SOLUTION: United States v Mark P Kaiser Case Study Questions
Page 1 UNITED STATES, Appellee, -v- MARK P. KAISER, Defendant-Appellant. Docket No. 07-2365-cr UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT 609 F.3d 556; 2010 U.S. App. LEXIS 13463; Fed. Sec. L. Rep. (CCH) P95,789 July 6, 2009, Argued July 1, 2010, Decided JUDGES: Precedently JACOBS, Chief Judge, CALABRESI, and POOLER, Circuit Judges. OPINION BY: POOLER OPINION POOLER, Circuit Judge: Mark P. Kaiser ("Kaiser") invites from a estimation of assurance and judgment entered on May 18, 2007, forthcoming a jury grief in the United States Bounds Pursue for the Southern Bounds of New York (Griesa, J.). The council alleged at grief that Kaiser, a eminent-level magistreconfirm at U.S. Foundation Services ("USF"), made delusive deformitys valueing the financial plight of USF, and at-last, the financial plight of Royal Ahold N.V. ("Ahold"), which adscititious USF in April 2000. Count One of the indictment alleged that from April 2000 to February 2003, Kaiser separateicipated in a treachery to execute securities deprivation, to construct spurious filings behind a while the Securities and Exchange Commission ("SEC"), and to cook books and registers, in permutation of 18 U.S.C. ß 371. Reckon Two abounding that Kaiser executeted securities deprivation in permutation of 15 U.S.C. ßß 78j(b) & 78ff, 17 C.F.R. ß 240.10b-5, and 18 U.S.C. ß 2. Counts Three, Four, Five, and Six abounding that Kaiser made or sourced to be made a spurious filing to the SEC on bestead of Ahold, in permutation of 15 U.S.C. ßß 78m(a) & 78ff, 17 C.F.R. ß 240.13a-1, and 18 U.S.C. ß 2. The jury rerancid a experienceing condemning Kaiser on all five reckons of the indictment. Behind a while value to Reckon One, the treachery reckon, the jury fix that the goalives of the treachery intervening making spurious filings and cooking books and records, but not executeting securities deprivation. Judge Griesa judgmentd Kaiser chiefly to a tidings of 84 months' restraint and imposed a $ 50,000 pure. Kaiser has been acquitd on sponsor pfulfilment disentanglement of this invite. Kaiser argues that tclose were two fallacys in the bounds pursue's jury edifyions, three void of truth evidentiary rulings, and two fallacys in sentencing. Behind a while value to the jury edifyions, Kaiser contends that the bounds pursue made fallacys on the apprised deviation plea and the "willfulness" component of securities deprivation. Kaiser argues that the bounds pursue besides erred in admitting 1) declaration of his delusive dealings precedently the abounding securities deprivation began in April 2000, 2) certain negotiation planners inferiorneathneathneathneath the negotiation registers exclusion to the description administration, and 3) a description assertion that USF's General Monition wanted to description Kaiser to the SEC. Finally, Kaiser argues that the bounds pursue erroneously fitted his judgment. We complete that the bounds pursue erred in its edifyions behind a while value to the apprised deviation plea and in admitting the assertion of USF's Unconcealed Counsel, but throw-by Kaiser's other claims on invite. Owing we surrender and remand the substance to the bounds pursue for a new grief, we do not gain Kaiser's claims that the bounds pursue's sentencing indulgent was in fallacy. I. BACKGROUND USF is one of the largest distributors of plantation and allied products in the United States. Its original negotiation is to serve as a middleman by purchasing incongruous plantation products from manufacturers and selling them to restaurants. Between 1994 and 2001, Kaiser supervised employees in USF's Purchasing Department, which managed the society's dealings behind a while Page 2 609 F.3d 556, *; 2010 U.S. App. LEXIS 13463, **; Fed. Sec. L. Rep. (CCH) P95,789 its plantation vendors. In the Purchasing Department, Kaiser passd cancelments from vendors unreserved as "promotional restorations," or "PAs," a image of rebate hired to USF upon contentment of certain purchasing targets. These PA cancelments are an grave source of fruits for USF and a useful introduceation of its negotiation. The indictment consequenced opposite Kaiser abounding that he bequeathed a point to delusively distend USF's PA proceeds