In the Courts

Subsequently the U.S. Supreme Court decided Crawford, holding that '[w]here testimonial statements are at issue ' the only indicium of reliability sufficient to satisfy constitutional demands is the one the Constitution actually prescribes: confrontation.' Crawford, at 68-69. Becker then petitioned for habeas relief. The district court found that the admission of the allocutions violated Crawford and that the error was not harmless, vacated the conviction and ordered a new trial. The government appealed.

The Second Circuit appeared to go to great lengths to get to the substantive Crawford analysis, meticulously distinguishing case law, and dispensing with each of the government's procedural arguments. Citing its 2004 McClain decision applying Crawford to plea allocutions of unavailable co-conspirators, the court quickly found that '[w]hether or not the district court's decision to admit the plea allocutions in Becker's case was consistent with the then-controlling law of this Circuit, there can be no doubt after Crawford that their admission violated the Confrontation Clause.' Becker, at *6 (emphasis omitted).

Thus, the court arrived at the harmless-error analysis. In order to distinguish Becker from previous harmless- error precedent, the court relied heavily on the nature of the securities fraud offense itself. 'To establish that Becker committed a criminal securities fraud violation, as well as to establish his membership in the conspiracy, the government was required to prove that he acted willfully.' Id. at *8. (citation omitted) The court went on to explain that '[w]e have defined willfulness in this context as 'a realization on the defendant's part that he was doing a wrongful act' under the securities laws.' Id. (citation omitted) The court also acknowledged that Becker's 'primary defense' was that 'he lacked mental culpability, and that his actions as broker at IA were driven by credulity and inexperience rather than by greed ' bolstered by the facts that Becker was only nineteen years old when he began working at IA and that he left the firm within a year, purportedly upon realizing that his fellow brokers were engaged in illegal activity.' Id.

The court focused on the nature and volume of plea allocutions. 'It would require no great leap in reasoning to assume that Becker's intent ' matched that of the eleven other IA brokers who pled guilty ' to the same or similar conduct. We do not have a great deal of difficulty concluding that, by introducing the allocutions, the government was inviting the jury to make precisely that improper assumption regarding Becker's criminal intent.' Id. at *8-9.

The court also examined how these allocutions interacted with the live trial testimony, including the effect of the cross-examination of the similarly situated former IA brokers that provided live trial testimony. The court concluded that 'facts elicited on cross-examination tended to support the defense's contention that Becker, due to his relative inexperience and naivet' at the time he joined IA, may have lacked the criminal intent necessary to support a conviction for securities fraud.' Id. at *11. The court noted that '[t]he defense had no similar opportunity at trial or before to cross-examine the eleven ' It appears, therefore, that Becker suffered precisely the harm that the Confrontation Clause is intended to avoid.' Id. (citation omitted)

Finally, the court took note of how the government itself used the allocutions at trial. 'In his closing, the [AUSA] repeatedly highlighted the significance of the allocutions, and pointed out (at least by implication) their consistency with [the testimony of the two cooperating witnesses].' Id. at *12.

In sum, the court concluded that the government did not meet its burden of establishing 'beyond a reasonable doubt that the erroneously admitted evidence did not affect the verdict obtained,' and affirmed the district court's decision in vacating the convictions. See Id.

In the Courts and Business Crimes Hotline were written by Audrey L. Harris, Associate Editor of this newsletter and an associate at Kirkland & Ellis LLP, Washington, DC.

Crawford Violation Not Harmless in Securities Fraud Where Intent Is Paramount

In United States v. Becker, 06-1274-cr, 2007 WL 2669604, (2d Cir. Sept. 13, 2007), consistent with its holding in United States v. McClain , 377 F.3d 219, 221-22 (2d Cir. 2004), the Second Circuit held that admission of co-conspirator plea allocutions without the opportunity for cross examination violates a defendant's Sixth Amendment confrontation right under the U.S. Supreme Court decision in Crawford v. Washington, 541 U.S. 36 (2004). However, Becker is noteworthy because of the highlighted role that the willful requirement of securities fraud played in the court's harmless error standard analysis, and its ultimate decision to affirm the lower court's judgment vacating the conviction. The court's reasoning is also instructive in arguing the willful-intent element of securities fraud, and is an artful lesson in distinguishing securities fraud actions from general criminal precedent.

