Yep (and particularly so when a company board member and stockholder relies on Raging Bull for info on the corporation). United States v. Jenkins, 2011 WL 208357 (9th Cir. 2011), decision available here.
Players: Decision by Judge B. Fletcher.
Facts: Jenkins was disbarred lawyer who created a Bahamian shell corporation to further a “pump and dump” scheme. Id. at *2. Jenkins and a co-defendant inflated the company’s value with (false) assurances on an internet bulletin board called, “Raging Bull.” Id. The duo then dumped the inflated stock through a Canadian brokerage. Id.
The case was investigated by Canada, and the US feds got an order tolling the statute of limitations while a MLAT request to Canada was pending. Id. at *4. The initial application for a tolling order did not have a supporting affidavit. Id.
Jenkins was convicted of various white collar counts after trial and received a sentence of ninety months (down from guidelines of 324-405!). Id. He appealed (including a challenge to the reasonableness of his sentence).
Issue(s): “The principal legal issue we face is whether 18 U.S.C. § 3292 suspended the running of the statute of limitations . . . . Section 3292 permits the district court to suspend the statute upon finding that the government reasonably believes evidence of a crime under investigation by a grand jury is in a foreign country and has requested that evidence.” Id. at *1. “[Jenkins] argues that an application to suspend the running of the statute of limitations must be supported by a sworn affidavit or other material of evidentiary value . . . .” Id.
Held: “[W]e hold that when the government moves to suspend the statute of limitations under § 3292, it must present something with evidentiary value tending to prove it is reasonably likely that evidence of the charged offenses is in the foreign country – not merely unsupported assertions.” Id. at *6 (internal quotations and citations omitted).
Of Note: This statute of limitations holding is a new rule for the Ninth, and follows a case out of the Eleventh Circuit. Id. at *6. Unfortunately for Jenkins, the government “cured” this mistake by submitting a supplemental application for order with an affidavit, that saved the otherwise-blown statute of limitations. Id. at *7.
How to Use: Jenkins is chock-a-block with white collar issues: two newish holdings merit flagging. First, Jenkins complains on appeal that a securities fraud conviction can’t rest on misrepresentations on an informal internet bulletin board (“Raging Bull”) – after all, what reasonable investor would ever rely on vague internet chatter? Surely an internet chat post isn’t “material?” Id. at *10. “We are not persuaded,” responds Judge Fletcher – there was sufficient evidence “to allow the jury to conclude that the Raging Bull posts were material.” Id. at *10. Hence, beware that “material” misrepresentations can lurk in even the most unreliable of places.
The second issue of note is a righteous challenge to some money-laundering counts, where the funds at issue went from Canada to Antigua without ever crossing US borders. Id. at *12. That challenge was rather summarily rejected by the Court, based on FRE 1006 “summary exhibits” illustrating the flow of funds from Canada to the United States. Id. at *13. Hence, beware of those brightly-colored flow-charts trotted out by government agents at trial: that innocuous “summary” evidence has a way of transforming itself into substantive evidence that can defeat an appeal.
For Further Reading: The roots of the fraud in Jenkins was a businessman who touted infrared camera technology for an application that wouldn’t work. Id. at *2. Last week a similar fraud was revealed by the BBC: millions of dollars worth of electronic “bomb detection devices” were sold internationally with the active endorsement of the British military. The gadgets (they look like divining rods) are pure hooey: their guts contain a digital anti-theft tag designed to prevent shoplifting. For a very interesting video and article on this scam, see here. The first arrest has already taken place: look forward to bomb dowsing-rod clients coming soon to a jurisdiction near you.
Image of the Wall Street bull from http://www.digitaljournal.com/img/8/7/3/i/4/1/8/o/RagingBull-WallStreet.jpg
Steven Kalar, Senior Litigator N.D. Cal FPD. Website at www.ndcalfpd.org