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United States v. Jean-Pierre.

No. 20-1039.  D.Colo. Judge McHugh. Securities Fraud—Fed. R. Evid. 404(b)—Harmless Error—Jury Instructions.

June 14, 2021

Defendant was an attorney specializing in corporate and securities law. From 2010 or 2011 until 2013, he worked with two other individuals, Sears and Dittman, to manipulate the stock prices of a company known as FusionPharm, Inc. Defendant’s role was to obfuscate negative information and to make stock trades exempt from Securities and Exchange Commission (SEC) registration by providing incomplete information.

FusionPharm’s stock was a microcap stock traded on the over-the-counter (OTC) market. In its “pink” tier, the OTC market distinguishes between companies that provide adequate current information, those that provide limited information, and those that provide no current information. Companies in the current information category must furnish quarterly financial statements, an annual disclosure statement, and an attorney letter stating that the company meets the disclosure requirements, including those of SEC Rule 144. FusionPharm regularly uploaded the required disclosures and the corresponding attorney letters, allowing it to stay in that category.

Beginning in April 2010, the OTC market refused to accept legal opinions from defendant because his repeated inconsistencies and omissions demonstrated that he failed to draft attorney letters with due diligence. Soon thereafter, defendant submitted 12 attorney letter agreements containing the unauthorized signature of his niece, who is also an attorney but who did not do legal work for defendant. Defendant also aided Sears, who had a conviction for securities fraud, in concealing Sears’s involvement with FusionPharm. In 2011, the Financial Industry Regulatory Authority (FINRA) began to investigate FusionPharm’s stock sales. Defendant impeded the investigation by falsifying documents. Based on defendant’s misrepresentations, FINRA closed its investigation. In its 2021 annual report, FusionPharm falsified revenue, making it look attractive to investors. Its stock sales led to net proceeds of over $11 million, including windfalls to Sears and Dittman.

In 2016, the FBI conducted a sting operation targeting defendant, and secured Sears’s cooperation. This operation led to defendant’s arrest and indictment. Following a jury trial, defendant was convicted on 28 counts.

Defendant appealed his conviction on four of the counts. He argued that the district court abused its discretion in admitting the attorney letter agreements with his niece’s signature. Even assuming that this evidence was improperly admitted, any error was harmless because defendant failed to object to other admitted evidence that demonstrated defendant used his niece’s signature without her permission to submit attorney letters to the OTC market.

Defendant also argued that the district court erred by not instructing the jury that the government had to prove beyond a reasonable doubt that the securities were not exempt under Rule 144. However, the instructions correctly set forth the first element of securities fraud, including four separate means of satisfying that element, and properly instructed the jury that the government must prove each element beyond a reasonable doubt. There is no requirement that the district court further instruct the jury that the government’s burden applies to a specific means of satisfying that element. In addition, though defendant sought further instructions focused on whether the securities at issue met the requirements of Rule 144, based on the evidence, the jury could have convicted him on the ground that a different statement or act violated the first element of securities fraud. Therefore, the district court determined it would be confusing to separately instruct the jury on only one factual theory.  Accordingly, the trial court did not abuse its discretion.

The convictions were affirmed.

Official US Court of Appeals for the Tenth Circuit proceedings can be found at the US Court of Appeals for the Tenth Circuit website.

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