United States v. McLellan

United States Court of Appeals
For the First Circuit

No. 18-2032

UNITED STATES OF AMERICA,

Appellee,

v.

ROSS MCLELLAN,

Defendant, Appellant.

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

[Hon. Leo T. Sorokin, U.S. District Judge]

Before

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

Martin Weinberg, with whom Kimberly Homan were on brief, for
appellant.
Stephen E. Frank, Assistant United States Attorney, with whom
Andrew E. Lelling, United States Attorney, was on brief, for
appellee.

May 20, 2020
 TORRUELLA, Circuit Judge. Ross McLellan ("McLellan")

appeals his convictions of securities and wire fraud as well as

conspiracy to commit securities and wire fraud for his leadership

role in a scheme to defraud overseas institutional investors by

applying hidden commissions on the buying and selling of U.S.

securities. First, McLellan disputes that there was sufficient

evidence to sustain his securities fraud convictions under 15

U.S.C. §§ 78j(b), 78ff(a), and 17 C.F.R. § 240.10b-5 (hereinafter

"Rule 10b-5") and objects to the district court's jury instruction

on the elements of said offense. Second, he protests that his

wire fraud conviction under 18 U.S.C. § 1343 was the product of an

improper extraterritorial application of the wire fraud statute,

and relatedly, he submits that it was error for the district court

not to instruct the jury that it had to find a domestic application

of the statute to convict. Third, he contends that the district

court erred by not compelling the U.S. government to exercise its

powers under Mutual Legal Assistance Treaties ("MLATs") with the

United Kingdom and the Republic of Ireland to seek evidence that

could have been favorable to his defense. See Mutual Legal

Assistance Treaty, U.S.-U.K. and N. Ir., Jan. 6, 1994 (hereinafter

"U.S.-U.K. MLAT"); Mutual Legal Assistance Treaty, U.S.-Ir.,

Jan. 18, 2001 (hereinafter "U.S.-Ireland MLAT").

Because we hold that the relevant securities law covers

misrepresentations of the commissions to be applied to securities

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trades by transition managers under the agency model, we find that

the evidence was sufficient to sustain McLellan's convictions and

that to the extent that the jury instructions may have been

overbroad, any error was harmless. Moreover, we need not address

whether § 1343 applies extraterritorially because McLellan was

convicted under a proper domestic application of the statute, and

to that end, the district court's jury instructions on wire fraud

nevertheless required the jury to find a domestic application.

Finally, because the district court correctly determined that it

lacked the authority to order the government to lodge MLAT requests

on behalf of a private party, we find no reversible error.

Accordingly, we affirm McLellan's convictions on all counts.

I. Factual Background

A. State Street's Transition Management Services

Because McLellan challenges the sufficiency of the

evidence, we summarize the evidence in the light most favorable to

the verdict. See United States v. Kanodia, 943 F.3d 499, 501 (1st

Cir. 2019).

McLellan, a former executive vice president of State

Street Bank ("State Street"), a Boston-based corporation, was

charged with committing securities and wire fraud for his part in

a scheme intended to defraud six institutional investors.

In his position, McLellan was the global head of State

Street's Portfolio Solutions Group ("PSG"), which included its

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transition management services, until October 2011. During

McLellan's tenure, State Street was one of numerous firms that

competed to provide transition management services to

institutional clientele. When large institutional investors, such

as pension funds, transition from one asset manager to another,

they typically hire a transition manager to restructure their

portfolios so as to minimize the "implementation shortfall."

Transition management firms specialize in buying and selling

securities on the open market on behalf of their clientele so as

to reduce as much as possible the monetary losses that the supply

and demand pressures of securities markets can cause during

transitions.

Two models dominate the transition services market: the

"principal" model and the "agency" model. Under the principal

model, the firm directly buys securities from and sells securities

to its client. While a transition manager in the principal model

assumes the risk that it will have to make unprofitable trades to

complete the transition for the client, it is also able to keep

any profit made on those trades for itself. Under the agency

model, the firm acts as an intermediary that facilitates the buying

or selling of securities for its clients through a third-party

broker-dealer. Firms utilizing the agency model profit from

transition services through two means: an upfront flat fee for the

entire transition or a disclosed fee per trade. The client -- not

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the transition management firm -- selects the securities to be

sold and bought on the open market. During the relevant time

period, State Street followed the "agency model." State Street

promoted this model to its clients through its advertising

materials and assured them that it would function as a fiduciary

while trading on their behalf.

As overseer of State Street's transition management

services, McLellan engaged Boston-based traders to buy and sell

U.S. securities for State Street clients. State Street's clients

in Europe, the Middle East, and Africa contracted with State Street

through the London-based State Street Bank Europe Ltd. ("SSBEL").

Edward Pennings ("Pennings"), a critical government witness at

trial, headed SSBEL's transition management group first as vice

president and then as senior managing director; he reported

directly to McLellan. Pennings spoke with McLellan daily about

State Street's clients and trades as the transactions at issue

progressed. Rick Boomgaardt ("Boomgaardt") headed SSBEL's

transition management desk in London. Although he reported

directly to Pennings, Boomgaardt periodically communicated with

McLellan about ongoing negotiations and transitions.

In the aftermath of the 2008 economic recession in the

United States, McLellan, Pennings, and Boomgaardt devised a scheme

to promise low commissions, or a flat fee, to potential clients

with the intention of embedding large hidden commissions in the

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price of the securities as reported to the clients during the

transition. McLellan directed Pennings and Boomgaardt to pursue

this scheme for large bond-based deals because those securities

were reported to clients on a "net" basis, which incorporated the

commissions into the price of the security as it was represented

to the client at the end of the transaction. This reporting

practice would make it difficult for clients to notice the hiked-up

charge. Conversely, commissions on stocks are typically reported

separately from the price of the stock, allowing the client to see

the precise purchase or sale price and the commission that the

firm took from the transaction. On occasion, Pennings, while in

his position at SSBEL, would represent to other State Street

employees that the commissions were approved by the European

management and were legal. At times, Pennings also relayed to

other members of the team that the contracts were sufficiently

vague to allow the taking of undisclosed markups despite having

made affirmative representations to the contrary.

B. The Relevant Transitions

The government's case against McLellan hinged on seven

discrete transitions that State Street handled for six clients.

Those clients were: Kuwait-based Kuwait Investment Authority

("KIA"); Netherlands-based Dutch Doctors; Ireland-based National

Treasury Management Agency ("NTMA"); U.K.-based Sainsbury's;

Ireland-based Eircom; and U.K.-based Royal Mail. Each of those

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six clients had a master transition management agreement ("TMA")

with State Street that governed the terms of all subsequent

transactions.

Institutional investors, such as these six clients,

solicit bids from transition management firms through a request

for proposals ("RFP"). Transition managers then submit estimates

of the implementation shortfall to the prospective client in the

hopes of winning its business. For each of these clients, Pennings

and Boomgaardt prepared all of the responses to RFPs, directly

negotiated the contracts for transitions, and prepared periodic

notices and pre-trade estimates. McLellan did not directly

communicate or negotiate with any of the six defrauded investors.

However, McLellan directed the scheme from the United States,

contacted traders in the United States to oversee and implement

the application of hidden commissions, and shaped the team's

response to the discovery of the scheme by attempting to cover it

up.

1. First KIA Transition

In March 2010, KIA, a Kuwaiti sovereign wealth fund,

selected State Street to manage a transition involving $2 billion

in bonds. Pennings negotiated the deal with a KIA representative

named Das. During the negotiations, Pennings represented to Das

that State Street would conduct the transition without taking any

commissions whatsoever even though Pennings always intended

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otherwise. Boomgaardt testified that he and McLellan decided to

make a zero-commission quote in order to compete with other banks

bidding on the KIA transition. After submitting the bid, Pennings

represented to KIA that State Street would make money on "the other

side of the transaction." At trial, Pennings testified that this

explanation to KIA was "nonsense" and meaningless because there

was no way to make money on "the other side of the transactions."

Pennings did tell Das that, absent a commission, State Street would

take a "spread," but he never explained how it would be applied or

how the spread would impact KIA. Pennings and Boomgaardt both

testified that they were not sure if Das understood how State

Street was going to make money on the deal. After the negotiations

were completed, Pennings sent a periodic notice to Das with the

terms of the transition agreement. This document represented in

a footnote that all bonds would be priced "net" per market

convention. The periodic notice, however, did not disclose that

a commission would be charged on each trade. Ultimately, KIA

commissioned State Street to handle half the transition and

commissioned a competitor, Nomura, to handle the other half of the

transition.

McLellan played an active behind-the-scenes role

throughout the KIA transition. Pennings and Boomgaardt testified

that the decision to submit the "zero commission" bid to KIA was

not only "discussed" with McLellan but also "came from" him.

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Pennings told McLellan through email that McLellan was "[g]onna

have to be creative," which Pennings testified meant that McLellan,

as the lead State Street executive in Boston, was going to have to

apply hidden commissions on the securities transactions in the

United States. After KIA accepted the bid, McLellan -- who

happened to be in London at the time -- contacted Stephen Finocchi,

a Boston-based trader, and asked for a report of the highest daily

prices at which the bonds in question were traded. According to

Boomgaardt, McLellan sought this information to ensure that the

price charged with the added commissions was below the daily high

to avoid tipping KIA off to the hidden commissions. Boomgaardt

further testified that he and McLellan looked at the data together

and decided how much commission to add to each of the bonds in the

KIA transition. Despite McLellan's precautions, State Street

still charged KIA above the reported daily high on some of the

bonds, which KIA did not question. In total, State Street skimmed

off $2.6 million in undisclosed commissions across the entire

transition. The final cost of the transition for KIA came in

approximately 0.07 percent below the original pre-trade estimate.

If State Street had not applied hidden commissions, KIA would have

made a net profit of roughly half a million dollars from the

transition.

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 2. Dutch Doctors Transition

In June 2010, Dutch Doctors, a Netherlands-based pension

fund for doctors, hired State Street to transition $1.6 billion in

European bonds. Pennings told Dutch Doctors that State Street

would conduct the transition for a commission of 1 basis point, or

0.01 percent of the aggregate value of the assets traded. After

securing the contract, McLellan and Pennings learned that Dutch

Doctors was contractually obligated to reserve all rights to

futures trading to its asset manager, JP Morgan, which meant that

the deal would yield less profit for State Street in the long run.

To cover the expected losses, Pennings secretly raised the charge

to 1.5 basis points, which ultimately translated to a total profit

to State Street of several million dollars, including $1 million

in hidden commissions.

Again, although McLellan did not communicate directly

with Dutch Doctors, he was intimately involved in the scheme and

the transition. On June 10, 2010, Pennings informed McLellan via

email that he was going to bid on a Dutch Doctors contract, which

Pennings claimed was necessary to enlist McLellan in a "push in

the U.S. . . . to make sure that [State Street Global Advisors, an

asset management affiliate of State Street,] would help us win

this deal." In response, McLellan encouraged Pennings to "[j]ust

win, baby," implying that Pennings should secure the contract and

a good deal for State Street by any means necessary. To that end,

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McLellan was in the loop about and encouraged Pennings's plan to

secretly raise the basis point for commissions to compensate State

Street for the loss that it would incur in futures trading.

