United States v. Kanodia

United States Court of Appeals
For the First Circuit

Nos. 17-1137
17-1590
UNITED STATES OF AMERICA,

Appellee,

v.

AMIT KANODIA,

Defendant, Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before

Howard, Chief Judge,
Lynch and Thompson, Circuit Judges.

Martin G. Weinberg, with whom Kimberly Homan was on brief for
appellant.
David M. Lieberman, Attorney, Criminal Division, Appellate
Section, U.S. Department of Justice, with whom John P. Cronan,
Acting Assistant Attorney General, William D. Weinreb, Acting
United States Attorney, Randall E. Kromm, Assistant United States
Attorney, and Brian A. Pérez-Daple, Assistant United States
Attorney, were on brief for appellee.

November 22, 2019
 HOWARD, Chief Judge. A jury convicted Amit Kanodia of

insider-trading securities fraud and related conspiracy offenses

after a twelve-day trial. Kanodia challenges the sufficiency of

the evidence to sustain his convictions, as well as various jury

instructions. He also appeals the district court's denial of his

motion for a new trial. For the reasons discussed below, we affirm

Kanodia's convictions and the denial of his new trial motion.

I. Facts

To set the stage for our analysis of the sufficiency

challenge, we sketch the facts in a manner hospitable to the jury's

verdicts, while leaving some details for later in the opinion.

See United States v. Rodríguez-Milián, 820 F.3d 26, 31 (1st Cir.

2016).

In or about 2007, Kanodia, an experienced real estate

investor, met Shahana Basu, a U.S.-licensed lawyer living in

London, England, through an online dating service. The two married

in April 2008, at which time Basu moved in with Kanodia in

Brookline, Massachusetts. In February 2012, Basu accepted the

chief legal officer position at Apollo Tyres ("Apollo") in New

Delhi, India. After Basu moved to New Delhi, Kanodia traveled to

India roughly once every two or three months, staying with her for

two or three weeks at a time.

In 2013, Basu helped negotiate Apollo's proposed

purchase of Cooper Tires ("Cooper"), an American company. Apollo

- 2 -
sought to use the acquisition to expand into the U.S. market. The

rumors of that expansion had been in the financial press since

late 2012. Apollo's insider-trading and confidential-information

policies covered Basu's work at the company, including her role

negotiating the Cooper transaction. Nevertheless, shortly after

Basu started at Apollo in the fall of 2012, she began boasting to

friends, sometimes in Kanodia's presence, that Apollo brought her

on board to orchestrate its acquisition of Cooper.

By early April 2013, Apollo and Cooper preliminarily

agreed on Cooper's purchase price. From April through May 2013,

Basu resided at the Waldorf Hotel in New York City while conducting

Apollo's due diligence on Cooper. Apollo considered the Cooper

deal's confidentiality so important that it required Basu and other

top executives to disguise their trip to New York to finalize the

deal. They did so in part by splitting the trip from India into

two legs, with two separate tickets. Kanodia stayed with Basu in

her room at the Waldorf for several weeks beginning in early April.

During her stay in New York, Basu disclosed to two acquaintances

that she was in New York to negotiate Apollo's purchase of a

company, in violation of Apollo's confidentiality policy. Both of

Basu's disclosures occurred in Kanodia's presence.

Meanwhile, Kanodia disclosed to his two closest friends,

Ifthikar Ahmed, a venture capitalist, and Steven Watson, a semi-

retired businessman with a Harvard MBA, that Basu was in New York

- 3 -
and that Apollo's purchase of Cooper would go forward. According

to Watson, Kanodia chose to provide this information to his "best

friends" because, if Kanodia personally traded based on his

knowledge of the deal, he would risk getting Basu or himself into

trouble. Instead, Kanodia expected that his friends would invest

and some of the investment profits would be paid back to him.

Kanodia sometimes updated Watson over the phone from Basu's room

at the Waldorf. But he generally preferred to speak in-person to

avoid detection.

That April, Kanodia told Ahmed and Watson that Apollo

planned to purchase Cooper for $35 per share. Both friends bought

shares of Cooper, then valued between $24 and $25 per share, in

April and May 2013. Ahmed also bought call options in May.1 The

jury heard evidence that Kanodia called the two men shortly before

some of their trades in Cooper's securities.

The companies announced the acquisition publicly on June

12, 2013. Kanodia, though, had informed Watson at least five days

before about the public announcement. With that information, on

1 A call option is an agreement that permits an investor to
purchase a financial instrument at a set price before a certain
date. This allows the investor to bet on whether an instrument's
market value will increase or decrease without the investor having
to pay the instrument's current market price. Thus, an investor
can earn a significant profit if the instrument's price changes as
the investor predicts, but the investor may lose the entire cost
of the options contract if it does not. See First Commodity Corp.
of Bos. v. CFTC, 676 F.2d 1, 2 (1st Cir. 1982) (Breyer, J.).

