In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15-1445
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
ERIC A. BLOOM,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 12 CR 409-1 — Ronald A. Guzmán, Judge.
____________________
ARGUED SEPTEMBER 13, 2016 — DECIDED JANUARY 19, 2017
____________________
Before BAUER, KANNE, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. In August 2007 Sentinel Manage-
ment Group collapsed. Sentinel managed short-term cash in-
vestments for futures commission merchants, individuals,
hedge funds, and other entities. Its bankruptcy left customers
and creditors in the lurch: over $600 million was lost. In the
wake of the collapse, Sentinel president and CEO Eric Bloom
was convicted of wire fraud and investment adviser fraud.
2 No. 15-1445
The government’s case rested on three theories. First, the
government presented evidence that Bloom, despite assuring
customers otherwise, put their funds at significant risk by us-
ing them as collateral for Sentinel’s risky proprietary trading.
Second, the government contended that Bloom fraudulently
manipulated the rates of return paid to clients on their invest-
ments. Third, the government claimed that Bloom continued
to accept new customer funds even after he knew that Senti-
nel was about to collapse. The jury found Bloom guilty on all
counts, eighteen of wire fraud and one of investment adviser
fraud.
On appeal, Bloom offers five arguments, which we ad-
dress in turn. First, Bloom challenges the sufficiency of the ev-
idence supporting his convictions. Second, he argues that his
convictions were tainted by prosecutorial misconduct. Third,
Bloom argues that the court erred by refusing to instruct the
jury properly on the meaning of a federal regulation govern-
ing futures commission merchants. Fourth, he challenges sev-
eral of the district court’s evidentiary rulings. Fifth, he argues
that in sentencing the district court used too high a loss
amount to calculate the sentencing guideline range. We find
no reversible error.
I. Factual Background
We first provide an overview of Sentinel’s business and its
representations to customers regarding how it used their
funds. Then we summarize Sentinel’s collapse in 2007 and
Bloom’s later indictment, conviction, and sentencing.
No. 15-1445 3
A. Sentinel’s Business Model
Sentinel was founded in 1979 by Philip Bloom, the father
of defendant Eric Bloom. The company had a single office in
Northbrook, Illinois, and had about twenty-one employees.
Sentinel managed investments for various clients such as
hedge funds, financial institutions, and individuals. Its pri-
mary business was handling short-term investments for fu-
tures commission merchants, also known as FCMs. FCMs
represent investors who trade in the futures and options mar-
kets, and they are regulated by the Commodity Futures Trad-
ing Commission (CFTC).
Defendant Eric Bloom joined the company in 1988. He
worked in several different positions during his career at Sen-
tinel, sometimes occupying multiple positions at once. Bloom
served as head trader from 1988 until 2003 and chief compli-
ance officer until 2006. He also served as president and CEO
from 1991 until August 2007 when the company filed for
bankruptcy.
Sentinel’s business model was unusual and perhaps
unique. It was registered with the CFTC as an FCM, but it did
not trade in futures or options. Instead, Sentinel invested
funds for other FCMs and, like a mutual fund, paid a return
based on profits and losses. Sentinel was the only company
that the CFTC permitted to operate in this manner.
There was a proviso, however. The CFTC required Senti-
nel to follow the CFTC regulations for FCMs. In particular,
CFTC Rule 1.25 limited the types of securities Sentinel could
purchase with customer funds. 17 C.F.R. § 1.25. To minimize
risk of loss and to assure that cash was returnable on demand,
Rule 1.25 permitted investment only in highly liquid, highly
4 No. 15-1445
rated securities such as U.S. Treasury bills. It also required
Sentinel to keep the funds of customers segregated from each
other and segregated from Sentinel’s own funds. Sentinel
signed “seg letters” and Investment Management Agree-
ments to this effect. These letters and agreements represented
to the CFTC and clients that Sentinel segregated customer
funds from its own “house” funds, that Sentinel would not
have any interest in the customer funds, and that Sentinel
would comply with CFTC rules.
Sentinel was also registered with the Securities and Ex-
change Commission (SEC) as an investment adviser. As an
adviser, Sentinel owed its clients a fiduciary duty of good
faith. SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180,
194 (1963) (investment adviser has “an affirmative duty of ut-
most good faith, and full and fair disclosure of all material
facts”) (internal quotation marks and citation omitted). De-
fendant Eric Bloom was named on Sentinel’s investment ad-
viser registration as the person authorized to give investment
advice on behalf of the company. The SEC Custody Rule also
required segregation of customer funds. 17 C.F.R.
§ 275.206(4)–2.
Sentinel provided two investment options for its clients:
the 125 Portfolio and the Prime Portfolio. The 125 Portfolio
was for FCMs, and it allowed them to invest their customers’
funds. This portfolio was intended to provide safe, short-term
investments with same-day liquidity. It was subject to CFTC
regulations, including Rule 1.25. At the time, Rule 1.25 per-
mitted investment only in securities with a rating of AA or
better. After 2007, however, the rule was revised to limit in-
vestment to securities that are fully guaranteed by the federal
No. 15-1445 5
government. At Sentinel, the pooled accounts of customer
funds from the 125 Portfolio were called “Seg 1.”
