Supreme Court Issues Decisions on Double Jeopardy, Bank Fraud, and Insider Trading
The U.S. Supreme Court issued three criminal opinions in November and December on double jeopardy, bank fraud, and insider trading.
In Bravo-Fernandez v. United States, decided Nov. 29, a unanimous Court held that where a jury renders irreconcilable verdicts by acquitting on some counts but convicting on other counts based on the same facts, and an appellate court later reverses the convictions for legal error, the issue preclusion component of the Double Jeopardy Clause does not bar retrial on the convicted counts.
Juan Bravo-Fernandez was convicted at a jury trial of stand-alone bribery in violation of 18 U.S.C. Sec. 666, but acquitted on related counts of conspiracy to violate Sec. 666 and traveling to violate Sec. 666. He appealed. His convictions were reversed on appeal due to instructional error.
On remand, the Government tried him again on the previously-convicted stand-alone bribery count. Bravo argued that retrial was barred by the issue preclusion component of the Double Jeopardy Clause.
Bravo contended that he could not be retried on the stand-alone bribery count because the jury necessarily determined he was not guilty of violating Sec. 666 when it acquitted him of conspiracy and traveling to violate Sec. 666.
But the Court disagreed.
The Court began by reviewing its Double Jeopardy jurisprudence. In Ashe v. Swenson (1970), the Court held that where Ashe was charged with robbing one of six poker players, but acquitted, the Government could not subsequently retry Ashe for robbing another of the poker players. The second prosecution violated Double Jeopardy because the sole issue at the first trial was whether Ashe had been one of the robbers, and the jury’s acquittal verdict precluded the Government from trying to convince a different jury of that same fact in a second trial.
Ashe held that the burden is on a defendant to demonstrate that the issue whose relitigation he seeks to foreclose was “actually decided” by a prior jury.
In United States v. Powell (1984), the Court held that a defendant cannot meet this burden when the same jury returns irreconcilable verdicts on the question he seeks to shield from relitigation. Powell’s jury had returned inconsistent verdicts of acquittal on some counts but conviction on other counts based on the same facts. On appeal, she argued that the inconsistent verdict entitled her to reversal of the convicted counts. But the Court held that when a jury returns inconsistent verdicts, “the jury did not speak their real conclusions.” The verdict does not prove that jurors were unconvinced of the defendant’s guilt; jurors could have been convinced of guilt, but chose to be lenient or compromise on the acquitted count.
In Yeager v. United States (2009), the Court held that Powell’s holding on inconsistent verdicts does not extend to where a jury acquits on one count, but is unable to decide another count based on the same facts. There was a difference between Powell’s inconsistent “verdicts,” and Yeager’s “verdict” of acquittal and “seemingly inconsistent hung counts.” The Court held that in Yeager’s situation, Double Jeopardy barred retrial. “When a jury acquits on one count while failing to reach a verdict on another count concerning the same issue of ultimate fact, the acquittal, and only the acquittal, counts for preclusion purposes,” the Court concluded. This is because hung counts reveal nothing more than a jury’s failure to reach a decision, and are not irreconcilable with the acquittal. Thus, hung counts play no role in issue preclusion analysis.
Turning to Bravo’s case, the Court held it was more like Powell, than Yeager. Bravo’s inconsistent verdicts rendered unanswerable what his first jury had “actually decided,” the Court said.
The appellate court’s reversal for instructional error does not change the analysis, the Court said. The ordinary consequence of a reversal for legal error is a new trial without the legal error.
“The critical inquiry is whether the jury actually decided that Bravo … did not violate Sec. 666,” the Court said. Since the jury’s verdicts were irreconcilably inconsistent, Bravo cannot meet his burden to prove that the first jury “actually decided” he was not guilty of violating Sec. 666 in the stand-alone bribery count, the Court concluded.
The Court noted, however, that there are at least three situations where retrial would be barred. First, Bravo cannot be retried on the acquitted counts. Second, Bravo could not be retried if the appellate court had vacated his conviction because of insufficient evidence, because that is the equivalent of an actual acquittal.
Lastly, a defendant cannot be retried “if the trial error could resolve the apparent inconsistency in the jury’s verdicts,” the Court said. “If, for example, ‘a jury receives an erroneous instruction on the count of conviction but the correct instruction on the charge on which it acquits, the instructional error may reconcile the verdicts.” Bravo’s instructional error could not reconcile the jury’s verdicts, however, because the same error applied in the acquitted and convicted counts.
Justice Thomas concurred in the result of the judgment, but expressed his view that the Double Jeopardy Clause does not contain an issue-preclusion prong. He said the holdings in Ashe and Yeager should be reconsidered in a future case.
In Shaw v. United States, decided Dec. 12, a unanimous Court held that 18 U.S.C. Sec. 1344(1), which makes it a crime to “defraud a financial institution,” includes situations of theft from individual depositors’ accounts.
Lawrence Shaw stole money from a depositor’s account. He argued the statute did not apply because he took money from the bank’s customer, not the “financial institution” itself.
The Court disagreed: “The basic flaw in this argument lies in the fact that the bank, too, had property rights in [depositor’s] bank account,” because the bank “has the right to use the funds as a source of loans.”
“[F]or purposes of the bank fraud statute, a scheme fraudulently to obtain funds from a bank depositor’s account normally is also a scheme fraudulently to obtain property from a ‘financial institution,’” the Court concluded.
The Court also rejected Shaw’s argument that the statute requires a showing of harm to the bank. The statute “demands neither a showing of ultimate financial loss nor a showing of intent to cause financial loss,” the Court said.
In Salman v. United States, decided Dec. 6, a unanimous Court held that a relative who receives inside information from a financial insider in a position of trust is criminally liable for trading on that information, even if the insider did not personally receive any money, property or other financial benefit for disclosing the information.
The Court had previously held that, under Sec. 10(b) of the SEC Act and SEC Commission Rule 10b-5, criminal liability for a person who receives inside information hinges on whether the insider who disclosed information did so for a “personal benefit.”
Bassam Salman traded securities based on inside information he received from a family member. The family member who gave Salman the information got it from a brother, who was an investment banker in a position of trust.
Salman was convicted of conspiracy to commit securities fraud in violation of 18 U.S.C. Sec. 371 and related charges. He argued that he was not liable for securities fraud because there was no evidence that the investment banker relative who originally disclosed the information received anything of a “pecuniary or similarly valuable nature” in exchange for the information.
But the Court disagreed. A “tipper benefits personally by making a gift of confidential information to a trading relative or friend,” the Court held.
The investment banker relative who disclosed the information knew that his relatives would use it for trading, the Court said. Salman was criminally liable because he traded on the information “with full knowledge that it had been improperly disclosed.”
Salman argued that extending criminal liability to relatives and friends under the circumstances here would lead to unlimited and indeterminate liability. But the Court said its ruling is “narrow.”