3. Second KIA Transition

In October 2010, KIA opened bidding for a second

transition involving $4 billion in assets. State Street, through

Pennings, again submitted a zero-commission bid to KIA and won the

transition contract. Once again, Pennings intended to take

undisclosed commissions on the transactions involved in the

trading. Pennings testified that he believed that Das knew how

State Street would make money on the deal.

For his part, McLellan approved Pennings's

zero-commission bid before it was submitted to KIA. After landing

the deal, McLellan requested that Pennings forward him a copy of

the TMA and the periodic notice. McLellan communicated with

various players throughout the transition about the commissions to

be taken in the United States. He personally approved a

London-based trader's instruction to take 18 basis points on the

buy side and 2 basis points on the sell side of each of the

transactions for KIA in the United States.

During the second KIA transition, State Street's newly

established "rates desk," an office within State Street that would

directly buy and sell bonds for clients, sought permission to

participate in the transition. McLellan and Pennings opposed their

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inclusion because of the risk that their scheme would be uncovered

by others within State Street. McLellan asked Pennings if "legal"

had looked at the TMA with KIA, to which Pennings responded:

"[A]bsolutely not. Nor did they look at the periodic notice. This

can of worms stays closed." McLellan agreed with Pennings that

they could not disclose the spread to others within State Street.

Ultimately, however, McLellan did share the agreement with State

Street's legal department. Pennings testified that the legal

department did in fact sign off on the rates desk's involvement

and that he did not know if anyone noticed the zero-commission

language. According to Pennings, State Street earned "$2.6 million

or thereabouts" from the second KIA transition but disclosed

"[z]ero, nothing" to KIA. Since the implementation shortfall of

$2,047,000 was well below the initial estimate, KIA would have

actually made a profit on the transition had State Street not

pocketed the hidden commissions.

4. NTMA Transition

In December 2010, NTMA, an Irish government employee

pension fund, sought to transition $4 billion in assets through

the sale of a combination of stocks and bonds because Irish banks

needed a cash injection at the time. Pennings submitted a bid for

the transition with a management fee of 1.25 basis points and no

commissions despite his intention to apply hidden commissions.

According to Boomgaardt, he did so to beat competitors for the

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bid. NTMA ultimately selected State Street to handle half of the

transition. With the negotiations for the contract completed,

Pennings instructed Boomgaardt not to inform NTMA transition

managers of the hidden commissions.

Pennings eventually renegotiated the fee to 1.65 basis

points based on complications associated with the trades that NTMA

sought to make. An NTMA official testified that the pension fund

believed that 1.65 basis points would be the only cost of the

transition and that additional commissions would not be applied.

In later communications, Pennings informed McLellan of his

intention to secretly increase the markup. At the conclusion of

trading, the transition came in below the estimated shortfall that

Pennings provided to NTMA. However, NTMA's representative

testified that it would not have selected State Street if it had

known that additional hidden commissions were going to be applied

because a competitor, Citibank, would have been less expensive.

Once again, McLellan oversaw the transition from the

United States. While McLellan never communicated directly with

NTMA, he did approve the bid with no commission and told Pennings

that the price charged to the client would have to include a hidden

commission in order for State Street to make a profit, and he spoke

directly with Pennings about the implementation of the scheme.

McLellan reviewed the TMA and periodic notice and determined that

nothing in the documents affirmatively prevented a broker-dealer

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from taking commissions on the trades. He then agreed to

Pennings's proposed commissions on the transition -- 10 to 12 basis

points on fixed income trades and 3 basis points on U.S. equities

-- and directed traders to use a rarely-consulted stock trading

account to evade State Street's automated systems for reporting

equities trades, which would have broken down the trade by market

price and commission charge in the documents given to the client.

He further oversaw the trading in Boston and told traders what

markdowns and markups to take on each of the transactions. At the

end of the transition, State Street had taken millions in

undisclosed commissions on trades for NTMA.

5. Sainsbury's Transition

In January 2011, Boomgaardt received an RFP from

Sainsbury's, a pension-fund for a large supermarket chain in the

United Kingdom, which he forwarded to Pennings. Boomgaardt sent

Sainsbury's a proposal that offered to conduct the

multimillion-dollar transition for a flat fee of £350,000.

Boomgaardt submitted this bid under the assumption that

competitors were also submitting low bids. Boomgaardt, however,

believed that his superiors -- i.e., Pennings and McLellan --

intended to take undisclosed commissions on transactions during

the transition. Pennings reaffirmed Boomgaardt's belief that

McLellan had approved their proposal for the transition. The TMA

with Sainsbury's provided that any commissions taken on the

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transition had to be detailed in the periodic notice, and the

relevant periodic notice provided that State Street would take no

commissions on the transition. A Sainsbury's representative

testified that he understood State Street's proposal to mean that

there would be no difference between the buy or sell cost and the

cost as represented in the final documents submitted to them. At

the conclusion of trading, the transition came in roughly 19.2

basis points below the original shortfall estimate. Nevertheless,

the Sainsbury's representative testified that the company would

not have hired State Street had it known that $1.1 million of

additional commissions would be applied, and it would have given

its business to a competitor, JP Morgan, instead. Once again,

State Street collected millions of dollars in hidden commissions.

6. Eircom Transition

In March 2011, Eircom, a telecommunications company in

Ireland, sought bids for transitioning approximately $1 billion in

assets. Boomgaardt proposed to conduct a transition for a flat

fee of €400,000, and Eircom awarded State Street the contract.

Pennings indicated to Boomgaardt that the contract did not prohibit

commissions and directed him to apply additional hidden

commissions on trades. Pennings testified that McLellan personally

approved the scheme to apply hidden commissions, which Boomgaardt

understood as well. In an email to Boomgaardt in May 2011,

McLellan mentioned the prospect of $1 million in revenue, which

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could only be achieved through the application of hidden

commissions.

7. Royal Mail Transition

In March 2011, Boomgaardt and Pennings proposed a flat

fee of 1.75 basis points to Royal Mail, a pension fund for postal

workers in the United Kingdom, for its transition of $3.2 billion

in assets. Again, Pennings intended to take undisclosed

commissions of roughly 1 basis point on U.S. trades and 2 basis

points on European trades. Pennings, however, forwarded a periodic

notice to Royal Mail that only outlined a flat management fee for

the entire transition and did not inform Royal Mail of his

intention to take commissions. In an email to Royal Mail

representatives, Pennings confirmed that the flat fee was the total

cost for the transition. Royal Mail testified that it would not

have hired State Street if it had known that hidden commissions

were going to be charged.

McLellan, once again, was operating behind the scenes on

the transition. Before bidding on the contract, Pennings told

McLellan of the opportunity, to which McLellan emailed in response:

"thin to win." Pennings understood this email to be an endorsement

of a low bid with hidden commissions to beat competitors in the

market and earn substantial profits. Pennings, however, never

communicated to McLellan that he had made a representation

regarding the flat fee as equating the total costs. Pennings

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nevertheless did notify McLellan of his intent to take commissions

of 1.5 to 2 basis points beyond the flat fee that he proposed.

McLellan coordinated trades in the United States and instructed

U.S. traders to place hidden commissions on the trades.

A Boston-based trader understood that the instruction was a

directive to mislead Royal Mail as to the price of the securities.

State Street collected over $1 million in revenue through

undisclosed commissions throughout the Royal Mail transition.

After receiving the final financial report on the

transition in June 2011, Royal Mail contacted Pennings and inquired

into State Street's charges because it appeared that additional

commissions had been applied to the transition. Pennings initially

denied that commissions had been applied but agreed to investigate

the matter and then discussed the issue with McLellan. McLellan

and Pennings decided to disclose only the commissions taken on

trades in the United States and not those in the European market

to Royal Mail. Pennings then carried out this plan and disclosed

to Royal Mail that the commissions were only an issue in the United

States. Boomgaardt testified that McLellan independently told him

to use the term "fat-finger trading error" when discussing the

commissions issue with Royal Mail. In an email, McLellan stated

that those in State Street should describe the commissions as an

"inadvertent commissions applied" error. Subsequently, McLellan

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authorized Pennings and Boomgaardt to refund the commissions on

U.S. trades, totaling $1 million.

After receiving these disclosures, Royal Mail hired an

independent auditor, Inalytics, to investigate the transition.

McLellan and Pennings instructed Boomgaardt not to forward

information to Inalytics that would disclose the European markups.

Absent this information, Inalytics requested that State Street

sign off on the propriety of the transition, and McLellan asked

Pennings to draft a compliance letter that omitted the commissions

on European securities. McLellan reviewed the letter, which

provided that only $1 million had been taken in commissions and

directed Boomgaardt to send it to Royal Mail. Boomgaardt, however,

refused and told a London-based State Street executive about the

commissions and the scheme.

In August, McLellan sought all information from

Boomgaardt pertaining to Royal Mail including the RFP, the TMA,

and the periodic notice. On a subsequent phone call between

McLellan, Boomgaardt, and Pennings, McLellan discussed how to

"message" a Royal Mail consultant "that we may have the same

booking issue in the U.K. as we do in the States." At that time,

Pennings and McLellan suggested taking the position that the

agreements permitted them to take hidden commissions on trades.

After this phone call, McLellan, however, decided that all

commissions would be refunded to Royal Mail. McLellan then

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directed Pennings to inform Inalytics of the European commissions

and that Pennings should "come clean for everything."

II. Procedural Background

McLellan was indicted on one count of federal conspiracy

under 18 U.S.C. § 371 based on predicates of securities and wire

fraud (Count 1), two counts of securities fraud under 15 U.S.C.

§§ 78j(b), 78ff(a), and 17 C.F.R. 240.10b-5 (Counts 2-3), two

counts of wire fraud under 18 U.S.C. § 1343 (Counts 4-5), and one

count of wire fraud affecting a financial institution under 18

U.S.C. § 1343 (Count 6).

During the pre-trial phase, McLellan requested that the

district court issue letters rogatory to the United Kingdom and

Ireland to obtain documents from NTMA and Eircom. He sought

internal communications from those firms pertaining to: (1) TMA

compensation terms with State Street and the victims'

understanding of those terms; (2) the victims' perception of the

fees; (3) all competing bids; and (4) the victims' perception of

State Street's overcharges. The district court granted the request

and issued nine letters rogatory, see 28 U.S.C. § 1781, each of

which noted in part that McLellan demonstrated "that justice cannot

completely be done amongst the parties without the production of

the documents requested." Those letters were sent to NTMA, Royal

Mail, Sainsbury's, Eircom, Inalytics, Mercer (a U.K. entity that

acted as a consultant to Eircom), Aon (another U.K. entity that

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acted as a consultant to Sainsbury's), Nomura, and Goldman Sachs.

