No. 90-7338 EUGENE LAFF, PETITIONER V. UNITED STATES OF AMERICA In The Supreme Court Of The United States October Term, 1990 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Second Circuit Brief For The United States In Opposition OPINION BELOW The opinion of the court of appeals (Pet. App. 1-4) is unreported. JURISDICTION The judgment of the court of appeals was entered on November 28, 1990, and a petition for rehearing was denied on January 8, 1991. The petition for a writ of certiorari was filed on February 27, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTIONS PRESENTED 1. Whether the district court erred in admitting similar act evidence. 2. Whether the government's closing argument denied petitioner a fair trial. STATEMENT After a jury trial in the United States District Court for the Southern District of New York, petitioner was convicted of conspiracy to violate the federal securities and anti-fraud laws, in violation of 18 U.S.C. 371; security price manipulation, in violation of 15 U.S.C. 78j(b) and 78ff; mail fraud, in violation of 18 U.S.C. 1341; and obstruction of a Securities and Exchange Commission investigation by giving false and evasive testimony, in violation of 18 U.S.C. 1505. He was sentenced to five years' imprisonment. The court of appeals affirmed. Pet. App. 1-4. 1. The evidence at trial showed that petitioner, chairman and controlling shareholder of Haas, a 75-year old Wall Street brokerage firm, was a key participant in a sprawling stock manipulation conspiracy tht spanned more than two years, encompassed numerous securities, and involved hundreds of millions of dollars. Petitioner -- together with Henry Lorin, Stanley Aslanian, Jr., and others -- planned and carried out sophisticated schemes to manipulate the common stock prices of three corportions: Flores, Big O Tires, and TS Industries. Petitioner also sought to cover up the stock manipulation conspiracy by backdating certain trading documents that were material to an SEC investigation and by testifying untruthfully before the SEC on March 10, 1988. Gov't C.A. Br. 2-3. 2. On appeal, petitioner challenged the district court's admission, over petitioner's objection, of evidence showing that on a prior occasion petitioner lied to his brother-in-law to induce him to hold a large block of Rancho Ventures stock while petitioner was attempting artificially to inflate the stock's price. Gov't C.A. Br. 39. Petitioner also challenged the district court's refusal to grant a mistrial on the ground that the government's closing argument unfairly prejudiced him. The court of appeals rejected both of petitioner's challenges and affirmed the judgment of conviction. The court first concluded that the district court properly admitted the similar act evidence under Rules 402 and 404(b), Fed. R. Evid., because the evidence of "(petitioner's) involvement in the manipulation of Rancho Ventures was admitted for the proper purpose of establishing (petitioner's) knowledge and intent in the charged price manipulation conspiracy." Pet. App. 2. Petitioner's "defense focused on his knowledge and intent, placing these elements squarely in issue at trial." Ibid. Thus, "(e)vidence of his participation in another fraudulent scheme involving securities was relevant to the government's refutation of (petitoner's) defense." Ibid. The court of appeals also concluded that "the district court made a 'conscientious assessment'" under Rule 403 "of whether the evidence's probative value was substantially outweighed by its potential to create unfair prejudice against (petitioner)." Pet. App. 2. As the court of appeals noted, the district court based its conclusion, in part, on an in camera review of the proposed testimony, and the district court "provided an appropriate limiting instruction to the jury in order to ensure its proper consideration of the Rancho Ventures evidence." Ibid. The court also rejected petitioner's contention that the government's closing argument unfairly prejudiced him, stating that "(n)one of the summation statements about which (petitioner) complains rise to the egregious level at which reversal is required." Pet. App. 3. "The prosecutor's statements concerning (petitioner's) wealth were a narrowly tailored response to (petitioner's) argument that, due to his great wealth, he lacked any motive to participate in the stock manipulation." Ibid. Moreover, "the district court instructed the jury that 'every party in a court of law is * * * an equal,' regardless of differences in wealth." Ibid. The court of appeals also concluded that "the prosecutor's challenges to (petitioner's) credibility, while strongly-worded, were not accompanied by 'intemperate statements evincing either the purpose or the likelihood of appealing to the jury's emotions rather than to its reason.'" Pet. App. 3 (citation omitted). "Rather, these statements appear to have been measured responses to the defense's attacks