United States v. Martinovich

• Decision Date: 11 September 2013
• Docket Number: Criminal No. 4:12cr101.
• Citation: 971 F.Supp.2d 553
• Court: U.S. District Court — Eastern District of Virginia
• Parties: UNITED STATES of America, v. Jeffrey A. MARTINOVICH, Defendant.

971 F.Supp.2d 553

UNITED STATES of America,
v.
Jeffrey A. MARTINOVICH, Defendant.

Criminal No. 4:12cr101.

United States District Court,
E.D. Virginia,
Newport News Division.

Sept. 11, 2013.

[971 F.Supp.2d 554]

Brian James Samuels, United States Attorney's Office, Newport News, VA, V. Kathleen Dougherty, U.S. Attorney's Office, Norfolk, VA, for United States of America.

OPINION AND ORDER CONCERNING DEFENDANT'S MOTIONS FOR JUDGMENT OF ACQUITTAL AND NEW TRIAL
ROBERT G. DOUMAR, Senior District Judge.

This matter comes before the Court upon Jeffrey A. Martinovich's (“Defendant”)

[971 F.Supp.2d 555]

Motion for Judgment of Acquittal and New Trial. ECF No. 100. For the reasons set forth herein, the Court: (1) DENIES Defendant's Motion for Judgment of Acquittal on Counts 1, 6–14, 17–18, and 20–23; (2) GRANTS Defendant's Motion for Judgment of Acquittal on Count 19; (3) DENIES Defendant's Motion for Judgment of Acquittal on Counts 3–5, 24, and 26, which the jury could not agree on; and (4) DENIES Defendant's Motion for New Trial.

CONTENTS

I.	PROCEDURAL HISTORY	555
II.	DEFENDANT'S MOTION FOR JUDGMENT OF ACQUITTAL; PURSUANT TO FED. R. CRIM. P. 29(C)	556

A.	Standard of Review	557
B.	Factual Background	557
C.	The Government Introduced Sufficient Evidence to Support; Defendant's Convictions on Counts 1 and 6–14	563
D.	Defendant's Convictions on Counts 17–23 and the “Merger; Problem”	563

1.
Standard of Review
564

a.	The “Merger Problem” and the Pre–FERA Two–Step Analysis	564
b.	The Pre–FERA Standard of Review Governs the Court's Analysis of Counts 17–23	567

2.
Discussion
568

a.	The Funds Underlying Counts 17, 18, and 20–23 Were Not Used to Pay Any Essential Expense of the Predicate Mail and/or Wire Fraud	568
b.	Defendant's Conviction on Count 19 Must Be Reversed, as the Merger Problem Arises and the Government Failed to Offer Evidence of Net Proceeds	571

E.
Defendant Is Not Entitled to a Motion for Judgment of Acquittal on Counts 3–5, 24, and 26, Which the Jury Could Not Agree On
571

III.
DEFENDANT'S MOTION FOR NEW TRIAL PURSUANT TO FED. R. CRIM. P. 33
572

A.	Standard of Review	572
B.	Discussion	572

IV.
CONCLUSION
575

I. PROCEDURAL HISTORY

On October 10, 2012, Defendant was charged in a 26–count Criminal Indictment with: (1) Count 1, Conspiracy to Commit Mail and Wire Fraud, in violation of Title 18, United States Code, Section 1349; (2) Counts 2–9, Wire Fraud, in violation of Title 18, United States Code, Sections 1343 and 2; (3) Counts 10–14, Mail Fraud, in violation of Title 18, United States Code, Sections 1341 and 2; (4) Counts 15–23, Engaging in Monetary Transaction in Property Derived from Specified Unlawful Activity, in violation of Title 18, United States Code, Sections 1957 and 2; and (5) Counts 24–26, Fraudulent Oaths and Declarations in Relation to a Bankruptcy Proceeding, in violation of Title 18, United States Code, Section 152 and 2. ECF No. 1.

Defendant's trial on those charges began on April 10, 2013. On April 24, 2013, the Court granted Defendant's Motion for Judgment of Acquittal with respect to

[971 F.Supp.2d 556]

Count 25, which alleged Fraudulent Oaths and Declarations in Relation to a Bankruptcy Proceeding, in violation of Title 18, United States Code, Section 152 and 2.

The jury began its deliberations on May 2, 2013. See Min. Entry, May 2, 2013, ECF No. 89. On May 6, 2013, the Jury returned a verdict which found Defendant guilty of: (1) Count 1, Conspiracy to Commit Mail and Wire Fraud, in violation of Title 18, United States Code, Section 1349; (2) Counts 6–9, Wire Fraud, in violation of Title 18, United States Code, Sections 1343 and 2; (3) Counts 10–14, Mail Fraud, in violation of Title 18, United States Code, Sections 1341 and 2; and (4) Counts 17–23, Engaging in Monetary Transaction in Property Derived from Specified Unlawful Activity, in violation of Title 18, United States Code, Sections 1957 and 2. Jury Verdict, ECF No. 92.

The jury returned a verdict of not guilty with respect to: (1) Count 2, Wire Fraud, in violation of Title 18, United States Code, Sections 1343 and 2; and (2) Counts 15–16, Engaging in Monetary Transaction in Property Derived from Specified Unlawful Activity, in violation of Title 18, United States Code, Sections 1957 and 2.

The Jury advised the Court that it could not reach a verdict with respect to: (1) Counts 3–5, Wire Fraud, in violation of Title 18, United States Code, Sections 1343 and 2; and (2) Counts 24 and 26, Fraudulent Oaths and Declarations in Relation to a Bankruptcy Proceeding, in violation of Title 18, United States Code, Section 152 and 2. The Court declared a mistrial as to those counts on which the jury could not reach a verdict. Jury Verdict, ECF No. 92; see also Min. Entry, May 6, 2013, ECF No. 91.

