United States v. Jiau

• Decision Date: 23 October 2013
• Docket Number: Docket Nos. 11–4167 (Lead), 12–2222(Con).
• Citation: 734 F.3d 147
• Parties: UNITED STATES of America, Appellee, v. Winifred JIAU, aka Wini, aka Sealed Defendant 1, Defendant–Appellant, Donald Longueuil, Son Ngoc Nguyen, aka Sonny, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

734 F.3d 147

UNITED STATES of America, Appellee,

v. Winifred JIAU, aka Wini, aka Sealed Defendant 1, Defendant–Appellant,Donald Longueuil, Son Ngoc Nguyen, aka Sonny, Defendants.

Docket Nos. 11–4167 (Lead), 12–2222(Con).

United States Court of Appeals, Second Circuit.

Argued: April 10, 2013.

Decided: Oct. 23, 2013.

Randa D. Maher, Law Office of Randa Maher, Great Neck, NY, and Winifred Jiau, pro se, Dublin, CA, for Appellant.

David I. Miller (Jenna M. Dabbs and Diane Gujarati, Assistant United States Attorneys, on the brief), for Preet Bharara, United States Attorney for the SouthernDistrict of New York, New York, NY, for Appellee.

Before: KEARSE, WALKER, and CHIN, Circuit Judges.

JOHN M. WALKER, JR., Circuit Judge:

Defendant–Appellant Winifred Jiau was convicted, following a jury trial in the District Court for the Southern District of New York (Jed Rakoff, Judge ), of conspiracy to commit securities fraud and wire fraud, in violation of 18 U.S.C. § 371, and insider trading, in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b–5 and 18 U.S.C. § 2. This opinion addresses Jiau's claims on appeal that (1) the district court erred in admitting evidence that she claims was recorded in violation of Title III of the Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S.C. §§ 2510–22 (“Title III”), and (2) the evidence against her was insufficient. We reject these arguments and affirm the conviction.¹

I. BACKGROUND

From September 2006 to December 2008, Jiau operated an insider trading scheme that involved a pair of tippers who worked at publicly-traded companies, Son Ngoc Nguyen of NVIDIA Corporation and Stanley Ng of Marvell Technology Group, Ltd., and a pair of tippees who were hedge fund managers, Samir Barai of Tribeca Capital Management and later Barai Capital Management (“BCM”) and Noah Freeman of Sonar Capital Management and later SAC Capital. Jiau worked as a contract employee at NVIDIA and as a consultant who provided information about the semiconductor industry to financial analysts. At each of those jobs, she was aware of the rules against disclosing material non-public information.

Jiau's scheme was to obtain from her tippers earnings data of their employer companies and convey this data to her tippees before those companies' quarterly financial results were publicly released. The tippees compared the data with Wall Street analysts' published expectations and unpublished rumors known as the “whisper.” If the data indicated that earnings would fail to meet expectations, the tippees would “go short” by selling their stock positions in the companies before the financial reports were made public. If the data showed that earnings would likely exceed Wall Street's expectations, the tippees would “go long” by buying the stock.

To provide an incentive, Jiau promised the tippers insider information for their own private trading. She also engaged in her own insider trading. After a three-week trial, a jury convicted Jiau of conspiracy to engage in insider trading and one substantive count of insider trading. On September 21, 2011, the district court sentenced her to 48 months' imprisonment and ordered a forfeiture of $3.118 million. This appeal followed.

II. Discussion

A. Motion to Suppress

Before trial, Jiau moved to suppress recordings of certain telephone conversations with the tippees that Barai had his subordinates record or transcribe as contemporaneous instant message notes. She asserted that the recordings and transcriptions were inadmissible under Title III, 18 U.S.C. §§ 2510–22. After holding a suppression hearing, the district court denied the motion, ruling that the recordings and transcriptions were not barred by Title

III. United States v. Jiau, 794 F.Supp.2d 484 (S.D.N.Y.2011).

We review a district court's ruling on a motion to suppress for clear error as to the facts and de novo on questions of law, United States v. Rodriguez, 356 F.3d 254, 257 (2d Cir.2004), and pay special deference to the district court's factual determinations going to witness credibility, Bennett v. United States, 663 F.3d 71, 85 (2d Cir.2011).