Additionally, the court granted a seven-month continuance of the

trial to provide McLellan with ample time to obtain the documents

requested via letters rogatory. While McLellan concedes that he

did "receive partial compliance with the letters rogatory from

some of the subpoenaed parties," he maintains that he was unable

to access "contemporaneous internal communications that would have

reflected the considerations that went into the selection of State

Street," and he did not receive any material directly from NTMA.

In January 2018, the Judicial Authority of Ireland

notified the district court that it declined to enforce the letters

and determined that an MLAT request was the only means of producing

the materials. McLellan then moved for the district court to order

the Executive Branch to make a request pursuant to the U.S.-Ireland

MLAT. McLellan further requested that the district court order

the government to exercise its MLAT powers to request documents

from U.K. entities when the production of evidence was stalled

within the U.K. police department.1 If the district court

declined, McLellan requested that the court exclude all evidence

1 We note that, prior to trial, McLellan also moved to order the
Attorney General to submit a request to depose a witness located
in the Netherlands who did not respond to the court's Rule 15
deposition order pursuant to the U.S.-Netherlands MLAT, which the
district court denied. However, he does not challenge this
decision on appeal.

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on NTMA and Eircom. The government opposed McLellan's request to

compel it to exercise its treaty powers.

The district court denied McLellan's motion to compel on

the ground that it lacked authority to do so. Additionally, it

found no valid basis to grant McLellan's request to exclude the

government's evidence solely because of his inability to procure

additional evidence. However, the district court did note that

"the more limited power available to McLellan to compel production

of witnesses or documents from outside the United States as

compared to within the United States potentially raise[d] fairness

or due process considerations."

At trial, McLellan objected to the district court's jury

instructions regarding the "in connection with" and "materiality"

elements of the securities fraud charge on the ground that they

were overly broad. Specifically, he argued that the jury should

have been instructed that the "in connection with" element was

only met if the fraud was "material to a decision by one or more

individuals to buy or to sell a covered security." On the wire

fraud counts, the district court held that 18 U.S.C. § 1343, or

the wire fraud statute, applies extraterritorially and denied

McLellan's proposed instruction that would have limited the wire

fraud statute to domestic conduct. Ultimately, the jury convicted

McLellan of securities fraud, wire fraud, and conspiracy (Counts

1-5) and acquitted him of wire fraud affecting a financial

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institution (Count 6). The district court then denied McLellan's

motion for a judgment of acquittal or a new trial.

At sentencing, the district court was "not persuaded"

that "there was an intent to defraud" on the first KIA transition

and thus did not include it in the loss calculation. The district

court then sentenced McLellan to eighteen months of imprisonment

to be followed by two years of supervised release and assessed a

$5,000 fine. McLellan filed a timely notice of appeal the very

same day.

On appeal, McLellan challenges each of his convictions

on the same grounds that he raised below. He asserts that the

district court erred in its interpretation of both the securities

fraud and wire fraud statutes as well as when it refused to compel

the government to exercise its powers under the U.S.-U.K. and

U.S.-Ireland MLATs. We take each of these challenges in turn.

III. Securities Fraud

A. Sufficiency of the Evidence

On appeal, McLellan challenges the sufficiency of the

evidence supporting his securities fraud convictions.

Specifically, he argues that Security Exchange Commission ("SEC")

Rule 10b-5 does not prohibit the misrepresentations for which he

is responsible, which, in his view, were not made "in connection

with" the purchase or sale of any covered securities but rather

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were merely intended to induce prospective clients to retain State

Street's transition management services.

We review challenges to the sufficiency of evidence de

novo. See United States v. Mehanna, 735 F.3d 32, 42 (1st Cir.

2013). "This review eschews credibility judgments and requires us

to take the facts and all reasonable inferences therefrom in the

light most favorable to the jury's verdict." Id. After reviewing

the record, "a guilty verdict need not be an inevitable outcome;

rather, 'it is enough that the finding of guilt draws its essence

from a plausible reading of the record.'" Id. (quoting United

States v. Sepúlveda, 15 F.3d 1161, 1173 (1st Cir. 1993)).

Importantly, McLellan's sufficiency challenge does not take aim at

the factual record itself. Instead, he challenges whether the

facts in the record are sufficient to sustain a conviction for

securities fraud premised on a Rule 10b-5 theory as a matter of

law.

1.

The Securities Exchange Act of 1934 ("Exchange Act")

"forbids the use of any manipulative or deceptive devices or

contrivances 'in connection with the purchase or sale of any

security.'" Hidalgo-Vélez v. San Juan Asset Mgmt., Inc., 758 F.3d

98, 104 (1st Cir. 2014) (quoting 15 U.S.C. § 78j(b)). As part of

its enforcement mechanisms, the Exchange Act grants the SEC the

authority to promulgate regulations, such as Rule 10b-5, "which

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likewise prohibits fraud in connection with the purchase or sale

of securities." Id. (citing 17 C.F.R. § 240.10b-5).2 The purpose

of the Exchange Act and complementary SEC regulations is "to insure

honest securities markets and thereby promote investor

confidence." Chadbourne & Parke LLP v. Troice, 571 U.S. 377, 390

(2014) (quoting United States v. O'Hagan, 521 U.S. 642, 658

(1997)). Congress's view was that the statutory scheme would

"protect investors against manipulation of stock prices," Basic

Inc. v. Levinson, 485 U.S. 224, 230 (1988) (citing S. Rep. No.

73-792, at 1-5 (1934)), and rein in "dishonest practices of the

market place [that] thrive upon mystery and secrecy." Id. (quoting

H.R. Rep. No. 73-1383, at 11 (1934)).

To make out a criminal case of securities fraud under

Rule 10b-5, the government must prove that the defendant, acting

willfully, knowingly, and with intent to defraud, made a material

2 Specifically, Rule 10b-5 declares it unlawful:
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to
omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which
they were made, not misleading, or
(c) To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit upon any
person,
in connection with the purchase or sale of any security.
17 C.F.R. § 240.10b-5.

-24-
misstatement or omission in connection with the purchase or sale

of any security. See United States v. Vilar, 729 F.3d 62, 88

(2d Cir. 2013); see also SEC v. Tambone, 597 F.3d 436, 447 n.9

(1st Cir. 2010) (noting that in public enforcement actions under

Rule 10b-5, as opposed to private civil enforcement actions, the

government need not prove reliance). Because McLellan lays siege

to his securities fraud conviction on the ground that his fraud

was not in connection with the purchase or sale of a security, we

train our analysis on that element of the offense.

The "in connection with" element requires the government

to prove that the alleged misrepresentation was "material to a

decision by one or more individuals (other than the fraudster) to

buy or to sell a 'covered security.'" Hidalgo-Vélez, 758 F.3d at

106 (quoting Troice, 571 U.S. at 387). This is "satisfied only

'where the misrepresentation [would make] a significant difference

to someone's decision to purchase or to sell a covered security.'"

Id. (quoting Troice, 571 U.S. at 387).3 We have at times referred

to the "in connection with" element as the "transactional nexus"

inquiry, and under this framework, we determine whether the alleged

3 Because Hidalgo-Vélez was a civil case in which the plaintiff
had to prove reliance, it made sense there (as in Troice) to say
that the plaintiff had to prove that the fraud actually made a
difference to a statutorily relevant investment decision; by
contrast, in a criminal case (as we have explained), the government
need only prove that the misrepresentation would have been material
to a reasonable investor.

-25-
scheme to defraud and the security transaction are sufficiently

close to warrant application of Rule 10b-5. Calderón Serra v.

Banco Santander P.R., 747 F.3d 1, 5 (1st Cir. 2014) (noting that

the "in connection with" element should not be read "so broadly as

to convert every common-law fraud that happens to involve

securities into a violation of § 10(b)" (quoting SEC v. Zandford,

535 U.S. 813, 820 (2002))).

In Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit,

the Supreme Court interpreted parallel "in connection with"

language in the Securities Litigation Uniform Standards Act

("SLUSA"), which gave it occasion to explain that Rule 10b-5's

transactional nexus required merely that "the fraud alleged

'coincide' with a securities transaction." 547 U.S. 71, 85 (2006)

(quoting United States v. O'Hagan, 521 U.S. 642, 656 (1997)); see

also Hidalgo-Vélez, 758 F.3d at 105-06. Subsequently, in Troice,

the Supreme Court reaffirmed Dabit and clarified that a "fraudulent

misrepresentation or omission is not made 'in connection with'"

the purchase or sale of covered securities "unless it is material

to a decision by one or more individuals (other than the fraudster)

to buy or to sell a 'covered security.'" Troice, 571 U.S. at 387

(emphasis added); see also Calderón Serra, 747 F.3d at 5 (treating

the question as whether the fraud was "in connection with" inducing

customers to take out loans or to purchase securities). Notably,

Troice reasoned that it did not modify the Dabit standard because

-26-
"[e]very one of [the Supreme Court's prior cases] concerned a false

statement (or the like) that was 'material' to another individual's

decision to 'purchase or s[ell]' a statutorily defined 'security'

or 'covered security.'" Troice, 571 U.S. at 393 (alteration in

original) (quoting Dabit, 547 U.S. at 75-77). We have since

interpreted Troice to infuse the transactional nexus analysis with

a determinative inquiry into materiality. See Calderón Serra, 747

F.3d at 6. Although Troice did not modify Dabit, we have understood

the case to mean that the alleged fraud must reach a certain

threshold of materiality to be deemed made "in connection with" a

transaction in securities. See Troice, 571 U.S. at 387-88.

In an attempt to dissolve the nexus between his fraud

and the discrete purchases and sales of securities, McLellan urges

us to find that his up-front misrepresentations to clients that

State Street would not be charging commissions were only material

to those clients' decisions to select State Street as a transition

manager and not to their decisions to buy or sell particular

securities. At its core, this argument is twofold. On the law,

McLellan argues that under Troice, a misrepresentation which goes

only to the selection of a transition manager is insufficient to

establish securities fraud. On the facts, McLellan maintains that

there is no evidence that State Street's zero-commissions

misrepresentations would have affected a reasonable investor's

decision about whether to buy or sell a statutorily covered

-27-
security. Neither assertion persuades us. After careful review,

we hold that a broker-agent who misrepresents to his prospective

clients how much they will pay, or what value they will receive,

for each securities trade that he makes on their behalf, commits

securities fraud within the meaning of Rule 10b-5.

2.

On a global level, McLellan mistakenly treats this case

as if there is only one investment decision at issue for each

transition: the client's macro-level decision that, over some

period of time, it would like to transition its investment in

Asset X to an investment in Asset Y. While McLellan's

misrepresentations may not have influenced that one macro-level

decision for any of the transitions, we do not understand an

investor's choice between transition managers to be the legal

equivalent of choosing between brokers to execute a purchase of a

single share of stock at the prevailing price at any given time.