for the years 2001 and 2002, that he affianced in prefer delusive acts to cloke the distendd mass from beyond testifiers, and that he made incongruous deformitys to the testifiers of the PA harmonys behind a while vendors. The council's case opposite Kaiser was primarily built encircling the attestion of three cooperators, all of whom testified pursuant to plea agreements behind a while the council: 1) Tim Lee, a USF employee in the Purchasing Department, 2) Bill Carter, who worked for Lee at USF, and 3) Gordon Redgate, who owned two corporations that supposing services to USF allied to the point. Lee and Redgate testified that Kaiser engineered the point and knew it was illicit. Kaiser, on the other hand, argued that he had been set up by Lee and Redgate as a scapegoat and that he had been insensible of the deprivation. A. Promotional Restoration ("PA") Proceeds Scheme Lee testified that, source in the 1990s, Kaiser passd PA reduces that claimd vendors to preward PAs, theme to the plight that USF would reward the equality if it did not converge its targets. Although the PA cancelments were not in-effect earned until USF met the plights in the reduce, Kaiser straightway chronicled the prepayments as proceeds in USF's books and registers, thereby artificially inflating the equality of fruits USF had earned from PA cancelments to ensure that USF met its hues and other budgetary targets. USF magistrates, including Kaiser, solely common bonuses when USF met these targets, providing a masterful deemblem for Kaiser to distend USF's PA proceeds. As an illustration, Lee testified environing Kaiser's involvement behind a while vendor Puritan Chemical. According to Lee, Kaiser passd a $ 26.5 darling PA from Puritan Chemical in 1999 to be earned et a tidings of ten years. The harmony supposing for an $ 18 darling precancelment to USF, opposing the flusht that none of the plights of the PA had been met. To disguise the cancelment, Kaiser sent Puritan Chemical's restrain to a third-party intermediary society owned by Redgate, which broke up the cancelment into six smaller restrains and sent them to USF. Kaiser argued that it was Lee who was fairly-deduced for most of the vendor reduces containing prepayments, pointing out that "[o]f the 80 reduces in the archives from 2000 and precedently, Kaiser attested 9 and Lee attested 45." Lee besides testified that Kaiser unobstructed a point in the 1990s whereby Kaiser would obtain?} "PA impoverishment" out of amounts that USF tit to vendors for consequence, thereby increasing the equality of PA proceeds on the books. Numerous of these impoverishment were loose and not verified by the vendors. If a vendor complained, Kaiser would either pass behind a while the vendor to pay end the impoverishment the forthcoming year, thereby allowing USF to converge current-year budget targets, or he would stall until the year-end audits had been completed. Both the PA precancelment point and the PA deduction point outcomeed in distendd PA proceeds on USF's books. B. Point Behind Ahold's Acquisition of USF In April 2000, Ahold adscititious USF. In existing 2001, Kaiser was designated the Chief Marketing Officer of USF, and his centre shifted detached from purchasing to the hawk plane of the negotiation. According to Lee, ultimately, Kaiser continued to be involved in a constellation of PA-allied points to boost USF's fruits. For exemplification, Lee testified that Kaiser coordinated closely $ 100 darling in delusive PA impoverishment in 2001. Kaiser, ultimately, alleged that it was Lee who executed the impoverishment and that Kaiser believed them to be strong. Kaiser besides telling out that his disappearance from the Purchasing Department coincided behind a while a illusiony extension in the reckon of vendor reduces, numerous of which had precancelment tidingss, and that it was Lee and Carter who were fairly-deduced for them. Kaiser attested solely one reduce behind 1999, and that reduce had no precancelment tidings. Lee besides testified of Kaiser's role in contrast the "PA reprove," or the equality of PA proceeds USF expected to hold in a abandoned fiscal year. 1 The reconfirm was fitted invetescold on PA proceeds common in earlier fiscal years and then adjusted for extensions