The second option for Sentinel customers—the Prime
Portfolio—was for non-FCM clients such as hedge funds, fi-
nancial institutions, and individuals. FCMs could also invest
their own “house” funds (not customer funds) in the Prime
Portfolio. The Prime Portfolio was slightly riskier. It was in-
tended to provide a higher rate of return than the 125 Portfolio
by investing in securities with longer maturity dates and
slightly lower ratings. Nonetheless, Sentinel and Bloom
promised that this portfolio would not stoop below high-
quality “investment grade” securities. These funds were
called “Seg 3.”
In addition to the two public portfolios, Sentinel had a
“house account” for its own proprietary trading. This account
was not constrained by the grade of securities. It could pur-
chase securities of any rating or no rating. Defendant Bloom’s
father, Philip Bloom, owned the majority of the funds in the
house account.
B. Sentinel’s Representations to Customers About Its Use of
Their Funds
Sentinel told its customers their funds would be safe, and
it backed this assurance with specific claims about its business
model and investment practices. The pitch was that customers
could earn higher-than-average interest, receive same-day
cash redemptions, and keep their funds effectively bank-
ruptcy-proof. Sentinel claimed this was possible because it
pooled cash from multiple clients, which afforded it greater
investment flexibility. It made these claims through market-
ing materials, sales presentations, and its website.
6 No. 15-1445
This was an attractive option to many Sentinel customers,
particularly FCMs. Since FCMs were investing their custom-
ers’ funds, preservation of principal was paramount for them.
Liquidity was also vital because FCMs receive margin calls
that require them to provide cash to exchanges on behalf of
their clients on short notice.
Sentinel told customers how it could assure the safety of
their customers’ principal. Its marketing materials said that it
purchased “only the highest quality and most liquid securi-
ties” and that its “objective [was] to achieve the highest yield
consistent with preservation of principal and daily liquidity,
not simply ‘the highest yield.’” Sentinel told customers of the
125 Portfolio that their supporting securities were highly
rated and complied with Rule 1.25.
Sentinel also promised that client funds would be segre-
gated and thus thoroughly protected from bankruptcy. For
both portfolios, Sentinel said that it would pool client assets
by portfolio and place them in segregated, bankruptcy-proof
custodial accounts in the client’s name in the Bank of New
York. The accounts would be bankruptcy-proof because, even
if Sentinel went bankrupt, the securities remained in segre-
gated accounts in the client’s name and would thus not be
considered Sentinel’s assets. And if the Bank of New York
failed, the assets would be transferred to another custodial in-
stitution.
Customers were also told that they would know which se-
curities generated their yields. Marketing materials stated:
“Sentinel sends daily emails … to each client reporting the to-
tal amount invested, the interest earned, and supporting se-
curities.” In other words, customers would know not only
how much interest they were earning but also how they were
No. 15-1445 7
earning it. In a letter to the CFTC, Sentinel said that customers’
profits and losses were based on their ownership shares of an
account’s investments; there was no allocation of profits and
losses across the different “Seg” accounts.
Sentinel also told customers that it used two means to as-
sure same-day liquidity: repurchase agreements and a loan
from the Bank of New York. A repurchase agreement is a
transaction where one party (the borrower) sells a security to
a counterparty (the lender) with an agreement to repurchase
the security later with interest. Sentinel was involved in both
ends of these transactions: sometimes it used its customers’
cash to purchase securities, earning interest when it resold the
security (lending); other times Sentinel sold securities to ob-
tain cash quickly, repurchasing the security and paying inter-
est afterwards (borrowing). Sentinel’s website said that it used
“overnight” repurchase agreements to facilitate its liquidity
needs.
The second means to assure same-day liquidity was a loan
with the Bank of New York. Sentinel and Bloom told clients
that this loan was specifically for the cash redemptions of cli-
ents in the Prime Portfolio, not the 125 Portfolio. Bloom spec-
ified that it was a one-day transaction that was paid off the
next day. It was purportedly only for liquidity purposes.
Bloom did not tell clients that the loan might be used to fund
leveraged trading of their portfolios or to fund other parties
outside their portfolios.
In Bloom’s trial the government offered extensive evidence
that Sentinel’s actual use of customer funds diverged from
these representations. Sentinel’s claims regarding the safety of
principal, the use of segregated accounts, and the sources of
customers’ interest were often untrue.
8 No. 15-1445
C. Collapse, Conviction, and Sentencing
Sentinel collapsed in August 2007. The company was far-
ing poorly in the spring of that year. By April it had more
debts than assets. It had over $2.4 billion in repurchase agree-
ment debt, and its Bank of New York loan balance was over
$280 million.
