3.Charge Conference
559 linesJUDGE KAPLAN: We will mark as Court Exhibit X for identification a copy of the circulation draft of the proposed charge. As soon as I get organized, we will get started. Any objections or suggestions from the government from the beginning through page 5, line 12?
MR. ROOS: Yes, Judge. On page 1, line 18 and 19 and page 2, lines 6 and 7, the crime is described as, by misappropriating those customers' deposits. We would ask for it to be, by making false statements or representations to obtain money or property and by misappropriating those customer deposits to reflect the fact that the government is going to argue both affirmative misrepresentations and misappropriation.
JUDGE KAPLAN: Who is going to speak from the other side?
MR. DICK: I will, your Honor, Gale Dick. We object to charges that omit the misappropriation theory all together.
JUDGE KAPLAN: You object to charges that omit the misappropriation --
JUDGE KAPLAN: I don't understand what you have just said.
MR. DICK: I misspoke. Sorry. The indictment charges the misappropriation theory. It does not charge a misrepresentation theory. In our view, instructions that omit discussion of the misappropriation theory and focus on the misrepresentation theory are constructive.
JUDGE KAPLAN: We are going to have to work out a way of understanding each other. We are going to have you start by you speaking more slowly.
JUDGE KAPLAN: Could we try that again.
MR. DICK: Yes, we certainly can. It's our position, your Honor, that the indictment charges solely a misappropriation theory. It does not charge a misrepresentation theory of wire fraud on customers. So instructions that reference a misrepresentation theory, in our view, are improper and a constructive amendment of the indictment.
JUDGE KAPLAN: Mr. Roos, what do you have to say?
MR. ROOS: It's definitely not a constructive amendment because the speaking indictment outlines several categories of false representations, statements, promises made by the defendant, so there is certain no constructive amendment. If they are referring to the description in the "to wit" clause, I think the law is clear that that does not bind the Court in terms of considering how it can describe the indictment or the theory, so I think it's appropriate to do both.
JUDGE KAPLAN: Counsel, frankly, I didn't get your name. Tell me again.
JUDGE KAPLAN: Mr. Dick, to my recollection, and I've had the issue recently, Mr. Roos is absolutely right with respect to the "to wit" clause. Is there any other basis on which you are objecting to submission of false statements?
MR. DICK: Yes, your Honor. In the speaking portions of the indictment, it does make reference to misrepresentations to lenders and to investors but not to consumers, customers.
JUDGE KAPLAN: You are going to address that?
MR. ROOS: I think, no. The answer is no. That's not correct. Not that I'm not going to respond. The answer is, that is not a fair characterization of the indictment. It describes his lies to Congress, the lies to the public.
JUDGE KAPLAN: Overruled. Your proposed language, Mr. Roos, is page 1, line 18 to start with.
MR. ROOS: Right. Your Honor, we defer to the Court on the specific language you want to use, but the idea being, the thrust of the wire fraud charge, which is by making material misrepresentations, or you can describe it as a representation or a statement or a promise to obtain money or property.
JUDGE KAPLAN: I am going to ask you to give me proposed language later on, so you have time to work it out. We will come back to that. Anything else on the section I inquired about? From the defense? Mr. Roos, you are going to have to stand.
JUDGE KAPLAN: What about you, Mr. Dick?
MR. DICK: Yes, your Honor. On page 4, line 13, it reads: Proof that the crime charged actually was committed or attempted. We do not believe attempted has been charged or proved. We would strike the words, and attempted.
JUDGE KAPLAN: I thought it said, or attempted.
JUDGE KAPLAN: Mr. Roos.
MR. DICK: Your Honor, at the bottom of that page, lines 22 and line 23, it states in the indictment that the defendant aided and abetted the commission of the crime. The proofs at trial have been about principal liability, not aiding and abetting, and we would strike that.
JUDGE KAPLAN: Unfortunately, I believe that it cites 18 U.S. Code Section 2, which is, among other things, aiding and abetting. Overruled. Anything else on that section?
JUDGE KAPLAN: Page 5, line 13 through page 6, line 19. Government.
JUDGE KAPLAN: Defense.
MR. DICK: I won't repeat this every time, your Honor, but I objected previously to what we view as a constructive amendment versus with respect to wire fraud on customers. As to the misrepresentation theory, I won't repeat that objection every time.
JUDGE KAPLAN: Overruled. Page 6, line 20 through page 8, line 15. Government.
MR. REHN: Yes, your Honor. Related to the previous point, on the bottom of page 7, at line 23, this is after describing the misrepresentation theory. Rather than saying a scheme to defraud existed if the government has proved, we would submit that the instruction should say, a scheme to defraud also includes a scheme to fraudulently embezzle or misappropriate, and then picking up with property at the top of the next page.
JUDGE KAPLAN: Let me just see if it's charged in substance. Any response to that, Mr. Dick?
JUDGE KAPLAN: I will charge it in substance as the government suggests. Again, I'd like to have specific language submitted.
JUDGE KAPLAN: Anything else from the defense down to line 15 on page 8?
JUDGE KAPLAN: OK.
MR. REHN: Sorry about that. In that same sentence, after it says, property belonging to another, there is an or there and then it gets into a definition of property entrusted to the defendant's care, which we think that the or is incorrect because it -- really this is a definition of what it means to be property entrusted to the defendant's care. So the government would suggest a period after another and then take the remainder of that sentence and move it to the bottom of this paragraph and have it just say, money or property is entrusted to the defendant's care. And then it continues as it is.
JUDGE KAPLAN: Any comment on that, Mr. Dick?
JUDGE KAPLAN: I'll come back to you in a minute. What the government is suggesting is that on line 8 we start a new sentence.
MR. REHN: Money or property is entrusted, and then it just continues with the rest of the sentence. That's on lines 2 through 5.
JUDGE KAPLAN: We are picking up there 2 through 5. I follow. I will do that. Anything else from the government on this section?
JUDGE KAPLAN: Mr. Dick, anything on your side?
MR. DICK: Yes, your Honor. With respect to this definition, I will say loosely related to fiduciary duty, there is a concept that we think is important to include, and relying here on the Second Circuit's decision in Skelly. This is the notion of reliance, dominance or control. I have some proposed language that I can read to you and then submit later.
JUDGE KAPLAN: You can read it.
MR. DICK: It says: A fiduciary relationship involves discretionary authority and dependency and at the heart of the fiduciary relationship lies reliance and de facto control and dominance.
JUDGE KAPLAN: Who is going to address that for the government?
MR. ROOS: Judge, I think the language, you have great confidence and trust, also comes from some of the Second Circuit cases about fiduciary relationships or other relationships of special trust. And I guess the question with the defense citation is what exact language are they proposing from it. We are not opposed, I think, conceptually to defining this in a way, if the Court wants to consider that, but we need to know what the language is that they are actually proposing. That doesn't sound like a jury instruction.
JUDGE KAPLAN: It doesn't.
MR. DICK: We would be happy to submit some language, your Honor. The concepts are drawn from the same body of case law, including Chestman.
JUDGE KAPLAN: That's all well and good. But if you are requesting a charge, as you know, it has got to be specific, and I have to conclude that the way in which you are requesting it is exactly consistent with the law, and I don't know what the language is.
JUDGE KAPLAN: Anything else through line 15 on page 8 from either side?
MR. REHN: Your Honor, we just noticed, there is a typo on line 14 at the end of the line, the word the before whether should be stricken.
JUDGE KAPLAN: You are correct. I will make that change. Page 8, line 15 through page 9, line 23. Government.
MR. REHN: We did have some thoughts on this terms of service language. I don't know if it makes sense to hear the defense position because they have recently submitted briefing on this. I don't know if our concerns may be mooted if they have concerns.
JUDGE KAPLAN: Mr. Dick, how about you?
MR. DICK: Yes, your Honor. I have something higher up on page 9, if you would like to hear that now, and then we can turn back to terms of service.
JUDGE KAPLAN: Higher up on page 9?
JUDGE KAPLAN: All right.
MR. DICK: It's our view that this clickwrap instruction is unnecessary. The conspicuousness of what is and is not contained in the terms of service has not been subject to proof at trial and it will confuse the jury and is unnecessary.