- 4 -
June 7, 2013, Watson purchased call options on Cooper stock that

entitled him to buy shares for $30. The options he purchased had

an expiration dates of July 20, 2013 or August 17, 2013. On June

10 and 11, Watson purchased additional Cooper call options, which

also provided him the right to buy shares at $30 and which expired

on August 17, 2013. Ahmed, too, traded in June 2013 prior to the

deal's announcement; he also purchased options for $30, and his

options expired on June 22, 2013. Additionally, Ahmed bought

shares in Cooper during June 2013.

In their June 12, 2013 announcement, the companies

disclosed that Apollo planned to purchase Cooper for $35 per share,

precisely as Kanodia had tipped his friends. Cooper's share price

rose 40% after the announcement, from about $25 to almost $35 per

share. Watson made $167,000 in profits from selling his Cooper

options and shares, while Ahmed made $1,100,000.

In August 2013, Kanodia created a new bank account for

an entity called the Lincoln Charitable Foundation ("LCF").

Shortly after Kanodia opened the account, Ahmed wired $220,000

into it. Watson agreed to pay Kanodia a 25% after-tax commission

on his profits and wrote a $22,500 check that was deposited into

the LCF account in December 2013.

The FBI interviewed Watson about his trades. After

initially telling the FBI that he purchased Cooper securities based

on his research into the tire industry, he eventually recanted and

- 5 -
accepted a plea deal in exchange for his cooperation. Kanodia was

indicted in May 2015. Ahmed was indicted as well, but he fled the

country after his initial appearance. A superseding indictment,

filed in June 2015, charged both Kanodia and Ahmed with nineteen

counts of insider-trading securities fraud and related conspiracy

offenses, in violation of 15 U.S.C. §§ 78j(b), 78ff(a), 17 C.F.R.

§ 240.10b-5, and 18 U.S.C. §§ 2, 371.

II. Trial and Post-Trial Proceedings

At trial, the government alleged that Kanodia's tips to

Ahmed and Watson constituted insider trading under the

misappropriation theory of insider-trading securities fraud.

Under this theory, corporate outsiders violate Section 10(b) of

the Securities Exchange Act of 1934 (the "Exchange Act") and Rule

10b-5 promulgated thereunder when they trade on the basis of

material, nonpublic information obtained from a corporate insider

to whom outsiders owe "a duty of trust and confidence that

prohibits them from secretly using such information for their

personal advantage." Salman v. United States, 137 S. Ct. 420, 423

(2016); 15 U.S.C. §§ 78j(b), 78ff(a); 17 C.F.R. § 240.10b-5.

Outsiders who owe insiders a duty not to trade on such "inside

information" also violate Section 10(b) and Rule 10b-5 when an

outsider (the "tipper") tips another outsider (the "tippee") in

exchange for a personal benefit. Salman, 137 S. Ct. at 423.

- 6 -
 The government's case included testimony by Watson, by

Apollo's chief financial officer, and by the chief operating

officer of Ahmed's former employer. Its case also included

documents revealing details about Kanodia's travel and the LCF

bank account, about Ahmed's and Watson's financial transactions,

and about Apollo's plans to acquire Cooper. After the close of

the government's case, Kanodia unsuccessfully moved for a judgment

of acquittal. Basu, who had gone to India, did not testify.

Kanodia's defense relied on witnesses who testified that

Basu had told them about the Apollo-Cooper deal and on testimony

by an expert who asserted that Cooper's financial performance

indicated that its pre-deal announcement share price understated

Cooper's true value. None of these witnesses claimed that Basu

had disclosed the deal's price or announcement date. A different

witness, Anand Mallipudi, testified that he understood that Basu

had disclosed confidential information to him in telling him there

were merger talks. Kanodia also introduced various news articles

about Apollo's interest in acquiring Cooper. Kanodia renewed his

motion for acquittal after presenting his case, which the district

court denied.

On October 17, 2016, the jury convicted Kanodia on eleven

counts of insider-trading securities fraud related to Ahmed's

purchases of options and stock in May and June 2013 and Watson's

trades in options in June 2013. The jury acquitted Kanodia for

- 7 -
the two men's other share purchases in April and May. Kanodia

moved for a judgment of acquittal and a new trial, which the

district court denied. In due course, the district court sentenced

Kanodia to a substantially below guidelines term of 20 months

incarceration. Kanodia timely appealed.

In February 2017, Kanodia again moved for a new trial

based on purportedly newly discovered Indian media reports and

witnesses. The anonymously sourced, mostly Hindi- and Urdu-

language reports offered various estimates that were close to the

eventual deal price and announcement date. Kanodia also offered

five purportedly newly-discovered witnesses, who averred in

affidavits that Basu had told them the deal price and announcement

date before the announcement. The district court denied this new

trial motion on the grounds that the reports could have been

discovered with due diligence before trial and that the witnesses

were cumulative. Kanodia seasonably appealed both his conviction

and that order, and we subsequently consolidated both appeals.