In 2007, Sentinel was also highly leveraged. It was using
securities in its portfolios as collateral to borrow cash and then
using that money to purchase additional securities. The goal
was to earn enough income from the additional investments
to beat the cost of borrowing. This came with risks. For in-
stance, if the value of the newly acquired security fell, losses
were incurred from both the asset depreciation and the cost
of borrowing. In April 2007, Sentinel’s overall leverage ratio
was approximately 2 to 1. Seg 3 was leveraged at a ratio of 3
to 1, and the house account was 20 to 1. The extent of the lev-
erage was concerning to Sentinel employees because “if the
market turned in the wrong direction,” then Sentinel would
suffer a “huge hit.” Sure enough, the market turned down.
By the summer of 2007, Sentinel no longer slouched to-
ward bankruptcy; it careened. National credit markets began
to contract, in part because of the crisis in the subprime mort-
gage industry. Sentinel’s repurchase-agreement counterpar-
ties reacted to these market problems by pushing back their
securities to Sentinel, many of which were illiquid collateral-
ized debt obligations (CDOs). On June 26, one large counter-
party returned approximately $166 million in securities. To
compensate, Sentinel borrowed more from the Bank of New
York, going well beyond the company’s credit limit. The loan
balance reached a high point on June 28, 2007 of $546 million.
No. 15-1445 9
Additional counterparties returned securities in July, and Sen-
tinel’s customers demanded redemptions. Sentinel was buck-
ling.
On August 4, Sentinel’s outside lawyer advised defendant
Bloom to “hold off taking any additional deposits … even
from existing customers.” Bloom and Sentinel refused. From
August 6 to August 10, Sentinel accepted approximately $300
million from customers. Though Sentinel continued accepting
new funds, customers were seeking redemptions at an even
higher rate. The company’s deterioration accelerated.
Friday, August 10, 2007 was Sentinel’s last day in opera-
tion. On Monday, August 13, Sentinel emailed its customers
to notify them that it was stopping redemptions. On August
16, the Bank of New York demanded that Sentinel repay its
loan. The balance was $313 million. On August 17, the bank
informed Sentinel that due to Sentinel’s failure to repay the
loan, the bank planned to sell Sentinel’s securities that served
as collateral for the loan. (Those securities were ultimately re-
turned to Sentinel’s bankruptcy trustee.) August 17 was also
the day Sentinel filed for bankruptcy. This court has ad-
dressed Sentinel’s bankruptcy in several appeals. See Grede v.
Bank of N.Y. Mellon Corp. (In re Sentinel Management Group,
Inc.), 809 F.3d 958 (7th Cir. 2016); Grede v. FCStone, LLC, 746
F.3d 244 (7th Cir. 2014); In re Sentinel Management Group, Inc.,
728 F.3d 660 (7th Cir. 2013).
In 2012 a grand jury indicted Bloom and Sentinel’s chief
trader, Charles Mosley, on eighteen counts of wire fraud and
10 No. 15-1445
one count of investment adviser fraud. 1 The indictment al-
leged that they used customer funds as collateral for Sentinel’s
proprietary trading, manipulated customer yield rates, and
continued to accept customer funds even after it was clear
Sentinel was about to fold. Bloom pled not guilty. Mosley pled
guilty to investment adviser fraud and entered into a cooper-
ation agreement with the government; however, he was not
called as a trial witness. Bloom’s four-week trial included tes-
timony from numerous former Sentinel employees, financial
records, customer accounts, marketing materials, emails, au-
dio recordings, and more. The jury found Bloom guilty on all
counts, and the court denied his motions for judgment of ac-
quittal and a new trial.
At sentencing, the court concluded that the Sentencing
Guidelines recommended life in prison. After considering the
sentencing factors in 18 U.S.C. § 3553(a), however, the court
sentenced Bloom to 168 months in prison. The court said that
the punishment was based primarily on the “duty to protect
the public by punishing past criminal conduct and deterring
future criminal conduct[],” and that the sentence would be
168 months regardless of the guideline calculation.
II. Analysis
Bloom challenges his convictions and sentence on five
grounds. He argues that (a) the evidence was insufficient to
support his convictions; (b) government misconduct tainted
the convictions; (c) the district court erred in its jury instruc-
1 An additional charge of making false statements to an employee ben-
efit plan in violation of 18 U.S.C. §§ 2 and 1027 was dropped during trial.
No. 15-1445 11
tion regarding Rule 1.25; (d) the court erred in several eviden-
tiary rulings; and (e) his sentence was improper because the
court erred in its guideline loss calculation.
A. Sufficiency of the Evidence
Bloom argues that the evidence presented at trial was in-
sufficient to support the guilty verdicts. He claims that Senti-
nel’s clients did not sustain losses because he defrauded them;
instead, the losses were due to the bad business practices of
Sentinel’s chief trader Mosley and the more general decline in
securities markets in 2007.
On challenges to the sufficiency of the evidence, we re-
view the evidence in the light most favorable to the guilty ver-
dict and draw “all reasonable inferences in its favor.” United
States v. Pust, 798 F.3d 597, 600 (7th Cir. 2015). We will affirm
a conviction if a rational trier of fact could have found the de-
fendant committed the essential elements of the crime. Id.
