U.S. v. KAHALE

arious times between 2003 and 2008. (Tr. 1726-30, HK D, E.) In addition, Agent Brady testified that he had determined that certain money transfers were made from B.I.M. to individuals located in the Philippines. (Tr. 1674.) Agent Brady also testified that he received documents upon request from Scarlato, including tax returns which showed that Scarlato claimed certain broker fees as income. (Tr. 1715-21.)

According to an FBI report, Agent Brady also testified that at Brady's request, another FBI agent interviewed an individual named Felix Mijares in the Philippines in November 2009. (Tr. 1730-31, HK G.) According to the FBI report of that interview which was conducted in Tagalog through an interpreter, Agent Brady testified that Mijares told the agent that he worked as a bodyguard and runner, and that in 2005 he met with Kahale and West in the Philippines when Kahale stated that he would send $15,000 to Mijares' bank account. (Id.) According to the FBI interview report, Mijares told the FBI agent that four months later he did receive $15,000 into his bank account from Kahale which Mijares reported using for personal expenses as well as B.I.M. Mining project-related expenses, including funding visits to four potential mine locations in the Philippines. (Id., Tr. 17643-66, HK G.) However, Mijares also told the FBI Agent in the Philippines that he was unable to purchase any of these mine locations because of insufficient funds. (Tr. 1765-66.) This $15,000 wire transfer from Kahale to Mijares also appeared to be corroborated by bank records obtained by Agent Brady. (Tr. 1753.) Finally, Agent Brady agreed that the FBI report indicated that Mijares had reported to the FBI agent that he had three telephone calls with West between 2005 and 2007. (Tr. 1730-31, HK G.)

Through Agent Brady, Kahale also introduced additional sections of his military record which reflected his honorable service and the views of Kahale's supervisor that Kahale possessed an "untiring devotion to duty." (Tr. 1731-37, HK F.) Additionally, the defendants elicited testimony regarding various investigative techniques which were and were not pursued by the government in investigating this case. (Tr. 1768-77.) Finally, Agent Brady acknowledged that Kahale, Graham, and Scarlato voluntarily spoke with the FBI during the government's investigation. (Tr. 1711, 1741-2.)

Scarlato also submitted evidence pursuant to a stipulation with the government that if called as a witness, Ron Dunson, a chairman of the Capital Region Chamber of Commerce in Connecticut would have testified that persons associated with that group introduced Scarlato to B.I.M. (Tr. 1784-85, DX FF.) In addition, Scarlato submitted Western Union documents showing that in 2005, Scarlato sent Kahale a total of $17,765.98 and Graham a total of $3,618. (Tr. 1785, DX GG.)

III. Motions for Judgment of Acquittal

At the close of the government's case, Graham argued his motion for a judgment of acquittal while reserving the right for further briefing, and the court reserved ruling. (2/12/10 Tr. 1170-71.) Graham also argued for a judgment of acquittal after the defense case with respect to Counts Two, Four, and Five, which related to mailings received by Valenzano, and the court reserved ruling. (Tr. 1780-84.) In addition, the court granted all defendants' applications, both after the government rested (2/12/10 Tr. 1164-65, 1172, Tr. 1354-55), and again after the defense case (Tr. 1179-80), that their Rule 29 motions be "deemed made" with further briefing deferred until after the jury's verdict.

Post-trial, Scarlato and Reisman submitted letter motions in support of their motions for judgments of acquittal. (See ECF No. 324, Letter dated 6/3/10 ("Scarlato Mem."), ECF No. 344, Letter dated 7/27/10 ("Scarlato Reply Mem."), ECF No. 321, Letter dated 5/26/10 ("Reisman Mem.").) In addition, Reisman moved for a new trial pursuant to Rule 33. (See Reisman Mem., see also ECF No. 357, Letter dated 8/30/10 ("Reisman Reply Mem.").) Graham and Kahale joined in their co-defendants' motions to the extent applicable. (ECF No. 323 Kahale Letter dated 6/2/10 ("Kahale Ltr."); ECF No. 325, Graham Letter dated 6/4/10 ("Graham Ltr.").) The government submitted a memorandum opposing the defense motions. (ECF No. 343, Memorandum dated 7/20/10 ("Gov. Mem.").)

IV. The Forfeiture Hearing

Upon request of the defendants (see ECF Nos. 296, 297, 298, 300), the court held a forfeiture hearing on June 7, 2010 ("forfeiture hearing") in order to "determine what property is subject to forfeiture." Fed.R.Crim.P. 32.2(b)(1)(A) and (1)(B). On the record at the conclusion of the hearing, the court denied defendants' previously briefed objections to the proposed Preliminary Order of Forfeiture. (See Minute Entry dated 6/7/2010.) However, the court reserved ruling on Scarlato's objection regarding the investors identified in the Indictment, which was first raised at the forfeiture hearing and then joined by the other defendants, (the "remaining forfeiture objection"), and provided the parties an opportunity to brief this additional issue. (See id.; see also ECF No. 331, Ltr. dated 6/14/10 ("Scarlato 6/14/10 Ltr."); ECF No. 334, Ltr. dated 6/21/10 ("Gov. 6/21/10 Ltr.").)

DISCUSSION

I. All Defendants' Rule 29 Motions

A. Rule 29 Standard

Rule 29(a) provides that a district court shall enter a judgment of acquittal for "any offense for which the evidence is insufficient to sustain a conviction." Fed.R.Crim.P. 29(a). However, a district court entertaining a motion for a judgment of acquittal must be "careful to avoid usurping the role of the jury." United States v. Jackson, 335 F.3d 170, 180 (2d Cir. 2003). Thus, "Rule 29(c) does not provide the trial court with an opportunity to substitute its own determination of . . . the weight of the evidence and the reasonable inferences to be drawn for that of the jury." United States v. Guadagna, 183 F.3d 122, 129 (2d Cir. 1999). Rather, in assessing a Rule 29 motion, a court must defer to the jury's resolution of witness credibility and its selection between competing inferences that could be drawn from the evidence. United States v. Tocco, 135 F.3d 116, 123 (2d Cir. 1998). This requires the court to consider the evidence in the light most favorable to the government and to draw all permissible inferences that the jury may have drawn in the government's favor. Jackson, 335 F.3d at 180.

Consistent with this deference, a jury verdict must be upheld if " any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." See id. (quoting Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original)). Moreover, the jury's verdict will be upheld even when it is based entirely on inferences from circumstantial evidence. United States v. Mariani, 725 F.2d 862, 865-66 (2d Cir. 1984); see also United States v. Lorenzo, 534 F.3d 153, 159 (2d Cir. 2008) ("[d]irect evidence is not required; `[i]n fact, the government is entitled to prove its case solely through circumstantial evidence, provided, of course, that the government still demonstrates each element of the charged offense beyond a reasonable doubt'") (quoting United States v. Rodriguez, 392 F.3d 539, 544 (2d Cir. 2004)). Finally, a court reviewing the sufficiency of the evidence must be careful not to analyze particular pieces of evidence in isolation, but instead should consider the evidence in its totality. See United States v. Rosenthal, 9 F.3d 1016, 1024 (2d Cir. 1993).

Only where the evidence that the defendant committed the crime alleged is either "nonexistent or so meager that no reasonable jury could find guilt beyond a reasonable doubt" may a district court grant a Rule 29 motion. Guadagna, 183 F.3d at 130 (internal quotations omitted). Consequently, "[a] defendant bears a heavy burden in seeking to overturn a conviction on grounds that the evidence was insufficient" under Rule 29. United States v. Aleskerova, 300 F.3d 286, 292 (2d Cir. 2002). However, "[i]f the evidence viewed in the light most favorable to the prosecution gives equal or nearly equal circumstantial support to a theory of guilt and a theory of innocence, then a reasonable jury must necessarily entertain a reasonable doubt." United States v. Glenn, 312 F.3d 58, 70 (2d Cir. 2002) (internal citations omitted).

B. Application

Scarlato argues that (1) Count Six fails for lack of venue; (2) Count Seven fails for insufficient evidence, and (3) the evidence was insufficient to establish Scarlato's intent to defraud the investors, a necessary element of all seven counts of the Indictment. (See Scarlato Mem., see also Scarlato Reply Mem.) Without citation to the record, Reisman argues summarily that "Reisman never participated in the fraudulent acts of Kahale, et al. Reisman is innocent of the instant charges." (See Reisman Mem. at 7.) Kahale and Graham join these arguments as applicable. (See Kahale Ltr., Graham Ltr.)

1. The Venue Objection Fails

In his Rule 29 motion, Scarlato contends for the first time that Count Six fails for lack of venue because the evidence at trial showed that Count Six concerned criminal activity occurring entirely outside the Eastern District of New York. (Scarlato Mem. at 3.) The government counters that Scarlato's venue objection is untimely, and therefore waived. (Gov. Mem. at 16-17.)