III. Kanodia's Conviction and the Sufficiency of the Evidence

Kanodia presents two challenges to the sufficiency of

the evidence to sustain his convictions. First, he argues that

the jury's verdicts rest on insufficient evidence to show that he

owed Basu a duty of trust and confidence. Alternatively, he

contends that the government failed to prove that he violated that

duty willfully. His arguments are unavailing.

- 8 -
 A. Standard of Review

We review sufficiency-of-the-evidence challenges de novo

and construe the trial evidence in the light most favorable to a

jury's verdict. United States v. Franco-Santiago, 681 F.3d 1, 8

(1st Cir. 2012); United States v. Ridolfi, 768 F.3d 57, 59 n.1

(1st Cir. 2014). Accordingly, we "do not 'assess the credibility'

of witnesses because 'that is a role reserved for the jury.'"

United States v. Robles-Alvarez, 874 F.3d 46, 50 (1st Cir. 2017)

(quoting United States v. Rivera-Donate, 682 F.3d 120, 134–35 (1st

Cir. 2012)). Out of deference to the jury's role, we only upset

jury verdicts where "no rational jury could have found the

defendant guilty beyond a reasonable doubt." United States v.

McPhail, 831 F.3d 1, 5 (1st Cir. 2016) (internal alterations

omitted) (quoting United States v. Prieto, 812 F.3d 6, 13 (1st

Cir. 2016)).

B. Duty of Trust and Confidence

Because the government prosecuted Kanodia on a

misappropriation theory of insider trading, the jury needed to

find that Kanodia breached a duty of trust and confidence owed to

a corporate insider, namely, Basu. See McPhail, 831 F.3d at 4.

The parties agree that such a duty may arise where the insider and

outsider share "a history, pattern, or practice of sharing

confidences." United States v. Parigian, 824 F.3d 5, 14 (1st Cir.

2016) (quoting 17 C.F.R. § 240.10b5-2). They dispute only whether

- 9 -
the government presented enough evidence for a reasonable jury to

conclude that Kanodia shared such a "history, pattern, or practice

of sharing confidences" with Basu.

In two prior cases, we have considered what evidence

will support a jury finding of a duty based on history, pattern,

or practice. In Parigian, we decided that an indictment of a

tippee-outsider properly alleged that the tipper-outsider owed

such a duty to a corporate insider where the indictment merely

asserted that the insider and the tipper were friends who had an

understanding that their discussions about business were to remain

secret. Id. at 9, 14. A jury later convicted the Parigian tipper

at trial, and we affirmed the sufficiency of the evidence in

McPhail, 831 F.3d at 7. We held in McPhail that the government

had adduced sufficient evidence of a "history, pattern, or practice

of sharing confidences," based on testimony from the corporate

insider that the insider and tipper were golf partners who spoke

daily (often about each other's business), helped each other

resolve financial and marital issues, and traveled together. Id.

at 3. The insider had also testified that he told the tipper to

keep information about the insider's employer confidential. Id.

at 5.

While we have not considered the question, other

circuits have held that a marital relationship, standing alone, is

insufficient to show a history, pattern, or practice of sharing

- 10 -
confidences. See SEC v. Yun, 327 F.3d 1263, 1272-73 (11th Cir.

2003); United States v. Chestman, 947 F.2d 551, 571 (2d Cir. 1991)

(en banc). We need not resolve that question today, because the

jury was not required to rest its findings solely on Kanodia's

marriage to Basu. Indeed, the jury could have credited the wealth

of testimony indicating that Kanodia and Basu not only shared

confidences in the history of their marriage, but also in their

business and career advisory relationships.

For instance, Watson testified that Kanodia had helped

Basu obtain employment in Boston. He further stated that Kanodia

introduced Basu to Kanodia's business contacts to help Basu find

clients. And Basu's tips to his friends were a species of

confidential business information that the jury could infer were

regularly shared by the couple. Watson acknowledged that Kanodia

provided him with the exact offer price and announcement date, and

the jury could infer that this information originated with Basu,

not the least because Watson testified that Kanodia told him that

Basu was working on the deal. Moreover, the jury could infer that

Kanodia, as an entrepreneur with an MBA, was sophisticated enough

to know that Basu's disclosures violated her duty of

confidentiality to Apollo. Further, Basu allowed Kanodia access

to the confidential papers about the acquisition by allowing him

to stay in her Waldorf suite, even though Kanodia's presence

created a reportable confidentiality risk. Consequently, the jury

- 11 -
could conclude that Kanodia knew that information about Apollo was

not his to share.

