14‐2442‐cr (L)
United States v. Lange
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2015
(Argued: February 17, 2016 Decided: August 15, 2016)
Docket Nos. 14‐2442‐cr, 14‐4443‐cr, 14‐4559‐cr
UNITED STATES OF AMERICA,
Appellant‐Cross‐Appellee,
v.
WILLIAM C. LANGE, AKA Kris Lange, JOSEPH G. PASCUA, FRANK E. PERKINS,
Defendants,
KRISTOFOR J. LANGE,
Defendant‐Appellee‐Cross‐Appellant,
BRAD A. RUSSELL,
Defendant‐Appellant.1
1 The Clerk of Court is respectfully directed to amend the official caption to
conform to the above.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NEW YORK
Before:
JACOBS, CHIN, and DRONEY, Circuit Judges.
Consolidated appeals from an order and judgments of the United
States District Court for the Eastern District of New York (Irizarry, C.J.) entered
after defendants were convicted at trial of conspiracy and securities fraud. The
Government appeals from the district courtʹs order vacating the conviction of
defendant Kristofor J. Lange on Count Three, the substantive securities fraud
count, on the grounds that the evidence was sufficient to establish venue. Both
defendants appeal their convictions on several grounds, including the sufficiency
of the evidence as to venue and the propriety of the jury instructions.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
WINSTON M. PAES, Assistant United States
Attorney (David C. James, Alixandra E.
Smith, Assistant United States Attorneys,
on the brief), for Robert L. Capers, United
States Attorney for the Eastern District of
New York, Brooklyn, NY, for Appellant‐
Cross‐Appellee.
‐2‐
RICHARD D. WILLSTATTER, Green & Willstatter,
White Plains, NY, for Defendant‐Appellee‐
Cross‐Appellant.
JAMES M. BRANDEN, Law Office of James M.
Branden, New York, NY, for Defendant‐
Appellant.
CHIN, Circuit Judge:
In 2014, following a six‐week trial, a jury found defendants Brad A.
Russell and Kristofor J. Lange (ʺKristoforʺ) guilty of conspiracy to commit wire
fraud and securities fraud (Count Two) in violation of 18 U.S.C. § 371 and
substantive securities fraud (Count Three) in violation of 15 U.S.C. §§ 78j(b) and
78ff. The jury also found Russell guilty of conspiracy to commit wire fraud in
connection with a separate but related scheme (Count One) in violation of 18
U.S.C. § 1349. Both defendants moved for a judgment of acquittal. The district
court (Irizarry, C.J.) granted Kristoforʹs motion with respect to Count Three,
finding insufficient evidence to establish venue in the Eastern District of New
York, and otherwise denied the motions.
The Government appeals from the June 5, 2014 order vacating
Kristoforʹs conviction on Count Three. Kristofor and Russell challenge their
convictions on several grounds, including sufficiency of the evidence as to venue
‐3‐
on Counts Two and Three and the propriety of the jury instructions. For the
reasons set forth below, we affirm Kristoforʹs and Russellʹs convictions, reverse
the district courtʹs order acquitting Kristofor on Count Three, and remand to the
district court with instructions to reinstate Kristoforʹs conviction on Count Three
and resentence Kristofor accordingly.
BACKGROUND
I. The Facts
Because Kristofor and Russell challenge their convictions based on
the sufficiency of the evidence to support venue in the EDNY, we view the
evidence ʺin the light most favorable to the government, crediting ʹevery
inference that could have been drawn in its favor.ʹʺ United States v. Tzolov, 642
F.3d 314, 318 (2d Cir. 2011) (quoting United States v. Rosa, 17 F.3d 1531, 1542 (2d
Cir. 1994)).
The charges in this case arise out of defendantsʹ involvement with
William Lange (ʺBillʺ), Kristoforʹs father and Russellʹs brother‐in‐law. Bill
concocted schemes to defraud investors in two of his companies: (1) Harbor
Funding Group, Inc. (ʺHFGIʺ) and (2) Black Sand Mine, Inc. (ʺBSMIʺ). Through
these schemes, Bill and his co‐conspirators defrauded HFGI investors of over $9
million and BSMI investors of some $780,000.
‐4‐
A. HFGI
In 2006, Bill formed HFGI as a mortgage company to process
investor loans. When that business failed to prosper, he transferred its assets to
another company in 2007 and announced a new strategy. HFGI would target
individuals, land developers, and construction companies in need of capital for
redevelopment projects in the Gulf‐Opportunity Zone, which covered the region
devastated by Hurricane Katrina, including Alabama, Louisiana, and
Mississippi. Bill created a Board of Directors for HFGI, composed of himself,
Stacey Lange (his wife), Russell, and Joseph Pascua, his long‐time business
partner.
In February 2008, HFGI began offering financing to investors. It
issued letters of intent (ʺLOIsʺ) representing that it had secured lender approval
and commitments to fund projects within thirty days. These representations
were false: HFGI had neither lender approval nor lender commitments to fund
projects and was not capable of providing meaningful funding.
From February 2008 through early 2009, HFGI made loan
commitments, requiring borrowers to pay a ten‐percent deposit. The deposits
were supposed to be held in escrow, to be refunded if the loan was not issued.
Instead, HFGI diverted the deposits for other purposes: investing in leveraged
‐5‐
funds, paying salaries, and covering personal expenses. Over the course of the
scheme, HFGI financed only one house to completion, and it failed to provide
funding for hundreds of projects it had committed to finance. In total, HFGI
diverted over $9 million from its clientsʹ escrow accounts before shutting down
and changing its phone number.
1. Kristoforʹs Involvement in HFGI
In 2006, Kristofor began working as an administrative assistant for
his father at HFGI.2 Kristofor was not centrally involved in the HFGI scheme,
but did attend a number of staff meetings where the lack of funding and
messaging to clients was discussed. Kristofor testified in the grand jury that he
knew HFGI ʺwasnʹt workingʺ and that as a result ʺwe closed it down . . . and
started another company.ʺ Govʹt App. at 71. His grand jury testimony was
admitted into evidence at trial.
2. Russellʹs Involvement in HFGI
Russell joined HFGI in 2006, working primarily as a loan processor.
As a member of the Board, Russell attended a number of Board meetings and
2 Kristofor was not charged in Count One for his participation in the HFGI
scheme, but his involvement serves as background for his knowledge and participation
in the BSMI scheme.
‐6‐
general staff meetings where HFGIʹs strategy to secure funding for Gulf‐
Opportunity Zone development projects was discussed.
As a loan processor, Russell was responsible for preparing and
keeping custody of the loan documents for HFGIʹs clients. In this role, he was
copied on emails with attachments from HFGIʹs escrow attorney reflecting the
transfer of escrow funds to HFGI. Two land developers, whose clients were
defrauded in the HFGI scheme, testified to Russellʹs participation in the scheme.
One testified that when she met with the Board to discuss potential loans, Russell
was present and spoke about the logistics of processing loans. She testified
further that Russell was her primary contact, sending her accountings of her
clientsʹ escrow deposits, wiring instructions, and LOIs promising financing.