A defendant is entitled to be tried in the place where the criminal acts allegedly occurred. See United States v. Cabrales, 524 U.S. 1, 5 (1998) ("Both Rule 18 of the Federal Rules of Criminal Procedure and the Constitution require that a person be tried for an offense where that offense is committed.") (internal citations and quotations omitted). For mail and wire fraud offenses proper venue lies in "any district" in which the offense "was begun, continued, or completed." 18 U.S.C. § 3237(a); see also United States v. Kim, 246 F.3d 186, 191 (2d Cir. 2001) (affirming district court finding that 18 U.S.C. § 3237(a) is "the appropriate venue provision" for wire fraud charges).

Rule 18 of the Federal Rules of Criminal Procedure provides, in relevant part:

the government must prosecute an offense in a district where the offense was committed. The court must set the place of trial within the district with due regard for the convenience of the defendant and the witnesses, and the prompt administration of justice.

Article 3, Section 2, clause 3 of the Constitution provides, in relevant part that "the Trial of all Crimes . . . shall be held in the State where the said Crimes shall have been committed." The Sixth Amendment also requires that "in all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by a jury of the State and district wherein the crime shall have been committed."

Given the strong "constitutional underpinning and importance of proper venue," the Second Circuit has instructed that the waiver of venue objections "should not be readily inferred." United States v. Novak, 443 F.3d 150, 161 (2d Cir. 2006) (quoting United States v. Price, 447 F.2d 23, 27 (2d Cir. 1971)). Nonetheless, inPrice, the Second Circuit identified two specific circumstances where a finding of waiver of a venue objection is proper: (i) "when the indictment or statements by the prosecutor clearly reveal this defect but the defendant fails to object" before trial, (the "first Price test"); or (ii) "when after the government has concluded its case, the defendant specifies grounds for acquittal but is silent as to venue," (the "secondPrice test"). Price, 447 F.2d at 27.

Here, the question is whether the first Price test applies and renders Scarlato's venue objection waived. Thus, the court must determine whether the "indictment and statements of the prosecutor" in this case "reveal[ed]" the venue defect to defendants prior to trial. See Price, 447 F.2d at 27. Both parties rely on Novak, 443 F.3d 150, to answer this question. The government contends that the venue defect was apparent on the face of the Indictment because it plainly alleged that the crime in Count Six took place "in the Western District of New York." (Gov. Mem. at 16-17.) Therefore, the government argues that the first Price test applies and the venue objection is waived. (Id.) In response, and also relying on Novak, 443 F.3d at 162, Scarlato argues that the objection is timely because the Indictment was ambiguous in that it alleged that the conduct in Count Six took place not only "in the Western District of New York" but also " elsewhere." (Scarlato Reply Mem. at 4.) Scarlato argues that this language induced Scarlato's reasonable belief that the government would adduce some evidence at trial indicating that some of the criminal conduct alleged in Count Six took place "elsewhere," including in the Eastern District of New York. (Id.)

Scarlato's motion relies on cases pertaining to the secondPrice test which concerns the waiver of a venue objection absent articulation in a Rule 29 motion for acquittal. (See Scarlato Mem. at 3-4 (citing United States v. Rommy, 506 F.3d 108 119 (2d Cir. 2007) (noting that venue objections will be waived "unless specifically articulated in defense counsel's motion for acquittal") (internal citation and quotation marks omitted) andUnited States v. Bala, 236 F.3d 87, 96 (2d Cir. 2000) (same).) Here, however, there is no dispute that Scarlato has sufficiently articulated the basis for his venue objection in his Rule 29 motion. Rather, the court's inquiry focuses on whether the alleged venue defect was apparent on the face of the Indictment and therefore waived prior to trial under the first Price test.See Novak, 443 F.3d at 161 ("When the defect in venue is apparent on the face of the indictment, a defendant waives the right to contest the issue if he or she fails to object prior to trial. It follows that, when a venue defect is not clear on the face of the indictment, a defendant may raise the objection for the first time in a motion for acquittal at the close of the government's evidence.")

In Novak, the district court rejected as untimely a defendant's venue objection which was first raised on a Rule 29 motion for a judgment of acquittal. 443 F.3d at 160. The Second Circuit reversed, finding that the venue objection was timely because in that case the "venue defect was not evident on the face of the indictment" because "nothing in [defendant] Novak's indictment precluded the conclusion that at least some of the charged criminal activity occurred in the Eastern District of New York." Id. at 162. Thus, the Court held that because Novak's indictment alleged that the criminal conduct occurred "in the Southern District of New York and elsewhere," there was nothing to preclude Novak's reasonable belief "that the `and elsewhere' language meant that the government intended to produce some evidence at trial linking [Novak's] crimes to both the Southern and Eastern Districts." Id. at 161-62.

In its analysis, the Second Circuit considered and distinguished the facts in Novak from a Ninth Circuit case which the Second Circuit acknowledged properly found the waiver of a venue objection. See id. (discussing United States v. Johnson, 297 F.3d 845 (9th Cir. 2002)). The Second Circuit observed that the indictment in Johnson ("Johnson indictment") contained ambiguous language similar to Novak in that the Johnson indictment similarly alleged that the charged wire fraud conduct "took place in the District of Arizona and elsewhere." Novak, 443 F.3d at 161-62 (emphasis added). However, the Second Circuit found that the Johnson indictment contained a "clarity" lacking from Novak's case because the Johnson indictment also included detailed information regarding the origins and destinations of each alleged "offending telephone call." Id. Thus, on its face, the Johnson indictment "contained all of the facts relating to the situs of the crimes charged," and the indictment itself therefore exposed the venue defect by revealing that none of the charged criminal conduct took place in the District of Arizona where the case was venued. See id.

Here, the facts are analogous to Johnson, rather than Novak, and accordingly the reasoning of Johnson — which was distinguished and cited approvingly by the Second Circuit inNovak — controls. Thus, although the Indictment here alleged that the criminal conduct charged in Count Six occurred "in the Western District of New York and elsewhere," even a cursory examination of the remaining language in Count Six of the Indictment reveals that the offending conduct charged in Count Six exclusively occurred in Falconer, New York and Slatington, Pennsylvania, and thus nowhere within the Eastern District of New York. (See Ind't ¶¶ 18-19.) The defect in venue here was thus apparent on the face of the Indictment, the first Price test applies, and the Scarlato's venue objection, first raised in his Rule 29 motion, is untimely and was waived. See Price, 447 F.2d at 28 ("On the record as a whole . . . defendant's waiver of any defect in venue is manifest. Despite clear notice and actual knowledge of the presumed defect before trial commenced, [the defendant] never moved to dismiss the indictment on this basis."); see also United States v. Lazala, 260 Fed. App'x 351, 354 (2d Cir. 2008) (finding venue argument waived where "alleged venue defect was obvious in light of the indictment and the statements made by the government during the first pre-trial conference, and [defendant] failed to raise any objection to venue until after the government rested at trial");United States v. Khan, 821 F.2d 90, 93 (2d Cir. 1987) ("Since the defect was apparent on the face of the indictment, [defendant's] failure to object prior to trial constituted a waiver of the lack of venue.").

Without any elaboration, Scarlato alleges that "none of the trial counsel for any defendant recognized [the venue] issue" prior to trial which he claims "can only be attributed to an unprofessional error by prior counsel to the defendant's prejudice" that gives rise to a claim of constitutionally ineffective assistance of counsel. (Scarlato Reply Mem. at 4.) However, ineffective assistance claims requiring further factual development are more properly raised in habeas corpus proceedings pursuant to 28 U.S.C. § 2255. See Massaro v. United States, 538 U.S. 500, 504-05 (2003). Accordingly, Scarlato should bring those claims in that forum.

2. The Evidence on Count Seven is Sufficient

Count Seven charged wire fraud in connection with Amankwah's $50,000 loan to B.I.M. (See Ind't ¶¶ 20-21.) Specifically, the evidence at trial showed that Count Seven involved the $90,000 wire transfer used partly to repay Amankwah $67,300 (from funds obtained from Stern) after Amankwah threatened to Reisman to contact federal authorities. (See Tr. 605, 617-20, 2/11/10 Tr. 1189-91, GX 65, 153, 153A, 154, 154A.) Scarlato claims that the evidence on Count Seven is insufficient as to him because there was no evidence: (i) that Scarlato was directly involved in soliciting Amankwah's investment, (ii) that Scarlato directly received any of Amankwah's $50,000 investment, (iii) that "Reisman's wire" of funds to Scarlato following Amankwah's investment made "Scarlato a participant in Count Seven," or (iv) that Scarlato caused Reisman to solicit Stern's investment, caused Stern to invest funds with Reisman that would be used to repay Amankwah, or helped or authorized Reisman's wiring of Stern's money to repay Amankwah. (See Scarlato Mem. at 4.)