JUDGE KAPLAN: Of course it has been subject to proof at the trial. It's right there on an exhibit. I don't remember the exhibit number, but it's right there. Back to you, Mr. Rehn.
MR. REHN: If the defense is proposing to cut this part -- are they just proposing to cut this paragraph?
MR. REHN: I think if you are going to cut that, you may need to cut the previous paragraph as well because that refers to some of the concepts that seem --
JUDGE KAPLAN: Is the government objecting to those two paragraphs or not?
JUDGE KAPLAN: That wasn't my question.
MR. REHN: If the defense doesn't want them, the government is not asking for them, if that's the question.
JUDGE KAPLAN: No, that's not the question. Please listen to the question and answer it.
MR. REHN: We would say -- if the first paragraph is included, the second paragraph provides necessary context to the first paragraph. If both paragraphs are included, we would also ask that the Court include the language about disclaimers that the government has proposed in its letters, which I could provide to the Court, that's taken from the Weaver case.
JUDGE KAPLAN: We will come back to that. What's the defendant's position on this?
MR. DICK: The defendant's position is that the introductory sentence to the last paragraph on page 8, first, my recollection that there is only one version of the terms of service, lines 18 and 19. We have no objection to keeping that in. We view the remainder with respect to clickwrap and the agreement as unnecessary, and we would ask that that be removed. So that would be --
JUDGE KAPLAN: Is there an objection to that or not?
MR. DICK: The one I articulated, in our view, the clickwrap and the conspicuousness, is not a subject of proof at trial.
JUDGE KAPLAN: What exactly is the defendant's position? If I take this out, what's the jury to be told about the significance or the relevance, for that matter, of the terms of service?
MR. DICK: In our view, your Honor, that's taken up in the paragraph on page 9, line 12, and we did submit last night, your Honor --
JUDGE KAPLAN: Yes. I got the submission late last night with 240 pages attached to it. I have not read all 240 pages yet.
MR. DICK: Yes, your Honor. In our view, the legal significance and the legal meaning of the terms of service are a proper subject for the jury to consider. Because it is a contract, its meaning is for the Court to instruct the jury on.
JUDGE KAPLAN: Whether it is a contract depends, does it not, on whether clicking on the box formed a contract and, if so, what the terms of that contract were. Isn't that true?
MR. DICK: Point taken, your Honor. In that event, I would be happy to submit this later in writing. On page 8, the sentence after the first -- this would go from lines 19 through 22. There is evidence that a prospective customer had to click on a box that said I agree to the FTX terms of service in order to open an account. We would keep that in, which, in our view, establishes the formation of a contract, and the meaning of the contract we would then turn to the paragraph on page 9.
JUDGE KAPLAN: Which paragraph on page 9?
JUDGE KAPLAN: Which doesn't address the meaning of the contract.
JUDGE KAPLAN: That's what you want. You want to say there was a contract and you don't want to address the meaning of it.
JUDGE KAPLAN: You just want to wing it on closing.
MR. DICK: No, your Honor. In fact, the meaning of the contract is the subject of the submission we made last night.
JUDGE KAPLAN: Yes, I know. But I am not going to charge that.
JUDGE KAPLAN: That submission was untimely, it's incomplete, it does not state the relevant law, it may not apply the right law. It has all kinds of problems that I've only touched on.
MR. REHN: Your Honor, it's the government's position that the core important point for the jury to be instructed on is what the Court has on page 9, beginning on line 12, that this is a criminal wire fraud case and not a civil breach-of-contract case. We don't think that the jury needs instruction on the terms of service as set forth in the previous two paragraphs. We do believe that if the Court is to provide that instruction, an instruction from Weaver regarding disclaimers --
JUDGE KAPLAN: You said that already. I understand that. There is no evidence whatsoever in the record, am I right, as to what the terms of service actually were before May 22, 2022. Isn't that so?
MR. REHN: I believe that's correct, your Honor. There is reference to existing prior drafts, but I do not believe they are in evidence.
JUDGE KAPLAN: There is reference in the testimony but certainly not a document and, to my recollection, certainly not even testimony as to what those terms were. Yes?
MR. REHN: I think that's right. I'm reminded by my colleague, there may have been some general description in Can Sun's testimony.
JUDGE KAPLAN: Can Sun's testimony, I believe, was to the effect that when he came aboard, there had been one or more prior documents which are terms of service, that there was a draft of a new one in progress, that the new one was finished under his administration, and that it went live, so to speak, became operational in May of 2022, right?
JUDGE KAPLAN: And he said something to the effect that there were some things in what went before that were in the May draft, but other things that weren't, something to that effect. Isn't that so?
JUDGE KAPLAN: So there is no evidence as to what the terms of service substantively said before May of 2022. That being the case, there is no evidence of a contract before May of 2022 because, clickwrap validity or not, there is no evidence as to whether the clickwrap approach was used before May '22, although maybe someone could infer that, but certainly no evidence as to what they were agreeing to then. Yes?
JUDGE KAPLAN: Now, then we come back to May of 2022. I understand that the defense wants me in one way or another to say that this was a contract when somebody clicked on the box after May of 2022. Aren't there issues of fact in that regard for this reason? If the clicking was not legally effective to form a contract between the customer and FTX, then the governing law clause in the terms of service has no bearing whatsoever. There has been no proof in this case, apart from that clause, as to whether there was ever a contract that whatever this relationship was, it was governed by English law or anything else, right?
JUDGE KAPLAN: Nothing. So what we have here is a situation in which the existence of a contract in the May 2022 period, putting aside for a minute the precise terms, depends on the circumstances in which a so-called clickwrap agreement is effective to form a contract, yes?
JUDGE KAPLAN: And in the absence of proof that foreign law, whether that's New Jersey or Antigua or the United Kingdom or Nauru, and that that foreign law is different than the law of New York, the Court is bound to apply New York law. Yes?
MR. REHN: Well, your Honor, there is no need for the Court or the jury to consider any substantive contract law because, as articulated in cases like Weaver, in a criminal federal wire fraud case the jury should consider all of the evidence of the relationship between parties, not just whether there was or was not compliance with the literal terms of the contract.
JUDGE KAPLAN: But if there is no contract, they can't consider an alleged contract, right?
MR. REHN: Your Honor, they can consider all of the ways in which the parties made representations and communications to each other and the terms of service are a form that was available to customers. For example, there was evidence that Can Sun sent the terms of service to Sculpture, which was a prospective customer at FTX, when they were asking questions about how their assets would be treated at FTX. So the question there is not whether Sculpture entered into a contract when it became a customer, but what it understood its assets would be treated as on the exchange.
JUDGE KAPLAN: Now I think I am beginning to understand your point. Mr. Dick, any response to that?
MR. DICK: Well, it's, at a minimum, conceded by the government that the terms of service, whether considered as a contract or as a series of representations, are relevant. So those contents, I think, are properly before the jury. And as your Honor is alluding to, whether or not it was in fact a contract is certainly relevant to the nature of the relationship between the customers and FTX. So our view is --
JUDGE KAPLAN: Whether or not it was a contract depends on whether the clickwrap agreement is sufficient for contract formation, isn't it?
JUDGE KAPLAN: Given what I said about no proof of foreign law and no ruling by the Court on any foreign law, I apply the law of New York to whether there was a contract, as opposed to some idle communication that was headed terms of service. Do you agree with that too?
JUDGE KAPLAN: So the government's point is, they would like to drop essentially the last -- the carryover paragraph on page 7. Is that right, Mr. Rehn?
MR. REHN: What we said is that we would certainly be fine with dropping both the paragraph beginning first that's on page 8 at line 18 and then the next paragraph that begins on page 9 at line 3, or include both with the government's proposed disclaimer instruction. Either one, we think, is acceptable.
JUDGE KAPLAN: I'm sorry. I think I said page 7, but I didn't mean page 7. I meant page 8. But you picked that up.
JUDGE KAPLAN: So you would drop the paragraph beginning on 8, line 18 through 9, line 11.
MR. REHN: To be clear, we don't object to the Court's views on this. If the Court thinks it's appropriate to include these paragraphs, we don't object to that. What we had a problem with was the defense suggestion that just cut one of the two paragraphs. So we are happy with cutting both or with keeping both with our proposed addition.