Another testified to similar communications with and receipt of loan documents
from Russell. Both testified that they repeatedly asked Russell about the delays
in funding, and that he responded by claiming ignorance and directing them to
Bill. Russell never told them that HFGI did not have the funds or a lender to
finance projects, and did not reveal that their clientsʹ deposits had been
withdrawn from escrow. By late 2009, when HFGI could no longer maintain the
‐7‐
scheme and was over $9 million in debt, Russell, at Billʹs direction, changed the
office phone number.
B. BSMI
After HFGI ceased operations, Billʹs companies were strapped for
cash. Bill announced to his employees that they would start a new company,
BSMI, to mine precious metals in Alaska. BSMI made multiple material
misrepresentations to induce investors to purchase BSMI stock, including that:
(1) HFGI had loaned BSMI $900,000; (2) BSMI had $850,000 available in total
assets; and (3) investorsʹ money would be used for expenses such as fuel, food,
transportation, labor, and insurance. In fact, investor funds were used primarily
to pay BSMI salaries and for personal expenses of BSMI co‐conspirators. BSMI
also concealed (1) Billʹs involvement in BSMI by not disclosing his involvement
in marketing materials and having him impersonate his son Kristofor, the BSMI
Vice President, when speaking with investors3 and (2) BSMIʹs connection to
HFGI. These misrepresentations were made to investors both orally (via in‐
person presentations, over the phone, or via internet webinars) and in written
3 According to Joseph Pascua, such concealment was necessary to prevent
potential investors from ʺlooking into who Bill Lange wasʺ because ʺif they did a
Google search, they would find out that Bill Lange had various companies that owed
people a lot of money.ʺ Trial Tr. at 1626.
‐8‐
materials (business plans, PowerPoint presentations, private placement
memoranda, and an email newsletter). Victims invested $780,000 in BSMI.
1. Kristoforʹs Involvement in BSMI
Kristofor was Vice President of BSMI and a member of the BSMI
Board of Directors. He attended key internal BSMI meetings, participated in
meetings where BSMI solicited investors, and made sales calls to potential
investors off a call list circulated by Russell. Kristofor allowed his father to pose
as him when addressing investors. At times, Kristofor was present when his
father impersonated him on the phone.
The BSMI business plan also contained material misstatements
regarding Kristoforʹs past business, marketing, and mining experience. For
example, the business plan stated that he (1) was an officer at First Choice
Financial, another company owned by Bill, (2) had extensive mining experience,
(3) was familiar with environmental issues and high‐tech mining equipment, (4)
worked for a finance company in marketing and was an officer of the company,
and (5) worked for a consulting company using his marketing expertise to
develop nationwide offices. Kristofor reviewed and approved his biography
before it was included in the business plan. Many of the statements about his
background were false or inaccurate. For example, Kristoforʹs mining experience
‐9‐
was limited to the time he spent helping his father as a child at Alaska mines,
where he ʺhelped with clean up,ʺ ʺhelped move the rocks,ʺ and ʺplay[ed] with
[his] BB gun.ʺ Trial Tr. at 3315‐16. Moreover, he was not an officer of First
Choice Financial and functioned at HFGI largely as an administrative assistant.
2. Russellʹs Involvement in BSMI
Russell was a salaried employee of BSMI and, unlike Kristofor, was
not an officer of the company. Russellʹs duties at BSMI included setting up and
managing the company website and office email addresses, preparing, editing,
and formatting the BSMI marketing materials ‐‐ including the business plan,
placement memoranda, the PowerPoint presentation, and electronic newsletters
‐‐ and culling and distributing the call solicitation lists of potential investors.
Russell reviewed, edited, and provided comments on the BSMI business plan,
which contained misrepresentations about the background and work experience
of the BSMI officers, omitted all references to HFGI, and contained false
information about BSMIʹs assets. Russell also ʺscrubbedʺ a sales lead call list
twice, to remove potential investors who were on the Federal Trade
Commissionʹs National Do Not Call Registry, and circulated it to the BSMI
employees tasked with making cold calls, as discussed below.
‐10‐
C. Acts Occurring in the Eastern District
BSMI operated out of Billʹs home state in Washington, but solicited
investors nationwide.4 The Government asserts on appeal that two categories of
acts establish venue in the EDNY with respect to the BSMI scheme: (1) cold calls
to potential investors and (2) email correspondence with an apparent potential
investor.
1. Cold Calls
In May of 2010, Bill purchased a sales lead list to solicit capital for
BSMI from investors nationwide. Several individuals, including Kristofor, were
tasked with cold‐calling potential investors. Three versions of the call list were
circulated to employees to be used for those calls.
The first list (the ʺunscrubbed listʺ) was circulated by Frank Perkins
to Joseph Pascua and to an email address shared by Kristofor and Bill on May 25,
2010. The unscrubbed list, derived from and identical to the sales lead list,
contained contact information for approximately 2,000 individuals, about 40 of
whom had addresses within the EDNY. The Government established that this
4 HFGI was also operated out of Washington, but one of the HFGI investors
was located in Brooklyn, as was the escrow attorney. Russell does not challenge the
juryʹs finding that this evidence was sufficient to establish venue in the EDNY on his
conviction for Count One, conspiracy to commit wire fraud. Accordingly, we focus
solely on acts occurring in the EDNY in furtherance of the BSMI scheme.
‐11‐
list was used by BSMI employees to make cold calls; one non‐EDNY investor on
that list who was initially solicited via cold call testified at trial.
Nine days later, Russell scrubbed the list to remove investors on the
Do Not Call Registry and circulated a ʺscrubbedʺ list (the ʺfirst scrubbed listʺ).
Russell sent the first scrubbed list by email to Julie Day, a BSMI employee, with a
carbon copy sent to the email address that Kristofor shared with Bill. In that
email, Russell stated that the list was ʺto replace the one I sent you last week to
start researchingʺ and that ʺ[o]nly the ones with the area code in GREEN
need[ed] to be researched.ʺ Govʹt App. at 343. The first scrubbed list contained
approximately 70 potential investors. Of these, 15 individuals had addresses in
the EDNY, 14 of which were highlighted green. In that email, Russell stated
ʺ[l]et me know when you are running low [on contact numbers] and I will send a
new list.ʺ Id.
Later that day, Russell circulated another list (the ʺsecond scrubbed
listʺ) to the email shared by Kris and Bill, copying Joseph Pascua and Frank
Perkins. The second scrubbed list contained approximately 50 names, two of
which had 718 area codes. The 718 numbers did not include corresponding
‐12‐
addresses and the Government did not establish that these individuals resided
within the EDNY.5
Two BSMI employees, Judith Shulmire and Joseph Pascua, testified
that cold calling was a key solicitation strategy for BSMI. Shulmire testified that
the entire staff was tasked with making sales calls to potential investors from the
circulated lists. Pascua also testified that three to five BSMI employees made
cold calls to solicit investment. Pascua further noted that on a call with Bill and
Frank Perkins, Bill stated that ʺhe needed to get aggressive in calling investorsʺ
from the list and that he would identify himself as Kristofor in these calls. Trial
Tr. at 1626. Shulmire also testified that Kristofor ʺmade some sales callsʺ and
participated in sales calls with his father where his father would pretend to be
him, with Kristoforʹs consent. Govʹt App. at 234. Kristofor also participated in
pre‐ and post‐call strategy sessions with his father and other BSMI staff.
