Circuit Reverses Grant of New Trial, Clarifies High Standard for Rule 33 Motions

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In United States v. Archer, the Second Circuit (Walker, Sullivan and Nathan, sitting by designation) reversed the grant of a Rule 33 motion for new trial in the Southern District of New York to Defendant Devon Archer, following his conviction for securities fraud and conspiracy to commit securities fraud.  The Circuit reinstated the jury verdict and remanded the case for sentencing.  Its decision emphasized that a successful Rule 33 motion based on the weight of the evidence requires a showing that the evidence “preponderates heavily” against the verdict.  The decision seems to harmonize prior law in the Circuit that offered somewhat different formulations of the relevant standard.  It is a reminder of the limited nature of post-verdict relief that is available to a trial defendant.

Background

Archer, his codefendant John Galanis, and other codefendants orchestrated a scheme to defraud the Wakpamni Lake Community Corporation of the Oglala Sioux Tribe out of the proceeds of a $60 million bond offering, in order to get their hands on cash for personal expenses and business plans.  They persuaded Wakpamni to offer the bonds on the promise that proceeds from the issuance would be placed in an annuity.  Defendants then purchased the first issuance through a company and placement agent that they controlled, without disclosing their control to Wakpamni, then placed the proceeds into a shell company rather than the promised annuity.   They used proceeds from that offering to purchase the second issuance through another company, again without disclosure.  Defendants arranged for the third issuance to be purchased by the client of another investment adviser that they controlled, then diverted those proceeds to the shell account and used them for personal expenses—including real estate for Galanis and capital for a new financial services company that Archer would head.  There was no active market for the bonds; when the interest came due, defendants engaged in a cover-up scheme.  Wakpamni ended up $60 million in debt and investors lost $40 million. 

Archer, Galanis and others were charged with conspiracy to defraud Wakpamni by inducing issuance of the bonds on the false promise of placement in an annuity, as well as securities fraud for making false statements and omissions as part of the scheme to misappropriate the bond proceeds and cause investor funds to be used to purchase the bonds.  Archer, Galanis and another codefendant were convicted on both counts.  The district court subsequently granted Archer’s Rule 33 motion for a new trial, focusing on Archer’s intent and concluding that “when each piece of evidence in this indisputably complex case is examined with scrutiny and in the context of all the facts presented, the government’s case against Archer loses much of its force.”

The Circuit Reinstates The Conviction

The Circuit reversed, clarifying the standard to be applied under Rule 33 and its prior decision in United States v. Ferguson, 246 F.3d 129 (2d Cir. 2001).  The Court held that “a district court may not grant a Rule 33 motion based on the weight of the evidence alone unless the evidence preponderates heavily against the verdict to such an extent that it would be ‘manifest injustice’ to let the verdict stand.”  Under Ferguson, “absent a situation in which the evidence was ‘patently incredible or defie[d] physical realities,’” or “where an evidentiary or instructional error compromised the reliability of the verdict, a district court must ‘defer to the jury’s resolution of conflicting evidence.’”  Furthermore, it “must be careful to consider any reliable trial evidence as a whole, rather than on a piecemeal basis.”

Here, the Circuit concluded that the evidence did not “preponderate heavily” against the verdict. For example, several emails admitted into evidence were susceptible to multiple interpretations as to Archer’s intent, both exculpatory and inculpatory; but it was not the province of the district court to “reweigh” the evidence, nor to “second guess the jury’s clear choice of a different inference” than that which the court found most compelling.  Circumstantial evidence—which the jury was entitled to credit—reasonably supported the inference that Archer knew the bond proceeds were being misappropriated, and that he intended to participate in the scheme by purchasing the bonds without informing the clients of the investment advisors of the conflicts of interest.  Archer’s intent was supported by his own misrepresentations to banks and the Board of Directors of an investment trust regarding the source of funds for the second bond purchase and his relationship with Galanis.  Furthermore, there was evidence Archer knowingly furthered the cover-up of the fraudulent scheme.

In short, the evidence the district court relied on to order a new trial did not “preponderate heavily” against the verdict.  The Circuit emphasized that “[a]bsent exceptional circumstances, a district court confronted with a Rule 33 motion may not act as the factfinder, discounting substantial circumstantial evidence or making contrary factual findings based on inferences that the jury clearly rejected.”  Moreover, the district court must consider the evidence “as a whole,” rather than piecemeal, and decline to “elevate its own theory of the evidence above the jury’s clear choice of a reasonable competing theory.”

Concluding Thoughts

The Circuit’s clarification of Ferguson demonstrates the high standard that must be satisfied in order to obtain a new trial under Rule 33.  Future defendants may struggle with this standard, particularly where the government casts such motions as merely repeating the defense’s theory of the case despite its rejection by the jury, and where that theory turns on key pieces of evidence rather than the record in its entirety.  Particularly in complicated white-collar cases where the evidence is hard to follow and where the jury may be swayed by the general impression that the defendants acted in an unethical or greedy manner, it is useful for the district judge to assess whether the evidence, even if legally sufficient, actually supported a conviction under the demanding standard required in criminal cases.  The district judge has seen the trial, heard the witnesses, and is therefore in a good position to make this assessment.

In New York state court, a defendant can argue that his or her conviction was contrary to the weight of the evidence.  See People v Bleakley, 69 N.Y.2d 490 (1987) (“If based on all the credible evidence a different finding would not have been unreasonable, then the appellate court must, like the trier of fact below, weigh the relative probative force of conflicting testimony and the relative strength of conflicting inferences that may be drawn from the testimony.  If it appears that the trier of fact has failed to give the evidence the weight it should be accorded, then the appellate court may set aside the verdict.”) (internal citation and quotation omitted)).  This standard of review has existed for many years without it denigrating the role of the jury in state court.  To the extent that this type of review is incompatible with Rule 33 and its associated precedent, perhaps it would be appropriate for Rule 33 to be amended to expressly permit district court judges to conduct this type of analysis.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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