This hurdle is high but not insurmountable. See, e.g., United
States v. Weimert, 819 F.3d 351, 354 (7th Cir. 2016) (reversing
conviction for insufficient evidence).
To establish that Bloom committed wire fraud, the govern-
ment had to prove that: (1) Bloom participated in a scheme to
defraud; (2) with intent to defraud; and (3) interstate wires
were used in furtherance of the fraud. 18 U.S.C. § 1343; United
States v. Sheneman, 682 F.3d 623, 628 (7th Cir. 2012). Bloom was
also convicted of investment adviser fraud, which required
the government to prove that Bloom was an investment ad-
viser who willfully used a means of interstate commerce to
employ a device or scheme to defraud Sentinel clients or that
he willfully aided another in doing so. 15 U.S.C. §§ 80b–6(1)
12 No. 15-1445
and (2) and 80b–17; 18 U.S.C. § 2. Bloom claims that the evi-
dence was insufficient to prove that he had the intent to de-
fraud or participated in a scheme to defraud.
We find sufficient evidence for the jury to have found
Bloom guilty under each of the government’s three theories.
The government provided ample evidence that Bloom was in-
tentionally involved in (1) a scheme to use customer funds as
collateral for Sentinel’s mounting loan with the Bank of New
York, which was in turn used to finance Sentinel’s own risky
trading; (2) a scheme to manipulate client yield rates by real-
locating interest from the House and Prime Portfolios to the
125 Portfolio in an effort to make the 125 Portfolio seem more
lucrative than it was; and (3) a scheme to solicit and accept
new funds during Sentinel’s final days without revealing that
the company was on the brink of bankruptcy.
1. Customer Funds as Collateral
First, the government provided sufficient evidence that
Bloom intentionally defrauded Sentinel customers by using
their funds as collateral for the house’s risky trading. Several
witnesses testified to this effect, including Sentinel’s chief fi-
nancial officer and other employees who helped to arrange
collateral for the Bank of New York loan in the form of cus-
tomer funds. The testimony of the witnesses was corrobo-
rated by documents, emails, and recorded phone calls.
The evidence showed that Sentinel adopted a high-risk,
high-leverage trading strategy. The strategy involved using
securities in Sentinel’s portfolios as collateral to borrow cash
through repurchase agreements and from the Bank of New
York. The cash was then used to purchase additional securi-
No. 15-1445 13
ties. This strategy sometimes created leverage in customer ac-
counts, especially the Prime Portfolio, but it created the most
leverage in the house account. The house account was highly
leveraged for quite some time before Sentinel collapsed. Sen-
tinel’s chief financial officer testified that she discussed the
matter with Bloom because she was concerned about leverag-
ing customer accounts, such as Seg 1, for the benefit of the
house loan that financed the house’s trading. She also emailed
him about her concerns on October 19, 2006 and testified
about this email during trial. In April 2007 she started sending
Bloom monthly leverage reports that discussed the mounting
repurchase agreements and the Bank of New York loan. The
leverage in the house account continued climbing in the sum-
mer of 2007, peaking at a ratio of 52 to 1 in July.
During this time, Sentinel purchased a significant amount
of collateralized debt obligations (CDOs), which had low or
no ratings and long maturity dates. These securities were
much riskier than the type of investments Sentinel told clients
it would make with funds invested in its 125 Portfolio or
Prime Portfolio.
Some of the funding for Sentinel’s trading came from its
credit line with the Bank of New York. When funds in the
house account were not sufficient collateral for that loan, Sen-
tinel employees testified, they turned to the customer ac-
counts. One Sentinel employee testified that, in accordance
with her training from Bloom, whenever the house account
was insufficient collateral for the bank loan, she turned to Seg
1 and Seg 3 for the biggest face-value securities. She then
transferred those securities into the lienable accounts that
provided collateral for the bank loan. In short, customer funds
were used as collateral for Sentinel’s own bank loan, which in
14 No. 15-1445
turn funded Sentinel’s risky trading. Bloom talked about this
scheme with his employees, even discussing it over the phone
during his July 2007 honeymoon on an African safari.
Sentinel’s customers were unaware that their funds were
being used in this manner. Sentinel sent its customers daily
email statements listing the securities in which the customers
had pro rata shares. These statements indicated that client
funds were segregated; they did not indicate that the funds
had been moved into lienable accounts to serve as collateral
for a loan that funded trading for Sentinel’s house account.
Taken together, this evidence was more than sufficient for the
jury to conclude that Bloom intentionally defrauded his cus-
tomers.
2. Manipulation of Customer Yield Rates
The government also offered sufficient evidence that
Bloom intentionally defrauded customers by manipulating
yield rates. Several witnesses testified about Bloom’s involve-
ment with this practice. Their testimony was corroborated by
documents and recorded phone calls. Sentinel used the yields
from the house account and the Prime Portfolio to inflate ar-
tificially the returns from the 125 Portfolio. Sentinel’s high-
risk trading in the house account generated higher returns
than the more conservative 125 Portfolio. The Prime Portfolio,
which was slightly riskier than the 125 Portfolio, likewise gen-
erated higher returns. Sentinel redistributed some of these re-
turns from the house account and the Prime Portfolio to the
125 Portfolio, effectively using the riskier accounts to subsi-
dize the more conservative account. With these inflated rates
of return in the 125 Portfolio, Sentinel could attract new clients
by outperforming its competition. Indeed, it advertised these
rates in its marketing material and on its website.