JUDGE KAPLAN: Given that position now, Mr. Dick, where are you?
MR. COHEN: I don't want to keep belaboring the point, your Honor, but for record purposes it is our view that there was a submission in English law --
JUDGE KAPLAN: It's your position that what?
JUDGE KAPLAN: Yes, I know there was.
MR. DICK: That being so, we reviewed the contract, the terms of service, should the jury find there to have been a contract, to be relevant, its terms, under English law, to be relevant. And in that event we would actually keep the language with respect to clickwrap because your Honor has pointed out, as to contract formation, that language lays that groundwork.
JUDGE KAPLAN: I am going to leave it with the change the government suggested.
MR. DICK: Just for record purposes, your Honor, on the Weaver instruction, the disclaimer instruction --
JUDGE KAPLAN: The Weaver instruction, where do I find that language?
MR. REHN: Your Honor, a version of it is in the letter that the government filed on October 19 at page 3, but I could also provide it to the Court now.
JUDGE KAPLAN: In your view, it would go where?
MR. REHN: It would go after line 11 on page 9. In considering whether a statement or omission is material, let me caution you that a clause in a contract or a disclaimer cannot render any misrepresentations, including any oral misrepresentations, immaterial as a matter of law.
JUDGE KAPLAN: Mr. Dick.
MR. DICK: Our views on this were set out in our letter of October 24. We view that instruction as unnecessary.
JUDGE KAPLAN: I have had, I am going to guess now, 200 pages of submissions in letters and proposed jury instructions, and if you're seriously advocating this position you are going to have to tell me what it said.
MR. DICK: In brief, your Honor, an instruction with respect to disclaimers we view as unnecessary and potentially confusing. The terms of service, again, in our view, formed a contract with substantive provisions. Rather than purely disclaimers with respect to prior disclosures regarding risk and those substantive procedures, we believe the jury would be tempted to disregard by the government's proposed instruction.
JUDGE KAPLAN: I think your position on this is in some respects inconsistent with what you said a minute ago about contract formation and disclaimers are in fact substantive provisions of contracts. So I am not going to adopt your suggestion, and I am going to charge, in substance, what the government said about disclaimers. There was something else after disclaimers.
MR. REHN: Yes, your Honor. Let me caution you that a clause in a contract or a disclaimer cannot render any misrepresentation.
JUDGE KAPLAN: When I go back upstairs and try to find the specific language, it's in your October 19 letter, page what?
JUDGE KAPLAN: Oh, well, how wonderful.
JUDGE KAPLAN: Now, I think we got through page 9, line 23. Did we get that far?
JUDGE KAPLAN: OK.
MR. REHN: Beginning on line 18, there is a sentence that begins, and if the government has proved such a relationship of trust and confidence, it says, you must determine whether or not the government has proved that FTX customers were materially deceived or misled. The issue there is that that seems that the government must prove misrepresentation and misappropriation, as opposed to what the law is, which is that it's an alternative theory. Because there is other places in the instructions where both alternatives are set forth, we think that sentence can just be cut. Separately, the instructions adequately define both misappropriation and material misrepresentations.
JUDGE KAPLAN: Mr. Dick.
JUDGE KAPLAN: That's out. Anything else through page 9, line 23 from either side? Hearing none, we will move on. Line 9-24 through page 11, line 7. Government.
JUDGE KAPLAN: We are on page 9, starting with line 24 through 11, line 7.
MR. REHN: Again, in keeping with the theme, on page 10, line 5, at the end of the line it says, that is sufficient to establish. We would propose the word also there.
JUDGE KAPLAN: Any objection to that, Mr. Dick?
JUDGE KAPLAN: I'll make that change. Anything else from the government through page 11, line 7?
JUDGE KAPLAN: Defendant.
JUDGE KAPLAN: 11, line 7.
JUDGE KAPLAN: I think the hard part is over. Page 11, line 8 through page 14, line 14. Government.
MR. REHN: Your Honor, the government has previously briefed the issue of the appropriate definition of willfully with respect to each of these crimes. It's our view that in the context of the wire fraud and securities fraud and commodities fraud charges, all of which are going to use the same definition of willfully, there is not a requirement that the defendant act with knowledge that one's conduct is unlawful. We think that's the heightened willfulness standard, and the willfulness standard that applies to these crimes -- to act willfully means to act voluntarily and with wrongful purpose.
JUDGE KAPLAN: Mr. Dick.
MR. DICK: With respect to the wire fraud counts, your Honor, we don't have any objection to that.
JUDGE KAPLAN: We will strike, with knowledge that one's conduct, through the end of line 17 and -- I misspoke there. We will strike, with knowledge that one's conduct is unlawful -- I did not misspeak -- through the end of line 17 and insert, voluntarily and with wrongful purpose. That picks up your point, Mr. Rehn?
JUDGE KAPLAN: Anything else through 14, line 14?
MR. REHN: Similarly, on page 12, at lines 23 and 24, there is a sentence that says: Good faith is an honest belief by the defendant that his conduct was not unlawful. I think that's the inverse of what we just discussed and imports an incorrect willfulness standard into the good-faith instruction.
JUDGE KAPLAN: And, therefore.
JUDGE KAPLAN: Mr. Dick.
MR. DICK: In our view, the sentence under discussion, which goes from lines 23 to 24, on page 12 should read: Good faith is an honest belief by the defendant that his conduct was not unlawful or improper. The invert proposition Mr. Rehn was referring to, we don't think is applicable, an honest belief that one's conduct was not unlawful.
JUDGE KAPLAN: Picking up the language that we just adopted on page 11, would it solve the concerns to say, good faith is an honest belief by the defendant that his conduct was not wrongfully intended?
JUDGE KAPLAN: Mr. Dick.
MR. DICK: Your Honor, we would ask for the original charge, conduct was not unlawful. We think that's proper.
JUDGE KAPLAN: Overruled. Anything else from either side to and including page 14, line 14?
JUDGE KAPLAN: Mr. Dick.
MR. DICK: Your Honor, on the top of page 13, there is what's been called the no-ultimate-harm instruction beginning on line 3. It's the sentence, however. We made a submission that we don't view that as necessary here. To the extent that the evidence shows Mr. Bankman-Fried believed customers would never be harmed, including in the short term, which is what we submit the evidence shows, this instruction is not necessary, and that's in our prior submission.
MR. REHN: Your Honor, there has been quite a bit of evidence for them in the defense case about a belief that the companies would be able to repay the customers, so there is a factual predicate for this instruction in the record, and it's an instruction that has been approved repeatedly in exactly these terms by the Second Circuit when a factual predicate exists in the trial record.
JUDGE KAPLAN: Overruled, Mr. Dick. Anything else from either side to 14, line 14? Hearing none, 14, line 15 through 15, line 13. Government.
JUDGE KAPLAN: Mr. Dick.
JUDGE KAPLAN: 15, line 15 to 16, line 16.
JUDGE KAPLAN: Thank you. 16, line 17 through 19, line 7. Government.
MR. REHN: Your Honor, on page 19, at 4 and 5, this is in respect to the aiding-and-abetting instruction. The prior sentence explains what the jury must find in order to convict the defendant on an aiding-and-abetting theory, but then the next sentence suggests they may not find the defendant guilty of the substantive crime if they don't find aiding and abetting, which suggests --
JUDGE KAPLAN: You're right.
MR. REHN: It should read: If, however, you do not so find, you may not find the defendant guilty of that substantive crime on an aiding-and-abetting theory.
JUDGE KAPLAN: You're absolutely right. And on page 3, the word must should be changed to should.
JUDGE KAPLAN: I assume it's fine with the defense.
JUDGE KAPLAN: Page 19, line 8.
JUDGE KAPLAN: I'm sorry?
JUDGE KAPLAN: Page 3.
JUDGE KAPLAN: I'm sorry. Page 3.
MR. DICK: Just on the aiding-and-abetting charge, your Honor. It's our position that the case that has been tried is not an aiding-and-abetting case and this instruction is unnecessary. Your Honor's earlier point about the statute and the aiding-and-abetting charge is taken, so we could just, for record purposes, record our view that the aiding-and-abetting charge --
JUDGE KAPLAN: I take your point. What about that, Mr. Rehn?