Viewing the record as a whole, the evidence at trial was sufficient for a jury to find that Scarlato acted with intent to defraud Amankwah and supports his conviction on Count Seven. Amankwah testified that he first met Scarlato at Reisman's office and that Scarlato told Amankwah that he and Reisman were trade partners who both worked for B.I.M. (Tr. 614-15, 654.) Thus, although Scarlato correctly points out that the evidence showed that Scarlato was not directly involved in soliciting Amankwah's $50,000 loan to B.I.M. (Tr. 640), the jury could permissibly have inferred that as Reisman's trade partner, Scarlato knew of, and indeed intentionally participated in, Reisman's efforts to defraud Amankwah through a fraudulent investment in B.I.M. This inference is bolstered by several pieces of evidence at trial.

First, the evidence showed that Scarlato received $44,000 of Amankwah's money from Reisman, although Scarlato later claimed that he was unaware that the money had originally come from Amankwah. (Tr. 613-15, 2/11/10 Tr. 1189-90, GX 135, 135A.) Thus, although no evidence showed Scarlato's direct participation in soliciting Amankwah's investment, the fact that Scarlato shared and enjoyed the fruits of that investment supports the jury's permissible inference that Scarlato was aware of Amankwah's investment and intended to defraud Amankwah, regardless of Scarlato's later claims to Amankwah that he lacked knowledge about the source of the funds (Tr. 615).

Second, the evidence showed that after learning from Reisman that Scarlato — rather than B.I.M. — had obtained a substantial portion of Amankwah's investment, Amankwah approached Scarlato and demanded the return of his money. (Tr. 614-15, 654.) In response, Scarlato professed his innocence and his lack of awareness that the $44,000 he had received from Reisman in fact came from Amankwah. (Tr. 615.) Yet in apparent contradiction of these statements, and in furtherance of the criminal conduct charged in Count Seven, the evidence shows that Scarlato then made incremental payments to Amankwah over a period of months. (Tr. 664, DX L.) Based on this evidence, a rational jury could have inferred that despite Scarlato's claims that he did not know the source of the $44,000 he received from Reisman, Scarlato did in fact know that the money came from Amankwah because he otherwise would have declined to send Amankwah money following this confrontation. Further, a rational jury could permissibly infer that Scarlato's payments to Amankwah were intended to placate Amankwah and forestall Amankwah's resort to law enforcement as he had threatened Reisman, Scarlato's trade partner.

Third, the evidence showed that at this same time, Scarlato gave Amankwah additional "depth" regarding B.I.M. and "grandmaster" Kahale, participated in a telephone call with Kahale and Amankwah, and gave Kahale's phone number to Amankwah. (Tr. 658-59.) This additional evidence shows that Scarlato took an active role in communicating with Amankwah following his investment and made efforts to reassure Amankwah regarding the soundness of the B.I.M. investment, all of which support the inference that Scarlato was fully aware of and intentionally participated in the criminal conduct charged in Count Seven.

Finally, the evidence also showed that eventually Scarlato refused to continue paying Amankwah, at which point Amankwah again threatened Reisman that he would go to law enforcement, and Reisman then obtained Stern's investment and used it to fully repay Amankwah through a wire transfer of funds. (Tr. 605, 616-20, 662, 2/11/10 Tr. 1190-91, GX 65, 154, 154A.) Based on this evidence, the jury could further have inferred that even without Scarlato's direct involvement, Reisman's action in repaying Amankwah — which eliminated the need for Scarlato's continued incremental payments to Amankwah and prevented Amankwah's reporting all defendants to the federal authorities — was taken in concert with, and for the benefit of, not only Reisman, but all defendants, including Scarlato. Moreover, there can be no doubt that Reisman's use of the wires was reasonably foreseeable under the circumstances. (See Scarlato Reply Mem. at 5 (citing United States v. Zichettello, 208 F.3d 72, 106 (2d Cir. 2000) (noting that wire fraud conviction requires that showing that one "transmits or causes to be transmitted" and one "causes" a wire transmission where one knows or reasonably can foresee that use of the wires will follow).)

Together, and considering all of this evidence in the light most favorable to the government, this evidence sufficiently established Scarlato's intent to defraud Amankwah. See Mariani, 725 F.2d at 865-66 (noting that jury's verdict will be upheld even when it is based entirely on inferences from circumstantial evidence). Therefore, Scarlato's motion for a judgment of acquittal on Count Seven is denied. See Jackson, 335 F.3d at 180 (jury verdict must be upheld if " any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt") (internal quotation omitted).

3. The Jury Permissibly Concluded that Each Defendant Possessed the Requisite Intent to Defraud

a. Legal Standard for Intent to Defraud

The elements of mail and wire fraud violations are essentially the same: "(1) a scheme to defraud, (2) to get money or property, (3) furthered by the use of interstate mail or wires." United States v. Autori, 212 F.3d 105, 115 (2d Cir. 2000). To establish a scheme to defraud under the first element, the government must prove "(i) the existence of a scheme to defraud, (ii) the requisite scienter (or fraudulent intent) on the part of the defendant, and (iii) the materiality of the misrepresentations."United States v. Pierce, 224 F.3d 158, 165 (2d Cir. 2000) (citations omitted). Further, to prove scienter or fraudulent intent, "the proof must demonstrate that the defendant had a conscious, knowing intent to defraud . . . [and] that the defendant contemplated or intended some harm to the property rights of the victim." Guadagna, 183 F.3d at 129 (internal citations and quotation omitted). Thus, "good faith" is a "complete defense to wire fraud" and, by extension, mail fraud.United States v. Dupre, 462 F.3d 131, 139 (2d Cir. 2006); see also United States v. Shellef, 507 F.3d 82, 108 (2d Cir. 2007) ("Because the mail fraud and the wire fraud statutes use the same relevant language, we analyze them the same way.") (citation omitted). However, proof of fraudulent intent may be established solely through circumstantial evidence. See Guadagna, 183 F.3d at 129.

b. Application

Under the first element, Scarlato, joined by Graham and Kahale, does not contest the actual existence of the scheme to defraud or the materiality of the misrepresentations made to B.I.M. investors and lenders, but instead solely contests the sufficiency of the government's proof with respect to his scienter or fraudulent intent. (See Scarlato Mem. at 2-3.)

Thus, Scarlato does not contest that, viewed in the light most favorable to the government, a rational juror could have found the existence of a scheme to defraud B.I.M. investors and lenders with broad outlines as follows: To secure investments, the defendants hailed B.I.M.'s status as a large mining concern which owned or controlled assets including gold and other precious minerals in various parts of the world such as the Philippines or Mexico, cited B.I.M.'s need for investor funds to recover those assets, touted Kahale's military background and government connections as means to facilitate the recovery of such assets, misrepresented Reisman's status as a C.P.A., and assured potential investors that they themselves or their family members had invested in the project, and that an investment in B.I.M. would lead to guaranteed returns in a matter of days or months. In exchange for many investors' money, the defendants offered fraudulent Gold Delivery Certificates promising the same as security. Yet when the investments matured or the Gold Delivery Certificates indicated that redemption was due, instead of gold or cash the defendants delivered letters and e-mails containing a litany of excuses to investors and lenders for the delays in redemption. Finally, none of the investors — save one who threatened to go to the police and who was repaid by another investor's money — ever recovered either their original investments or the promised returns on their investments.

Scarlato further does not contest that a rational juror could have concluded beyond a reasonable doubt based upon the evidence adduced at trial, that in fact, defendants' representations about B.I.M.'s size and assets, Kahale's military status, Reisman's status as a C.P.A., the defendants' own stakes in the venture, and the "guaranteed" nature of investments with B.I.M. were materially false and misleading.

Rather, Scarlato solely disputes his knowledge as to the falsity of these representations. However, as set forth below, the evidence adduced at trial provided sufficient basis for a rational trier of fact to conclude, beyond a reasonable doubt, that each defendant possessed the fraudulent intent required for their convictions on all counts in the Indictment.

i. Kahale

Kahale joins his co-defendants' motions without raising any individual arguments. (Kahale Ltr.) However, because there was abundant evidence Kahale's integral role in the conspiracy to defraud and his knowledge of its fraudulent purposes, Kahale's generalized objection to the sufficiency of the evidence fails.

The testimony of several witnesses established that Kahale directly solicited investors including Wetmore, Vacchani, Valentini, and Wong, even after it was apparent that other investors had not been repaid, (Tr. 59-61, 303, 307, 813-14, 828-29), secured investments with fraudulent Gold Delivery Certificates bearing his own signature (GX 2, 24, 64, 70-73, 78-81, 81A, 223), and took an active role in assuaging disgruntled B.I.M. investors such as Wetmore, Amankwah and Valentini, who had failed to receive their guaranteed returns from B.I.M. within the promised timeframe (see, e.g., Tr. 68-69, 71, 121-22, 125, 231-32, 205-06, GX 11-20, 13A, 22, 24, 26, 27). Based on this evidence, the jury could permissibly infer that Kahale himself made and also witnessed misrepresentations about B.I.M.'s size and assets and his own background and connections to both potential and existing B.I.M. investors which he well knew to be patently false.