2. Email Correspondence
In July 2010, Postal Inspector Lucente, who worked and resided in
the EDNY, viewed a webinar broadcast from the BSMI office in Washington that
described potential investment opportunities in BSMI. On November 29, 2010,
Inspector Lucente emailed the company under a pseudonym to express interest
5 The 718 area code covers areas within and outside the EDNY.
‐13‐
in investing in BSMI. Inspector Lucente was located in his office in the EDNY
when he communicated with BSMI. On November 30, 2010, Inspector Lucente
received an email response from the address info@black‐sand‐inc.com thanking
him for his interest in BSMI. Three days later, JoEll Pascua, Joseph Pascuaʹs wife
and a BSMI employee, sent Inspector Lucente a second email including a BSMI
newsletter containing material misrepresentations about BSMI. On December 5,
2010, Joseph Pascua sent another email to Inspector Lucente, stating that ʺthe
opportunity may be limited with BSMI,ʺ citing BSMIʹs need to work with
accredited investors with whom BSMI had a pre‐existing relationship, but
leaving open the possibility of working with Inspector Lucente. Trial Tr. at 2008.
II. The Proceedings Below
In December 2010, a grand jury in the EDNY indicted Bill and
Joseph Pascua for wire and securities fraud in connection with both the HFGI
and BSMI schemes. Over the course of the investigation, the Government
interviewed Kristofor and Russell regarding their involvement in HFGI and
BSMI, and both testified before the grand jury.
On November 21, 2011, Kristofor and Russell were indicted on two
counts in connection with the BSMI scheme: (i) conspiracy to commit securities
and wire fraud, in violation of 18 U.S.C. § 371 (Count Two) and (ii) substantive
‐14‐
securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff (Count Three).
Russell was also charged with conspiracy to commit wire fraud in violation of 18
U.S.C. § 1349 (Count One) in connection with the HFGI scheme.
At trial, at the close of the Governmentʹs case, Kristofor and Russell
moved for a judgment of acquittal on Counts Two and Three, pursuant to Rule
29(a) of the Federal Rules of Criminal Procedure, claiming primarily that the
evidence was insufficient to establish venue in the EDNY. The district court
ruled that the Government had presented sufficient evidence of venue on the
conspiracy count (Count Two) but reserved decision as to venue for the
substantive securities count (Count Three).
On March 6, 2014, the jury found Russell guilty on Count One and
both Russell and Kristofor guilty on Counts Two and Three. Following the
verdict, the defendants renewed their Rule 29(a) motion with respect to venue on
Counts Two and Three and moved for acquittal on all counts on the basis that
there was insufficient evidence of their knowledge and intent. Russell also
sought a new trial on the basis that the district court erred in submitting
ʺconscious avoidanceʺ and ʺno ultimate harmʺ charges to the jury.
‐15‐
On June 5, 2014, the district court issued an opinion and order
denying the motions, except that it granted Kristoforʹs motion with respect to
Count Three.
The district court sentenced both defendants on November 13, 2014.
Kristofor was sentenced to five yearsʹ probation and ordered to pay $780,000 in
restitution to the victims of the BSMI fraud. Russell was sentenced to 120
monthsʹ imprisonment, and ordered to pay $10,707,894.59 in restitution to the
victims of the HFGI and BSMI schemes.
These appeals followed.
DISCUSSION
Two principal issues are presented on appeal: (1) the sufficiency of
the evidence as to venue with respect to Counts Two and Three, and (2) the
propriety of certain jury instructions. We address these two issues in turn, as
well as certain additional arguments raised by defendants.
I. Venue
A. Applicable Law
A defendant in a criminal case has the right to be tried in the district
where the crime was ʺcommitted.ʺ U.S. Const. amend. VI; see also Fed. R. Crim.
P. 18 (ʺUnless a statute or these rules permit otherwise, the government must
‐16‐
prosecute an offense in a district where the offense was committed.ʺ). ʺWhen a
federal statute defining an offense does not specify how to determine where the
crime was committed, ʹ[t]he locus delicti must be determined from the nature of
the crime alleged and the location of the act or acts constituting it.ʹʺ Tzolov, 642
F.3d at 318 (quoting United States v. Cabrales, 524 U.S. 1, 6‐7 (1998)). Venue may
lie in more than one place if ʺthe acts constituting the crime and the nature of the
crime charged implicate more than one location.ʺ United States v. Reed, 773 F.2d
477, 480 (2d Cir. 1985). Venue is proper ʺin any district in which an offense was
ʹbegun, continued or completed.ʹʺ Id. at 483 n.4 (quoting 18 U.S.C. § 3237(a)).
We review a challenge to the district courtʹs ruling regarding venue
de novo. Tzolov, 642 F.3d at 318. The Government bears the burden of proving
venue by a preponderance of the evidence. Id. Where the Government has
prevailed at trial, we review the sufficiency of the evidence as to venue in the
light most favorable to the Government, crediting ʺevery inference that could
have been drawn in its favor.ʺ Id. (quoting Rosa, 17 F.3d at 1542). Venue may be
proved by circumstantial evidence. United States v. Potamitis, 739 F.2d 784, 791
(2d Cir. 1984).
‐17‐
1. Securities Fraud
The Securities Exchange Act of 1934 provides for venue for criminal
securities fraud ʺin the district wherein any act or transaction constituting the
violation occurred.ʺ 15 U.S.C. § 78aa(a). We have found that ʺvenue is proper in
a district where . . . the defendant intentionally or knowingly causes an act in
furtherance of the charged offense to occur in the district of venue.ʺ United States
v. Royer, 549 F.3d 886, 894 (2d Cir. 2008) (quoting United States v. Svoboda, 347
F.3d 471, 483 (2d Cir. 2003)). To be ʺin furtherance of the charged offense,ʺ acts or
transactions must constitute the securities fraud violation ‐‐ mere preparatory acts
are insufficient. Tzolov, 642 F.3d at 319 (finding venue on a securities fraud count
insufficient because defendantsʹ flights in and out of airports in the EDNY were
not acts constituting the violation). A securities fraud violation occurs where
defendants ʺuse or employ, in connection with the purchase or sale of any
security . . . any manipulative or deceptive device,ʺ including the making of
material false statements. 15 U.S.C. § 78j(b).
Even without knowledge or intent to cause an act in furtherance of
the crime to occur in the district of venue, venue may still be proper. In Svoboda,
we held that a defendant need not intentionally or knowingly cause an act in
furtherance of a charged offense to occur in the district to establish venue.
‐18‐
347 F.3d at 483. Instead, it is enough that ʺit is foreseeable [to the defendant] that
such an act would occur in the districtʺ and that act does in fact occur. Id.