or decreases in sales and deauthorized sales. However, owing USF's PA proceeds had been distendd in earlier years, the PA reconfirm for fiscal year 2001 was besides distendd. In appoint to requite for this shortfall, the council argued that Kaiser chronicled and sourced others to archives non-existent PAs in "top-plane journal entries" on the society books. This outcomeed in phantom representations receivable for PA cancelments that USF was not, in flusht, tit. By January 2002, the representations receivable et for PA cancelments had developed to $ 300 darling. By the end of 2002, the et had ballooned to further than $ 700 darling. Page 3 609 F.3d 556, *; 2010 U.S. App. LEXIS 13463, **; Fed. Sec. L. Rep. (CCH) P95,789 1 Kaiser denies substance fairly-deduced for contrast the PA reprove. Lee testified that he was not certain who set the reprove, but that Kaiser was involved in certain conversations environing it. However, the council introduced a July 11, 2001 email instrument in which Kaiser assured other USF employees of the "reconfirm that you should be accruing" invetescold on Kaiser's tribute of the representationing. C. Deloitte's Audit of USF After Ahold adscititious USF, the representationing secure Deloitte & Touche ("Deloitte") was hired to audit USF's year-end financial assertions. Although Kaiser was no longer the leader of the Purchasing Department, he was calm?} fairly-deduced for helping Deloitte guide its audit of USF's PA proceeds. Most of the acts abounding in the indictment anxiety Kaiser's involvement behind a while the Deloitte audit. 1. Delusive Accounting Practices According to the council, owing Kaiser knew that a eminent PA representations receivable et would establish the distrust of Deloitte testifiers, he began manipulating commonplace, non-PA cancelments to construct them illusion to testifiers as if vendors were paying down their PA et. For illustration, in the 2001 audit, tclose was a $ 10.6 darling cancelment from Redgate's society that was treated as a PA flush though it was not allied to any PA negotiation. Kaiser sent Redgate a backdated communication requesting that the cancelment be treated as a PA and asked Redgate to transmit testifiers solely the top separate of the restrain so that they would not perceive the point of the cancelment. Redgate wrote in his planner on February 5, 2002, that Kaiser had determined to say he "needs top vision of restrain dated 4/11/02 for 10 darling. Top party solely!" The council besides cited a $ 1.6 darling cancelment common from the vendor Frozen Farms, which was chronicled as a PA cancelment from another vendor, Koch Poultry Farms. Later, Kaiser attested and sent Koch Poultry Farms a approval communication stating that it tit USF $ 3.18 darling. By reallocating the $ 1.6 darling that had been common from Frozen Farms to the PA-allied acreckon receivable for Koch Poultry, the council argues that Kaiser endeavored to mislead Deloitte testifiers by creating the spurious collision that the closely $ 3.18 darling PA shape was fairly-deduced and that it was substance hired down by Koch Poultry. Kaiser responded to these allegations at grief by emphasizing that the alsubsidence of PAs floating vendors had inoffensive explanations, including that the realsubsidence of funds was inevitable to acreckon for changes in USF's negotiation. 2. Delusive Misrepresentations In localation to attempting to cloke the distendd PA proceeds, Kaiser allegedly lied to Deloitte testifiers environing two flushts allied to the PA harmonys. First, the council alleged that in appoint to cloke the entity of PA prepayments, Kaiser told the testifiers that USF did not hold prepayments. In a instrument that illusions to bear been handy for a November 29, 2000 Audit Committee Meeting, behind a while "Mark Kaiser," imaged on the front screen, tclose is a assertion that illusions to bear been drafted by USF address to Deloitte. The assertion provides that USF did not "regularly pass 'upfront' cancelments from vendors for its [PA] programs." This rancid out to be spurious. Kaiser argued that the deformity could not be straightway attributed to him, and that, in any flusht, he was never made apprised of the reckon of PA agreements behind a while precancelment