Ample evidence allowed a rational juror to conclude that Kahale knew the falsity of the representations regarding B.I.M.'s size, operations, and assets. First, Kahale was the President, Chief Executive Officer, and Treasurer of B.I.M. (See, e.g., GX 2, 75.) Aside from Graham, who served as B.I.M.'s Secretary and a Director, there was no evidence that B.I.M. had any other officers or employees. (See 2/12/10 Tr. 1128-61, GX 2, 217, 226, DX V.) Further, evidence showed that B.I.M. operated out of the same small office space in Las Vegas which was used by Graham as a home (Tr. 1431-33, GX 217), and that B.I.M. could not produce any documents evidencing its right or access to gold or other mineral resources (2/13/10 Tr. 112461, GX 217, 226, DX V). Moreover, Johnson, called by the defense, testified unequivocally that B.I.M. did not have rights to any gold based on contracts with Western Sierra Mines because B.I.M. never paid on its single forward delivery contract with that company. (Tr. 1488-92.) Finally, Kahale was a signatory on B.I.M.'s bank account (2/11/10 Tr. 1177) the contents of which was comprised mostly of investor money (GX 201), from which the primary expenditures were withdrawals and checks made out to cash (2/11/10 Tr. 1196-97, GX 151, 151A-D), and from which no meaningful transactions involving gold were derived (id.). Weighing this evidence together, the jury could permissibly infer that Kahale understood the status of B.I.M.'s true status and operations and therefore, that he understood the falsity of the representations about B.I.M.'s size and assets which he and others were making to investors (see, e.g., GX 91, 91A).

Sufficient evidence also permitted a rational juror to infer that Kahale had knowledge of the falsity of the representations about his own military status. The evidence at trial showed that while Kahale and his co-defendants referred extensively to Kahale's high military rank (see, e.g., Tr. 62, 810, GX 75), far from being an active Two-Star General, Kahale was in fact honorably discharged from the Army in 1965 at the rank of Sergeant (Tr. 868-69, GX 215). A reasonable jury could therefore infer that Kahale had knowledge of the falsity of his and others' representations regarding his own military background.

Ultimately, this evidence permitted a rational jury to infer that because Kahale knew the true nature of B.I.M.'s size and business operations and his own military status, Kahale well knew and understood the falsity of defendants' promises to investors that their investments in B.I.M. would yield significant returns within specified time frames. Sufficient evidence thus permitted the jury to infer that Kahale had knowledge of the misrepresentations at the heart of the bargain between the investors and the defendants and to therefore conclude beyond a reasonable doubt that Kahale possessed the requisite scienter. Kahale's Rule 29 motion is therefore denied.

ii. Graham

Graham argues that even viewed in the light most favorable to the government, there was insufficient evidence that Graham had "knowledge of the falsity of any representation that he made or that he knew of being made in connection with B.I.M." (Tr. 1171, Graham Ltr.) In support of this argument, Graham notes that many of the government's witnesses who were themselves sophisticated and experienced businessmen and investors also believed the representations that they heard about B.I.M. (Id.) Further, Graham asserts that the testimony of the witnesses reveals that any misrepresentations made by Graham himself were actually "based on information about what other people were doing, information that [Graham] was told." (Id.) However, sufficient evidence at trial permitted a rational juror to infer that not only was Graham actively involved in the scheme to defraud, but that also — unlike the investors to whom he compares himself — Graham fully understood the falsity of the representations made in connection with B.I.M. and therefore possessed the requisite fraudulent intent to further the fraudulent scheme.

First, like Kahale, the evidence showed that Graham personally took an active role in the scheme to defraud. For example, the evidence showed that Graham participated in at least one conference call with Wetmore in connection with Wetmore's second $200,000 investment in B.I.M. regardless of whether Wetmore recalled specific representations made by Graham. (Tr. 59-61.) In addition, Graham signed each of the Gold Delivery Certificates which promised significant returns within a specific time frame and which were both used to solicit investors (Tr. 52, 582-85, 657, GX 2, 60, 64) and issued to B.I.M. investors to purportedly secure their investments in B.I.M. (GX 2, 24, 64, 70-73, 78-81, 81A, 223). In addition, one such Gold Delivery Certificate which referred to the El Picacho Mine in Mexico and was shown to investors to encourage B.I.M. investments bore a typewritten notation beneath Graham's signature: "Based on mining contracts with Western Sierra Mining Inc. and B.I.M. Mining Corp." (Tr. 52, 582-85, 657, GX 2, 64). Further, Graham took an active role in placating investors whose investments were overdue for redemption. The evidence showed that Graham authored a number of Investor Update Letters (GX 11-20), communicated with investors over the phone (Tr. 317-19, 321), and sent and was copied on e-mails with investors (GX 13A, 21, 22, 25-27). For example, Vacchani testified that Graham reassured him about Vacchani's B.I.M. investments via e-mail (Tr. 314, GX 103), telephone (Tr. 317-19, 321), and on one occasion in person when Vacchani travelled to Las Vegas to obtain a personal guarantee from Kahale which was witnessed by Graham (Tr. 317-19, GX 98A).

Second, despite Graham's protestations that any representations he made were based on information "told" to him by others, the evidence at trial was sufficient to permit a rational jury to infer that Graham well knew the falsity of those representations. Like Kahale, Graham's role as an officer of the company, namely, as Secretary and a Director of B.I.M. (see, e.g., GX 2), Graham's status as a signatory on B.I.M.'s bank account (2/11/10 Tr. 1177), and the evidence showing that B.I.M. operated out of Graham's small office/home on Flamingo Road in Las Vegas (Tr. 1431-32, GX 217) also support an inference that Graham had personal knowledge of B.I.M.'s true size, business operations, and assets, which were misrepresented in Graham's and B.I.M.'s communications with investors and on the Gold Delivery Certificates signed by Graham. Further, the evidence that B.I.M.'s April 2004 financial statement bears B.I.M.'s letterhead and lists its address as Graham's Flamingo Road office/home, and the negligible response B.I.M. made to the government's subpoena for documents, also supports the jury's permissible inference that Graham had knowledge of the false representations contained in B.I.M.'s 2004 financial statement (GX 91), the 2004 Gold Delivery Certificate indicating in a typewritten note beneath Graham's signature that B.I.M. possessed assets under contract with Western Sierra (GX 2), and the many investment update letters and e-mails signed by or copied to Graham. Based on this evident knowledge, the jury could infer Graham's fraudulent intent in publishing those many false documents to potential investors.

Finally, and also similar to Kahale, the timing of Kahale and Graham's solicitation of the investments from Wong (Tr. 504, 546, 551, 554, GX 107, 239), just three weeks after sending yet another Investor Update Letter to Wetmore justifying the delay in Wetmore's redemption of his overdue Gold Delivery Certificate (GX 19), strongly suggests that Graham had knowledge of the falsity of the representations being made to the Wongs by Kahale, which Graham witnessed, acknowledged and agreed with (Tr. 496-98, 544-45).

This evidence was more than sufficient for the jury to properly conclude that Graham possessed the requisite fraudulent intent for his conviction on all counts. Graham's motion for a judgment of acquittal is therefore denied.

iii. Scarlato

Scarlato claims that the evidence was insufficient to convict him beyond a reasonable doubt on the issue of scienter because (i) the evidence did not rebut that Scarlato possessed a good faith belief in the representations he and others made with respect to B.I.M. and Kahale's background; and (ii) there was no proof that Scarlato "contemplated actual harm or injury to the investors." (Scarlato Reply Mem. at 1-3.) However, the evidence, considered together and in the light most favorable to the government, was sufficient to establish Scarlato's fraudulent intent.

Scarlato narrowly — and incorrectly — construes the Indictment as charging solely that "Scarlato knew that B.I.M. Mining did not need funds to process overseas assets." (Scarlato Reply Mem. 1.) To the contrary, the Indictment charged a number of false representations by defendants in connection with the overarching scheme to defraud (see Ind't ¶¶ 11-15), and any fair reading of the Indictment gives notice of this overarching scheme which cannot, and need not, be reduced to any single charged misrepresentation. See United States v. LaSpina, 299 F.3d 165, 182 (2d Cir. 2002) ("[I]n the context of a conspiracy charge, `the Government need not . . . set out with precision each and every act committed . . . in furtherance of the conspiracy,' particularly where the acts proven at trial were part of the `core of the overall scheme and in furtherance of that scheme.'") (quoting United States v. Cohen, 518 F.2d 727, 733 (2d Cir. 1975)).

