U.S. v. DiIanni, 95-1524

• Decision Date: 07 May 1996
• Docket Number: No. 95-1524,95-1524
• Citation: 87 F.3d 15
• Parties: UNITED STATES of America, Appellee, v. Robert A. DiIANNI, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 15

87 F.3d 15

UNITED STATES of America, Appellee, v. Robert A. DiIANNI, Defendant, Appellant.

No. 95-1524.

United States Court of Appeals, First Circuit.

Heard May 7, 1996.

Decided June 24, 1996.

Francis J. DiMento, with whom DiMento & Sullivan, Boston, MA, was on brief for appellant.

Mark J. Balthazard, Assistant United States Attorney, with whom Donald K. Stern, United States Attorney, was on brief for appellee.

Before CYR, Circuit Judge, ALDRICH, Senior Circuit Judge, and GERTNER, ^* District Judge.

BAILEY ALDRICH, Senior Circuit Judge.

Defendant Robert A. DiIanni found himself in serious trouble with the Securities and Exchange Commission; was indicted, and ultimately pleaded guilty to three counts of mail fraud, three counts of wire fraud, one count of interstate transportation of property taken by fraud and one count of securities fraud. He received two consecutive sentences of 42 and 60 months, execution of the latter suspended with three years supervised release. A special condition of his probation required compliance with a permanent injunction entered in an SEC-initiated civil case that arose out of some of the same fraudulent activities. This forbade defendant from, inter alia, engaging in any conduct "in connection with the purchase or sale of any security," that would violate Rule 10b-5, ¹ under the Securities Exchange Act, 15 U.S.C. § 78j(b). In May, 1992, defendant was released from prison and, in due course, engaged in conduct which led the government to successfully charge him with having breached this special condition by impersonating his stepson in securities dealings with the brokerage firm National Financial Services Corporation ("NFSC"), as well as a general condition that he refrain from lying to his probation officer. The court revoked probation and sentenced defendant to two years imprisonment. He appeals. We affirm.

To revoke probation the sentencing court must make both a retrospective determination that the probationer has violated a condition of his probation, and a discretionary, prospective determination that any violation(s) warrants revocation. Black v. Romano, 471 U.S. 606, 611, 105 S.Ct. 2254, 2257-58, 85 L.Ed.2d 636 (1985) (revocation must meet due process requirements); United States v. Gallo, 20 F.3d 7, 13 (1st Cir.1994). The government need not prove a violation beyond a reasonable doubt, but must merely satisfy the court that a violation occurred. Id. at 14. The second step requires individualized evaluation of the particular probationer and "a predictive decision, based in part on [an] assessment of [his] propensity toward antisocial conduct." Id. We review the court's decision for abuse of discretion. Id. at 13; United States v. Nolan, 932 F.2d 1005, 1006 (1st Cir.1991) (court's revocation determination "will not be disturbed absent a showing of manifest abuse").

Condition Four of defendant's probation requires that he "answer truthfully all inquiries by the probation officer...." Defendant does not dispute that he falsely denied to his probation officer that he was "in any way involved" in managing or trading the securities on a brokerage account statement that the officer happened to notice during an unannounced visit to defendant's home. He simply contends his prevarication is immaterial because, contrary to what the probation officer apparently believed, the conditions of his probation do not forbid him from trading in securities. Condition Four is not limited to inquiries that relate to other conditions of defendant's probation, however, and cannot be read to leave defendant free to pick and choose which inquiries deserve a truthful answer.

The court also found defendant had willfully concealed his identity--and therefore his status as felon convicted for fraud in connection with securities transactions--as the person controlling certain brokerage accounts with NFSC, and the limited partnerships ostensibly behind them, and that this amounted to a violation of defendant's special condition of probation. The record discloses that defendant incorporated a consulting outfit in his wife's name, set up two limited partnerships naming his stepson, Mark Pinguey, as general partner, and opened a margin account with NFSC for each partnership, signing Pinguey's name. He then deposited 600,000 shares of a marginable stock borrowed through the consulting firm to one of the accounts, enabling him to obtain a $2.5 million credit from NFSC to purchase more stock. During all ensuing transactions and other dealings with NFSC, defendant held himself out as Pinguey. Even when defendant, posing as Pinguey, was asked by an NFSC representative whether "a Mr. DiIanni" was impersonating Pinguey, defendant kept up the ruse. The record supports the court's finding that defendant deliberately made untrue statements in identifying and representing himself as Pinguey in his dealings with NFSC, and--contrary to his story that he was acting under Pinguey's "authorization"--did so systematically with the intent to conceal the fact that he, not Pinguey, controlled the transactions that NFSC processed through the accounts.

In order for defendant's untruths and omissions to come within the prohibitions of the civil injunction, however, they had to have been of "material fact" within the meaning of Rule 10b-5. 17 C.F.R. § 240.10b-5(b). See Basic Inc. v. Levinson, 485 U.S. 224, 231, 108 S.Ct. 978, 983, 99 L.Ed.2d 194 (1988). The true identity of an investor is not always material, see United States v. Bingham, 992 F.2d 975 (9th Cir.1993), but where there is a "substantial likelihood" that a reasonable decision-maker would have viewed the omitted fact "as having significantly altered the total mix of information...