Venue may also be established if the defendant aids and abets
anotherʹs crime of securities fraud in the district. The aiding and abetting statute
provides that a defendant who ʺaids, abets, counsels, commands, induces or
procures [the] commissionʺ of an offense against the United States is ʺpunishable
as a principal.ʺ 18 U.S.C. § 2(a). To prove that a defendant aided and abetted a
substantive crime, the Government must establish that ʺthe underlying crime
was committed by someone other than the defendant and that the defendant
himself either acted or failed to act with the specific intent of advancing the
commission of the underlying crime.ʺ United States v. Smith, 198 F.3d 377, 383 (2d
Cir. 1999) (quoting United States v. Pipola, 83 F.3d 556, 562 (2d Cir. 1996)).
Where guilt of a substantive offense is premised on aiding and
abetting, ʺ[v]enue is proper where the defendantʹs accessorial acts were
committed or where the underlying crime occurredʺ because ʺ18 U.S.C. § 2 alters
the common law rule to provide an additional venue where . . . the principal[]
acted.ʺ Smith, 198 F.3d at 383.
‐19‐
Accordingly, to establish venue in the district for a conviction of
securities fraud, either directly or through aiding and abetting, the Government
must prove that a criminal act occurred in the district of venue. ʺWe must
therefore ʹdiscern the location of the commission of the criminal acts.ʹʺ United
States v. Rowe, 414 F.3d 271, 278 (2d Cir. 2005) (quoting United States v. Rodriguez‐
Moreno, 526 U.S. 275, 279 (1999)). ʺ[W]here a crime consists of distinct parts
which have different localities the whole may be tried where any part can be
proved to have been done.ʺ Id. (quoting Rodriguez‐Moreno, 526 U.S. at 281).
In considering challenges to venue for other criminal acts, we have
held that venue lies both in the district where a telephonic communication in
furtherance of a crime was made and where it was received. See United States v.
Rommy, 506 F.3d 108, 120 (2d Cir. 2007) (finding venue for drug conspiracy
proper where conspirators made calls into the district and noting that ʺ[i]n cases
involving telephone calls between co‐conspirators in different districts, we have
ruled that venue lies ʹin either district as long as the calls further the conspiracyʹʺ
(quoting Smith, 198 F.3d at 382)) (collecting cases); United States v. Bushwick Mills,
Inc., 165 F.2d 198, 202 (2d Cir. 1947) (explaining that an offer made by telephone
in Brooklyn to an offeree in New York in violation of the Emergency Price
‐20‐
Control Act ʺmay be prosecuted in either districtʺ); see also United States v.
Stewart, 878 F.2d 256, 257‐58 (8th Cir. 1989) (upholding venue for a substantive
drug offense and related conspiracy in North Dakota where phone calls were
placed to a North Dakota landline but automatically forwarded and received in
Minnesota because defendant ʺbelieved that he was calling [North Dakota], and
indeed he wasʺ).
Venue is also proper in the district where an electronic
communication was received. Royer, 549 F.3d at 895 (finding venue proper on a
securities fraud charge, noting ʺ[r]eceipt of electronic transmissions in a district is
sufficient to establish venue activity thereʺ); Rowe, 414 F.3d at 279‐80 (venue
proper for a conviction of advertising to receive, exchange, or distribute
pornography where defendant posted an internet advertisement, it was
foreseeable that the advertisement would be viewed within the district, and a
law enforcement official viewed it in the district).
We hold that the same rules apply to securities fraud violations:
Venue is proper not only in the district where telephonic or electronic materially
fraudulent communications were initiated, but also in the district where such
communications were received.
‐21‐
2. Conspiracy to Commit Securities and Wire Fraud
Venue is proper for conspiracy charges ʺin any district in which an
overt act in furtherance of the conspiracy was committed.ʺ Tzolov, 642 F.3d at
319‐20 (quoting Royer, 549 F.3d at 896) (defendantsʹ act of boarding a plane at JFK
airport, located in the EDNY, was an overt act sufficient to establish venue in the
EDNY on conspiracy charge). ʺAn overt act is any act performed by any
conspirator for the purpose of accomplishing the objectives of the conspiracy.
The act need not be unlawful; it can be any act, innocent or illegal, as long as it is
done in furtherance of the object or purpose of the conspiracy.ʺ Id. at 320. ʺThis
includes not just acts by co‐conspirators but also acts that the conspirators caused
others to take that materially furthered the ends of the conspiracy.ʺ Royer, 549
F.3d at 896. The Government is ʺnot restricted to the overt acts charged in the
indictment in justifying its choiceʺ of venue. United States v. Schwartz, 535 F.2d
160, 165 (2d Cir. 1976).
3. Substantial Contacts
ʺ[O]n occasion we have supplemented our venue inquiry with a
ʹsubstantial contactsʹ test that takes into account a number of factors . . . .ʺ United
States v. Rutigliano, 790 F.3d 389, 399 (2d Cir. 2015) (quoting United States v.
Coplan, 703 F.3d 46, 80 (2d Cir. 2012)). Those factors include ʺthe site of the
‐22‐
defendantʹs acts, the elements and nature of the crime, the locus of the effect of
the criminal conduct, and the suitability of the [venue] for accurate factfinding.ʺ
Royer, 549 F.3d at 895 (quoting Reed, 773 F.2d at 481). The substantial contacts
inquiry is not a ʺformal constitutional test,ʺ but instead is a useful guide to
consider ʺwhether a chosen venue is unfair or prejudicial to a defendant.ʺ United
States v. Saavedra, 223 F.3d 85, 93 (2d Cir. 2000).
B. Application
The district court granted Kristoforʹs motion for acquittal as to
Count Three, finding insufficient evidence of venue to support his substantive
securities fraud conviction. The district court denied his motion as to Count
Two, the conspiracy count, and denied Russellʹs motion on both Counts Two and
Three.
Because ʺvenue must be proper with respect to each count,ʺ United
States v. Beech‐Nut Nutrition Corp., 871 F.2d 1181, 1188 (2d Cir. 1989), and each
defendant, we review each count in turn, beginning with Count Three.
1. Securities Fraud
The Government does not contend that either defendant
intentionally committed acts constituting the violation within the EDNY.
Accordingly, to support a finding of venue in the EDNY, the evidence must have
‐23‐
ufficient to establish tthat: (1) accts occurred in the diistrict of veenue,
been su
includin
ng acts com
mmitted by
y others, th
hat constittute the vio
olation, Tzzolov, 642 F
F.3d
at 319, a
and (2) theese acts (a) were foreeseeable to the defendants, Svooboda, 347 F
F.3d
at 483, o
or (b) the d
defendantss aided and
d abetted iin the secu
urities frau
ud scheme and
are therrefore liablle for thosee underlying crimes committed by a prin
ncipal with
hin
the disttrict, Smith, 198 F.3d at 383. On
n the recorrd before u
us, we concclude that a
reasona
able juror ccould find by a prepo
onderancee of the eviidence that (i) acts
occurreed in the ED n of securiities laws, and (ii)
DNY that constitute a violation
defenda
ants were iinvolved b
both becau
use (a) thesse acts werre foreseeaable to them
m
and (b) they aided
d and abettted the BS
SMI securitties fraud scheme.
i. DNY Constituting Securities Fraaud
Accts in the ED
The d
district cou
urt did nott err in con
ncluding th
hat a reaso
onable trierr of
fact cou
uld find tha
at a BSMI co‐conspirrator comm
mitted actss within th
he EDNY th
hat
were in
n furtheran
nce of the B
BSMI securrities fraud
d scheme, and thereffore
constitu
uted securiities fraud.