MR. REHN: Your Honor, there has been quite a bit of evidence that other people committed substantive crimes and that the defendant took various acts in furtherance of that. For instance, Ms. Ellison testified that she sent fraudulent balance sheets to lenders after consulting with the defendant. A jury could certainly conclude that even if they don't find that the defendant caused her to do that, such that he's guilty as a principal, he nonetheless aided and abetted her by reviewing the balance sheets. That's just one of many examples in which the defendant communicated with others in furtherance of substantive crimes that they were committing.
JUDGE KAPLAN: Why isn't that right, Mr. Dick?
JUDGE KAPLAN: Well, I don't think that's right, is it? Because I certainly take your point that it could be a conspiracy charge. But if the crime was then actually committed by someone else, the defendant's conduct, Mr. Rehn argues, could be viewed as aiding and abetting that person in committing the substantive mail fraud and wire fraud offense.
MR. DICK: I understand your Honor's point. In our view, that has not been what the case has been about or what the proof at trial has been about, but we can record our position for the record.
JUDGE KAPLAN: Your position is recorded. Overruled. Page 19, line 8 through page 21, line 24. Government.
JUDGE KAPLAN: Defense.
JUDGE KAPLAN: Thank you. Page 21, line 25 through page 24, line 17. Government.
JUDGE KAPLAN: Mr. Dick.
JUDGE KAPLAN: Page 24, line 18 through page 29, end of the page. Government.
JUDGE KAPLAN: Yes.
MR. REHN: The law does not require the government to prove an overt act that is alleged in the indictment. It only needs to prove an overt act. We would suggest striking the words alleged in the indictment. So that sentence should read: The government may satisfy the overt-act element by proving an overt act, but it is not required to prove the particular overt acts alleged in the indictment.
JUDGE KAPLAN: I hate to tell you how many times the charge has been given in these precise words. I understand that as a matter of drafting what you propose sounds harmless, but what's here accurately states the law. Your point is overruled.
(Continued on next page)
MR. REHN: Your Honor, we think that the issue is the law does not require the overt act that's set forth in the indictment to have been proven.
JUDGE KAPLAN: Yeah, and how is that not covered in the sentence that begins on line 24?
MR. REHN: Well, the sentence on line 24 says that we may satisfy it by proving an overt act alleged in the indictment.
JUDGE KAPLAN: Keep reading.
JUDGE KAPLAN: Right.
JUDGE KAPLAN: Okay. Anything from the defense on this section?
MR. DICK: Yes, your Honor. On page 27, lines 6 and seven, "wilfully," in the context of securities fraud, our charge proposed and it's our position that "wilfully" in this context requires a specific intent to violate the securities law.
JUDGE KAPLAN: Mr. Rehn?
MR. REHN: That's not correct under the governing law. I'm not sure what authority the defense is looking to.
JUDGE KAPLAN: Mr. Dick, maybe you'll enlighten us?
MR. DICK: Certainly, your Honor. Two cases that I'm thinking of: United States v. Cassese, 428 F.3d 92, 98 (2d Cir. 2005); and United States v. Peltz, 433 F.2d 48, 55 (2d Cir. 1970).
JUDGE KAPLAN: Give me the second one, please?
JUDGE KAPLAN: Let me take a look.
MR. REHN: Your Honor, with respect to the Kaiser case, 609 F.3d 556, 569, specifically held that willfulness does not require a showing that the defendant had awareness of the general unlawfulness of his conduct.
JUDGE KAPLAN: Does not require?
JUDGE KAPLAN: An awareness of the general unlawful nature of his conduct?
MR. REHN: That's right. But rather that he had an awareness of the general wrongfulness of his conduct, which is what we discussed earlier in the context of the wire fraud charge. One other authority for the Court, Judge Rakoff gave an instruction along the lines of what we've suggested in United States v. Petit, and the Second Circuit just recently affirmed that. That's United States v. Petit. The citation for the Second Circuit case is 2022 WL 3581648 at *4.
JUDGE KAPLAN: All right. Now give me a couple of seconds to look at these authorities. Mr. Dick, Peltz and Cassese, if it adopted the standard you said at all, did so for insider trading cases alone; isn't that right?
MR. DICK: I think I disagree, your Honor, and if one looks at the Kaiser decision, it seemed to say that for insider trading cases only, the specific intent I mentioned——intent to violate the securities law——was not required, but for a misrepresentation on investors theory, it was required.
JUDGE KAPLAN: Mr. Rehn, what about it?
MR. ROOS: I believe he actually has that backwards. I believe in the insider trading context——I don't have the case in front of me, your Honor, but as I recall, the insider trading cases sometimes do have a stronger willfulness instruction than the more general misrepresentation on investors cases, so on my recollection, that's what the Kaiser case says. It certainly was the case in Petit that the Second Circuit recently affirmed an instruction that the defendant acted deliberately and with a bad purpose and said that there was no further instruction required for willfulness. Petit, I believe, was not an insider trading case; it was just a general securities fraud case.
JUDGE KAPLAN: The government is right on this, so that it will stand as written. Anything else on this section from either side? Mr. Dick?
JUDGE KAPLAN: Mr. Rehn?
JUDGE KAPLAN: Page 30, line 1, through 34, line 10.
MR. REHN: Very minor, your Honor. On page 30, at lines 14 and 15, it says, "this Count Six." I think just the word "this" should be stricken in both places.
JUDGE KAPLAN: It is very minor. I'm not going to change it.
JUDGE KAPLAN: Yes.
MR. DICK: On page 33, beginning on line 9, the instruction with respect to in connection with commodities fraud——fraud, that is, in connection with commodities trades, the Court's instruction reads, "One way the government may prove a sufficient connection to the United States——"I beg your pardon. I'm on the wrong page. I'm on page 32. I apologize, your Honor. This is in the middle of page 32, beginning on line 11. The charge proposes that the "in connection with" requirement would be met as long as there was some nexus or relation between the alleged fraud, fraudulent conduct, and the swap or contract of sale of a commodity, and in the next sentence, on line 15, it suggests that that connection requirement would be met if the fraudulent conduct touched upon a swap or a contract of sale of commodity. In our view, under the Brady standard, that's insufficient.
JUDGE KAPLAN: Mr. Rehn?
MR. REHN: Your Honor, again, I don't have the cases in front of me, but I believe that this is consistent with the government's proposed instruction, which drew from some of these same authorities that the Court has drawn from, so unless there's a specific authority the defense is citing, I think these are correct.
JUDGE KAPLAN: What specifically do you rely on, counselor?
JUDGE KAPLAN: With respect to this point.
MR. DICK: Yes, to this point. To the "in connection with" requirement, we were relying on Dabit v. Merrill Lynch, Second Circuit of 2005, which required an integral relationship between the fraud and commodities trades.
JUDGE KAPLAN: Citation, please.
JUDGE KAPLAN: I'm sorry. 395?
MR. DICK: Yes, 395 F.3d 25, 37. I'll note that that case, Dabit, was overruled on other grounds——specifically, the scope of preemption under SLUSA.
JUDGE KAPLAN: All right. I'll take a look. What language are you asking for here, Mr. Dick?
JUDGE KAPLAN: I'm not going to charge it in those terms. I'm going to leave it as it is. While I understand that there is identical language in Dabit, quoted from another case, reading Dabit overall, I think the instruction I propose to give is consistent with the case law. Certainly Dabit did not purport to adopt the view that would be reflected if I charged it in the precise terms the defense is requesting. It takes it out of context. Anything else?
JUDGE KAPLAN: Yes.
MR. DICK: ——in the paragraph beginning on line 9, with respect to extraterritorial conduct, with the territorial application of the statute. As written, the charge would have that element, the territoriality requirement, satisfied by a showing that, "some conduct relevant to the offense charged in Count Six occurred in the United States." In our view, there should be additional language in that sentence, saying "and that the fraudulent conduct was not predominantly foreign."
JUDGE KAPLAN: Mr. Rehn?