To the contrary, as the record demonstrates, the idiosyncrasies of

transition management services (as compared to run-of-the-mill

brokerage services) belie McLellan's attempt to escape liability

for his fraudulent misrepresentations.

Investors that hire transition managers are preparing to

transition sizeable investment portfolios (often valued in the

hundreds of millions if not billions of dollars) from one set of

assets to another. Under the agency model, when the investor hires

-28-
a transition manager to handle a transition, the investor turns

over its portfolio to the transition manager, who enters an

extended series of individual securities transactions on behalf of

the investor. That the clients did not actually make those

micro-level decisions themselves, instead entrusting them to State

Street, does not relieve McLellan of securities fraud liability.

In our view, even if a client had already made a macro-level

decision about the securities it wished to buy or sell before

hiring State Street, the micro-level trading decisions that the

client delegates to State Street as the transition manager under

the agency model -- i.e., the choices of when, at what price, and

in what quantities to trade -- are "decision[s] to purchase or to

sell a covered security" within the meaning of Troice, 571 U.S. at

387.

It follows that McLellan's up-front misrepresentations

that he would not charge commissions were "material" to those

when-and-how decisions because they reasonably induced the clients

to delegate those decisions to State Street as their transition

manager. See Hidalgo-Vélez, 758 F.3d at 106. Moreover, while

McLellan's after-the-fact price reports themselves may not be

material to (i.e., not reasonably capable of influencing) any of

the micro-level decisions that State Street made on its clients'

behalf, McLellan's up-front no-commission lies understated the

total price that clients would ultimately pay or receive for the

-29-
securities that State Street bought and sold on their behalf. In

other words, those lies also translated into back-end price

inflation, which was necessary to conceal and complete the fraud.

And it is well-settled that the price of a security is material to

a reasonable investor's buy-sell decision. See Rayner v. E*Trade

Fin. Corp., 899 F.3d 117, 122 (2d Cir. 2018) ("It is frivolous to

suggest that negatively influencing the price and quantity at which

clients may buy and sell securities would not 'make[] a significant

difference to someone's decision to purchase or to sell a covered

security." (alteration in original) (quoting Troice, 571 U.S. at

387)).

Together, this is enough to satisfy Rule 10b-5's

transactional nexus requirement.

3.

We find clear support for this position in several lines

of precedent. First, we look to SEC v. Zandford, where the client

gave the defendant-broker control over his investment account, and

the broker then "sold the [client's] securities while secretly

intending from the very beginning to keep the proceeds." 535 U.S.

813, 824 (2002). There, the Supreme Court held that the fraud

satisfied the "in connection with" requirement because a broker

"who sells customer securities with intent to misappropriate the

proceeds, violates [Section] 10(b) and Rule 10b-5," even though

the fraudster did not misrepresent the value of any security or

-30-
fraudulently induce the customer to enter a securities

transaction. Id. at 819–20. The Court explained that the

"connection between the deception and the sale" was identical to

a case in which the defendant "sold [the victim] a security ([an]

option) while secretly intending from the very beginning not to

honor the option." Id. at 823-24 (quoting Wharf (Holdings) Ltd.

v. United Int'l Holdings, Inc., 532 U.S. 588, 597 (2001)). In

both cases, the fraud "deprived the [victim] of the benefit of the

sale" that the fraudster had expressly or impliedly promised to

deliver. Id. at 824. Those promises were "material to a transaction

in the relevant securities by or on behalf of someone other than

the fraudster" and met the "in connection with" requirement.

Troice, 571 U.S. at 393 (citing Zandford, 535 U.S. at 822 and

Wharf, 532 U.S. at 590–92); see also Superintendent of Ins. of

N.Y. v. Bankers Life & Cas. Co., 404 U.S. 6, 9 (1971) (controlling

shareholders committed securities fraud when they duped company

into authorizing sale of treasury bonds with the misrepresentation

that "it, the seller, would receive the proceeds").

And that is just what happened here; McLellan induced

clients to delegate to him a whole set of investment decisions --

i.e., the micro-level decisions about when and how to execute the

trades -- by promising them the full proceeds from each trade while

planning all along to pocket the undisclosed commissions. Indeed,

McLellan (unlike Zandford, who just sold his clients' securities

-31-
and pocketed the proceeds), made an affirmative, up-front

misrepresentation that overstated the benefit that State Street's

clients would derive from each trade. On that score, his case is

even more straightforward than the one the Supreme Court considered

in Zandford. McLellan tries to distinguish Zandford because there,

he says, each sale breached the broker's fiduciary duty and "in

and of itself was a fraud upon the client," so the fraud "perfectly

coincided" with Zandford's sales of securities; whereas here, the

government did not pursue the same theory; instead, it focused on

McLellan's no-commission lies, which were made to clients after

they had already decided which securities to trade as part of the

transition, before they decided to hire State Street, and before

State Street executed any trade on their behalf. However, in

truth, McLellan's lies were about the trades themselves. He

misrepresented to the clients how much State Street would charge

for each trade it made on their behalf, and the alleged fraud was

not complete until he followed through on the scheme by taking an

unauthorized cut of the proceeds from each trade. Because the

lies overstated the benefit that clients would get from every

purchase and sale, and the complete fraud coincided with each

trade, it had the close nexus to those transactions that we have

required for securities fraud under Rule 10b-5. Hidalgo-Vélez,

758 F.3d at 105; Calderón Serra, 747 F.3d at 6.

-32-
 The Second Circuit's decision in United States v. Litvak

is also consistent with our conclusion. 808 F.3d 160, 167-68

(2d Cir. 2015) (Litvak I). To lay out the facts, Litvak was a

residential mortgage-backed securities ("RMBS") broker-dealer who

acted as a principal, buying and reselling RMBS to investor-buyers

(the victims). In one of his schemes, he bought RMBS from

third-party sellers for one price, then lied to the investor-buyers

by saying that he had paid a higher price, effectively hiding an

undisclosed markup. See Litvak I, 808 F.3d at 167-68. The Second

Circuit held that there was enough evidence for a securities fraud

conviction because, in the opaque market for RMBS (where investors

have to rely on brokers to tell them what prices the securities

are selling for), a broker-dealer's misrepresentations to

investor-buyers about the price he paid for the RMBS can inflate

the price at which the investor-buyer ultimately agrees to pay for

it. See id. at 167-68 nn.5-7, 175-76. Therefore, although the

buyer-victims in Litvak did not pay Litvak any more than the price

they negotiated to pay him, they would have negotiated a lower

price if they had known Litvak had bought cheaper than he let on

(or so a jury could find). Id.; see also United States v. Litvak,

889 F.3d 56, 67 (2d Cir. 2018) (Litvak II). As here, the broker

fraudulently induced the victims to pay more per trade (in the

amount of a hidden markup) than they would have paid otherwise.

-33-
 Along those lines, McLellan cites a pair of Eleventh

Circuit decisions to support his contention that, legally, a

misrepresentation which goes only to the selection of a transition

manager is insufficient to establish securities fraud: Brink v.

Raymond James & Assocs., Inc., 892 F.3d 1142 (11th Cir. 2018); and

SEC v. Goble, 682 F.3d 934 (11th Cir. 2012). However, a closer

inspection leads to the conclusion that McLellan's case is actually

even clearer than Litvak, and distinct from Goble and Brink,

because State Street's clients, unlike the victims in the Eleventh

Circuit cases, did not know "how much [they were] being charged

for costs associated with each [securities] transaction" and were

"charged more than [they] agreed to pay." Brink, 892 F.3d at 1149.

In Goble, the owner of a brokerage firm directed an

employee to record a fake transaction in the company's books in

order to avoid SEC regulations requiring businesses to set aside

a certain amount of funds. 682 F.3d at 939-40. The Eleventh

Circuit determined that this activity was a "misrepresentation

that would only influence an individual's choice of

broker-dealers," and it was therefore not material to an investment

decision to purchase or sell securities. Id. at 944. In Brink,

a broker misrepresented to clients the purpose of a "processing

fee" by indicating that the fee was used to facilitate securities

trades but then also built a commission into the fee. 892 F.3d at

1144-45. The Eleventh Circuit held that a misrepresentation that

-34-
only goes to "the choice of a type of investment account . . . is

not intrinsic to the investment decision itself." Id. at 1148-49.

However, the Eleventh Circuit emphasized in Brink that the

defendant "did not 'mislead [its] customers as to what portion of

the total transaction cost was going toward purchasing securities

versus the cost of the broker's involvement.'" Id. at 1149

(quoting Litvak I, 808 F.3d at 176) (alteration in original).

Thus, because the fee was fully disclosed prior to the transaction,

the Eleventh Circuit could conclude that "a reasonable investor

would [not] have made different investment decisions." Id.

These factual distinctions between McLellan's fraud

(i.e., that of a transition manager under the agency model) and

the misrepresentations at issue in Brink and Goble are critical.

While the fraud in Brink and Goble may have been relevant to an

investor when deciding whether to do business with the broker

generally, the Eleventh Circuit determined that it did not

influence the narrower decision to purchase or sell the securities

through that transaction, and thus it lacked the close nexus

required to prove Rule 10b-5 securities fraud. In those cases,

however, the investors were not misled as to the value or price of

a security, nor did the broker apply undisclosed markups.

Cf. Litvak I, 808 F.3d at 175-76. Instead, the brokers

misrepresented ancillary facts about their businesses, such as the

nature of a processing fee and the financial state of the firm.

-35-
These types of misrepresentations could be fairly regulated by

competition in the marketplace (as opposed to the Exchange Act)

because, knowing the full cost up front, the customer could always

seek the services of another firm to help purchase or sell the

desired securities. See id.

By contrast, McLellan's misrepresentations concerned the

costs of the trades themselves and required McLellan to distort

the prices of the securities that his firm traded on the back end

to conceal (and complete) the fraud. That is precisely why, under

the agency model of transition management services, McLellan's

no-commission lies have a tight-enough nexus to the relevant

securities transactions to fit "comfortably within the confines of

the 'in connection with' requirement." Hidalgo-Vélez, 758 F.3d at

107. For the foregoing reasons, misrepresentations that influence

the choice of a transition manager under the agency model, unlike

the choice of a run-of-the-mill broker-dealer, necessarily affect

who makes the micro-level trading decisions, and therefore, the

statutorily relevant investment decisions themselves.

Circling back to Litvak, McLellan also tries to

distinguish the case on its facts because there, he suggests, the

fraud influenced the victims' decisions about whether to buy or

sell the covered securities at all, not just what price to pay or

when to trade. But from Zandford, we know that there need not "be

a misrepresentation about the value of a particular security in

-36-
order to run afoul of the [Exchange] Act"; inducing the victim to

let you sell its securities, then pocketing the proceeds you

promised to pass on, is enough. See 535 U.S. at 820. And the

victims in Litvak did not testify they would have foregone the

trades if Litvak had not lied -- only that they would have paid

less, just as the State Street clients would have here. See

Litvak I, 808 F.3d at 167-68 nn.5-7.

