United States v. Hager, 010518 FED5, 16-51330
|Opinion Judge:||PER CURIAM:|
|Party Name:||UNITED STATES OF AMERICA, Plaintiff - Appellee v. SEAN JAMES HAGER, Defendant-Appellant|
|Judge Panel:||Before DENNIS, CLEMENT, and GRAVES, Circuit Judges.|
|Case Date:||January 05, 2018|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
Appeal from the United States District Court for the Western District of Texas USDC No. 1:15-CR-108-1
Before DENNIS, CLEMENT, and GRAVES, Circuit Judges.
Defendant Sean Hager was a long-time salesperson for Velocity Electronics ("Velocity"), a computer parts distributor in Austin, Texas. From 2008 to 2012, he misused Velocity's confidential information to perpetrate a scheme that netted him $1.16 million. Hager was charged and convicted of mail, wire, and tax fraud, as well as money laundering. He raises numerous legal issues on appeal, but none is persuasive. We affirm his conviction on all charges.
Velocity is essentially a middle-man broker: it buys computer parts on the open market from suppliers and then resells them at a 20% markup to clients based on their specific needs. Velocity uses an in-house proprietary software system ("VIS") to store and organize crucial business information, including its suppliers, clients, inventory, and past sales. The VIS aggregates and analyzes information about pricing-both the prices at which it purchases products, and the prices at which it sells products. The software generates pricing trends that can be organized by client and product, and it sets purchasing and selling price quotes that ensure a 20% profit margin. This quote establishes a "fail point, " meaning employees cannot enter price quotes resulting in a lower margin unless a manager manually overrides the software.
Velocity considers the information contained within the VIS to be confidential and makes this clear to its employees: employees sign multiple confidentiality agreements upon hiring; the employee manual expressly designates information contained in the VIS as confidential; and the importance of keeping the information confidential is "discussed frequently." The confidentiality of its profit margin is particularly important because the release of this information would severely compromise its negotiations with clients.
Hager was a well-respected Velocity employee. He was the salesman responsible for Dell, one of the company's most important clients. But Hager came to believe that Velocity did not have his "long-term interests at heart." In 2008, he decided to take advantage of his access to the company's confidential information for personal gain. Hager formed a company called Echt Electronics ("Echt") in his wife's name. He used Echt to buy parts he knew Velocity needed because he was aware of which parts Dell was ordering. He would then sell those parts to himself as a Velocity salesperson at a price that he knew- thanks again to his access to VIS data-would meet Velocity's 20% profit margin. He thereby avoided triggering any "fail points" that would require managerial override. Velocity then sold the parts purchased from Echt to Dell. Hager employed this scheme for four years. During that time, Velocity purchased about $2.7 million in parts from Echt, and Hager made a profit of about $1.16 million from the fraud.
While the scheme was ongoing, Hager lied to Velocity to prevent being caught. He told other Velocity employees, for example, that Echt was run by two fictional Asian people named "Tim" and "Mary, " who would only do business with him and did not want to communicate with anyone else. But Hager's cover was poor: his scheme was discovered in 2012 when a fellow employee ran an internet search on Echt and discovered that the company was listed under Hager's wife's name and that its registered address was Hager's home. Hager left Velocity soon thereafter.
Over the course of his Echt scheme, Hager filed three federal tax returns-for 2008, 2009, and 2010. Hager hired a tax preparer to help file the returns. The tax preparer testified at Hager's trial that Hager did not inform her of his income from Echt when she prepared his returns.
Hager was indicted on two counts of mail fraud, two counts of wire fraud, one count of engaging in monetary transactions in property derived from specified unlawful activity, and three counts of aiding and assisting the preparation of false tax returns. After an eight-day trial, the jury found Hager guilty on all counts. He was sentenced to 42 months' imprisonment for the fraud and money laundering counts and 36 months' imprisonment for the tax counts, all to run concurrently.
The focus of Hager's appeal contests his mail and wire fraud charges. He raises two legal challenges: First, he argues that the applicable provisions of the mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, no longer protect confidential business information after the Supreme Court's opinion in Skilling v. United States, 561 U.S. 358 (2010). Second, he argues that, even if they still protect confidential business information, they only protect a narrow subset-namely, trade secrets as defined by state law. Relying on these arguments, Hager contends that the mail and wire fraud counts of the indictment failed to allege an offense, and, in the alternative, that...
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