United States v. Bergstein
| Decision Date | 29 May 2018 |
| Docket Number | 16-cr-746 (PKC) |
| Parties | UNITED STATES OF AMERICA, v. DAVID BERGSTEIN, Defendant. |
| Court | U.S. District Court — Southern District of New York |
On March 1, 2018, a jury found defendant David Bergstein guilty of all seven counts of the indictment, charging him with investment adviser fraud, securities fraud, wire fraud, and conspiracy to commit all three. (Dkt. 1). At trial, the government relied in part on the testimony of cooperating witnesses, investors in the Weston Capital Asset Management ("Weston") funds at issue or their representatives, and individuals who previously invested with Bergstein. Bergstein put on a defense consisting in part of his own testimony and that of business associates.
At the close of the government's case, Bergstein orally moved for a judgment of acquittal as to all counts and renewed the motion after the close of all evidence. (Tr. at 2227-30, 3009). The Court reserved decision on both occasions. (Id. at 2229, 3010). Both sides submitted letter briefs on the motion. (Dkts. 299, 304). The Court granted Bergstein's motion to extend the time for filing post-trial motions for a judgment of acquittal or a new trial. (Dkt. 315). Bergstein made no new motion. The oral trial motion on which the Court reserved decision remains pending. For the reasons to be explained, the Court denies the motion for a judgment of acquittal.
DISCUSSION.
Rule 29 requires a court, "on the defendant's motion," to "enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction." Rule 29(a), Fed. R. Crim. P. When a court reserves its decision until after the jury returns a verdict of guilty, "it must decide the motion on the basis of the evidence at the time the ruling was reserved." Rule 29(b), Fed. R. Crim. P.
On such a motion, a court "must view the evidence 'in a light that is most favorable to the government, and with all reasonable inferences resolved in favor of the government.'" United States v. Anderson, 747 F.3d 51, 60 (2d Cir. 2014) (quoting United States v. Persico, 645 F.3d 85, 104 (2d Cir. 2011)). A court further "defer[s] to the jury's evaluation of the credibility of the witnesses, its choices between permissible inferences, and its assessment of the weight of the evidence." United States v. Jones, 482 F.3d 60, 68 (2d Cir. 2006). If "any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt," the court must deny the motion. United States v. Aguilar, 585 F.3d 652, 656 (2d Cir. 2009) (quoting Jackson v. Virginia, 443 U.S. 307, 319 (1979)) (emphasis in original). But if "'the evidence viewed in the light most favorable to the prosecution gives equal or nearly equal circumstantial support to a theory of guilt and a theory of innocence, then a reasonable jury must necessarily entertain a reasonable doubt.'" United States v. Lorenzo, 534 F.3d 153, 159 (2d Cir. 2008) (quoting United States v. Glenn, 312 F.3d 58, 70 (2d Cir. 2002)). This strong "deference . . . to a jury verdict is 'especially important when reviewing a conviction of conspiracy'" because conspiracies are inherently secretive and rarely "'laid bare in court'" in all respects. Anderson, 747 F.3d at 72-73 (quoting United States v. Pitre, 960 F.2d 1112, 1121 (2d Cir. 1992)).
subject to limited exemptions. 15 U.S.C. § 80b-2(a)(11); see also Abrahamson v. Fleschner, 568 F.2d 862, 871 (2d Cir. 1977) (), overruled in part on other grounds by Transam. Mortg. Advisors, Inc. (TAMA) v. Lewis, 444 U.S. 11 (1979).
There is no challenge to the sufficiency of the evidence showing that Hallac was an investment adviser to the Weston funds at issue—known as the P2 Fund, the TT Portfolio, and WFF—as "clients" within the meaning of section 80b-6. Bergstein instead argues that the evidence was insufficient to show that Hallac was an investment adviser to investors in those funds. At the January 25, 2018 Final Pretrial Conference, the Court held that "a fair-minded reading . . . of the indictment . . . charges a fraud on the funds." (Conference Tr. at 8). The Court maintains that holding.1 Neither party asserted that a statutory exemption to the definition of investment adviser applies to Hallac. At trial, Hallac testified that he acted as "the head of" Weston and all its funds, managing "other people's monies" in exchange for "a share of the profits." (Tr. at 1358, 1360, 1396-97). He also testified regarding his obligations to keep Weston's "clients . . . informed of everything that's going on, and to make them aware if something new has happened," including by providing investment advice to investors as requested. (Id. at 1396-97). As the Court will later discuss, Hallac's advisery functions related to "securities." A rational jury could thus conclude beyond a reasonable doubt that Hallac served as an investment adviser to Weston's funds.
Section 80b-6(4), in relevant part, prohibits an investment adviser from "engag[ing] in any act, practice, or course of business which is fraudulent, deceptive, or manipulative," without any requirement of a client relationship. Bergstein challenges the legal sufficiency of any investment advisery fraud conviction on the basis that the indictment omits reference to the rules promulgated under section 80b-6(4), which define the conduct prohibited by section 80b-6(4). An indictment must contain a "plain, concise, and definite written statement of the essential facts constituting the offense charged," including the "official or customary citation of the statute, rule, regulation, or other provision of law" allegedly violated. Rule 7(c)(1), Fed. R. Crim. P. Unless there is a showing of prejudice, an indictment is sufficient when it "state[s] the elements of the offense and provide[s] even minimal protection against double jeopardy." United States v. Stringer, 730 F.3d 120, 124-25 (2d Cir. 2013). "The fact that the wrong section of the statute was cited does not invalidate either the charge or the convictions if . . . no prejudice is shown to derive from the miscitation." United States v. Calabro, 467 F.2d 973, 981 (2d Cir. 1972)); see Rule 7(c)(2), Fed. R. Crim. P.
The indictment properly cites section 80b-6. Bergstein offers no evidence or argument that the lack of citation to rules promulgated under section 80b-6(4) mislead or prejudiced him. To the contrary, a statute its by nature directs attention to the rules promulgated under it, and this Circuit denies reversals of convictions for the more severe error of incorrectly citing the applicable statute absent a showing of prejudice. See, e.g., Calabro, 467 F.2d at 981. The lack of a regulatory citation cannot serve as a basis for granting a judgment of acquittal on any count.
The 1934 Act and the Securities Act of 1933 (the "1933 Act") (together, the "Securities Acts") define "security" to include "note[s]" and "investment contract[s]." 15 U.S.C. §§ 77b(a)(1), 78c(a)(10). In this case, the predicate securities included: (i) for Count Four, the note between Arius Libra Inc. ("Arius Libra") and the P2 Fund (the "P2 Note"), and (ii) for Count Five, the Swartz IP Services Group Inc. ("Swartz IP") note purchase agreement with the TT Portfolio and any notes issued in accordance with it (the "TT Note"). (Dkt. 114).
Whether a note is a security is decided in light of the purpose of the...
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