The G
Governmeent presentted direct aand circum
mstantial eevidence th
hat
BSMI personnel teelephoned
d and emaiiled resideents of the EDNY to ssolicit
‐24‐
investments, see Potamitis, 739 F.2d at 791 (circumstantial evidence may establish
venue), including the following:
BSMI personnel engaged in cold calling to solicit investments;
they did so aggressively, on a national basis;
they did so using call lists that included dozens of individuals
residing in the EDNY6; and
BSMI personnel communicated with Inspector Lucente in the
EDNY, and sent him an electronic newsletter used to solicit investments.
These communications within the district constituted securities
fraud violations. The calls made by BSMI employees and email distribution of
the BSMI newsletter ʺwere crucial to the success of the schemeʺ of securities
fraud and contained a number of material misstatements regarding the BSMI
6 The unscrubbed list included approximately 40 individuals with EDNY
addresses, representing two percent of the total names on the list. The first scrubbed
list contained 15 individuals with EDNY addresses, representing 21 percent of the total
names on the list. We have previously found that a jury could reasonably conclude
venue was established based on circumstantial evidence where only 2.3 percent of
paying subscribers to an insider tip website resided in the EDNY. See Royer, 549 F.3d at
894. There, the defendant sent private messages to his subscriber base advising them to
short stock or publish information to affect the value of certain stock. See id. We
concluded that ʺthe jury could reasonably infer that it was more likely than not that one
or more of these [EDNY] subscribers traded in the applicable securities.ʺ Id. Here,
approximately two percent of EDNY residents were included on the unscrubbed list
and approximately 18 percent of EDNY residents were included on the first scrubbed
list. Accordingly, like in Royer, a reasonable juror could conclude that an EDNY
resident was solicited.
‐25‐
scheme. Royer, 549 F.3d at 895. For example, the talking points and newsletter
falsely provided that BSMI had a valuable gold mind in Alaska and that testing
established that the mine contained great quantities of gold. Accordingly, these
acts constituted securities fraud violations, and were not just preparatory. See 15
U.S.C. § 78j(b) (making it a violation to ʺuse or employ, in connection with the
purchase or sale of any security . . . any manipulative or deceptive deviceʺ); cf.
Tzolov, 642 F.3d at 319 (concluding that boarding flights in the EDNY to travel to
investor meetings where material false statements were made was insufficient to
establish venue on substantive securities fraud count).
Russell and Kristofor argue that the email correspondence was
merely preparatory because Inspector Lucente did not ultimately invest in BSMI.
But whether Inspector Lucente, or any EDNY recipient of a cold call, actually
invested is irrelevant. The making of an investment is not an element of the
crime of securities fraud. Instead, the mere use of material misrepresentations to
solicit investment is the ʺessential element of the crimeʺ in furtherance of
securities fraud. Tzolov, 642 F.3d at 318‐9.
Considering the evidence ʺin the light most favorable to the
government, [and] crediting every inference that could have been drawn in its
‐26‐
favor,ʺ id. at 318 (internal qu
uotation m
marks omittted), we co
onclude th
hat the jury
y
have reason
could h nably foun
nd by a preeponderan
nce of the eevidence th
hat BSMI
employ
yees called and emailled residen EDNY for the purpose of soliciiting
nts of the E
investm
ments throu
ugh materiial misstattements.
ii.
i Deefendantsʹ IInvolvemen
nt
For th
he reasonss described
d below, w
we conclud
de that a reeasonable juror
have found
could h d by a prep
ponderancee of the ev
vidence thaat the acts occurring
within tthe EDNY were foreeseeable to defendan
nts or that tthey aided
d and abettted
the crim
mes of anotther BSMI employeee within th
he EDNY.
a. Foreseeeability
The d
district cou
urt erred b
by failing to
o considerr whether iit was
able to Kriistofor thatt calls wou
foreseea uld be mad
de to prosp
pective ED
DNY investtors.
Kristofo
or participated in thee BSMI ina
augural strrategy meeeting wherre Bill stateed
that cap
pital would
d be raised
d ʺ[b]y selliing stock tto investorrsʺ and thaat ʺeverybo
ody
in the co
ompanyʺ w
was asked to solicit iinvestors. Trial Tr. aat 1482, 29777. Call lissts
king points were circculated to the email account sh
and talk hared by K
Kristofor an
nd
Bill. Tw
wo of thosee circulated
d calls listss contained
d names w
with EDNY
Y addressees.
Kristofo
or was task
ked with a
and actuallly made saales calls, p
participateed in pre‐caall
‐27‐
and post‐call strategy meetings, and sat in on calls made by Bill. He also
attended meetings where BSMI employees discussed strategies for soliciting
investment over the phone, and specifically discussed the need to conceal Billʹs
involvement by having him pose as ʺKris Langeʺ on calls. A reasonable jury
could conclude that it was foreseeable to Kristofor that calls would be made to
investors in the EDNY to solicit investment.
The district court also erred by concluding that the Government was
required ʺto present evidence at trial of [Kristoforʹs] involvement in creating the
newsletter or otherwise disseminating materially false information in this
districtʺ to establish venue through the EDNY email correspondence. Sp. App. at
17. It was foreseeable to Kristofor that investor solicitations would be followed
up with electronic correspondence containing newsletters, private placement
memoranda, or other solicitation materials to convince a potential target to invest
with BSMI. Joseph Pascua sent a sample follow‐up email to be used to solicit
investments to Kristofor and other BSMI employees. Kristofor received multiple
versions of these solicitation materials at his work email account, which he
shared with his father.
‐28‐
Similarly, both the cold calls to potential investors within the EDNY
and the email correspondence to Inspector Lucente were foreseeable to Russell.
Testimony at trial established that Russell was responsible for scrubbing the call
lists and distributing the culled lists to employees with instructions to solicit
potential investors. He was therefore aware that investors within the EDNY
were on the list, and were likely to be called as part of BSMIʹs strategy to solicit
investment. At BSMI, Russell assisted with the preparation of materially false
promotional materials, such as drafts of the business plan, business plan
summary, and placement memoranda to be emailed to potential investors. He
reduced the electronic file size of the business plan and business plan summary
to ʺhelp when sending the file via email.ʺ Govʹt App. at 935. Similarly, Russell
reviewed a draft of the quarterly newsletter drafted by Pascua. In light of
Russellʹs involvement in both the cold calls and the preparation of promotional
materials to be sent to potential investors, it was clearly foreseeable to Russell
that cold calls would be made to investors within the EDNY and that
promotional materials, such as the newsletter, would be emailed into the district.