In fact, the Indictment charged that as part of the overall scheme to defraud, the defendants made misrepresentations to investors and lenders in connection with: (i) B.I.M.'s size and business operations (Ind't ¶ 12); (ii) the defendants' own backgrounds and business contacts (id.); (iii) B.I.M.'s possession of assets including gold and other precious metal resources (id. ¶ 11); (iv) B.I.M.'s need for funds to process, transport and market those assets from abroad (id.); (v) the promise that the Gold Delivery Certificates issued by B.I.M. would bring the bearers "large sums of money upon maturity" (id. ¶ 13); (vi) the reason for the delays in redeeming the Gold Delivery Certificates (id. ¶ 14); and (vii) the expectation that after those delays the Gold Delivery Certificates would be "redeemed soon" for a "profitable return" (id.).

Rather, the crux of the scheme to defraud charged in the Indictment was defendants' false promises to investors and lenders that their investments in B.I.M.'s gold recovery efforts would be used to recover or process gold and other assets and yield significant `guaranteed' and `risk-free' returns within a period of days or months. The evidence at trial provided sufficient proof that (i) Scarlato knew that B.I.M. did not use funds to process or recover any gold from overseas because he knew B.I.M. was a fraud; and (ii) Scarlato intended to harm his victims to his own advantage as part of this scheme.

Although not raised by the parties, to the extent Scarlato's motions can be construed as arguing a constructive amendment of the Indictment or prejudicial variance, the court finds the arguments meritless. No constructive amendment occurred because the evidence at trial concerned the same "elaborate scheme to defraud investors as was alleged in the Indictment." See United States v. Heimann, 705 F.2d 662, 666 (2d Cir. 1983) cert. denied, 466 U.S. 962 (1984) (rejecting constructive amendment claim where the participants, victims, subject, and nature of the fraudulent scheme proved were the same as those alleged in the indictment);see also Dupre, 462 F.3d at 140-41 (same). In addition, the court finds that there was no variance because the Indictment placed defendants on notice that the core of criminality charged was that defendants fraudulently enticed victims to invest in B.I.M. with promises of guaranteed returns which then never materialized. See Heimann, 705 F.2d at 666 (rejecting claim of variance and noting that "[b]ecause proof at trial need not, indeed cannot, be a precise replica of the charges contained in an indictment, this court has consistently permitted significant flexibility in proof, provided that the defendant was given notice of the `core of criminality' to be proven at trial") (citation omitted); see also United States v. Spindona, 636 F.2d 792, 797-98 (2d Cir. 1980) (finding no variance where indictment charged defendant concealed fact that funds were obtained fraudulently while proof at trial established defendant concealed only the source of the funds). Further, even if the court were to assume the existence of a variance, such variance would not be legally significant because the "allegation and proof substantially correspond" and therefore no prejudice resulted.Dupre, 462 F.3d at 141-42 (finding no prejudicial variance even where "the particular wire transfer identified in the [conspiracy charge in the] indictment was not proven at trial" but other wire transfers were proved) (citation omitted).

Even assuming, arguendo, that Scarlato's narrow interpretation is correct, and that the Indictment "did not charge [Scarlato] with falsely representing that the funds would be used in gold recovery operations," but merely with falsely representing that B.I.M. needed investors funds to process or recover gold from overseas assets, the evidence at trial would still be sufficient to prove Scarlato's knowledge and intent to harm in connection with these misrepresentations given the adequate evidence from which the jury could have inferred his knowledge of the overall fraudulent nature of the B.I.M. project.

First, regarding his knowledge of the falsity of the representations, Scarlato relies on Defendant's Exhibit G ("DX G"), a purported fee agreement between Scarlato and B.I.M., and argues that this document supports his innocent state of mind because he would not have wanted a "binding contract" with B.I.M. "if he thought he was participating in an illegal scheme to defraud" and moreover, "given that his entitlement to a large commission had B.I.M.'s written approval [according to DX G], he had no reason to doubt the project's viability despite his retaining earned commissions." (Scarlato Reply Mem. at 2-3.) This argument is unavailing. The court notes that DX G was admitted for all purposes (2/11/10 Tr. 1249), published to the jury at trial (see, e.g., 2/11/10 Tr. 1210-11), and argued for its truth by Scarlato's counsel on summation (Tr. 1881). Thus, after adequate opportunity to consider this evidence and counsel's arguments, the jury rejected Scarlato's proposed inference that Scarlato lacked fraudulent intent based upon his understanding of DX G, and permissibly so. Indeed, ample evidence from trial permitted a rational juror to conclude beyond a reasonable doubt that Scarlato had every reason to doubt the viability and legitimacy of B.I.M.'s overseas gold recovery and processing projects and indeed, understood that these projects, and hence, the concomitant need for and use of the funds to support them, were a fraud. See Dupre, 462 F.3d at 138-39 ("[Defendant's] assertion that she trusted in the Roberta Project's legitimacy and lacked an intent to defraud does not convince us that no rational juror could have believed beyond a reasonable doubt that [the defendant] knew the project for what it was — a fraud.")

The timing and content of Scarlato's solicitation of investors is critical to this analysis. The evidence at trial showed that Scarlato was prolific in his recruitment of investors for B.I.M., promising guaranteed returns and profits to solicit either alone or with other defendants: Wetmore (for his second investment), Vacchani, Peter Valentini, Joseph Valentini, Valenzano, and Dolan, for total investments of at least $624,000. According to the evidence at trial, Scarlato was first involved in soliciting Wetmore's $200,000 B.I.M. investment in the fall of 2004. (Tr. 59.) However, just a few months later, in early 2005, Scarlato was approached by Amankwah, who had already threatened to go to the police when he did not receive a return on his B.I.M. investment within the promised time frame. (Tr. 614-16, 654.) As discussed above, the evidence showed that Amankwah complained to Scarlato regarding the lack of return on Amankwah's B.I.M. investment, explained that Reisman had represented that Scarlato had received $44,000 of Amankwah's money, and demanded that Scarlato return money to Amankwah. (Id.) Thus, as early as the beginning of 2005, Scarlato was on notice that B.I.M.'s `guaranteed' investments were not producing returns as promised.

In addition, as noted supra Section I.B.2, strong circumstantial evidence also suggests Scarlato's indirect involvement in soliciting Amankwah.

Just a few months later, in July 2005, Scarlato was on further notice of B.I.M.'s inability to deliver its promised returns when B.I.M. failed to pay on Wetmore's November 2004 investment. (Id. 68-69.) At that time, Scarlato participated in a phone call with Wetmore, Kahale, and Graham, where the defendants made excuses for the delay and Scarlato offered Wetmore a Gold Delivery Certificate as collateral for Wetmore's prior $200,000 investment. (Id. 68-69, 121-25, 231-32, GX 24.)

Moreover, at this time Scarlato was representing to investors that he personally invested in B.I.M. and was using investor funds for personal purposes including the purchase of a new pickup truck, and was likely aware that Reisman was also using investor funds for personal use given that Scarlato was aware of Wetmore's initial $100,000 investment through Reisman. (Tr. 150, 160-63.) "[J]urors are entitled, and routinely encouraged, to rely on their common sense and experience in drawing inferences."See United States v. Huezo, 546 F.3d 174, 182 (2d Cir. 2008). Here, relying on their common sense, jurors would be permitted to infer from the fact that Scarlato used B.I.M. investment funds for personal use that Scarlato did not in fact subscribe to a good faith belief that B.I.M. was using investor funds to recover gold and other assets, and in fact, that he knew that such representations were false. Such an inference logically would follow from the common sense notion that if Scarlato truly subscribed to a belief that B.I.M. possessed significant gold assets "on the ground" in remote locations around the world and merely needed investor money to bring those assets back to the United States with substantial guaranteed returns resulting in a matter of days or months, Scarlato would not hamper B.I.M.'s enterprise by siphoning off a substantial portion of the required funds for personal use, notwithstanding Scarlato's view that his purported B.I.M. fee agreement "entitle[d]" him to a large "commission." Indeed, common sense and experience would even further support the jury's finding where, as here, Scarlato's own purported investment in Gold Delivery Certificates, if true, assured that he would shortly share in the promised rewards from the completed project in an amount greater than the personal fees deducted. (See Tr. 986-987.)

Together, this series of events gave the jurors a basis to find that Scarlato had ample reason "to doubt the legitimacy of the scheme." See Dupre, 462 F.3d at 138-39. Yet Scarlato continued to solicit additional investors for B.I.M. and falsely portrayed the investments as "no risk" and "guaranteed." (Tr. 810-11, 986, 989.) Thus, in the summer of 2005, Scarlato solicited an investment from Valenzano, in October 2005 he solicited investments from father and son Valentini, and in November 2005 he solicited Vacchani's investment.