MR. REHN: Your Honor, that would be inconsistent with a number of recent cases that say that as long as there is domestic conduct in the United States, that's sufficient for facing jurisdiction on this particular provision of the commodities law. For instance, In re Platinum and Palladium Antitrust Litigation, 61 F.4th 242, 267 (2d Cir. 2023), it held that it was proper to apply the Commodities and Exchange Act domestically where the plaintiffs alleged domestic conduct by the defendants that violated the CEA.
JUDGE KAPLAN: What are you relying on, Mr. Dick?
MR. DICK: I was relying on the "predominantly foreign" phrase from Prime International, which the Platinum and Palladium case and others have cited and relied upon.
JUDGE KAPLAN: What's the citation?
JUDGE KAPLAN: And Mr. Rehn, the case you were citing was 62 or 67?
JUDGE KAPLAN: Thank you.
MR. DICK: Your Honor, I apologize. I do not have that citation. I'd be happy to provide it shortly after the conference, but I simply don't have it right here.
JUDGE KAPLAN: Okay. Let me just read the government's case. Just to digress for a moment, I note on page 31, line 27, where it says "interstate commerce," I think it should say "interstate or foreign commerce." Anybody disagree with that?
JUDGE KAPLAN: Okay. Getting back to where we were. I'll ask the defendant to submit the authority to my chambers, unless you have it now.
JUDGE KAPLAN: Good.
JUDGE KAPLAN: Thank you. Now, Mr. Dick, I hate to do this, but restate your point on this, your language?
MR. DICK: Yes, your Honor. This would be beginning on line 11 of page 33. The end of that sentence currently reads, "some conduct relevant to the offense charged in Count Six occurred in the United States," and I would propose adding "and that the fraudulent conduct was not predominantly foreign."
JUDGE KAPLAN: That sounds right to me, Mr. Rehn.
MR. REHN: Your Honor, I have that Platinum and Palladium case, which seems to indicate that just an allegation of domestic conduct is sufficient.
JUDGE KAPLAN: Well, so you'd better point me to exactly where, because——
MR. REHN: There's language there in which the court upheld domestic application of the statute, and it says, "because plaintiffs also allege domestic conduct by the defendants," which I don't believe that case has further language requiring "predominantly."
JUDGE KAPLAN: All they're saying is that the complaint said there was domestic conduct. That can't be taken I think in this context to mean that any claim of any domestic conduct is enough, can it?
MR. REHN: Your Honor, the Commodities Exchange Act I do believe does criminalize commodities fraud if conduct committed in furtherance of the offense is committed within the United States. There is very specific law about when it's appropriate to have purely extraterritorial application of the law.
JUDGE KAPLAN: Yes.
JUDGE KAPLAN: So what part of the CEA says that action in furtherance in the United States is enough?
MR. REHN: So, your Honor, what we would point to is 7 U.S.C. Section 2, subsection (i), which defines the——or no. I apologize, your Honor. That's incorrect. That's relating to swaps, which is the next paragraph. I'm actually looking at CFTC's Rule 180.1, which is what defines sort of the scope of commodities fraud that the CFTC——
JUDGE KAPLAN: What title of the C.F.R. is that?
JUDGE KAPLAN: 180.1?
JUDGE KAPLAN: 17. I don't think that really supports you. So give me your language, Mr. Dick. I'm going to adopt it.
MR. DICK: Yes, your Honor. This would be page 33, line 11, beginning right after the word "states." That is at the beginning of the sentence. And we would propose "and that the fraudulent conduct was not predominantly foreign."
JUDGE KAPLAN: But this is a conspiracy count, yes?
JUDGE KAPLAN: Which changes it. I would adopt your language if it were a substantive count. Doesn't it change it?
MR. DICK: I believe this is as to the object element of the conspiracy, which does have to be specific. It doesn't mean that Mr. Bankman-Fried's conduct has to have been here or there. The fraudulent conduct as a whole——that is, the object of the conspiracy——must be predominantly foreign.
JUDGE KAPLAN: Well, then shouldn't it read, "and that the fraudulent conduct that was the object of the conspiracy would not have been predominantly foreign"?
JUDGE KAPLAN: Mr. Rehn?
JUDGE KAPLAN: Okay. We're done through page 34, line 10, right?
MR. DICK: With apologies, on this very hard-fought page, one last issue, your Honor? In the bottom paragraph on page 33, beginning on line 15, actually the sentence that begins on line 20, which says, "In assessing this issue, you may also consider whether conduct in furtherance," etc. This is essentially saying, if conduct had an effect on commerce in the United States, it may satisfy the territoriality requirement. In our view, this sentence from here to the bottom of the paragraph actually belongs at the end of the prior paragraph that begins, "One way the government." As to swaps, which is the beginning of this paragraph. Swaps, "the conduct may be foreign provided there is a direct and significant effect on US commerce." With respect to commodities other than swaps, the standard is the one that's quoted at the bottom of this paragraph.
JUDGE KAPLAN: You've lost me.
MR. DICK: Yes, your Honor. So for swaps, there is a specific carveout or a specific rule saying that extraterritorial conduct is covered by the statute, provided there is a direct and significant effect on United States commerce. That is the rule that's quoted in the first lines of this paragraph, 15-20. For other commodities, an effect on United States commerce may be a way of proving a territorial application of the statute, but it is not the direct and significant allegation, it is the language that we believe is set forth beginning on lines 20-25.
JUDGE KAPLAN: Mr. Rehn?
MR. REHN: Your Honor, I think actually we agree with the defense on this point. I think that lines 20-25 should be moved up and come at the end of the previous paragraph.
JUDGE KAPLAN: Okay. I will move it into the prior paragraph. That solves the problem all around?
JUDGE KAPLAN: Okay. Page 34, line 11.
MR. REHN: Just one note, your Honor? Sorry. Going back to page 31, we noticed on line 5, it also needs to be interstate or foreign commerce.
JUDGE KAPLAN: Thank you. Page 34, line 11 through page 39, line 10. Government?
JUDGE KAPLAN: Yes.
MR. REHN: We found it a little confusing where it says, "The government must prove that a person would have agreed to conduct financial transactions with the knowledge that." The "would have" I think was——it seems a little confusing. We would just suggest specifically, "The government must prove beyond a reasonable doubt an agreement to conduct financial transactions with knowledge."
JUDGE KAPLAN: Sounds like an improvement. Mr. Dick?
JUDGE KAPLAN: Okay. Anything else on that section, from either side?
JUDGE KAPLAN: Okay. Page 39, line 11 through page 42, line 9.
MR. REHN: We had a similar issue at the top of page 41, your Honor where there were just a number of sort of subjunctive phrasings of "would."
JUDGE KAPLAN: So tell me how you would propose to fix it.
MR. REHN: So starting at line 1, we would suggest, "I instruct you that the government is not required" rather than "would not be required."
JUDGE KAPLAN: Yes.
MR. REHN: In line 2, that the person in question "knew" rather than "would have known," on line 3, "the government is required" rather than "would be obliged." On line 4, that the person in question "knew," again, rather than "would have known." And then on line 7, again, just strike "would have known" and put "knew" and strike "would have" before "involved."
JUDGE KAPLAN: Mr. Dick?
MR. DICK: We found your Honor's instruction as written perfectly clear so we don't think this is necessary.
JUDGE KAPLAN: This is just parallel to the change we just made, isn't it?
JUDGE KAPLAN: Okay. I'll adopt those suggestions, without objection. Conscious avoidance. Is the government seeking that or not?
MR. REHN: Yes, your Honor. We think that there is clearly a basis for a conscious avoidance instruction.
JUDGE KAPLAN: And it is?
MR. REHN: Yes, your Honor. To take just one example, earlier this morning, the defendant testified that he overheard references to the fiat@ account and chose not to ask any further questions, which in and of itself would be a basis for deliberately avoiding knowing a truth that was apparent to him. And there were a number of other instances in his testimony where he acknowledged being aware of facts that should have given rise to knowledge but avoided learning more. In addition to the defendant's own testimony, there was testimony in the government's case in chief regarding this. For example, Nishad Singh testified that the defendant made up excuses to avoid meetings where the financial hole at FTX was discussed, suggesting that the defendant was deliberately avoiding that knowledge. And so there's a basis for the instruction.
JUDGE KAPLAN: Mr. Dick?