‐29‐
b. Aiding and Abetting
Kristofor and Russell were charged in Count Three both as
principals and as aiders and abettors pursuant to 18 U.S.C. § 2(a). A reasonable
trier of fact could have concluded that both defendants aided and abetted the
BSMI securities fraud by participating in the solicitation strategy, and could
therefore be tried not only where they committed accessorial acts, but also
ʺwhere the principal acted.ʺ Smith, 198 F.3d at 385.
Kristofor made cold calls to solicit investments, joined Bill on cold
calls and in investor meetings, and allowed Bill to impersonate him to prevent
potential investors from learning of Billʹs tarnished reputation and involvement
with HFGI. Russell scrubbed and circulated the call lists, and edited
promotional materials for distribution to potential investors. Accordingly, both
defendants aided and abetted the scheme of securities fraud and could be tried in
any district where the other BSMI employees committed crimes in connection
with the scheme, including the EDNY.
The district court erred by concluding that the Government was
required to present evidence that Kristofor aided and abetted the specific acts
carried out by other BSMI employees in the district of venue. Our precedent
‐30‐
does not require that a defendant aid and abet the specific criminal activity
occurring within the district of venue.
In Smith, the defendant participated in a loan sharking and extortion
conspiracy led by a co‐defendant. 198 F.3d at 380. There, the defendant was
charged with aiding and abetting substantive crimes of extortion. Id. at 383‐85.
We held that venue was proper for the defendant both where his accessorial acts
were committed and where the principal committed a crime. Id. at 383. The
government presented evidence that his co‐defendant committed acts in the
district to further his extortion scheme by calling his victims from the district of
venue. We found that ʺ[e]ven if [the defendant] committed all of his accessorial
actsʺ outside of the district of venue, he could be tried in any district where the
principal acted. Id. It was enough that the defendant aided the scheme
generally; the jury was not required to find that he aided the specific acts of
extortion committed within the district.
Here, just as in Smith, it was enough that other BSMI personnel
committed acts in the district and that Kristofor and Russell aided and abetted
the fraudulent scheme. See Smith, 198 F.3d at 383‐85. Accordingly, venue was
proper in the EDNY with respect to the substantive securities fraud count.
‐31‐
2. Conspiracy
The Government established by a preponderance of the evidence
that conspirators committed, or caused to be committed, overt acts in furtherance
of the BSMI conspiracy in the EDNY.
As set forth above, a reasonable juror could find that the following
acts occurred in the EDNY in furtherance of the conspiracy: (1) cold calls by
BSMI employees to the EDNY, (2) JoEll Pascuaʹs electronic mailing of the BSMI
newsletter to Inspector Lucente, and (3) Joseph Pascuaʹs email communication
with Inspector Lucente. These acts constituted overt acts in furtherance of the
objectives of the conspiracy to commit securities fraud. See Tzolov, 642 F.3d at
320 (holding overt act need not be unlawful, provided it furthers conspiracy);
Rommy, 506 F.3d at 119.
While a non‐conspiring BSMI employee may have placed the cold
calls, and JoEll Pascua (who was not charged in the conspiracy) sent some of the
email correspondence to Inspector Lucente, this does not alter our conclusion
that these acts were overt acts materially furthering the conspiracy, because a
reasonable juror could surely conclude that the BSMI employees were instructed
to take these acts by a conspirator. See Royer, 549 F.3d at 896 (overt acts include
ʺacts that the conspirators caused others to take that materially furthered the
‐32‐
ends of the conspiracyʺ). The Government presented testimony establishing that
Bill instructed the BSMI employees to make the cold calls. Similarly, it was
reasonable to conclude that Bill or Joseph Pascua instructed JoEll Pascua to send
the newsletter to potential investors as part of her administrative duties. These
acts materially furthered the objectives of the conspiracy. Accordingly, the
district court did not err in concluding that venue was properly established for
both defendants with respect to the conspiracy count.
3. Substantial Contacts
Defendants argue that even if the acts occurring in the EDNY would
otherwise establish venue for Counts Two and Three, venue is nevertheless
improper because they did not have ʺsubstantial contactsʺ with the EDNY.
The substantial contacts ʺinquiry is made only ʹif the defendant
argues that his prosecution in the contested district will result in a hardship to
him, prejudice him, or undermine the fairness of the trial.ʹʺ Rutigliano, 790 F.3d
at 399 (quoting Coplan, 703 F.3d at 80). Kristofor and Russell did not seek a pre‐
trial change of venue on grounds of prejudice or hardship; because they did not
raise the issue of venue until after the close of the Governmentʹs case, it is
questionable whether the substantial contacts test should be applied. See
Rutigliano, 790 F.3d at 398.
‐33‐
In any event, we conclude that venue is proper even under the
substantial contacts test. The Governmentʹs evidence was sufficient to establish
that defendants and their co‐conspirators attempted to solicit investment in BSMI
from the EDNY, as well as across the country. BSMI maintained a website
designed to attract investors across the United States, the BSMI investment
recruitment scheme included solicitation of investment using nationwide call
lists, and BSMI employees, including a co‐conspirator, emailed with a potential
investor in the EDNY. These ʺalleged criminal acts provide substantial contact
with the district.ʺ Reed, 773 F.2d at 481. The factors to be considered in applying
the substantial contacts test support this conclusion.
First, some of the co‐conspiratorsʹ acts occurred in the EDNY, and
the Government introduced evidence that both defendants aided and abetted
those acts, as discussed above. Second, the criminal conduct had impact in the
EDNY (on Inspector Lucente and likely others) and nationally (on various
potential investors). Third, the elements and national reach of the crime of
securities fraud carried out by defendants support venue in the EDNY. See
Royer, 549 F.3d at 895 (ʺIndeed, the defendants, having concocted a scheme that
. . . defrauded investors throughout the country, can hardly complain that their
‐34‐
very modus operandi subjected them to prosecution in numerous districts,
including the Eastern District of New York.ʺ). Finally, the district court did not
err in concluding that the Eastern District was no less suitable for accurate fact‐
finding than any other district involved in the schemeʹs implementation. While
another venue may have been more convenient for defendants, ʺwhere the acts
constituting the crime and the nature of the crime charged implicate more than
one location, the [C]onstitution does not command a single exclusive venue.ʺ
Reed, 773 F.2d at 480. Accordingly, defendants had substantial contacts with the
EDNY and conducting the trial in the EDNY was not unduly prejudicial.
II. Jury Instructions
We review a challenge to jury instructions de novo. United States v.
Coppola, 671 F.3d 220, 247 (2d Cir. 2012). ʺA jury instruction is erroneous if it
misleads the jury as to the correct legal standard or does not adequately inform
the jury of the law.ʺ United States v. Nektalov, 461 F.3d 309, 313 (2d Cir. 2006)
(quoting United States v. Wilkerson, 361 F.3d 717, 732 (2d Cir. 2004)). We will
reverse only if ʺthe charge, viewed as a whole, demonstrates prejudicial error.ʺ
Coppola, 671 F.3d at 247. Where a ʺdefendant requested a different jury
instruction from the one actually given, the defendant ʹbears the burden of
showing that the requested instruction accurately represented the law in every
‐35‐
respect and that, viewing as a whole the charge actually given, he was
prejudiced.ʹʺ Nektalov, 461 F.3d at 313‐14 (quoting Wilkerson, 361 F.3d at 732).
