USCA1 Opinion
UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
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No. 95-1524
UNITED STATES OF AMERICA,
Appellee,
v.
ROBERT A. DiIANNI,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge] ___________________
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Before
Cyr, Circuit Judge, _____________
Aldrich, Senior Circuit Judge, ____________________
and Gertner,* District Judge. ______________
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Francis J. DiMento with whom DiMento & Sullivan was on brief for __________________ __________________
appellant.
Mark J. Balthazard, Assistant United States Attorney, with whom __________________
Donald K. Stern, United States Attorney, was on brief for appellee. _______________ ______________________
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____________________
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*Of the District of Massachusetts, sitting by designation.
ALDRICH, Senior Circuit Judge. Defendant Robert A. ____________________
DiIanni found himself in serious trouble with the Securities
and Exchange Commission; was indicted, and ultimately pleaded
guilty to three counts of mail fraud, three counts of wire
fraud, one count of interstate transportation of property
taken by fraud and one count of securities fraud. He
received two consecutive sentences of 42 and 60 months,
execution of the latter suspended with three years supervised
release. A special condition of his probation required
compliance with a permanent injunction entered in an SEC-
initiated civil case that arose out of some of the same
fraudulent activities. This forbade defendant from, inter _____
alia, engaging in any conduct "in connection with the ____
purchase or sale of any security," that would violate Rule
10b-5,1 under the Securities Exchange Act, 15 U.S.C.
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1. The Rule provides, in relevant part:
It shall be unlawful for any person,
directly or indirectly, by the use of
. . . any facility of any national
securities exchange,
(a) To employ any device, scheme, or
artifice to defraud,
(b) To make any untrue statement of
a material fact or to omit to state a
material fact necessary in order to make
the statements made, in the light of the
circumstances under which they were made,
not misleading, or
(c) To engage in any act, practice
or course of business which operates or
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78j(b). In May, 1992, defendant was released from prison
and, in due course, engaged in conduct which led the
government to successfully charge him with having breached
this special condition by impersonating his stepson in
securities dealings with the brokerage firm National
Financial Services Corporation ("NFSC"), as well as a general
condition that he refrain from lying to his probation
officer. The court revoked probation and sentenced defendant
to two years imprisonment. He appeals. We affirm.
To revoke probation the sentencing court must make
both a retrospective determination that the probationer has
violated a condition of his probation, and a discretionary,
prospective determination that any violation(s) warrants
revocation. Black v. Romano, 471 U.S. 606, 611 (1985) _____ ______
(revocation must meet due process requirements); United ______
States v. Gallo, 20 F.3d 7, 13 (1st Cir. 1994). The ______ _____
government need not prove a violation beyond a reasonable
doubt, but must merely satisfy the court that a violation
occurred. Id. at 14. The second step requires ___
individualized evaluation of the particular probationer and
"a predictive decision, based in part on [an] assessment of
[his] propensity toward antisocial conduct." Id. We review ___
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would operate as a fraud or deceit upon
any person, in connection with the
purchase or sale of any security.
17 C.F.R. 240.10b-5.
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the court's decision for abuse of discretion. Id. at 13; ___
United States v. Nolan, 932 F.2d 1005, 1006 (1st Cir. 1991) _____________ _____
(court's revocation determination "will not be disturbed
absent a showing of manifest abuse").
Condition Four of defendant's probation requires
that he "answer truthfully all inquiries by the probation
officer . . . ." Defendant does not dispute that he falsely
denied to his probation officer that he was "in any way
involved" in managing or trading the securities appearing on
a brokerage account statement that the officer happened to
notice during an unannounced visit to defendant's home. He
simply contends his prevarication is immaterial because,
contrary to what the probation officer apparently believed,
the conditions of his probation do not forbid him from
trading in securities. Condition Four is not limited to
inquiries that relate to other conditions of defendant's
probation, however, and cannot be read to leave defendant
free to pick and choose which inquiries deserve a truthful
answer.
The court also found defendant had willfully
concealed his identity -- and therefore his status as felon
convicted for fraud in connection with securities
transactions -- as the person controlling certain brokerage
accounts with NFSC, and the limited partnerships ostensibly
behind them, and that this amounted to a violation of
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defendant's special condition of probation. The record
discloses that defendant incorporated a consulting outfit in
his wife's name, set up two limited partnerships naming his
stepson, Mark Pinguey, as general partner, and opened a
margin account with NFSC for each partnership, signing
Pinguey's name. He then deposited 600,000 shares of a
marginable stock borrowed through the consulting firm to one
of the accounts, enabling him to obtain a $2.5 million credit
from NFSC to purchase more stock. During all ensuing
transactions and other dealings with NFSC, defendant held
himself out as Pinguey. Even when defendant, posing as
Pinguey, was asked by an NFSC representative whether "a Mr.