upon the integrity of the prosecution." Ibid. Finally, the court of appeals concluded that "the prosecutor's statement that (petitioner) had withheld incriminating pages from his 'posting book,' despite a subpoena for these records, did not deprive (petitioner) of a fair trial." Pet. App. 3. Rather, "this statement was properly inferred from the evidence previously presented," and, "when viewed in the context of a seven-week trial, this statement cannot be said to have caused (petitioner) substantial prejudice." Id. at 3-4. ARGUMENT Petitioner renews his claims that the district court erred in admitting extrinsic act evidence and in denying his motion for a mistrial based on the prosecutor's closing argument. His claims turn wholly on the application of settled law to the particular circumstances of his trial and raise no significant legal issue. Further review accordingly is unwarranted. 1. Petitioner first claims (Pet. 18-26) that the district court abused its discretion by allowing the introduction of evidence concerning the Rancho Ventures scheme. That contention is without merit. The Federal Rules of Evidence permit the admission of evidence of "other crimes, wrongs, or acts" if the evidence is relevant to some issue at trial other than the defendant's character and if its probative value is not substantially outweighted by its unfair prejudicial effect. Fed. R. Evid. 402, 403, 404(b). See Huddleston v. United States, 485 U.S. 681, 687 (1988). As Rule 404(b) states, such evidence may be introduced at trial to prove "opportunity, intent, preparation, plan, knowledge, identity or absence of mistake or accident." The similar act evidence in this case was admitted specifically to demonstrate petitioner's knowledge and intent in the security manipulation scheme. Petitioner largely conceded that the manipulations charged in the indictment had taken place and that his brokerage firm had been the hub of the unlawful activity; his primary defense was that he lacked any knowledge of the conspiracy and that his actions were taken without any intent to deceive customers or to manipulate stocks. See Gov't C.A. Br. 49-50. As the district court observed (see id. at 42-43), petitioner's participation in another fraudulent scheme during the time frame of the indictment -- one in which he lied to another for the very same reason he lied to his customers regarding the three charged stocks -- was plainly relevant to rebut his claim that his actions with regard to the charged stocks were undertaken without fraudulent intent or knowledge of the criminality of his actions. See, e.g., United States v. Greenwood, 796 F.2d 49, 53 (4th Cir. 1986) (evidence of prior false statements on a bank loan application admissible on issue of intent in case involving charges of submitting false leases to employer in order to obtain excess reimbursements); United States v. O'Brien, 618 F.2d 1234, 1237-1238 (7th Cir.) (evidence of prior misbranding of food products and obtaining kickbacks through the use of false invoices admissible in case involving charges of credit fraud), cert. denied, 449 U.S. 858 (1980). /1/ Petitioner also complains (Br. 21) that the district court failed to undertake an explicit balancing of the evidence's probative value against its potential for unfair prejudice. A trial court, however, need not engage in a "mechanical recitation of Rule 403's formula as a prerequisite to admitting (similar act) evidence," particularly where "(t)he issues of both the probative value and possible prejudicial effect of admitting this evidence were presented to the judge when he made the decision to admit it." United States v. Sliker, 751 F.2d 477, 487 (2d Cir. 1984), cert. denied, 470 U.S. 1058 (1985). There was no abuse of discretion here: The evidence bore directly upon the most hotly contested issue in the case -- petitioner's state of mind -- and proof that petitioner was involved in the illegal manipulation of a fourth stock was not likely to inflame the jury in an unfair way. Moreover, the district court's instruction ensured against any jury misunderstanding by underscoring that the Rancho Ventures evidence was relevant only to show petitioner's knowledge of the overall stock fraud and his fraudulent intent. The judge cautioned that this evidence could not be used "to show that (petitioner) is simply a bad man, and if he was bad in one way he would be bad in another way." Gov't C.A. Br. 47-48 n.