MR. DICK: Judge, your Honor, in our view, the evidence——the government has sought to prove direct or actual knowledge, which is not the right factual predicate for a conscious avoidance charge, and we would object.
JUDGE KAPLAN: Why not? Why isn't it? The government's position is he knew or he blinded himself to it. That's true in every case, or almost every case, where there's a conscious avoidance charge.
MR. DICK: In our view, the government has tried to prove that he knew that there was actual or direct knowledge.
JUDGE KAPLAN: So what?
JUDGE KAPLAN: Do you have any case law that supports that?
JUDGE KAPLAN: Okay. Overruled. I mean, you know, to take the textbook example of a conscious avoidance charge, defendant is observed standing on the corner of some busy intersection and somebody comes up to him and says, Do me a favor, would you take this suitcase across the street to the barbershop, and if you make it across the street with the suitcase, I'm going to give you $2,000. And here's the two thousand dollar bills torn in half. You get the other half when you come back. And the government seeks to prove that the defendant knew the suitcase was full of crack cocaine, and their alternative position is, if he didn't know it was crack cocaine, well, then he certainly blinded himself to the fact that there really were drugs in the suitcase. Classic case. That's the definition, isn't it?
MR. DICK: That hypothetical does reflect the definition, your Honor. We don't think this charge is necessary here.
JUDGE KAPLAN: Okay. Overruled. Venue. Are we really going to have a venue instruction? Is that going to be necessary or not? I understand the government's position. Mr. Dick?
JUDGE KAPLAN: Okay. Any objection to the venue charge as I've stated it here?
MR. REHN: We just had one minor thing on line 15. I think it should be "this district" as opposed to "the district."
JUDGE KAPLAN: I think we can make that change.
JUDGE KAPLAN: Of course it's the district. "The Sovereign District," right? That's your office's position. Any problems with the venue charge, Mr. Dick?
JUDGE KAPLAN: Or the variance in dates?
JUDGE KAPLAN: Okay. Section III. Anything from the government?
JUDGE KAPLAN: Defense.
JUDGE KAPLAN: Section IV, anything from the government?
MR. REHN: Your Honor, on the top of page 49, the first three lines relate to stipulations of testimony, which I don't believe there are any in the case. All the stipulations are of fact. So we would strike those first three lines and then get rid of "Moreover," beginning on line 4.
JUDGE KAPLAN: Well, you made a stipulation of testimony out of the presence of the jury this morning. Do you want that presented to the jury or not?
MR. REHN: I don't think we intend to present that to the jury, but if the defense intends to, we're open to keeping this language.
JUDGE KAPLAN: All right. Look, let's not take a lot of time. The first paragraph on page 49 is stricken. Anything else on the last section?
MS. SASSOON: Page 53, your Honor.
JUDGE KAPLAN: Another quarter is heard from.
MS. SASSOON: Just to keep it moving. Sections J and K referred to "at least one witness" and "at least one witness." I think it was just one witness for each.
JUDGE KAPLAN: Fine. Anything else in IV?
MR. DICK: Your Honor, on page 49, falsus in unum, we view that as unnecessary here. The general credibility charge covers the ground, we believe. We understand that charge is disfavored, although it is in the Court's discretion, and it is unnecessary here.
JUDGE KAPLAN: Overruled.
MR. REHN: Your Honor, on page 53, there is a instruction regarding expert witnesses. Because the expert witnesses weren't qualified on the record, I don't know if they should be identified or——
JUDGE KAPLAN: Do we need this charge at all?
MR. REHN: Your Honor, I think it is helpful because the testimony given by the experts was so different from other witnesses in the case and was based on, in part, their qualifications and their methodologies, and so an instruction explaining that as a basis for admitting that testimony we think is typically given and is appropriate.
JUDGE KAPLAN: Look, I'm willing to give it. I'm just trying to make this less than a three-hour read to the jury.
JUDGE KAPLAN: I do prefer not to, unless both sides wants it. Identification.
JUDGE KAPLAN: Okay. Fine. Anything else?
JUDGE KAPLAN: Through 56? Let's go to that.
MR. REHN: Yes, on the bottom of page 54, with respect to the relevance of the campaign finance violations, because Mr. Salame is not charged as a co-conspirator in the crimes charged in this case, we think that should only refer to his relationship of mutual trust with Mr. Singh and so should strike Mr. Salame.
JUDGE KAPLAN: Okay. Done.
MR. DICK: However, your Honor, in that same section, there are a couple of references to alleged violations of the campaign laws, and that's on line 15——
JUDGE KAPLAN: That's correct. You want to take out the word "alleged."
MR. DICK: Violations of the campaign laws, your Honor. It's the campaign contributions that are in evidence here. The government, prior to trial, said they would not seek to prove that the violation——that the campaign contributions were unlawful. They did not seek to prove that. It's not in evidence, and we submit that language is improper.
JUDGE KAPLAN: Mr. Rehn?
MR. ROOS: So the complication here, of course, is that Nishad Singh, who testified under a cooperation agreement with a charge of conspiring to violate the campaign finance laws, was crossed on that charge and then said on redirect that he conspired with the defendant. Your Honor appropriately gave a limiting instruction, and this is not a point we're going to press at the close of the case, but I think it's not totally accurate to say that we were limited just to a discussion of donations, given what the cross did.
JUDGE KAPLAN: Suppose I struck the word "alleged" and after "violations" inserted "Mr. Singh." Does that solve anybody's problems?
JUDGE KAPLAN: Does that solve your problem? I know you don't want to commit to anything. I understand that. I'm asking you a direct question. I'd like a direct answer.
JUDGE KAPLAN: Yes. Government okay with that?
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JUDGE KAPLAN: What's your proposal?
MR. REHN: We think to avoid kind of characterizing it one way or another, instead of alleged violations of campaign finance laws, we could say, alleged political straw donations on line 15 and also on line 23. The problem with limiting it to Mr. Singh is that, as the testimony came in, clearly it related to a coordinated conspiracy between the defendant and Mr. Singh regarding those campaign donations. I think limiting it to Mr. Singh might leave a misimpression.
JUDGE KAPLAN: Why don't we deal with this by simply adding at the end of the paragraph that, I remind you that the defendant is not charged in this case with any violation of the political -- of the campaign finance laws.
JUDGE KAPLAN: Does that solve the problem?
JUDGE KAPLAN: I'm assuming there is nothing else up to and including page 57, line 22. Do we need the charges in paragraphs T and U at all, 57 and 58?
MR. REHN: Your Honor, we certainly think that U should be included. With respect to T, I guess we don't think it's needed, unless the defense closes by reference to certain investigative techniques which are not employed here, which obviously we don't yet know if that's going to happen yet.
JUDGE KAPLAN: Mr. Dick, what about it?
JUDGE KAPLAN: I'm sorry?
JUDGE KAPLAN: T is out, and you are not going to make that argument. What are the false exculpatories that you are relying on?
MS. SASSOON: For example, your Honor, the Good Morning America clip where he said this was permitted by the borrow/lend program and other statements that were elicited that he made after the collapse to justify the conduct.
JUDGE KAPLAN: The defendant's objection is overruled. That's enough. Anything else through the end of the draft charge?
MR. ROOS: Judge, in V, line 19 on page 58, it says: Communications sent and received over the messaging applications Signal and Slack. I think the way the evidence came in is that the government just argued or you heard evidence about the defendant deleting or causing to be deleted Signal, so we could delete, and Slack.
JUDGE KAPLAN: I am sure Mr. Dick has no objection to that.
JUDGE KAPLAN: Anything else through the end of the draft charge?
JUDGE KAPLAN: Thank you.
MR. ROOS: One thing that's not in here. Your Honor gave an instruction on the limited purpose of prior consistent statements about halfway through the trial. We thought it might be appropriate to just repeat the same instruction or something close in your Honor's final instructions.
JUDGE KAPLAN: Prior consistent statements?
MR. ROOS: Correct. It was in the context of those all-hands meeting recordings. Right before they were played, your Honor gave a legal instruction about how the jury should consider those.
JUDGE KAPLAN: Well, I'm sure it was profound, but I can't remember it. Can you point me to where it is in the transcript.