On appeal, the defendants argue that the district court erred in its
ʺconscious avoidanceʺ and ʺno ultimate harmʺ charges to the jury. Each
instruction is discussed below.
A. The Conscious Avoidance Instruction
ʺThe conscious avoidance doctrine provides that a defendantʹs
knowledge of a fact required to prove the defendantʹs guilt may be found when
the jury is persuaded that the defendant consciously avoided learning that fact
while aware of a high probability of its existence.ʺ Svoboda, 347 F.3d at 477
(internal quotation marks omitted). ʺThus, a conscious avoidance instruction is
warranted (i) when a defendant asserts the lack of some specific aspect of
knowledge required for conviction and (ii) the appropriate factual predicate for
the charge exists, i.e., the evidence is such that a rational juror may reach the
conclusion beyond a reasonable doubt that the defendant was aware of a high
probability of the fact in dispute and consciously avoided confirming that fact.ʺ
Nektalov, 461 F.3d at 314 (citations and internal quotation marks omitted).
‐36‐
1. The Conscious Avoidance Doctrine in the Conspiracy Context
Kristofor contends that the district court erred by failing to instruct
the jury that conscious avoidance may not be used as a substitute for knowing
participation in a conspiracy.
On a charge of conspiracy, the Government must prove ʺ(1)
knowing participation or membership in the scheme charged and (2) some
knowledge of the unlawful aims and objectives of the scheme.ʺ United States v.
Ferrarini, 219 F.3d 145, 154‐55 (2d Cir. 2000) (internal quotation marks omitted).
ʺConscious avoidance may not be used to support a finding as to the former, i.e.,
intent to participate in a conspiracy, but it may be used to support a finding with
respect to the latter, i.e., knowledge of the conspiracyʹs unlawful goals.ʺ Id.; see
also Svoboda, 347 F.3d at 478‐79 (ʺ[T]he conscious avoidance doctrine may be
invoked to satisfy the requirement that a defendant [knew] of the unlawful aims
of the conspiracy,ʺ but ʺ[t]here must be further proof that the defendant joined in
the illegal agreement with the intent of helping it succeed in its criminal
purpose.ʺ). Where the conspiracy jury instruction requires a finding that the
defendant possessed the requisite intent, the instructions ʺcannot be taken to
permit the jury to infer the necessary intent to join the conspiracy from mere
conscious avoidance.ʺ Ferrarini, 219 F.3d at 156.
‐37‐
The district court did not include Kristoforʹs requested instruction
that conscious avoidance may never be used as a substitute for knowing
participation.7 The conspiracy jury instructions advised jurors that the
Government had to prove beyond a reasonable doubt that the defendants
participated with knowledge and intent. The district court noted that it had just
explained in its general instructions ʺwhat it means to act knowingly and
intentionally.ʺ Trial Tr. at 3820. The general definition of ʺknowinglyʺ had
included language on conscious avoidance.8
7
Specifically, Kristoforʹs counsel requested that the district court ʺinstruct
the jury that conscious avoidance may never be used as a substitute for knowing
participation or membership in the conspiracies and schemes to defraud charged in the
Indictment. In other words, the government must prove that the defendant being
considered knowingly participated in and became a member of the conspiracy or
scheme to defraud alleged in a particular count of the Indictment being considered.ʺ
Def. Kristofor J. Langeʹs Proposed Jury Instructions at 1, Dkt. No. 1:10‐cr‐00968, ECF
No. 254. Counsel relied on United States v. Lewis, 545 F. Appʹx 9 (2d Cir. 2013)
(summary order), to bolster his challenge to the instruction that was actually given.
That non‐precedential summary order notes that a conscious avoidance jury instruction
is erroneous if it ʺconvey[s] to the jury that one could innocently join an undertaking
without knowing of its illegal character, and that conscious avoidance of later
indications of wrongful behavior was sufficient to make that person a member of a
criminal conspiracy.ʺ Lewis, 545 F. Appʹx at 11.
8 The district courtʹs conscious avoidance instruction provided:
In determining whether the defendant acted knowingly, you
may consider whether the defendant deliberately closed his
eyes to what otherwise would have been obvious to him.
You may only infer knowledge of the existence of a
‐38‐
The district courtʹs conspiracy charge instructions, however, would
not have permitted the jury to substitute conscious avoidance for intent. The
instructions clearly provided that the Government had to prove that the
defendants intentionally engaged in the conspiracy. For example, the charge
instructed that ʺthe government must prove beyond a reasonable doubt . . . that
the defendants knowingly and intentionally became a member of the
conspiracy,ʺ id. at 3819, the defendant ʺmust have participated with knowledge
of at least some of the purposes or objectives of the conspiracy, and with the
intention of aiding in the accomplishment of the unlawful end, id. at 3823, and
ʺ[i]n sum, a defendant . . . must have intentionally engaged, advised or assisted
particular fact if the defendant was aware of a high
probability of its existence unless the defendant actually
believed that it did not exist. If you find beyond a
reasonable doubt that the defendant acted with a conscious
purpose to avoid learning a highly probable truth, then this
element may be satisfied. However, guilty knowledge may
not be established by demonstrating that the defendant was
merely negligent, foolish, careless or mistaken. It is entirely
up to you to determine whether the defendant deliberately
closed his eyes and what inferences, if any, fairly may be
drawn from the evidence on this issue. Whether the
defendant acted knowingly may be proven by a defendantʹs
conduct and by all of the facts and circumstance
surrounding the case.
Trial Tr. at 3816‐17; see also Leonard Sand et al., Modern Federal Jury Instructions—
Criminal, ¶ 3A.01, at 3A‐2 (2011 ed.) (model conscious avoidance instruction identical in
substance to the district courtʹs instruction).
‐39‐
in [the conspiracy] for the purpose of furthering the illegal undertaking,ʺ id. The
instructions required the jury to find that the defendants intentionally joined the
conspiracy to convict, and accordingly, the instructions did not allow the jury to
infer intent from mere conscious avoidance. See Svoboda, 347 F.3d at 478‐79
(upholding a similar instruction defining knowledge to include conscious
avoidance, where the instructions required ʺfurther proof that the defendant
joined in the illegal agreement with the intent of helping it succeed in its criminal
purposeʺ).
2. Factual Predicate for the Instruction
Russell contends on appeal that it was improper to instruct the jury
on conscious avoidance for both the HFGI and BSMI conspiracies, because there
was no factual predicate for the instruction. Specifically, Russell argues that
because the ʺrecord evidence indicates that [the defendant] had actual
knowledge [of the object of the conspiracy], there was no factual predicate for a
conscious avoidance charge.ʺ United States v. Kaplan, 490 F.3d 110, 128 (2d Cir.
2007) (emphasis omitted).