Based upon all of this evidence, a rational jury could have inferred that while soliciting these B.I.M. investments Scarlato well knew that B.I.M. was a fraud and that therefore, Scarlato knew that the representation that B.I.M. need or would use investor funds to extract gold from overseas was false. Thus, the evidence at trial sufficiently established proof from which a rational juror could conclude beyond a reasonable doubt Scarlato's knowledge of the falsity of these representations.

Second, there is also sufficient proof from which a rational juror could conclude beyond a reasonable doubt that Scarlato possessed the requisite intent to harm his victims. To establish fraudulent intent, the government must show more than a mere intent to deceive, but "that some actual harm or injury was contemplated by the schemer." See United States v. Regent Office Supply Co., 421 F.2d 1174, 1180 (2d Cir. 1970). However, such proof does not require proof of actual harm. See id. Yet where proof does exist "that someone was actually victimized by the fraud," this constitutes "good evidence of the schemer's intent."Id. at 1181. The schemer's intent to harm may also be inferred when a fraudulent "scheme has such effect [of harming its victims] as a necessary result of carrying it out." Id. (internal citation and quotation omitted). In other cases, fraudulent intent may be "apparent" where "the false representations are directed to the quality, adequacy or price of the goods themselves . . . because the victim is made to bargain without facts obviously essential to the bargain." Id. at 1182. Finally, fraudulent intent may also be "inferable from facts indicating a discrepancy between benefits reasonably anticipated because of the misleading misrepresentations and the actual benefits which the defendant delivered, or intended to deliver." Id.

Here, the jury could have inferred Scarlato's intent to harm on any number of grounds. First, the evidence at trial showed that numerous people, including Wetmore, Vacchani, Peter Valentini, Joseph Valentini, Valenzano, and Dolan — all individuals directly solicited by Scarlato — were victimized by the fraud. None of these investors received any return on their B.I.M. investments and lost tens, if not hundreds of thousands of dollars while Scarlato enjoyed significant portions of those funds for his own use. (See GX 150, 150A-E, 155, 156, 157.) This fact alone strongly supports an inference of Scarlato's intent to harm. See Regent Office Supply Co., 421 F.2d at 1181. Second, the evidence showed that by carrying out the overall scheme to defraud, harm to victims necessarily would result, and this evidence further supports an inference of intent to harm. See id.

Finally, the evidence showed that Scarlato represented to the investors that their money would be used for B.I.M.'s gold recovery operations (see Tr. 63-65, 303, 695-96, 809-811, 986, 998), and never disclosed that he would withhold a commission or fee from their investments (see id. 88, 96-97, 322-23, 696, 833-34, 987), but in fact used substantial portions of the investments for his personal purposes (see GX 150, 150A-E, 155, 156, 157). Scarlato's misrepresentations through omission regarding his hefty "commissions" certainly caused a "discrepancy" between benefits reasonably anticipated by the investors and the benefits delivered or intended to be delivered by Scarlato and the other defendants. See Regent Office Supply Co., 421 F.2d at 1182. Indeed, the investor-victims' testimony established that they were "made to bargain without facts obviously essential to the bargain." See id.; see also United States v. Kinney, 211 F.3d 13, 18 (2d Cir. 2000) (finding fraudulent intent established where "the victims of defendants' fraud . . . were given false information about how their money would be spent, and made a decision whether to donate money based on that information" and rejecting defendants' assertion "that these misrepresentations did not affect the [victims'] understanding of their bargain . . . and mislead them as to the nature and quality of [the recipient charitable organization's] activities") (emphasis in original.

Alternatively, these misrepresentations could fairly be characterized as directed at the "quality . . . of the goods themselves." See id. In addition, Scarlato's false representations about tons of gold ore and coffins full of gold bars were directed to the quality and adequacy of the B.I.M. investment, as were Scarlato's misrepresentations that he personally invested thousands of his own money with B.I.M. and that the returns were "guaranteed." Thus, a rational juror could find that Scarlato's misrepresentations regarding his "commissions" further give rise to an inference of his intent to harm because his intent was to injure the victims to his own advantage by withholding or misrepresenting material facts. See id. ("Because defendants' dishonesty was not incidental to the [victim's] decision to make donations to [the charitable organization], but rather was aimed at influencing those decisions directly, an intent to defraud was established.")

From all of this evidence, a rational juror could have concluded beyond a reasonable doubt that Scarlato possessed the requisite scienter or fraudulent intent. Accordingly, there is no basis to disturb the jury's finding and Scarlato's motion for a judgment of acquittal under Rule 29 is denied.

iv. Reisman

Reisman's seven page memorandum in support of his post-trial motions contains a five page outline of the applicable legal standards and two pages of argument devoid of any record cites — or even extra-record cites. (See generally Reisman Mem.) Specifically, Reisman recites background information about how he claims he was introduced to B.I.M., describes his alleged diligence in investigating B.I.M. and Western Sierra, the allegedly exculpatory testimony that he was prepared to introduce from Dr. Alan Cohler, and his alleged lack of contact with the other defendants after 2005. (See Reisman Mem. at 5-7.) Yet Reisman cites no evidence in the record to support these assertions, and fails to explain how such evidence, even if introduced, would have exculpated him. Moreover, Reisman fails to explain the contradictory evidence that does exist in the record from Wetmore, who testified at trial, or the lack of corroborating testimony from Johnson, who also testified at trial but whose testimony fails to support Reisman's claims of his frequent contact with him.

Reisman's ineffective assistance of counsel claims in relation to this allegedly exculpatory evidence are discussed infra, Section II.

There was ample evidence for the jury to conclude beyond a reasonable doubt that Reisman possessed the requisite intent to defraud. Even alone, the evidence that Reisman solicited Wetmore's first $100,000 investment in B.I.M. for "the production costs of processing gold" (Tr. 49-57, 143-44) but gave nothing to B.I.M. and instead kept that entire amount and used it for his personal expenses including $67,300 used to buy a house (2/11/10 Tr. 1168-69, GX 150A) and that Wetmore never recovered his investment or any profit provides sufficient basis to support the jury's rational inference that Reisman possessed the requisite fraudulent intent. See Regent Office Supply Co., 421 F.2d at 1181 ("proof that someone was actually victimized by the fraud is good evidence of the schemer's intent").

Moreover, the evidence that Reisman knowingly misrepresented his status as a C.P.A. (Tr. 54, 57, 1785-86; GX 1, 4, 234) also provides support for the jury's rational inference that Reisman intended to defraud his victims. See Regent Office Supply Co., 421 F.2d at 1182. ("fraudulent intent is apparent" where "false representations are directed to the quality, adequacy or price of the goods themselves").

Because this evidence was sufficient to support Reisman's conviction, Reisman's motion for a judgment of acquittal under Rule 29 is denied.

II. Reisman's Rule 33 Motion

As noted, rather than contesting the evidence at trial, Reisman's motion is premised upon alleged exculpatory evidence that was not introduced at trial allegedly due to trial counsel's ineffective assistance. (Id. 5-7; see also Reisman Reply Mem. at 1.) The thrust of Reisman's arguments thus focuses not on the legal insufficiency of the evidence adduced at trial under Rule 29, but rather on the sufficiency of the "exculpatory" evidence which was not adduced at trial due to trial counsel's alleged error. (See Reisman Reply Mem. at 1.) Accordingly, Reisman appears to principally argue for a new trial pursuant to Rule 33. However, for the reasons that follow, Reisman's Rule 33 motion for a new trial is denied.

A. Rule 33 Standard

Federal Rule of Criminal Procedure 33(a) provides that "upon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires." Fed.R.Crim.P. 33(a). However, "[g]enerally, a motion for a new trial should not be granted unless the trial court is convinced that the jury has reached a seriously erroneous result or that the verdict is a miscarriage of justice." Smith v. Carpenter, 316 F.3d 178, 183 (2d Cir. 2003). Although a trial court has broader discretion under Rule 33 than under Rule 29 to set aside a verdict and order a new trial, this discretion must be "exercised sparingly," "with great caution, and only in the most extraordinary circumstances." United States v. Sanchez, 969 F.2d 1409, 1414 (2d Cir. 1992).

Thus, the crucial question for a district court deciding a Rule 33 motion is whether "it would be a manifest injustice to let the guilty verdict stand." Id. (citation omitted). A "manifest injustice" occurs where a trial court cannot be satisfied that "competent, satisfactory and sufficient evidence" supports the jury's finding of guilt beyond a reasonable doubt, and where a "real concern" exists "that an innocent person may have been convicted." Id.