Moreover, from Dabit, we know that the choice of when to

buy or sell a security, which itself often affects how much you

pay or receive from the sale, is itself a significant investment

decision that the Exchange Act and Rule 10b-5 protect. Dabit

involved a holder action, in which the plaintiffs alleged that

Merrill Lynch's analysts intentionally overvalued stocks held by

its investment banking clients and caused its brokers and their

clients to "continue[] to hold their stocks long beyond the point

when, had the truth been known, they would have sold." Dabit, 547

U.S. at 75. When the truth was revealed, the stock prices tanked.

Id. The brokers and their clients sued alleging that they were

"fraudulently induced, not to sell or purchase, but to retain or

delay selling their securities" and thereby suffered losses. Id.

at 77. The Supreme Court held that this fraud met the "in

connection with" requirement even though the plaintiffs were not

"defrauded into purchasing or selling particular securities." Id.

at 85, 85 n.10. And as we have explained, the Court in Troice,

-37-
right after establishing that the "fraudulent misrepresentation or

omission [must be] . . . material to a decision by one or more

individuals (other than the fraudster) to buy or sell a 'covered

security,'" the Court qualified that "[w]e do not here modify

Dabit." Troice, 571 U.S. at 387.

4.

Our conclusion that McLellan's up-front

misrepresentations satisfy the "in connection with" requirement is

also bolstered by the long line of cases finding that the taking

of undisclosed markups constitutes securities fraud. See Grandon

v. Merrill Lynch & Co., 147 F.3d 184, 193 (2d Cir. 1998) (finding

that undisclosed excessive markups violated Rule 10b-5); SEC v.

First Jersey Sec., Inc., 101 F.3d 1450, 1469 (2d Cir. 1996) ("[A]

broker-dealer who charges customers retail prices that include an

undisclosed, excessive markup violates . . . § 10(b) of the

securities laws."); Bank of Lexington & Tr. Co. v. Vining-Sparks

Sec., Inc., 959 F.2d 606, 613 (6th Cir. 1992) ("[T]he failure to

disclose exorbitant mark-ups violates section 78j(b) and Rule

10b-5."); Ettinger v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,

835 F.2d 1031, 1033-36 (3d Cir. 1987) (reversing a grant of summary

judgment because it had "no doubt" that taking undisclosed

excessive markups violated Rule 10b-5). McLellan argues that these

cases are inapplicable for two reasons. First, he contends that

they all deal with "excessive" markups, but there is no showing

-38-
that State Street's markups were "excessive." Second, he submits

that Troice changed the legal landscape so as to foreclose his

conviction.

First, to be sure, McLellan is right that there is no

finding that the commissions were "excessive" in some abstract

sense. There is no allegation here that State Street's markups

were not "reasonably related to prices charged in an open and

competitive market." Grandon, 147 F.3d at 189. However, the

rationale underlying the undisclosed markup cases is that

broker-dealers make an "implied representation that [they] charge

their customers securities prices that are reasonably related to

the prices charged in an open and competitive market." Id. Here,

McLellan expressly misrepresented the markups he planned to

charge, charging the clients a higher markup than he represented.

If a broker's failure to disclose an abnormally high markup is a

material omission, McLellan's affirmative promise that he would

charge a lower markup than he planned to charge must be a material

misstatement.

Second, there are reasons to be skeptical that Troice

had such a major impact on what conduct is prosecutable as

securities fraud. For instance, in Troice, the Supreme Court

"specif[ies] at the outset that [the] holding does not limit the

Federal Government's authority to prosecute frauds like the one

here," or otherwise "limit[] the Federal Government's prosecution

-39-
power in any significant way." 571 U.S. at 381 (internal quotation

marks omitted). McLellan essentially asks that we ignore that

language and apply Troice to limit the Federal Government's ability

to prosecute anyway. We decline the invitation.

5.

Finally, we note that McLellan's behavior is the type of

fraudulent behavior which was meant to be forbidden by the Exchange

Act and Rule 10b-5. Unlike the defendant in Troice, State Street

defrauded "victims who took, who tried to take, who divested

themselves of, who tried to divest themselves of," and "who

maintained an ownership interest" in covered securities. Troice,

571 U.S. at 378; see also id. at 388–89 ("The regulatory statutes

refer to persons engaged in securities transactions that lead to

the taking or dissolving of ownership positions. And they make it

illegal to deceive a person when he or she is doing so."). The

clients sought to "reap the benefit of trading in [those] covered

securities," Hidalgo-Vélez, 758 F.3d at 108, and McLellan deprived

them of part of that benefit, as in Zandford. His fraud therefore

implicates "[t]he purpose of § 10(b) and Rule 10b-5," which is "to

protect persons who are deceived in securities transactions -- to

make sure that buyers of securities get what they think they are

getting and that sellers of securities are not tricked into parting

with something for a price known to the buyer to be inadequate,"

or in the case of State Street, for a deal that is "not to be what

-40-
it purports to be." Chem. Bank v. Arthur Andersen & Co., 726 F.2d

930, 943 (2d Cir. 1984). And in Troice, the Supreme Court was

clear that brokers, accountants, investment advisors, and others

who "give advice, counsel, and assistance in investing in the

securities markets" remain subject to the federal securities laws

unless they "do not sell or participate in selling securities

traded on U.S. national exchanges." Troice, 571 U.S. at 390.

Transition management services are important to institutional

investors restructuring huge portfolios, and if those investors

cannot trust transition managers to tell them how much the

transition will cost, their services lose much of their value to

the national securities markets and their participants,

potentially influencing investors' decisions about whether to move

at all. See Zandford, 535 U.S. at 823 (noting that if investors

"cannot rely on a broker to exercise [its] discretion for their

benefit, then the [brokerage] account loses its added value").

So by our lights, a broker-agent's misrepresentation is

material to statutorily relevant investment decisions if it would

reasonably influence an investor's choice to entrust the agent

with the decisions of when, at what price, and in what quantities

to trade the securities. And a lie that clients will receive more

of the benefit of each purchase and sale, when in fact, the

broker-agent intends to (and does) charge hidden commissions on

each trade, is "material" to that choice and, therefore, to the

-41-
myriad investment decisions that it influences. That McLellan's

fraud misled clients about the costs of each trade, and therefore

"depended heavily on misrepresentations about [the] transactions

in covered securities," confirms a tight-enough nexus to those

transactions to satisfy the "in connection with" requirement.

Hidalgo-Vélez, 758 F.3d at 107 (citation omitted).

We therefore conclude that the Troice standard is

satisfied, and we decline to find that misrepresentations that

only affect the selection of a transition manager necessarily lack

a tight-enough nexus to qualify as securities fraud within the

meaning of Rule 10b-5. Accordingly, the evidence was sufficient

to support McLellan's securities fraud convictions.

B. Instructional Error

Relatedly, McLellan takes issue with the district

court's instruction to the jury regarding the "in connection with"

element of Rule 10b-5. Our approach to claims of instructional

error is "two-tiered": we review questions about whether jury

instructions "conveyed the essence of the applicable law" de novo

and questions about whether the district court's "choice of

language was unfairly prejudicial" for abuse of discretion. United

States v. Tkhilaishvili, 926 F.3d 1, 14 (1st Cir. 2019) (quoting

United States v. Sabean, 885 F.3d 27, 44 (1st Cir. 2018)). An

incorrect instruction, however, "will not require us to set aside

-42-
a verdict if the error is harmless." United States v. Sasso, 695

F.3d 25, 29 (1st Cir. 2012).

As to Rule 10b-5's "in connection with" requirement, the

district court instructed the jury:

This requirement is satisfied if you find that Mr.
McLellan's alleged conduct in some way touched upon
or coincided with a securities transaction; that is,
that the alleged fraud or deceit had some relationship
to the individual sales or purchases.

(emphasis added). The court further instructed the jury that it

could find the materiality component of the "in connection with"

element satisfied if there was a "substantial likelihood that a

reasonable investor engaging a transition manager would view the

statement as significantly altering the total mix of information

available." McLellan objected to both instructions as overbroad

because they could have enabled the jury to convict him based on

a theory of misrepresentations that do not satisfy the updated and

narrower "in connection with" requirement. Instead, McLellan

requested to have the jury instructed that the "in connection with"

element was only met if the fraud was "material to a decision by

one or more individuals to buy or to sell a covered security." He

further requested that "material" be defined as "meaningfully

affect[ing] a reasonable investor's consideration about whether to

buy or sell a security, and at what price."

On its face, the framing used by the district court in

its "in connection with" jury instructions displays some degree of
-43-
overbreadth. We have indeed interpreted Troice to cabin the "in

connection with" requirement, such that the fraud (as we have

explained above) must be one that would make a significant

difference to a reasonable investor's decision to purchase or sell

securities rather than merely touch upon or coincide with a

discrete securities transaction. See Hidalgo-Vélez, 758 F.3d at

106. In other words, the government must establish that the

misrepresentation would make "a significant difference to

someone's decision to purchase or to sell a covered security," not

merely that it was, in some sense, related to that decision. Id.

(quoting Troice, 571 U.S. at 386-87). Nevertheless, it is not

clear either that Troice should be read to require a narrower jury

instruction. For one, the instructional language here is drawn in

part from Dabit, which Troice explicitly indicated that it did not

modify. Plus, Dabit rejected the proposition that the "in

connection with" element is satisfied "only when the plaintiff

himself was defrauded into purchasing or selling particular

securities" and holds that to find securities fraud, "it is enough

that the fraud alleged 'coincide' with a securities transaction."

Dabit, 547 U.S. at 85.

However, even assuming the instructions were overbroad,

such a finding would not warrant overturning the conviction if the

potential error in the jury instruction were harmless. Where a

potentially erroneous instruction deals with an "essential element

-44-
of the crime," United States v. Doherty, 867 F.2d 47, 58 (1st Cir.

1989), it is harmless if "it appears beyond a reasonable doubt

that the error complained of did not contribute to the verdict

obtained." United States v. Wright, 937 F.3d 8, 30 (1st Cir. 2019)

(internal quotation marks omitted). "An erroneous instruction on

an element of the offense can be harmless beyond a reasonable

doubt, if, given the factual circumstances of the case, the jury

could not have found the defendant guilty without making the proper

factual finding as to that element." Doherty, 867 F.2d at 58; see

also Pope v. Illinois, 481 U.S. 497, 503 (1987). The government

bears the burden of proving "that an instruction that is

constitutionally flawed is harmless." Wright, 937 F.3d at 30. In

order to engage in this inquiry, we must "review[] the entire

record" and "consider[] the likely impact of the error on the minds

of the jurors." Doherty, 867 F.2d at 58; see also Neder v. United

States, 527 U.S. 1, 19 (1999).