ʺ[A] conscious avoidance instruction is warranted (i) when a
defendant asserts the lack of some specific aspect of knowledge required for
conviction and (ii) the appropriate factual predicate for the charge exists . . . .ʺ
‐40‐
Nektalov, 461 F.3d at 314 (citations and internal quotation marks omitted). To
establish a factual predicate, there must be evidence that ʺthe defendant was
aware of a high probability of the fact in dispute and consciously avoided
confirming that fact.ʺ Id. (internal quotation marks omitted). Contrary to
Russellʹs assertion, where the defendant asserts a lack of actual knowledge, the
Government need not choose between an actual knowledge and a conscious
avoidance theory because ordinarily ʺ[t]he same evidentiary facts that support[]
the governmentʹs theory of actual knowledge also raise[] the inference that he
was subjectively aware of a high probability of the existence of illegal conduct
and thus properly serve[] as the factual predicate for the conscious avoidance
charge.ʺ United States v. Cuti, 720 F.3d 453, 464 (2d Cir. 2013); see also Svoboda, 347
F.3d at 480. A factual predicate ʺmay be established where[] a defendantʹs
involvement in the criminal offense may have been so overwhelmingly
suspicious that the defendantʹs failure to question the suspicious circumstances
establishes the defendantʹs purposeful contrivance to avoid guilty knowledge.ʺ
Svoboda, 347 F.3d at 480 (alterations and internal quotation marks omitted).
Here, there was a factual predicate for the district courtʹs conscious
avoidance charge. The Government presented ample evidence of both Russellʹs
‐41‐
involvement in the schemes and Russellʹs attempts to avoid specific knowledge.
See Cuti, 720 F.3d at 463 (ʺThe Government need not choose between an actual
knowledge and a conscious avoidance theory.ʺ (internal quotation marks
omitted)). This included evidence that Russell knew (1) of the lack of funding for
the HFGI scheme, of the transfer of funds out of the client escrow accounts, and
that BSMIʹs business plan and PPM contained material misrepresentations, and
(2) avoided learning of the HFGI fraudulent scheme, by refusing to respond to
the questions of dissatisfied investors and instead referring them to Bill. Based
on this evidence, the jury could reasonably infer that if Russell lacked actual
knowledge, he was ʺsubjectively aware of a high probability of the existence of
illegal conduct,ʺ Cuti, 720 F.3d at 464, and ʺpurposeful[ly] contriv[ed] to avoid
guilty knowledge,ʺ Svoboda, 347 F.3d at 480.
Moreover, the charge was warranted because Russell argued at trial
that he lacked knowledge of the nature of the fraudulent schemes. During
summation, Russellʹs counsel asserted a lack of specific knowledge required for
conviction, noting that Russell ʺdidnʹt knowʺ that HFGI was defrauding clients,
Trial Tr. at 3683‐84, ʺdid not know when the funding would be available,ʺ id. at
3693, claimed that ʺthereʹs no way . . . he would know if the metallurgical reports
‐42‐
in the [BSMI] business plan were accurate,ʺ id. at 3702, and had ʺno reason . . . to
knowʺ about the money and assets of BSMI, id. The charge was more than
appropriate in light of this defense. Cuti, 720 F.3d at 464 (ʺ[Defendantʹs]
purported lack of knowledge defense, despite [his] deep involvement in the
transactions that effectuated the fraud, all but invited the conscious avoidance
charge.ʺ). Accordingly, the district court did not err by instructing the jury on a
theory of conscious avoidance.
B. The No Ultimate Harm Instruction
Russell argues that the district court erred in giving a ʺno ultimate
harmʺ charge to the jury for both the HFGI and BSMI schemes.9 He contends
that the charge was inapplicable because he made no false or misleading
statements to investors or potential investors. This argument is without merit.
9 The district courtʹs no ultimate harm instruction provided:
You are instructed that if the defendant participated in the
scheme to defraud, then a belief by the defendant, if such
belief existed[,] that ultimately everything would work out
so that no one would lose any money, does not require you
to find that the defendant acted in good faith. No amount of
honest belief on the part of the defendant that the scheme
would, for example, ultimately make a profit for investors[,]
would [excuse] fraudulent actions or false representations
caused by him.
Trial Tr. at 3829.
‐43‐
A ʺno ultimate harmʺ instruction given by the district court is proper
where (1) there was sufficient factual predicate to necessitate the instruction,
(2) the instruction required the jury to find intent to defraud to convict, and (3)
there was no evidence that the instruction caused confusion. United States v.
Berkovich, 168 F.3d 64, 67 (2d Cir. 1999).
The instruction here was proper. First, there was a factual predicate
for the instruction, because there was evidence that Russellʹs co‐conspirators
intended to immediately deprive investors of their capital through fraud, even if
they truly believed that in the long‐term HFGI and BSMI would ultimately
succeed, deriving profits for the defrauded investors. See, e.g., United States v.
Rossomando, 144 F.3d 197, 2001 (2d Cir. 1998) (noting that ʺwhere some
immediate loss to the victim is contemplated by a defendant, the fact that the
defendant believes (rightly or wrongly) that he will ʹultimatelyʹ be able to work
things out so that the victim suffers no loss is no excuseʺ). Second, the
instructions clearly required that the jury find that the defendants intended to
defraud investors. Third, there is nothing in the record to suggest that the
instruction caused any confusion. See Berkovich, 168 F.3d at 67.
‐44‐
III. Defendantsʹ Additional Arguments
The defendants raise a number of additional arguments on appeal,
which we consider and reject.
First, Kristofor argues that the district court violated the rule of
completeness by admitting redacted portions of his grand jury testimony while
excluding other portions. The omitted portions, however, were not necessary to
place the admitted portions in context. See United States v. Johnson, 507 F.3d 793,
796‐97 (2d Cir. 2007) (holding rule of completeness requires admission if
necessary to explain or put admitted portion in context or avoid misleading
jury). The omitted statements were generally post‐hoc explanations for prior
conduct, which did not alter the meaning of the admitted redacted portion.
Next, Kristofor argues that the district court abused its discretion
with respect to a number of evidentiary rulings. This argument is without merit.
We reverse a district courtʹs evidentiary rulings ʺonly if we find manifest error,ʺ
that is not ʺharmless,ʺ United States v. Miller, 626 F.3d 682, 688 (2d Cir. 2010)
(internal quotation marks omitted), and upon review of the record before us, we
conclude that there was no such manifest error here.
Finally, Russell argues that his indictment was obtained in violation
of his Fifth Amendment privilege against self‐incrimination. Russell, however,
‐45‐
knowingly waived his Fifth Amendment right at the time of his testimony.
Moreover, even if Russellʹs grand jury evidence had been obtained in violation of
his Fifth Amendment right against self‐incrimination, the suppression of such
testimony at trial, not the dismissal of the indictment, would have been the
appropriate remedy. United States v. Rivieccio, 919 F.2d 812, 816 (2d Cir. 1990).
Russellʹs grand jury testimony was not introduced at trial. Accordingly, there
was no need to suppress the testimony or dismiss the indictment.
CONCLUSION
For the foregoing reasons, the judgment of the district court is
AFFIRMED in part and REVERSED in part and we REMAND to the district
court with instructions to reinstate Kristoforʹs conviction on Count Three and
resentence Kristofor accordingly.
‐46‐