New York, NY, for Appellant Anthony Martin.
Before: LEVAL, HALL, Circuit Judges.*
Defendants Dennis Michael Nouri (“Michael Nouri”), Reza Eric Nouri (“Eric Nouri”), and Anthony Martin (“Martin”) appeal from judgments of conviction entered in the United States District Court for the Southern District of New York (Chin, J.). All three were convicted in a jury trial of conspiracy to commit securities fraud, wire fraud, and commercial bribery in violation of 18 U.S.C. § 371, and of securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b–5, and 18 U.S.C. § 2. Michael and Eric Nouri were also convicted of wire fraud in violation of 18 U.S.C. §§ 1343, 1346, and 2, and of commercial bribery in violation of 18 U.S.C. §§ 1952(a)(3) and 2. Michael Nouri was sentenced principally to 96 months' imprisonment, Eric Nouri to 18 months' imprisonment, and Martin to 57 months' imprisonment.
Each of the appellants contends on this appeal that the district court erred in instructing the jury on fraud by deprivation of honest services, especially in the context of securities fraud, and that there was insufficient evidence to sustain convictions for securities fraud. Martin also contends that there was insufficient evidence to convict him of honest-services wire fraud, that the district court erroneously limited his examination of a witness, and that his sentence was unreasonable. We find no merit to appellants' arguments and accordingly affirm the judgments.
We summarize the trial evidence in the light most favorable to the government, as required in assessing a challenge to the sufficiency of the evidence. United States v. Hsu, 669 F.3d 112, 114 (2d Cir.2012).
Michael Nouri was the President, Chief Executive Officer, and Chairman of the Board of Directors of Smart Online, Inc., a public company, which provided assorted internet-based assistance to small businesses. The stock of Smart Online was traded beginning April 15, 2005 on the Over–the–Counter Bulletin Board. Eric Nouri is Michael Nouri's younger brother and was employed at Smart Online as a content engineer. Smart Online never turned a profit.
William Blume, a licensed stockbroker who worked at Maxim Group (“Maxim”) from 2005 through 2007, testified pursuant to a cooperation agreement with the government that he met Michael Nouri in May 2005 and told Michael that he, Blume, could pay brokers to purchase Smart Online stock. Michael Nouri agreed to this plan and gave Blume a check for $10,000 to be used for such payments to brokers.
Sometime after that initial meeting, Michael Nouri asked Blume to enter into consulting agreements with Smart Online “for everybody's protection.” Trial Tr. 447:23–448:9. Blume agreed but specified that the consulting contracts be in the names of his wife, Myra, and son, Mitchell, rather than his own. Blume explained that he did not want his firm to know of his receipt of payments. Michael Nouri did not object to making the consulting agreements and sending the payments in the name of Blume's wife and son. Eric Nouri facilitated the process of setting up the agreements. The agreements did not reveal that the payments to Blume's wife and son were in exchange for Blume's customers' purchases of Smart Online shares.
Once the paperwork was signed, Blume began receiving payments from Smart Online as compensation for purchasing Smart Online shares for his customers' accounts and for getting other brokers to do the same. Typically, Blume was paid $1 for each share of Smart Online purchased. Between 2005 and 2007, Blume received over $100,000 from Smart Online, usually by wire transfers sent by Eric Nouri. The wire transfers from Smart Online were in the names of Mitchell, Andrew, or Myra Blume. Blume did not reveal to his customers for whom Smart Online stock was purchased that he was receiving money from Smart Online for their purchases of Smart Online stock. Blume testified that he did not tell them about the payments because if they knew, they would not have purchased the shares and would have told his employer, Maxim, about the payments. Blume did not want Maxim to know about the payments because he understood that his receipt of the payments was illegal and violated Maxim's rule that its brokers not receive compensation from third parties.
Blume recruited several brokers, including the appellant Martin, Ruben Serrano, James Doolan, and Alan Kaiten—all of whom worked at Maxim—as well as Alain Lustig—who worked at Jesup & Lamont Inc.—to purchase Smart Online stock for their customers, for which the brokers would receive a portion of the money Blume received. Blume told Martin he would pay Martin if Martin's customers bought Smart Online shares and that the money was from Michael Nouri, the CEO of Smart Online. Normally, brokers were compensated by receiving a portion of sales commissions charged by their employer to their customers, and commissions were generally under five percent of the amount of the transaction. Maxim's average commission was approximately two percent. Blume paid Martin approximately half a dozen times for buying Smart Online stock, at times for amounts as large as 44,000 shares.
In addition to the brokers named above, David Gardner, a broker who worked at vFinance between 2003 and 2006, and who testified pursuant to a cooperation agreement, received payments from Michael Nouri as the president of Smart Online for purchasing Smart Online shares in his customers' accounts and did not disclose the payments to his customers.
Gardner entered into a consulting agreement with Smart Online in July 2005 and then promoted Smart Online to other brokers in July and August 2005. Shortly thereafter, Smart Online began compensating Gardner for his customers' purchases of Smart Online shares. Gardner purchased over 100,000 shares of Smart Online for his customers. Smart Online paid Gardner more for those purchases than the authorized brokerage commissions he made on them. At Michael Nouri's direction, Gardner purchased Smart Online stock for his customers at an inflated price that was higher than the customers otherwise could have obtained.
