United States v. Klein, 011019 FED2, 17-3355

Docket Nº:17-3355
Opinion Judge:Robert A. Katzmann, Chief Judge.
Party Name:United States of America, Appellee, v. Tibor Klein, Defendant, Robert Schulman, Defendant-Appellant.
Attorney:Mark D. Harris (John E. Roberts, on the brief), Proskauer Rose LLP, New York, New York, for Defendant-Appellant. David C. Pitluck, Assistant United States Attorney (Jo Ann M. Navickas and Julia Nestor, Assistant United States Attorneys, on the brief), for Richard P. Donoghue, United States Attorn...
Judge Panel:Before: Katzmann, Chief Judge, Kearse and Chin, Circuit Judges.
Case Date:January 10, 2019
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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United States of America, Appellee,

v.

Tibor Klein, Defendant,

Robert Schulman, Defendant-Appellant.

No. 17-3355

United States Court of Appeals, Second Circuit

January 10, 2019

Argued: October 22, 2018

Mark D. Harris (John E. Roberts, on the brief), Proskauer Rose LLP, New York, New York, for Defendant-Appellant.

David C. Pitluck, Assistant United States Attorney (Jo Ann M. Navickas and Julia Nestor, Assistant United States Attorneys, on the brief), for Richard P. Donoghue, United States Attorney for the Eastern District of New York, Brooklyn, New York, for Appellee.

Before: Katzmann, Chief Judge, Kearse and Chin, Circuit Judges.

Robert A. Katzmann, Chief Judge.

Defendant-appellant Robert Schulman appeals from an October 4, 2017 judgment convicting him, following a jury trial, of one count of conspiracy to commit securities fraud and one count of securities fraud. On appeal, Schulman argues that the district court erroneously denied his motion pursuant to Federal Rule of Criminal Procedure 29 to vacate his convictions. According to Schulman, his convictions cannot stand because the government adduced insufficient evidence at trial of his criminal intent. Because the jury was not required to credit Schulman's deposition testimony that he intended only to brag when he tipped his friend and financial advisor about an upcoming merger, and the evidence taken as a whole permitted the jury to find beyond a reasonable doubt that Schulman intended his communication to lead to trading in securities of the company in question, we disagree. Accordingly, we AFFIRM the judgment of the district court.

This securities fraud case calls upon us to review whether there was sufficient evidence of criminal intent to sustain a judgment of conviction against a tipper who did not directly trade on material, non-public information but rather shared it with a tippee who did. Robert Schulman appeals from a judgment entered October 4, 2017 in the United States District Court for the Eastern District of New York (Azrack, J.) convicting him, after a jury trial, of one count of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 371, and one count of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff. The jury found, in relevant part, that Schulman engaged in a conspiracy to trade in the securities of a company called King Pharmaceuticals ("King") using material, non-public information that he obtained through his representation of King while a partner at the law firm of Hunton & Williams ("Hunton"). Schulman's sole contention on appeal is that the government adduced insufficient evidence at trial of his criminal intent.

Schulman's arguments focus on a comment Schulman says he made to his friend and financial advisor Tibor Klein: "[I]t would be nice to be king for a day." App. 251. Schulman concedes that, in making this comment, he "disclosed non- public information to a friend who was also his financial advisor." Appellant's Br. at 4. But, according to Schulman, his comment was merely a "joke," App. at 251, or, as he argues now, "a boastful, imprudent" remark, Appellant's Br. at 4. He contends that no reasonable jury could conclude beyond a reasonable doubt-in light of his testimony that he communicated nothing more about King or its ongoing merger talks, see App. at 252 ("I would have never told him . . .there's a potential merger."); id. ("[T]hat's the extent of what I would have communicated to him.")-that he disclosed this information "with the expectation that [Klein would] trade on it," United States v. Martoma, 894 F.3d 64, 79 (2d Cir. 2017); see also Salman v. United States, 137 S.Ct. 420, 428 (2016).

We disagree. The evidence here, taken as a whole, is sufficient to support the jury's verdict. The jury was entitled to discredit Schulman's testimony in a prior deposition that he intended only to brag and that he told Klein nothing about King's ongoing merger talks. Extensive circumstantial evidence supports an inference that Schulman communicated more to Klein than that "it would be nice to be king for a day" and that Schulman expected Klein to use the non- public information he shared with him to trade in King securities. Accordingly, the judgment of the district court is AFFIRMED.

Background

On August 4, 2016, a grand jury in the Eastern District of New York charged Robert Schulman and Tibor Klein with securities fraud and conspiracy to commit securities fraud. On February 24, 2017, the district court granted Klein's motion to sever his trial from Schulman's, and on March 6, 2017, Schulman's trial commenced. At trial, the Government introduced, inter alia, the testimony of a cooperating witness, Michael Shechtman; sworn statements Schulman made to the U.S. Securities and Exchange Commission ("SEC") in a deposition on August 27, 2012; and notes taken during Schulman's meeting with the U.S. Attorney's Office ("USAO") on May 19, 2015. Schulman called, among others, his wife, Ronnie Schulman. Neither Robert Schulman nor Klein testified at trial.

I. Trial Evidence

The evidence at trial included the following. Schulman was a Washington D.C.-based partner in Hunton's patent group. Klein was the principal of Klein Financial Services, a registered investment advisor based in Long Island, New York. In or about 2000, Schulman and his wife, Ronnie Schulman, hired Klein. The Schulmans gave Klein discretionary authority over their investment accounts, meaning that Klein could trade securities without first obtaining the Schulmans' permission. For his efforts, the Schulmans paid Klein one percent of their portfolio per year, an arrangement akin to those Klein had with other clients.

Approximately three times each year, Klein traveled to the Schulmans' home in McLean, Virginia to discuss the Schulmans' finances. On these...

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