After doing so, we having little difficulty concluding

that, even assuming the "in connection with" jury instructions

were overboard, any potential error was harmless beyond a

reasonable doubt. The government's case was premised on McLellan's

up-front misrepresentations that State Street would not take

commissions from the securities trades it made on behalf of its

clients as part of their transition, which as a matter of law,

satisfy the transactional nexus requirement under Rule 10b-5. The

-45-
jury was free to believe Pennings, Boomgaardt, and other witnesses

when they testified about the structure and intent of the scheme

to hide commissions, or the jury could have determined that these

witnesses were not credible, in which case they would have

acquitted McLellan. The jury was not free, however, to extrapolate

from Pennings and Boomgaardt's testimony that some other scheme,

not advanced by the government and not supported by the evidence,

was the fraud alleged to have occurred.4 From the confines of the

evidence produced at trial, we find no evidence from which the

jury could rationally have reached a conclusion to convict under

these instructions on a ground other than that McLellan directed

misrepresentations as to commissions, which where material to the

statutorily relevant trading decisions of State Street's clients.

As noted in the previous section, the government's case thus fell

firmly within the scope of Rule 10b-5, and the jury's conclusion

would have remained the same even with a tailored jury instruction.

Therefore, to the extent that the jury instruction as to

the "in connection with" element of Rule 10b-5 might have been

4 This case is thus distinguishable from cases such as Wright,
where the government advanced the theory on which the defendant
was potentially erroneously convicted. See Wright, 937 F.3d at
30. While the government need not advance the erroneous theory
for an instructional error to be harmful, there must be something
in the record from which a jury could have reached a legally
erroneous, but rational, decision to convict. We find nothing in
the record that would support such a rational decision based on
the potentially overbroad instruction.

-46-
overbroad, any potential error was ultimately harmless.

Accordingly, we affirm McLellan's securities fraud convictions.

IV. Wire Fraud

Next, McLellan challenges his conviction for wire fraud.

He argues that the federal wire fraud statute, 18 U.S.C. § 1343,5

does not apply extraterritorially, and that the district court

erred by failing to provide an instruction that would have required

the jury to find a domestic application of the statute. We need

not decide whether § 1343 applies extraterritorially because the

facts underlying McLellan's conviction suffice to establish a

domestic application of § 1343 inasmuch as he committed each

required element of wire fraud from the United States through

domestic wires. As the instructions required the jury to find

that McLellan utilized a wire in the United States, we find that

the district court did not err in refusing to supply a domestic

application instruction.

5 The wire fraud statute, 18 U.S.C. § 1343, provides that:
Whoever, having devised or intending to devise any
scheme or artifice to defraud, or for obtaining money
or property by means of false or fraudulent pretenses,
representations, or promises, transmits or causes to
be transmitted by means of wire, radio, or television
communication in interstate or foreign commerce, any
writings, signs, signals, pictures, or sounds for the
purpose of executing such scheme or artifice, shall
be fined under this title or imprisoned not more than
20 years, or both.

-47-
 "A district court's refusal to give a requested

instruction is reviewed de novo." United States v. Figueroa-Lugo,

793 F.3d 179, 191 (1st Cir. 2015) (emphasis added). The defendant

must present evidence sufficient to show "that he was entitled to

the instruction." Id. "The initial threshold determination we

must make is whether the evidence, viewed in the light most

favorable to the defense, 'can plausibly support the theory of the

defense.'" Id. (quoting United States v. Gamache, 156 F.3d 1, 9

(1st Cir. 1998)). If the evidence is sufficient, we then move onto

a three-part test where the district court is reversed only if the

proffered 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).

McLellan's argument that he is entitled to the domestic

application instruction he seeks is only plausible if the wire

fraud statute does not apply extraterritorially. Otherwise he may

properly be convicted based on foreign conduct, "barring some other

limitation." RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090,

2101 (2016) (quoting Morrison v. Nat'l Aus. Bank Ltd., 561 U.S.

247, 267 n.9 (2010)).

-48-
A. Extraterritorial Reach of § 1343

We review the extraterritorial application of a statute

in two steps. First, "we ask whether the presumption against

extraterritoriality has been rebutted." RJR Nabisco, 136 S. Ct.

at 2101. "Absent clearly expressed congressional intent to the

contrary, federal laws will be construed to have only domestic

application." Id. at 2100. The threshold question is "whether

Congress has affirmatively and unmistakably instructed that the

statute" will apply extraterritorially. Id. In the clearest case,

this intent is evinced when the statute affirmatively proscribes

activities that "tak[e] place outside the United States." Id. at

2101 (alteration in original) (quoting 18 U.S.C. § 1957(d)(2)).

While such "an express statement . . . is not essential," id. at

2102, we nevertheless "assume that Congress legislates with an

awareness of the presumption against extraterritorial

application." Carnero v. Bos. Sci. Corp., 433 F.3d 1, 7 (1st Cir.

2006).6 "If the statute is not extraterritorial, then at the

6 "The presumption serves at least two purposes." Carnero, 433
F.3d at 7. First, it prevents "unintended clashes between our
laws and those of other nations." Id. (quoting Equal Emp't Opp.
Comm'n v. Arabian Am. Oil Co. ("Aramco"), 499 U.S. 244, 248
(1991)). Second, it is premised on the notion that Congress is
primarily concerned with domestic conditions. Id. In analyzing
a statute, we consult a statute's "text, context, structure, and
legislative history." Id.; see also RJR Nabisco, 136 S. Ct. at
2101 (employing same approach).

-49-
second step we determine whether the case involves a domestic

application of the statute." RJR Nabisco, 136 S. Ct. at 2101.

While it is "usually . . . preferable for courts to

proceed in [this] sequence," we may "start[] at step two in

appropriate cases." Id. at 2101 n.5. We do so when it is "plain"

that a domestic application is present but the statute itself gives

rise to complex questions of congressional intent. Cf. Pearson v.

Callahan, 555 U.S. 223, 236-37 (2009) (noting efficiency benefits

of skipping to second step of qualified immunity analysis). "One

reason to exercise that discretion is if addressing step one would

require resolving 'difficult questions' that do not change 'the

outcome of the case,' but could have far-reaching effects in future

cases." WesternGeco LLC v. Ion Geophysical Corp., 138 S. Ct. 2129,

2136 (2018) (quoting Pearson, 555 U.S. at 236-37).

Because § 1343 contains difficult questions about

whether Congress intended the statute to apply extraterritorially,

we skip to the second step and determine that the present case is

a domestic application of the statute. Compare European Cmty. v.

RJR Nabisco, Inc., 764 F.3d 129, 141 n.11 (2d Cir. 2014), rev'd on

other grounds, 136 S. Ct. 2090 (2016) (finding § 1343 does not

apply extraterritorially), with United States v. Lyons, 740 F.3d

702, 718 (1st Cir. 2014) (finding Wire Act applies

extraterritorially); and United States v. Georgiou, 777 F.3d 125,

137-38 (3d Cir. 2015) (holding § 1343 applies extraterritorially).

-50-
B. Domestic Application of § 1343

We determine whether the wire fraud statute applies

domestically based on the facts at hand "by identifying the

statute's focus and asking whether the conduct relevant to that

focus occurred in United States territory." WesternGeco LLC, 138

S. Ct. at 2136 (internal quotation marks omitted). A statute's

"focus" is the "object of its solicitude." Id. at 2137 (noting

that the "focus" includes the "conduct it seeks to regulate, as

well as the parties and interests it seeks to protect or vindicate"

(alternations and internal quotation marks omitted)).

In McLellan's view, the "focus" of § 1343 is the fraud

simpliciter that the transmission of communications through wires

seeks to advance and not the use of the wires themselves. Under

that theory, he maintains that there is no possible domestic

application of the wire fraud statute, since the alleged fraud

transpired in a foreign country through Pennings and Boomgaardt's

use of foreign wires. For the following reasons, we disagree.

To be convicted of wire fraud, the government must

establish (1) "a scheme to defraud"; (2) "knowing and willful

participation in the scheme with the intent to defraud";

and (3) "the use of interstate or foreign wire communications to

further that scheme." United States v. Valdés-Ayala, 900 F.3d

20, 33 (1st Cir. 2018) (internal quotation marks omitted). As we

have previously found, the structure, elements, and purpose of the

-51-
wire fraud statute indicate that its focus is not the fraud itself

but the abuse of the instrumentality in furtherance of a fraud.

See United States v. Gordon, 875 F.3d 26, 37 (1st Cir. 2017) ("[I]n

enacting the mail and wire fraud statutes, Congress took aim at

the means of conducting a substantive offense, not at the

substantive offense itself."); see also Pasquantino v. United

States, 544 U.S. 349, 358 (2005) ("[T]he wire fraud statute

punishes fraudulent use of domestic wires."); Bascuñán v. Elsaca,

927 F.3d 108, 122 (2d Cir. 2019) (analyzing the elements of § 1343

and finding that "the regulated conduct is not merely a 'scheme to

defraud,' but more precisely the use of the mail or wires in

furtherance of a scheme to defraud" (emphasis omitted)); United

States v. Driver, 692 F. App'x 448, 449 (9th Cir. 2017) (rejecting

argument that the scheme to defraud is the focus of the wire fraud

statute because "[t]he focus of [the mail and wire fraud statutes]

is upon the misuse of the instrumentality of communication"

(quoting United States v. Garlick, 240 F.3d 789, 792 (9th Cir.

2001))).

A statute is applied domestically "[i]f domestic conduct

satisfies every essential element to prove a violation . . . even

if some further conduct contributing to the violation occurred

outside the United States." European Cmty., 764 F.3d at 142; see

also RJR Nabisco, 136 S. Ct. at 2101 ("If the conduct relevant to

the statute's focus occurred in the United States, then the case

-52-
involves a permissible domestic application even if other conduct

occurred abroad.").

This framework is easily met in this case. The district

court instructed the jury that it could only convict McLellan if

a "wire communication" was sent by him or was caused to have been

sent by him. The district court defined "wire communication" to

include only "a telephone communication or email from one state to

another or between the United States and another country." It

finally instructed the jury that the wire communication need not

be "essential to the scheme" but "must have been made for the

purpose of carrying out the scheme."

While McLellan argues that he could have been convicted

for one stray domestic wire, this glosses over the indictment and

the district court's instructions. The § 1343 counts pinpointed

two specific email communications between McLellan and Pennings.

The first was an April 5, 2011 email from Pennings to McLellan

that noted plans to "increase the spread" on NTMA trades. The

second was a June 22, 2011 email, which told Pennings to inform

Royal Mail that "inadvertent commissions" were applied in the

United States.