B. Application

Although "newly discovered evidence" is the only ground for a new trial specifically contemplated by Rule 33, a defendant may also seek a new trial based upon a claim of ineffective assistance of counsel. Fed.R.Crim.P. 33, see also United States v. Salameh, 54 F. Supp. 2d 236, 248 (S.D.N.Y. 1999) (noting that a Rule 33 motion may be based upon an ineffective assistance of counsel claim). Such a claim requires that the court inquire as to whether a defendant's legal representation was so deficient as to violate the Sixth Amendment of the Constitution. Strickland v. Washington, 466 U.S. 668, 687 (1984).

The Supreme Court has instructed that "in most cases a motion brought under [28 U.S.C] § 2255 is preferable to direct appeal for deciding claims of ineffective assistance." Massaro, 538 U.S. at 504. However, despite this "general rule," the Second Circuit has noted its discretion to review such claims on direct appeal when the record is fully developed and resolution is beyond doubt. See United States v. Garcia, 413 F.3d 201, 219 n. 13 (2d Cir. 2005). Because this is such a case, the court considers the claim on the instant post-verdict motion rather than awaiting a petition for habeas corpus under 28 U.S.C. § 2255.

To prove ineffective assistance of counsel rising to the level of a constitutional violation, a defendant must overcome a two-prong test, first demonstrating deficient performance by counsel (the "performance prong"), and second, demonstrating that counsel's deficiency prejudiced the defense (the "prejudice prong"). Strickland, 466 U.S. at 687-88. Counsel is "ineffective" under the performance prong when counsel's efforts fall "below an objective standard of reasonableness." Williams v. Taylor, 529 U.S. 362, 390-91 (2000) (quoting Strickland, 466 U.S. at 688). The prejudice prong underStrickland is satisfied by proving that "`there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.'" Williams, 529 U.S. at 391 (quoting Strickland, 466 U.S. at 694.)

It is the accused's "heavy burden" to demonstrate a constitutional violation under Strickland. United States v. Gaskin, 364 F.3d 438, 468 (2d Cir. 2004). Moreover, in assessing an attorney's effectiveness, a court must "indulge a strong presumption that counsel's conduct falls within the wide range of reasonable professional assistance." Strickland, 466 U.S. at 689 (quoting Michel v. Louisiana, 350 U.S. 91, 101 (1955)). Indeed, "strategic choices [by counsel] made after thorough investigation of law and facts relevant to plausible options are virtually unchallengeable; and strategic choices made after less than complete investigation are reasonable precisely to the extent that reasonable professional judgments support the limitations on investigation." Strickland, 466 U.S. at 690-91.

Here, the trial transcript, court record, and this court's own recollection of the performance during trial of Reisman's trial counsel, JaneAnne Murray, Esq. ("Ms. Murray"), leave no doubt that Ms. Murray's performance at trial met, if not exceeded, any objective standard of reasonableness. See Williams, 529 U.S. at 390-91. The trial transcript reflects Ms. Murray's cogent opening and closing statements, appropriate interposition of objections, careful cross-examinations of several witnesses, articulate arguments both oral and written on behalf of her client's positions, and adherence to a trial strategy. (See, e.g., 30-37, 1892-1910, 207-33, 1675-86.) Further, the court record demonstrates that Ms. Murray actively and vigorously litigated a number of evidentiary and other issues on behalf of Reisman in various filings with the court both before and during the trial. (See generally Dkt. No. 09-cr-159.) Finally, this court's own subjective recollection of Ms. Murray's conduct during trial is corroborated by the trial transcript and court record.

Further, to the extent Reisman argues that counsel's performance was deficient based upon her alleged failure to call Dr. Alan Cohler ("Cohler") as an exculpatory witness, his arguments fail. (See Reisman Mem. at 7.) First, although "the decision not to call a witness must be grounded in some strategy that advances the client's interests" rather than "animated primarily by a desire (by counsel) to save himself labor," Eze v. Senkowski, 321 F.3d 110, 129 (2d Cir. 2003), ultimately "the tactical decision of whether to call specific witnesses — even ones that might offer exculpatory evidence — is ordinarily not viewed as a lapse in professional representation," United States v. Schmidt, 105 F.3d 82, 90 (2d Cir. 1997), cert. denied, 522 U.S. 846 (1997). Here, the record is clear that counsel investigated and pursued the possibility of utilizing Cohler's allegedly "exculpatory" testimony (Tr. 736), and rejected that course (Tr. 972), only after reasonable investigation, rendering counsel's choice virtually unassailable on a motion for ineffective assistance of counsel. Strickland, 466 U.S. at 690-91 ("strategic choices [by counsel] made after thorough investigation of law and facts relevant to plausible options are virtually unchallengeable"); see also id. at 689 (discussing "strong presumption that counsel's conduct falls within the wide range of reasonable professional assistance").

While the trial record itself makes clear that counsel's decision not to call Cohler resulted from nothing other than a reasonable trial strategy, the court also notes that counsel's diligent investigation of Cohler's potential value as a defense witness is corroborated by various contemporaneous ex parte submissions to the court. (See ECF No. 208, Sealed Letter dated 2/5/10; ECF No. 209, Sealed Order dated 2/5/10; ECF No. 378, Sealed Letter dated 2/12/10.)

This record establishes that counsel's performance plainly falls within an objective standard of reasonableness. As such, Reisman's ineffective assistance of counsel claim necessarily fails. See Strickland, 466 U.S. at 697 ("there is no reason for a court to . . . address both [the prejudice and performance] components of the inquiry if the defendant makes an insufficient showing on one"). Moreover, notwithstanding Reisman's own conclusory assertions that Cohler was "prepared to testify" and produce "exculpatory" documents, Reisman has presented no evidence to suggest that allowing the guilty verdict to stand would result in a "manifest injustice." Sanchez, 969 F.2d at 1414. To the contrary, and as discussed above, the court is satisfied that "competent, satisfactory and sufficient evidence" supports the jury's finding of guilt beyond a reasonable doubt. See id.

Accordingly, there is no basis for this court to order a new trial pursuant to Rule 33, based upon a claim of ineffective assistance of counsel or otherwise, and Reisman's motion for a new trial is therefore denied.

III. Forfeiture

Having ruled on the foregoing motions and having previously denied the defendants' fully briefed objections to the Preliminary Order of forfeiture, only Scarlato's newly raised objection relating the investors identified in the Indictment remains before the court (the "remaining forfeiture objection"). (See Minute Entry dated 6/7/10.) For the reasons set forth below, the court now denies this remaining forfeiture objection.

A. Forfeiture Standard

Under 18 U.S.C. Section 981(a)(1)(C), the government is entitled to forfeiture of funds that "constitute[] or [are] derived from proceeds traceable to a violation" of the mail and wire fraud statutes or a conspiracy or scheme to commit such offense. See 18 U.S.C. §§ 981(a)(1)(C), 1956(c)(7)(A), and 1961(1)(B); see also United States v. Schlesinger, 396 F. Supp. 2d 267, 274-78 (E.D.N.Y. 2005) aff'd 514 F.3d 277 (2d Cir. 2008),cert. denied 129 S. Ct. 174 (2008) ("any property which `constitutes or is derived from proceeds traceable to . . .' a violation of mail or wire fraud, or a conspiracy to commit such offense, is subject to criminal forfeiture") (quoting 18 U.S.C. § 981(a)(1)(C)) (additional citations omitted).

A court may not enter an order of forfeiture "unless the indictment or information contains notice to the defendant that the Government will seek the forfeiture of the property" as a part of the sentence. Fed.R.Crim.P. 32.2(a). Thus, in any case where the indictment or information contains notice of criminal forfeiture, the court must "determine what property is subject to forfeiture under the applicable statute" following a guilty plea or conviction after trial. Fed.R.Crim.P. 32.2(b)(1)(A). The determination of forfeitability may be based upon the record from the guilt phase of a trial, or upon any additional reliable and relevant evidence or information submitted by the parties. Fed.R.Crim.P. 32.2(b)(1)(B). If the court finds by a preponderance of the evidence that property is properly subject to criminal forfeiture, the court must promptly enter a preliminary order of forfeiture. Fed.R.Crim.P. 32.2(b)(2)(A); see also United States v. Fuchter, 411 F.3d 377 (2d Cir. 2005) (holding that the preponderance of the evidence standard is the rule for criminal forfeiture findings).

B. Application

Scarlato's submission elucidates two new bases for limiting the forfeitable amount in the Preliminary Order of Forfeiture. (See Scarlato 6/14/10 Ltr.) First, Scarlato asserts that the forfeiture amount should be limited to the proceeds realized from the victims identified in paragraph 8 of the Indictment as Investors 1, 2, and 3, (see Ind't. ¶ 8); and second, Scarlato contends that the forfeitable funds under Count Seven of the Indictment should be limited to only $50,000 because victim Akwasi Amankwah ("Amankwah") only personally invested that amount while the remaining roughly $50,000 value under that Count came from another source, and because Amankwah was repaid. (See Scarlato 6/14/10 Ltr.)

