United States v. Chartier
| Decision Date | 26 August 2021 |
| Docket Number | 17-CR-0372(JS) |
| Parties | UNITED STATES OF AMERICA, v. JEFFREY CHARTIER and LAWRENCE ISEN, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
For the United States: Whitman G.S. Knapp, Esq., Kaitlin T Farrell, Esq.
For Defendant Jeffrey Chartier: Robert P. LaRusso, Esq., The LaRusso Law Firm, PLLC, Dorea H. Silverman, Esq.
For Defendant Lawrence Isen: John F. Kaley, Esq., Doar Rieck Kaley & Mack, Gary M. Kaufman, Esq. The Law Office of Gary Kaufman, PLLC.
On March 18, 2020, a jury convicted defendants Jeffrey Chartier (“Chartier”) and Lawrence Isen (“Isen ” and together “Defendants”) of conspiracy to commit securities fraud, conspiracy to commit wire fraud conspiracy to commit money laundering, securities fraud, and money laundering, for their participation in stock manipulation schemes. Before the Court are Defendants' motions for judgments of acquittal or, in the alternative new trials pursuant to Federal Rules of Criminal Procedure 29 and 33.[1] Separately, Defendants filed a joint motion for a new trial on the basis that COVID-19 unduly interfered with the jury's deliberations.[2] For the reasons that follow, Chartier's motion is GRANTED in part and DENIED in part; Isen's motion is DENIED; and the Defendants' joint motion is DENIED.
BACKGROUND[3]
On August 5, 2019, Defendants, with co-defendants
Michael Watts (“Watts”) and Stephanie Lee (“Lee”), were charged in a seventeen-count Superseding Indictment for their participation in schemes to defraud investors and potential investors in publicly traded companies: (1) CES Synergies, Inc. (“CESX”); (2) Hydrocarb Energy Corporation (“HECC”); (3) Intelligent Content Enterprises, Inc. (“ICE”); and (4) National Waste Management Holdings, Inc. (“NWMH, ” and together the “Companies”). (ECF No. 465.)
As relevant here, Count One charged both Defendants with conspiracy to commit securities fraud in violation of 18 U.S.C. §§ 371, 3551 e t seq.; Count Two charged both Defendants with conspiracy to commit wire fraud in violation of 18 U.S.C. §§ 1349, 3351 et seq.; Counts Three, Four, and Five charged Chartier with securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, 18 U.S.C. §§ 2, 3551 et seq., for the “First CESX Stock Manipulation
Scheme, ” the “Second CESX Stock Manipulation Scheme, ” and the “NWMH Stock Manipulation Scheme, ” respectively; Counts Six and Seven charged Isen with securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, 18 U.S.C. §§ 2, 3551 et seq., for the “HECC Stock Manipulation Scheme” and the “ICE[] Stock Manipulation Scheme, ” respectively; Count Eight charged both Defendants with conspiracy to commit money laundering in violation of 18 U.S.C. §§ 1956(h), 3551 et seq.; Counts Nine through Eleven charged Chartier with money laundering and Counts Twelve through Fifteen charged Isen with money laundering, in violation of 18 U.S.C. §§ 1957(a), 1957(b), 2, and 3551 et seq.; and Count Sixteen charged Chartier with attempted obstruction of an official proceeding in violation of 18 U.S.C. 1512(c)(2), 3551 et seq.[5]
Generally, the Superseding Indictment charged that Defendants “artificially controll[ed] the price and volume of traded shares” in the Companies by: (1) “artificially generating price movements and trading volume in the shares;” and (2) “material misrepresentations and omissions in their communications with victim investors about” the stock of the Companies. (Superseding Indictment ¶ 31.) To carry out this scheme, Defendants hired co-defendants Anthony Vassallo (“Vassallo”), who operated Elite Street Research (“Elite”), and/or Erik Matz (“Matz”) and Ronald Hardy (“Hardy”), who operated “My Street Research, ” which were “purported financial services business[es]” that “promoted the stocks of publicly traded companies to individual investors, primarily through cold-call campaigns and the circulation of a newsletter.” (Id. ¶¶ 1-2, 2728, 32.) In reality, Elite and My Street Research operated as “Boiler Rooms” that engaged in “manipulative trading patterns, including wash trades and matched trades, to drive up” the share prices of various publicly traded companies while its employees “aggressively and repeatedly called and emailed victim investors to purchase shares.” (Id. ¶¶ 32-35.) My Street Research operated under many names, including “Power Traders Press.” (Id. ¶ 1.) The Court refers to My Street Research, Power Traders Press, or any variation thereof, as the “Boiler Room, ” as it was referred throughout trial.