Given the instructions, the jury was required to find

(1) that the emails were sent or caused to be sent to, from, or

within the United States, (2) with the intent to defraud, and (3)

that the emails were for the purpose of carrying out the scheme to

-53-
defraud. A jury, then, could only convict McLellan if it

determined McLellan sent or caused another to send a domestic wire

that met each of these requirements. In doing so, the jury in

effect would be concluding that McLellan abused a domestic

instrumentality while in the United States. Therefore, the

instructions as presented sufficiently ensured a domestic

application of the wire fraud statute. See Baird, 712 F.3d at

628. This conclusion disposes of McLellan's claim that the district

court erred in refusing to apply a domestic application

instruction. To prevail on this claim, he needed to present

evidence sufficient to show that the proffered instruction was

"not substantially covered by the charge as rendered." Id. He

falters on this prong because the instruction he desired was

substantially covered by the one given by the court.

As we deal with an instance where a domestic defendant

sent or received communications on behalf of a domestic corporation

through domestic wires in a scheme that was in part implemented

domestically, we need not at this stage determine where the precise

line is between domestic and foreign activity "because wherever

that line should be drawn, the conduct alleged here clearly states

a domestic cause of action." European Cmty., 764 F.3d at 142.7

7 In a case where a foreign defendant is alleged to have committed
wire fraud against a foreign victim, and the use of domestic wires
was merely "incidental" to the overall scheme, additional inquiry
may be necessary to ensure a domestic application of the statute.
-54-
However, we make clear what is implied in the Second Circuit

decisions. Where a defendant is charged with wire fraud based on

having sent or received wire communications while in the United

States for the purpose of carrying out a scheme to defraud, the

wire fraud statute has been applied domestically even if the victim

is located outside of the United States. See European Cmty., 764

F.3d at 139 (rejecting conclusion that the presumption against

extraterritoriality "insulat[es] purely domestic conduct from

liability simply because the defendant has acted in concert with

a foreign enterprise"); see also Elbaz, 332 F. Supp. 3d at 974

("[I]t does not matter if the bulk of the scheme to defraud

involves foreign activity[] [b]ecause the focus of the wire fraud

statute is misuse of U.S. wires to further a fraudulent scheme.").

That the fraud is ultimately conducted through foreign wires does

not mitigate this finding; the jury was required to find that

McLellan's use of domestic wires was in furtherance of the fraud

against the foreign victim. See Pasquantino, 544 U.S. at 371

Bascuñán, 927 F.3d at 122 (establishing two part framework that
finds "wire fraud involves sufficient domestic conduct when (1)
the defendant used domestic mail or wires in furtherance of a
scheme to defraud, and (2) the use of mail or wires was a core
component of the scheme to defraud"); see also United States v.
Elbaz, 332 F. Supp. 3d 960, 974 (D. Md. 2018) (noting difference
in a "scenario in which a fraud scheme [is] perpetrated by
foreigners against other foreigners, with no U.S. nexus other than
the incidental use of U.S. wires, is nevertheless charged as a
domestic offense"). This, however, is not the case presented to
us today.

-55-
(finding domestic application where domestic wires were used to

organize a scheme to defraud a foreign sovereign in that foreign

sovereign's territory). It is McLellan's domestic conduct through

domestic wires that spurred his prosecution. See id.

Not only was the instruction in effect tailored to

require a domestic application, the evidence was more than

sufficient to find a domestic application. On the large scale,

the jury heard substantial evidence that McLellan directed the

scheme from the United States, dictated the commissions to be

applied to U.S.-based trades through email and phone calls, and

used email and phone calls to shape the response to Royal Mail's

discovery of the scheme. On the smaller scale, the April 5th email

was an approval of a scheme to increase, without NTMA's consent,

commissions applied on security trades in the United States. The

June 22nd email was sent by McLellan to direct the coverup of the

scheme. As the given instructions required the jury to find all

the elements for a domestic application and the evidence was

sufficient to support that conclusion, we find that the district

court did not err in declining to provide McLellan's proposed

instruction.

V. Mutual Legal Assistance Treaties

Finally, McLellan asserts that the Due Process Clause of

the Fifth Amendment and the Compulsory Process Clause of the Sixth

Amendment demand that courts have the authority to order the

-56-
government to exercise its MLAT powers to request evidence from

foreign countries. He therefore argues that the district court

erred by declining to compel the government to pursue the evidence

and testimony he sought through the MLAT process when its letters

rogatory proved ineffectual. Because the district court does not

possess the power to order the government to lodge requests under

MLATs, we disagree and find no reversible error.8

We review the district court's determination that it

lacked the power to order the government to make an MLAT request

de novo because it "turn[s] on an interpretation of law." Obiora,

910 F.3d at 560. The district court determined that it lacked the

authority "to compel the government to exercise its rights under

any of the relevant MLATs on behalf of, or for the benefit of, a

private person." First, to support its ruling, it quoted our

decision in United States v. McIntyre (In re Price), 685 F.3d 1,

11 (1st Cir. 2012) (internal quotation marks omitted) (hereinafter

"Price I") for the proposition that "treaties do not generally

8 Alternatively, McLellan argues that the district court erred in
not excluding the government's evidence obtained from foreign
clients. As his claim is reviewed for an abuse of discretion,
United States v. Obiora, 910 F.3d 555, 560 (1st Cir. 2018), and
the evidence the government sought to introduce was probative and
equally available to McLellan, we see no grounds to find that the
district court abused its discretion in not excluding this
evidence. See United States v. Sensi, 879 F.2d 888, 899 (D.C.
Cir. 1989) ("[A] defendant's inability to subpoena foreign
witnesses is not a bar to criminal prosecution.").

-57-
create rights that are privately enforceable in the federal

courts." Second, it referenced United States v. Rosen, 240 F.R.D.

204, 214-15 (E.D. Va. 2007), which "not[ed] that no court has held

that a defendant's compulsory process rights are violated when the

executive branch declines to exercise a treaty power to compel

testimony of a non-American in another country." McLellan

challenges both rationales.

Our opinion in Price I is the lodestar for the MLAT

origin story and the appropriate law to apply when private

individuals seek MLAT relief. As the district court noted,

"treaties do not generally create rights that are privately

enforceable in the federal courts." United States v. Li, 206 F.3d

56, 60 (1st Cir. 2000) (en banc).9 The U.S.-U.K. MLAT is no

exception because it "expressly disclaims the existence of any

private rights." Price I, 685 F.3d at 13. Article 1, paragraph

3 of the U.S.-U.K. MLAT provides the textual hook for this

conclusion. Id. at 12-13. It states, in full: "This treaty is

intended solely for mutual legal assistance between the Parties.

The provisions of this Treaty shall not give rise to a right on

9 This comports with the "background presumption" that
"[i]nternational agreements, even those directly benefitting
private persons, generally do not create private rights or provide
for a private cause of action in domestic courts." Medellín v.
Texas, 552 U.S. 491, 506 n.3 (2008) (alteration in original)
(quoting Restatement (Third) of Foreign Relations Law of the United
States § 907 cmt. a, at 395 (1986)).

-58-
the part of any private person to obtain, suppress, or exclude any

evidence, or to impede the execution of a request." U.S.-U.K.

MLAT, art. 1, ¶ 3. In relevant part, the U.S.-Ireland MLAT is a

carbon copy. See U.S.-Ireland MLAT, art. 1, ¶ 4.

However, we recognize that McLellan seeks relief under

the Constitution and only indirectly invokes the MLATs. By asking

the district court for an order to compel the government to

exercise its treaty powers to request potentially favorable

evidence to his case from foreign countries, McLellan seeks to

protect his due process rights rather than "to vindicate a private

treaty right."10 It is well-settled law that "no agreement with a

foreign nation can confer power on the Congress, or on any other

branch of Government, which is free from the restraints of the

Constitution." Boos v. Barry, 485 U.S. 312, 324 (1988) (quoting

Reid v. Covert, 354 U.S. 1, 16 (1957) (plurality opinion)). As

the Ninth Circuit has noted, those restraints certainly include

"the separation of powers and the guarantee of due process." In

re Premises Located at 840 140th Ave. NE, Bellevue, Wash., 634

F.3d 557, 571-72 (9th Cir. 2011) (citing Am. Ins. Ass'n v.

Garamendi, 539 U.S. 396, 416 n.9 (2003) (holding that treaties are

10 Along those lines, McLellan contends that even if the MLATs
preclude private rights of action, "they do not preclude the
ability of courts to order the government to seek evidence in the
interests of ensuring defendants a fair trial." By his reading,
the language of the MLATs is "broad enough to encompass requests
made by the government on behalf of criminal defendants."
-59-
"[s]ubject . . . to the Constitution's guarantees of individual

rights")). McLellan submits that because MLATs create an

"evidence-gathering imbalance" in criminal cases where the charges

include conduct occurring abroad, the related guarantees of the

Due Process Clause of the Fifth Amendment and the Compulsory

Process Clause of the Sixth Amendment empower the courts to

safeguard these rights to restore the evidentiary balance,

notwithstanding the absence of private rights of action in the

MLATs.

As McLellan notes, we have held that district courts

possess the authority to quash a subpoena issued by the government

pursuant to a U.S.-U.K. MLAT request. United States v. Trs. of

Bos. Coll. (In re Price), 718 F.3d 13, 23 (1st Cir. 2013)

(hereinafter "Price II"). Our reasoning was based on the

observation that "[n]othing in the text of the U.S.-U.K. MLAT, or

its legislative history . . . lead[s] us to conclude that the

courts of the United States have been divested of an inherent

judicial role that is basic to our function as judges." Id.11

Relying on Price II, McLellan contends that if separation of powers

11 Additionally, he cites to the Ninth Circuit case quoted in
Price II rejecting the government's assertion of sole discretion
in MLAT affairs because it "suggests that by ratifying an MLAT,
the legislative branch could compel the judicial branch to reach
a particular result . . . in particular cases, notwithstanding any
concerns, such as violations of individual rights, that a federal
court may have." In re 840 140th Ave. NE, 634 F.3d at 572.

-60-
justifies a trial court's retention of power to quash MLAT

subpoenas issued by the U.S. government that potentially infringe

on First Amendment protections, then it must also dictate that

courts have the power to "ensure the defendant's right to a

fundamentally fair trial" by "ordering the government to exercise

its undoubted right to obtain the evidence." For the following

reasons, we disagree.

First, our line of cases involving MLAT subpoenas is

readily distinguishable from the predicament that McLellan faces.

In Price I and Price II, the Executive Branch exercised its

diplomatic discretion to comply with the United Kingdom's MLAT

request for information related to an ongoing investigation into

a casualty from the conflict in Northern Ireland. See Price II,

718 F.3d at 16-17. Accordingly, the U.S. government issued two

subpoenas through an appointed commissioner, see 18 U.S.C. § 3512,

to compel Boston College ("BC") to produce interviews from formerly

active participants in the conflict that were compiled by one of

BC's research projects. Price II, 718 F.3d at 16. The central

holding of Price II was that the district court had abused its

discretion by compelling BC to produce interviews that exceeded

the scope of the original subpoena, thus implicating First

Amendment concerns. Id. at 17. In Price I, we determined that

the treaties precluded private rights of action, and we therefore

denied foreign citizens' motions to intervene in BC's motion to

-61-
quash. 685 F.3d at 3, 13. Additionally, we held that § 701(a)(1)

of the Administrative Procedure Act ("APA") barred jurisdiction

over the prospective plaintiff's APA claim because the U.S.-U.K.