**. And the government reiterated to the jury that the similar act evidence was introduced solely to show petitioner's knowledge and intent with respect to the charged offenses. /2/ 2. Petitioner is also incorrect in asserting (Pet. 26-43) that the government's statements in closing argument denied him a fair trial. We note at the outset that inappropriate prosecutorial comments, standing alone, do not justify reversal of a criminal conviction obtained in an otherwise fair proceeding. United States v. Young, 470 U.S. 1, 11-12 (1985). Moreover, a court of appeals should give deference to the conclusions of the district judge, who heard and assessed the closing remarks, as to whether those arguments were in fact prejudicial or inflammatory. See, e.g., United States v. Lowenberg, 853 F.2d 295, 304 (5th Cir. 1988), cert. denied, 489 U.S. 1032 (1989). In this case, the district judge observed that the prosecutor's closing argument was "a very thorough and very fine summation." Gov't C.A. Br. 61. Contrary to petitioner's contentions (Pet. 31-32), the government did not impermissibly attack petitioner based on his wealth. As the court of appeals noted, the "prosecutor's statements concerning (petitioner's) wealth were a narrowly tailored response to (petitioner's) argument that, due to his great wealth, he lacked any motive to participate in the stock manipulation." Pet. App. 3. /3/ Moreover, the district court instructed the jury that "every party in a court of law is * * * an equal," regardless of differences in wealth. That instruction, together "with the government's own statement to the jury that it should only consider (petitioner's) wealth in regard to his motive, eliminated any potential of prejudice to (petitioner)." Pet. App. 3. Petitioner is also mistaken in asserting (Pet. 32-35), that the government improperly attacked petitioner's credibility. The court of appeals correctly found (Pet. App. 3) that "the prosecutor's challenges to (petitioner's) credibility, while strongly-worded, were not accompanied by intemperate statements evincing either the purpose or the likelihood of appealing to the jury's emotions rather than to its reason." Pet. App. 3. Rather, they were a reasonable response to petitioner's closing arguments. Petitioner's counsel had argued that the government's claims were "a cluster of lies," and he mocked the government's assertion in its opening summation that a trial is a search for the truth. Gov't C.A. Br. 67. Because defense counsel had accused the prosecutors of distorting the truth and of lacking the judgment to tell the difference between truthful and untruthful witnesses, strong rebutting language was proper. Finally, the jury was properly instructed that it was the sole judge of the witnesses' credibility, so that, even if any remarks in the government's summation were in any way excessive, petitioner was not deprived of a fair trial. See Gov't C.A. Br. 68. Finally, the prosecutor's statement that petitioner had withheld incriminating pages from his "posting book," despite a subpoena for those records, did not deprive him of a fair trial. See Pet. 35. The court of appeals found (Pet. App. 3-4) that "this statement was properly inferred from the evidence previously presented." See Gov't C.A. Br. 80. Moreover, as the court noted, "when viewed in the context of a seven-week trial, this statement cannot be said to have caused (petitioner) substantial prejudice." Pet. App. 4. /4/ CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General ROBERT S. MUELLER, III Assistant Attorney General GEOFFREY R. BRIGHAM Attorney JUNE 1991 /1/ Petitioner is also incorrect in asserting (Pet. 20) that his participation in the Rancho Ventures "pump and dump" scheme was insufficiently shown to allow admission of the evidence. Similar act evidence may be admitted if the jury could reasonably find from all the evidence in the case (including evidence of the charged crimes) the facts that would make the similar act evidence relevant. Huddleston, 485 U.S. at 687-692. The government satisfied that burden in this case. See Gov't C.A. Br. 41 n.*. /2/ The prosecutor explained: Now, it is important to note that we did not introduce this Rancho Ventures evidence for anything other than one reason. We introduced this evidence because it goes to (petitioner's) intent. This is not a manipulation which itself is charged in this indictment. It is simply something which we have introduced because we submit that the Rancho Ventures evidence goes to (petitioner's) motive and intent to commit the crimes in this case * * *. Gov't C.A. Br. 47 n.**. /3/ A court "should not lightly infer that a prosecutor intends an ambiguous remark to have its most damaging meaning or that a jury, sitting through lengthy exhortation, will draw that meaning from the plethora of less damaging interpretations." Donnelly v. DeChristoforo, 416 U.S. 637, 647 (1974). /4/ Petitioner did not object to that statement until the jury had already begun to deliberate. His objection was therefore untimely and waived in the absence of plain error. Gov't C.A. Br. 80. Additionally, the isolated remarks occurred in the course of almost 300 pages of government summation following a seven-week trial. Id. at 83. Any possible danger of prejudice was further minimized by the district court's thorough general instructions to the jury about how to evaluate the arguments of counsel. Id. at 82.