Contrary to Kanodia's claims on appeal that the

government introduced little evidence about the nature of their

marriage relationship, Watson provided evidence that Kanodia and

Basu enjoyed a close relationship. Before Basu's taking the job

at Apollo, she lived with Kanodia in Massachusetts. After she

left for India, Kanodia frequently flew to India to spend weeks at

a time with her. And during their stay at the Waldorf in April

and May 2013, the couple socialized with friends together.

Kanodia argues that it is improper to rely on the tips

themselves to establish a pattern of sharing confidences; he

emphasizes that the duty must have existed prior to the tips. But

the jury had before it ample evidence that these disclosures

occurred in the context of the pair's previously shared marriage,

business activities, and close personal relationship. The jury

could reasonably infer that Kanodia and Basu shared a prior

history, pattern, or practice of sharing business confidences.

Kanodia also argues that because Basu disclosed her role

working on the deal to others, she (and consequently he) did not

consider the information confidential. The jury reasonably found

otherwise. The trial record shows that Basu merely boasted about

her work on the proposed deal in general terms and did not share

with those to whom she boasted the specific details as to price

- 12 -
and timing that Watson testified he relied on to trade. Moreover,

the jury reasonably could have concluded that she disclosed

information with the understanding that her acquaintances would

keep the information confidential, an inference supported by

Mallipudi's testimony that he "presumed" exactly that. Because

the jury could credit Watson and Mallipudi's testimony, sufficient

evidence existed to show that Kanodia owed Basu a duty of trust

and confidence.

C. Willful Breach

The evidence similarly suffices to prove Kanodia's

willful breach of his duty to Basu.

For Kanodia's convictions to stand, there must be enough

evidence to permit a rational jury to infer that Kanodia acted

willfully. 15 U.S.C. § 78ff(a); United States v. O'Hagan, 521

U.S. 642, 665-66 (1997). "[I]n order to establish a willful

violation of a statute, the Government must prove that the

defendant acted with knowledge that his conduct was unlawful."

Bryan v. United States, 524 U.S. 184, 191-92 (1998) (internal

quotations omitted) (quoting Ratzlaf v. United States, 510 U.S.

135, 137 (1994)). Because willfulness is a mental state, only

rarely is it proven by direct evidence. United States v. Bank of

New Eng., N.A., 821 F.2d 844, 854 (1st Cir. 1987).

Here, the jury heard strong circumstantial evidence

showing that Kanodia acted with knowledge that his scheme violated

- 13 -
the law. In addition to the evidence described above, Kanodia's

methods of carrying out his scheme betray a consciousness of

wrongdoing. See United States v. Zanghi, 189 F.3d 71, 81 (1st

Cir. 1999) (holding that "evidence of conduct tending to mislead

or conceal" permits a jury to infer willfully unlawful conduct).

According to Watson, Kanodia attempted to conceal his

communications with Watson by avoiding written messages and

speaking in vague terms over the telephone. Watson also testified

that Kanodia told him that he could not trade himself. And,

significantly, Kanodia disguised the kickbacks that he received

from Ahmed and Watson as purported charitable donations to LCF.

IV. Jury Instructions

Kanodia further appeals the district court's decisions

to give or refuse to give certain jury instructions. First, as to

a willful blindness instruction given by the trial judge, Kanodia

asserts that the instruction lacked a sufficient evidentiary

basis. Second, Kanodia also argues that the district court

erroneously denied his requests to instruct the jury that to

convict, it needed to find that (1) Ahmed and Watson actually used

-- as opposed to merely possessed -- material, nonpublic

information when trading in Cooper securities in order to be

trading "on the basis of" material, nonpublic information, see

O'Hagan, 521 U.S. at 652-53; (2) Basu did not waive Kanodia's duty

- 14 -
of trust and confidence to her; and (3) Kanodia deceived Basu by

tipping Ahmed and Watson. None of these objections merit relief.

A. Willful Blindness

We assume, solely arguendo but favorably to Kanodia,

that we evaluate de novo the contention that the trial evidence

did not support a willful blindness instruction. Compare United

States v. Parker, 872 F.3d 1, 14 (1st Cir. 2017) (reviewing de

novo), with United States v. Valbrun, 877 F.3d 440, 445 (1st Cir.

2017) (observing that previous panels have applied abuse-of-

discretion review). The trial evidence warrants a willful

blindness instruction if "(1) a defendant claims a lack of

knowledge, (2) the facts suggest a conscious course of deliberate

ignorance, and (3) the instruction, taken as a whole, cannot be

misunderstood as mandating an inference of knowledge." United

States v. Azubike, 564 F.3d 59, 66 (1st Cir. 2009).