After being charged in 2002, Gregg Becker was convicted of securities fraud and conspiracy to commit securities fraud, mail fraud and wire fraud during a jury trial in the Southern District of New York. The case related to Becker's actions as a licensed securities broker at the Melville, Long Island, branch of Investor Associates ('IA'), in so-called 'boiler rooms,' and related allegations of deceptive sales tactics and providing misleading information to potential clients. The evidence at trial included recorded telephone conversations between Becker and potential clients, the live testimony of two other former IA brokers as cooperating witnesses, and three former customers. The government also 'read into evidence, over the defense's objections, the transcripts of eleven plea allocutions by former IA brokers who described their intentional participation in the fraudulent scheme.' Becker, at *2. The allocutions were largely identical in their detailed descriptions of specific practices, and 'broad statements concerning the pervasiveness of the fraud ' potentially implying that all IA brokers were knowing participants in the conspiracy.' Id. Becker was convicted and his conviction was affirmed on direct appeal.

Subsequently the U.S. Supreme Court decided Crawford, holding that '[w]here testimonial statements are at issue ' the only indicium of reliability sufficient to satisfy constitutional demands is the one the Constitution actually prescribes: confrontation.' Crawford, at 68-69. Becker then petitioned for habeas relief. The district court found that the admission of the allocutions violated Crawford and that the error was not harmless, vacated the conviction and ordered a new trial. The government appealed.

The Second Circuit appeared to go to great lengths to get to the substantive Crawford analysis, meticulously distinguishing case law, and dispensing with each of the government's procedural arguments. Citing its 2004 McClain decision applying Crawford to plea allocutions of unavailable co-conspirators, the court quickly found that '[w]hether or not the district court's decision to admit the plea allocutions in Becker's case was consistent with the then-controlling law of this Circuit, there can be no doubt after Crawford that their admission violated the Confrontation Clause.' Becker, at *6 (emphasis omitted).

Thus, the court arrived at the harmless-error analysis. In order to distinguish Becker from previous harmless- error precedent, the court relied heavily on the nature of the securities fraud offense itself. 'To establish that Becker committed a criminal securities fraud violation, as well as to establish his membership in the conspiracy, the government was required to prove that he acted willfully.' Id. at *8. (citation omitted) The court went on to explain that '[w]e have defined willfulness in this context as 'a realization on the defendant's part that he was doing a wrongful act' under the securities laws.' Id. (citation omitted) The court also acknowledged that Becker's 'primary defense' was that 'he lacked mental culpability, and that his actions as broker at IA were driven by credulity and inexperience rather than by greed ' bolstered by the facts that Becker was only nineteen years old when he began working at IA and that he left the firm within a year, purportedly upon realizing that his fellow brokers were engaged in illegal activity.' Id.

The court focused on the nature and volume of plea allocutions. 'It would require no great leap in reasoning to assume that Becker's intent ' matched that of the eleven other IA brokers who pled guilty ' to the same or similar conduct. We do not have a great deal of difficulty concluding that, by introducing the allocutions, the government was inviting the jury to make precisely that improper assumption regarding Becker's criminal intent.' Id. at *8-9.

The court also examined how these allocutions interacted with the live trial testimony, including the effect of the cross-examination of the similarly situated former IA brokers that provided live trial testimony. The court concluded that 'facts elicited on cross-examination tended to support the defense's contention that Becker, due to his relative inexperience and naivet' at the time he joined IA, may have lacked the criminal intent necessary to support a conviction for securities fraud.' Id. at *11. The court noted that '[t]he defense had no similar opportunity at trial or before to cross-examine the eleven ' It appears, therefore, that Becker suffered precisely the harm that the Confrontation Clause is intended to avoid.' Id. (citation omitted)

Finally, the court took note of how the government itself used the allocutions at trial. 'In his closing, the [AUSA] repeatedly highlighted the significance of the allocutions, and pointed out (at least by implication) their consistency with [the testimony of the two cooperating witnesses].' Id. at *12.

In sum, the court concluded that the government did not meet its burden of establishing 'beyond a reasonable doubt that the erroneously admitted evidence did not affect the verdict obtained,' and affirmed the district court's decision in vacating the convictions. See Id.

In the Courts and Business Crimes Hotline were written by Audrey L. Harris, Associate Editor of this newsletter and an associate at Kirkland & Ellis LLP, Washington, DC.