No. 15-1445 15
Sentinel employees testified that they doctored the yield
rates on a daily basis from 2004 until the company’s bank-
ruptcy in 2007. Instead of paying customers the interest they
actually earned, Sentinel employees divvied up interest pay-
ments according to the instruction of Bloom or Charles Mos-
ley. Bloom in fact created a spreadsheet to help employees cal-
culate how to redistribute funds, which was called the “Daily
Yield/Rate Calculation.” The spreadsheet listed both the ac-
tual interest earned by customers’ securities and the rate set
by Sentinel.
The rate setting often favored the customers in “Seg 1”
(125 Portfolio). For example, on December 7, 2006, the interest
actually earned by Seg 1 was $96,942.63. After the rate manip-
ulation by Sentinel, that portfolio was allocated $103,832.46.
On that same day, Seg 3 (Prime Portfolio) actually earned
$148,005.09 in interest and the house account earned
$17,949.85. After Sentinel’s rate adjustment, Seg 3 customers
were paid just $112,657.32 and the house account received
$49.11.
Although co-defendant Mosley oversaw the daily rate set-
ting, Bloom was aware of and involved in the practice. He cre-
ated the spreadsheet that employees used, and he received a
daily email with the rate calculation spreadsheet for that day.
Employees also sometimes consulted Bloom himself with spe-
cific rate-setting questions. For instance, on July 30, 2007,
Bloom spoke with an employee who was setting the rates and
agreed to inflate the 125 Portfolio to keep it competitive. At
the end of that day, Seg 1 actually earned $63,477.53, but was
paid $100,420.34 using the interest earned by customers in Seg
3 and by the house account. Another employee testified that
he raised the matter with Bloom before May 15, 2007, and
16 No. 15-1445
Bloom acknowledged that Seg 3 and the house account sup-
plemented Seg 1.
Sentinel’s customers were unaware of this practice because
Sentinel sent daily account statements that indicated a tradi-
tional form of rate calculation. These statements said they
were “Customer Segregated Funds,” and each contained an
“Asset List” of the securities in which the customer owned a
partial share. The statements then provided the clients’ “Net
Equity,” “Net Interest” earned from the security, and the “Net
Interest Rate.” The customers who received these statements
naturally believed that they conveyed the amount of interest
the customers had earned from their securities; they had no
reason to believe that their interest was used to subsidize
other customers in other portfolios. This evidence was suffi-
cient for the jury to conclude that Bloom intentionally de-
frauded his clients by manipulating their yield rates.
3. Soliciting and Accepting New Funds When Sentinel’s
Collapse Was Imminent
Third, the government offered sufficient evidence for the
jury to conclude that Bloom defrauded customers by solicit-
ing and accepting funds even after he knew that Sentinel was
about to collapse. Sentinel was faltering in the summer of
2007, and it was clearly headed for bankruptcy by the begin-
ning of August. Sentinel’s loan balance with the Bank of New
York was significantly over its $300 million limit, peaking at
over $500 million at the end of June. The bank even temporar-
ily refused to send transfers to Sentinel customers because of
the outsized loan. In addition, one of Sentinel’s major clients
had $150 million of its assets frozen at the request of the
CFTC, further crippling Sentinel. On top of that, Sentinel’s re-
purchase-agreement counterparties were pushing back their
No. 15-1445 17
securities to Sentinel while Sentinel clients were demanding
redemptions at an unsustainable rate.
On Friday, August 3, 2007, Sentinel consulted with its out-
side lawyer. He reviewed Sentinel’s financial records and on
Saturday, August 4 advised Bloom to “hold off taking addi-
tional deposits until we get some of these issues worked out,
even from existing customers.” Bloom did not hold off. The
following Monday, Sentinel accepted approximately $110 mil-
lion in customer funds. On Wednesday, August 8, Sentinel’s
outside lawyer said he would withdraw from representation
unless Sentinel ceased operations and notified the CFTC.
Again, Sentinel refused, and the attorney withdrew on Au-
gust 9. Sentinel continued accepting tens of millions of dollars
from customers from Monday, August 6 through Friday, Au-
gust 10 before halting all redemptions on Monday, August 13.