Matz, Hardy, and Vassallo pled guilty on April 11, 2018, August 22, 2018, and December 14, 2018, respectively. (ECF Nos. 195, 265, 329.) Eight other Boiler Room employee/co-defendants also pled guilty. Co-defendant Robert Gleckman (“Gleckman”) pled guilty on August 2, 2019 for his involvement in the HECC scheme. (ECF No. 460.) Chartier, Isen, Lee, and Watts did not, and the Government proceeded with the charges against them.
On August 6, 2019, the Court held a pre-trial conference and (1) granted Watts's motion to sever his trial so he could proceed to trial in October 2019; and (2) granted Isen's, Chartier's, and Lee's adjournment requests and scheduled their trial to begin on January 23, 2020. (ECF No. 466.) The trial against Watts began on October 7, 2019, and a jury convicted him of all charges on October 23, 2019. (See ECF Nos. 556 & 580.) On December 17, 2019, the Court denied Isen's motion to sever his trial from Chartier and Lee's trial. United States v. Isen, No. 17-CR-0372, 2019 WL 6875369, at (E.D.N.Y. Dec. 17, 2019). On January 23, 2020, the Court scheduled jury selection to begin on February 3, 2020, and trial to begin on February 10, 2020. (ECF No. 667.) On January 24, 2020, Lee pled guilty pursuant to a cooperation agreement with the Government. (ECF No. 674.)
Jury selection commenced on February 3, 2020 and trial began on February 10, 2020. Trial continued for sixteen days, over the course of approximately six weeks, until March 18, 2020, when the jury convicted Defendants of all charges.
Matz testified at trial as a cooperating witness and explained that he worked as a licensed stockbroker from 1996 to 2007, when he was kicked out of the industry due to a regulatory finding that he was “churning a client's account and taking excessive commissions.” (Tr. 126:6-20, 637:5-39:9, 645:5-57:20, 947:11-16.) In January 2014, he returned to the securities industry and worked for co-defendant Vassallo at Elite. (Tr. 127:10-28:7, 230:6-24, 697:1-6.) In July 2014, Matz and codefendant Hardy, Matz's “right hand man, ” left Elite and established the Boiler Room, which operated under many names to evade online reviews that it was a “pump and dump shop, ” among other reasons. (Tr. 128:8-31:17, 239:25-40:19, 737:13-38:12, 1089:6-23.) According to Matz, the Boiler Room operated as a carbon copy of Elite, such that it “pretended to be an investment research newsletter” but was a stock manipulation company: he was “paid in stock and cash by different companies, ” such as CESX, HECC, ICE, and NWMH, “to push” victim/investors to purchase those companies' shares at the same time the Boiler Room, or Defendants, sold those companies' shares. (Tr. 116:24-17:5, 229:20-31:17.) With the Boiler Room's involvement, a company's stock price would rise. However, it always “end[ed] the same way” and the price eventually “teeter[ed] and crater[ed] down.” (Tr. 170:16-24.)
To raise stock prices, Matz manipulated stock through both wash and matched trading[6] and provided false consulting agreements and invoices in the amount that the Boiler Room, or the Defendants, generated from those manipulated trades. (Tr. 121:1523.) Specifically, after the Boiler Room was hired to “push” a company's stock, Boiler Room employees cold-called victim/investors to convince them to subscribe to the Boiler Room's newsletter and website. (Tr. 143:14-15, 150:12-55:4; E.g., GX 20.) Once a victim/investor agreed to subscribe, Boiler Room account executives aggressively called those victim/investors to “push” them to purchase shares of stock that the Boiler Room was hired to promote, such as CESX, HECC, ICE, or NWMH. (Tr. 155:59.) Victim/investors were instructed to wait for the account executives to advise them of “what stock to buy, when to buy it, what price to buy it.” (Tr. 144:18-45:3.) Armed with knowledge that the victim/investors were prepared to purchase shares at a certain time and price, Matz “navigate[d] the market” and sold his own shares in the company (that he received as compensation) or relayed that information to someone else, like Lee, Chartier, or Isen, to sell their shares in the company at the same price, time, and volume. (Tr. 166:18-70:5, 779:10-19.) Account executives did not tell the victim/investors that the Boiler Room sold shares or coordinated with company shareholders to sell their shares at the same time that victim/investors purchased shares. (Tr. 170:6-10.) Several victim/investors testified at trial to the aggressive nature and volume of calls from the Boiler Room and described the ways that the Boiler Room instructed them to purchase shares of CESX, HECC, ICE, or NWMH. (E.g., Tr. 55-115, 465-78, 510-34, 54595, 2097-2149.) They also testified to the financial losses they suffered in connection with their investments.
From July 2014 to July 2017, the Boiler Room pushed approximately twelve to thirteen penny stocks, including CESX, HECC, ICE and NWMH. (Tr. 131:18-33:14.) During this time, Chartier visited both Elite's and the Boiler Room's offices at least once and Isen visited the Boiler Room's offices at least five or six times. (Tr....
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