Gardner did not disclose to vFinance that he was being paid by Smart Online to purchase Smart Online shares because he understood his receipt of such payments violated the securities laws and vFinance policy. Gardner told Michael Nouri that he had not disclosed the payments to vFinance. With the exception of one customer, Gardner did not inform his customers that he received compensation from Smart Online for their purchases of Smart Online stock. Gardner also did not disclose to his customers that Michael Nouri was directing him to purchase shares for them at higher prices than he otherwise could have obtained.
In addition to using Smart Online funds to pay Blume and Gardner for purchases of Smart Online stock, Michael and Eric Nouri would also often direct them when to buy shares and at what prices. For example, Michael Nouri would frequently direct Gardner to delay a purchase until the end of the day to so as show interest in the stock at the market close and to purchase shares at prices higher than the prices at which they were offered. Blume and Gardner both testified that they understood that the purpose of paying brokers to purchase Smart Online shares, and of purchasing shares as Michael Nouri directed, was to generate volume and to elevate the share price, and thereby to help Smart Online qualify for listing on the NASDAQ Stock Market. William Lederer, Chairman and CEO of Socrates Media, LLC in 2005, testified that, in August 2005, Michael Nouri told him of Nouri's desire to have Smart Online's stock trade on NASDAQ and said he was supporting the stock price and could prevent a decline in the stock price using his contacts with brokers.
In September 2005, Smart Online submitted a listing application to NASDAQ. At that time, Smart Online's stock price was over $10 per share, having risen from $1.50 five months earlier, when it first traded on the Over–the–Counter Bulletin Board. On January 6, 2006, NASDAQ approved Smart Online's application. The U.S. Securities and Exchange Commission (“SEC”), however, suspended trading in Smart Online's stock on January 17, 2006, before its listing became effective.
In December 2005, the Federal Bureau of Investigation (“FBI”) approached Blume regarding his connection to Smart Online, and around January 2006, after the suspension of Smart Online's stock, the FBI similarly approached Gardner. Gardner and Blume agreed to cooperate with the FBI by allowing the FBI to record their conversations with Michael Nouri, Eric Nouri, and brokers, and to photograph Blume paying the brokers. In recorded conversations prior to the trading suspension, Michael and Eric Nouri directed Blume when, how, and at what price Blume and his brokers should purchase Smart Online shares, and discussed paying Blume for the purchases. In another recorded conversation, Blume and Eric Nouri talked about purchases of Smart Online shares and about paperwork relating to the wire transfers. Blume also recorded a discussion with Martin about obtaining Smart Online's stockholder...
To continue reading
Request your trial
-
United States v. Percoco
... ... See United States v ... Silver , 864 F.3d 102, 111 & n.24 (2d Cir. 2017); see also Rosen , 716 F.3d at 700; United States v ... Nouri , 711 F.3d 129, 139 (2d Cir. 2013); United States v ... Bahel , 662 F.3d 610, 636 (2d Cir. 2011); Ganim , 510 F.3d at 148-49. Put differently, "[a] quid pro quo is a government official's receipt of a benefit in exchange for an act he has performed, or promised to perform, in the course of the ... ...
-
Makinen v. City of N.Y.
... ... CITY OF NEW YORK, et al., Defendants. No. 1:11cv07535 ALCGWG. United States District Court, S.D. New York. Signed Sept. 30, 2014. 53 F.Supp.3d 681 Lisa Ferro Joslin, ... ...
-
United States v. Ghailani
... ... United States v. Skelly, 442 F.3d 94, 99 (2d Cir.2006). In such cases, we review the challenge to the language of the jury charge for plain error, see United States v. Nouri, 711 F.3d 129, 138 (2d Cir.2013), which occurs when (1) there is an error; (2) the error is clear or obvious, rather than subject to reasonable dispute; (3) the error affected the appellant's substantial rights, which in the ordinary case means it affected the outcome of the district court ... ...
-
United States v. Avenatti
... ... 358, 409 (2010). “[T]o violate ... the right to honest services, the charged conduct must ... involve a quid pro quo, i.e., an ... ‘intent to give or receive something of value in ... exchange for an ... act.'” United States v ... Nouri, 711 F.3d 129, 139 (2d Cir. 2013) (quoting ... United States v. Bruno, 661 F.3d 733, 743-44 (2d ... Cir. 2011)). To demonstrate a quid pro quo ... agreement, the Government “ha[s] to prove, beyond a ... reasonable doubt, ... that the defendant received, or ... ...
-
Sentencing
...because defendant denied involvement in prostitution scheme that was relevant to defendant’s guilty plea for drug charges); U.S. v. Nouri, 711 F.3d 129, 146 (2d Cir. 2013) (reduction denied because defendant contested intent to defraud victims of securities fraud); U.S. v. King, 604 F.3d 12......