Defendant filed the instant Motion for Judgment of Acquittal and New Trial on May 20, 2013. ECF No. 100. The Government requested a one-week extension to file its Response. Gov.'s Mot. for Ext. of Time, ECF No. 101. For good cause shown, the Court granted the Government's Motion and ordered the Response to be filed on or before Friday, June 7, 2013 at 5:00 P.M. Eastern Standard Time. Ord., ECF No. 102. In accordance with the Court's Order, the Government filed its Response on June 7, 2013 at 4:17 P.M. Eastern Standard Time. Gov.'s Resp. to Def.'s Mot. for J. of Acq. & New Trial, ECF No. 105.

II. DEFENDANT'S MOTION FOR JUDGMENT OF ACQUITTAL PURSUANT TO FED. R. CRIM. P. 29(c)

Rule 29 of the Federal Rules of Criminal Procedure requires a Court, on a defendant's motion, to enter a Judgment of Acquittal with respect to “any offense for which the evidence is insufficient to sustain a conviction.” Fed.R. Crim.P. 29(a). “A defendant may move for a judgment of acquittal, or renew such motion, within 14 days after a guilty verdict....” Fed.R. Crim.P. 29(c).

Defendant moves the Court, pursuant to Rule 29(c), for a Judgment of Acquittal on various charges. The verdict was returned on May 6, 2013. Jury Verdict, ECF No. 92; see also Min. Entry, May 6, 2013, ECF No. 91. Defendant filed the instant Motion for Judgment of Acquittal and New Trial on May 20, 2013. ECF No. 100. The Court FINDS that Defendant's Motion for Judgment of Acquittal was timely filed and will proceed to consider the merits of said Motion.

Defendant argues for Judgment of Acquittal on three distinct sets of charges. ECF No. 100. First, Defendant's argues that insufficient evidence of false or fraudulent conduct was presented at trial to support Defendant's convictions on Counts

[971 F.Supp.2d 557]

1 and 6–14. See Def.'s Mot. for J. of Acq. & New Trial 2–3, ECF No. 100. Second, Defendant argues that the Government failed to present evidence that the monetary transactions serving as the basis for his convictions on Counts 17–23 involved the “net profits” of his fraudulent scheme, as is allegedly required by United States v. Santos, 553 U.S. 507, 128 S.Ct. 2020, 170 L.Ed.2d 912 (2008), and its progeny, see Def.'s Mot. for J. of Acq. & New Trial 3, ECF No. 100. Finally, Defendant argues that no rational trier-of-fact could conclude guilt beyond a reasonable doubt on the hung counts—Counts 3–5, 24, and 26—and accordingly moves for Judgment of Acquittal on those counts. See Def.'s Mot. for J. of Acq. & New Trial 3, ECF No. 100. The Court will address each of these arguments in the subsections set forth below.

A. Standard of Review

When considering a challenge to the sufficiency of the evidence, the proper test is whether, “[v]iewing the evidence in the light most favorable to the Government,” United States v. Hickman, 626 F.3d 756, 762–63 (4th Cir.2010) (quoting United States v. Bynum, 604 F.3d 161, 166 (4th Cir.2010), cert. denied,560 U.S. 977, 130 S.Ct. 3442, 177 L.Ed.2d 347 (2010)), the court is able “to determine whether the conviction is supported by ‘substantial evidence.’ ” Id. at 763 (quoting United States v. Young, 609 F.3d 348, 355 (4th Cir.2010)). “[S]ubstantial evidence is evidence that a reasonable finder of fact could accept as adequate and sufficient to support a conclusion of a defendant's guilt beyond a reasonable doubt.” Id. (internal quotation marks omitted) (quoting Young, 609 F.3d at 355).

“A defendant challenging the sufficiency of the evidence bears ‘a heavy burden,’ as ‘[r]eversal ... is reserved for the rare case where the prosecution's failure is clear.’ ” United States v. Melvin, 508 Fed.Appx. 209, 210 (4th Cir.2013) (unpublished decision) (quoting United States v. Ashley, 606 F.3d 135, 138 (4th Cir.2010), cert. denied,––– U.S. ––––, 131 S.Ct. 428, 178 L.Ed.2d 333). The court is to “consider the evidence in the light most favorable to the government, making all inferences and credibility determinations in its favor.” United States v. Hoyte, 51 F.3d 1239, 1245 (4th Cir.1995) (citing United States v. Williams, 41 F.3d 192, 199 (4th Cir.1994), cert. denied,514 U.S. 1056, 115 S.Ct. 1442, 131 L.Ed.2d 321 (1995)), cert. denied,516 U.S. 935, 116 S.Ct. 346, 133 L.Ed.2d 242 (1995).

B. Factual Background

Viewing the evidence presented at trial in the light most favorable to the Government, the Court will first set forth the factual predicate by which it will assess Defendant's arguments.

In or about 1999, Defendant founded the Martinovich Investment Consulting Group (“MICG”), a financial services company that provided investment advice and investment-related services to its clients. As a typical broker-dealer, MICG was initially dedicated to investing client money in traditional investment vehicles such as stocks, bond, and annuities. MICG was licensed by the Securities and Exchange Commission (“SEC”) and subject to regulation by the Financial Industry Regulatory Authority (“FINRA”).

MICG utilized First Clearing, LLC (“First Clearing”), which is now a non-bank affiliate of Wells Fargo & Company, to provide brokerage account services. Amongst other things, First Clearing compiled and issued investor statements with account and/or investment portfolio information to MICG's clientele. Those statements were sent to MICG's clients...