United States v. Salman

• Decision Date: 06 July 2015
• Docket Number: No. 14–10204.,14–10204.
• Citation: 792 F.3d 1087
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Bassam Yacoub SALMAN, aka Bessam Jacob Salman, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

792 F.3d 1087

UNITED STATES of America, Plaintiff–Appellee

v.Bassam Yacoub SALMAN, aka Bessam Jacob Salman, Defendant–Appellant.

No. 14–10204.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 9, 2015.

Filed July 6, 2015.

John D. Cline (argued), Law Office of John D. Cline, San Francisco, CA, for Defendant–Appellant.

Merry Jean Chan, Assistant United States Attorney (argued), Melinda Haag, United States Attorney, Barbara J. Valliere, Chief, Appellate Division, United States Attorney's Office, San Francisco, CA, for Plaintiff–Appellee.

Appeal from the United States District Court for the Northern District of California, Edward M. Chen, District Judge, Presiding. D.C. No. 3:11–CR–00625–EMC–1.

Before: MORGAN CHRISTEN and PAUL J. WATFORD, Circuit Judges, and JED S. RAKOFF, Senior District Judge.^*

OPINION

RAKOFF, Senior District Judge:

Defendant–Appellant Bassam Yacoub Salman appeals his conviction, following jury trial, for conspiracy and insider trading. He argues that the evidence was insufficient to sustain his conviction under the standard announced by the United States Court of Appeals for the Second Circuit in United States v. Newman, 773 F.3d 438 (2d Cir.2014), which he urges us to adopt. We find that the evidence was sufficient, and we affirm.¹

BACKGROUND

This case arises from an insider-trading scheme involving members of Salman's extended family. On September 1, 2011, Salman was indicted for one count of conspiracy to commit securities fraud in violation of 18 U.S.C. § 371 and four counts of securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. §§ 240.10b–5, 240.10b5–1 and 240.10b5–2, and 18 U.S.C. § 2. At trial, the Government presented evidence of the following:

In 2002, Salman's future brother-in-law Maher Kara joined Citigroup's healthcare investment banking group. Over the next few years, Maher began to discuss aspects of his job with his older brother, Mounir (“Michael”) Kara. At first, Maher sought help from Michael, who held an undergraduate degree in chemistry, in understanding scientific concepts relevant to his work in the healthcare and biotechnology sectors. In 2004, when their father was dying of cancer

, the focus of the brothers' discussions shifted to companies that were active in the areas of oncology and pain management. Maher began to suspect that Michael was trading on the information they discussed, although Michael initially denied it. As time wore on, Michael became more brazen and more persistent in his requests for inside information, and Maher knowingly obliged. From late 2004 through early 2007, Maher regularly disclosed to Michael information about upcoming mergers and acquisitions of and by Citigroup clients.

Meanwhile, in 2003, Maher Kara became engaged to Salman's sister, Saswan (“Suzie”) Salman. Over the course of the engagement, the Kara family and the Salman family grew close. In particular, Salman and Michael Kara became fast friends. In the fall of 2004, Michael began to share with Salman the inside information that he had learned from Maher, encouraging Salman to “mirror-imag [e]” his trading activity. Rather than trade through his own brokerage account, however, Salman arranged to deposit money, via a series of transfers through other accounts, into a brokerage account held jointly in the name of his wife's sister and her husband, Karim Bayyouk. Salman then shared the inside information with Bayyouk and the two split the profits from Bayyouk's trading. The brokerage records introduced at trial revealed that, on numerous occasions from 2004 to 2007, Bayyouk and Michael Kara executed nearly identical trades in securities issued by Citigroup clients shortly before the announcement of major transactions. As a result of these trades, Salman and Bayyouk's account grew from $396,000 to approximately $2.1 million.

Of particular relevance here, the Government presented evidence that Salman knew full well that Maher Kara was the source of the information. Michael Kara (who pled guilty and testified for the Government) testified that, early in the scheme, Salman asked where the information was coming from, and Michael told him, directly, that it came from Maher. Michael further testified about an incident that occurred around the time of Maher and Suzie's wedding in 2005. According to Michael Kara, on that visit, Michael noticed that there were many papers relating to their stock trading strewn about Salman's office. Michael became angry and admonished Salman that he had to be careful with the information because it was coming from Maher. Michael testified that Salman agreed that they had to “protect” Maher and promised to shred all of the papers.