Title III generally prohibits the interception or wiretapping of electronic communications not authorized by a court of law or permitted by one of the statute's exceptions. 18 U.S.C. § 2511. Among the exceptions permitting interceptions is one for a recording that is made “in the ordinary course of ... business.” 18 U.S.C. § 2510(5)(a)(i).² A separate statutory exception permits a party to the communication, who is not acting under the color of law, to make the recording himself or consent to the recording. 18 U.S.C. § 2511(2)(d). This latter exception does not apply, however, “if the communication is intercepted for the purpose of committing any criminal or tortious act in violation of the Constitution or laws of the United States or any State.” Id. Recordings in violation of Title III are inadmissible as evidence. 18 U.S.C. § 2515; United States v. Horton, 601 F.2d 319, 324 (7th Cir.1979); Fleming v. United States, 547 F.2d 872, 874 (5th Cir.1977). The question presented here is whether, when a call is made in furtherance of an insider trading conspiracy but is recorded in the ordinary course of business, the recording is inadmissible under Title III.

It is undisputed that Barai had a hearing impairment, and consented to his subordinates listening in on, recording, or transcribing his telephone conversations for his and their benefit.³ The recordings and transcriptions were therefore made in the ordinary course of business and therefore admissible under § 2510(5)(a)(i). See Arias v. Mut. Cent. Alarm Serv., Inc., 202 F.3d 553, 559 (2d Cir.2000) (finding ordinary course exception applicable where “[l]egitimate business reasons support the ... recording of [such] calls”); see also18 U.S.C. § 2510(5)(b) (permitting recordings made through “a hearing aid or similar device being used to correct subnormal hearing to not better than normal”). The recordings were also made with the consent of Barai, a party to the communication, and therefore admissible under § 2511(2)(d).

Jiau argues that the interceptions were made in furtherance of illegal insider trading and inadmissible because Barai would not have been able to understand the insider information without the recordings. This argument conflates the purpose of the communications with the purpose of the recordings. It is the latter that controls. Notwithstanding that some of Barai's recorded calls were made to carry out illegal insider trading, in deciding whether a violation of Title III occurred, we look to why the calls were recorded and not why the calls were made. The carve-out within § 2511(2)(d), which renders inadmissible consented recordings made for the purpose of perpetrating “criminal” or “tortious” acts, is to be construed narrowly. It is confined to instances where the recording party intends to use the recording to harm or injure a recorded party, such as to blackmail, threaten, or publicly embarrass the recorded party. See In re DoubleClick Inc. Privacy Litig., 154 F.Supp.2d 497, 514–15 (S.D.N.Y.2001) (summarizing the legislative intent and history of § 2511(2)(d) and related case law). Hence, a Title III violation exists “if, at the time of the recording, the [recording party] plans to use the recording to harm the other party to the conversation.” Caro v. Weintraub, 618 F.3d 94, 100 (2d Cir.2010). On the other hand, “[i]f, at the moment he hits ‘record,’ the offender does not intend to use the recording for criminal or tortious purposes [against the other party], there is no violation.” Id. In summary, the fact that an illegal enterprise was discussed in the recorded conversation is not determinative of a violation under § 2511(2)(d), United States v. McTiernan, 695 F.3d 882, 890 (9th Cir.2012), because we look to the “intended use of the recordings” to determine the purpose of the recording. In re High Fructose Corn Syrup Antitrust Litig., 216 F.3d 621, 626 (7th Cir.2000).

When Barai's subordinates made the recordings and transcriptions, there was no indication that they intended to use the interceptions to harm Jiau, unlike in United States v. Vest, where a Title III violation was found because the recording was made to blackmail the recorded official to ensure his performance of his agreed role in a bribery scheme. 639 F.Supp. 899, 905–08 (D.Mass.1986). Hence, the recordings and transcriptions at issue are also not inadmissable under § 2511(2)(d).

B. Sufficiency of Evidence

Jiau contends that the evidence at trial was insufficient to prove that (a) her tippers personally benefited from their disclosure of insider information; (b) Barai's firm acted on her information to carry out trades of Marvell stock on May 23 and 27–29, 2008; and (c) the information she supplied to her tippees met the materiality requirement of the securities laws.

We review the sufficiency of the evidence de novo and ask “whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” United States v. Espaillet, 380 F.3d 713, 718 (2d Cir.2004) (quotation marks omitted). “[A] judgment of acquittal” is warranted “only if the evidence that the defendant committed the crime alleged is nonexistent or so meager that no reasonable jury could find guilt beyond a reasonable doubt.” Id. (quotation marks omitted). Ample evidence supported each of the contested factual findings.

To hold Jiau criminally liable for insider trading, the government had to prove each of the following elements beyond a reasonable doubt: (1) the insider-tippers (Nguyen and Ng) were entrusted the duty to protect confidential information, which (2) they breached by disclosing to their tippee (Jiau), who (3) knew of their duty and (4) still used the information to trade a security or further tip the information for her benefit,...