MR. ROOS: Ms. Sassoon is pulling it right now. I believe your Honor used a modified version of the Third Circuit's model instructions at the time.
JUDGE KAPLAN: I need more help than that.
MS. SASSOON: Transcript 1141.
JUDGE KAPLAN: Thank you. Mr. Dick, what do you say to that?
MR. DICK: As long as it's consistent with the instruction your Honor gave before, we don't object.
JUDGE KAPLAN: I'm sorry. I couldn't get the last --
MR. DICK: If it is consistent, if it's the instruction your Honor gave during trial, we do not have an objection.
JUDGE KAPLAN: I'll insert it in substance. Now, let me get a yellow pad. I just want to make sure that I know for certain what we have, for want of a better term, left open. On page 1, line 17, the government owes me language about misrepresentation and false statement. That also applies to page 2 around line 6, as I remember it. Then at page 7, onto 8, we have the requests by the government for something out of Weaver, right, or have we adequately covered that?
MR. REHN: I think that was at the end of the paragraph on page 9 where the Weaver instruction was. On page 7 and 8, we had proposed some instructions.
JUDGE KAPLAN: Give me just one second. On page 9, I had agreed to add the language, in considering whether a statement or omission was material. Let me caution you that a clause in an investment contract or disclaimer cannot render any misrepresentation, including any oral misrepresentation, immaterial as a matter of law. That's the Weaver instruction.
JUDGE KAPLAN: Is there anything else on 7 and 8 that I'm waiting on you on, or did the movement of the entrusted language in paragraph 8 to the end of that paragraph take care of whatever we had discussed?
MR. REHN: I think you had asked us to propose a slight change to the sentence that runs from the bottom of page 7 to the top of page 8 to reflect that a scheme to defraud also includes a scheme to fraudulently --
JUDGE KAPLAN: Yes, you are right. That's three things that the government owes me. I think that's it. The defense, I don't think I'm waiting on for any language or authority, right?
JUDGE KAPLAN: Can the government get this stuff to me by 4:30?
JUDGE KAPLAN: Any comments by either side on the draft verdict form? My law clerk reminds me of his understanding that the defense was going to submit proposed language based on Skelly with respect to page 8, is that right?
JUDGE KAPLAN: Thanks, John Hammel. The draft verdict form has been distributed, yes?
JUDGE KAPLAN: John Hammel has been very busy today.
MS. SASSOON: Sorry. That's my computer, not my phone.
JUDGE KAPLAN: You're lucky, not having brought your toothbrush. We will mark a copy of the circulation draft Court Exhibit Y for the record. Does anybody have anything on the verdict form?
JUDGE KAPLAN: I wouldn't have thought so.
MR. EVERDELL: No, your Honor.
JUDGE KAPLAN: Let's just take a minute to talk about
closing argument. Where do we stand on how long you expect to be?
MR. ROOS: I think somewhere between two and three hours, probably closer to the two than the three range. That's for the principal summation, not for the rebuttal.
JUDGE KAPLAN: Mr. Cohen.
MR. COHEN: Two to three hours, your Honor.
JUDGE KAPLAN: It would, of course, be highly desirable to get both arguments in tomorrow, which I think may be hard, but I think it's in everybody's interest. And we normally get around five hours of testimony. We can shorten the lunch break a little, which I will try to do, but I leave it in your hands. Then we will hear on Thursday the rebuttal closing. How long do you think, folks?
MS. SASSOON: Your Honor, that will depend in part on the defense closing, but I would estimate 45 minutes.
JUDGE KAPLAN: OK.
MS. SASSOON: To make sure I understand, that will be scheduled for Thursday?
JUDGE KAPLAN: I am told we have somewhere roughly five or six hours of closing arguments tomorrow. If that's the case, there is an outside chance, unless you want a commitment, in which case I'll give it to you, we can start Thursday. But bear in mind that if the closings, including the rebuttal, go into Thursday, then we have the rebuttal argument and delivering the charge. This charge, as you know, is about 60 some pages long. I am not going to be able to read that in a half hour. It's going to take a long time.
MS. SASSOON: Your Honor, what I would propose, if the Court is amenable, is to begin the rebuttal, if defense closing ends by 3:30, but otherwise plan for Thursday so that there isn't a risk of keeping the jury past 4:30 and grumpy.
JUDGE KAPLAN: Sound fair, Mr. Cohen?
MR. COHEN: I'm sorry. I am not sure I follow your Honor.
JUDGE KAPLAN: Ms. Sassoon proposed that she will give the rebuttal closing tomorrow if you wind up by 3:30. Otherwise, she will start first thing Thursday morning.
MR. COHEN: In other words, if I run later, I am not going to get limited. She will just start --
JUDGE KAPLAN: You are not going to get limited. I am not limiting anybody here. It's just a matter of how the day goes and what each side does. Then, of course, it seems to me that if we wind up with the rebuttal going into Thursday, we probably finish the closing just before or in the half hour or hour after lunch, and the jury will get the case sometime in the afternoon. And then in light of juror number 3's flight, we would break until Monday, unless somebody has a better idea.
MS. SASSOON: If the jurors wanted to stay later on Thursday to deliberate longer, we would have no objection to that.
JUDGE KAPLAN: Yes. Thank you. I assume you don't either.
MR. COHEN: We don't object to that. It's also possible to seat the alternate, your Honor. We would like to have the jury come in on Friday.
JUDGE KAPLAN: Given where we are, I would be willing to do that if both sides agree to do that. I am inclined to think not otherwise.
MS. SASSOON: At this point we are not prepared to seat the alternate.
MR. COHEN: We would be amenable to doing that.
JUDGE KAPLAN: Well, I am not foreclosing you from making an application if you think you can justify it. I don't have a view one way or another about whether you can justify it. If it's done by consent, that's one thing. If it's not by consent, that's another issue for me to decide. That's where we are.
MS. SASSOON: One quick question, your Honor. If I have no exhibits or need for a monitor during rebuttal, is it possible to use the smaller podium in front of the jury?
JUDGE KAPLAN: What smaller podium are we talking about?
MS. SASSOON: I know some courtrooms have access to a more easily moved podium that doesn't have a monitor affixed to it. I would feel more comfortable there if the Court were amenable to it.
JUDGE KAPLAN: I would feel more comfortable if you would use that one.
MS. SASSOON: Understood.
JUDGE KAPLAN: That may be why there isn't another one in this room. Yes, Mr. Rehn.
MR. REHN: One more thing, your Honor. It is our understanding that the Court's practice is to send the indictment back to the jury. We wanted to confirm that.
JUDGE KAPLAN: It is. Anything else? It's also my practice to keep you in or in the environs of the courtroom while the jury is deliberating, except for a designated lunch period every day.
MR. EVERDELL: Your Honor, with your Honor's practice of sending the indictment back to the jury, is it just the charging language, or does it include the speaking portions of the indictment as well?
JUDGE KAPLAN: The whole indictment.
MR. EVERDELL: The forfeiture allegations as well?
JUDGE KAPLAN: Good question. Normally, I do, but it's never come up before, that I can remember.
MR. EVERDELL: Your Honor, if you would give us maybe just the evening to think about whether we want to make any application with respect to redacting the indictment, we would appreciate it.
JUDGE KAPLAN: Sure. No more letters.
MR. EVERDELL: Of course, your Honor.
MS. SASSOON: Except by 4:30.
JUDGE KAPLAN: Except by 4:30. That's it, folks. See you in the morning. o0o
(Continued on next page)
(In open court; jury not present)
JUDGE KAPLAN: Be seated, please. Sorry to bring you all back, but when I went back to consider some of the points raised in respect of the charge, I was reminded that the government, in its letter of October 25th, docket item 334, seemed to me took the position that the government would be required to show a false statement in order to prevail on the misappropriation theory. Specifically, there was an objection by the defense to a sentence in a proposed charge by the government that the government was not required to show that the defendant made a misrepresentation or false statement in order to fraudulently embezzle or misappropriate, and the government agreed to remove the sentence requiring proof of a false statement. And then we constructed the charge that we were discussing earlier——Court Exhibit X——on the basis that the government would have to prove a false statement, but the government objected to all the statements in the charge that so indicated. And the defense said they were fine with removing the sentence the government objected to. And I just thought it was significant enough to bring you all together and find out whether I just am incapable of understanding the letter the government sent me or whether something else has gone awry in this process.