The jury also heard evidence that Bloom and his family
made unusual personal withdrawals from Sentinel in its last
days. Bloom’s father Philip, who was the board chairman,
suddenly withdrew all of his funds from the house account
on July 18, 2007. This $11 million withdrawal constituted the
majority of funds in the house account. (The record contains
no explanation for this withdrawal. On appeal Bloom indi-
cates that it was because his father was diagnosed with pros-
tate cancer in June 2007.) Defendant Eric Bloom likewise
made unusual withdrawals right before the company col-
lapsed. In June Bloom paid himself a premature $50,000 bo-
nus (bonuses were usually paid at the end of the year), and in
late July he gave himself a $200,000 retroactive raise. Bloom
argued that the money was intended as a down payment for
a home he planned to build with his new wife. The weighing
of such evidence—and deciding whether it showed Bloom’s
18 No. 15-1445
knowledge of the company’s impending collapse—is the
province of the jury, who were apparently not persuaded by
Bloom’s explanations.
This evidence was sufficient for the jury to conclude that
Bloom intentionally defrauded customers by taking new
funds when he knew Sentinel was about to fold. We empha-
size that Sentinel was not merely experiencing financial dis-
tress during its last week in business (August 6–10). The com-
pany had undergone financial difficulty throughout the sum-
mer of 2007, but Bloom was not charged with fraud under this
theory for the funds that Sentinel received during that time.
He was charged with fraud only for the funds Sentinel re-
ceived during its last business week, after the company’s out-
side lawyer had advised Bloom to stop accepting funds, and
the writing of Sentinel’s bankruptcy was on the wall. Review-
ing this evidence in the light most favorable to the govern-
ment, the government provided sufficient evidence for the
jury to find Bloom guilty under each of its theories.
B. Claims of Prosecutorial Misconduct
Bloom argues next that the district court erred by refusing
to grant a new trial based on prosecutorial misconduct. He
claims that the government misled the jury about the evi-
dence and unfairly attacked the defense for wasting time. We
find no prosecutorial misconduct.
We review for abuse of discretion a district court’s denial
of a new trial based on alleged prosecutorial misconduct.
United States v. Xiong, 262 F.3d 672, 674–75 (7th Cir. 2001). This
requires two steps. First, we determine whether the prosecu-
tor’s conduct was improper in itself. United States v. Durham,
766 F.3d 672, 684 (7th Cir. 2014). If it was, we ask whether, in
No. 15-1445 19
light of the whole record, the improper conduct denied the
defendant the right to a fair trial. Id. As we have noted, this
standard is “difficult to satisfy,” United States v. Bell, 624 F.3d
803, 811 (7th Cir. 2010), but it is not impossible. See, e.g.,
United States v. Farinella, 558 F.3d 695, 701–02 (7th Cir. 2009)
(reversing for insufficient evidence and directing acquittal,
but noting that “had the government presented enough evi-
dence to sustain a conviction, we would have reversed the
judgment and ordered a new trial on the basis of the prosecu-
tor’s misconduct”).
Bloom first claims that the government “misled the jury”
regarding the evidence. This argument duplicates Bloom’s
earlier challenges to the probative value and sufficiency of the
evidence. Bloom argues that the government misconstrued
the innocent nature of his phone calls on July 6, 17, 30, and
August 19, 2007. He claims the government committed mis-
conduct when it argued that the “Daily Yield/Rate Calcula-
tion” spreadsheet that Bloom helped to create was designed
to cheat Sentinel customers. And he argues that the govern-
ment misrepresented the evidence when it claimed that he ap-
proved of the use of customer funds as collateral for Sentinel’s
loan with the Bank of New York.
None of these accusations has merit. The government was
permitted to argue reasonable inferences about the evidence,
United States v. Klebig, 600 F.3d 700, 718 (7th Cir. 2009), and it
did so here. In addition, the district court reminded the jury
at several points that the arguments made by the lawyers are
not evidence and that jurors should rely on their own under-
standing of the facts. See United States v. Mallett, 496 F.3d 798,
802 (7th Cir. 2007) (court assumes that jury follows instruc-
tions absent evidence to the contrary).
20 No. 15-1445
Bloom also argues that the government improperly at-
tacked defense counsel during trial in two incidents. First, the
government objected that defense counsel’s cross-examina-
tion was repetitious and “practically bordering on a waste of
the jury’s time.” The government later said that defense coun-
sel was putting up a “smoke screen.” The court overruled the
defense’s objection. We agree with the district court: the gov-
ernment did not act improperly. It criticized defense counsel’s
tactics, not defense counsel personally. This is permissible.
See United States v. Washington, 417 F.3d 780, 787 (7th Cir. 2005)
(finding no prosecutorial misconduct, in part, because the
prosecutor’s arguments “focused on the lameness of the de-
fense rather than defense counsel personally”).
C. Jury Instruction on Rule 1.25
Bloom argues next that the district court erred when it re-
jected his proposed jury instruction that the CFTC’s Rule 1.25
“permits the use of leveraged trading by FCMs using funds
covered by Rule 1.25” or, at minimum, does not prohibit the
use of leveraged trading. This understanding of the rule was
based on the testimony of Paul Bjarnason, a former CFTC of-
ficial who participated in drafting Rule 1.25 and who testified
as a defense expert here. Bjarnason was also a chief account-
ant at Sentinel until 2001 and served as a consultant to Senti-
nel afterwards. The district court rejected Bloom’s proposed
instruction and instead gave the jury the full text of the rule.
