U.S. v. Blackwell

• Decision Date: 29 August 2006
• Docket Number: No. 05-4588.,05-4588.
• Citation: U.S. v. Blackwell, 459 F.3d 739 (6th Cir. 2006)
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Roger D. BLACKWELL, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

459 F.3d 739

UNITED STATES of America, Plaintiff-Appellee, v. Roger D. BLACKWELL, Defendant-Appellant.

No. 05-4588.

United States Court of Appeals, Sixth Circuit.

Argued: July 25, 2006.

Decided and Filed: August 29, 2006.

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ARGUED:

William C. Wilkinson, Thompson Hine, Columbus, Ohio, for Appellant. J. Michael Marous, Assistant United States Attorney, Columbus, Ohio, for Appellee.

ON BRIEF:

William C. Wilkinson, Scott A. Campbell, O. Judson Scheaf, III, Michele L. Noble, Thompson Hine, Columbus, Ohio, for Appellant. J. Michael Marous, Assistant United States Attorney, Columbus, Ohio, for Appellee.

Before: MOORE, CLAY, and GRIFFIN, Circuit Judges.

OPINION

CLAY, Circuit Judge.

Defendant, Roger D. Blackwell, appeals a December 15, 2005 final judgment of the United States District Court for the Southern District of Ohio, convicting Defendant of one count of conspiracy to commit insider trading in violation of 18 U.S.C. § 371, one count of conspiracy to obstruct an agency proceeding in violation of 18 U.S.C. § 371, fourteen counts of insider trading in violation of 15 U.S.C. §§ 78j and 78ff, one count of obstructing an agency proceeding in violation of 18 U.S.C. § 1505, and two counts of making false statements in a federal matter in violation of 18 U.S.C. § 1001; sentencing Defendant to seventy-two months imprisonment; and fining Defendant $ 1,000,000. For the reasons set forth below, we AFFIRM Defendant's convictions and sentence.

I. BACKGROUND

Defendant is a former professor at Ohio State University's School of Business, as well as the president of Roger Blackwell and Associates ("RBA") and an investor in Black Jack Enterprises. Between 1991 and 2004 he was married to Kristina Stephan-Blackwell ("Stephan-Blackwell"). The events in this case arise out of the conduct of Defendant and Stephan-Blackwell in 1999, while Defendant was a member of the board of directors of a small natural foods company, Worthington Foods ("WF"). In July 1999, Kellogg Company ("Kellogg") initiated negotiations for a buyout of WF. The buyout occurred in October 1999. Between July and October 1999, however, several of Defendant's friends and family members invested in WF stock. The following is a list of persons linked to the Blackwells, who bought stock between July and October 1999:

• Gertrude and Alfred Stephan ("the Stephans"), the parents of Stephan-Blackwell;

• Dale and Christian Blackwell, the father and son of Defendant, respectively;

• Kelley L. Hughes ("Hughes"), RBA's director of marketing;

• Kevin L. Stacey ("Stacey"), the husband of Hughes;

• Arnold L. Jack ("Jack"), a long-time friend of Defendant and co-owner of Black Jack Enterprises;

• Justin Voss ("Voss"), a long-time friend and business associate of Defendant; and

• Jack Kahl ("Kahl"), a long-time friend and business associate of Defendant.

The increased buying activity in WF stock between July and October 1999 led to an investigation. On December 15, 1999, the National Association of Securities Dealers ("NASD") sent Kellogg a questionnaire on the Kellogg-WF buyout, requesting information on relationships between persons who bought stock between July and October 1999 and persons who knew about the buyout. Pursuant to the NASD inquiry, Kellogg forwarded the list of persons who bought stock to Defendant, and requested that he inform them of any relationships he had with such persons. Defendant responded to the inquiry by stating: "I supplied no information about the transaction to any of the people on the list or any one else. When asked by anyone about Worthington Foods during this period, I replied that I was not able to comment about the company's stock, as is my standard practice." (J.A. at 4882.)

On March 16, 2000, the NASD sent a follow-up questionnaire to Kellogg. The follow-up, among other things, explicitly requested that Defendant supply information on his relationships to the Blackwells, Jack, Black Jack Enterprises, Hughes, Stacey and a statement as any circumstances under which they might have learned of the buyout. Defendant responded, explaining his relationships to them, but denying that he informed them of the buyout. Defendant stated, and still maintains, that he promoted WF because he believed in its value, but never disclosed the buyout.

On November 2, 2000, the Securities and Exchange Commission ("SEC") issued a subpoena, requiring Defendant to produce various documents and appear to testify before the SEC. Defendant eventually testified before the SEC on January 9, 2001, claiming that he did not disclose any information about the Kellogg-WF buyout to any person. In January 2002, the SEC sent a written inquiry to Defendant. Defendant responded on January 18, 2002, reiterating his position that he never disclosed any information about the Kellogg-WF buyout. In February 2002, Stephan-Blackwell and her parents testified before SEC. They denied that Blackwell had given them insider information on the buyout.