tidingss. Second, the council alleged that in appoint to cloke the prepayments from the testifiers, Kaiser told them that USF did not bear written PA harmonys behind a while the vendors. In a communication providing recommendations to USF address for the year fulfilment December 29, 2001, Deloitte intervening an "[o]bservation" allied to USF's "promotional restorations behind a while vendors" that "no exact written harmony's [sic] are attested." An testifier testified that the instrument was discussed at a meeting animated by Kaiser. Kaiser argued that this assertion was not localally attributed to him, and telling to attestion from testifiers at grief that involved their inferiorneathneathneathstanding that tclose were some written harmonys in situate. 3. Delusive Approval Letters Finally, the council alleged that Kaiser attempted to cloke the distendd PA proceeds from Deloitte testifiers by drafting and transmiting approval communications to certain clarified vendors requesting approval that USF had earned and was tit the PA equalitys reflected on its books. Lee testified that one vendor, Pactiv, was shocked by a communication asking it to confirm that it tit $ 5.6 darling in promotional restorations for 2001. Another vendor, Ken's Foods, refused to emblem a communication unless Lee attested off on an localational communication stating that the equality in the approval was not in-effect tit. Redgate testified that his society had attested approval communications behind receiving assurances from Kaiser that it would not bear to pay the equalitys set forth in the communications. The council introduced declaration at grief, the admissibility of Page 4 609 F.3d 556, *; 2010 U.S. App. LEXIS 13463, **; Fed. Sec. L. Rep. (CCH) P95,789 which is now at consequence on this invite, that Redgate conjointly chronicled these conversations in negotiation planners. Kaiser argued that the council relied closely exclusively on these planner entries to illusion that the approval scholarship attested by Kaiser were not cheerful-natured-tempered-tempered credulity estimates of the vendors' PA obligations. The grief pursue admitted the planners et Kaiser's hindrance inferiorneathneathneathneath the negotiation registers exclusion to the description administration. Fed. R. Evid. 803(6). D. The Point Unravels The decisive straw was a communication attested by Kaiser and sent to the vendor Heritage Bags stating that Heritage tit a PA et of et $12 darling. The CFO of that society was a antecedent Deloitte testifier, who became anxietyed and sent a separeconfirm communication to Deloitte contrast forth the accureconfirm et, $ 2.5 darling, and besides disclosing that tclose was a precancelment and a written harmony. On February 11, 2003, behind receiving this communication and other declaration that USF had harmonys behind a while vendors that supposing PA harmonys, Deloitte projecting is-sue on its 2002 year-end audit. An examination ensued, outcomeing in an indictment opposite Kaiser charging him behind a while treachery to execute securities fraud, construct spurious filings behind a while the SEC, and cook books and registers; securities deprivation; and making spurious filing behind a while the SEC. Grief commenced on October 12, 2006 and on November 8, 2008, the jury rerancid a experienceing of sullied on all counts. Specifically, the jury fix the that goalives of the treachery intervening making spurious filings and cooking books and registers, but not executeting securities deprivation. On May 17, 2007, Judge Griesa judgmentd Kaiser to 84 months' imprisonment, two years' supervised acquit, a $ 50,000 pure, and a $ 600 distinctive tribute. This invite followed. II. DISCUSSION Kaiser establishs numerous incongruous challenges to the grief adown. We foremost attend Kaiser's claims behind a while value to the apprised deviation and willfulness jury edifyions. We then hinge to Kaiser's discussion that he had inadequate regard of declaration the council introduced about to his activities precedently 2000. Finally, we attend Kaiser's claims behind a while value to the attestion of USF's unconcealed monition and the bounds pursue's bearing of Redgate's negotiation planners. A. Jury Instructions Kaiser argues that the bounds pursue erred in edifying the jury behind a while value to the willfulness limitation and the recognition limitation of securities deprivation. We afsecure the bounds pursue's edifyions on willfulness, but tally that the bounds pursue erred in edifying the jury on the consequence of apprised deviation. 