The government responds first, that Scarlato's interpretation of the Indictment is unsupported by "any reasonable construction of [the Indictment's] language, by logic, [or] by case law," and second, that the entire $100,000 attributable to Amankwah is properly included in the forfeiture amount. (See Gov. 6/21/10 Ltr.) The government therefore contends that no limitation on the proposed Preliminary Order of Forfeiture is warranted. (See id.) For the reasons that follow, the court rejects both arguments advanced by Scarlato.

1. Scheme to Defraud B.I.M. Investors

Indisputably the government must demonstrate a "requisite nexus between the property and the offense" of conviction prior to forfeiture pursuant to Federal Rule of Criminal Procedure 32.2(b)(1)(A). Yet, "[w]here the conviction itself is for executing a scheme, engaging in a conspiracy, or conducting a racketeering enterprise, the government need only establish that the forfeited assets have the `requisite nexus,' Fed.R.Crim.P. 32.2(b)(1), to that scheme, conspiracy, or enterprise." United States v. Capoccia, 503 F.3d 103, 117-18 (2d Cir. 2007). Thus, although defendants generally cannot be ordered to forfeit funds which are proceeds of uncharged or acquitted conduct, where an indictment charges a conspiracy or scheme to defraud, the proceeds of uncharged or acquitted conduct may become forfeitable because the government may be able to prove that money "involved in the uncharged or acquitted [conduct] nevertheless constituted the proceeds of, or was traceable to, or was involved in, the [conspiracy or scheme to defraud] crime of conviction." See id. at 117.

While Scarlato correctly identified these controlling rules and precedent, Scarlato errs in his contention that "the indictment [in this case] charged Mr. Scarlato with participating in a scheme to defraud [only] the named investors" identified in paragraph 8 of the Indictment. (See Scarlato 6/14/10 Ltr. at 4.) The plain language of the Indictment reveals otherwise. The "Introduction" section of the Indictment sets forth in paragraphs 1-8 certain defined terms under a preamble which notes that the terms are defined "unless otherwise indicated." (See Ind't. ¶¶ 1-8.) For example, paragraph 1 of the Indictment defines a Nevada corporation known as "B.I.M." while paragraph 2 of the Indictment defines a New Jersey corporation known as "Metro." (See id. at ¶¶ 1, 2.) Similarly, paragraph 8 of the Indictment defines "Investor No. 1, Investor No. 2, and Investor No. 3" as "B.I.M. investors whose identities are known to the Grand Jury." (id. at ¶ 8.)

As noted supra Note 2, the evidence at trial showed that Investors Nos. 1, 2, and 3 were Peter Valentini, Marcello Valenzano, and Vernon Wetmore, respectively. (See Tr. 1601.)

Scarlato argues that because the definition in paragraph 8 does not elaborate and explain that Investors Nos. 1, 2, and 3 were "among" the B.I.M. investors alleged to have been defrauded, this indicates that the individuals identified in paragraph 8 are the exclusive B.I.M. investors victimized by defendants' scheme to defraud which is charged in Count One of the Indictment. This argument ignores the plain meaning of the definition contained in paragraph 8, which can only be understood as defining Investors Nos. 1, 2, and 3 as specific individuals "whose identities are known to the Grand Jury" without limiting the undefined term "investors," which is used elsewhere in the Indictment, to those three individuals. Indeed, nowhere in paragraph 8, nor elsewhere in the Indictment, is the generic term "investors" defined or limited to only Investors Nos. 1, 2, and 3. Moreover, where the Indictment intends to refer to a specific investor, as in paragraph 17, it does so. Meanwhile, the conspiracy charged in Count One and set forth in paragraphs 10-15 of the Indictment refers to generic B.I.M. "investors and lenders" which accordingly may include, but is not limited to, the previously defined individual Investors Nos. 1, 2, and 3. Thus, reviewing the plain language of the Indictment in the context of the document as a whole, it is clear that the Indictment charged the defendants with conspiracy to defraud not only the individuals identified as Investors Nos. 1, 2, and 3, but rather "B.I.M. investors and lenders" generally.

For example, after defining Investor Nos. 1, 2, and 3, paragraph 8 could have, but did not, include a phrase defining those three investors collectively, such as "(together, `investors')." Alternatively, contrary to Scarlato's suggestion, paragraph 8 simply does not state that Investors Nos. 1, 2, and 3 "were the B.I.M. investors," rather, the text of paragraph 8 reads that Investors Nos. 1, 2, and 3 "were B.I.M. investors whose identities are known to the Grand Jury." (Ind't at ¶ 8.) Finally, there is no stand-alone paragraph in the Introduction or elsewhere in the Indictment which defines the terms "investors." (See generally Ind't.)

Moreover, here, unlike in Capoccia, upon which Scarlato relies, because the offenses of conviction include a conspiracy charge, the "breadth of the conduct forming the basis of the offense of conviction" includes a broader category of criminal conduct encompassed by the overall scheme to defraud. See Capoccia, 503 F.3d at 117-18 (noting that unlike in cases involving conspiracy charges, where a defendant's conviction "is not for a scheme, conspiracy, or enterprise," but rather relates to "individual instances of transferring stolen money," any uncharged transfers could not have the "requisite nexus" to the conduct underlying the conviction and therefore were not properly forfeitable) (emphasis added). Accordingly, here, in addition to the funds obtained from the three investors individually specified in the Indictment, the funds obtained from the additional investors who testified at trial possess the "requisite nexus" to the overall scheme "to defraud B.I.M. investors and lenders" charged in Count One of the Indictment, and of which all defendants were convicted.

A common-sense reading of the plain language of the Indictment, the applicable rules, and relevant case law thus demonstrate that the properly forfeitable property in this case need not be limited to those funds obtained from the three investors specifically identified in the Indictment as Investors Nos. 1, 2, and 3, but rather should encompass all funds obtained as part of the overall scheme to defraud, of which all defendants were convicted.

2. Forfeitable Amount Attributable to Amankwah

Scarlato also argues that the amount of forfeitable funds relating to Count Seven of the Indictment should be limited to victim Amankwah's personal investment of $50,000, presumably because the remaining amount came from another source, and further, that even the $50,000 amount should not be included in the forfeitable amount because Amankwah was compensated. (Scarlato 6/14/10 Ltr. at 2.) First, it is unclear why Scarlato believes that the forfeitable amount in connection with Count Seven should be limited to Amankwah's own $50,000 investment. Count Seven again charges the defendants with devising a scheme or artifice to defraud "B.I.M. investors and lenders," nowhere limited to Amankwah. Moreover, as the court discussed on the record during the forfeiture hearing, the proceeds from defendants' fraudulent scheme in this case are properly defined by 18 U.S.C. Section 981(a)(2)(A), which unambiguously states that "proceeds" for cases "involving illegal goods, illegal services, [and other] unlawful activities" as here, means "property of any kind, obtained directly or indirectly, as the result of the commission of the offense giving rise to the forfeiture, and any property traceable thereto, and is not limited to the net gain or profit realized from the offense."

As noted by Scarlato, the 9th Circuit held in 2004 that 18 U.S.C. Section 981(a)(2)(C), the provision cited by Scarlato for "cases involving fraud in the process of obtaining a loan or an extension of credit" applies only to civil forfeiture. See United States v. Boulware, 384 F.3d 794, 813 (9th Cir. 2004), rev'd on other grounds, 552 U.S. 421 (2008). Although Scarlato notes his disagreement with the Ninth Circuit's holding, he does not cite any Second Circuit authority to the contrary. Moreover, Scarlato does not cite any Second Circuit case which does apply 18 U.S.C. Section 981(a)(2)(C) in the criminal forfeiture context, much less allows that provision to limit the amount of forfeitable proceeds flowing from a conviction under the mail and wire fraud statutes.

Accordingly, the funds obtained from both Amankwah and Caring Little Hands represent proceeds of the fraud charged in Counts One and Seven of the Indictment and such funds are forfeitable as proceeds of defendants' unlawful conduct.

The plain language of the Indictment, the relevant case law, rules, and statutory authority therefore cannot support defendants' remaining forfeiture objection, and that objection is therefore denied.

CONCLUSION

As set forth above, the defendants' motions for judgment of acquittal under Rule 29 are denied, Reisman's motion for a new trial under Rule 33 is denied, and defendants' remaining forfeiture objection is denied. By September 30, 2010, the government shall submit for the court's endorsement a revised Preliminary Order of Forfeiture for the amount of $1,104,000 which represents the proceeds obtained from the crimes charged in the Indictment and of which defendants were convicted at trial. 18 U.S.C. § 981(a)(1)(C), Fed.R.Crim.P. 32.2(b)(2)(A).

SO ORDERED.

Dated: Brooklyn, New York

September 27, 2010