Kanodia only disputes that the evidence satisfies the

second requirement: whether the facts suggest a conscious course

of deliberate ignorance. To meet this element, the government

must demonstrate "warning signs that call out for investigation or

evidence of deliberate avoidance of knowledge," that is,

sufficient "red flags." United States v. Appolon, 695 F.3d 44, 57

(1st Cir. 2012). Here, the jury could infer that, as a highly-

educated, savvy businessman, Kanodia deliberately avoided

investigating red flags indicating that he had a duty of trust and

- 15 -
confidence to Basu which he could not violate. Information about

proposed business mergers is widely understood to be highly

valuable and therefore sensitive. See Basic Inc. v. Levinson, 485

U.S. 224, 238 (1988) ("[A] merger in which [a company] is bought

out is the most important event that can occur in a small

corporation's life." (quoting SEC v. Geon Indus., Inc., 531 F.2d

39, 47–48 (2d Cir. 1976) (Friendly, J.)). That sensitivity should

have been self-evident to Kanodia. Indeed Mallipudi, a friend, not

a husband, testified that he "presumed" that Basu's bare

disclosures about the existence of Apollo-Cooper merger talks

should be kept secret. Kanodia not only told Watson that Kanodia

could not trade on the information because of Basu's job, but also

conditioned his tips on Watson kicking him back some of Watson's

trading profits. Based on this evidence, the jury could find that,

if Kanodia did not know that he was prohibited from profiting from

Watson's trading on the confidential deal details, then his

ignorance was willful.

Kanodia offers two rejoinders to this conclusion.

First, he argues that evidence about "Basu's unilateral

expectations" of confidentiality lacks probative value because

Basu's disclosures to other businesspeople occurred in Kanodia's

presence. His objection is misplaced. The trial record does not

show that Basu disclosed the offer price or the announcement date

to her business acquaintances. Further, her general boasts about

- 16 -
her playing a role in the merger talks alerted at least Mallipudi

to the confidential nature of the information. Second, Kanodia

points to the purported differences in "business cultures" between

India and the United States. But Kanodia cites no trial evidence

in support of this factual proposition. And assuming that those

differences do in fact exist, both Kanodia and Basu had extensive

business experience in the United States and both had earned

American professional degrees. Kanodia was thus well-equipped to

navigate any purported differences between American and Indian

business cultures. The trial record contained sufficient warning

signs to justify a willful blindness instruction.

Even if the willful blindness instruction were

unjustified, the error would have been harmless because the

government presented sufficient evidence that Kanodia actually

knew that his tips violated the law. See United States v. Fermin,

771 F.3d 71, 79 (1st Cir. 2014). Among other facts, Kanodia's

statements that he could not trade himself, his directions to send

money to LCF, and his business experience all provide sufficient

grounds for the jury to infer Kanodia's actual knowledge of his

disclosure's unlawfulness.2 There was no reversible error in the

district court's willful blindness instruction.

2 Furthermore, it is not at all likely that the jury
convicted Kanodia on a theory of negligence or recklessness. See
United States v. Littlefield, 840 F.2d 143, 148 n.3 (1st Cir. 1988)
(identifying the harm from an improvidently given willful

- 17 -
 B. "On the Basis of" Instruction

Turning next to Kanodia's claims of error regarding the

rejection of his preferred instructions, Kanodia asserts that the

district court improperly instructed the jury on the definition of

trading "on the basis of" material, nonpublic information. See

O'Hagan, 521 U.S. at 652–53. We review de novo whether the

district court's instruction correctly stated the law. United

States v. McDonough, 727 F.3d 143, 156 (1st Cir. 2013).

Nevertheless, we will not disturb a verdict, notwithstanding a

legally incorrect instruction, if the instructional error was

harmless. See United States v. Sasso, 695 F.3d 25, 29 (1st Cir.

2012). Our inquiry is not "whether there was enough to support

the result" but "whether the error itself had substantial

influence" on the jury's verdict. Kotteakos v. United States, 328

U.S. 750, 765 (1946).3 This case presents no need for us to fully

blindness instruction as the jury mistakenly convicting the
defendant on a negligence theory).
3Kanodia's reply brief characterizes his objection to this
instruction as relating to due process. Appellants suffering a
constitutional error, as opposed to a trial error, are entitled to
reversal unless the court can "declare a belief that [the error]
was harmless beyond a reasonable doubt." Chapman v. California,
386 U.S. 18, 24 (1967). Even though Kanodia's reply brief suggests
that the instruction violates the Fifth Amendment by creating a
mandatory presumption, his initial brief argues that the
instruction erroneously interprets Section 10(b) of the Exchange
Act. We thus apply Kotteakos's standard here. See Pignons S.A.
de Mecanique v. Polaroid Corp., 701 F.2d 1, 3 (1st Cir. 1983)
(holding that claims not raised in the appellant's initial brief
are waived).

- 18 -
resolve how to determine whether a trade is "on the basis of"

material, nonpublic information, however, for even if the

government must show that the tippee used the information to

convict a tipper, Kanodia's conviction would stand.