The Government further presented evidence that Maher and Michael Kara enjoyed a close and mutually beneficial relationship. Specifically, the jury heard testimony that Michael helped pay for Maher's college, that he stood in for their deceased father at Maher's wedding, and, as discussed above, that Michael coached Maher in basic science to help him succeed at his job. Maher, for his part, testified that he “love[d] [his] brother very much” and that he gave Michael the inside information in order to “benefit him” and to “fulfill [ ] whatever needs he had.” For example, Maher testified that on one occasion, he received a call from Michael asking for a “favor,” requesting “information,” and explaining that he “owe[d] somebody.” After Michael turned down Maher's offer of money, Maher gave him a tip about an upcoming acquisition instead.

Finally, the Government presented evidence that Salman was aware of the Kara brothers' close fraternal relationship. The Salmans and the Karas were tightly knit families, and Salman would have had ample opportunity to observe Michael and Maher's interactions at their regular family gatherings. For example, Michael gave a toast at Maher's wedding, which Salman attended, in which Michael described how he spoke to his younger brother nearly every day and described Maher as his “mentor,” his “private counsel,” and “one of the most generous human beings he knows.” Maher, overcome with emotion, began to weep.

The jury found Salman guilty on all five counts. Salman then moved for a new trial pursuant to Rule 33 of the Federal Rules of Criminal Procedure, on the ground, inter alia, that there was no evidence that he knew that the tipper disclosed confidential information in exchange for a personal benefit. The district court denied his motion in full.

Salman timely appealed, but did not raise a challenge to the sufficiency of the evidence in his opening brief. After he filed his reply brief, the United States Court of Appeals for the Second Circuit, in United States v. Newman, 773 F.3d 438 (2d Cir.2014), vacated the insider-trading convictions of two individuals on the ground that the Government failed to present sufficient evidence that they knew the information they received had been disclosed in breach of a fiduciary duty. Id. at 455. After the Second Circuit denied the Government's petition for panel rehearing and rehearing en banc, United States v. Newman, Nos. 13–1837, 13–1917, 2015 WL 1954058 (2d Cir. Apr. 3, 2015), Salman promptly moved for leave to file a supplemental brief arguing that the Government's evidence in the instant case was insufficient under the standard announced in Newman, which he urged this Court to adopt. We granted Salman's motion and gave the Government an opportunity to respond.

DISCUSSION

A.

The threshold question is whether Salman waived the present argument by failing to raise it in his opening brief on this appeal, even though he had raised it below and, after Newman was decided, promptly raised it in a supplemental brief that the Government responded to before oral argument. Ordinarily, we will not consider “ ‘matters on appeal that are not specifically and distinctly argued in appellant's opening brief.’ ” United States v. Ullah, 976 F.2d 509, 514 (9th Cir.1992) (quoting Miller v. Fairchild Indus., Inc., 797 F.2d 727, 738 (9th Cir.1986) ). However, we make an exception to this general rule (1) for “good cause shown” or “if a failure to do so would result in manifest injustice,” (2) “when it is raised in the appellee's brief,” or (3) “if the failure to raise the issue properly did not prejudice the defense of the opposing party.” Id. (internal citation and quotation marks omitted).

The third exception applies here. As both parties have had a full opportunity to brief this issue and to address it at oral argument, the Government cannot complain of prejudice. See Hall v. City of Los Angeles, 697 F.3d 1059, 1072 (9th Cir.2012) (finding no prejudice where parties had opportunity to brief the issue); Ibarra–Flores v. Gonzales, 439 F.3d 614, 619 n. 4 (9th Cir.2006) (considering issue not raised in opening brief where opponent had an opportunity to address the issue at oral argument). Accordingly, we address Salman's claim on the merits.

B.

In reviewing a challenge to the sufficiency of the evidence, we must determine whether, when viewed in the light most favorable to the Government, the evidence was “ ‘adequate to allow any rational trier of fact to find the essential elements of the crime beyond a reasonable doubt.’ ” United States v. Richter, 782 F.3d 498, 501 (9th Cir.2015) (quoting United States v. Nevils, 598 F.3d 1158, 1164 (9th Cir.2010) (en banc)). Salman urges us to adopt Newman as the law of this Circuit, and contends that, under Newman, the evidence was insufficient to find either that Maher Kara disclosed the information to Michael Kara in exchange for a personal benefit, or, if he did, that Salman knew of such benefit.²

The “personal benefit” requirement for tippee liability derives from the Supreme Court's opinion in Dirks v. S.E.C., 463 U.S. 646, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983). Dirks presented an unusual fact pattern. Ronald Secrist, a whistleblower at a company called Equity Funding, had contacted Raymond Dirks, a well-known securities...