New York Federal Criminal Practice Blog
January 6, 2009

Second Circuit Holds Evidence of Bogus Account Statements is Relevant in Securities Fraud Case

Although bogus account statements generated to lull defrauded investors are not in and of themselves sufficient to establish a securities fraud violation, because they are not statements made “in connection with the purchase or sale of any security,” they are relevant evidence of the defendant’s intent to defraud and the extent of the scheme employed, the Second Circuit held yesterday in a short decision in United States v. Kelley, 06-5536-cr, 2009 WL 18725 (2d Cir. January 5, 2009).  The Court explains:

The statements provided the jury with evidence both that Kelley had intended to defraud his clients and that he continued efforts to avoid detection by deceiving his clients about the value of the investments, often up to two years after a particular investment ceased to have any value. The account statements also indicate that Kelley’s actions in defrauding his clients were not simple mistakes but were instead part of a larger, intentional scheme to defraud . . . We hold, therefore, that the district court did not abuse its discretion in admitting evidence concerning the bogus account statements that were generated and disseminated several years after the victims had been induced to invest.

Lawyers: Richard Lind, Esq. (defendant); AUSA Steven Feldman

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