1. The District Court's Instruction

The district court instructed the jury that, to show

that a trade was on the basis of material, nonpublic information,

"[a]ll that is required is that [Ahmed and Watson] were in

possession of the material non-public information at the time that

they traded." Kanodia disputed that Ahmed and Watson's mere

possession of confidential information sufficed; he insisted that

the government must prove that they actually used the tips to

trade. Specifically, Kanodia requested the jury be instructed

that the government needed to prove beyond a reasonable doubt that

Ahmed or Watson:

placed trades in Cooper securities on the basis of
material, non-public information received from Mr.
Kanodia in violation of Mr. Kanodia's fiduciary or
confidentiality duties owed to Ms. Basu. For
trades to be on the basis of material, non-public
information, you must find that Mr. Watson and/or
Mr. Ahmed were in possession of confidential
material, non-public information and used that
information in consummating their transactions. .
. .

The district court denied Kanodia's request, and Kanodia objected

to the district court's failure to instruct the jury that the

- 19 -
material non-public information needed to have been both possessed

and used to support conviction.4

2. If There Was Any Error, It Was Harmless

The government introduced more than enough evidence as

to use to sustain Kanodia's conviction. Watson testified that he

relied on Kanodia's tips to trade. Kanodia sometimes placed phone

calls to both men shortly before they traded. Ahmed and Watson

invested heavily in Cooper as Kanodia continued to feed them

information. Moreover, they bought options that would have proven

worthless if Cooper's share price did not jump quickly. And both

transferred a combined sum of $242,500 to the LCF account

controlled by Kanodia after profiting handsomely on their trades.

Although the government opposed Kanodia's requested

instruction, it refrained from suggesting that Ahmed and Watson's

mere possession of Kanodia's tips sufficed to show Kanodia's

culpability. Accordingly, any instructional error did not have a

substantial influence on the jury's verdict.

4 Kanodia renews this objection on appeal, but we bypass
it. The government argues that the district court instruction was
properly based upon the SEC's interpretation of Section 10(b) in
Rule 10b5-1 (which the government argues deserves Chevron
deference). See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council,
Inc., 467 U.S. 837, 842-43 (1984). We need not address this issue,
because any error was harmless.

- 20 -
 C. Waiver of Duty

Kanodia also contests the district court's refusal to

instruct the jury that it must find that Basu did not waive

Kanodia's duty of trust and confidence to her. Kanodia's briefing

is unclear whether he is asserting that this omission constitutes

a failure to instruct the jury as to all the elements of the

charged offense or to give a required theory-of-the-defense

instruction. It appears that at trial Kanodia requested an

instruction that the government had to prove that Basu did not

waive Kanodia's duty as an element of the offense. On appeal,

Kanodia appears to shift tactics, framing his argument at some

points as a request for a theory-of-the-defense instruction and at

others for an elements instruction. Whether Kanodia requested an

elements or theory-of-defense instruction -- and thus regardless

of whether de novo or plain error review applies -- his argument

fails. McDonough, 727 F.3d at 156 (elements of offense); United

States v. Peake, 804 F.3d 81, 98 (1st Cir. 2015) (theory of the

defense). The failure to give a requested theory-of-the-defense

instruction triggers reversal only if the instruction was "(1)

substantively correct as a matter of law, (2) not substantially

covered by the charge as rendered, and (3) integral to an important

point in the case so that the omission of the instruction seriously

impaired the defendant's ability to present his defense." United

States v. Baird, 712 F.3d 623, 628 (1st Cir. 2013).

- 21 -
 While Kanodia's duty was "integral to an important point

in the case," Kanodia's requested instruction was incorrect as a

matter of law. Peake, 804 F.3d at 98. Kanodia does not claim

that any court has required the government to prove that the

insider did not explicitly waive an outsider's duty of trust and

confidence in order to sustain an insider trading conviction. See

McPhail, 831 F.3d at 6 (holding that an insider's disclosures to

individuals other than the defendant-outsider might show the

nonexistence of a duty). The insider cannot waive the duty, and,

to the extent Basu's knowledge of disclosures might go to the

nonexistence of a duty, the district court's instruction

"substantially covered" the applicable theory. Kanodia, like the

tipper in McPhail, could -- and did -- argue that Basu's

disclosures defeated any duty of confidentiality he owed to her.

Unfortunately for Kanodia, a reasonable jury could have found such

a theory implausible, for, among other reasons, Kanodia received

much more specific and sensitive disclosures than the outsiders

who testified at trial. Accordingly, the district court did not

err in refusing to give Kanodia's waiver instruction.

D. Deception

Kanodia's final claim of instructional error faults the

district court for failing to focus the jury's attention on whether

he deceived Basu. Here again, Kanodia does not clearly indicate

whether he believes that the district court omitted elements of

- 22 -
the offense or wrongly declined to give a theory-of-the-defense

instruction. Framed either way, his argument is unpersuasive.