In early 2003, Defendant and Stephan-Blackwell began to have marital difficulties. They separated and Stephan-Blackwell moved to New York, where she began dating Terry Lundgren. In the spring of 2004, Stephan-Blackwell's attorney contacted the government about the instant case. Sometime thereafter Stephan-Blackwell learned that the government was considering pressing charges against her for perjury and insider trading. In the summer of 2004, Stephan-Blackwell and the government worked out an immunity deal, in which Stephan-Blackwell and her parents would receive immunity in exchange for Stephan-Blackwell's admission to conspiracy, perjury, and insider trading and testimony against Defendant. Stephan-Blackwell and Defendant finalized their divorce at approximately the same time. Several months later, Stephan-Blackwell and Lundgren became engaged.

In this same time period, Kahl also approached the government about his involvement in the instant case. On May 27, 2004, pursuant to a proffer of immunity, Kahl admitted to the FBI that Defendant tipped him on the Kellogg-WF buyout. Subsequently, Kahl testified before the grand jury. Specifically, Kahl testified that he spoke with Defendant around 12:30 p.m. on his (Kahl's) birthday, September 20, 1999, and that Defendant informed him that Kellogg was going to buy out WF and that Kahl should buy WF stock.

On August 26, 2004, a grand jury indicted Defendant, Hughes, Stacey, Jack, Voss, and Black Jack Enterprises on charges of insider trading in violation of 15 U.S.C. §§ 78j and 78ff, conspiracy to commit insider in violation of 18 U.S.C. § 371, obstruction of agency proceedings in violation of 18 U.S.C. § 1505, conspiracy to obstruct agency proceedings in violation of 18 U.S.C. § 371, and making false statements in violation of 18 U.S.C. § 1001.

At trial Stephan-Blackwell, Mary Hiser, Jack Kahl, Dwight Twomley, and Michelle Destefano testified for the government. Stephan-Blackwell testified that she informed her parents, the Stephans, and her cousin, Sigrid McFetridge, of the buyout and encouraged them to buy WF stock after discussing the propriety of doing so with Defendant. She further testified that she and Defendant gave her parents money to buy WF stock. Stephan-Blackwell also testified that both she and Blackwell lied to the NASD and SEC about the tipping, and that she coached her mother to lie to the SEC. She further testified that she deleted emails to Jack Kahl, Sigrid McFetridge, Gertrude Stephan, and Justin Voss on November 8, 2002, after receiving a SEC subpoena, in order to protect herself and Defendant. According to Stephan-Blackwell, Defendant was aware of the deletions and condoned them. Additionally, she and Blackwell formulated a plan to withhold information and obscure their relationships with parties who bought WF stock.

Significantly, during Stephan-Blackwell's trial testimony, Defendant allegedly mouthed "I hate you" to Stephan-Blackwell. Finding that such conduct would constitute witness intimidation, the district court allowed Defendant to be cross-examined on this issue, during which Defendant denied mouthing anything to Stephan-Blackwell.

Mary Hiser, Defendant's assistant at RBA, testified that she was responsible for opening mail and emails at RBA and that no mail or emails had been sent to RBA about the buyout. Hiser further testified that on November 10, 2000 she noticed that four entries had recently been deleted on November 8, 2000 from RBA's database: (1) Sigrid McFetridge; (2) John Kahl;¹ (3) Alfred Stephan; and (4) Justin Voss. Hiser printed a copy of the record of deletion because she knew that RBA's files had been subpoenaed. The record was entered into evidence.

Jack Kahl testified that Defendant Blackwell informed him of the buyout, and that he bought WF stock on the morning of his birthday, September 20, 1999, based on the tip. Kahl could not remember the exact date that Defendant tipped him but believed it was around his birthday.

Twomley, WF's CEO and chairman of the board in 1999, testified regarding WF, the buyout, and Defendant's knowledge of it as a board member. Twomley further testified that there were rumors, mainly among WF employees, in the summer of 1999 that a bigger company would buy out WF.

Michelle DeStefano, an FBI agent involved in investigating the defendants, testified that subpoenaed phone records evidenced numerous phone calls between the defendants between July and October 1999.

Thereafter, defendants Jack, Voss, Hughes, Stacey, and Blackwell, as well as non-defendants, Dale Blackwell (Defendant's father), Professor Jarrell, and John Adams testified for the defense. All the defendants denied wrongdoing. Specifically, they all denied that Defendant Blackwell informed them of the buyout. Jack, an attorney, and...