In the Courts

In United States v. Lake, ” F.3d ”, 2007 WL 30038 (10th Cir. Jan. 5, 2007), the Tenth Circuit held that convictions that depended on the falsity of required reports to the Securities Exchange Commission (SEC) must be set aside because the government failed to show that the information allegedly omitted from the reports was required, and therefore did not show that the reports were false or fraudulent.

Defendants, former executives in an energy company, were convicted in a jury trial of wire fraud, money laundering, circumvention of internal financial controls, and conspiracy. All the counts of the indictment stemmed from the defendants' alleged personal use of company aircraft, and their subsequent failure to report that use to the SEC. Specifically, the government alleged that submitting required, but deceptive, reports to the SEC constitutes mail fraud. On appeal the Tenth Circuit set aside the convictions. The court explained that the government never established that the defendants failed to comply with SEC regulations and that the jury was never instructed on the SEC's reporting requirements. The court held that the reports could not be shown to be false or misleading without a showing that reporting the withheld information was required. Because no such showing was made, the convictions for wire fraud and money laundering were set aside without the opportunity for retrial. The circumvention and conspiracy charges were set aside on other grounds and may be retried.