Kanodia principally relies on the O'Hagan Court's

statement that "if the fiduciary discloses to the source that he

plans to trade on the nonpublic information, there is no 'deceptive

device' and thus no § 10(b) violation." 521 U.S. at 655 (quoting

15 U.S.C. § 78j(b)). But this statement does not establish the

deception of the person to whom the misappropriator owed a duty is

an element of the offense.

More importantly, the breach of the duty of trust and

confidence itself has long been held to be the deceptive device

that the government must prove. See id. at 652 ("[A] person

commits fraud in connection with a securities transaction, and

thereby violates § 10(b) and Rule 10b–5, when he misappropriates

confidential information for securities trading purposes, in

breach of a duty owed to the source of the information." (internal

quotation marks omitted)). The O'Hagan Court simply stated that

no breach of a duty occurs when the evidence tends to show that an

insider allowed an outsider to share the insider's confidential

information. It did not require the government to prove a

negative, and Kanodia does not identify any precedent doing so

either. Thus, insofar as Kanodia purports to raise an objection

based on the district court's failure to state the offense's

elements, the objection is off-base.

- 23 -
 Even interpreted as an objection based on the district

court's failure to grant him a theory-of-the-defense instruction,

Kanodia's challenge still fails. He could have argued that Basu

knew about his disclosures even with the district court's

instructions.

V. New Trial Motion

Kanodia's strongest contention is that the district

court erred in denying his motion for a new trial. Our deferential

standard of review compels us to affirm.

A. Standard of Review

We review a district court's denial of a Rule 33 motion

for a new trial on the basis of newly discovered evidence for

manifest abuse of discretion. United States v. Turner, 501 F.3d

59, 73 (1st Cir. 2007). We will order a new trial on the basis of

newly discovered evidence only if:

(i) the evidence upon which the defendant relies
was unknown or unavailable to him at the time of
trial; (ii) the failure to bring the evidence
forward at trial was not occasioned by a lack of
diligence on the defendant's part; (iii) the
evidence is material (as opposed to being merely
cumulative or impeaching); and (iv) the evidence is
such that its introduction would probably result in
an acquittal upon a retrial of the case.

United States v. Maldonado-Rivera, 489 F.3d 60, 66 (1st Cir. 2007)

(citing United States v. Wright, 625 F.2d 1017, 1019 (1st Cir.

1980)); Fed. R. Crim. P. 33(a). For our analysis in this case, we

- 24 -
group the first two and the latter two elements together. See

Maldonado-Rivera, 489 F.3d at 66.

Here, the district court denied Kanodia's new trial

motion, reasoning that the reports could have been discovered with

due diligence before trial and that the witnesses were cumulative.

B. Due Diligence

Kanodia argues that his proffered media reports and five

witnesses are "newly discovered," and that his failure to introduce

them at trial was not caused by a lack of due diligence. "[D]ue

diligence [is] 'a context-specific concept' generally akin to the

degree of diligence a reasonably prudent person would exercise in

tending to important affairs." United States v. García-Álvarez,

541 F.3d 8, 18 (1st Cir. 2008) (quoting Maldonado-Rivera, 489 F.3d

at 69). Moreover, whether a party exercised due diligence

"[depends] upon the nature of the evidence in question." United

States v. Hernández-Rodríguez, 443 F.3d 138, 144 (1st Cir. 2006).

But "[w]here . . . the newly proffered evidence all pertains to a

matter that the defendant knew would be in issue at his trial, and

the source of that evidence was an obvious one, the district court

ha[s] every right to deem the requirement of due diligence

unsatisfied." Maldonado-Rivera, 489 F.3d at 69.

Here, both the press's purportedly detailed coverage and

the Indian business community's knowledge of the Apollo-Cooper

merger talks constituted Kanodia's key trial defenses. As a

- 25 -
consequence, a reasonably prudent person pursuing this line of

defense would have looked into a variety of Indian media sources,

including some non-English language publications. Nevertheless,

Kanodia consciously chose not to research non-English language

publications. That such sources existed would have been obvious

to Kanodia. See García-Álvarez, 541 F.3d at 18. What's more,

three of the fifty-nine articles Kanodia seeks to introduce are in

English, and twenty-one (including all of the English language

articles) were published online prior to the trial. As a result,

Kanodia has not carried his burden of showing that the district

court manifestly abused its discretion in excluding these reports.5

Next, Kanodia claims to have identified five newly

discovered witnesses. One witness, Inderjit Singh, however, was

known to Kanodia before trial, and we therefore decline to consider

his affidavit. Kanodia had met Singh in April 2013 and had general

knowledge of his potential testimony. Kanodia insists that he

omitted Singh from his witness list because he was unavailable.