MLAT "by its express language precludes judicial review." Id. at

13. These cases constitute the inverse of McLellan's situation.

Since the U.S. government has not exercised its

discretion to pursue evidence through the relevant MLATs, McLellan

effectively urges the Court to find that the MLATs have expanded

the role of the judiciary to include the ability to compel the

government to seek the type of evidence he requests. Separation

of powers surely cannot be stretched so far in this direction as

to provide an avenue for a district court to compel a co-equal

branch to take certain action on behalf of a private individual

without textual or statutory direction.12 Quite the opposite of

Price II, here, it would offend separation of powers principles to

permit the Judiciary to "impair" the Executive "in the performance

12 This is consistent with the view taken by the Department of
Justice at a hearing before the Senate Foreign Relations Committee:
"While a U.S. court would be able to ask the prosecution to make
a request under the treaty (i.e., to adopt a request as its own),
the court would lack the power or authority to compel the
Government to make a request for the benefit of the defense over
the objection of the prosecution." Consular Conventions,
Extradition Treaties, and Treaties Relating to Mutual Legal
Assistance in Criminal Matters (MLATs): Hearing Before the S. Comm.
on Foreign Relations, 102d Cong. 40 (1992) (statement of Robert
Mueller III, Assistant Att'y Gen., Criminal Div., Dep't of
Justice).

-62-
of its constitutional duties." Price II, 718 F.3d at 22 (quoting

Clinton v. Jones, 520 U.S. 681, 701 (1997)). The Constitution may

protect individuals in the United States from subpoenas to comply

with foreign MLAT requests, but it generally does not vest criminal

defendants with the power to compel the government to lodge

diplomatic requests on their behalf. See United States v.

Sedaghaty, 728 F.3d 885, 917 (9th Cir. 2013) ("[T]he district court

had no authority to order the Executive Branch to invoke the treaty

process to obtain evidence abroad for a private citizen.").13

A contrary finding could potentially open U.S. foreign affairs to

the far-flung theories of criminal defendants and risk delay of

13 Despite our search, we could find no decision contrary to this
proposition. United States v. Schneider, No. 17-935, 2019 WL
4242637, at *17 (E.D. Pa. Sept. 6, 2019) (rejecting the defendant's
argument that the government's use of an MLAT with Russia deprived
him of his "rights to a fair trial, due process and compulsory
process"); Escalante v. Lizarraga, No. ED CV 17-850-R (SHK), 2018
WL 2938520, at *7-9 (C.D. Cal. Apr. 16, 2018) ("[A] criminal
defendant has no rights under the [MLAT between the U.S. and
Mexico] to obtain evidence."); United States v. León, No. 09 CR
383-16, 2018 WL 1832878, at *4 (N.D. Ill. Apr. 16, 2018) ("[T]his
Court has 'no authority to order the Executive Branch to invoke
the treaty process to obtain evidence abroad for a private
citizen.'" (quoting Sedaghaty, 728 F.3d at 911-917)); United
States v. Márquez, No. 10CR3044 WQH, 2012 WL 349580, at *4 (S.D.
Cal. Feb. 2, 2012) ("[T]he Sixth Amendment right to compulsory
process . . . does not require an order compelling the Government
to use the MLAT to obtain evidence on behalf of the Defendant.");
United States v. Jefferson, 594 F. Supp. 2d 655, 674-75 (E.D. Va.
2009) ("It is . . . 'quite clear that the right to compulsory
process extends only to forms of process a court can issue of its
own power, not to forms of process that require the cooperation of
the Executive Branch or foreign courts.'" (quoting Rosen, 240
F.R.D. at 214)).

-63-
trial as other countries respond to those requests. Id. (noting

distinctions between immunity context and international

treaties).14

Second, despite McLellan's protestations, our holding in

United States v. Theresius Filippi, 918 F.2d 244 (1st Cir. 1990),

does not dictate otherwise. The Sixth Amendment encompasses a

criminal defendant's right "to have compulsory process for

obtaining witnesses in his favor." U.S. Const. amend. VI. This

includes "[t]he right to offer the testimony of witnesses, and to

compel their attendance, if necessary." United States v.

Acevedo-Hernández, 898 F.3d 150, 169 (1st Cir. 2018) (quoting

Washington v. Texas, 388 U.S. 14, 18-19 (1967)). This right,

however, is not absolute. See United States v. Resurrección, 978

F.2d 759, 762 (1st Cir. 1992) ("The Constitution does not

automatically entitle a criminal defendant to unobtainable

testimony."). "There can be no violation of the defense's right

to present evidence . . . unless some contested act or

omission (1) can be attributed to the sovereign and (2) causes the

loss or erosion of testimony which is both (3) material to the

14 This is certainly not a case where there was a "stacked deck"
against McLellan. See Sedaghaty, 728 F.3d at 916. McLellan
concedes that he was able to receive some measure of documents
from the relevant clients. This is, therefore, not a case where
the government possesses evidence, or has easy access to evidence,
that a criminal defendant lacks. Instead, "both sides faced
obstacles in obtaining evidence from abroad." See id.

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case and (4) favorable to the accused." United States v. Hoffman,

832 F.2d 1299, 1303 (1st Cir. 1987); see also Theresius Filippi,

918 F.2d at 247.

Theresius Filippi featured a criminal defendant facing

drug trafficking charges who was unable to secure the presence of

a key corroborating witness located in Ecuador due to government

inaction. 918 F.2d at 245-46. Since the district court judge

determined that the witness was material and that his testimony

would have been favorable to the defense, our analysis concerned

the attributability and causation prongs of the Hoffman test. Id.

at 247. We recognized that "the right of compulsory process does

not ordinarily extend beyond the boundaries of the United States."

Id. However, we determined that the government's subpoena power

abroad was not at issue because the witness was willing -- and

indeed intended -- to testify at trial but for his inability to

"overcome the immigration hurdles blocking his entry into the

United States." Id. In our view, the "onus" was therefore on the

government "merely to make it possible" for the witness to attend

trial "by requesting a Special Interest Parole from the

[Immigration and Naturalization Service]." Id. Although we

ultimately affirmed the conviction because the defendant waived

his compulsory process rights by "proceed[ing] at trial without

his witness," id. at 246, we also found that the U.S. Attorney's

"deliberate omission to act, where action was required" directly

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caused the defense to lose its only material witness, which rose

to the level of impermissible interference with his Fifth and Sixth

Amendment rights. Id. at 247.

McLellan's case is readily distinguishable on the

causation and favorability prongs of the Hoffman test. First,

McLellan has not established that the U.S. government actually or

proximately caused the absence of the evidence he seeks. The

omission in this case is the government's discretionary decision

not to initiate MLAT requests for evidence on McLellan's behalf

when the letters rogatory failed to achieve the desired result.

However, while the government may request evidence through the

MLAT process, it cannot guarantee compliance. See United States

v. Mejía, 448 F.3d 436, 444 (D.C. Cir. 2006) ("Having the authority

'to seek' tapes or transcripts through a treaty is not the same

thing as having 'the power to secure' them."); United Kingdom v.

United States, 238 F.3d 1312, 1317 n.5 (11th Cir. 2001)

("[C]ompliance with an MLAT request is not mandatory with respect

to records held by governmental agencies."). The Judicial

Authority of Ireland's reply to the district court's letters

rogatory statement that it understands the U.S.-Ireland MLAT to be

the appropriate avenue for requesting evidence refers to a

protocol, but it does not promise results.

McLellan's claim also stumbles on the favorability

element. Although the district court acknowledged that the

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evidence McLellan sought was material to his case (specifically to

the materiality component of securities fraud), McLellan failed to

provide a plausible showing that the evidence would be favorable

to his defense. See Hoffman, 832 F.2d at 1303 ("There must be a

plausible showing that the testimony was both material and

favorable to the defense."). McLellan sought information from

Ireland-based Eircom and NTMA pertaining to (1) internal

communications related to the firms understanding of the offer

from State Street, (2) communications regarding the fees,

(3) competing bids, and (4) communications related to overcharges.

While McLellan argues strenuously that the evidence was necessary

to cross-examine witnesses on the securities fraud counts, he

presented no plausible basis for the district court to determine

that the evidence in the possession of those firms contained

information that could have led to an acquittal, and he concedes

that he does not know the contents of the documents that he seeks.

See id.15 His arguments only demonstrate that the evidence was

15 In an analogous case, the Supreme Court held that the government
was not required to halt a deportation of a potentially material
and possibly favorable witness, where the criminal defendant made
no showing that the testimony the witness would have given would
have been favorable. United States v. Valenzuela-Bernal, 458 U.S.
858, 870-71 (1982). While the Court recognized that it would be
difficult for an accused defendant to determine if testimony from
the witness would be material and favorable at trial, and relaxing
the requirements might be justified in those instances, it
determined that such difficulty does not "afford[] the basis for
wholly dispensing with such a showing." Id. at 870.

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material, but he has not demonstrated that the evidence would have

been favorable. A showing of materiality, alone, is insufficient

to show favorability. Id.; see also United States v. Combs, 555

F.3d 60, 63-64 (1st Cir. 2009) (rejecting criminal defendant's

claim that "it [was] impossible to know how [the witness] might

have testified absent [the government's] conduct" as insufficient

to establish favorability).

We conclude, therefore, that the district court does not

have the authority to compel the government to issue MLAT requests.

Nor is the "onus" on the government in this case to "make it

possible" for the defendant to obtain, via an MLAT request,

evidence that he cannot establish is favorable to his case.

Theresius Filippi, 918 F.2d at 247. Thus, we find no reversible

error. However, we believe it important to note that we do not

disagree that the text of the MLATs at issue do not explicitly

preclude the government from using its discretion to lodge requests

on behalf of criminal defendants. Prosecutors have a duty to "act

in accordance with the obligations imposed on [them] as

. . . agent[s] of justice," id. at 246, and where practicable,

deploying the government's MLAT capabilities in such a manner would

be a just way of fulfilling those obligations.16 However, where,

16 In the rare event that a court does make a request for
information under an MLAT, the Department of Justice takes the
position that "[a] decision would be made on a case-by-case basis,"
and even if "the prosecutor is not persuaded that evidence abroad
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as here, a criminal defendant makes no plausible showing that the

government could have secured evidence that is both material and

favorable to his defense, we have little difficulty concluding

that the prosecutors did not violate this duty.

VI. Conclusion

Accordingly, we affirm McLellan's convictions on all

counts.

Affirmed.

really exists or is needed, he or she may well ask the Department
to make the request anyway, in order to alleviate any questions or
concern the court may have on the matter." 102d Cong. 41 (1992).

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