Bloom claims that whether Rule 1.25 allows leverage was a
“purely legal question” and that the court’s failure to instruct
the jury properly requires a new trial.
We review de novo a district court’s refusal to provide a re-
quested jury instruction “‘when the underlying assignment of
error implicates a question of law,’ but ‘general attacks on the
No. 15-1445 21
jury instructions are reviewed for an abuse of discretion.’”
United States v. DiSantis, 565 F.3d 354, 359 (7th Cir. 2009), quot-
ing United States v. Macedo, 406 F.3d 778, 787 (7th Cir. 2005). A
defendant is entitled to a jury instruction if “(1) the instruction
provides a correct statement of the law; (2) the theory of de-
fense is supported by the evidence; (3) the theory of the de-
fense is not part of the government’s charge; and (4) the failure
to include the instruction would deprive the defendant of a
fair trial.” United States v. Kokenis, 662 F.3d 919, 929 (7th Cir.
2011), quoting United States v. Campos, 541 F.3d 735, 744 (7th
Cir. 2008).
The district court’s decision on the jury instruction for Rule
1.25 was not a reversible error, but it does give us pause.
Bloom is correct that whether Rule 1.25 permitted leverage is
a question of law, and in general it is the duty of the trial judge
to instruct the jury on the relevant law. See United States v.
Sanchez, 604 F.3d 356, 360 (7th Cir. 2010) (“It is the basic prem-
ise of our legal system that juries are the triers of fact only; it
is for the judge, not the jury, to interpret the law.”), quoting
United States v. White, 472 F.3d 458, 463 (7th Cir. 2006). The
government even objected to Bjarnason’s testimony at trial be-
cause the interpretation of Rule 1.25 was “within the exclusive
province” of the court. We have said that the “meaning of stat-
utes, regulations, and contract terms is ‘a subject for the court,
not for testimonial experts. The only legal expert in a federal
courtroom is the judge.’” United States v. Lupton, 620 F.3d 790,
799–800 (7th Cir. 2010), quoting United States v. Caputo, 517
F.3d 935, 942 (7th Cir. 2008).
Despite these concerns, we conclude that the district
court’s ruling on the requested instruction was not a reversi-
ble error because Rule 1.25 was only a minor issue in the case
22 No. 15-1445
against Bloom. See, e.g., United States v. Choiniere, 517 F.3d 967,
972 (7th Cir. 2008) (finding no reversible error where trial
court failed to give a requested jury instruction on a “minor
issue” that was not central to the charges). Bloom was indicted
and convicted not for violating Rule 1.25 but for wire fraud
and investment adviser fraud. See id. at 972–73 (upholding
denial of jury instruction because it “does not reflect a theory
that has any evidentiary support because it is entirely non-
responsive to the conduct that was alleged in the indict-
ment”), quoting White, 472 F.3d at 462. Bloom’s conviction did
not depend on the intricacies of Rule 1.25. Instead, it required
the government to prove beyond a reasonable doubt that he
defrauded his customers. The government had to prove that
Bloom’s business practices materially deviated from the
promises he made to his customers. The government made
this showing in several ways, including for instance, that
Bloom failed to segregate customer funds despite telling cus-
tomers otherwise. There was ample evidence for the jury to
convict Bloom without considering the nuances of Rule 1.25.
He was not deprived of a fair trial because the district court
rejected his proposed instruction.
Even assuming the correctness of Bjarnason’s interpreta-
tion of Rule 1.25, this still would not have justified Bloom’s
proposed jury instruction. Bjarnason testified that, while Rule
1.25 permitted leverage of the customer accounts, the leverage
must be for the benefit of those customers: “Leverage done,
for example, in the SEG 1 account should be for the benefit of
the SEG 1 customers, the investors.” The evidence showed,
however, that Sentinel leveraged customer funds for the ben-
efit of its own house account. Bloom’s proposed instruction
would have been misleading even under his own expert’s ac-
count.
No. 15-1445 23
D. Evidentiary Rulings
Bloom claims that the district court erred when it admitted
certain out-of-court statements by Sentinel employees and
Philip Bloom. Specifically, he argues that the court applied
Federal Rule of Evidence 801(d)(2)(D) incorrectly by admit-
ting statements of Sentinel employees, which were then im-
puted to Bloom. Bloom claims that he did not have the requi-
site intent to defraud and that without these statements the
government had no “direct evidence” of his involvement in
any fraudulent activity. Bloom focuses on three groups of out-
of-court statements, which include emails from the chief fi-
nancial officer to Philip Bloom, emails from an office manager,
and one email from an assistant trader. He also contends the
government unfairly blamed him for his father’s sudden $11
million withdrawal from the house account several weeks be-
fore Sentinel collapsed.
We review de novo a district court’s legal interpretation of
the Federal Rules of Evidence, but we review for abuse of dis-
cretion the court’s ultimate decision to admit or exclude evi-
dence. United States v. Loughry, 660 F.3d 965, 969 (7th Cir.
2011), citing United States v. Rogers, 587 F.3d 816, 819 (7th Cir.