DiIanni" was impersonating Pinguey, defendant kept up the
ruse. The record supports the court's finding that defendant
deliberately made untrue statements in identifying and
representing himself as Pinguey in his dealings with NFSC,
and -- contrary to his story that he was acting under
Pinguey's "authorization" -- did so systematically with the
intent to conceal the fact that he, not Pinguey, controlled
the transactions that NFSC processed through the accounts.
In order for defendant's untruths and omissions to
come within the prohibitions of the civil injunction,
however, they had to have been of "material fact" within the
meaning of Rule 10b-5. 17 C.F.R. 240.10b-5(b). See Basic ___ _____
Inc. v. Levinson, 485 U.S. 224, 231 (1988). The true ____ ________
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identity of an investor is not always material, see United ___ ______
States v. Bingham, 992 F.2d 975 (9th Cir. 1993), but where ______ _______
there is a "substantial likelihood" that a reasonable
decision-maker would have viewed the omitted fact "as having
significantly altered the total mix of information made
available," the Rule's materiality requirement is fulfilled.
Basic Inc., 485 U.S. at 231-32 (internal quotations omitted). __________
The record indicates that in his heyday defendant was a
successful, high-profile investment advisor, well-known in
the financial world. His indictment and convictions were
well documented in the local press, which detailed the
millions he bilked from his victims, as well as the fast and
loose financial dealings that had prompted SEC sanctions
years earlier. A 1990 feature on the cover of the Boston
Globe's business pages dubbed him "one of Boston's most
notorious investment advisors of the 1980s," and reported his
post-incarceration plans to jump back into the financial fray
upon release from prison. Had defendant signed his own name
to the margin account agreements in December of 1992, rather
than Pinguey's, there is a substantial likelihood that it
would have rung someone's bell at NFSC, and the means of
uncovering the details of defendant's past were readily
available. We have no doubt this information would have
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significantly transformed the picture.2 We also think it
reasonable to conclude that an intent to preclude NFSC from
obtaining this information was in large measure the reason
defendant employed Pinguey as his puppet. Defendant's
behavior was manifestly outside the bounds of Rule 10b-5.3
Given the relationship between defendant's
probation infractions and his past criminal conduct, it was
not unreasonable for the court to conclude that defendant's
post-release activities suggested he was positioning himself
incognito to get right back into his old heists. The court
found his new offenses "in many ways a kind of shadow of the
offenses that led initially to Mr. DiIanni's incarceration
. . . . Moreover, they come after considerable experience
here with violations of the federal securities law, a SEC
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2. The court credited testimony that NFSC would not have
entered into any margin account agreements with a convicted
felon. It is of no moment that NFSC did not perform a credit
check on Pinguey, which of course would not have revealed
anything about defendant. Defendant's assertion in his
appellate brief that NFSC was not checking any accounts at
the time is unsupported and in any event does not alter the
fact that, under defendant's particular circumstance, his
identity alone would have been material to NFSC's decision
whether to open the margin accounts. Compare Bingham, 992 _______ _______
F.2d at 976 (no evidence was introduced to show investors
would have found the misrepresented or omitted information
significant).
3. The civil injunction requires defendant to conform his
behavior to the provisions of Rule 10b-5. Proof of material
reliance, although necessary to state a private cause of
action for damages under Rule 10b-5, see Estate of Soler v. _______ ___ _______________
Rodriguez, 63 F.3d 45, 53 (1st Cir. 1995), is not required to _________
demonstrate violation of the terms of the injunction, and
therefore also of defendant's special condition of probation.
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injunction, a criminal prosecution . . . . And so, what I
have before me is a recidivist who -- offered any opportunity
-- will undertake to engage in conduct that is proscribed by
the federal securities laws." The court reasonably found
defendant's efforts to explain away his behavior not
credible, and his propensity for "anti-social" conduct
substantial.
Finally, defendant contends that a two year
sentence is too harsh. It was well within the court's
authority to impose and, for the reasons amplified above, we
find no abuse of discretion.
Affirmed. ________
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