Singh told Kanodia's private investigator that he had symptoms of

an undiagnosed heart problem in "late September 2016." Yet he was

not hospitalized until October 12, 2016, and Kanodia had already

filed his witness list on September 19, 2016. Moreover, Kanodia

did not depose Singh. This chronology and the concomitant failure

5 In any event, the newly proffered articles do not disclose
the detailed information that Kanodia obtained from Basu.

- 26 -
to take steps to preserve Singh's testimony means the district

court did not abuse its discretion in finding that Singh did not

qualify as a newly discovered witness.

C. Materiality

That leaves us to consider the other four proposed new

witnesses, Jamaluddin Ahmed, Raji George, Sanjay Kumar, and Vivek

Singh. The government argues that the district court permissibly

found these witnesses provide cumulative, not material, evidence.

We agree. Because "the district court 'has a special sense of the

ebb and flow of the . . . trial[,]' . . . . we afford substantial

deference to the district court's views regarding the likely impact

of belatedly disclosed evidence." United States v. Peake, 874

F.3d 65, 70 (1st Cir. 2017) (first alteration in original) (citing

United States v. Mathur, 624 F.3d 498, 504 (1st Cir. 2010)).

These four witnesses' affidavits purport to fill a gap

in Kanodia's trial defense: although Kanodia showed that Basu had

been loose-lipped about her work on Apollo's acquisition of Cooper,

he failed to show that she had disclosed the deal's price and the

announcement date to other outsiders. Three new witnesses, George,

Kumar, and Vivek Singh, would testify that Basu told them the deal

price and the announcement month. Kumar also would testify that

many in the New Delhi business community knew the deal price and

announcement months in advance.

- 27 -
 In light of the deferential standard of review, however,

we must credit the many conceivable reasons supporting the district

court's holding. First, Jamaluddin Ahmed, a journalist, does not

assert in his affidavit that he spoke to Basu and instead only

repeats rumors that he heard. The district court could have

determined that testimony as to unsourced gossip was

insufficiently reliable to affect the verdict. See United States

v. Contorinis, 692 F.3d 136, 144 (2d Cir. 2012) (positing that

confirmation of information by a corporate insider may be material

because "[r]umors or press reports about the transaction may be

circulating but are difficult to evaluate because their source may

be unknown"). Additionally, such testimony would be cumulative

because of the many published news articles that Kanodia introduced

at his defense at trial. Accordingly, the district court did not

manifestly abuse its discretion in ruling that Ahmed's testimony

was cumulative.

Second, George's affidavit indicates that he did not

speak with Basu in close temporal proximity to the May and June

trades for which the jury convicted Kanodia. He claims to have

spoken to Basu in April, months before the deal would be announced.

Basu's earlier disclosure would have lacked the certainty of

Kanodia's tips in May and June. See Basic, 485 U.S. at 238-41

(reasoning that the more certain it is that a merger will occur,

- 28 -
the more likely it is that information about a proposed merger is

material).

That leaves Kumar's and Vivek Singh's proposed

testimony. Kumar's affidavit states that he met Basu "around the

first week of June 2013 . . . [w]here she stated that . . . Apollo

Tyre is buying Cooper Tire of USA and the deal is valued around

2.5 billion USD and will close very shortly." Vivek Singh avers

in his affidavit that he also met Basu in "early June 2013" and

that she told him that negotiations for Apollo to purchase Cooper

for $2.5 billion were "in advance state and the deal will be

through within few weeks [sic]."

The district court did not manifestly abuse its

discretion in denying the new trial motion based on these two new

witnesses. Kumar qualifies all of his proposed testimony regarding

the key details ("around 2.5 billion USD" and "very shortly"), and

Vivek Singh's testimony is similarly vague as to the timing

("advance state").

Further, if these details were made as public as the

affidavits claim, the opportunity to so profitably trade on the

widely known information would not have existed. See Halliburton

Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 272 (2014)

("[M]arket professionals generally consider most publicly

announced material statements about companies, thereby affecting

stock market prices." (quoting Basic, 485 U.S. at 246 n.24)) If

- 29 -
the information discussed in the affidavits were public (even if

only public in India), Cooper's share price would have reflected

this information. Yet it did not -- as Kanodia admits, the price

"remained relatively stable" for the first six months of 2013 --

so Watson was able to place highly profitable trades even on the

day before the deal's announcement. This stability obtained even

amidst rumors dating back to late 2012 that Apollo might buy

Cooper. The fact that Basu bragged about her role to others was

a fact already in evidence and was not a basis for a new trial.

The district court did not manifestly abuse its discretion in

denying Kanodia's motion for a new trial.

VI. Conclusion

For the foregoing reasons, we AFFIRM Kanodia's

convictions and the denial of his new trial motion.

- 30 -