2009).
Federal Rule of Evidence 801(d)(2)(D) provides that a
statement is not hearsay if it is “offered against an opposing
party” and “was made by the party’s agent or employee on a
matter within the scope of that relationship and while it ex-
isted.” We have acknowledged that the law regarding this
rule is “somewhat muddled.” Stephens v. Erickson, 569 F.3d
779, 793 (7th Cir. 2009), quoting Aliotta v. National Railroad Pas-
senger Corp., 315 F.3d 756, 761 (7th Cir. 2003). We need not
chart these waters, however, because even if there were any
24 No. 15-1445
errors admitting these statements under Rule 801(d)(2)(D),
they were harmless.
The emails of the office manager and the chief financial
officer were also admitted as co-conspirator statements under
Rule 801(d)(2)(E), and Bloom does not challenge those rulings
in his appeal. The statement by the assistant trader was a two-
sentence email with portfolio documents attached. At trial,
Bloom’s counsel expressly agreed to admission of the portfo-
lio documents under the business record foundation. See Fed.
R. Evid. 803(6)(B). The two sentences of the email were not a
significant part of the four-week trial, and their admission did
not affect Bloom’s substantial rights. Any error would have
been harmless. Fed. R. Crim. P. 52(a). Further, the govern-
ment’s statements regarding Philip Bloom’s unusual with-
drawal were appropriate to show Bloom’s intent, as discussed
above in Part II-A-3.
E. Sentencing
Finally, Bloom challenges his sentence. In computing a
sentencing guideline range for Bloom, the district court used
a total loss amount of $666 million under U.S.S.G. § 2B1.1.
That enormous loss produced a guideline range of life in
prison. The sentencing judge, however, imposed a 168-month
prison sentence, saying that his decision was driven primarily
by the sentencing factors under 18 U.S.C. § 3553(a).
Bloom claims that the district court erred in its loss calcu-
lation by failing to consider other causes for the losses, such
as the collapse of the securities markets in 2007, the wrongdo-
ing of Sentinel’s head trader Charles Mosley, and the CFTC’s
former, less stringent rules for investing in securities. Bloom
also claims that the loss calculation was too high because the
No. 15-1445 25
court incorrectly assumed that Sentinel clients were fraudu-
lently induced to invest in the company. Rather, Bloom ar-
gues, his case did not involve fraudulent inducement because
the government did not provide evidence that Sentinel clients
would not have entrusted their money to him had they
known about the fraud.
We review de novo the district court’s interpretation of the
Sentencing Guidelines, and we review its factual findings for
clear error. United States v. Walsh, 723 F.3d 802, 807 (7th Cir.
2013). The Supreme Court’s decision in United States v. Booker,
543 U.S. 220 (2005), held that the federal Sentencing Guide-
lines are advisory. Since Booker, sentencing judges have had
broad discretion to impose non-guideline sentences by
weighing the factors under § 3553(a). In United States v. Lopez
we explained, as we often have:
In a case … presenting a rather technical and ar-
cane question in applying the Sentencing
Guidelines, it is perhaps worth another re-
minder that the Guidelines are, after all, guide-
lines. They must be considered seriously and
applied carefully. In the end, however, the de-
fendant’s sentence is the responsibility of the
district judge, after careful consideration of all
the relevant factors under 18 U.S.C. § 3553(a). …
A district court facing a tricky but technical is-
sue under the Guidelines may exercise its dis-
cretion under section 3553(a) and may spell out
on the record whether and to what extent the
resolution of the guideline issue affected the
court’s final decision on the sentence.
26 No. 15-1445
634 F.3d 948, 953–54 (7th Cir. 2011) (citations omitted); see also
United States v. Harris, 718 F.3d 698, 703 n.2 (7th Cir. 2013)
(“Sentencing Guidelines are advisory, not mandatory, and …
district judges are free to deal with such abstract and artificial
[guideline] issues by telling the parties and reviewing courts
that the decision on the final sentence did not depend on their
resolution.”); United States v. Sanner, 565 F.3d 400, 406 (7th Cir.
2009) (“When a judge proceeds in this manner, she must make
clear that the § 3553(a) factors drive the sentence without re-
gard as to how the prior conviction fits under a particular
guideline. Doing so will make the often nit-picking review of
issues like this under our now advisory guideline scheme un-
necessary.”).
Here, the sentencing judge faced a challenging technical
issue under the Guidelines and followed this advice. He re-
viewed all of the sentencing materials and carefully consid-
ered the Guidelines. The judge then acknowledged the con-
troversy surrounding the loss calculation but said that he
would impose the same sentence regardless of the guideline
range: “this is a sentence the Court would impose regardless
of what the ultimate proper sentencing guideline calculation
is determined to be as the sentence is driven by the statutory
sentencing factors, specifically the need to … deter future con-
duct and to protect the public.” The court appropriately exer-
cised its discretion under § 3553(a). The guideline calculation
did not produce any reversible error.
Bloom’s convictions and sentence are AFFIRMED.