1. Apprised Deviation [omitted] 2. Willfulness Judge Griesa edifyed the jury that the claimd invisible recite for securities deprivation was that Kaiser "acted perceiveingly and behind a while eager to circumvent," and elaborated as follows: In appoint to condemn the prisoner, you must experience that he knew that spurious assertions were substance made, spurious advice was substance incorporated into the hues outcomes and the representations receivable outcomes, that he knew that the promotional restoration shapes were substance distendd, and that he did this behind a while eager to source a blunder, a quittance. Now this instrument that he cannot be condemned of mistake, he cannot be condemned if he in cheerful-natured-tempered-tempered credulity deliberation that these outcomes were set-right, flush though they rancid out not to be correct. And the council must confirm the incompatible of the theme of misobtain?} or cheerful-natured-tempered-tempered credulity admission. The council must confirm, as set forth close, that he knew of the spurious and delusive inflation of the promotional restoration shapes, he knew of the spurious and delusive inflation of hues as a outcome and representations receivable as a outcome and that he did that behind a while eager to engender a blunder. Kaiser argues that the bounds pursue erred in enfeebled to edify the jury that "willfulness" claimd perceiveledge of illicitity. 2 We do not tally, ultimately, that "willfulness" claims scrutiny that the prisoner knew that his actions were illicit. 2 Both separateies requested that Judge Griesa edify the jury that willfulness claimd perceiveledge of illicitity. Judge Griesa did not introduce the proposed edifyion, and did not administration on the proposed edifyions precedently giving the allocate, trade the usage "a lavish of spell." [HN7] Besource Kaiser failed to goal behind Judge Griesa abounding the jury, we reconsideration the jury edifyion for unobstructed fallacy. Fed. R. Crim. P. 30(d). The Securities Exchange Act of 1934 criminalizes solely "willful" permutations of its provisions. 15 U.S.C. ß 78ff(a); United States v. Cassese, 428 F.3d 92, 98 (2d Cir. 2005). Behind a while value to misstatements in open filings, the prisoner must bear besides acted behind a while perceiveledge of the falsity of the assertion. See 15 U.S.C. ß 78ff(a). But the council is not re- Page 5 609 F.3d 556, *; 2010 U.S. App. LEXIS 13463, **; Fed. Sec. L. Rep. (CCH) P95,789 quired to introduce "[p]roof of a local eager to disobey the law . . . to defend a assurance inferiorneathneathneathneath ß 32(a) of the Act, supposing that jocular scrutiny is certain that the prisoner intended to execute the act prohibited." United States v. Schwartz, 464 F.2d 499, 509 (2d Cir. 1972). Instead, a prisoner may establish the shelter that he did not perceive the law to avoid restraint. See 15 U.S.C. ß 78ff(a) ("[N]o idiosyncratic shall be theme to restraint inferiorneathneathneathneath this minority for the permutation of any administration or government if he confirms that he had no perceiveledge of such administration or government."). In aspect of this choice statutory expression, we bear held that, whatever "willful" strength balance for points of other statutes, for the points of Minority 32(a), it does not circumvent the limitation that a prisoner knew he was violating the law. United States v. Dixon, 536 F.2d 1388, 1395 (2d Cir. 1976) ("A idiosyncratic can willfully disobey an SEC administration flush if he does not perceive of its entity" (quoting United States v. Peltz, 433 F.2d 48, 54 (2d Cir. 1970)); see besides United States v. Tarallo, 380 F.3d 1174, 1188 (9th Cir. 2004) ("Under our regulation, . . . 'willfully' as it is used in ß 78ff(a) instrument eagerionally inferiorneathneathneathtaking an act that one perceives to be wrongful; 'willfully' in this texture does not claim that the ...
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