MR. REHN: Your Honor, it has been the government's position throughout that the misappropriation theory does not require proof of a false statement or misrepresentation. I unfortunately actually don't have a copy of that particular letter. I think that was in the context of a dispute over some particular language in the defendant's proposed instruction that I think became——ended up not being included in any event, but like I said, I don't have the letter in front of me, unfortunately.
JUDGE KAPLAN: Borrow my copy. Page 2, first full paragraph.
MR. REHN: This was in relation to the special verdict. So, your Honor, as we say on the first page of the letter, there is not a need for a special verdict form. I think we were addressing the possibility that if the Court was concerned about that, a sentence that previously appeared in our proposed instruction could be removed. I don't believe that sentence is actually in the current instruction.
JUDGE KAPLAN: No. But it isn't because in light of what you said in the letter, the proposed instruction that we discussed earlier——Court Exhibit X——takes the view that I took the government to be expressing in its letter.
MR. REHN: So are you particularly highlighting the sentence that we proposed to strike on page 9, I think, is where that——
JUDGE KAPLAN: Page 9 of what?
JUDGE KAPLAN: Well, it occurs in relation to page 1, lines 17 and 18, page 2, lines 5-7, and page 7, lines 22 through page 8, line 1. And also the sentence on page 9, lines 18-21.
MR. REHN: So, I mean, in each case I think what we had proposed is a correct statement of the applicable law. If the issue is——
JUDGE KAPLAN: What you have proposed this afternoon——and we'll mark it Court Exhibit X1 to indicate the proposed language you sent me after the earlier charge conference——is, to my way of thinking, inconsistent with your letter to me of October 25th.
MR. REHN: So again, I think as we said earlier this afternoon, what we're proposing is that the misappropriation theory is an alternative way of the jury of convicting.
JUDGE KAPLAN: I know you're now saying that, and I know that the suggestions you made during the charge conference reflect that view, which I regard as a view you abandoned for the purpose of eliminating a dispute or a disagreement about a special verdict and about the problem——perhaps problem——of there being two alternative theories on which you were proposing to convict the defendant as a principal on the wire fraud count.
MR. REHN: I take your point as to this paragraph in the letter, your Honor. I'm not sure——you know, I think our view that we've expressed today is the view that we have adopted previously in the case, and the view that——
JUDGE KAPLAN: You did. You adopted it earlier, and then you bailed out of it.
MR. REHN: Your Honor, I guess the question that this raises is, if the Court is proposing that to do the alternative instruction requires a special verdict form, you know, in that context, I think we would evaluate whether it makes sense to have a special verdict form and whether, you know, we'd rather have a single instruction without a special verdict form, you know. I think that was the context in which this was drafted.
JUDGE KAPLAN: Believe me, I know what the context was. I've heard enough about context in the last five weeks to last me a very long time. But that's another matter.
MR. REHN: So I don't view us as having abandoned any prior positions. And again, if we're put to the question of whether the instruction as we proposed it today requires a special verdict form, you know, we would ask that, you know, the Court give us an opportunity to consider that issue. That wasn't the context in which we discussed the instructions this afternoon.
JUDGE KAPLAN: Let me hear from the defense.
MR. COHEN: Thank you, your Honor. Now that your Honor has pointed it out, we agree with your Honor's analysis, and we think we should go back to the language that your Honor originally drafted before the modification to 17 and 18 because otherwise, as your Honor points out, we'd be in a special verdict form situation where I don't think either side wants to be.
MR. REHN: Your Honor, I think that we would have to consider——I think we are, I think, open to going back to some of the originally——the language in the original charge, if that's the Court's——if the Court believes that that would require a special verdict form, which as we said in our letter, we don't think it would. But I think that at least with respect to some of the language, rather than saying what the government's burden is as to one of the theories, there was a suggestion the government would have to prove both separate theories, and I think that was our primary concern.
JUDGE KAPLAN: Well, look, I'm the one who introduced the term "special verdict," and as I know I pointed out on the record, that was a misnomer on my part. It's not a special verdict that's in other kinds of cases. It would be special interrogatories. And it would raise other issues. And I'm not professing to know the answer to the question of whether it would require special interrogatories or what the consequences of posing special interrogatories would be. Where I am is that we had a deadline for proposed charges, we had a second deadline for amended proposed charges, we have had a blizzard of letters and so forth, and six days ago today, the government took the position that it took in their letter, and after we have gotten to the point of being about 15 hours from closing argument and an hour or more after the conclusion of the charge conference, subject only to you giving me some proposed language on one or two points, all of which are implicated by this, and a request to the defendant for something also, now all of a sudden, to my perception, you're——whether you intended it or not——backing off the position you took six days ago, and I don't see why I should put up with it. I don't mean put up with it in a sense that I'm carping or anything, I mean, but the fact is, it just seems to me too late in the game to undo what's been done.
MR. REHN: Your Honor, if that's the Court's position, we understand it. It was certainly not our intention to change positions. I think there was a context in which we were suggesting a particular sentence in our proposed requests to charge didn't need to be included, and then when we got the Court's request to charge, we proposed certain language we thought would clarify.
JUDGE KAPLAN: I'm not saying anybody acted in bad faith with respect to this charge. Not a bit. But I think that's where I am. I know it's where I am. And so on those points, on pages 1, 2, and 7 and 8, I'm going to charge as I initially proposed, save with respect to moving what is the second very large clause at page 8, lines 2-5, into a separate sentence at the end of that paragraph. That was not controversial. But the charge is I think making clear that the government has to prove a false statement in order to prove misappropriation. And that's how it's going to go to the jury. Now this ought not to be much of a problem for the government because god knows there's more than sufficient evidence of both, to get to the jury, obviously. And it's a matter, in significant measure, of ordering the trial in a way that is consistent with what everybody has said with good intentions and avoiding other unintended consequences that might follow from allowing the government to change its position here, whether or not the position they took was exactly what they thought they were taking. So that's the answer. Now should I have somewhere a letter from the defense on the one point I was going to get a proposal for, as to language?
MR. EVERDELL: We didn't file it on the docket, but we can hand up a copy right now.
JUDGE KAPLAN: Okay. Hand it up and we'll get this all put to bed. And you've seen this, Mr. Rehn, right?
JUDGE KAPLAN: Well, why don't you take a minute, and I'll get the case they cite up on my computer, assuming my computer is going to work. And we'll mark the letter that defense counsel handed up Court Exhibit X2 for identification. Ready, Mr. Rehn?
MR. REHN: I don't actually have a copy of Skelly, but I can address more generally the principles without seeing whether Skelly requires this language. I'm doubtful it does in light of the fact that the instruction that has been proposed by the government and I think is broadly in line with the Court's proposed instruction is modeled on this Court's instructions in Gatto and Blaszczak, both of which were in 2018, postdating the Skelly case. And those instructions rely primarily on the leading Second Circuit case, which is the Chestman case, that requires just language regarding a relationship of trust and confidence. I don't believe there's any need to insert this additional language from Skelly. I think requiring a relationship of trust and confidence to be proven is sufficient to instruct the jury on the nature of the relationship of trust that the government has to prove.
JUDGE KAPLAN: Defense want to be heard on this any further?
MR. DICK: I don't think there's much to add, your Honor. As your Honor knows, having looked at Skelly, there was reversal there for giving an instruction very much like what's currently based on Chestman and in the Court's proposed charge, but without this added language, which is with respect to reliance, dominance, and de facto control.
JUDGE KAPLAN: Yes, I don't regard the adaptation of language from Skelly as a fully accurate assessment of the holding of Skelly, but even if I did, Skelly cites Chestman approvingly. Chestman is an en banc decision. It deals not only with the elements of fiduciary duty but also of its, quote-unquote, functional equivalent. It is, in my view, somewhat broader than Skelly and still controlling in the circuit, and it goes beyond the proposed instruction by the defense. So I'm not going to give that charge. So I think we are now set. We all know where we are. And I will see everybody in the morning. Have a good evening. THE LAW CLERK: All rise.
(Adjourned to November 1, 2023, at 9:30 a.m.)